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The billboards are advertising; Spotify is advertising – that sigh of relief we all apparently hear is the lowering of auto rates. Well, as long as you don’t consider the 7.5% increases over the next 2 years – and then we’ll save money – up to $400 apparently. So, what is the cost, what are we giving up to ‘save money’. These savings are tied towards the move to a no-fault system, whereby anyone injured in a motor vehicle collision can access care, irrespective of whether you are the ‘at-fault’ driver or not. Well, you can now actually. So, no change there. Apparently, this ‘care first’ model will allow quicker and more care up front – although there is no current wait to access care. And, as previously reported, more care up front doesn’t improve outcomes, it actually worsens them1, so that’s not very attractive or well thought out. These facts are among many opinions expressed regarding the possible shortcomings of moving to ‘no fault’. Most of these opinions come from those who would be directly affected by such changes – that being the lawyers who currently serve to assist injured Albertans to protect their rights and ability to seek compensation which has been enshrined by legal precedent. No longer (except in rare and special occasions) will this be possible.
So, do the lawyers making these opinions, who obviously have skin in the game and could be seen to be biased, have valid arguments? Does legal representation, or even, compensation itself influence health outcomes. As a health care provider, that is the primary consideration we have. I have no ability to lower rates, but I do very much care about those injured recovering in a timely manner. Thus, I will attempt to put some thoughts down regarding some of the science around compensation systems and health outcomes, with full knowledge that this topic is fraught with challenges to investigate scientifically.
There is a common belief that compensation, and by extension at-fault insurance schemes, delay recovery and subsequently prolong disability2. Those that support this view, point to different studies and even systematic reviews (summaries of all studies published on a particular topic) which suggests that compensation is bad for health2. However, the empirical literature used to support this argument has methodological limitations. Two underlying reasons for the compensation hypothesis worsening health outcomes are often proposed. One belief is that (A) compensation and its related systems and processes (i.e. legal involvement and being asked to describe the original collision and explaining why you are still in pain over and over again) are indeed harmful to health, and the other is that (B) the lure of financial compensation prompts people to exaggerate the extent of their health problems or over-state the effects of those problems on their abilities to function.
Today we will focus on the second of these claims.
Do people deliberately understate their health status for financial gain?
Over the years, I’ve heard this claim ‘more than once’. It makes me pause and think – am I, as a health care provider, party to a possible fraud? Is the person in front of me, essentially ‘pulling my leg’ and overstating their injuries for financial gain. I believe every healthcare provider’s response would be the same – our ethical standards and professional obligations (we answer to a professional association and disciplinary hearings if we don’t follow different health acts accordingly) provide serious sanctions if one was ever party to such a scheme. From an evidence perspective, and particularly within insurance economics, overstating or exaggerating symptoms for financial gain is known as a ‘moral hazard’. This is pertinent in systems that provide compensation (e.g. for pain and suffering) over and beyond treatment costs. Different studies have attempted to test for moral hazard. One way to test this presumption is to compare whiplash rates across jurisdictions, as occurred in Europe3. However, the studies did not operationalize the definition of whiplash – some countries using self-report symptoms, and some radiological evidence. Given that whiplash symptoms are not demonstrable with X-ray4, claim rates across jurisdictions obviously varied and thus conclusions from these studies regarding moral hazard are not valid.
What Happened in Saskatchewan When They Changed to No-Fault?
In Saskatchewan, Cassidy and colleagues reported higher rates of claims compensation in a fault-based or tort (can sue for damages) scheme, prior to the scheme changing to no-fault5, whereby no compensation is available for pain and suffering. However, the Cassidy study does not compare the health of claimants and non-claimants, or address how the pool of claimants alters in response to a change in scheme design. Cassidy measured claim rates – or time until claim closure, which as we know (in a no-fault system) is determined by the insurers. This was a proxy measure used to measure ‘recovery’. The reduced frequency of claims observed after switching from a fault-based to a no-fault scheme may simply demonstrate a change in behaviour in response to new ‘society rules’ and associated incentives: people were likely less able and/or less willing to exercise their right to pursue a claim for compensation when compensation benefits were removed. Thus, this study cannot provide evidence on claim exaggeration prior to system change. Another test for moral hazard that is methodologically more robust involves comparing the health of claimants pre- and post-claim settlement, to test whether symptoms improve when the financial incentive to understate health status has been removed. A review of these studies6 finds no evidence that claimants deliberately and systematically exaggerate their symptoms prior to the settlement of their claims. Those who have not yet settled their claims exhibit a very similar recovery trajectory compared to those who have reached settlement. That is, people who claim compensation are not cured by a verdict.
