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Research Questions

  1. What factors explain the increases in California's spending on workers' compensation medical benefits from 2007 to 2012?
  2. Could Workers' Compensation Information System medical data be used for ongoing monitoring of system performance?

Following reforms in 2003–2004 to the California workers' compensation (WC) program, expenditures for medical care provided to injured workers declined for several years, only to begin rising again in 2007. By 2012, total medical spending had increased 32 percent relative to 2007 levels despite a reduction in the number of WC claims. Senate Bill (SB) 863 made additional reforms intended to improve the efficient delivery of high-quality care to injured workers. The Commission on Health and Safety and Workers' Compensation asked RAND to identify the factors that explain the spending increases and to explore the feasibility of using medical data from the Workers' Compensation Information System (WCIS) for ongoing monitoring of system performance and in-depth analyses of selected issues affecting system performance. This report provides a framework for understanding changes in medical spending levels and provides the results from RAND's analysis of WCIS data for 2007–2012. It establishes a baseline that can be used in a future study to evaluate the impact of the SB 863 provisions.

Key Findings

Annual Spending Increases over the 2007–2012 Period Are Largely Unexplained After Accounting for Inflation and Changes in Workers' Compensation (WC) Claims Incidence and Injury Mix

  • Medical service spending increased 9.9 percent from 2007 to 2012. After accounting for the measured cost drivers in RAND's framework (inflation, new WC claims, and injury mix), the predicted change over the period is –2.4 percent. This creates a residual spending increase of 12.3 percent in 2012 that is attributable to unmeasured changes in intensity of services and injury mix.
  • The residual change in systemwide spending is large: $1.5 billion. This represents about 23 percent of total 2012 service year spending and nearly all of the increase in spending in service year 2012 relative to 2007. The increases in payments to individuals account for 65 percent of the residual. To a large extent, these increases may be attributable to improved reporting of further medical expenses in claims settlements.

The Workers' Compensation Information System (WCIS) Can Be Used Both to Monitor Overall Trends in Spending and Utilization of Medical Services Provided to Injured Workers and to Examine Specific Issues

  • However, there are limitations to using these data because not all WC claims are reported into the system, and among the reported claims, there is further underreporting of medical bills.
  • Until there is greater compliance with reporting requirements, estimates of total spending and utilization cannot be generated from the WCIS data without supplementing the WCIS with external data.

Recommendations

  • A performance monitoring system should be designed to provide information that will enable policymakers and other stakeholders to identify areas in which performance is suboptimal, which allows for the prioritization of identified issues and the development of policies and interventions that will facilitate improvements in performance.
  • These same systems should be used to evaluate the effects of reforms and interventions.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Data

  • Chapter Three

    Decomposing Spending Trends

  • Chapter Four

    Monitoring Trends in Utilization and Spending and Return-to-Work Outcomes

  • Chapter Five

    Monitoring Trends in Quality Indicators

  • Chapter Six

    Monitoring Trends in Access to Medical Care

  • Chapter Seven

    Physician Participation Rates and Payment Levels

  • Chapter Eight

    Medical-Legal Services

  • Chapter Nine

    Summary of Overall Findings and Recommendations for Monitoring System Performance

  • Appendix A

    Supplemental Analyses for Chapter Three

  • Appendix B

    Monitoring Analyses for Chapters Four Through Six

  • Appendix C

    Sensitivity Analyses of Provider Participation Rates for WC Patients

The research described in this report was prepared for the Commission on Health and Safety and Workers’ Compensation (CHSWC) and conducted by the Justice Policy Program within RAND Justice, Infrastructure, and Environment.

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