Mari Edlin in “Managed Healthcare Executive” highlights some of the factors driving inflation in prescription drug expense in workers comp.
Edlin’s article includes interviews with a number of industry sources (your humble author included), but perhaps the most insightful piece relates to the role of the physician in managing drug costs.
“George Furlong, director of medical payment products for CHOICE Medical Management Services in Tampa, agrees that managing utilization is key to controlling costs and places the onus on physicians. “Since no copayment exists in workers’ compensation, there is no incentive for the patient to ask for a less expensive drug

Tom Lynch’s “Workers’ Comp Insider” blog provides interesting news related to return to work, safety and risk management among other topics. The latest post is a synopsis of state-specific WC news.
A good site to bookmark and check frequently; the archives are a treasure trove of information on these topics.

CMS, the federal agency that oversees Medicare, announced yesterday that it will be increasing payments to physicians across the board effective 1/1/05. The increase will directly affect Worker Comp fee schedules, which (in large part) are based on Medicare’s fee schedule.
CMS’ announcement includes the following:
“The Physician Fee Schedule sets rates for how Medicare pays more than 875,000 physicians and other health care professionals. In 2005, CMS projects that aggregate spending under the fee schedule will increase 4 percent to $55.3 billion, up from $53.1 billion in 2004. The spending increase is due in part to an MMA provision that increased physician payment rates by 1.5 percent, a move that negated a previous law’s planned cut of payment rates by 3.3 percent for 2005.”
We have been telling clients and state agencies for years that basing fee schedules on Medicare is a bad idea for several reasons. Here is a clear demonstration of one of them – the state effectively cedes control over pricing to the feds.
Others include a much different mix of services (comp – musculoskeletal, Medicare geriatric, oncology, cardiac) and completely different communications requirements (none in Medicare, intensive in comp for RTW, care management, etc.)
Here’s the net. Comp insurers and self insured employers will be paying more for physician services (on a unit cost basis) than they did this year. Moreover, with the change from the planned reduction to an increase, the impact is almost 5%.
The news is not all bad for the simple reason that price per unit of service is but one of the drivers of medical inflation in workers comp. But therein lies the rub; with the overwhelming emphasis on price controls in the WC managed care industry, many have neglected utilization and frequency which are significantly more important contributors to medical trend increases.

NCCI recently released the 2004 WC Prescription Drug Survey update. Key findings include:
– Rx costs now account for over 12% of WC medical expense, up from 11.8% last year and 10.1% in 1997
– Price has overtaken utilization as the primary driver of inflation, although utilization is still a significant contributor
– PBMs are seen as part of the answer, but certainly not all
The survey also notes that three classes of drugs account for 87% of scripts – painkillers, muscle relaxants, and antidepressants, with Celebrex(r) and Vioxx(r) holding down the top and third spot in terms of total dollars paid.
Watch this space for updates on HSA’s Second Annual Survey of Prescription Drug Management in Workers’ Comp(sm). This Survey will expand on the First Annual Survey.