Milliman compared the 1996 MFG reimbursements with the current workers' compensation fee schedules for the following ten states: California, Colorado, Florida, Georgia, Kentucky, New York, North Carolina, Ohio, Oklahoma, and Washington.

The conclusions of this comparison were as follows:

* For General Medicine Services, Texas MFG MARs are near the mid-point of the corresponding fee schedule maximums for other states.

* Texas MFG MARs are higher than all or nearly all the corresponding fee schedules maximums for the states studied for several CPT sections.

* The Texas MFG MAR level for evaluation and management services is lower than the corresponding reimbursement level in all but three of the states studied.

* Relative to other states, the average fee for workers' compensation services is higher in Texas.

The 1996 MFG MARs average approximately 130% of calendar year 2001 Medicare allowed fees. Although surgical CPT codes (including the non-invasive surgical procedures such as injections) under the 1996 MFG are reimbursed in aggregate at 174% of Medicare fees, the relationship to Medicare fees varies significantly from one CPT code to the next, e.g.:

* approximately one third of the surgical procedures commonly performed in Texas were reimbursed at or below Medicare fees;

* approximately 5% were reimbursed at less than half of Medicare fees;

* approximately 16% were reimbursed between 200 and 300% of Medicare fees; and

* approximately 5% were reimbursed at more than 3 times the Medicare fees.

The ROC also conducted a comparison of the Texas workers' compensation system with the following eight states: California, Colorado, Florida, Georgia, Kentucky, Minnesota, New Jersey, and Oregon. (ROC and Med-FX, L.L.C., Striking the Balance: An Analysis of the Cost and Quality of Medical Care in the Texas Workers' Compensation System, A Report to the 77th Texas Legislature, January 2001)

Conclusions from the ROC study were as follows:

* Texas has the highest average medical costs per claim (more than 20% higher than the second-highest state, New Jersey, and more than 2.5 times higher than the lowest-cost state, Kentucky).

* When similar types of injuries were compared in the group health and workers' compensation systems, Texas had higher than average medical costs for the top five types of injuries.

* Five medical treatment types (surgery and related hospitalization, physical medicine, office visits, diagnostic tests, and pharmaceutical drugs) account for the vast majority of medical costs in Texas. Out of the nine workers' compensation systems compared in this study, Texas has either the highest or the second-highest utilization rates for each of these treatment types.

In setting the 2002 MFG fees, the commission thus has used Medicare fees as a benchmark and has considered commercial market payments as indicative of economic indicators in health care, as required by the statute. The commission determines "fair and reasonable" is not based solely on the market value of services provided to injured employees. Fair and reasonable compensation in the Texas workers' compensation system is a balance of all the required components of the Act. These are rigorous statutory requirements, which are not easily balanced. In balancing the statutory mandates and objectives, the commission considered numerous issues, with the goal of establishing fair and reasonable fees that will assist in achieving effective medical cost control.

Treating physicians within the workers' compensation system are responsible for maintaining administratively time consuming functions such as, researching compensability, establishing relationships with carriers, and evaluating return to work. Because of these added responsibilities in workers' compensation, it is appropriate that the evaluation and management codes be upgraded to a higher level of reimbursement.

The following additional burdens and considerations specifically related to the workers' compensation system are different than in the Medicare system and are important in the development of the MFG:

* impact on access to quality care;

* administrative complexity in the workers' compensation system;

* commission return-to-work objectives; and

* requirements for training.

ACCESS TO QUALITY CARE

The commission has determined that the adopted fees will not negatively impact injured employees' access to quality care.

In recent correspondence with the commission, the TABCC Technical Work Group stated, "There is no evidence to suggest Medicare beneficiaries have any difficulty gaining access to needed services or that the quality of those services is diminished by Medicare reimbursement rates or payment policies. For DME and dental services, there is no evidence that beneficiaries of that program have difficulty gaining access to services or that the quality of services has been decreased by the payment schedule." "While there were expressions of concern about potential access problems, no actual access problems have been documented in any specialty. The current level of Medicare payment to physicians is sufficient to provide reasonable access to quality medical care to injured workers." The TABCC Technical Work Group also stated that while there may be some physicians who have closed their practices to new Medicare patients, the inability of a patient to access a specific doctor is different from a problem of access to medical care. "There is no shortage of surgeons willing to treat Medicare or other insured patients. The documented problem in the Texas workers' compensation system is over-utilization of surgery services relative to patients with the same characteristics covered by group health plans." (Contained in correspondence from TABCC to the Executive Director of the commission on March 1, 2002)

A study was conducted by the Project HOPE Center for Health Affairs for the Medicare Payment Advisory Commission (MedPAC) in 1999 to monitor the impact, if any, of the 1998 changes in Medicare fee-for-service (FFS) payments. The possible impacts monitored included, among others, changes in physicians' practices and changes in access to physician services. Results of the study indicated that many physicians had made practice changes in the past year to reduce practice costs and/or increase revenue. These efforts included a reduction in the number of office staff or the hours they work, curtailing salary increases, or reducing fringe benefits. Other practice changes included increasing the number of patients seen by the practice in an attempt to boost revenue and the expansion of the range of services offered. (MedPAC, Results of the Medicare Payment Advisory Commission's 1999 Survey of Physicians about the Medicare Program, September 1999)

