Changes in Indiana Workers’ Comp System Aimed at Slowing Rise in Medical Costs per Claim

As in other states with no restrictions on pricing in the workers’ compensation system, medical costs per claim are high and are rising in Indiana, according to a recent study by the Workers’ Compensation Research Institute in Cambridge, Mass.

Hospital costs, especially, were higher than the median in a comparison of workers’ comp experience in the 16 states in the study, which looked at data from 2006 to 2011. Workers’ comp payments to hospitals in Indiana averaged nearly $12,000 per claim in 2010, WCRI found.

“Hospital costs are an important driver of Indiana medical costs,” according to Carol A. Telles, a senior analyst at WCRI.

Hospital outpatient treatment has risen 51 percent, Telles said, while non-hospital treatment costs are growing 4 percent per year and hospital inpatient costs are growing 8 percent per year.

In a webinar focused on WCRI’s CompScope Medical Benchmarks for Indiana 14th Edition, Telles said, “prices paid under workers’ compensation were higher than prices paid under group health.”

For instance, a separate 2013 WCRI study comparing workers’ comp and group health outpatient costs in Indiana with other states showed that “Indiana payments under workers’ compensation were 26 percent higher than group health for shoulder episodes and 17 percent higher for knee surgical episodes,” according to the recently released benchmark study.

On the brighter side, Indiana workers in general “tended to return to work faster than in some of the other states study found,” Telles said. Also offsetting higher prices in Indiana is lower to typical utilization of medical care in the workers’ comp system.

Fee Schedule

Telles said legislation in 2013 and 2014 took steps to stem the cost increases in Indiana’s workers’ comp system. Legislation in 2013, House Enrolled Act 1320, created a fee schedule for billing facilities that goes into effect July 1, 2014. That fee schedule was set by consensus in the state’s General Assembly at 200 percent above Medicare. Physicians are not subject to the fee schedule.

HEA 1320 also capped the price of repackaged drugs at an average wholesale price set by the original manufacture. That provision went into effect on July 1, 2013.

Also effective July 1, 2013, was a cap on the price of medical implants, set at actual cost plus 25 percent.

HEA 1320 additionally enacted indemnity benefit increases that will be phased in over three years, between July 1, 2014, and July 1, 2016.

Senate Enrolled Act 294 passed this year tweaks HEA 1320 to establish a distinction between a medical service provider and a medical service facility; places restrictions on physician dispensing of medication; and limits physician reimbursements for dispersed medications.

WCRI noted in its benchmark study that at 200 percent of Medicare, the Indiana fee schedule is higher than that of most other states that use a Medicare-based system of reimbursement. However, the study pointed out, system stakeholders in Indiana “indicated that current hospital payments are often much higher than 200 percent of Medicare.”

In a statement announcing the publication of its most recent 16-state study, WCRI said it will take a while before the effects of the legislative changes will be apparent.

“Future studies will help policymakers measure the effectiveness of the reforms on the costs and growth of medical care for injured workers in Indiana,” said Ramona Tanabe, WCRI’s deputy director and counsel.

The states included in the study are Arkansas, California, Florida, Illinois, Indiana, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Texas, Virginia and Wisconsin. They represent nearly 60 percent of the workers’ comp benefit payments in the United States, according to WCRI.