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Press Release · November 16, 2005

Employer Or Employee? Workers’ Comp Costs Differ Depending On Who Chooses Medical Provider

But Study Uncovers New Twist – And It May Be Most Important Finding

SAN FRANCISCO, California, November 16, 2005 — Medical and income replacement payments in workers’ compensation cases are lower–yet patient recovery is not adversely affected–when employers rather than employees choose a medical provider, according to a study released today by the Workers Compensation Research Institute (WCRI) and the Public Policy Institute of California (PPIC). There is, however, a notable exception to this finding–one that may be the report’s most interesting and policy relevant, particularly for California.

First, the overall numbers: When workers rather than employers choose a doctor, medical payments are between 10 and 21 percent higher, income-replacement benefits are between 8 and 15 percent higher, time away from work is between 23 and 32 percent longer, and recovery of physical health is about the same. However, workers are 57 to 59 percent more likely to report higher satisfaction with their medical care when they choose the provider themselves.

Although these results tend to support those who believe employer choice reduces costs, other findings undercut that support to some extent. When workers choose a health care provider who has previously treated them, the difference from employer choice–in terms of cost, recovery, and the amount of time it takes to return to work–is nonexistent or statistically weak. Yet, workers are 86 to 89 percent more likely to report higher satisfaction when they make this choice. In contrast, when workers choose a new provider–someone they have never seen before–medical payments are between 12 and 20 percent higher, income benefits are 15 to 20 percent higher, and time away from work grows 40 to 48 percent longer than when the provider is selected by the employer.

“These findings really illuminate a new facet in the state’s workers comp debate,” says PPIC senior fellow David Neumark, who co-authored the study with WCRI executive director Richard Victor and University of Connecticut professor of economics emeritus Peter Barth. “They suggest a balance can be struck between worker and employer choice.” The report, The Impact of Provider Choice on Workers’ Compensation Costs and Outcomes, points out that California’s recent workers’ compensation legislation–which gives employees the right to be treated by their own physician under certain circumstances–may have struck that balance.

The Public Policy Institute of California is a private, nonprofit organization dedicated to improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett.