2006 national council on compensation insurance, inc. all rights reserved workers compensation and...
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2006 National Council on Compensation Insurance, Inc. All rights Reserved
Workers Compensation and Group Health
Presented by
John Robertson, FCAS, MAAA
Casualty Actuaries of the Southeast MeetingApril 11, 2006
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• Workers Compensation (WC) medical costs per claim grew 9% to 12% per year over the last several years
• WC does control prices for non-hospital medical services through fee schedules in most states
• But medical costs can be high even with price controls due to overutilization
• Utilization controls are new to WC, but have been in place in Group Health (GH) for many years
• How do WC medical costs compare to those in GH?
Medical Costs
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Workers CompensationMedical Cost Trends
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1991-2004: Based on data through 12/31/2004, developed to ultimateBased on the states where NCCI provides ratemaking servicesExcludes the effects of deductible policies
$8
.3
$8
.4
$8
.2
$8
.9
$9
.4
$1
0.1
$1
1.1
$1
2.0
$1
3.2
$1
4.2
$1
6.0
$1
7.4
$1
9.0
$2
0.9
+10.3%
+9.1%
+8.7%
+12.3%
+8.1%+9.5%
+8.3%+10.1%
+7.4%+5.1%+9.0%
-2.1%+1.3%+6.8%
5
7
9
11
13
15
17
19
21
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Annual Change 1991–1995: +3.9%Annual Change 1996–2003: +9.2%
WC Medical Claim Cost TrendsRemain High in 2004
Lost–Time ClaimsMedicalClaim Cost (000s)
Accident Year
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4.53.6
2.83.2 3.5
4.14.6 4.7
4.0
5.1
7.4
10.1
8.3
9.5
8.1
12.3
8.7 9.1
10.3
4.4
0
2
4
6
8
10
12
14
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Change in Medical CPI Change in Medical Cost per Lost-Time Claim
Workers Compensation Medical Severity Has Been Growing Much Faster Than the
Medical CPILost–Time Claims
Percent Change
Medical severity 1995-2004: Based on data through 12/31/2004, developed to ultimateBased on the states where NCCI provides ratemaking services, excludes the effects of deductible policiesSource: Calendar year medical Consumer Price Index (CPI), Economy.com; accident year medical severity, NCCI
Year
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Workers Compensation Medical Losses Are More Than Half of Total Losses
All Claims—NCCI States
45%55%
1984
MedicalIndemnity
1994
51%49%
Indemnity Medical
2004
44% 56%Indemnity Medical
Based on data through 12/31/2004, developed to ultimateBased on the states where NCCI provides ratemaking servicesExcludes the effects of deductible policies
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Cost, Price, and Utilization
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Price Versus Costof Medical Services
• Cost = Price x Utilization
• Utilization = Quantity adjusted for Quality/Mix
• Cost and price are usually but not always correlated
• Utilization patterns are the difference
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Prices Per Service
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Prices for Individual Medical ServicesExcluding Hospitals
• Prices paid per service for WC are similar to those paid for GH
• States with a WC medical fee schedule showed a WC price level from 8% to 31% below that of GH
• States with no applicable fee schedule showed a WC price level 16% to 19% above that of GH
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States Studied
• Comparisons are based on workers compensation [WC] and group health [GH] data for 1997 to 2001
• Studied five states: Florida, Georgia, Illinois, Kentucky, Tennessee
• States selected to represent some variety of physician cost controls in the workers compensation system
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Comparison of State Controls
1 WCRI Managed Care & Medical Cost Cont Inventory 2001-2002, Table 3.8AWP: Average wholesale price for a prescription drugDAW: Dispense as written DRG: Diagnosis Related GroupRBVRS: Resource based relative value scale UCR: Usual, customary and reasonable
State
Basis of physician
fee schedule
Fees relative to Medicare
Initial choice of physician
Choice from
provider list?
Basis of prescription
drug fee schedule
Basis of hospital
fee schedule1
Authorized use of
managed care?
