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As incentives within the Patient Protection and Affordable Care Act (ACA) push more and more patients toward so-called “capitated” health insurance plans—in which payments are “prospectively” made to health care providers at the beginning of the plan year on a per capita basis—and away from “traditional” fee-for-service health plans, a likely consequence will be an unwelcome increase in workers’ compensation medical payment costs, according to a study recently released by the Workers’ Compensation Research Institute (WCRI) [See Victor, Richard A., Fomenko, O. and Gruber, J., “Will the Affordable Care Act Shift Claims to Workers’ Compensation Payors?”, September 2015]. The researchers posit, for example, that if just three percent of group health cases with soft tissue conditions were shifted to workers’ compensation, as seems likely according to the study, overall workers’ compensation costs in Pennsylvania could increase by nearly $100 million. In California, the so-called “case-shifting “effects would be even greater, increasing workers’ compensation costs by more than $225 million. Even in small states, the impact could be significant, report the researchers.
Case-Shifting: Whom Do You Bill?
How does this sort of case-shifting arise and why are soft tissue injuries particularly susceptible to the phenomenon? According to the researchers, the opportunity for case-shifting stems from the fact that early on in any treatment process, the medical care provider is called upon to determine who will be billed for the service. If the provider determines that the injury or condition is related to the workplace, the bill is sent on to the employer’s workers’ compensation insurer and it is paid on a fee-for-service model. If, on the other hand, the injury or condition is unrelated to the employment, then the employee’s health care insurance company is billed. In past years, it often made little difference how the condition was classified, since sending the bill in either direction resulted in payment on a fee-for-service basis. The ACA, with its incentives toward capitation, has changed all that.
Where a worker/patient is covered by a capitated plans–and because of the ACA’s incentives, this is going to be more and more common–a diagnosis that the patient’s medical condition is unrelated to work results in an obligation on the part of the provider to render the service, but it does not result in any additional revenue; the care provider has already received all the money that will ever be received (this year) for that patient. If, however, the medical care provider could somehow legitimately “code” the injury/condition as work-related, a bill could be rendered to the workers’ compensation insurer and accordingly paid on a fee-for-service basis.
Soft Tissue Conditions More Prone to Case-Shifting
As noted by the researchers, when it comes to most traumatic injuries—contusions, fractures, severe sprains, and the like—causation is clear. If the worker fell or sustained some other traumatic injury at work, the medical bill is rendered to the workers’ compensation insurer. If he or she suffered the injury at home, the worker’s health care insurance must be billed.
With soft tissue conditions, however, things aren’t so cut and dried. The condition might be linked to a specific event, such as the lifting of heavy object at work. In that situation, just as with the traumatic fracture, treatment is rendered and the workers’ compensation insurer pays on a fee-for-service basis. In many others cases, however, the cause of the pain or soft tissue injury is more obtuse; it might be the result of repetitive motion within the workplace, or some congenital issue that suddenly manifests itself, or even due to the ordinary process of aging. The medical care provider realizes that if the worker/patient is covered by a capitated health plan and the “caused by the aging process” box is checked at the initial visit, there will be no additional payment for the service rendered. Said the physician to the patient, “Doesn’t your job involve some repetitive motion?”
As the WCRI study shows, this incentive to characterize soft tissue conditions as work-related is difficult to resist. Indeed, the research shows that as more patients in a state are covered by capitation plans, more and more soft tissue conditions are adjudged by medical care providers as being work-related.
The researchers analyzed workers’ compensation and group health medical data from a large commercial database for the period 2006 through 2010. As noted by the researchers, this database was, in turn, based on a large convenience sample of patients where the data was provided by health insurers and self-insured employers. There was, of course, no way to determine if the initial treating provider deemed the injury work-related or not. The researchers inferred that decision from whether a patient’s care was paid under workers’ compensation or under group health.
Study’s Core Findings
How did health care providers respond to the case-shifting incentives? The WCRI study indicates that viewing the data across all states, a patient covered by a capitation group health plan was 11 percent more likely to have his or her soft tissue injury characterized as work-related than a similar patient whose coverage was with a fee-for-service group health plan. According to the study, the higher the number of workers covered by capitation group health care policies, the higher the incidence of case-shifting. Moreover, as one would expect, the researchers saw no such case-shifting for patients with fractures, lacerations, contusions, etc.
Moreover, where capitation plans are uncommon, virtually no case-shifting was observed. The researchers felt that this was more than just the result of having fewer capitated patients seeking care. Medical providers seemed much less aware of the financial incentives in states with few capitation plans.
The study indicates that there are even stronger implications when the data is examined at a state-by-state level. The researchers posit that in an average state—one with approximately 19 percent of the population covered by a capitated group health plan—an increase of capitation rates to 30 percent would result in an almost 10 percent increase in the number of soft tissue conditions that were characterized as work-related and paid via the workers’ compensation system. According to the researchers, this would be the equivalent of a three percent increase in overall workers’ compensation payments, representing as much as $200 million for California, as noted above. This appears the direction toward which America is moving.
The researchers acknowledged that the study has some limitations. They indicate the study may actually understate the level of case-shifting to workers’ compensation in future years. While the study likely reveals the effect of ACA’s incentives on the medical care provider, it does not include case-shifting caused by a different set of patient incentives. As many are aware, another feature of the ACA is the growing number of patients having larger deductibles and copayments in their health group plans. Anyone who has secured his or her own health insurance since the passage of the ACA knows that the annual deductibles can be $5,000 per patient—sometimes even more. Since there are generally no copays and no deductibles in workers’ compensation claims, there is a strong incentive for the patient to see his or her condition as related to the workplace.
The Study’s Implications
Based on the data analyzed, the researchers suggest that case-shifting from group health insurance to the workers’ compensation arena will likely increase employers’ overall costs for four reasons:
1. The workers’ compensation system typically pays higher prices for medical care, sometimes as much as four times the price paid for the same surgery as that paid by group health insurers.
2. Income benefits paid via the workers’ compensation system are generally higher than those paid by non-occupational disability insurance.
3. Many more workers are covered by workers’ compensation than are covered by non-occupational disability insurance.
4. The combination of higher income benefits paid via workers’ compensation and the tax-free nature of the income provide an incentive for some workers to stay out of work longer than if they were protected only by non-occupational disability insurance.
The researchers point out also that, in future years, the effect of case-shifting will be greatest in states that currently have low numbers of capitation.
Further Study Needed
Additional study is needed, particularly regarding the effect that high deductible plans have on lower and middle income workers. How do they respond to the incentive to self-identify their condition as work-related?
During the debate over passage of the ACA, Speaker Pelosi noted that the true measure of the legislation’s benefits would not be immediately recognized, that only after passage would Americans begin to see the positive impact the new health care law would have. At least to the extent that the WCRI’s findings are correct, the same can be said about the long-term costs to the workers’ compensation system that are associated with the ACA’s internal incentives.
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