In regard to any impact on access to care the 1999 MedPAC survey monitored three areas. The survey supported that physicians do not appear to be experiencing much difficulty when seeking referrals for their FFS Medicare patients. Only 4% of the respondents stated that it was "very difficult" to find suitable referrals for their FFS Medicare patients, and this figure was statistically comparable to the 3.7% of physicians reporting referral difficulties for their privately-insured FFS patients, while 20% of the physicians said it was very difficult to refer their HMO patients and more than 25% said they had a very difficult time referring their FFS Medicaid patients. (MedPAC, September 1999)

In regard to physician acceptance of new patients, the 1999 survey exhibited that for all types of patients considered together, physician acceptance of new patients has held steady from 1994 to 1999. Of note, acceptance of new FFS Medicare patients has remained on par with the acceptance of new privately-insured FFS patients over this time interval, and is significantly above acceptance of new patients with other types of insurance or of those without health insurance coverage. The results indicate that there is no evidence to support the hypothesis that recent Medicare payment changes have affected physicians' willingness to accept new FFS Medicare patients. The conclusion that FFS Medicare payment changes have not had a significant impact on physician acceptance of FFS Medicare patients is further strengthened by a closer look at the variations in FFS Medicare acceptance rates by type of physician. Acceptance rates among surgeons - who typically experienced relatively large declines in Medicare revenue as a result of the payment changes - fell by an insignificant 0.1 percentage points and remain higher than FFS Medicare acceptance rates among non-surgeons. Conversely, acceptance rates for non-proceduralists (or medical specialists) - who typically enjoyed higher payments as a result of the payment changes - fell by 2.5 percentage points, and are significantly below acceptance rates for other types of physicians in 1999. For two of the three over-sampled specialties - which were selected specifically because of the large Medicare payment decreases they received - there was no change at all in the acceptance of new Medicare patients. Acceptance rates did fall by 3.4 percentage points among orthopedic surgeons, but this change was not statistically significant. (MedPAC, September 1999)

The other access to care factor monitored by the 1999 survey was the possible changes in appointment priority. The fact that physicians are continuing to accept new FFS Medicare patients at very high rates may be a misleading indicator of these patients' access to physician care if they are encountering increased difficulty in obtaining an appointment within a reasonable period of time. Results from this physician survey indicate that access to FFS Medicare patients appears to be good when considered from this perspective. Only one in ten physicians reported that they had made any change at all since 1997 in the priority accorded to Medicare patients seeking an appointment with them. Only slightly more than half of the physicians said Medicare patients are now given a lower appointment priority, while the remaining 44% said the appointment priority was not higher. Apparently, the physicians' awareness of FFS Medicare payment changes since 1997 does not appear to be related to whether the priority given to Medicare patients has changed since that time. (MedPAC, September 1999)

Government figures also do not support the widespread claims that doctors are rejecting Medicare. Physician participation in Medicare is increasing - it reached 86.3% in 2000 - a 4% increase over 1999. The percentage of physicians participating in Medicare has increased every year since 1996. (American Medical News, Opting out: Physicians exiting Medicare program, June 25, 2001) In addressing issues regarding rising health insurance premiums, the Health Insurance Association of America (HIAA) cited findings of the Bureau of Labor Statistics (BLS) that the number of active physicians in the country grew more rapidly during the 1990s than the general population. (HIAA's Issue Brief: Why Do Health Insurance Premiums Rise?, March 2000) The physician supply has increased over the last four decades, mostly because of an increase in the number of specialists. Specialist income growth has nearly doubled primary care physician income growth. (Blue Cross Blue Shield Association, Medical Cost Reference Guide, Health Costs Campaign)

Similar views were expressed in recent testimony before Congress by Glenn M. Hackbarth, J.D., Chairman of the MedPAC. Mr. Hackbarth stated that according to data from the Medicare Current Beneficiary Survey, access to care was not a problem in 1999. This survey also showed that the number of providers accepting Medicare payment had increased from previous surveys. Counts of physicians billing Medicare show that the number of physicians furnishing services to beneficiaries has kept pace with growth in the number of beneficiaries. From 1995 to 1999, the number of physicians per 1,000 beneficiaries grew slightly, from 12.9 to 13.1. The percentage of beneficiaries reporting trouble getting care (4%) was low in 1999 and essentially unchanged from previous years. (Testimony Before the Subcommittee on Health of the House Committee on Ways and Means, Hearing on Physician Payments, February 28, 2002)

Further, Chairman Hackbarth added, "One of the most important findings of the survey was that among physicians accepting all or some new patients, more than 95% said they were accepting new Medicare fee-for-service patients--a finding consistent with the results of another recent survey." This would indicate that Medicare reimbursement alone is not a deterrent for healthcare providers to provide access to care. The same assumption can be made concerning access to care in the Texas workers' compensation system relative to reimbursement.

