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Workers’ Compensation Comes of Age

With close to $40 billion in net written premium, the workers’ compensation line of business is an important driver of financial success for many property/casualty insurers. It has come a long way since its inception roughly 100 years ago. 

As we move forward into the second century of workers’ compensation, it’s possible to anticipate many of the challenges (and opportunities) that are coming. What follows is a checklist of areas to watch.

CLAIMS FREQUENCY—Many aspects of the U.S. economy should help keep claims frequency flat or negative in the near future, including:

An increasing underground economy

In April, Mark Koba, a senior editor at CNBC, chronicled the growth of a large shadow economy of workers who, because they are unable to find regular employment, are taking jobs under the table with no reportable income or taxes. Since these workers have no workers’ compensation insurance protection, medical costs may shift from the workers’ compensation system to the health care system. With some estimates showing construction employment at just 75 percent of 2007 levels, it’s possible that a portion of these jobs are being filled by under-the-table workers. If that’s the case, these traditional higher-frequency classes may not show up as heavily in the industry’s calculations as they have in the past—moderating frequency trends going forward.

Growth in Social Security disability payments

Also in April, CNN Money reported a 29% increase in the number of Americans with little or no employment income who receive disability payments. For those who were formerly employed, the increase was a staggering 44%. In 2011, according to the CNN report, the federal government spent almost $250 billion on disability payments to some 23 million Americans. Although this is a ballooning liability for the federal government, the impact on workers’ compensation insurers is largely in the opposite direction. As workers who are less than healthy exit the workforce, the remaining pool of healthier workers will lead to claims frequency decreases in the future.

Expansion of other state and federal backstops

Since the recession began, there’s been a dramatic increase in federal and state assistance. A March article that appeared on the MoneyNews website reported that the number of food stamp recipients reached a record high in 2012, with an average of 46.6 million people receiving food stamp benefits each month. According to Supplemental Nutrition Assistance Program (SNAP) data, total food stamp benefits increased from $30.4 billion in 2007 to $74.6 billion in 2012, a 145% increase. As state unemployment benefits and other backstop programs cover more people for longer periods, the pool of future workers’ compensation claimants likely to file claims shrinks. When individuals leverage government backstop programs and choose not to work, workers’ compensation insurers benefit.

Older workers not retiring

People are working longer. For the manufacturing industries, this most likely means a dramatic reduction in the number of new employees entering the workforce. Although older workers have higher claims severity, new workers have significantly higher claims frequency.

Workplace health and safety efforts

The risk management and environmental, health, and safety departments of companies continue to focus on enhancing return-to-work programs, promoting workplace wellness, and improving workplace safety. These efforts continue to bear fruit, especially as the workforce ages and the adverse impacts of obesity receive more attention.

Part-time to full-time bias on frequency

Workers’ compensation frequency is often calculated as a ratio of the number of lost-time claims per an adjusted payroll amount. To the extent that recent payroll increases have been driven by more part-time workers converting to full-time work, the doubling of exposure for current workers isn’t the same as doubling the number of workers. In the short term, a heavier reliance on existing employees working longer hours very likely will help make frequency statistics look better. This trend could reverse if smaller employers keep their head count under 50 employees or reduce employee hours to part time (under 30 hours) to mitigate the impact of the employer mandate in the Affordable Care Act (ACA). Newly added part-time workers are likely to bring higher claim frequency, while workers taken below the 30-hour threshold to avoid employer-mandated health care might have an increased incentive to shift claims to workers’ compensation.

SEVERITY—A number of coalescing factors could drive medical and indemnity severity higher in the years ahead, including:

Rising interest rates

With the Federal Reserve finally winding down its quantitative easing programs, interest rates will be heading higher. To the degree that this coincides with an improving economy, indemnity severity is likely to tick up with rising wage pressure. Medical severity, which historically has run at roughly double the medical consumer price index, is likely to rise from the 3% levels we are experiencing today. Severity trends in the 6% to 7% range may be manageable in light of today’s rate increases, but it will be difficult to expand profit margins over the long term if medical inflation returns to double-digit levels.

Claims predictive modeling

Companies increasingly are using advanced analytics to identify claims for triage as early as the first notice of loss. By identifying the highest severity claims, assigning the appropriate resources for triage, and doing a better job on referrals from special investigative units, companies are favorably affecting the duration and severity of claims.

Obesity

The obesity statistics are staggering. The Centers for Disease Control and Prevention (CDC) estimates that in 2010, 36% of Americans age 20 or older were obese. The Robert Wood Johnson Foundation in a 2012 report predicted that obesity rates for adults over the next 20 years would reach or exceed 44% in every state in the United States, and exceed 60% in 13 of those states. Recent NCCI studies show that the ratio in the medical costs per claim of obese to nonobese claimants at the end of five years is 5.3, and the duration of obese claimants is five times that of nonobese claimants. Given the fact that workers of all ages are struggling with maintaining a healthy weight, workers’ compensation costs will only increase as other comorbidities associated with obesity increase costs.

