Will Health Reform Help Or Hurt Workers' Comp?

There is already a bill before Congress seeking to revamp the way physicians are paid under Medicare, primarily by increasing compensation for cognitive services (office visits and the like) while slashing payments for procedures–surgeries, imaging, etc.

Regardless of whether that bill gets much traction, Medicare physician compensation will be dramatically different in 2010. The Sustainable Growth Rate formula calls for physician reimbursement to drop by around 21.5 percent in 2010, unless Congress takes action. Congress always takes action, but this year it is highly likely the "action" will be much more than a modest fee increase.

My sense is Congress will increase reimbursement for E&M codes (cognitive services). Since almost all workers' comp fee schedules are based on Medicare, any change in Medicare impacts comp reimbursement.

(NCCI is monitoring this closely. The change will not affect each fee schedule state immediately but will flow through the states as their fee schedules are updated.)

Watch Capitol Hill carefully. If Congress passes and President Barack Obama signs legislation altering Medicare reimbursement, clinic companies may be big winners. While it is unlikely this will be part of an overall reform bill, one never knows.

This will also be good news over the long term for workers' comp in general. Good comp medical care requires physicians to spend time listening to patients, as well as talking with employers, adjusters and case managers. Docs don't get paid (at least not adequately) for this time, so therefore any increase in reimbursement for office visits will encourage them to spend time with claimants instead of doing procedures.

At the very least, it will not discourage doctor-patient discourse.

o Facilities:

Expect Medicare to reduce reimbursement to hospitals. While the major hospital advocacy groups have "committed" to cutting costs by $160 billion over 10 years, at the end of the process I expect they'll have to pony up significantly more.

If and when these reductions go into effect, hospitals may well look more closely at other payers as they seek to make up for lost revenue. Workers' comp is a very soft target–while it makes up about 2 percent of hospital revenues, an analysis indicates it provides about 16 percent of the profit margin.

o Medical care delivery:

If there is a major reform initiative passed, there will likely be fundamental changes in the way health care is delivered, where it's provided, and how it's evaluated.

The recent recommendation by the Massachusetts Special Committee to change reimbursement from a fee-for-service model to a global fee arrangement is an indicator of where we will likely end up–but in five-to-10 years, and not for workers' comp.

Today, health care is delivered episode by episode–diagnosis, care plan, treatment, assessment, and repeat steps two-to-four until the situation is resolved. This episodic care model will (over time) change to one based on functional outcome management–focused on returning and maintaining patient functionality.

This will be in large part driven by the growing influence of, and need to develop a better model to address chronic care–one that will heavily emphasize patient education and monitoring.

It will also require a different location of care–the so-called "medical home." Some see this model (which refers not to a particular building, but to a coordinated, comprehensive approach to care) as a big part of the solution in workers' comp.

Studies indicate the model decreases medical errors and improves the quality of care delivered. Notably, the medical home is not a primary-care gatekeeper model–but rather one where the physician is tasked with, and responsible for coordinating care and educating the patient.

o Drugs:

If Congress calls for the secretary of the Health and Human Services Department to negotiate drug prices, this will affect workers' comp in one of two ways.

Either workers' comp payers will be able to piggyback on the federal government's negotiated rates (in which case per-pill prices will come down), or (more likely) workers' comp payers find their per-pill prices increase due to cost-shifting.

At this point, it is looking increasingly likely that the latter will occur, as the Obama administration and Congress are desperately seeking sources of cash to fund universal coverage, with drugs a pretty soft target. If pharmaceutical firms are forced to negotiate prices with the Centers for Medicare and Medicaid Services, the big manufacturers will look to recoup those lost revenues and margin by increasing prices to private payers–including workers' comp.

Workers' comp is a vulnerable target for cost-shifting. As the number of people without insurance has increased, the need for providers to make up revenue lost when delivering services to the uninsured and underinsured has grown more acute.

If health care reform including mandated universal coverage passes, there will be much less need for providers to look to workers' comp to make up for revenue shortfalls from charity care service delivery. That would be good news indeed.

Joseph Paduda is principal at Health Strategy Associates LLC in Madison, Conn. He may be reached at jpaduda@healthstrategyassoc.com.