Californias Painful New Path to Work Comp Reform

Sunday, September 28, 2003 | 0

By Steven MacDonald
Co-Founder & CEO of Matrix Healthcare Services

In the world of political reform, California tends to serve as America's trendsetter. While national headlines have tended to focus on California's ongoing political sideshows such as the Gary Condit scandal, and the 'Recall' soap opera of 2003, the state has managed to produce many substantive reforms behind the scenes that other states strive to emulate. For example, California's $250,000 cap on non-economic medical malpractice damages has emerged as a blueprint of sorts for other legislatures currently working to stem rapidly escalating professional malpractice premiums.

Of course other states have also been working (often fruitlessly) on efforts to contain the soaring costs of worker's compensation healthcare. Once again, California has emerged with a new plan designed to ground the skyrocketing costs of coverage that businesses buy to insure their employees in the event of workplace injury. Supporters of California's latest cost containment plan estimate a $6 billion savings in a $25-billion system. Regrettably, this time the California Legislature has passed a series of six bills (commonly known in political circles as AB 227 and SB 228) that will likely produce a rash of negative unintended consequences for employers, patients and payers.

Clearly, California's businesses need relief from workers' compensation premiums that have risen more than 100% annually in recent years. The state's new plan to limit chiropractic and physical therapy treatments and create new guidelines for treatment for work-related injuries may bring some such relief (although a majority of state lawmakers contend that the reforms will produce little if any savings). However, the decision to include the adoption a new fee schedule for workers' compensation prescription medications in this reform package violates the most basic rule of healthcare reform: cost containment is *not* an end in itself-if the measures used to contain costs ultimately compromise quality of patient care.

Revising the workers' compensation prescription fee schedule to pay reimbursements to the Medi-Care schedule appears to curb costs when analyzed on paper. However, when put into practice, this new fee schedule will dismantle timely, efficient, and affordable prescription processing for patients.

To understand why patients and ultimately, providers and employers will suffer, California needs to look no further than its friendly, pharmaceutically frustrated northern neighbor of Oregon.

Aggressive fee schedules in Oregon have resulted in pharmacies forcing patients to pay cash for their prescription medicine. This system of reimbursement has screeched to a grossly inefficient, costly and paper-clogged halt.

Oregon offers an important lesson to California and the rest of the nation. From the pharmacy's perspective, the revision of fee schedule spells essentially no guarantee of payment-at least not within a reasonably accepted timeframe. This logically leads pharmacies to require patients to pay out-of-pocket for injury-related prescription medicine. This is where hassle and inconvenience inevitably enters the picture from the patient's perspective. In the process, the patient suddenly loses access to affordable medicine. Of course the chain extends well-beyond diminished care for injured workers.

The end result satisfies no one.

Furthermore, California's workers' compensation initiative ultimately reinforces an expression popularized by former California Governor Jerry Brown: "Just because there's a problem: it doesn't mean government can make it better: it may make it worse."

Indeed, many key players in California's private sector have been working internally within the system to contain workers' compensation costs. More specifically, companies have been aggressively responding to the current cost challenge by adopting fee schedules and embracing pharmacy benefit manager partnerships. This effort alone was put in place to streamline check-writing and claim payment processing, and has already worked for many California Workers' Compensation payers, bringing pharmacy fees more in line with rates paid in many other U.S. states.

This positive, innovative, productive, outcome-focused movement is now halted by a government-imposed roadblock. That's because SB 228 and AB 227 undermine these progressive efforts-and in many instances will force these benefit managers to stop providing services to these workers compensation carriers altogether. Of course, this will place an onerous and completely needless burden on claims processors throughout the state. Remember that 10-20% of the workers' compensation charges incurred in California (and throughout the nation) are pharmacy-related. Squeezing the cost-containment-minded PBMs from the system reverts the claims payor from 21st Century automation to 20th Century manual paper-claim processing. This can effectively cripple any claim office and result in injured workers not receiving necessary prescription medicine.

Workers' Comp reform is without a doubt necessary. A serious look and adjustment to medical and pharmacy fee schedules should be an important element to any reform package. However, any cost savings achieved on paper by linking workers' compensation prescription schedules to the Medi-Cal schedule would, by any practical form of measurement be more than offset by the resulting conflict and inefficiency. Why, because unlike workers' compensation, Medi-Care doesn't require a dizzying maze of phone calls for authorization, they guarantee payment and they pay quickly.

California is indeed taking a bold step toward reform by passing AB 227 and SB 228. Unfortunately, the step was triggered by knee-jerk in a strikingly unstable recall-charged political atmosphere. No economic system can accommodate the equivalent of a 30% tax without a cascade of unwanted and unplanned results. Likewise, to assume that businesses are willing to continue to provide healthcare services to injured workers without any of guarantee payment in this environment is improbable.

George Eliot wrote in her novel, 'Mill on the Floss' that 'nature repairs her ravages'. Eventually, nature will always restore order after an earthquake. Nature will also clean up the dregs of a volcano, and grow new vegetation after a forest fire. In time, (and with a great deal of persistence from thoughtful advocates), the course of nature in California politics will lead injured workers, employers and insurance providers away from the painful new path they are now asked to take. The greatest challenges lie ahead.

-Steven Macdonald is co-Founder and CEO of Matrix Healthcare Services (www.matrixhcs.com). You may contact Steven at (877) 804-4900 or steve@matrixhcs.com.

The opinions of the author do not necessarily reflect the opinions of workcompcentral.com management or its editors. The article is published for the sole purpose of provoking thoughtful debate about the subject matter written.