AIA Backs Medicare-Based Fee Schedule for Tenn. Workers’ Comp Medical Services

August 20, 2004

In testimony Friday before the Tennessee Department of Labor’s Medical Care and Cost Containment Committee, the American Insurance Association (AIA) endorsed a Medicare-based, objective fee schedule for provider reimbursement as the best way to ensure timely access to care for injured workers and to keep overall medical costs at a reasonable level.

Friday’s hearing is part of the implementation process for one of the key reforms of the workers’ compensation law enacted earlier this year. Addressing the high prices paid for medical services is reportedly necessary if the cost savings predicted under the new law are to become reality. Many states with high cost reputations, including California, Connecticut, and Massachusetts, have significantly lower medical costs than Tennessee. Tennessee had been one of the few (eight) remaining states without a medical fee schedule for workers’ comp, prior to enactment of this year’s reform law.

“AIA’s recommendation of a Medicare-based fee schedule is based on the principle that workers’ compensation reimbursement levels should be no higher than those for other major health care financing and delivery systems,” David Corum, AIA assistant vice president, commented.

“The workers’ compensation system – ultimately employers – should not subsidize the cost of treatment other payment systems are responsible for reimbursing. Reimbursement schedules should ensure that injured workers can access the care they need when they need it and should apply to all the health care services provided by the compensation system,” Corum continued.

“Likewise, providers should be paid promptly for their services, when payers have the information from providers necessary to make determinations of the appropriateness of treatment,” Corum added.

On the other hand, AIA is opposed to a reimbursement approach based on provider charges.

A charge-based system is reportedly inherently inflationary and will over-compensate certain provider groups while under-compensating others. In fact, it is this intrinsic flaw in charge-based systems that reportedly led to the development of the Medicare fee schedule, a unique approach to compensating provider groups based on an assessment of relative costs in providing those services. Finally, a charge-based system can reportedly provide incentives that keep injured workers from receiving the appropriate medical treatment.

On the basis of these principles, AIA believes reimbursement for medical services generally should parallel Medicare reimbursement levels, which is the case in 17 states that currently use a Medicare-based fee schedule.

“The adoption of a Medicare-based fee schedule will provide an important tool to help control rapidly growing medical costs in the system, while ensuring that workers have ready access to the medical care they are entitled to receive,” Corum said.

AIA believes the implementation of medical reimbursement rules designed to restrain medical treatment costs will be crucial if the predicted savings of the new law are to become a reality, ensure continued stability and predictability in the workers’ comp system, and thereby meet the expectations of the legislature and governor in enacting the 2004 reforms.

The fee schedule will be adopted by the Department of Labor by Dec. 31, 2004, and become effective July 1, 2005.

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