CWCI: Second consecutive marginal declines in average medical payments
Changes to medical development of outpatient services in the California workers' comp system prior to newly adopted reforms are outlined in the report. CWCI analyzed workers' comp claims from accident year 2002 through the third quarter of AY 2012.
The report focuses on short- and long-term changes in medical and indemnity benefit development as well as changes in medical service and pharmaceutical utilization and cost of the claims. The findings show the trends in medical and indemnity benefit payments before the implementation of S.B. 863.
Between AY 2010 and AY 2012, the average medical benefits decreased 1 percent at three months of development, and 3 percent at six months of development. However, the authors note that the apparent decrease in medical cost inflation bears watching since the development on many of those claims is in the early stages.
The report confirms previous research showing there was a significant decrease in workers' comp medical payments immediately after the reforms in 2004, followed by increases starting with AY 2006 claims. Increases were noted in the four medical cost subcategories of treatment, pharmacy and durable medical equipment, medical/legal costs, and medical cost containment.
Following the decreasing payments immediately after the 2002-04 reforms, medical payments "began a steady uptrend," the report says. "Between AY 2005 and AY 2011, average first year medical payments for California workers' compensation indemnity claims increased 73.5 percent -- from $5,381 to $9,388 -- while average first-year medical payments for all claims (including medical-only cases) rose 64.9 percent -- from $2,087 to $3,442."
While treatment remains the biggest medical expense, accounting for approximately 73 cents of every medical dollar paid in the first year on AY 2011 claims, the figure is down from AY 2002's 79.4 cents, the report says. Instead, medical management/cost containment expenditures have seen one of the biggest percent increases among the medical expense subcategories.
Those expenses increased from 6.7 percent of the first-year medical dollar in 2002 to 11.6 percent in AY 2005, then climbed to 13.9 percent in AY 2011. The authors surmise the increasing medical management/cost containment expenses may be due to some of the provisions of the earlier reforms.
In terms of indemnity development trends, the report says overall average first-year payments were up 37.2 percent from $4,631 on AY 2002 claims to $6,354 on AY 2011 claims, although there was a brief decrease in 2005 after the enactment of S.B. 899."Since then, however, average indemnity payments have been trending up steadily, with average first year indemnity payments up 33.6 percent from the post-reform low recorded on AY 2005 claims," the report says. Beginning with AY 2006 claims, "average indemnity payments have been trending up, even in the later stages of development."
By Nancy Grover
Read more at the WorkersComp Forum homepage.
October 21, 2013
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