A little-noted provision of Gov. Schwarzenegger’s health plan will implement a pilot program to study the effectiveness of “24-hour care,” using members of the CalPERS benefit program for state employees. It’s not clear whether the pilot will include some or all CalPERS enrollees, although other private employers will have the right to opt into the plan.
24-hour care is among the most-“piloted” concepts in health insurance history. Formal pilots go back to the 1980’s with CIGNA and other large carriers, and informal programs date back as far as the 1960’s. I’ve participated in a number of these experiments myself.
There are many reasons why 24-hour care might be attractive. Allowing people to use familiar doctors for a work-related injury seems more reasonable. There should be no need for two separate health bureaucracies, and there is the hope that combining the two systems might create administrative savings. Lastly, medical expenses under workers’ compensation are considerably higher than they are for similar conditions under health insurance.
It’s easy to understand why comp insurers might be attracted to a 24-hour care program. As far back as a decade ago, studies documented that medical expenses are higher under workers’ comp. One study showed that injured workers in California had 8.4 times as many physician visits per injury, with 2.5 times as many lab tests and surgeries, as those whose injuries weren’t covered by workers’ comp.(1)
But some fundamental design issues have never been addressed in the 24-hour concept. First, workers’ compensation is an exclusive remedy based on a compact between the employer and employee. Exclusive remedy says, in effect, that employees waive their right to a lawsuit in return for full coverage of their injury. That means that injured workers have no out-of-pocket costs in workers’ comp, while universal coverage plans like the Governor’s and Sen. Ron Wyden’s include deductibles and copays.
Eliminating out-of-pocket costs would dramatically increase the cost of providing health insurance, both by eliminating patient contributions and by removing incentives that (rightly or wrongly) discourage some treatment from taking place.
Secondly, workers’ comp places very different financial incentives on insurance companies than health insurance does. Insurers pay for a work comp injury “from cradle to grave” – or, from the time of injury until the case is closed (either by recovery or death.) And they pay for salary replacement and other non-medical costs incurred as a result of the injury.
The result is that financial incentives under workers’ comp are in some ways more humane than they are under standard group health insurance. Group health insurers have incentives to encourage undertreatment of certain chronic conditions, especially when costly interventions like surgery are required. Comp insurers, on the other hand, pay a higher overall medical bill if they delay needed treatment.
In addition, health insurers pay no penalty if delaying or denying treatment results keeps a patient out of work longer. Comp insurers do, however, since they either pay salary replacement costs or must factor in estimates of future lost income when settling claims.
Some 24-hour plans I assisted tried to address this inequality by including non-occupational disability insurance into the mix, creating a more equivalent program for medical and non-medical conditions. But the issues of portability and out-of-pocket costs were never fully resolved.
There are other unresolved concerns, too. Regulatory requirements make it unlikely that 24-hour plans can save on administrative costs in the short term. In fact, these experiments have tended to increase overhead expenses.
It’s not clear whether the Governor’s plan envisions 24-hour coverage or simply 24-hour coordination. Its language specifies only that the plan “will ensure that health care services are delivered by the same set of providers … used in the managed care/HMO program for work-related and non-work-related healthcare.” There are no specifics yet about whether the plan will include coordination of other administrative functions such as member relations or utilization review.
24-hour care might still be a good idea, but it may take some new thinking to make it a viable aspect of health care reform – one that takes into account the different incentives built into the workers’ compensation system.
(1) Johnson W. et al 1996. “Why is the treatment of work-related injuries so costly? New evidence from California.” Inquiry. 33: 53-65.