Troubled Illinois Injury-Claim System Hit in Audit

Illinois’ troubled system for compensating injured state workers hands out money too readily, sometimes without medical evidence to back up a claim and occasionally paying benefits the hurt employee didn’t even seek, according to an audit released Wednesday.

Auditor General William Holland suggested lawmakers follow up last year’s overhaul of the workers’ compensation system with further improvements in a report that found information about the process “incomplete, inaccurate, and inconsistent.”

State workers claiming injury at work received $295 million on more than 26,000 claims from 2007 through 2010, the report found.

Holland’s report found overworked claims adjustors assigned to review claims carrying caseloads several times larger than is practical and negotiating settlements with workers’ lawyers, a job the attorney general should do. They sometimes approved temporary disability payment while a case was ongoing even though the worker hadn’t asked for it.

Files on some claims paid were missing medical evidence for the injury. Arbitrators deciding contested cases had no guidelines for deciding compensation and issued wildly inconsistent awards for the same injuries. Some had conflicts of interest in the cases they presided over.

And while the state has written intentions to analyze trends for possible fraud, it has no means of statistical review to do so.

“We identified numerous shortcomings in both the structure and operations of the workers’ compensation program” for state employees, Holland wrote. “These problems have led to a program that is ill-designed to protect the state’s best interests.”

Illinois budgets money for state workers’ on-the-job injuries, paying in various cases medical bills, compensation for missed work during recovery, and permanent disability. The state’s personnel agency, the Department of Central Management Services, finds the majority of claims legitimate and pays them. When the state contests a claim, it goes before an arbitrator for the Workers’ Compensation Commission. Those cases are either settled with an arbitrator’s approval or the arbitrator decides on an award after a hearing.

The General Assembly ordered Holland’s audit last spring as it prepared to reform the system because of rising costs and Belleville News-Democrat reports about outsized payouts at one prison, arbitrators who received their own injury payments or had questionable professional conduct, and other problems. Federal prosecutors launched investigations in early 2011.

The changes in state law required a reduced medical fee schedule and caps on some awards, new arbitrators who are lawyers, Workers’ Compensation Commission staff members dedicated to fraud prevention and more.

“We have implemented many reforms since last year that already address various recommendations to improve outcomes for the state and businesses in Illinois,” CMS spokeswoman Alka Nayyar said.

But Holland found, for example, that state officials had taken no action to put in place a fraud-detection method that the law required by Jan. 1.

The main problem is a huge program that understaffed agencies are trying to wrangle with outdated computers, the review found.

CMS adjustors who decide uncontested claims had caseloads of as many as 1,500 while the industry recommends caseloads of no more than 250. The state attorney general should be handling those settlements but CMS adjustors were in some cases finalizing settlements.

Adjustors and arbitrators both made awards for cases whose files were missing medical evidence of the injury and arbitrators had no guidelines for how much to award. For instance, a common injury such as Carpal Tunnel Syndrome meant compensation for the loss of 5 percent of the use of a hand in one case to total disability in another. The new law caps carpal tunnel awards.

The Workers’ Compensation Commission agreed with Holland’s recommendation to strengthen its conflict of interest standards after the audit found former arbitrators had professional relationships with lawyers or doctors involved in cases they were deciding and six instances where arbitrators continued hearing cases when they had their own workers’ compensation claims pending.