1 Testimony before Texas Senate Select Interim Committee on Workers' Compensation April 29, 2004 About WCRI Independent, not-for-profit research organization, established 1983 Has diverse membership support Studies are peer-reviewedreviewed Resource for public officials and stakeholders Published well over 100 studies on WC Content-rich website: www.wcrinet.org
2 WCRI Approach Mission: Be a catalyst for improving WC systems by providing the public with high- quality, credible information on important public policy issues. Studies focus on delivery system Not make recommendations nor take positions on issues WCRI s Benchmarking Tools CompScope TM 4 th Edition Benefit amounts Timeliness Medical costs Disability duration Attorney involvement Vocational rehabilitation use Benefit delivery expenses
3 WCRI s Benchmarking Tools 4 th Edition Anatomy 4th Edition Medical costs Medical prices Utilization of services By provider type By type of service CompScope TM WCRI s Benchmarking Tools Worker Outcome Surveys 2nd Edition 4 th Edition 4th Edition CompScope TM Anatomy Access to health care Recovery of health and functioning Return to work Yes or no Speed Sustainability Earning recovery Satisfaction with health care
4 Lessons from Recent WCRI Studies Benchmarks for Texas, 4 th Editions CompScope Anatomy of medical costs & utilization Worker outcomes in Texas Fee schedule benchmarks Impact of networks Comparison of chiropractic and physician- directed physical medicine care DBE: Powerful Database and Strategic Asset for Texas Robust sample 13 million claims 24-60% of claims in each state Accident years 1994-2001, as of 2002 States represent > 60% of U.S. WC benefits Representative Voluntary and residual market Self-insured employers State funds
5 A Key Value Proposition for Workers Compensation Systems Costs to employers should be directly related to the outcomes received by injured workers States with higher costs should deliver better outcomes to workers Increases in employers costs should produce improved outcomes for workers Unnecessary costs those that do not improve outcomes to injured workers Focus of public policy actions reduce unnecessary costs paid by employers Findings from Three Benchmark Studies for Texas Texas employers pay among the highest cost per claim among 12 large states Sustained rapid growth in cost per claim Major cost drivers are: Medical cost per claim and poor return to work outcomes Texas workers achieve poor outcomes on most measures among 4 states studied
6 Texas Cost per Claim among Highest Average Cost per Claim $10,000 $8,000 $6,000 $4,000 $2,000 $0 IN WI CT PA NC TN MA IL FL LA TX CA 1999/2002 Claims, Adjusted for Injury and Industry Mix and Wages 3 rd Year of Double-Digit Growth in Cost per Claim in Texas 14 Annual % Change 12 10 8 6 4 2 0 96/97 to 97/98 97/98 to 98/99 98/99 to 99/00 99/00 to 00/01 00/01 to 01/02 Percentage Change in Average Cost per Claim at 12 Months' Experience, Not Case-Mix Adjusted
7 TX Medical Payments per Claim Much Higher Than Median State Avg. Medical Payment/Claim $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 MA CT WI PA IN NC IL* FL TN CA LA TX 1999/2002 Claims with > 7 Days Lost Time, Adjusted for Injury and Industry Mix * Balance Billing Allowed Continued Double-Digit Growth in Medical Payments per Claim in TX Annual % Change 14 12 10 8 6 4 2 0 96/97 to 97/98 97/98 to 98/99 98/99 to 99/00 99/00 to 00/01 00/01 to 01/02 Percentage Change in Average Medical Payments per Claim at 12 Months' Experience, Not Case-Mix Adjusted
