Sandy's Corner

So you’re telling me there’s a chance… *YEAH!*

I suppose for those who know me they know that I am not really giving up the ghost when I admit out loud that I love the movie Dumb and Dumber. And much to my family’s chagrin (mostly my wife’s) if I am channel surfing and happen to luck upon the movie whilst doing said activity the process comes to a prompt halt. While the movie is a treasure trove of silliness and one-liners, there is one exchange between two of the movie’s lead actors Lloyd (Jim Carrey) and Mary (Lauren Holly) that sticks out for many fans and non-fans alike.


Lloyd: What do you think the chances are of a guy like you and a girl like me… ending up together?

Mary: Well, Lloyd, that’s difficult to say. I mean, we don’t really …

Lloyd: Hit me with it! Just give it to me straight! I came a long way just to see you, Mary. The least you can do is level with me. What are my chances?

Mary: Not good.

Lloyd: You mean, not good like one out of a hundred?

Mary: I’d say more like one out of a million.


Lloyd: So you’re telling me there’s a chance… *YEAH!*


“So you’re telling me there’s a chance … YEAH!” That was what I was thinking as I sat in the Medical Committee presentation at the IAIABC National Convention entitled An Overview of the NCCI Medical Data Call. The presentation was being made by National Council on Compensation Insurance (NCCI) Actuary Raji Chadarevian and was an interesting compilation of highlights from many different NCCI studies.


The presentation utilized the well-documented shift of medical (on average) from representing 47 cents of every dollar roughly 25 years ago to almost 60 cents today –with some state’s medical at 70 cents of every dollar. On its face, this would not appear to be any reason to “think” YEAH let alone say it out loud, but when we look at the longer trends over the same period of time there is a ray of hope in the data.


As published by NCCI, the average medical cost per lost-time claim (those claims that historically consume much of the medical utilization/costs) grew at a rate of +1.9% yr. from 1991-1993, followed by +8.9% from 1994-2001, and +5.7% from 2002-2011. While at first blush the numbers from 2002-2011 may look high, they take on a different view when further broken down as the average increase per year from 2002-2008 was +6.9% yet from 2009-2011 it was only +3% and even hit a low of +1.4% in 2011. Yes, these newer claims have not fully developed yet, but it is a positive trend and we will take what we can get when it comes to medical cost trends these days. And when the annual change in Medical Cost per Lost-Time Claim (CLTC) is juxtaposed against the annual change in US Medical CPI (MCPI), the same positive trend is again repeated: from 2002-2008 the CLTC was +6.86% yr. compared to a MCPI of +4.16% (with the CLTC 65% greater per year); from 2009-2011 the CLTC was +2.87% yr. compared to the MCPI of +3.47% (with theMCPI 30% greater per year).


Regulating the price of medical has clearly been an important piece to helping moderate the system costs and studies by NCCI and others have shown that the implementation and updating of fee schedules by states has been an important tool. In the 1970s and prior only 11 states had physician fee schedules followed by 18 in the 1980s, 40 in the 1990s, and 44 in the 2000s. The pattern repeats itself with the number of states utilizing hospital inpatient fee schedules with 2 states in the 1970s and prior, 7 in the 1980s, 16 in the 1990s, and 36 in the 2000s. Additionally, between 2000 and 2012, as states implemented changes and updates to their fee schedules, NCCI reported that the corresponding medical severity growth per claim dropped.


As to utilization (consumption), from 1996-2006 the numbers again follow the same path. NCCI states that the number of treatments per claim for lost-time claims closed within 24 months of the date of injury showed an increase from just under 40 treatments per claim in 1996 to just under 60 treatments in 2001 whereupon it levels off from 2001-2006. That is great news as the consumption of the medical services has a significant effect on the total costs. It also means that as more and more states implement medical treatment guidelines and adhere to them, the utilization of medical services becomes more and more predictable, level, and managed.


The one notable area of medical that continues to move in the opposite direction is that of pharmaceuticals which has been driven in part by the growth in physician dispensing and the explosion of the use of narcotics (opioids). And while great effort has been made in the use of generic drugs in place of brand name drugs, the brands still represented more than half of the costs in 2011. NCCI reports that while brand name drugs were 24% of the drugs dispensed in 2011 they represented 56% of the total drug spend.


So what does all this mean? It means that I am telling you that maybe there is a chance and that all of the efforts by all of the parts of the claims management system are having an impact. Kudos to the carriers and their chosen vendors for their diligence in actively managing the claims process while at the same time assuring that the injured worker fully receives the medical services they require to heal and return to life. Maybe, just maybe, if we as an industry continue on the path we are traveling our odds of succeeding may just turn better than one out of a million. I think that even Lloyd would join us in giving ourselves one big YEAH!