Worker’s Compensation: Time for a Fee Schedule

By Chris Reader
WMC Director of Health and Human Resources Policy

This column was published in the 2017 edition of Wisconsin Business Voice.

A legislative battle is brewing in Madison to correct runaway prices for worker’s compensa­tion medical bills. This is an important issue for employers in Wisconsin of ev­ery size and from every industry, from trucking and manufacturing to retailers and municipalities.

Despite many good things hap­pening in the worker’s compensation system in Wisconsin, including low litigation rates, reduced number and severity of injuries, top-notch health­care quality and quick return to work for injured workers, medical billing is out of control. In fact, according to national experts that study worker’s compensa­tion throughout the country, costs in WI were 60 percent above average for injuries that required seven or more days off of work in 2014/15, the latest years studied, and 47 percent above average for all injuries, including those with less than seven days lost time. If you take a three year average, medical costs in Wisconsin remained the high­est in the nation at 39 percent above average. The overall amount spent on worker’s compensation medical bills in Wisconsin has more than doubled since 1994, from $314 million to $648 million in 2014.

It’s not just across state lines – the difference is also apparent when comparing worker’s compensation to group health pricing. Identical proce­dures cost much more if paid through worker’s compensation versus group health. Consider this example; if two individuals are outside shoveling the sidewalk after a blizzard, right next to each other, one in front of his house and one in front of a neighboring busi­ness, and they both suffer the same knee injury, see the same doctor and have the same knee arthroscopy, the arthroscopy on the knee that is covered by worker’s compensation will cost on average 237 percent more. That vari­ance is one of the highest in the nation.

At the same time that medical prices have gone up, Wisconsin employers and their workforces have come togeth­er to dramatically reduce the number of workplace injuries in our state. Due to investments in safety by employers, safety training and a workforce that aims to be safe on the job, workplace injuries have fallen dramatically over the last 20 years, from 219,975 an­nual injuries in 1994 to 93,229 injuries in 2014. If you combine that decrease with the increasing prices, we have witnessed a per claim price increase since 1994 of more than 450 percent.

While the primary goal of safety investments and training is to keep workers safe, a secondary effect of the dramatic reduction in injuries should be cost savings for employers on their worker’s compensation costs, freeing money for things like wage and benefit increases, worker training, new hires, capital investments, and research and development. This safety dividend has not occurred due to sharp climb in medical costs over the same time period.

Whether a business is self-insured or fully insured for worker’s compensation, this is an important issue. Self-insured employers understand the costs first­hand as they get the medical bill every time one of their workers is injured. For employers that carry worker’s com­pensation insurance and may not see individual bills, their insurance premium rates should be dramatically less today than they are, but the skyrocketing health care costs get baked into insur­ance premiums year over year, keeping rates higher than they would otherwise be. Even in 2018, when rates are fall­ing significantly due to a continued reduction in the number and severity of injuries, rates are still propped up higher than they should be because of increasing medical costs.

Fortunately there is a tried and tested solution for Wisconsin to implement. Forty-four states have implemented a medical fee schedule to control worker’s compensation medical costs. It’s time for Wisconsin to join those states and implement this common sense reform.

You might be wondering, even if you agree that costs are too high, why the state should be involved. Worker’s compensation is a state-mandated social program that Wisconsin imple­mented in 1911, the first state to do so, to ensure injured workers get treated and, if possible, back on the job quick­ly, without needing to sue employers. The tradeoff for employers not getting sued for workplace injuries is that they are almost universally required to take part. Insurance rates are set by state government. State government estab­lishes dispute procedures and governs how much injured workers receive in weekly benefits. The only aspect not set by state government is the cost of medical treatment employers are required to pay. And employers or their insurance companies must pay regard­less of what doctor the injured worker chooses for treatment. The bottom line is the state is involved in every aspect of worker’s compensation now, except for the medical prices.

Lawmakers are currently being asked to support a proposal put before them by the Worker’s Compensation Advi­sory Council (WCAC) that includes a fee schedule that would bring worker’s compensation pricing in line with group health rates, plus a small 2.5 percent amount to cover any administrative costs providers might encounter during the course of a worker’s compensation claim. The WCAC is a council compro­mised of five management representa­tives and five labor representatives, and every two years it recommends changes to the laws governing worker’s compensation. In full disclosure, I serve on the council as a management repre­sentative. Because of the diverse mem­bership on the council, which includes both WMC and the AFL-CIO, propos­als from it are generally regarded by lawmakers as good reforms and ad­opted without much fanfare. This year, however, we expect medical providers to oppose the council bill in an effort to protect the high prices they charge for worker’s compensation claims.

An employer coalition has also formed and is currently working to convince lawmakers to pass the fee schedule bill into law. If you agree that it’s time Wisconsin joins with 44 states and puts in place common sense con­trols on worker’s compensation medi­cal bills, reach out to your state law­maker today and voice your support. If enough employers voice their support, Wisconsin will finally join almost every other state and bring down runaway worker’s compensation pricing.

See the full issue of Wisconsin Business Voice.