One of the most startling claims made by Governor Pat McCrory in his State of the State address to the General Assembly earlier this month was his statement about problems with the way worker’s compensation claims were paid to state employees.
“Our examination of workers compensation estimates that 40 percent of workers costs are related to abuse or outright fraud,” McCrory said.
Several media organizations, including WRAL-TV and the Associated Press, followed up with stories trying to find out where McCrory came up with the 40 percent figure—a rate of fraud and abuse that experts say far outpaces reality.
A professor of health economics told WRAL that roughly two or three percent of cases may involve fraud by workers with additional abuses by employer insurance companies, but even then it’s hard to imagine a fraud rate out of the single digits, nowhere near the 40 percent that McCrory claimed had he found after “an examination of workers compensation estimates.”
McCrory’s office couldn’t exactly explain where he got the number, but AP reported that it came from conversations between State Human Resources Director Neal Alexander and a “third party vendor” and was an informal estimate not an analysis of claim or payment data.
That doesn’t sound like much of an examination at all, more like an offhanded comment that McCrory presented as a fact to misleadingly rail against alleged fraud and abuse.
Alexander was appointed State Human Resources Director by McCrory in 2013. His most recent job was as a vice-president of HR at Duke Energy, McCrory’s former employer.
Alexander was also recently the board chair of The Employers Association, a membership organization in Charlotte that provides training and human resources services to corporations. He is still listed as a member of the board.
And there appears to be a policy angle to the group too. It is one of three members of The Employers Coalition of North Carolina, a public policy organization that was created, according to its website, “to give the business community a more focused avenue of public policy input concerning the issue of lost jobs and the decline of the business climate in North Carolina.”
The coalition has hired three lobbyists to walk the halls of the General Assembly this session. The first policy item on the Employers Association site describing the coalition is worker’s compensation, which the site says “is becoming a major burden to employers.”
Apparently the organization that Alexander used to chair is still not happy with the system, despite significant reforms since the Republicans took over the General Assembly and the appointments by Governor McCrory to the Industrial Commission that oversees worker’s comp.
What better place than a State of the State speech to score some rhetorical points and rail against imaginary fraud to set the stage for future “reforms” of the way workers hurt on the job are compensated?
And McCrory didn’t stop with the absurd fraud claim in his speech. He also said that total worker’s compensation claims paid by the state cost about $150 million a year—enough, he pointed out, to give a two percent raise to start workers every year.
But that would only happen if there were no claims paid. Surely McCrory isn’t suggesting that. He’s just using those figures to further demagogue the issue.
Maybe nothing will come of all this, the governor allowing the head of an employer group he has appointed to a key administration post to translate an informal conversation into wildly exaggerated numbers and a policy recommendation to respond.
But at the very least, it raises serious questions about how decisions are made in McCrory’s office and how the governor is either intentionally misleading the public or being used by people who are.
There is a real crisis involving workers in North Carolina that is costing the state millions of dollars, the misclassification of workers by employers as independent contractors who should be on their payrolls as employees.
That practice, detailed in the News & Observer series “Contract to Cheat,” robs thousands of workers of benefits and job protections, costs the state tens of millions of dollars in unpaid payroll and unemployment taxes, and penalizes businesses who are following the law and protecting their employees.
McCrory didn’t mention that problem at all in his speech, even though the abuse is clear and documented and has raised concern among state lawmakers.
But who needs facts when you have informal conversations to base major speeches and policy recommendations on?
(Above cast image licensed under the Creative Commons Attribution-Share Alike 2.0 Generic license.)