Workers' comp racks up healthcare costs

A study comparing hospital costs for one of the most common surgeries suggests that it's more expensive when paid for by workers' compensation than by group insurance.

The Workers Compensation Research Institute compared 2008 hospital outpatient payments for shoulder surgeries, and found group health insurance paying quite a bit a less on average in several large states.

In half of the 16 states studied, hospital outpatient payments for shoulder surgeries covered by workers' compensation were at least $2,000 higher than average payments by group health plans – with workers' compensation-covered surgeries costing the most in Wisconsin, at more than $11,000.

In California and Massachusetts, though, workers' compensation-covered shoulder surgeries cost less than group health insurance, about $6,000 and $2,500 respectively.

Massachusetts had the lowest shoulder surgery costs covered by workers' compensation and the second lowest covered by group health ($4,592, compared to New Jersey, which had the lowest group health costs, $4,583).

Two states, Virginia and Florida, saw workers' compensation hospital payments nearly double or more those of group health for shoulder surgeries. In eight states, workers' compensation payments for outpatient surgeries were between 16 and 80 percent higher than average group health reimbursements, ranging between $1,881 and $4,975 more.

Four states, Maryland, Michigan, Pennsylvania and Wisconsin, saw only modest differences between workers' compensation and group health payments, within 16 percent, although Wisconsin’s payments by both insurance types were among the highest – $9,990 for group health and $11,221 for workers compensation.

The reasons for the differences are somewhat perplexing, researcher Olesya Fomenko said in the report.

On one hand, states with higher workers' compensation payments were “rarely states with above-typical group health hospital payments,” Wisconsin being the outlier. On the other hand, workers' compensation payments showed “substantially greater interstate variation” than group health payments, Fomenko wrote in the report.

Fee schedule regulations may be one factor, Fomenko noted in the report. In most of the 16 states without fee schedules – Indiana, Iowa, New Jersey, Virginia and Wisconsin – workers' compensation paid at least $2,800 more than group health. In fixed-amount fee schedule states, workers' compensation payments were below or near group health levels, such as in California and Massachusetts.

“Given that there is no obvious reason why treating an injured worker should be cheaper, and given that providers can choose whether or not to treat patients injured under workers’ compensation, policymakers in these lower-cost states might want to inquire about problems with access to hospital care for injured workers,” Fomenko wrote.