At the recent Workers’ Compensation Research Institute (WCRI) Annual Conference in Phoenix, Alex Swedlow of the California Workers’ Compensation Institute (CWCI) presented key findings on the current state of California’s workers’ compensation system. His presentation highlighted significant improvements in efficiency and cost control while acknowledging persistent challenges in the nation’s largest workers’ compensation market.
Claim Dynamics and Post-Pandemic Recovery
California has returned to pre-pandemic claim volumes, with COVID-related claims now reduced to nearly zero. The system has stabilized after the volatility experienced during the pandemic years, with medical inflation and utilization rates leveling out.
A notable improvement is California’s closure rate for claims. Once “infamous” for claims that remained open indefinitely, California is now much closer to other states in claim closure rates even at 12, 24, and 36 months of development.
Medical Care Trends
The presentation highlighted several positive developments in medical treatment patterns:
- Reduction in Inpatient Services: California has seen a 52% decrease in inpatient discharges, twice the decline rate of the entire state healthcare system. This shift has been accompanied by appropriate increases in outpatient surgeries.
- Spine Surgeries: A 62% reduction in inpatient spine surgeries followed the removal of perverse financial incentives that previously required payers to pay twice for surgical hardware.
- Physical Medicine and Office Visits: Utilization has remained stable before, during, and after the pandemic, suggesting consistent access to care.
Pharmaceutical Progress
One of the most dramatic improvements has been in pharmaceutical management, particularly opioids:
- A 72% decrease in opioid prescriptions over a 14-year period
- A corresponding 71% increase in anti-inflammatory medications
- A 94% reduction in the percentage of claims with opioids in the first 12 months
- Only 3.7% of workers’ compensation patients receiving opioids were simultaneously obtaining opioids from another healthcare system, down from higher rates in 2017
These findings were based on special access to California’s Prescription Drug Monitoring Program (PDMP), which provided data on 240 million prescriptions between 2016 and 2023.
Dispute Resolution Challenges
Despite improvements in medical care efficiency, California continues to struggle with high litigation rates and medical disputes:
- California ranks in the top three or four states for litigation or attorney involvement rates for indemnity claims
- A 2021 fee schedule update for Medical-Legal evaluations led to a 51% increase in comprehensive exam costs and created incentives for excessive documentation
- Independent Medical Review (IMR) implementation has not reduced disputes as anticipated:
- California processes 101 times more IMR decisions than Texas despite being only one-third larger in population
- California has 68 times the volume of medical decision disputes compared to group health plans, Medicare, and Medicaid combined, despite being only 1/140th their size
- The top 10 providers filing IMR challenges account for one in nine of the entire volume of 124,000 disputes
- 95% of IMR letters are generated by applicant attorneys rather than physicians themselves
Climate and Workplace Injuries
The presentation addressed recent legislative attempts to create heat-related presumptions for agricultural workers, noting that between 2019 and 2023, there were only 659 heat-related injuries in the agricultural sector, representing just 0.6% of claims. Analysis showed this rate was consistent with other outdoor industries, suggesting current OSHA standards implemented in 2005 may already be addressing the issue effectively.
California in Context
When compared to other states, California shows both improvements and ongoing challenges:
- California has moved from being the highest-cost state for medical expenses on indemnity claims to being in the top third
- Indemnity costs have fallen closer to median levels
- Premium rates have fallen from first to third highest in the nation
- California remains #1 in permanent partial disability claim frequency and in the cost to deliver benefits (loss adjustment expenses)
Cultural Factors Affecting System Performance
Swedlow presented a fascinating correlation between state performance and what researchers call “cultural tightness and looseness.” This measure, developed by Stanford researcher Michelle Gelfand, scores states based on rule enforcement, tolerance for diversity, economic conditions, and other factors.
California scored as the “loosest” of all 50 states, meaning it has less rigid rule enforcement and greater tolerance for diversity. This cultural characteristic correlates strongly with higher workers’ compensation costs and permanent partial disability rates.
Conclusion
The presentation concluded that California’s workers’ compensation system has “greatly improved the efficiency, price, consistency and selection of higher quality medical care,” while acknowledging that distinctive aspects of California’s culture and approach to governance continue to influence system outcomes. Despite significant progress, California remains an outlier in several key metrics compared to other states.
Artificial Intelligence aided in the development of this article.
Been a while since I was involved in California and it seems there has been progress. One characteristic I do recall was that California was always reforming and improving, but only in relation to itself. Sounds like there has been some real progress. Good for them.