California: Comp medical costs per claim grew rapidly despite reforms
Medical costs per workers' compensation claim in California grew in 2006 and 2007 after several years of significant decreases due to reforms, according to a recent report.
The study -- Monitoring the Impact of 2002-2004 Reforms on California Workers' Compensation System: CompScopeTM Benchmarks, 10th Edition -- was conducted by the Workers Compensation Research Institute in Cambridge, Mass. According to researchers, comprehensive legislative reforms enacted from 2002 to 2004 radically changed California medical costs per claim from being the highest of 15 states examined in the study pre-reform to being lower than typical post-reform. However, medical cost containment expenses per claim increased steadily in the state over the study period, even during the period from 2003 to 2005 when medical costs per claim had double-digit decreases due to the reforms.
The study monitored the impact of reforms on medical costs, indemnity benefits, and other benchmarks of system performance, using data with experience through the first quarter of 2008. Researchers said the shift in costs was due to the significant change in utilization of nonhospital services -- from 33 percent higher than typical of the study states pre-reform to 9 percent lower than typical post-reform. The study concluded that several reform provisions had a direct impact on utilization of medical services, such as a 24-visit cap on physical medicine treatments, requiring use of the American College of Occupational and Environmental Medicine's treatment guidelines, mandating utilization review programs, and adopting medical provider networks.
Among the highlights of the study, WCRI researchers found that:
- Lost time medical costs jumped significantly in 2007. For claims with more than seven days of lost time, medical costs per claim saw a nearly 9 percent increase in 2007 for claims with 12 months of experience. According to another forthcoming WCRI study, researchers said prices paid for services rendered by nonhospital providers remained stable in 2007, so the increase in medical costs per claim was likely driven by other factors, such as utilization of nonhospital services and hospital inpatient and outpatient payments.
- Indemnity benefits grew mainly with wages. Indemnity benefits per claim with more than seven days of lost time grew mainly with wages after 2005 as large decreases from the reforms ended.
- Permanent partial disability/lump-sum payments dropped post-reform then grew moderately. From 2004 to 2005, researchers said the reforms led to fewer claims with permanent partial disability benefits and/or lump-sum settlements and smaller PPD/lump-sum payments per claim. For claims with 36 months of experience, the frequency of PPD/lump-sum claims in California fell 5 percentage points, and the average PPD/lump-sum payments per claim decreased 18 percent. However, after 2005, the average PPD/lump-sum payments per claim had moderate growth, including a nearly 6 percent increase in 2007, and the frequency of PPD/lump-sum claims remained fairly stable.
- Temporary disability claim duration remained stable. The study found that the average duration of temporary disability per claim in California remained stable in 2006 and 2007 after continuous rapid decreases post-reform.
- Timeliness of first payment was typical to other states. The timeliness of the first indemnity payment to injured workers in California was typical of the 15 states, researchers said, despite slightly slower injury reporting speed. The speed of payment once payers received notice of injury in the state was fairly typical.
- Injury reporting improved. Researchers found that over the study period, the injury reporting time improved continuously. From 2002 to 2007, the percentage of claims reported to payers within three days of injury increased by about 8 percentage points.
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March 1, 2010
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