Illinois None NA Employee No NA NA No
Tennessee None NA Employee Yes NA NA No
Florida RBRVS 83% Employer No AWP + $4.18Per
procedureYes
Georgia UCR 146% Employee YesAWPx1.2 +
$4.00Per DRG Yes
Kentucky RBRVS 128% Employee NoWhen DAW
AWP + $5.00Cost based Yes
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WC Prices Are Lower Than GHin Fee Schedule StatesMedian Reimbursement per Service
Excluding Hospitals
$4
9
$6
9
$9
4
$6
3
$8
3
$7
1
$7
6
$7
9
$6
8
$7
2
$0
$25
$50
$75
$100
$125
FL GA IL KY TN
WC
GH
Illinois and Tennessee did not have fee schedules in timeframe of study
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Network Price Discounts Bigger ifThere Is No Fee Schedule
Median Reimbursement per ServiceExcluding Hospitals
$0
$25
$50
$75
$100
$125
FL GA IL KY TN
WC In-Network
WC Out-of-Network
GH In-Network
GH Out-of-Network
Illinois and Tennessee did not have fee schedules in timeframe of study
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Injuries Studied
• Price per service comparisons based on a market basket of professional services for five injuries
– Carpal Tunnel Syndrome
– Inguinal Hernia
– Back Strain or Sprain
– Open Wound of Fingers
– Contusion of Lower Limb
• Injuries selected to include
– Hard and Soft Tissue Injuries
– Cumulative and Traumatic Injuries
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Treatments Associated WithCarpal Tunnel Cases
CPT Code* Description of procedure0181 Anesthesia for lower arm surgery6472 Carpal tunnel surgery 7311 Radiologic exam (x-ray) of the wrist9586 Needle electromyography, one limb9590 Motor nerve conduction test9700 Physical or occupational therapy evaluation9701 Hot or cold pack therapy9702 Microwave therapy9703 Physical therapy treatment9711 Therapeutic exercises 9712 Electrical stimulation therapy9714 Extended physiotherapy9725 Manual therapy9726 Regional manipulation therapy 9753 Kinetic therapy9775 Muscle testing with exercise9907 Special supplies9920 Office visit, new patient9921 Office visit, established patient
CPT: Current procedural terminology* Truncated to four digits
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Strong Correlation Between WC and GH for Individual Treatments
Prices for Services on Carpal Tunnel CasesFlorida
$0
$100
$200
$300
$400
$500
$600
01
81
64
72
73
11
95
86
95
90
97
00
97
01
97
02
97
03
97
11
97
12
97
14
97
25
97
26
97
53
97
75
99
07
99
20
99
21
99
24
Me
dia
n P
ric
e
WC
GH
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Costs of Treating Injuries
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Overall Cost of Treating an Injury
• WC costs more than GH to treat similar injuries, mostly because of differences in by utilization
• WC has more intense and costly treatments earlier on than does GH
• Cost differences are smaller than average for acute injuries and trauma-related conditions like fractures or sprains
• Cost differences are greater for injuries subject to surgery and for chronic or pain-related injuries
• GH has a greater proportion of low cost treatments than does WC
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Medical Conditions Includedin Cost Analysis
Cost analysis is based on treatment of twelve conditions
InH-Inguinal hernia
Surgery Option
HID-Herniated intervertebral disc
CTS-Carpal tunnel syndrome
BRS-BursitisChronic & Pain Related
OSD-Other spinal and back disorders
SSC-Injury: spine and spinal cord
FSA-Fracture or sprain: ankle
Acute & Trauma Related
FDS-Fracture, dislocation, or sprain: humerus (head) or shoulder
FDH-Fracture, dislocation, or sprain: wrist or hand or fingers
LKL-Injury, knee, ligamentous
ILE-Injury, open wound, or blunt trauma: lower extremity
IUE-Injury, open wound, or blunt trauma: upper extremity
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Cost Analysis is Based onSuper-Episodes
• GH does not have a concept similar to “claim” in WC
• Sophisticated episode groupers have evolved for analyzing GH medical data, including Medstat’s Episodes Grouper™ (Grouper)
• As Grouper builds episodes, each is put into a “major diagnostic category” (MDC)
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• Grouper splits WC claims into several episodes
• Noticed that many WC injuries have a “core episode,” i.e., an episode that occurs exactly once and that is characteristic to the WC injury
• A “Super-Episode” is a combination of a unique core episode with other related treatment episodes within a claim for WC and Patient ID for GH
• Identified 12 core episode MDCs
• For each core episode, developed a customized list of related treatment MDC codes
Super-Episodes
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Assembling Super-Episodes
• Core Outliers: Remove WC claims/GH patients with any core episode for which paid is greater than the 95th percentile or less than the 5th percentile
• Time Window: Include only episodes within defined time periods relative to the core episode
• Related Care: Include only episodes with MDC in the related treatment list
• Related to Total: For WC, include only WC claims for which core plus related care accounts for 90% of all care over the time window
• Core to Related: Include only super-episodes for which the ratio of core episode paid to all related paid exceeds the 5th percentile for that ratio among the included WC claims
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Core Episode
Related Episodes
Time Window
Super-Episode:
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Kentucky WC Paid — Hernia External
$0
$1,000,000$2,000,000
$3,000,000$4,000,000
$5,000,000
Sta
rt
Co
reO
utli
ers
Tim
eW
ind
ow
Re
late
dC
are
Re
late
dto
To
tal
Co
re t
oR
ela
ted
Steps
Super-Episodes
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Methodology
• Most analysis from regression models
• Controlled for age, gender, time (inflation)
• Generally based on costs of treatments provided in first three months
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• Medical costs correlate with age
• Do costs also correlate with gender?