In the newly adopted MFG, not all reimbursements are reduced from the 1996 MFG reimbursement amounts. The realignment of values for E/M codes, resulting from adoption of the RBRVS system significantly increases reimbursement to treating doctors as the gatekeeper in the workers' compensation system. This realignment indicates that since the adoption of the 1996 MFG evaluation and management services have been reimbursed at a level below the reimbursements in the Medicare system. Despite this below Medicare reimbursement for these services, the commission has not seen a corresponding reduction in availability of treating doctors. In addition to evaluation and management services, overall reimbursement for designated doctor examinations and required medical examinations are increased, as is reimbursement for anesthesia services.

Because there are many changes being implemented at once as a result of HB-2600 (increased training for doctors, changes to requirements for inclusion on the approved doctors list, preauthorization process changes, new medical dispute resolution processes, etc.), the collective effect of these changes cannot be fully predicted or decomposed. However, MedPAC's annual review has as its objective ensuring that Medicare beneficiaries continue to have access to high-quality care. MedPAC routinely monitors access for Medicare beneficiaries. Because Medicare does not have information on the costs of physician services, MedPAC uses information on several other factors that allow judgment about adequacy of payments including the number of physicians furnishing services to Medicare beneficiaries and physician survey results. As stated previously, MedPAC's study of access to physician services found no indication that cuts in physician payment levels change the willingness or ability of physicians to continue to serve Medicare beneficiaries. (MedPAC, Report to the Congress: Medicare Payment Policy, March 2000) MedPAC also concluded that for most care settings, payments in 2002 to providers appear to be adequate; there is no compelling evidence that payments are too high or too low. (MedPAC, March 2002)

Physician participation is a factor in access to care. If the Medicare experience is indicative of physician reaction to changes and reimbursement, the Texas workers' compensation system should not experience any significant access or quality problems as a result of the adopted fees. The commission will likewise review, to the extent possible, the effects that these many changes in the workers' compensation system may have on access to care and quality of care, to determine if adjustments should be made.

Subscribing employers' continued participation in the Texas workers' compensation system is critical. The high costs per claim in Texas impact premium costs and the availability of coverage to Texas employers. In fact, "almost half (48 percent) of current subscribers indicated that they would consider dropping coverage if premiums increased by some increment up to 20 percent . . . . This propensity of employers to seriously weigh the possibility of opting out of the system in the event of higher costs holds across employers of all sizes." (ROC A Study of Nonsubscription to the Texas Workers' Compensation System, February 2002) This statement shows the importance of controlling the high costs per claim experienced in Texas.

Testimony on behalf of the Center for Studying Health System Changes stated that decline in accepting all new Medicare patients was the sharpest for physicians with the weakest connections to Medicare and physicians with the lowest revenue for Medicare were the most likely to report accepting no new Medicare patients. And the extent to which payment cuts to Medicare physicians compromise Medicare patients' access to care will depend on the community where patients live. This is because the relationship between Medicare payment rates and the rates paid by private insurers vary widely across communities. (Ginsburg, February 2002)

According to the Ginsburg testimony, there is considerable geographic variation in relative payments across 12 communities that were tracked. In Miami, Northern New Jersey and Orange County, California, private insurers' physician payment rates relative to Medicare are relatively low compared with other communities. For example, in Miami, private payments range from 80% to 108% of Medicare physician payments. In Northern New Jersey, private rates ranged from 95% to 105 % of Medicare payments. In contrast, Boston, Cleveland, Greenville, Little Rock and Seattle have private rates that are much higher than Medicare. For example, private payments in Little Rock range from 120% to 180% of Medicare physician payments and from 100% to 150% in Boston.

As a result of this variation in communities, a substantial decline in Medicare payments would pose the greatest risk to beneficiaries' access in those communities, such as Boston and Little Rock, where Medicare payment rates are the lowest relative to private rates. Based on the Milliman analysis median commercial reimbursement in Texas is slightly less than reimbursement under the 1996 MFG. Since these reimbursement levels are similar and within the established 100-140% of 2002 Medicare fair and reasonable range the change in reimbursement should not put injured employees at risk. (Ginsburg, February 28, 2002)

The commission notes that quality care and expensive care do not necessarily equate. (News from Dartmouth, Comparing the Health Care of States (More Spending Doesn't Help), April 2001) A comparison of state-level per-capita Medicare spending and the state-level Medicare quality of care shows that, although there is a remarkable difference in per-capita spending across states, ranging from $2,763 in Oregon to $5,668 in Texas and $6,307 in Alaska, higher per-capita spending does not appear to relate to better quality. Texas, the second-highest state in Medicare per-capita spending, ranks in the bottom 20% with regard to quality care for Medicare beneficiaries. (News from Dartmouth, April 13, 2001)