Control of Medical Costs in Texas Workers’ Comp System is Vital

By Nancy Schroeder | March 24, 2003

Texas is a king size state with king size problems regarding medical care costs in its workers’ compensation system. However, Texas’ workers’ compensation system is not alone in facing escalating medical care costs. The growth in overall medical costs is having a severe impact upon the entire United States health care system.

Increased costs first became a concern in other sectors of the health care system and now their impact is being felt in the nation’s workers’ compensation system. Between 1996 and 2001 average annual growth in workers’ compensation medical costs countrywide was 6.8 percent, with the growth in the last couple of years somewhat over 10 percent.

What is important for each state to realize is that the rate of growth varies substantially by state depending on the tools that are available to address excessive charges and utilization of medical care, as well as the basic cost-containment incentives within its system. Unfortunately, Texas is one of the states that have very few tools in its satchel.

Texas made extensive system reforms in 1989 and enacted a series of reforms in 2001 through House Bill 2600, but contrary to the general perception, the reforms did very little to address medical costs—and the system is showing it. The average medical cost per case is more than 60 percent higher in Texas than it is countrywide. The difference is greatest for temporary total disability cases, where the average cost is almost double the country average.

When you examine the individual components of utilization and the price of care that make up overall costs, Texas stands out in just about every measure. Worse yet, its growth rate is among the highest in the nation. A recent study by the Workers’ Compensation Research Institute (WCRI) compared the major components of the costs of workers’ compensation medical care for eight states, including Texas. (The other states were California, Connecticut, Florida, Georgia, Massachusetts, Pennsylvania and Wisconsin). Texas had the most services performed and the highest costs of these states, even after adjusting for differences in the types and severity of injuries.

• The average medical payment per claim was 42 percent higher than California, the next highest state, and more than double that of Massachusetts the lowest; and

• The number of visits per claim and different services provided was slightly higher than California, the next highest state, and two and one half times Wisconsin, the lowest.

What this means is that employers in Texas are paying for more treatment, more often, and, for many services, at a higher rate. While these differences in the delivery of medical care in Texas as compared to other states are evident for all medical care providers, the differences are greater for “physical medicine” services, which includes services such as physical therapy and chiropractic services. According to the WCRI study, physical medicine services are growing faster in terms of both costs and utilization. The study found that the cost per claim for chiropractic services in Texas is more than twice that of the next closest state and four times that of the eight-state median.

There is also a similar pattern for physical therapists. The average cost per claim for physical therapy services is the highest of the eight states and about 60 percent above the median. Other areas where Texas stands out are in the cost and use of diagnostic services, the frequency of the use of hospital facilities, and the cost and number of physician visits.

The extra care and cost might be justified if there was evidence that it was resulting in better outcomes or reductions in disability. However, this does not appear to be the case as the cost per claim for temporary total disability and the frequency of permanent partial disability are significantly above average in Texas. If anything, the extra care seems to be prolonging the disability and adding to other costs.

The prognosis for Texas, if it does not address these issues, is that the problem will simply get worse. The good news is that there is a great deal of information about the cost drivers in the system.

It is critical that Texas take steps to address what appears to be excessive utilization of medical services across the board. This can be done through the adoption of some type of managed care whether through networks or a primary treating physician approach, through tight, evidence based protocols with real teeth, perhaps even through caps on certain types of visits. It is also important that Texas address issues of unbundling of medical charges, pharmaceutical costs, and the ongoing controversy over the medical fee schedule.

Nancy Schroeder is assistant vice president for workers compensation for the National Association of Independent Insurers (NAII).

Topics California Texas Claims Workers' Compensation

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