Despite attempts by lawmakers to put into place rules to reducedrug cost and medical expenses, the cost of drugs within theworkers' compensation industry continues to rise nationwide. Itappears that ultimately there are few laws that can reverse thetrend of more expensive drugs used by more workers' compensationpatients.

For example: Several states have attempted to address theproblem of physician-dispensed drugs, which cost far more inoverhead expense than pharmacy-dispensed drugs. Most drugsdispensed to workers' compensation patients are of the highlyaddictive pain-related medication type (oxycodone, OxyContin),which are extremely expensive. The result: Increased costs thatinsurers pay out, which increases the costs of claims andeventually increases premiums paid by employers toinsurers. 

States Try to Tackle the Problem

States like Florida, with its very highrate of physician-dispensed drugs, along with Maryland and Kentucky, haveattempted to address this rising medical cost challenge with legaland 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 drugsoutright, most recently with three bills introduced in the 2011legislative session. Regardless of the outcome of that legislation,Florida, along with the rest of the country, will have to grapplewith the likelihood of permanently high medical costs. Drug costs,including the inflation of them when too many physicians dispensetoo many expensive ones, are just part of the rising medicalexpense challenge. In the world of workers' compensation claims,the problem is compounded by regulatory compliance and reportingrequirements.

Maryland's and Kentucky's experiences with Medicare set-asidesdemonstrate how the combination of rising costs and regulationquickly become a complex, expensive process that adds to states'and insurers' medical expense burden. Insurers and states currentlystruggle to conform to additional reporting requirements related toset-asides stipulated in successive Medicare Acts; the recent2007 Medicare,Medicaid and SCHIP Extension Act added even more. Marylandpassed emergency regulation in 2009 mandating that parties involvedin workers' compensation settlements potentially resulting infuture medical benefits obtain federal approval from Centers for Medicaid & MedicareServices (CMS) for Medicare set-aside agreements before theMaryland Workers'Compensation Commission can approve them.

The result? Delays, especially with Maryland's emergency rulenow in limbo pending public comment.

Undeterred by Maryland's experience, this year Kentuckylawmakers introduced a bill requiring CMS approval before asettlement can be awarded for future medical expenses. The bill issitting motionless in Kentucky while insurers and claimantsexperience delays in getting settlements approved and paid. Thelonger it takes to get a settlement approved, the longer theinsurer has to make additional benefit payments. In addition, thereporting of these set-asides adds additional processes to theworkflow of insurers, eliminating the efficiencies hard-won byputting into place technology solutions designed to optimize andstreamline claims operations.

Technology May Be the Answer

As state laws and regulatory initiatives progress—sometimes withunintended consequences as seen in the cases of Maryland andKentucky and perhaps even Florida—technology might be the only wayto truly address rising medical expenses. Workers' compensationmedical claims require compliance with a myriad ofmulti-jurisdictional regulations, reporting to multiple state andfederal organizations at various times (subject to constantchange), and a cost-containment approach that eliminates leakagewherever possible.

Insurers, however, can leverage technology to limit medical costincreases where they have the most control: their own claimsmanagement environment. The challenge is to incorporate complianceand reporting efficiently and accurately into the claims operationas part of an overarching cost containment strategy in the face ofmounting medical costs—not an easy task when penalties fornoncompliance are steep and opportunity costs associated withmissed savings even steeper.

Putting the right technology in place to reduce the impact ofrising drug and other medical expense costs on workers'compensation claims requires incorporating compliance, reportingand cost containment capabilities into the claims operation.

For instance, medical bill review software can be deployed toassist in writing rules to pend costly pharmacy bills to bereviewed and negotiated outside the standard review process usingpre-negotiated pharmacy benefit managers and specialized preferredprovider organization networks. With this technology, insurers (andultimately states) can address ever-increasing drug costs in ameaningful way.

An automated reporting solution that provides web-basedreporting of first and subsequent reports of injury and medicalbills helps lower claims reporting costs, increases claim accuracy,reduces manual processing and data entry, and maintains compliancewith state EDI reporting requirements. This technology helps claimsadministrators remain in compliance with multi-state regulationsand the constantly evolving CMS reporting, query and responseformats.

Taking medical bill review for workers' compensation to the nextlevel—opening up critical claims information to all partiesinvolved in the workers' compensation claim—is likely where thefuture of claims management is headed. In this scenario, claimsexaminers, managed care experts and the patient quickly and easilylocate participating network providers and other informationrelevant to a workers' compensation claims transaction in realtime. Injured workers receive the detailed information that willhelp them heal and return to work faster, and insurance payers areable to improve their claims processes by accessing the savingsavailable from pre-negotiated networks and providers, enabling amore efficient, cost-effective claims process.

Technology is the only sure way to tackle the rising drug costepidemic and steady increase in medical expenses. The law works inunpredictable ways, and regulation is a permanent part of theworkers' compensation landscape.