Category Archives: NCCI

The Road to Recovery: Post-Acute Care in Workers Compensation

The following is directed towards all those engaged in medical travel and have been following my blog for some time. Sorry I haven’t been writing in a while. I either did not see anything to write about, or just wasn’t in the mood.

But the article below should be of extreme interest to all of you who deal with post-acute care and after care, even though you are not involved as of yet in workers’ comp.

As the original focus of the blog was transforming workers’ comp, this should be read by those of you who have followed my ideas on the subject. Let me know what you think.

NCCI, for those of you not familiar with them, is the organization responsible for collecting and distributing data about the American workers’ comp industry, what is driving the costs of comp, and of claims, and other financial data relevant to the industry’s function.

Here is the link to their article:

Source: The Road to Recovery: Post-Acute Care in Workers Compensation

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Trends in Workers’ Compensation Claims: Some Things to Think About for Medical Travel

It is rare that I post articles from the National Council on Compensation Insurance (NCCI) on this blog, and it has been some time since I discussed workers’ comp and medical travel in the same post, so I thought that this would be a good time to do so.

NCCI is the premier source for data collection in the workers’ compensation industry. Their focus is more involved with the factors that drive the cost of workers’ comp insurance, rather than specific issues in workers’ comp that one might find from reading the reports of the Workers’ Compensation Research Institute (WCRI).

As the article will note, there has been a decrease in frequency of claims, but an increase in severity. Claim frequency is defined by NCCI as the number of claims involving lost wage benefits paid, divided by earned premium. For those of you in the health care and medical travel worlds, just know that it means there are more claims reported to insurance carriers.

Claim severity, on the other hand, is defined as losses incurred, divided by the number of claims, for lost wage benefits paid. This will be of importance to the medical travel industry, as they have found a +16% increase in medical severity from 2011 to 2016.

I will let you read the rest of the article here.

State of the Line Report — 2018 Edition

It’s May, and you know what that means. It means NCCI has held its Annual Issues Symposium, and the State of the Line Report, presented by Chief Actuary Kathy Antonello.

But this year I am going to do something a little different. I am going to compare the data presented this year with some of the data from last year and the year prior, so that the reader can see how much change there has been year over year from the 2017 and 2018 reports. Last year’s data and the year before was presented in my post, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 2.”

First up, this year’s WC Average Medical Lost-Time Claim Severity in Chart 1.

Chart 1.

As you can see, there has been another slight increase in the lost-time claim severity from the 2016 to 2017 preliminary data. In 2016, the average medical lost-time claim severity was $28,800 and the preliminary 2017 severity was $29,900, an increase of nearly $1,000.

The key takeaway here is that NCCI estimates that the AY 2017 average medical lost-time claim severity is 4% higher than the corresponding AY 2016 value.

Looking back at the data from last year’s report, we can compare the preliminary 2016 data with the actual 2016 data reported above. Chart 2 exhibits last year’s data.

Chart 2.

Source: NCCI’s Financial Call Data; p Preliminary based on data valued as of 12/31/2016.

In chart 2, the preliminary medical lost-time claim severity was $29,100 and represented a 5.0% change from 2015. In 2015, it was $27,700 and saw a -1.4% change from the prior year.

This is borne out in the next chart, Chart 3, where the 2015 average medical lost-time claim severity was estimated at $28,500, or a 1.0% change from 2014.

Chart 3.

 

Next, we look at the cumulative change in medical lost-time claim severity (1997-2017p), as highlighted in chart 4.

Chart 4.

In this chart, the cumulative change in medical lost-time claim severity is contrasted with the cumulative change in the Personal Health Care Chain-Weighted Price Index (1997-2017p). The PHC is a proxy for medical care price inflation that responds to changes in the blend of different medical services over time.

From the chart, the cumulative change in medical lost-time claim severity has strongly outpaced the change in the PHC index in that same period, indicating that while the PHC index is nearly flat, the medical lost-time claim severity is rising and will continue to do so.

