Wisconsin surgeons performing the same arthroscopic knee surgery on two groups of patients in recent years collected on average $1,573 from one group and $3,728 from the other.
The lower amount came from those with a group health insurance policy, while the higher amount came from those injured on the job and covered under the state’s workers’ compensation system.
The price discrepancy, reported in a recent study of medical payments in Wisconsin, is fueling discussion about the cost to businesses of workers’ comp insurance. In an unusual move, several Republican lawmakers are considering changes to the system.
Wisconsin’s workers’ compensation system is considered one of the best in the country. Injured workers can access quality health care and return to work quickly, keeping costs low.
The average duration of workers’ comp benefits is 60 days, the shortest of all the states and half the national average, according to recently published data from the National Council on Compensation Insurance.
Typically the state’s Workers’ Compensation Advisory Council, with representation from management and labor, sets workers’ comp policy by bargaining changes and recommending bills to the Legislature. Lawmakers often adopt the proposals without changes in order to insulate the system from political swings in leadership.
But Republican legislators led by Rep. Dan Knodl, R-Germantown, are reviewing the issue as part of a larger effort to make the state more business friendly. The Legislature’s labor committees held a hearing on the topic on July 31.
Knodl, the Assembly committee chairman, said he has held several private meetings with interested legislators since early summer and plans to send recommendations to the council later this month on possible cost-saving changes.
“I’m not saying anything is broken,” Knodl said. “There will be some positive reform that labor and management are going to be happy with and will strengthen an already good system.”
Assembly Speaker Robin Vos, R-Rochester, compared the workers’ comp issue to unemployment insurance. During this year’s budget process the Legislature made changes to the program — reducing benefits to employees in order to shore up state reserves drained during the recession — without the support of a related labor-management advisory council.
“As we saw with unemployment, the costs were spiraling out of control,” resulting in costs shifting to employers, Vos said.
“I’d like to make sure the (Workers’ Compensation Advisory) Council has every chance to have those negotiations among themselves,” Vos said. “If they can’t reach some consensus, the Legislature might have to act.”
One of the first states
Wisconsin in 1911 became one of the first states to adopt a workers’ comp system, which ensures injured employees receive medical care paid for by their company as a way to avoid costly litigation.
The state requires almost all businesses to buy private workers’ comp insurance or self-insure and has regulations that encourage employers to bring workers back and employees to return quickly. Employers pay higher rates if employees don’t return near their previous salary, and weekly cash benefits through the system are low enough that employees prefer returning to work as soon as possible.
Workers injured on the job can see the medical provider of their choice. If the injury causes a long-term disability, the provider rates the severity and the insurance company provides a regular payment. Disagreements about the severity are resolved by a division in the state Department of Workforce Development.
In 2011, workers filed nearly 98,000 claims, not including companies that self-insure.
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The system works well, so it’s unclear why major changes would be necessary, said Mark Grapentine, a non-voting representative for the Wisconsin Medical Society on the advisory council.
“When you talk with other states and other states’ workers’ comp systems, it is generally an albatross on their health care world,” Grapentine said. “Whereas in Wisconsin it’s held up as providing some of the best health care in the country that can be touted as a reason to do business in Wisconsin.”
Injured Wisconsin workers express the highest satisfaction rates with health care on surveys, according to the Workers’ Compensation Research Institute, based in Cambridge, Mass.
Wisconsin’s litigation rate is among the lowest in the nation, with 3.7 percent of claims involving a defense attorney.
Premiums paid by employers also have remained stable over the past decade with annual increases averaging 0.1 percent, according to the Wisconsin Compensation Rating Bureau, which helps set workers’ comp premiums based on historical cost data.
At the same time, medical costs have risen faster in Wisconsin than in states with similar systems, according to WCRI. Between 2006 and 2011, the average annual increase in medical costs was 8.6 percent in Wisconsin, while the median increase among 16 states studied was 5.8 percent.
Medical costs skyrocket
In a review of nonhospital prices paid in 25 states in early 2012, Wisconsin’s prices were the highest. The state also had the largest percent increase in medical costs between 2002 and 2012 at 53 percent.
But despite the higher medical costs, premiums have remained stable, most likely because cash payments to injured workers for missed work in Wisconsin are lower than in other states due to the quick return-to-work rate. Total cash payments, made in lieu of wages, have been declining for years.
“Clearly this has become a provider compensation program,” said Andy Franken, president of the Wisconsin Insurance Alliance. “Seventy cents out of every claim dollar goes to providers and not to workers.”
Grapentine highlighted Wisconsin’s low cost per claim, which according to NCCI ranked 37th out of 45 states in 2013. He noted individual procedures may cost more, but they are higher quality, resulting in fewer follow-up appointments and faster return-to-work rates. Workers’ comp cases also come with additional administrative requirements, which drive the cost higher.
Another factor that might explain higher return-to-work rates, and increased costs, is Wisconsin’s system allows workers to see any doctor, unlike a managed care group health insurance system where the number of doctors are limited, said James Buchen, the Wisconsin Manufacturers and Commerce representative on the council.
Prices aren’t negotiated like they are with group health insurance, Buchen noted. And there also aren’t fee schedules for procedures, which several other states use.
Management members of the workers’ comp council are proposing a fee schedule as a way to control costs, setting prices at 175 percent of what Medicare pays. They argue that cash payments can’t decline forever and medical costs are expected to continue going up.
But the non-voting medical industry representatives on the council objected. A fee schedule, they argue, could lead to fewer doctors taking workers’ comp patients, resulting in reduced access, more time away from work and higher costs to the system.
Labor members of the council haven’t supported the fee schedule, but for the first time agree that something needs to be done to control the medical costs, said Stephanie Bloomingdale, secretary-treasurer of the Wisconsin AFL-CIO.
“What we would like to see is more money going into workers’ pockets,” Bloomingdale said. “For short-term and long-term disability those amounts have been stagnant for a long time, while more and more of the dollar is going to health care cost.”
The council initially asked the medical groups for an alternative proposal by Sept. 6, but agreed to push it back to mid-October after the Wisconsin Compensation Rating Bureau releases new data on state workers’ comp medical costs. The WCRB data is scheduled for release Oct. 4.