8 Texas Is Relatively Unique: Sustained Rapid Growth in Medical Costs/Claim Annual Ave. % Change 15% 10% 5% 0% CT PA MA NC IN FL WI TN LA CA TX Average Medical Payments per Claim at 12 Months' Experience, Not Case-Mix Adjusted 1996/1997-1999/2000 1999/2000-2001/2002? IL Texas Duration of Temporary Disability among the Highest Temporary Disability (Weeks) 30 25 20 15 10 5 0 WI IN TN IL CT FL NC TX CA 1999/2002 Claims with > 7 Days Lost Time, Adjusted for Injury and Industry Mix and Wages
9 Duration of Temporary Disability Grew in Texas Since 1998/1999 Temporary Disability (Weeks) 20 15 10 5 0 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 Claims with > 7 Days Lost Time at 12 Months' Experience, Not Case-Mix Adjusted Annual Ave. % Change Duration of Disability Grew in Most States after 1999 10% 8% 6% 4% 2% 0% -2% -4%? IN PA TN LA MA WI FL TX IL NC CT CA Weeks of Temporary Disability, Claims > 7 Days Lost Time at 12 Months Experience, Not Case-Mix Adjusted 1996/1997-1999/2000 1999/2000-2001/2002
10 Continued Rapid Growth in Indemnity Benefits per Claim 16 Annual % Change 12 8 4 0 96/97 to 97/98 97/98 to 98/99 98/99 to 99/00 99/00 to 00/01 00/01 to 01/02 Percentage Change in Average Indemnity Benefits per Claim at 12 Months' Experience, Not Case-Mix Adjusted Frequency of PPD/Lump-Sum Claims Grew Steadily in Texas Year 1996/1997 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 % Claims with PPD or Lump Sum Payments 33.3 34.1 35.2 36.6 36.4 37.7
11 Drivers of Medical Costs in Texas Utilization, utilization, utilization By non-hospital providers Especially by chiropractors Average Prices Are Lower and Utilization Higher Than Typical State TX 12-State Median % Diff Average payment/claim $9,314 $6,736 +38% # services/visit 3.9 3.4 +15% # visits/claim 33.2 20.2 +64% Average price/service $75 $109-31% 2001/2002 Claims with > 7 Days Lost Time (Injury/Industry Mix Adjusted)
12 More Visits/Claim to Physicians & Chiropractors, for Similar Claims Visits per Claim TX 12-State Median Difference Physician 12.0 8.9 35% Chiropractor 38.4 19.8 94% PT/OT 15.4 14.6 5% 2001/2002 Claims with > 7 Days Lost Time (Injury/Industry Mix Adjusted) Texas Physicians Treated with More Office Visits/Claim, for Similar Claims 10 Visits per Claim 8 6 4 2 0 WI IN TN NC CT MA FL IL LA PA CA TX 2001/2002 Claims with > 7 Days Lost Time Injury and Industry Mix Adjusted
13 Texas Chiropractors Received Much Higher Payments/Claim Than in the Typical State Payments per Claim $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 Texas 12-State Median $0 Physician Chiropr. PT/OT Hospital 2001/2002 Claims with > 7 Days Lost Time, Injury and Industry Mix Adjusted Compared to Chiropractors in Other States, Texas Chiropractors Treated in 30% of claims 5-10% typical Received revenue/claim that is 4 times higher Treated with average of 38 visits 18-21 visits is typical Received average prices that are 50% higher Also, % of WC medical dollar paid to Texas chiropractors grew since 1996 from 7% to 20%
14 TX Chiropractors Received Much Higher Payment/Claim vs. Chiropr. in Typical State $7,000 Payment per Claim $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 FL NC TN IN MA CT WI PA LA IL CA TX 2001/2002 Claims with > 7 Days Lost Time Injury and Industry Mix Adjusted TX Chiropractors Treated in More Claims Than Chiropractors in Typical State 35% Percent of Claims 30% 25% 20% 15% 10% 5% 0% IN NC TN FL LA CT PA IL MA WI CA TX 2001/2002 Claims with > 7 Days Lost Time Injury and Industry Mix Adjusted
