Predictions and Politics

Tuesday, October 14, 2014 | 0

The latest study from the California Workers' Compensation Institute suggests that implementation of a Texas-like or Washington-like formulary could produce substantial savings in the California work comp system on the order of $124-$420 million.

I was extremely impressed with the detailed methodology CWCI developed. Not only did they dig into the formularies at the National Drug Code level and build the analysis from the bottom up, Alex Swedlow and team also created a model that incorporates the effects of drug substitution in light of formulary implementation. And it's not an overly simplistic approach, either. They use the Medispan Generic Product Identifier number to assess the likelihood of substitution for drugs not included on the formulary. The reader of this report learns more than just dollars and cents in California; some of the key take-aways relate to the vast differences between the Texas and Washington approaches. Bottom line: The report is educational and insightful and should be required reading.

There's just one major variable the report doesn't include: politics.

That's not a shot at CWCI – that's not their role, their mandate or their mission. But I couldn't help look at the numbers and think, "there's no way a closed formulary concept survives a fight in Sacramento."  

I'm always encouraging people to avoid cynicism and here I am dishing it out. But it's hard to imagine a politically diverse state like California (was that diplomatic enough?) implementing something remotely close to what Texas (a much more politically homogeneous state) did or what Washington (a monopolistic work comp system) implemented.

Keep in mind that even in Texas, the legislation that called for the creation of a closed formulary was signed into law in 2005. Full implementation of that closed formulary finally occurred in 2013. That's eight years of regulatory wrangling in a state where less than 10% of injured workers are represented by attorneys and employers need not bother with work comp at all if they so choose.

On the other hand, we learned this morning from the Oregon Workers' Compensation Premium Rate Ranking Summary that California is the most expensive state in the country. While there has always been a lot of debate about the methodology of this annual report, perhaps it's enough to create the burning platform California so desperately needs to get a handle on medical costs.

Michael Gavin is president of Prium, a managed care provider for the workers' compensation industry. This column was reprinted with his permission from the firm's Evidence Based blog.