State: California
CWCI: Medical Costs Climbing Again After Post-Reform Declines: WEST [06/04/09]

California's reforms produced medical savings of $12.8 billion to $25.3 billion over a four-year period, but medical costs are climbing rapidly again, the California Workers' Compensation Institute said in a report released Wednesday.

"The legislative and administrative intent of the 2002-2004 California medical reforms was to improve the quality of  care, control costs and facilitate return-to-work for injured workers," the CWCI said. "This study suggests that these reforms are showing signs of compromise."

The CWCI said steady growth in medical costs briefly subsided after passage of major reform bills in 2003 and 2004, but started to climb again in accident year 2006. Increases were recorded in the average amounts paid for medical treatment, pharmaceutical and durable medical equipment, medical-legal reports, and medical management, the institute said.

Between accident years 2005 and 2007, average medical payments for all California claims at 12 months after injury rose 23%, from $2,100 to $2,582, CWCI said. Average first-year medical payments for indemnity claims increased 30%, from $5,465 to $7,129.

Breaking out the growth in average first-year payments in accident years 2005 to 2007,  the study found:

  • The average amount paid on all claims for treatment increased from $1,735 to $2,081 (+20%), while on indemnity claims, the average amounts paid for treatment rose from $4,443 to $5,665 (+28% increase)
  • Average pharmaceutical and durable medical equipment (DME) payments for all claims rose from $80 to $112 (+40%), while on indemnity claims the average amount paid for pharmaceuticals and DME climbed from $224 to $319 (+42%)
  • Average medical-legal payments on all claims increased from $80 to $126 (+58%) while for indemnity claims they went from $220 to $349 (+59%)
  • Average medical management payments for all claims jumped from $194 to $279 (+44%) and from $519 to $784 (+51%) for indemnity claims.

"While some cite medical management expenses as a key medical cost driver, looking at ultimate medical costs on insured work injury claims, based on low and high estimates of  California workers' compensation medical inflation trends, the study estimated that for AY 2002 through AY 2008, average medical payments per claim fell between 25.7% and 54.5% from what they would have been without the reforms," the institute said. "Looking at aggregate medical dollars, the study found the reforms were associated with an  estimated cumulative net savings of $12.8 billion to $25.3 billion in insured medical costs for AY 2004 through AY 2008."

The study updates an analysis published in 2007, using a special data set compiled from CWCI's Industry Claims Information System (ICIS). The data included policy, claim, benefit and medical service detail for California injured workers with dates of injury between January 2002 and June 2008, and medical payment transactions through September 2008. The final data sets allowed the authors to analyze total medical benefit payment transactions and sub-categories of medical benefits (medical treatment, pharmaceuticals and durable medical equipment, medical/legal and medical management).

Source: CWCI

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