15 % of Claims Involving Texas Chiropractors Doubled Since 1996 35% Percent of Claims 30% 25% 20% 15% 10% 5% 0% 1996 1997 1998 1999 2000 2001 Claims with > 7 Days Lost Time Injury and Industry Mix Adjusted TX Chiropractors: More Visits/Claim Than Chiropractors in Other States Avg. Visits per Claim 40 35 30 25 20 15 10 5 0 TN FL NC IN LA WI CT MA IL PA CA TX 2001/2002 Claims with > 7 Days Lost Time Injury and Industry Mix Adjusted
16 Texas Chiropractors Receive 20% of Total Medical Payments 1-3% Is Typical % of Medical Payments 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% IN TN NC FL LA CT IL PA WI MA CA TX 2001/2002 Claims with > 7 Days Lost Time Injury and Industry Mix Adjusted Share of Medical Payments to Chiropractors Grew from 7% to 20% 25% Percent of Payment 20% 15% 10% 5% 0% 1996 1997 1998 1999 2000 2001 1996/1997-2001/2002 Claims with > 7 Days Lost Time Injury and Industry Mix Adjusted
17 Findings from Three Benchmark Studies for Texas Texas employers pay among the highest cost per claim among 12 large states Sustained rapid growth in cost per claim Major cost drivers are: Medical cost per claim and poor return to work outcomes Texas workers achieve poor outcomes on most measures among 4 states studied Major Findings for Texas TX workers report similar injury severity TX workers report similar or poorer outcomes than in MA and PA Poorer recovery of physical health Higher percent did not have substantial and sustainable RTW Workers report similar or less access to care Workers report similar or less satisfaction with care
18 Four States Co-sponsored Texas Research & Oversight Council California State WC Agency Pennsylvania State WC Agency Massachusetts State WC Agency Expect to add 4-8 more states in 2004 More TX Workers Do NOT Have Substantial RTW Than CA/MA/PA 30 25 % of Workers 20 15 10 5 0 TX CA MA PA No RTW No RTW No Substantial RTW No Substantial RTW
19 Factors Shaping Substantial RTW Not perceived physical severity of injury Two keys to substantial RTW Physical recovery Workers with pre-injury attributes indicating disadvantage in labor market Low education, low wage, low tenure, interviewed in Spanish TX Workers More Likely to Report Big Problems with Access to Desired Services % of Workers with Big Problems 16 14 12 10 8 6 4 2 0 Initial Provider TX CA MA PA
20 TX Workers Less Likely to Report Very Satisfied with Overall Care 60 50 % of Workers 40 30 20 10 0 TX CA MA PA TX Workers More Likely to Report Wanting to Change Providers Due to Dissatisfaction % of Workers 35 30 25 20 15 10 5 0 Initial Provider TX CA MA PA
21 Reflections on Key Value Proposition for Texas WC System Costs to employers should be directly related to the outcomes received by injured workers States with higher costs should deliver better outcomes to workers Increases in employers costs should produce improved outcomes for workers Despite higher medical costs/claim in Texas Workers report similar injury severity Workers report similar or poorer outcomes Lessons from Recent WCRI Studies Benchmarks for Texas, 4 th Editions CompScope Anatomy of medical costs & utilization Worker outcomes in Texas Fee schedule benchmarks Impact of networks Comparison of chiropractic and physician- directed physical medicine care
22 WCRI WC Fee Schedule Study Compare fee schedules to state Medicare and across states Based on 2001 fee schedules Today: also compare 2001 and 2004 Texas fee schedule Outline Virtue of new Texas approach What is the right fee schedule level?
