Medicare and Workers' Comp: NCCI's View

Monday, February 8, 2010 | 0

By Joe Paduda

Recently, NCCI released a white paper entitled "Medicare and Workers Compensation Medical Cost Containment." The report goes well beyond a discussion of the relationship between Medicare's physician and hospital reimbursement policies' impact on workers' comp; not that it doesn't address that timely topic in some detail, but it also details the unforeseen implications of using Medicare reimbursement, the impact of the growing Medicare deficit on future health care, and the demographic factors and how they are felt differently in work comp and Medicare.

Ok, pretty geeky stuff I'll admit, but interesting nonetheless. (Wait, isn't that contradictory?)

Here's my summary of takeaways you should know.

The Center for Medicare and Medicaid Services (CMS) projects health care as a percentage of GDP will go up one full point to 17.6% this year, driven by a declining economy while the demand for health care decline. US health care costs continue to be the highest in the world, by far.

Unlike group health, there's an increasing disparity between Medicare reimbursement for specialty care  and radiology and Work comp fee schedule rates. Comp pays relatively more than group health care for these services.

One of the (many) issues inherent in basing work comp on Medicare is that Medicare rates change for reasons specific to Medicare. As an example, the adoption of changes due to the budget neutrality factor legislation in 2008 changed the basic formula used in setting physician reimbursement. The changes increased relative value units (RVUs) and decreased conversion factors (CF). For those WC states that only adjust CFs, this may well have unintended consequences. The NCCI report stated "simply updating CFs for inflation and not offsetting the RVU change will give MARs that are about 8% higher than is likely to be intended."

One conclusion in the study really stood out: CMS says the vast majority of Medicare patients "have access to specialty care, so it follows that many wc specialty care MARs (fee schedules) are well above what is needed to assure access (for WC patients)."

As an example Illinois work comp pays 450% of Medicare, Alaska 510%, Connecticut 360% for surgery.
That does raise a question: If most reimbursement for WC is below the WC fee schedule, does that not at least partially negate the importance of the FS as a price setting mechanism?

Finally here's another finding worthy of consideration. The percentage of comp medical costs subject to physician fee schedules has declined from 58% in 2001 to 53% in 2006 (+/-). And, more and more procedures are being done on outpatient basis, and many states don't have outpatient reimbursement schedules that have limits on utilization or even address it like Medicare's methodologies do.

What does this mean for you?

Watch what happens with Medicare. Closely.

Joe Paduda is principal of Health Strategy Associates, an employer consulting firm based in Connecticut. This column was reprinted with his permission from his blog, http://www.managedcarematters.com.