Why do regulators base WC reimbursement on Medicare? It’s easy, simple, and already familiar to legislators and regulators alike. It is also a big mistake.
Medicare is a program for America’s elderly – over-65, mostly sedentary, and mostly not employed. Workers comp covers ‘working age’ folks; primarily 18-65. ) Many of the surgeries being performed on Medicare vs. workers’ compensation patients are fundamentally different.
The types of outpatient surgeries that can be performed on workers’ compensation patients, who are generally young and in overall good health, are different than the outpatient surgeries Medicare covers (pays) for. Medicare sharply restricts outpatient surgery for good reason as Medicare patients are frail and surgery followed by an inpatient stay is safer given their complicated medical conditions and health risks of prolonged general anesthesia. WC claimants are younger, in better physical condition, and much better suited for outpatient surgeries – yet basing WC reimbursement policies on Medicare would forbid, or at the least financially dis-incent, outpatient surgery in favor of inpatient.
Medicare fee schedules (like the one Florida’s Three-Member Panel is considering adopting) result in more specialist care and more procedures being performed. (opens pdf) National studies show this frequently leads to poorer outcomes and more suffering for patients, in addition to higher costs for payers.
Medicare recipients’ medical conditions are very different from comp claimants’. The top ten Medicare DRGs (Medicare’s coding for inpatient care) are:

• Heart Failure & Shock
• Simple Pneumonia & Pleurisy
• Specific Cerebrovascular Disorders
• Psychoses
• Chronic Obstructive Pulmonary Disease
• Major Joint & Limb Reattachment Procedures, Lower Extremity
• Angina Pectoris
• Esophagitis, Gastroent & Misc Digest Disorders
• G.I. Hemorrhage
• Nutritional & Misc Metabolic Disorders

No spine conditions, multiple trauma, burns, TBIs, crushing injuries, joint surgeries…
Inflation in Medicare billing is rampant – if you think it is bad in WC generally (and you would be right) it is an order of magnitude worse in Medicare. In Florida, the current annual inflation rate is north of 14% for Medicare outpatient services.
Medicare reimbursement disproportionately favors hospital-based care. With facilities reimbursed at levels much higher than free-standing doctors’ offices and clinics, basing reimbursement on Medicare encourages providers to affiliate with, provide care in, and bill thru facilities. In Florida, the impact is dramatic; basing reimbursement on hospital outpatient service charges will increase costs by an estimated $1,675 to $2,320 per claim (calculations courtesy of FairPay Solutions, an HSA client).
What provider would want to treat in their own, lower cost clinic or office, if they could more than double their fees by working through a hospital?
Finally, CMS itself has warned against using their payment methodologies for non-Medicare patients. “The cost-based relative weights were developed solely using Medicare data. We do not have non-Medicare data…For this reason we are concerned that non-Medicare payers may be using our payment systems and rates without making refinements to address the needs of their own population.” (page 272)
I could go on, but you get the picture. The populations are starkly different, claimants’ health status is different, their motivations are different, provider types are different, and reimbursement should reflect these differences.
Unfortunately, Medicare is the easy choice. Easy, but dead wrong.