• Before we compare WC and GH costs, we need to adjust for cost differences due to differing demographics
Demographics Play a Role
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Cost Relativity by Age GroupAge Group 40-49=100%
88%
100%
109%117%
95%
0%
20%
40%
60%
80%
100%
120%
20-29 30-39 40-49 50-59 60-70
Costs Increase with Age
Percent
Based on WC and GH CombinedFive-State Average
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WC Claimants Are More Likely To Be Male
64%
36%
44%
56%
47%
53%
0%
10%
20%
30%
40%
50%
60%
70%
Male Female
WC Workforce GH
Five-State Average
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109%
102%97%
89%
101% 100%97%
90%
105%109%
95%
59%
50
75
100
125
INH BRS FSA FDS FDH HID IKL ILR IUE OSD CTS SSC
Based on WC and GH CombinedFive-State Average
Costs by Gender Are Less StraightforwardFemale Cost Relativity by Medical Condition
Male = 100%Percent
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Nearly Half of the GH Cases Are Below $500
Distribution of Costs forCarpel Tunnel [393] Cases in FL
0%5%
10%15%20%25%
30%35%40%
45%50%
$0-$500
$500-$1000
$1000-$1500
$1500-$2000
$2000-$2500
$2500-$3000
$3000-$3500
$3500-$4000
$4000-$4500
$4500-$5000
$5000-$5500
$5500-$6000
$6000-$6500
$6500-$7000
$7000-$7500
$'7500-$8000
GH
WC
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After Removing Cases Under $500WC Still Has Higher Costs
Distribution of Costs forCarpel Tunnel Cases > $500 in FL
Re
mo
ve
d
0%5%
10%15%20%25%
30%35%40%
45%50%
$0-$500
$500-$1000
$1000-$1500
$1500-$2000
$2000-$2500
$2500-$3000
$3000-$3500
$3500-$4000
$4000-$4500
$4500-$5000
$5000-$5500
$5500-$6000
$6000-$6500
$6500-$7000
$7000-$7500
$'7500-$8000
GH
WC
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WC/GH Cost Relativities by Condition
• All the 12 medical conditions show a similar pattern of relative costs across the 5 states
• Inguinal hernia (INH), degenerative disk disease (HID), and carpal tunnel (CTS) have cost relativities that are both the largest and the most variable by state of the 12 conditions studied
• Fractures, cuts, and knee injuries (FSA, FDS, FDH, ILR, IUE, and IKL) exhibit the lowest and the least variable cost relativities by state
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Acute Injury orTrauma Related
Chronic andPain Related
SurgeryOption
297%
192% 198% 203%
138%121% 122% 123% 121%
242%
122%
303%
0
50
100
150
200
250
300
350
INH HID CTS BRS OSD SSC FSA FDS FDH IKL ILR IUE
WC/GH Cost Comparison by Injury GroupWithin Three Months of Injury
GH = 100%Percent
Five-State Average
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WC/GH Cost Comparison by State
• All the states show a similar pattern of relative costs across the 12 medical conditions
• Illinois and Tennessee, the two states without workers compensation medical fee schedules, have the highest relativities for workers compensation above group health
• Georgia and Kentucky have somewhat more moderate (but still high) relativities
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WC/GH Cost Comparison by State
• Florida workers compensation costs are moderately higher than group health
• One would expect Florida to have a lower cost relative to group health based on it’s price advantage for physician services
• Recent legislation in Florida, effective last year, established a hospital fee schedule (SB 50A)
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153%
194%
153%
207%
122%
0
50
100
150
200
250
FL GA IL KY TN
WC Costs Are ConsistentlyGreater Than GH Costs
Within Three Months of InjuryGH = 100%
Percent
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227% 226%
354%
239%
419%
241%
186%
262%
151%181%
160%112%
146%122%
83%
0
100
200
300
400
500
600
FL GA IL KY TN
Surgery Option Chronic & Pain-Related Acute & Trauma-Related
Percent
WC/GH Cost Comparison by State and Injury Group
Within Three Months of InjuryGH = 100%
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Cost Comparisons Show Small Decline as Time Window Is Increased
WC/GH Cost Comparisonby State and Time Window
GH=100%
0%
50%
100%
150%
200%
250%
FL GA IL KY TN
3 mo 6 mo 1 yr 2 yrs
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• Prices paid by WC and GH for medical services are roughly comparable
• WC costs are higher than GH; differences are due to utilization
• WC costs for injuries where surgery is a likely option and chronic or pain-related injuries are significantly higher than those for GH
• The cost difference between WC and GH is lower in states with fee schedules than in states without
Summary