According to NCCI, the medical lost-time claim costs have risen faster, +175% , than the PHC index of +61%, over the period from 1997-2017, with most of the gap occurring in the years before the recession.

However, looking at the data from last year’s report, as shown in chart 5, the cumulative change in medical lost-time claim severity was much higher, as estimated by NCCI, which was +227%.

Chart 5.

Sources: NCCI’s Financial Call Data; Centers for Medicare & Medicaid Services ; p Preliminary based on data valued as of 12/31/2016.

The next chart, chart 6, compares the relative growth rates between medical severity and price inflation.

Chart 6.

On the left-hand side, the medical lost-time claim severity grew approximately 4.5% per year faster than the medical care prices for the same period.

On the right-hand side however, the change in the medical lost-time claim severity and the medical care price tracked one another in the same ten-year period. Yet, there is a slight rise in the medical lost-time claim severity after 2015 continuing into 2017.

The key takeaways as NCCI reported were that much of the gap between the cumulative changes in medical lost-time claim severity and the PHC index since 1997 arose from the years prior to 2007. And that both the severity and care prices have grown at approximately the same rate, as indicated above.

Lastly, the next chart, chart 7, indicates the average annual change from 2012 to 2016 for all NCCI states. Note: all states in grey are either monopolistic states or are intrastate-rated states that do not report data to NCCI.

Chart 7.

The state with the highest average annual change was Nevada, and the states with the lowest average annual change, were Maine, Massachusetts, North Carolina, Oregon, and Rhode Island.

The key takeaways here are that the average annual change in medical lost-time claim severity was +2.3% from the four years between 2012 and 2016. The increase in Nevada, NCCI stated, was due to a very large claim that occurred in 2016. The decrease in North Carolina was due to a combination of large claim activity in 2012 and a change in the medical fee schedule in 2013 and 2015.

But it is apparent that most states experienced a change at, or below 10% from 2012 to 2016. And if we are to believe that claim frequency is decreasing, then we must ask ourselves, why is the medical lost-time claim severity rising, as seen in chart 1, one hundred dollars short of $30,000.

One answer we have already examined is the cumulative change in medical lost-time claim severity from 1997 to 2017, although preliminary as of this week’s report.

However, what is not shown is what lies behind those numbers, i.e., what is happening in each claim to cause the severity to rise, or not rise. There is no indication, as there never is, as to what amount of the rise is due to the cost of surgery or to other claim factors such as hospital bills, ancillary services such as medical equipment, anesthesia services, any testing performed, etc. In short, we don’t know if what is causing health care costs generally to rise also is affecting the medical lost-time claim severity.

As I have stated before in this blog, workers’ compensation must look to other alternatives to help bring down the medical lost-time claim severity. This cannot be achieved by looking between all three coasts. It must include looking at less expensive, but equally advanced medical care elsewhere. Otherwise, the gap will only get wider over time.

 

 

 

 

A Deeper Dive into Medical Cost Rising for Lost-Time Claims

It is said, a picture is worth a thousand words, and I have ten pictures, courtesy of NCCI’s Barry Lipton’s presentation on that subject.

It was brought to my attention by my fellow blogger, James Moore, of J&L Risk Management Consultants. I met James back in February at the NCCI 2017 Data Education Program in West Palm Beach.

Mr. Lipton is the Senior Actuary and Practice Leader, and his presentation was called, “Medical Cost Trends Then and Now.

Yesterday’s posts regarding the slight increase in the average medical costs for lost-time claims only scratched the surface of the subject. I hope this post will dive deeper into it, so that we can see the whole picture.

In my first post from yesterday, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 1”, I discussed how physician costs and prescription drug costs impacted medical costs for lost-time claims.

On the issue of physician costs, Mr. Lipton showed that there was a decline in the 2015 medical payments per claim due to physician costs, but as the following chart proves, despite this decline, physician costs contribute a larger share of the total costs.

Chart 1.

Chart 6.

