Friend and colleague Alex Swedlow took the podium at the California Self-Insurers’ Association Fall Employer Summit to discuss what’s going on in the Golden State, and what you need to do to manage your program.

Joe Paduda

First up: Why are California’s admin expenses so unbelievably high?

Well, the medical delivery system is quite expensive. The volume of medical services delivered is just high, especially for pretty expensive services.

Second, there are few controls that limit demand. We’re talking deductibles and copays, and no shortage of supply of providers willing to meet that demand.

Third, dispute resolution is challenged by lots of litigation, by a utilization review/independent medical review process that is expensive and (my words, not his) abused by a relatively small number of docs and attorneys.

Fourth: This all drives medical management expenses up. Waaaaay up.

The result: Medical payments that are 58% higher than the median state, and second highest of all states.

Myth bust: There’s no association between fee schedule levels and medical costs, so it isn’t a problem fixable by cutting the fee schedule.

Of course, some protested that the reforms — UR, employer direction, IMR, Medical Treatment Utilization Schedule (clinical guidelines), etc. — were going too far and harming workers. Citing the huge influx of UR, they contended that a lot of needed care was being blocked.

Except that wasn’t true. In fact, the vast majority of care performed and/or reviewed was delivered. That includes the 95% of IMR requests submitted by applicants' attorneys.

The good news is there are fewer UR/IMRs for drugs these days — which tracks a similar trend in drug spend overall — and in particular a major decline in opioid consumption.

The California Workers' Compensation Institute will be releasing an update on current goings-on in the UR/IMR space, providing stakeholders with specific attention paid to modifications rather than approvals or denials.

What does this mean for you?

Costs can be driven up by admin expense, but without those admin expenses, costs would be even higher.

Joseph Paduda is co-owner of CompPharma, a consulting firm focused on improving pharmacy programs in workers’ compensation. This column is republished with his permission from his Managed Care Matters blog.