Policy Documents

Effectiveness of WC Fee Schedules: A Closer Look

Barry Lipton, Dan Corro, Natasha Moore, and John Robertson –
February 1, 2009

This study continues work on Workers Compensation (WC) medical fee schedules. The study uses experience from Group Health coverage (GH) as a natural measure to assess the effectiveness of WC fee schedules. The fee schedule promulgated by Medicare provides another useful comparison.

Our previous studies have found that utilization is the main reason WC pays more than GH to treat comparable injuries. While the main emphasis in this study is prices WC pays for medical services, the study looks at both utilization and price.

Some of the main results are:

  • For comparable injuries, when WC pays higher prices than GH for specific services, those services tend to be used more often in WC than in GH.
  • The proportion of WC medical cost that is subject to physician fee schedules is declining by about one percentage point per year.
  • The Medicare fee schedule is very useful as a starting point for the design of WC medical fee schedules, but has notable shortcomings for WC, including too little emphasis on return to function and too little sensitivity to cost differences among states.
  • Particularly in specialty areas such as surgery and radiology, fee schedules can result in WC reimbursement rates that are especially high compared with GH.
  • While fee schedules tend to concentrate reimbursements at the maximum allowable rate, there are many payments that are either greater than or less than the maximum allowable rate.
  • Reimbursement for care that physicians provide at hospitals and other facilities is more likely to exceed the fee schedule than care provided in their offices. This is partly because the fee schedule need not always apply when facilities bill for these services.
  • A higher proportion of reimbursements are at or below the fee schedule when WC medical services are provided through a network as opposed to when they are not.