Medical costs are the largest component of workers’ compensation payments and have grown very rapidly in recent years, prompting the application of managed care techniques. The Workers’ Compensation Research Institute issues a regular report on trends in medical costs. The one recently released covers 35 states which account for 87% of workers’ compensation payments, and is based on actual payments. (WCRI Report) Some states try to regulate costs through use of fee schedules, others allow networks or other tactics to control costs, and some are more free-for-all. States tend to refine their fee schedules regularly and some states, such as California, have moved more to a Medicare-like mechanism in the past few years. The analysis reveals substantial variation in prices paid across states. For professional services, for example, prices ranged from 26% below the 35-state median in Florida to over 150% above it in Wisconsin. States with no fee schedule had much higher prices, from 39% to 168% greater, than the median price of states with fee schedules. Similarly, growth in prices over the period 2008 to 2017 was as low as a negative 17% in Illinois to plus 39% in Wisconsin; and states with no fee schedule also had much higher increases in prices. Total price growth was 30% in the non-fee schedule states versus 6% in the fee schedule ones. (Note that most commercial health plans would have been thrilled even with the 30% number over that time period.) Non-fee schedule states were able to achieve some moderation in price rises by use of other techniques, like allowing limited networks, where workers’ comp payers then have leverage to get lower prices. Most significant changes in prices, up or down, were related to fee schedule changes, either a comprehensive overall, or in some cases, changes to the prices paid for specific types of services. The states which had major recent fee schedule price changes experienced significant political battles over those changes. When prices are regulated, instead of a commercial-type negotiation, the process becomes a political one–who has more political clout, employers or unions and provider groups? That is a great way to control health spending.
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The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry. Mr. Roche is available to assist health care companies through consulting arrangements through Roche Consulting, LLC and may be reached at [email protected].
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