Experts: Years of work-comp turmoil ahead
The latest rescue of Obamacare by the U.S. Supreme Court ensures that employers, over the next several years, can expect extra turmoil in state workers’ comp programs.
That’s because genuine fixes to the so-called Affordable Care Act (ACA) — which is already dramatically impacting U.S. industrial-insurance programs — almost certainly will have to await a new president taking office.
Even then, that president and that Congress will first need to come to terms on multiple, complex policy questions.
Ironically, the strain the ACA is imposing on state workers’ compensation programs is occurring, experts say, in all three of the areas of health care that the ACA was supposed to improve — access, cost and quality.
In the short term at least, access is being reduced, costs raised and quality lowered.
The pressures on workers’ comp in those areas seem likely to speed the rise of alternatives to industrial insurance’s traditional form.
State legislators around the country are increasingly exploring such alternatives.
Shedding light on the possibilities is Texas, which for over 100 years has allowed — as an alternative to the state’s traditional state workers’ comp — most private employers the option of developing their own system of care for injured employees.
Proponents of the Lone Star State’s dual system call it the “most successful occupational injury management system in the United States.”
Yet, before most employers ever decide to jump ship from traditional workers’ comp, they’ll first want to understand something:
Why is the ACA expected to end up reducing injured workers’ access to healthcare?
It’s “Economics 101, in terms of supply and demand,” is the answer Deloitte insurance researcher Sam Friedman gave at a National Council on Compensation Insurance conference last August:
With millions who are currently uninsured expected to have coverage this year, we could see waiting rooms overwhelmed with new patients for primary care doctors, specialists, diagnostic facilities, hospitals, and rehabilitation centers. At a minimum, many [injured workers] could have a much harder time getting an appointment to see a doctor, arrange for tests, or schedule physical therapy in a timely fashion.
Such delays, said Friedman, could significantly push up costs for workers comp carriers, while at the same time delaying medical assessments and treatments “to get people back on the job and off wage indemnity payments as quickly as possible.”
Those “same supply and demand pressures could lead medical care providers to raise their prices for labor, tests, and services — particularly when charged to workers comp insurers, which generally have far less market leverage than either the government” or most health insurers, said Friedman.
Thus, the ACA’s negative consequences for access will also impact insurance-carriers’ costs and employers’ premiums, plus the immediate quality of care available to injured workers.
The assumption underlying Obamacare and other forms of state-mandated healthcare provision has long been that health insurance — whether personal, employer-based or national — automatically means universal access to health care.
This simplistic assumption, however, is not true.
The long waiting lists afflicting the national-health systems of Britain and Canada show this clearly. Health care is something everyone wants, and yet there are only so many doctors and hospitals to go around — or dollars to provide new ones. Someone, somewhere, has to say no. Therefore, everywhere, in some form or fashion, health care is rationed.
The British and Canadian waiting lists are simply the way that those systems ration medical care.
Thus, the expansion of such waiting-list rationing into U.S. medical care is a serious matter. It’s especially so for American employers and insurance carriers locked into state-regulated work-comp systems shadowed by federal bureaucracies.
Nevertheless, this waiting-list rationing in America appears likely to soon grow even worse: The Association of American Medical Colleges says it expects within the next four years, U.S. shortages of 45,000 primary care doctors and 46,000 specialists. Thus, predicts the AAMC, many of the estimated 36 million Americans who expect to have coverage under Obamacare will find themselves facing long waits to see medical providers.
The U.S. Department of Health and Human Services is similarly reported to estimate the current doctor shortage at 63,000, put it at 131,000 by 2025, and state: “This collision of care needs and the shortage of both primary care and specialist physicians could greatly impact the delivery of healthcare in the workers’ compensation marketplace.”
In Nevada the problem should be especially acute, given the state’s well-documented shortage of doctors: In numbers of active doctors per 100,000 residents, the state has some of the fewest, ranking 46th in the nation.
Moreover, the situation has grown even worse following Gov. Brian Sandoval’s approval of the Obamacare Medicaid expansion in Nevada, notwithstanding prescient predictions of trouble.