23 Virtue of New Approach New approach: Pays all providers in proportion to expense and effort Ensured by RBRVS & single conversion factor Creates neutral utilization incentives Old approach: Created incentives for more invasive and specialty care Old Approach Creates Incentives for Invasive and Specialty Care 80% % above Medicare 60% 40% 20% 0% -20% E&M Surgery Radiology
24 New Approach Creates Neutral Incentives for Utilization 80% % above Medicare 60% 40% 20% 0% -20% E&M Surgery Radiology What Is Right Fee Schedule Level? Fees set at lowest rate consistent with access to timely, quality care How identify this level? Compare to other major Texas payors WC may require premium for some services Limited evidence on impact on access New fee schedule should improve access to primary care; debate is about specialty care
25 WC Evaluation & Mgmt. Fees (2001) -10 below to 25% above Medicare % Different from State Medicare Fee Schedule 150% 125% 100% 75% 50% 25% 0% -25% -50% MA CA PA TX 2001 TX 2004 Despite Higher Fee Schedule, More TX Workers Report Big Problems in Access to Provider than MA % of Workers with Big Problems 14 12 10 8 6 4 2 0 Initial Provider TX CA MA PA
26 Lessons from Recent WCRI Studies Benchmarks for Texas, 4 th Editions CompScope Anatomy of medical costs & utilization Worker outcomes in Texas Fee schedule benchmarks Impact of networks Comparison of chiropractic and physician- directed physical medicine care Networks of Providers: Findings of Studies by WCRI and Others Function Price discounts Utilization: provider credentialing, treatment guides Networks lower medical costs Evidence from FL, WA, OR, CA, CT, TX Other network impacts No difference in health [WA] Lower satisfaction with care [FL, OR, WA] Shorter duration of disability [CA, CT, TX, WA]
27 WCRI Network Study: Medical Costs Lower in Network Cases % Network Medical Cost Differential, Indemnity Claims 70 60 50 40 30 20 10 0 Backs ILC Other Inj Texas Calif Conn Network Differential Driven by Lower Utilization % Network Medical Cost Differential, Indemnity Claims 250 200 150 100 50 0-50 -100-150 Backs ILC Other Inj. Lower Prices Fewer Services Provider/Svc Mix
28 Network Penetration by State % Payments Paid to Network Providers 100% 80% 60% 40% 20% TX 0% 1 2 3 4 5 6 7 8 9 10 11 12 Months from Injury Network Penetration by State % Payments Paid to Network Providers 100% 80% 60% 40% 20% 0% 1 2 3 4 5 6 7 8 9 10 11 12 Months from Injury CT FL GA PA CA TX MN WI MA
29 Employer Control of Change Increases Network Impact % Payments Paid to Network Providers 100% 80% 60% 40% 20% 0% 1 2 3 4 5 6 7 8 9 10 11 12 Months from Injury Employer Employee Lessons from Recent WCRI Studies Benchmarks for Texas, 4 th Editions CompScope Anatomy of medical costs & utilization Worker outcomes in Texas Fee schedule benchmarks Impact of networks Comparison of chiropractic and physician- directed physical medicine care
30 Cases Analyzed - Back SSP Defined as back sprains, strains, and non- specific pain of spine, including Back strains and sprains Non-specified back disorders Non-allopathic lesions Include cases with appropriate primary ICD9s Exclude cases with discs, surgery, and complicating conditions Back SSP Cases Included in Study Relatively homogeneous cases 52,000 open/closed claims From 5 large insurers/tpas 55 states (CA,CT,FL,MA,TX) w/guidelines 1997 injuries with treatment through 6/1999 Comparison Cases treated only by chiropractors Cases treated only by physician who directed to physical medicine services Medical costs include ALL medical costs
31 Chiropractor Cases Cost More Than MD Cases to Get Same Outcome % Medical Cost Difference 30% 20% 10% 0% -10% -20% CA CT FL MA* TX *Not comparable because codes are different Chiropractor Cases Cost More Than MD Cases to Get Same Outcome 40% % Total Cost Difference 30% 20% 10% 0% -10% -20% CA CT FL MA* TX *Not comparable because codes are different
32 Lessons from Recent WCRI Studies Benchmarks for Texas, 4 th Editions CompScope Anatomy of Medical Costs & Utilization Worker Outcomes in Texas Fee Schedule Benchmarks Impact of Networks Comparison of chiropractic and physician- directed physical medicine care