Do Collision Earnings Change After Compensation?
To overcome some of the methodological limitations investigating the influence of compensation on health outcomes, one study utilized a clever design. The authors examined pre-collision and post-collision earnings of people seeking claims for their injuries to determine whether compensation-seeking behaviour explained their prolonged symptoms. Despite receiving financial reimbursement for their injuries, the people making the claims experienced significant reductions in earnings, long after receiving the settlement – when compared to those not exposed to a whiplash injury. The authors also note, that it is possible that people receiving a cash settlement, may not need to work as hard moving forwards, however, when there was a strong financial incentive to not reduce earning, this outcome persisted. The authors conclude that “moderate injuries tend to be chronic, and that compensation-seeking behaviour is not the main explanation for this group”. Another similar study investigated earning potentials pre- and post-reforms in Denmark7. Again the authors found no evidence that the duration of disability increases when compensation for permanent loss of earnings increased as it did in Denmark in 2002. One must note that there was a propensity for being on temporary disability when compensation increased that was independent of worse health status.
The Role of Financial Compensation
For those injured, financial compensation is provided to assist injured persons avail themselves of the necessary treatment to recover from their injuries and prevent them requiring care from publicly funded services with limited resources such as Alberta Health Services that is generally not involved in service delivery of those with motor vehicle collision injuries. This is important, as those who claim compensation generally demonstrate worse health than non-claimants8-10 and are often substantially more disadvantaged by their injuries11. Furthermore, the amount of compensation awarded for personal injuries tends to be consistent with the economic costs of damages12, although it has also been suggested that claimants may be systematically under-compensated13. Thus, the data above does not provide sufficient evidence that moral hazard in injury compensation claims is common. Hence, the literature suggests that the ability to sue, as provided in ‘at-fault’ compensation schemes does not result in worse health outcomes. Maybe the lawyers are right after all…
Next, we will touch on the role of lawyer involvement in health outcomes…
References:
1. Cote P, Hogg-Johnson S, Cassidy JD, Carroll L, Frank JW, Bombardier C. Initial patterns of clinical care and recovery from whiplash injuries: a population-based cohort study. Arch Intern Med 2005;165(19):2257-63.
2. Merskey H, Teasell RW. The disparagement of pain: Social influences on medical thinking. Pain Research and Management 2000;5:259-270.
3. Chappuis G, Soltermann B, Cea, Aredoc, Ceredoc. Number and cost of claims linked to minor cervical trauma in Europe: results from the comparative study by CEA, AREDOC and CEREDOC. Eur Spine J 2008;17(10):1350-7. DOI: 10.1007/s00586-008-0732-8.
4. Elliott JM, Noteboom JT, Flynn TW, Sterling M. Characterization of acute and chronic whiplash-associated disorders. J Orthop Sports Phys Ther 2009;39(5):312-23.
5. Cassidy JD, Carroll LJ, Cote P, Lemstra M, Berglund A, Nygren A. Effect of eliminating compensation for pain and suffering on the outcome of insurance claims for whiplash injury. N Engl J Med 2000;342(16):1179-86.
6. Spearing NM, Gyrd-Hansen D, Pobereskin LH, Rowell DS, Connelly LB. Are people who claim compensation “cured by a verdict”? A longitudinal study of health outcomes after whiplash. J Law Med 2012;20(1):82-92.
7. Cassidy JD, Leth‐Petersen S, Rotger GP. What happens when compensation for whiplash claims is made more generous? Journal of Risk and Insurance 2018;85(3):635-662.
8. Elliott J, Sterling M, Noteboom JT, Treleaven J, Galloway G, Jull G. The clinical presentation of chronic whiplash and the relationship to findings of MRI fatty infiltrates in the cervical extensor musculature: a preliminary investigation. Eur Spine J 2009;18(9):1371-8.
9. Gargan MF, Bannister GC. The rate of recovery following whiplash injury. Eur Spine J 1994;3(3):162-4.
10. Norris SH, Watt I. The prognosis of neck injuries resulting from rear-end vehicle collisions. J Bone Joint Surg Br 1983;65(5):608-11.
11. Leth-Petersen S, Rotger GP. Long-term labour-market performance of whiplash claimants. J Health Econ 2009;28(5):996-1011. DOI: 10.1016/j.jhealeco.2009.06.013.
12. Abelson P. Is injury compensation excessive? Economic Papers: A journal of applied economics and policy 2004;23(2):129-139.
13. Crocker KJ, Tennyson S. Insurance fraud and optimal claims settlement strategies. The Journal of Law and Economics 2002;45(2):469-507.