Source: NCCI Annual Issues Symposium 2017

According to James, the main reason for the reduction in costs is the physician utilization per claim. Even though it is only a3% reduction, it is significant, James says, in a time of upward spiraling medical costs. Chart 2 bears this out.

Chart 2.

Chart 7.

Source: NCCI Annual Issues Symposium 2017

The second part of my post yesterday, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 2”, looked at the steady rise of the average medical cost for lost-time claim.

If we compare the chart from yesterday’s post to the one Mr. Lipton presented, we will see that his chart does show increases and decreases over time in the average medical costs per lost-time claim, but my chart indicates that ever since 1995, it has been rising steady.

Both charts, do show that the average medical cost per lost-time claim is hovering around $30,000, and if the numbers are consistent with ones for earlier years, represents almost 60% of the total claims cost.

My Chart.

Chart 2.

Chart 3.

Chart 4.

Source: NCCI Annual Issues Symposium 2017

To examine this in greater detail, Mr. Lipton broke down the Accident Years into three separate periods and slides, to show the change in medical cost per lost-time claim. He compared the change in Personal Health Care (PHC) Spending per Capita with the Medical Cost per Lost-Time Claim.

In the period, 1995-2002, the average growth rate (AGR) for WC was 9%, and the AGR for PHC was 6%. In the next period, 2002-2009, WC AGR was 6%; PHC AGR was 5%, and finally, in the last period, 2009-2015, the WC AGR was 1%, while the PHC AGR was 3%, as seen in chart 4.

Chart 4.

Chart 10.

Source: NCCI Annual Issues Symposium 2017

To understand what was driving the decline in Accident Year 2015, Mr. Lipton identified six different drivers, as indicated in chart 5.

Chart 5.

Chart 8.

Source: NCCI Annual Issues Symposium 2017

Finally, Mr. Lipton discussed how hospital costs contributed to medical cost per lost-time claims by highlighting the difference between inpatient and outpatient costs, which are rising.

The following chart looks at the four years prior to the 2016 Accident Year, 2012-2015.

Chart 6.

Chart 9.

Source: NCCI Annual Issues Symposium 2017

In 2012, Hospital Inpatient Paid per Stay amounted to $19,514, in 2013, it rose to $22,944 (18% increase), in 2014, it was $24,558, or a 7% increase, and last, in 2015, it was $25,320, or 3% increase over the previous year.

As for Hospital Outpatient Paid per Visit, the number are considerably lower for each year when compared to Inpatient Stays, but nonetheless have been rising.

So perhaps this, at the end is why the average medical cost per lost-time claim has been rising over a period of over twenty years, from 1995 to 2015.

I wrote to James last night when I saw his recent posts on this presentation, and he responded that we are both correct in our analysis, but looking at it from different points of view.

My conclusion after reading this presentation and my discussion with James suggests to me that there are two things going on here. One, when a worker is injured and receives medical care, unless and until he or she goes to a hospital, the best way to lower costs is through what James calls one of his six keys to reducing workers’ comp costs. One of those keys is medical control by the employer, which James said reduced cost by 75%.

But I also realized that when an injured worker goes to the ER or an Ambulatory Service Center as an Outpatient, has an Inpatient stay, that this is where the medical costs go up.

Naturally, Workers’ Comp medical spending is only a fraction of the overall health care spend of the US, and as costs for health care in general rise, so too does costs in workers’ comp.

So, while many have argued or shown that they can lower costs on the front end, from time of injury to return to work for most claims where no surgery is required, one of the largest reasons for the steady rise in the average medical cost per lost-time claims is hospital costs.

On this, both James and I agree. However, it is important that many in the industry see this as well. Keep thinking that it will change by doing this or that has not worked, the numbers prove that. Maybe it is time for something out of the box.

Slight Increase in Average Medical Costs for Lost-Time Claims, Part 2

Ever since I began my MHA degree, I have analyzed the average medical cost severity for lost-time workers’ comp claims.

The average medical costs for lost-time claims have been rising steadily for the past two decades and only recently had a negative change.