Sure enough, the administration had “drastically underestimated the number of people who would enroll in Medicaid and didn’t hire enough staff to process the flood of applications,” reported the Las Vegas Sun in May 2014.
“Statewide, the number of Medicaid patients has jumped 41 percent since October  when enrollment started. The state has added 130,000 new patients, bringing the total Medicaid population to 466,956. And officials still are working through a backlog,” said the paper.
Making Nevada’s situation yet worse is the fact that, on average, about six out of 10 doctors will not accept new Medicaid patients. That’s according to a 2008 survey by the Center for Studying Health System Change.
Thus, with the 40 percent of doctors who will accept new Medicaid patients, the waiting lists for appointments necessarily become even longer.
Given this developing crunch, some business advisors are increasingly counseling employers to reexamine the health care networks to which their employees, when injured, are sent.
For example, a Maine firm, Allen Insurance & Financial, advises:
To avoid delayed treatment, your company should enroll in a quality care network and keep those relationships strong. Your medical providers should be carefully selected to ensure that your employees receive quality care in a timely manner.
That means abandoning one of firms’ traditional ways of conceiving workers’ comp. As the Robert Wood Johnson Health Initiative observed as far back as 2001, “While some employers may consider quality in their selection of medical care plans for workers’ compensation, others will opt for the lowest-cost approach with extensive controls over use of services.”
It is this latter group of firms that will face the most difficulty, experts agree. David A. North, president and CEO of Sedgwick Claims Management Services, advises employers to “begin analyzing the availability of facilities and physicians practicing near their locations and begin forging relationships and agreements to provide quality care for their workforce.”
The same message is coming from Safety National, which provides excess workers’ compensation coverage to self-insured employers and self-insured groups. Assessing discussions at the September 2014 California Workers’ Compensation & Risk Conference, the company observed that because workers’ compensation makes up only “makes up a small percentage of the overall medical spend in the U.S.,” the nation’s major health-care players won’t be modifying Obamacare “based on what our industry prefers.”
“Instead,” Safety National counsels employers “to be creative and also be willing to pay providers for quality care.” That “might mean your company contracts with providers directly. This is no longer the discount-based model that we are used to. Incentivize your providers for great outcomes and you will get the best care for your employees to get them back to work.”
Experts also expect the Affordable Care Act to increase fraud against employers and their work comp insurance carriers.
Because workers’ compensation involves neither co-pay nor payment of deductibles, observes Richard Victor, director of the Workers Compensation Research Institute, not only workers injured away from work but also deductible-wary providers of health-care services may be tempted to shift their billing to work comp.
“We will be watching developments regarding the expansion of Medicaid with an eye toward two specific effects,” says Victor. “Specifically, will low reimbursement rates in Medicaid provide an incentive for providers to try to shift injuries to workers compensation? Alternatively, will the anticipated reduction in unreimbursed indigent care reduce the financial pressure to shift costs to workers compensation?”
Already, claims managers are reporting a “dramatic increase in questionable or ‘red flag’ claims as the ACA has been phasing into place,” says Stacey Cheese, a claims manager at East Coast Risk Management. She says, “identifying the true cause of an injury is becoming a larger and larger area of focus in our workers’ compensation claims handling process.”
Because reimbursement rates available to providers under the ACA tend to be lower than the reimbursement rates under workers’ comp systems, an incentive exists for providers to shift ineligible payments over to a workers’ comp carrier.
A WCRI study found such cost shifting mostly happening with soft tissue injuries and in states where capitated health plans predominate — that is, where physicians are reimbursed at a flat rate per patient. A 30 percent increase in soft tissue workers’ compensation claims was found in such states.
WCRI’s Victor also points out that Obamacare has made high-deductible general health insurance plans very common, which means many patients are being surprised by the big increases in providers’ bills.
“There is a palpable fear among providers who foresee problems collecting deductibles from newly stunned patients who never expected these costs on top of copays and 80/20 reimbursement,” says Barry Thompson, a risk-management consultant who oversees work-comp claims for some nationwide employers.
“Providers have no appetite to collect deductibles after the fact,” he observes, noting that the risk to such providers “if they let a deductible patient off the hook” and stick workers’ comp with the bill, is usually very small.
Before the ACA, says Thompson, the existence of group health plans was a comfort to providers: If work comp wouldn’t pay, the health plan most likely would. Now, however, providers “want to avoid the inevitable patient-deductible-collection scenario.”
This poses a very serious problem for workers’ comp claims, he argues, “because it presents an urgent situation to which adjusters are not accustomed and therefore not inclined to respond quickly.
“When an employee shows up for an MRI the day after their injury only to be told it is not approved and are sent home, or likewise for a PT appointment, it destroys any semblance of employee care that my good clients have worked hard to establish. The employee’s next call may well be to an attorney. I personally have had to chase unwitting adjusters down for days to perform this approval. It is new territory not in their work rules.”
The fraud is often blatant, says Thompson. “Providers are very boldly and deliberately ascribing patients to” workers’ comp.
“I am not referring to grey-area confused patients,” he says. “Astoundingly, in three instances of surgical need in the last five months from three different jurisdictions the employee doctors conclude[d] conditions as work related and document[ed] the cases as such. This problem only occurred once before in many prior years of memory with my client’s experience.”
Thompson, president of Acuity Risk LLC, advises clients and others to “Meet with your claims service team and ask them to establish a process for immediate written diagnostic, PT or other specialist approvals.” He also says, “Be prepared for provider sabotage. If an employee’s doctor has [stated] an incorrect WC situation, then file a WC claim with immediate denial and prepare evidence, such as an employee statement or other medical documentation.”
The fatal conceit
Notwithstanding Obamacare’s negative consequences so far for workers’ compensation, insurers hope that the wider availability of primary care will create a generally healthier workforce and reduce workers’ comp comorbidities, such as obesity and tobacco addiction.
WCRI’s Victor also acknowledges the theoretic possibility that the national program might reduce fraudulent claims by workers by relieving financial pressures on them. Also conceivable is that, down the road, Accountable Care Organizations, or ACOs, established under the Affordable Care Act, may actually turn out to work.
So far, however, it doesn’t look likely. Even one of the act’s primary authors, Ezekial Emanuel, says evidence is still lacking that ACOs can substantially reduce costs.
ACOs are intended to be networks of doctors and hospitals that share financial and medical responsibility for providing care for patients. Supposedly, these ACOs will receive financial incentives to, at the same time, reduce federally subsidized costs and increase the quality of care that patients receive.
“That effort is sinking like a stone,” wrote the Cato Institute’s Michael F. Cannon back in 2011, “because it — like the rest of this sweeping [ACA] law — is premised on the fatal conceit that government experts can direct the market better than millions of consumers making their own decisions.”
“Accountable care organizations,” is federal jargon, says Cannon, “for the radical concept that when doctors and nurses actually talk to each other about shared patients, there will be fewer mix-ups, less duplication and patients will receive better, more convenient care at a lower cost. Markets created the first ACOs, including Kaiser Permanente, more than six decades ago.”
Yet, Cannon observes, “For nearly five decades, Medicare regulations have financially penalized doctors who coordinate care.” Even Medicare’s own Payment Advisory Commission has acknowledged that Medicare regulations are “largely neutral or negative towards quality” and sometimes pay providers “even more when quality is worse” — such as when poor coordination injures Medicare patients.
He also points out a basic incoherence in the ACO scheme: “If doctors and hospitals invest substantial resources to form an ACO, and better care coordination reduces the amount they bill Medicare, then the ACO will get to keep part of the savings.”
Cannon then cited the well-respected health care expert Robert Laszewski, president of Health Policy and Strategy Associates and former chief operating officer of Liberty Mutual Insurance Group.
“Here’s a flash for the policy wonks pushing ACOs,” wrote Laszewski. “They only work if the provider gets paid less for the same patient population. Why would they be dumb enough to voluntarily accept that outcome?”
Laszewski wrote that in 2011, but told Nevada Journal last week that he’s not changed his mind.
The next and final installment of this series will report on major alternatives emerging around the country to traditional workers’ compensation.