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Workers’ Compensation and Medicare

By February 3, 2010Commentary

NCCI is one of the primary organizations doing substantial and useful research in regard to workers’ compensation issues.  A recent report focused on the use of Medicare reimbursement mechanisms and schedules by many states in crafting workers’ compensation fee schedules for physician services.  (NCCI Study) Some of the relationship between Medicare and workers’ compensation is driven by the aging of the workforce and by Medicare’s always secondary stance, which often requires that a set-aside be created for future medical costs which might otherwise be paid for by Medicare.  But the major relationship of interest in this study was fee schedule use.

The study gives some background on how Medicare’s physician fee schedule is built and how Medicare has tried to use those schedules to shift payment from procedural to cognitive services and from specialists to primary care physicians.   Although a number of states base their fee schedules on Medicare’s, they often have not followed Medicare’s shifts and they often customize their own reimbursement schemes, usually in regard to maximum payable amounts.  In general, this has meant that most states have reimbursement above Medicare rates, in some cases well-above.    This excess payment is particularly true in specialties like surgery and radiology.    Workers’ compensation also tends to pay more than group health plans for many services.

One of the other main points of the NCCI study is that cost has shifted from physician services to hospital inpatient and outpatient and other facility settings, for which many, if not most, states do not have a fee schedule.  Workers’ compensation plans tend to be compensating these services at levels above, often far above, what Medicare and group health plans pay.  While there are vendors who can help reduce the charges for these services, it would be helpful to employers if states adopted more comprehensive fee schedules and utilized payment mechanisms, such as episode-based reimbursement, which have been shown to control utilization as well as unit price.

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