Capitol Alert

2012 workers’ compensation reform cut medical costs

Construction workers finish off the roof on the northwest corner of the Capitol Yards Apartments in West Sacramento in 2014. Construction is one of the most dangerous jobs and on-job injuries are covered by the workers’ compensation system.
Construction workers finish off the roof on the northwest corner of the Capitol Yards Apartments in West Sacramento in 2014. Construction is one of the most dangerous jobs and on-job injuries are covered by the workers’ compensation system. jvillegas@sacbee.com

The 2012 overhaul of California’s multibillion-dollar system of compensating workers for job-related illnesses and injuries appears – as intended – to have reduced its medical costs, according to a new study by the Workers Compensation Research Institute.

The WCRI, based in Cambridge, Mass., said that in 2013, the first year the reform took effect, the average medical payment per claim declined by 5 percent after steady increases over the preceding half-decade. The decline in California also contrasted with medical cost increases in other states, the study noted.

The reform, sponsored by Gov. Jerry Brown and backed by both employers and unions, was aimed specifically at reducing medical costs and using the savings to increase cash benefits to disabled workers.

“For one example, one provision reduced fee schedule rates for services provided in ambulatory surgery centers from 120 percent of Medicare to 80 percent of Medicare,” the institute’s executive vice president, Ramona Tanabe, said in a statement.

“This may be related to the decrease in medical payments per claim in 2013. SB 863 (the reform bill) also eliminated separate reimbursement for implantable medical devices, hardware, and instruments for spinal surgeries. This could be another factor underlying the decrease reported.”

The WCRI study also credited the reform with moderating other costs of the system, including cash benefits and overhead.

The report complements another recent recommendation by the California Workers’ Compensation Insurance Rating Bureau for a small reduction in premiums charged by insurers to employers for covering benefits.

The recommended 5 percent reduction in the “pure premium advisory rate” also cited moderating costs, especially for medical care. California has the nation’s highest employer-paid workers’ compensation costs, averaging $3.48 per $100 of payroll. Other states range downward to as low as 88 cents in North Dakota.

The 2012 reform has drawn sharp criticism from medical care providers, who say they were unfairly singled out by other stakeholders in the system. It continued the tradition of making major changes in the system about once a decade.

The WCRI’s study is available only by sale at this website.

Call The Bee’s Dan Walters, (916) 321-1195. Back columns, sacbee.com/walters. Follow him on Twitter @WaltersBee.

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