Casualty Actuarial Society

Workers Compensation: Recent Research on Medical Costs

Wednesday, May 23, 2012: 8:00 a.m.
Palm 3A (Arizona Grand Resort)
The panelists will discuss recent research on Workers Compensation medical costs.

"Impact of Changes to Physician Fee Schedules in Workers Compensation: Evidence From 31 States," by Frank Schmid The study provides evidence of the impact of changes to physician fee schedules in workers compensation.  The data set comprises transactions of workers compensation physician services from 31 states for the time period 2000 through 2010; services provided by hospitals and ambulatory surgical centers are excluded.  It is found that in response to a fee schedule increase, price and quantity of physician services combined increase by about 80 percent of the legislated price level change, on average.  The magnitude of this response varies with the difference between fee schedule prices and actual prices (price departure).  In response to a fee schedule decrease, price and quantity taken together decline by about 50 percent of the legislated price level change, on average.

"The Impact of Health Care Reform on Workers' Compensation Medical Care:  Evidence from Massachusetts," by Paul Heaton 

Although it is widely recognized that health care reform has the potential to affect the volume and cost of medical care received through the workers' compensation (WC) system, to date there is little empirical evidence of this effect. This study used the experience of Massachusetts, which implemented a health care reform package with several provisions similar to those in the Patient Protection and Affordable Care Act of 2010, to empirically estimate how health reform impacts WC hospital care. It was found that WC billing frequency for both emergency room visits and inpatient hospitalizations fell by 5 to 10 percent as a result of reform, but that billed charges and treatment volume were not measurably affected. These impacts were observable among patients with more costly injuries and persisted even after various approaches were used to account for the effects of the economic downturn that began at the end of 2007. While many outstanding questions about the impacts of health reform on WC remain, this early quantitative, empirical evidence suggests that reform may reduce medical costs borne by the WC system.

Frank A. Schmid, Director and Senior Economist, NCCI, Inc.
Brian Ingle, Executive Vice President, Willis Re, Inc.
Frank A. Schmid, Director and Senior Economist, NCCI, Inc.
  • Frank Schmid Fee Schedule Changes CAS Spring Meeting 2012.pdf (1.5 MB)
  • WillisReRand_HealthcareReform_WC_CAS052312.pdf (582.2 kB)
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