The data for average medical lost-time claims severity comes from all jurisdictions where NCCI provides ratemaking services. The data is valued as of 12/31/2005, and accident year 2016 is preliminary as of 12/31/2016.

NCCI estimated that Accident Year 2016 was 5% higher than the corresponding 2015 value, as seen in Chart 2.

Chart 2.

Chart 2.

Source: NCCI’s Financial Call Data p Preliminary based on data valued as of 12/31/2016.

Comparing the above chart with last year’s chart, you will notice that there is a difference of 0.4% for 2015.

Looking at both charts, it is easy to see that the average medical cost for lost-time claims is still going up, and is now closer to $30,000. The trendline has been increasing since 1991.

I have been advocating every year that doing the same things repeatedly, and expecting different results is not only crazy, it is not lowering the average medical cost for lost-time claims.

It is also apparent that the enactment of the ACA has not done much to lower the average; in fact, just the opposite.

avg-med-cost-2016

NCCI went further in analyzing average medical cost by examining the cumulative change in the Medical Lost-Time Claim Severity from 1995 – 2016, as indicated in Chart 3.

Chart 3.

Chart 3.

Sources: NCCI’s Financial Call Data; Centers for Medicare & Medicaid Services p Preliminary based on data valued as of 12/31/2016.

The growth in the corresponding Personal Health Care Chain-Weighted Price Index (PHC), a proxy for medical care price inflation that responds to changes in the blend of different medical services over time, varied from 2.6% in 1995 to 1.3% in 2016p.

The takeaways here are:

  • In the latest year, medical lost-time claim severity increased by 5%, compared with a 1.3% growth in the PHC.
  • In 2015, medical lost-time claim severity decreased by 1.4%and the PHC presented its lowest increase in years (0.5%).

When the changes in medical lost-time claim severity is compared to the change in the growth of the PHC index over three time periods, any change over and above the change in PHC is considered a change in the utilization of medical services.

Key takeaways:

  • From 1995 to 2001, PHC increased by about 16% and utilization of medical services increased 56.6% for an overall combined increase in medial lost-time claim severity of 72%.
  • Compared with the prior period, 2002 to 2008 saw a similar rate of increase in the PHC, but utilization slowed
  • In the most recent period, the change in utilization is almost nonexistent.

The key takeaways for the five previous years, 2011 – 2015 are:

  • The majority of the observed changes are increases, indicating that the average medical benefit level across most states was higher in 2015 than in 2011.
  • Mississippi’s relative higher average medical severity change is primarily the result of larger losses.
  • Virginia is in the process of developing a medical fee schedule, which may put downward pressure on that jurisdiction’s average medical lost-time claim severity.

What does this mean for you?

This is the eighth Annual State of the Line report I have examined, and from all the data I have seen in this period, the average medical cost for lost-time claims has never shown a marked decrease with all the various methods employed to lower costs so many in the industry have touted.

And while there have been cases where costs have gone down for individual employers and states; overall, this is not the case. Perhaps it is due to medical cost inflation, or perhaps to the cost of health care generally, but either way it is not getting better.

Slight Increase in Average Medical Costs for Lost-Time Claims, Part 1

It’s that time of the year again, the time when I review the NCCI State of the Line Report.

As an added feature this year, I am including a look at the Medical Cost data, a new subject which I heard about back in February, when I attended NCCI’s 2017 Data Education Program.

First up is the distribution of medical costs by category. NCCI supports regulatory and legislative initiatives by providing State Medical Data Reports using data from their Medical Data Call.

For Service Year 2015, the distribution of payments across the various categories is based on data for all jurisdiction where NCCI provides ratemaking services, except Texas.

The key takeaway, as the following table will show, is that in 2015, physician costs were almost 40% (38%) of total medical costs, combined inpatient and outpatient hospital costs were approximately 30% (31%), and prescription drug costs were about 11%.

Table 1.

Table 1.

