Texas Workers’ Compensation Medical Costs Per Claim Stable

January 29, 2010

Medical costs per workers’ compensation claim in Texas were stable in 2007, following several years of dramatic decreases, according to a new study by the Workers Compensation Research Institute (WCRI).

The decline in costs resulted from the enactment of two major pieces of reform legislation as well as an increased effort to manage medical care by system payors, the WCRI said.

The study, “Monitoring the Impact of Reforms in Texas: CompScope Benchmarks, 10th Edition,” said that prior to the passage of House Bill 2600 in 2001 and House Bill 7 in 2005, medical costs per claim in Texas were the highest of the states studied by the Cambridge, Mass.-based WCRI.

By 2007, Texas medical costs per claim were 19 percent lower than the typical study state for claims with more than seven days of lost time. Fee schedule decreases under HB 2600 combined with increased management of medical care by payors through utilization review and other means were behind the decline.

However, the increase in the 2008 medical fee schedule conversion factors to reflect increases in practice expenses since 2002 and the separate conversion factor established for surgery may result in a one-time increase between 16 to 41 percent in prices paid for services by nonhospital providers

At the same time, WCRI reported that medical cost containment expenses per claim continued to grow rapidly in Texas, even after medical costs began to decline. At an average of $2,818, Texas had the highest medical cost containment expenses per claim among the study states in 2007/2008, 37 percent higher than typical.

The study noted that indemnity benefits per claim rose ten percent in 2007, largely due to a nearly 25 percent increase in the maximum benefit for statutory weekly temporary total disability. Despite this significant increase in the maximum benefit, the percentage of workers whose benefits were limited by the maximum was 17 percent, more than double the percentage in the typical study state.

The study also found that from 2002 to 2006 indemnity benefits per claim decreased 9 percent overall, largely the result of a decrease in the duration of temporary disability. Since 2002, WCRI said the average duration of temporary disability for injured workers in Texas declined by more than three weeks for claims at an average of 36 months of experience, likely related to the decrease in medical utilization under HB 2600 and payor focus on managing medical care.

In addition, the study said Texas had faster time to first indemnity payment, lower defense attorney involvement, and lower permanent partial disability/lump-sum payments compared to the typical study state.

Defense attorney involvement was lowest in Texas, 8 percent compared to 24 percent in the typical study state for 2005 claims with more than seven days of lost time and 36 months of experience. This likely reflects some combination of the dispute resolution process, limits on attorney fees, limits on settlements, and relatively lower PPD/lump-sum payments per claim – which may impact the necessity or the willingness of defense attorneys to become involved in certain types of workers’ compensation cases in Texas.

Source: WCRI, www.wcrinet.org.

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