WASHINGTON (Dec. 10, 2012) — Wisconsin’s 20-year-old certified database system has failed to control costs in the state’s workers’ compensation market and should be replaced with more aggressive cost control mechanisms, a new paper by the R Street Institute concludes.

Authored by R Street Senior Fellow R.J. Lehmann, the paper finds that the database’s recommended payment levels were nearly double the maximum payment amounts in bordering states, while actual payments made by Wisconsin workers’ comp insurers were 34 percent higher than those prescribed by medical fee schedules in neighboring states.

Under Wisconsin’s certified database system, workers’ comp insurers may refer to published reimbursement tables to resolve disputes about the reasonableness of their medical reimbursements. Maximum medical payments are set at 1.2 standard deviations from the mean for any given medical coding.

Lehmann suggests that Wisconsin lawmakers could follow the lead of other states by adopting an explicit fee schedule, which would reduce administrative burdens in validating payment amounts, reduce the need for the state’s Department of Workforce Development to adju­dicate fee disputes and reduce the need for bill audits.

However, Lehmann writes that a fee schedule “would not be a panacea,” as data from states with existing fee schedules show that insurers increasingly have opted to take advantage of the discounts offered by managed care networks, thus subjecting a shrinking proportion of workers’ comp cases to the fee schedules. Instead, he suggested that more close­ly aligning the structure of works’ comp benefits with those of group health insurance would allow workers’ comp insurers to institute cost control techniques like deductibles and co-payments

“The advantage of moving in the direction of group health-style cost containment would lie not only in discouraging overutilization by patients,” Lehmann writes. “It also could serve to address the broad cost-shift from group health to workers’ comp. NCCI’s data shows that workers’ comp reimbursements trend higher than those for group health across a broad range of procedures, which suggests that providers may be charging higher rates to workers’ comp patients to compensate for discounted rates negotiated by group health insurers.”

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