Source: NCCI’s State Medical Data Reports

Drilling down further, the distribution of physician costs for Service Year 2015, indicates that the bulk of the costs were associated with physical medicine, 30%, and surgery was associated with 24%, 10% associated with radiology, as shown in Table 2.

Table 2.

Table 2.

Source: NCI’s State Medical Data Reports

Getting even further, the next area the report covered was prescription drug payment changes over time.

The key takeaways here are the following:

  • In 2011, generic equivalents represented 47% of payments for all drugs prescribed. This increased to 58% by 2015, and driven largely by brand-name drugs.
  • Repackaged drugs now represent a small portion of overall drug payments because several states have implemented regulation on reimbursement.

Table 3.

Table 3.

Source: NCCI’s Medical Data Reports

NCCI analyzed the impact of prescription drug fee schedules on the cost of drugs by classifying states into one of four categories. States that had fee schedules were classified as Low, Medium, or High, based on the size of the Average Wholesale Price (AWP). The fourth category were states without a schedule.

The key takeaways here are:

  • Transitioning from not having a schedule to a low-fee schedule significantly reduces prices for WC prescriptions
  • Moving from no schedule to a high-fee schedule may increase drug costs, as shown in the following chart.

Chart 1.

Chart 1.

Source: NCCI’s Medical Data Reports

NCCI also looked at physician payments as a percentage of the Medicare reimbursement rate. In most states, they said, WC physician services are subject to fee schedules, just like the ones in group health and Medicare.

One way to measure physician costs across the states is to compare WC payments to the Medicare reimbursement rate.

The key takeaway from this is:

  • Prices paid relative to Medicare vary widely, from about 100% (Florida – 101%) to over 250%
  • Of the five jurisdictions with the largest percentage, all but Alaska (263%) are currently operating without a fee schedule
  • Countrywide the average is 150%

What does this mean for you?

While there are some positives in these numbers, especially with the cost savings from going to a low fee schedule for drugs, and an increase in the use of generic over brand-name drugs, and a decline in the percentage of repackaged drugs, medical costs are still very high for workers’ comp.

In the next post, I will look at the medical lost-time claim severity.

NCCI’s 2017 Data Educational Program: A Personal View

Many of you have probably read my blog and notice that I sometimes refer to an organization called the National Council on Compensation Insurance or NCCI.

Back in the mid 1990’s, I worked there briefly, and also did a stint with a software vendor company reporting data to NCCI and independent state bureaus for workers’ compensation claims and policy data.

One of my blog readers told me about this year’s conference held in West Palm Beach and that we could me there. He came down from North Carolina yesterday, but left after the last class.

The program began on Tuesday, but I attended sessions starting on Wednesday. These are the classes I took:

  • Unit Statistical Data Editing and Correction
  • Medical Data Call Validation
  • Medical Data Collection Tool
  • Introduction to Unit Statistical Data Reporting (refresher course for me)
  • DCI Data Validation and Quality Issues
  • WCSTAT (Unit) Data File Submission and Processing
  • Unit Statistical Data-Premium Rating Programs and Exposures
  • Unit Statistical Data-Loss and Claim Conditions

Most of the classes were two hours long, with a fifteen minute break in between.

The classes were given by two presenters who rotated during the sessions, so that you did not get just one person’s knowledge and experience.

The participants ranged in age, but many were considerably younger than your humble writer. I had missed the 2oth anniversary reception Tuesday evening, but this was not really a social event, so it did not matter.

The technology I saw displayed this week was a far cry from what I worked with back in the 90’s, and is all web-based and very easy to learn. My impression from the information presented in all classes was that NCCI is taking a more customer-friendly approach to workers’ comp data reporting, which was something I found lacking back in the 90’s.

I know there are still areas of contention with some aspects of NCCI’s ratemaking role, as someone recently pointed out on LinkedIn regarding higher premiums for certain classification codes that are forcing small businesses out of business, but that is the exception and not the rule.

Overall, I felt it was worth it to attend, and I have gained a better appreciation for data reporting.