Despite attempts by lawmakers to put into place rules to reduce drug cost and medical expenses, the cost of drugs within the workers’ compensation industry continues to rise nationwide. It appears that ultimately there are few laws that can reverse the trend of more expensive drugs used by more workers’ compensation patients.
For example: Several states have attempted to address the problem of physician-dispensed drugs, which cost far more in overhead expense than pharmacy-dispensed drugs. Most drugs dispensed to workers’ compensation patients are of the highly addictive pain-related medication type (oxycodone, OxyContin), which are extremely expensive. The result: Increased costs that insurers pay out, which increases the costs of claims and eventually increases premiums paid by employers to insurers.
States Try to Tackle the Problem
States like Florida, with its very high rate of physician-dispensed drugs, along with Maryland and Kentucky, have attempted to address this rising medical cost challenge with legal and regulatory mechanisms. The results have been mixed; clearly, the unpredictable process of lawmaking is not a cure-all.
Florida has attempted to ban physicians from dispensing drugs outright, most recently with three bills introduced in the 2011 legislative session. Regardless of the outcome of that legislation, Florida, along with the rest of the country, will have to grapple with the likelihood of permanently high medical costs. Drug costs, including the inflation of them when too many physicians dispense too many expensive ones, are just part of the rising medical expense challenge. In the world of workers’ compensation claims, the problem is compounded by regulatory compliance and reporting requirements.
Maryland’s and Kentucky’s experiences with Medicare set-asides demonstrate how the combination of rising costs and regulation quickly become a complex, expensive process that adds to states’ and insurers’ medical expense burden. Insurers and states currently struggle to conform to additional reporting requirements related to set-asides stipulated in successive Medicare Acts; the recent 2007 Medicare, Medicaid and SCHIP Extension Act added even more. Maryland passed emergency regulation in 2009 mandating that parties involved in workers’ compensation settlements potentially resulting in future medical benefits obtain federal approval from Centers for Medicaid & Medicare Services (CMS) for Medicare set-aside agreements before the Maryland Workers’ Compensation Commission can approve them.
The result? Delays, especially with Maryland’s emergency rule now in limbo pending public comment.
Undeterred by Maryland’s experience, this year Kentucky lawmakers introduced a bill requiring CMS approval before a settlement can be awarded for future medical expenses. The bill is sitting motionless in Kentucky while insurers and claimants experience delays in getting settlements approved and paid. The longer it takes to get a settlement approved, the longer the insurer has to make additional benefit payments. In addition, the reporting of these set-asides adds additional processes to the workflow of insurers, eliminating the efficiencies hard-won by putting into place technology solutions designed to optimize and streamline claims operations.
Technology May Be the Answer
As state laws and regulatory initiatives progress—sometimes with unintended consequences as seen in the cases of Maryland and Kentucky and perhaps even Florida—technology might be the only way to truly address rising medical expenses. Workers’ compensation medical claims require compliance with a myriad of multi-jurisdictional regulations, reporting to multiple state and federal organizations at various times (subject to constant change), and a cost-containment approach that eliminates leakage wherever possible.
Insurers, however, can leverage technology to limit medical cost increases where they have the most control: their own claims management environment. The challenge is to incorporate compliance and reporting efficiently and accurately into the claims operation as part of an overarching cost containment strategy in the face of mounting medical costs—not an easy task when penalties for noncompliance are steep and opportunity costs associated with missed savings even steeper.
Putting the right technology in place to reduce the impact of rising drug and other medical expense costs on workers’ compensation claims requires incorporating compliance, reporting and cost containment capabilities into the claims operation.
For instance, medical bill review software can be deployed to assist in writing rules to pend costly pharmacy bills to be reviewed and negotiated outside the standard review process using pre-negotiated pharmacy benefit managers and specialized preferred provider organization networks. With this technology, insurers (and ultimately states) can address ever-increasing drug costs in a meaningful way.
An automated reporting solution that provides web-based reporting of first and subsequent reports of injury and medical bills helps lower claims reporting costs, increases claim accuracy, reduces manual processing and data entry, and maintains compliance with state EDI reporting requirements. This technology helps claims administrators remain in compliance with multi-state regulations and the constantly evolving CMS reporting, query and response formats.
Taking medical bill review for workers’ compensation to the next level—opening up critical claims information to all parties involved in the workers' compensation claim—is likely where the future of claims management is headed. In this scenario, claims examiners, managed care experts and the patient quickly and easily locate participating network providers and other information relevant to a workers' compensation claims transaction in real time. Injured workers receive the detailed information that will help them heal and return to work faster, and insurance payers are able to improve their claims processes by accessing the savings available from pre-negotiated networks and providers, enabling a more efficient, cost-effective claims process.
Technology is the only sure way to tackle the rising drug cost epidemic and steady increase in medical expenses. The law works in unpredictable ways, and regulation is a permanent part of the workers’ compensation landscape.