State Initiatives: Success of Medical Cost Containment Measures

At the 2015 National Council of Self-Insurers Annual Conference, Natasha Moore from NCCI discussed the effectiveness of medical fee schedules and other cost containment measures that states have recently implemented.

Characteristics of a well-defined fee schedule include:

• Specific maximum reimbursement rates for procedures instead of reimbursement based on a percentage of billed charges.
• Being comprehensive so that medical providers do not shift treatments to areas not covered by the fee schedule.
• If the fee schedule is set too high, it becomes a target for billing and can actually increase payments. This happened when Illinois implemented their fee schedule.
• If the fee schedule is set too low, you could run into access to care issues. However, studies have not demonstrated that this actually happens. Access to care seems to be more based on availability of physicians versus the fee schedule rates.

There are currently six states without fee schedules. Virginia and New Hampshire are two of those states. They introduced legislation in 2015 to develop a fee schedule, but this legislation did not advance.

In the last few years, Indiana and North Carolina have successfully implemented fee schedules.

Other successful law changes include:

• Georgia limited the duration of medical care for non-catastrophic claims to 400 weeks.
• Montana implemented a 500-week limit on medical care for claims that were not permanent total disability.

Pharmacy Pricing

Average wholesale price (AWP) is often the foundation of pharmacy fee schedules. This is a number set by the drug companies and does NOT reflect prices actually paid in the retail marketplace. It is the equivalent of a “suggested retail price” used in marketing to make an item appear to be discounted when it really is not.

NCCI did a study to see if fee schedules based on AWP had an impact on prescription prices paid under workers’ compensation. Findings include:

• Multipliers ranged from 80-140% of AWP.
• Dispensing fees ranged from $4-$12 per prescription.
• States with similar fee schedules do not necessarily have similar pricing.
• States with lower fee schedules have lower prescription drug prices.
• In states with high fee schedules, prescription drug prices were higher than states with no pharmacy fee schedules.
• 22% of workers’ compensation prescriptions are for brand name drugs, and this accounts for 55% of pharmacy payments made.