Legislation Cut California’s Workers’ Compensation Medical Costs

Three years ago, Gov. Jerry Brown and the Legislature enacted a major overhaul of the system that compensates workers for job-related injuries and illnesses.

Senate Bill 863, backed by employers and labor unions, affected many specific aspects of the system but was aimed largely at reducing medical costs and redirecting savings into cash benefit increases for disabled workers.

The measure sought to change the long-standing practice in workers’ compensation cases of charging unregulated medical fees for care by tying fees to other publicly financed health care programs.

The medical care portions of the bill appear to be having the desired effect, a new study by the Workers’ Compensation Insurance Rating Bureau concludes.

As implemented, the legislation has reduced overall payments to medical providers, the WCIRB found, and “as expected…shifted the total share of medical payments from specialists to primary care providers,” its layman’s language interpretation says.

One cost-containment provision, limiting medical fees to 120 percent of those allowable under Medicare, reduced payments affected by the fee schedule from $496.9 million in the first six months of 2013 to $452.2 million in the first half of 2014. However, the report notes an “upsurge in utilization” that has been pushing medical costs upward a bit this year.

The 2012 bill continued a long-standing practice of making a major overhaul in the multi-billion-dollar workers’ compensation system roughly once a decade when enough of its financial stakeholders can agree, often imposing the burdens of change on other stakeholders.

The measure was formally opposed by lawyers representing injured workers and informally by providers of medical and rehabilitation services.