Study: Comp Reform Led to Drop in Medical Payments Per Claim in California

May 16, 2017

California’s total costs per workers’ compensation claim with more than seven days of lost time have remained stable after the passage of workers’ comp reform, while most other states experienced an increase during this period, according to a study by the Workers Compensation Research Institute.

The total costs per California workers’ compensation claim in 2013 evaluated as of March 2016 was changed little compared with injuries in 2010 with 36 months of experience. This stability in total costs per claim was a result of several offsetting trends, according to Ramona Tanabe, WCRI’s executive vice president and counsel.

She believes the that a decrease in medical payments per claim likely reflected the impact of Senate Bill 863, the state’s workers’ comp reform law, which took effect in 2013.

The law reduced the fee schedule rates for ambulatory surgery centers; eliminated separate reimbursement for implantable medical devices, hardware, and instruments for spinal surgeries; and began a multi-year transition to a professional services fee schedule based on the resource-based relative value scale.

SB 863 also increased permanent disability benefits for injured workers, which Tanabe said explains in part why indemnity benefits per claim grew 5 to 6 percent per year in 2014 and 2015. She believes an increase in wages in multiple industries also contributed to this trend.

SB 863 also created an independent medical review process for handling medical treatment disputes. This provision was expected to reduce medical-legal expenses involving workers’ comp claims, assuming more expensive qualified medical evaluator reports would be replaced by less costly IMR reports. WCRI found the anticipated decrease in medical-legal expenses per claim has not yet been observed.

Other findings in the study include:

  • One driver of higher total costs per claim in California was a higher percentage of claims with more than seven days of lost work time.
  • California’s higher indemnity benefits per claim were mainly driven by longer duration of temporary disability benefits and more frequent permanent partial disability/lump-sum settlement payments.
  • California had the highest benefit delivery expenses per claim of the 18 states studied due to higher medical cost containment expenses per claim and higher litigation expenses per claim.

The study, CompScope Benchmarks for California, 17th Edition, focuses on income benefits, overall medical payments, costs, use of benefits, duration of disability, litigiousness, benefit delivery expenses, timeliness of payment, and other metrics.

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