What Will Federal Health Care Reform Mean for Workers’ Compensation in the U.S.?


 

Workers’ compensation professionals have been following the health care reform efforts in the U.S. Congress with mixed feelings: there is hope that it will do something about rapidly escalating medical costs and at the same time fear that it might “muck up” the special nature of treating occupational injuries. With passage of the central reform bill (H.R. 3590) by both houses of Congress on March 23, 2010, the consequences for workers’ compensation become a bit clearer.

The first thing to note is that there is no language in the law that would directly and explicitly affect workers’ compensation. From the beginning of bill-drafting in both the House and Senate, it was clear that workers’ compensation was not an area that should get mixed into the reform process. Many feared a massive lobbying effort by the P&C industry to have workers’ compensation removed from discussion. As a result, the final bill (H.R. 3590) references workers’ compensation twice: 1) Section 2401, in connection with a mandate to have certain community health service agencies carry workers’ compensation insurance, and 2) Section 10109, which calls for the Secretary of Health and Human Resources to develop rules that will facilitate the exchange of financial and administrative transactions for the purpose improving the operation of the health care system and reducing administrative costs. This second provision deserves watching because it invites comments to the Secretary on whether this rule should include property and casualty insurance, including workers’ compensation.

While the direct impacts are absent, there are several indirect effects worth discussing.

First, the short supply and patient backlogs of primary care providers in some rural areas and in poverty stricken areas may well get worse, particularly after 2014 when penalties for going uninsured and tax credits to subsidize insurance purchase first kick in. This may produce access problems for injured workers as well. This is particularly true in states with extremely low fee schedules and/or demanding paperwork requirements. Fortunately, the current supply trends for specialists are much better than for primary care doctors, so the surge of newly insured patients may not impact access to specialty care as much.

Second, pharmacy costs may continue to rise robustly due to extra demand from expanded Medicare Part D coverage and the complete absence of price controls or re-importation options.

Third, some durable medical devices for injury treatment will cost more due to an excise tax imposed on some devices. The effect here is modest.

Fourth, by presenting the states with many billions of unfunded costs through the expansion of Medicaid coverage (about 15 million of the uninsured will get coverage through Medicaid eligibility), the legislation promises to create additional stress on already strapped state budgets. In most states, workers’ compensation administrative agencies are currently reeling under severe state budget cuts. Operating with position vacancies, lack of funds for new service improvements and no funds for travel or training will continue to hamper service delivery.

The following list contains other more speculative impacts on workers’ compensation.

First, there may be a slight reduction in claims frequency rates because more workers will have access to health insurance. This is highly speculative since the connection between general health coverage and the propensity to file workers’ compensation claims is scant; what few studies there are do not show a connection. More likely is the possibility, albeit a weak one that injured workers will be healthier because they have greater access to care. Healthier individuals would thereby pose less risk of injury at work and if injured, recover faster. Examples of this would be if obesity, smoking, depression, and substance abuse could be remitted or better controlled by general health care. I contend that the connection is weak at best but still something to consider.

Second, the legislation may add fuel to the already vigorous study and experimentation directed at better models for managing the coordination and delivery of medical care. The bill funds pilot programs experimenting with physician and hospital services under one coordinated manager and recipient of payment, inspired by the efficiency of organizations such as Mayo Clinic.

In addition, the reform allocates $500 million or more a year for "comparative effectiveness research." This could be a boon to workers’ compensation if it did indeed foster more evidence-based protocols on how to best treat certain high-cost occupational injuries and diseases.

These pilots, experiments and new payment models are mainly directed at Medicare expenditures. Their impacts on workers’ compensation seem limited in the short run.

Third, the overall effects of health reform on the economy and job growth would affect the growth of covered employment, claim and payrolls. Here, as in other areas, it is difficult to sort out the short and long term affect of the legislation. Given the magnitude of the federal deficit, especially Medicare, and the fact that health expenditures affect nearly a fifth of the U.S.’s economic output, there is a lot to worry about and hope for. Like the rest of the population, workers’ compensation may just have to “wait, see, and respond accordingly” as the reform initiatives are implemented.


Please note: this is an opinion piece written by Greg Krohm, Executive Director of the IAIABC.

 


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