Last year, the Division of Workers’ Compensation (DWC) adopted a new Medical-Legal Fee Schedule (MLFS). In what may have been a profoundly accidental bit of irony, the MLFS was effective April 1, 2021. Per the documents prepared by the DWC: “These proposed changes provide a raise in the reimbursement rate for medical-legal reports of approximately 25%.”
Medical-legal reports are requested when there is a dispute over whether an injury is compensable, the nature of permanent disability and impairment, or the need for future medical care. This process involves the DWC certifying and administering the process for the appointment of qualified medical evaluators (QMEs). This includes developing a fee schedule for the payment of these reports.
According to the most recent pure premium rate filing by the Workers’ Compensation Insurance Rating Bureau (WCIRB), however, the “raise” in the MLFS is 39 percent. The reason? As most would acknowledge, and as noted in the rate filing, the sharp increase in medical-legal costs compared to the WCIRB’s prospective estimate in 2021 is primarily driven by a significantly higher-than-projected increase in the costs for record review.
This is not, in some respects, an inconsequential number. As was the case last year, the MLFS costs are a significant part of the requested increase in pure premium rates. On the other hand, while the MLFS is increasing costs, the question is whether the increase that was intended should be considered a subject of remediation as opposed to the increase that was unintended. For purposes of rate making, costs are costs regardless of whether intended or not. But for purposes of discussions at the ephemeral table in Sacramento, it serves as a reminder not to pay for something twice.
It would seem that the issue of record review is one that could be resolved at the DWC. It would also seem that this cost driver is something that should be resolved by both applicant and defense attorneys and their associated document vendors.
The fact that it was not resolved during the negotiations over the MLFS strongly suggests the issue is not as simple as it seems. The cost of compiling and serving records for an evaluation has always been a sore point – particularly as it now relates to per page fees resulting in payment for duplicate or irrelevant information.
And yet, QME costs appear to be table stakes in a discussion – which may or may not be occurring – between the true “stakeholders” in the system. This is the subtext of the benign Assembly Bill 2828 (Santiago) which will be taken up in the Assembly Appropriations Committee on May 19. As noted in the Assembly Appropriations Committee analyses: “the author intends to amend this bill to become a larger workers’ compensation reform package, with the goal of raising permanent disability benefits, minimizing delays associated with medical treatment requests and reducing frictional costs within the workers’ compensation system.”
So, it would appear that frictional costs will include some of the rapidly increasing QME expenses. The current numbers suggest med-legal reports are roughly 14 percent of all medical costs. That translates to near $500 million. How much this upward curve could be bent downward depends on what exactly is proposed and how it relates to other changes which may occur.
But in California’s system, “fixing” the QME process – which has been an ongoing effort since shortly after it was first created in 1989 – will not pay for what labor and medical providers want to see changed in the system.
Note: The opinions expressed herein may or may not be those of Workers’ Comp Executive. Mark Webb is a former Arizona insurance regulator, insurance company chief compliance officer, and is an expert in corporate governance, risk and compliance. He is the owner of Prop 23 Advisors.