Workers Compensation Costs Out of Control According to New Data

Median Workers Comp Payments Nearly 5 Times the Medicare Rates for Same Procedures

November 12, 2013

[Madison, Wisc…] The Workers Compensation Advisory Council (WCAC) is worried that medical costs are out of control and has spent the past few months formalizing a plan to keep them in check. Documents recently obtained by the MacIver Institute show there is reason to worry.

The documents, prepared by Wisconsin Compensation Rating Bureau (WCRB), compare the median payments from Workers Compensation to Medicare reimbursement rates in 2012. WCAC is currently considering a plan to tie Workers Comp payments to 175 percent of the Medicare reimbursement rate, which is similar to what other states have done.

Unfortunately, the 2012 data shows that the median amount paid by Workers Comp was nearly five times the Medicare reimbursement rate for the top 25 procedures performed in 2012. That is 177 percent greater than what is being proposed by the Council.

Arthroscopic shoulder surgeries, which doctors perform to inspect, diagnose, and repair problems within a person’s shoulder joint, had the largest differentiation in cost at 1,680 percent of the Medicare rate. The next highest was arthroscopic knee surgeries at 796 percent.

None of the Workers Comp median payments for the top 25 procedures were within 175 percent of the Medicare reimbursement rate.

The lowest differentials were for office or outpatient visits. Workers Comp median payments were between 199 percent and 232 percent of the Medicare rate for office visits ranging from 10 to 45 minutes.

Another major cost differential were payments made to medical providers for professional components of a procedure. An MRI or CT scan had Workers Comp payments as high as 664 percent of the Medicare rate. Along with these procedures, the professional component could have an even greater differential, as high as 707 percent.

WCRB prepared this data to provide the Advisory Council with a general comparison of payments made by Workers Comp and Medicare for similar services. However, they do warn of limitations on the data since median payments for Workers Comp were used and services provided may differ.

Since median payments were used, some costs could be significantly higher than the data provided, but there could also be costs that are significantly lower.

WCAC still believes there is reason to worry.

While a Workers Compensation Research Institute report says Wisconsin has the lowest average indemnity payments per claim, that injured workers get back faster, and overall costs per claim are among the lowest in the 16 states they examined, they say medical costs per claim in the state are still way up.

Another study, by the Wisconsin Insurance Alliance, found that the maximum allowance for medical costs in the Badger State were nearly double what they were in neighboring states. Many believe the reason for such high medical costs is that there is no limit to what medical providers can charge the Workers Comp system.

WCAC will meet on Tuesday to discuss the plan to tie Workers Comp payments to the Medicare reimbursement rate. MacIver has learned that medical providers have come up with their own plan to lower costs, but an industry insider told the MacIver Institute that their plan was very underwhelming.

The full report from WCRB, which breaks down data regionally, is available here.