California: Study points to continued increases in costs despite reforms

Yet another research report indicates reforms adopted in California in the early 2000s are no longer effective in holding down medical costs. The latest study was issued by the California Workers' Compensation Institute.

Like other reports issued in recent years, the newest data indicates medical costs have been rising for the last several years and have surpassed pre-reform levels. However, there is some indication that the rate of medical inflation may be slowing down.

The reforms adopted between 2002 and 2004 included:

A mandatory medical treatment utilization schedule.
24-visit caps on physical medicine, chiropractic care, and occupational therapy.
Expansion of the Official Medical Fee Schedule, including an outpatient surgery facility schedule, a revised pharmacy schedule, and a generic drug substitution requirement.
The extension of employer medical control from 30 days postinjury to the life of the claim for employers that have workers' comp Medical Provider Network programs.

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The report examines data from nearly 2 million claims from accident year 2002 through September 2010. It shows the average medical expenditure per indemnity claim for each accident year and the average amount paid per claim for each of four medical subcategories at six valuation points: three months, one year, two years, three years, four years, and five years.

The research concurs with previous information from both CWCI and the California Workers' Compensation Insurance Rating Bureau that shows medical costs dipped following the reforms, then began increasing in 2006.

For example, at the 12-month valuation point medical benefit payments on indemnity claims from AY 2005 averaged 14.3 percent less than those from the pre-reform AY 2002. After that, however, the average medical benefit payments began to climb between 10 and 13 percent annually.

That trend was seen in all valuation points except the three-month valuation point. Average medical benefit payments at three months were relatively stable until accident year 2008 when they jumped nearly 35 percent, which the authors say may indicate an overall change to a faster delivery of medical services after injury.

The researchers also divided the data into the payment sub-categories of medical treatment, pharmacy and durable medical equipment, medical management/medical cost containment, and medical-legal. They found increases in the average amounts paid per claim in all four, "suggesting that inter-related, underlying factors are influencing rising costs."

The authors said they will soon publish another report that looks at key underlying factors such as attorney involvement, geography, and specific comorbidities and secondary medical conditions associated with the increasing medical payment trends.

Read more at the WorkersComp Forum homepage.

October 13, 2011

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