Medical Cost Trends in the Texas Workers Compensation System. Texas Department of Insurance Workers Compensation Research Group August 2004

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1 Medical Cost Trends in the Texas Workers Compensation System Texas Department of Insurance Workers Compensation Research Group August

2 Purpose of This Analysis To update the average medical cost per claim for all injuries through injury year 2003, oneyear post injury; and To analyze the average medical cost per claim for specific types of injuries through injury year 2002, one-year post injury. 2

injury; and To analyze the average medical cost per claim for

3 Data and Methods Data comes from Texas Workers Compensation Commission (TWCC) medical database, as of April To ensure an apples to apples comparison, TDI grouped all diagnoses into diagnostic buckets according to a methodology prescribed by the American College of Occupational and Environmental Medicine (ACOEM). Average medical costs per claim for all injuries were calculated for injury years at one-year post injury to ensure that all claims included in the analysis have the same claim maturity. Average medical costs for specific types of injuries were only calculated for injury years at one-year post injury since diagnostic groupings may change once insurance carriers have submitted all remaining medical data pertaining to 2003 and 2004 medical services to TWCC. 3

4 Key Medical Cost Findings for All Injuries 4

5 Claim, All Injuries, Injury Years , One-Year Post Injury $3,500 $3,000 $2,758 $2,951 $3,078 * $2,500 $2,288 $2,409 $1,500 $500 Injury Year 1999 Injury Year 2000 Injury Year 2001 Injury Year 2002 Injury Year 2003 Source: Texas Workers Compensation Commission, Medforms database, as of April 2004 and the Texas Department of Insurance, Workers Compensation Research Group, August Note: Average medical costs per claim do not include pharmacy costs. * Average medical cost estimates for injury year 2003 should be considered preliminary until insurance carriers have submitted all remaining medical data pertaining to 2003 and 2004 medical services to the Texas Workers Compensation Commission. 5

Compensation Research Group, August 2004. Note: Average medical costs per claim do not include pharmacy costs.

6 Claim, All Injuries, Injury Years , One-Year Post Injury Injury Year * Average Medical Cost Per Claim $2,288 $2,409 $2,758 $2,951 $3,078* Average Annual Increase in Medical Costs +5.3% +14.5% +7.0% +4.3%* Total medical cost increase from injury years 1999 to % Source: Texas Workers Compensation Commission, Medforms database, as of April 2004 and the Texas Department of Insurance, Workers Compensation Research Group, August Note: Average medical costs per claim do not include pharmacy costs. * Average medical cost estimates for injury year 2003 should be considered preliminary until insurance carriers have submitted all remaining medical data pertaining to 2003 and 2004 medical services to the Texas Workers Compensation Commission. 6

5% Source: Texas Workers Compensation Commission, Medforms database, as of April 2004 and the Texas Department of Insurance, Workers Compensation Research Group, August 2004.

7 Key Medical Cost Findings for Specific Types of Injuries 7

8 Claim, Ankle and Foot Soft Tissue Injuries, $1,619 $1,677 $1,600 $1,313 $1,361 $1,200 $800 $400 8

9 Claim, Hand and Wrist Nerve Compression Injuries, $7,000 $6,000 $5,000 $4,618 $4,716 $5,632 $5,922 $4,000 $3,000 9

10 Claim, Hand and Wrist Soft Tissue Injuries, $2,500 $2,336 $2,358 $1,710 $1,801 $1,500 $500 10

11 Claim, Hand and Wrist Superficial Trauma, $893 $783 $800 $673 $669 $600 $400 $200 11

12 Claim, Knee Internal Derangement Injuries, $6,000 $5,112 $5,621 $5,000 $4,573 $4,484 $4,000 $3,000 12

13 Claim, Low Back Nerve Compression Injuries, $14,000 $12,477 $12,000 $10,000 $9,260 $9,783 $10,760 $8,000 $6,000 $4,000 13

14 Claim, Low Back Soft Tissue Injuries, $4,500 $3,976 $4,236 $4,000 $3,500 $3,000 $3,223 $3,507 $2,500 $1,500 $500 14

15 Claim, Multiple Body Parts Soft Tissue Injuries, $3,000 $2,644 $2,905 $2,500 $2,153 $2,317 $1,500 $500 15

16 Claim, Neck Soft Tissue Injuries, $6,000 $5,053 $5,332 $5,000 $4,378 $4,575 $4,000 $3,000 16

17 Claim, Shoulder Soft Tissue Injuries, $6,000 $5,000 $4,000 $3,788 $4,113 $4,775 $5,221 $3,000 17

18 Claim, All Other Injuries, Injury Years , One-Year Post Injury $4,000 $3,500 $3,000 $2,860 $2,899 $3,353 $3,574 $2,500 $1,500 $500 18

19 Summary Based on the most recent TWCC medical data analyzed by TDI, the average medical cost per claim has increased approximately 35 percent from injury year 1999 to 2003, one-year post injury. This re-affirms the findings presented previously to this committee that medical costs per claim continue to be high. After analyzing the average annual increases in medical costs per claim, it appears that for injury years 2002 and 2003, there may be a trend towards reductions in workers compensation medical cost inflation. TDI will continue to monitor these numbers as new data are submitted to TWCC. The possible reasons for those reductions in medical cost inflation have not yet been quantified, however they may be the result of stricter utilization review practices by insurance carriers, stricter insurance carrier reviews of claim compensability, and reductions in the TWCC Medical Fee Guideline (effective August 1, 2003). 19

After analyzing the average annual increases in medical costs per claim, it appears that for injury years 2002 and 2003, there may be a trend towards reductions in workers compensation medical cost

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