The Tail

"Workers’ compensation is a really expensive way to sell health insurance,” Frank Neuhauser, a researcher with the University of California, Berkeley, who regularly performs research on California's workers' compensation system told WorkCompCentral.

He was responding to questions about a report recently from the National Academy of Social Insurance that demonstrates just how important the state is to the national work comp market.

Injured workers in California received nearly 20% of the $181.4 billion in medical and indemnity benefits paid by state and federal workers’ compensation programs between 2010 and 2012.

In looking at the NASI numbers, the California Workers’ Compensation Institute noted that the $11.5 billion paid in medical and indemnity benefits in California was “by far the highest in the nation, exceeding the combined total of New York, Pennsylvania and Florida, which ranked second, third and fourth among all states.”

The total amount paid by all states and the District of Columbia in 2012 was $58.1 billion. Adding the compensation paid to federal employers and to miners filing federal black lung claims, the total payout for all U.S. comp systems totaled $61.9 billion in 2012.

The $11.5 billion paid in California accounted for 19.8% of benefits paid by state systems in 2012, and 18.6% of all benefits paid, including federal compensation programs. New York accounted for 8.7% of all benefits paid in 2012, Pennsylvania accounted for 4.7% and Florida accounted for 4.6%.

According to the data analysis, medical and indemnity payments in California grew by 20.2% between 2010 and 2012, surpassed only by North Dakota (31.4%) and Maine (21.7%).

California was third among the Top 10 states in terms of the growth rate for total benefits paid over this period. New York was first at 16.8% and Texas was second at 14%.
The national average was 5.8%.

At a conference several months ago, Department of Industrial Relations chief, Christine Baker, responded to an audience member's argument that injured workers weren't getting medical treatment by citing a statistic confirming that billions of dollars are being spent on medical care and the NASI data confirms her contention.

Bowzer gets wagged by his tail.

Medical benefit payments increased 27.1% in California from $5.2 billion in 2010 to $6.6 billion in 2012. This was the third largest in the nation.

North Dakota saw medical benefits increase 32.2% to $90.9 million from $68.7 million, and New York came in second, with medical payments increasing 7.5% to $1.8 billion from $1.7 billion.

Of course this data doesn't tell us that the money actually gets to the injured worker in terms of care or towards positive outcomes - it simply means that money is being spent. The efficiency of those dollars is not measured or analyzed.

Which is why Neuhauser was so circumspect in his poignant observation.

For every $100 of covered wages, California paid $1.38 in benefits, ranking No. 7 in 2012, according to the NASI data. The top six were West Virginia at $1.81, Montana at $1.67, Washington at $1.63, Alaska at $1.61, Oklahoma at $1.52 and Maine at $1.43. The national average excluding federal programs was 95 cents per $100 of covered wages.

In yesterday's post, "Quick Read," a chart shows that California is sixth in terms of overall claim costs (inclusive of medical only and indemnity claims) at just over $17,000. New York was by far the most costly at over $27,000.

The cost to employers in California is $1.85 per $100 in covered wages, according to NASI, making it the fourth most expensive state.

Alaska at $2.74, Montana at $2.49 and Oklahoma at $2.22 topped California in terms of employer expense. The national average cost was $1.29 per $100 of payroll.

But, the NASI data indicates that 74.6% of employer premium dollars are being directed to injured workers in the way of indemnity benefits or medical care, compared to a national average of 73.6% of premium dollars being directed to injured workers, which means that while California is expensive, its administrative costs are similar to other states.

Of course the data can be sliced and diced in several different ways, leading to different results, but all basically forming the same conclusion - that workers' compensation delivery of medical benefits is very expensive.

As noted by Neuhauser, group health sees 12 cents to 13 cents of every dollar going to administrative costs and profit. Workers’ compensation pays about 14% of premium dollars just on medical cost-containment programs such as bill review.

“We’re paying more for medical cost containment in workers’ compensation than group health pays for everything they do,” he said.

California is the tail that wags the dog.

Woof.