An aging workforce

As workers age, gradual changes in hearing, vision, strength, and balance may lead to increased probabilities and durations of workplace injuries, including sprains, strains, slips and falls, carpal tunnel syndrome, knee and shoulder problems, hip replacements, and back issues. A 2012 NCCI study, however, concluded that an aging workforce appears to have far less of a negative impact on workers’ compensation claims costs than was previously thought. Although there’s evidence that injured workers older than 35 years have higher costs than those younger than 35, costs associated with injured worker cohorts older than 35 tend to be quite similar. And while older workers have more costly injuries, the NCCI observed that such injuries are becoming more prominent in younger workers.

While the NCCI has presented conflicting data on the claim costs of older workers, we know that the number of older workers in the workforce will nearly double in the next 15 to 20 years. The U.S. Department of Health and Human Services estimates that the 39.6 million persons age 65 years or older today will increase to roughly 72.1 million by 2030. That equates to roughly one in every five Americans being 65 or older. While the jury is out on the precise impact of an aging workforce on claim frequency and severity, an aging workforce increases the likelihood of more severe injuries and longer claim durations.

LONG-TERM TRENDS—On the plus side, several trends are emerging that could benefit workers’ compensation insurers in the long run, including:

Price transparency

When the Surgery Center of Oklahoma in Oklahoma City started posting its prices online four years ago, it forced competing area hospitals to follow suit. Although it will take time to catch hold across the country, greater price transparency in the delivery of health care could benefit workers’ compensation insurers. Running counter to this trend is the pace of consolidation in health care. The ACA, with its focus on accountable care organizations (ACOs), electronic medical records, and other coordination-of-care rewards, is fueling consolidation in health care at an unprecedented rate. With increased consolidation comes increased local pricing power, and workers’ compensation insurers could find themselves on the wrong end of that pricing pendulum.

Opioid use

The epidemic of opioid abuse that had swept the nation is finally starting to abate. State governors, attorneys general, and legislatures are passing laws to toughen criminal and administrative penalties for doctors and clinics, establishing standards of care for doctors who prescribe narcotics, increasing the reporting and tracking of prescriptions, and limiting reimbursements to physicians who dispense prescription drugs to no more than a certain percentage above cost. State agencies, local agencies, and the U.S. Drug Enforcement Administration also are aggressively prosecuting individuals involved in illegal prescribing activity and “pill mills,” causing physicians, nurse practitioners, and pharmacies to surrender their federal licenses to dispense controlled substances. In the most serious cases, the offenders have had to surrender their medical licenses to state medical/pharmacy boards. Physicians and medical boards also have developed resources to guide physicians on responsible opioid prescribing, and there’s been a rise in the number of physicians who have had their licenses suspended by state medical boards for the unlawful distribution of controlled substances and for prescription drug fraud. Organizations like the Federation of State Medical Boards and Physicians for Responsible Opioid Prescribing also have joined the fight.

Given the high-profile nature of these efforts to define the proper use of opioids in treating injured workers, it’s likely the workers’ compensation line will see an effect. With medical expenses exceeding 60% of workers’ compensation costs, 20% of that going toward prescription drugs, this would be a welcome development.

Medical tourism

Medical tourism continues to grow as an option for patients all across America. An airline magazine recently had advertisements from hospitals outside the United States showing savings of 50% to 80% on procedures such as knee and hip replacements that are common in workers’ compensation. The general cost in the United States for a knee replacement was shown at $34,000, versus the overseas cost of just $10,000. A hip replacement was listed as $35,000 versus the overseas cost of just $11,000. Even with the cost of airfare, transportation, and hotel accommodations, the potential savings are significant (acknowledging that we aren’t attempting to control for quality or safety differences). With several companies and health insurers investigating offering medical tourism options to their employees and insureds, there could come a day when workers’ compensation insurers could leverage these tremendous savings to help drive down severity for certain procedures. While businesses may welcome the cost savings, we recognize that persuading state legislatures and injured workers to agree to these practices could be difficult.

The ACA

Several economist and workers’ compensation industry stakeholders have predicted that the ACA will create shifts in the workers’ compensation industry. But exactly how isn’t clear. Many refer to the Massachusetts Health Care Reform Act to bolster the argument that the ACA will lower overall health care costs and workers’ compensation costs. Under Massachusetts health care reform, costs within the workers’ compensation system decreased. Although ACA is more complex, similar provisions in the two laws allow a comparison of the impact on the workers’ compensation system. Analysis by RAND in 2012 found that expanding coverage to previously uninsured individuals resulted in a drop in workers’ compensation costs in Massachusetts. Finding an association between being insured and the frequency of workers’ compensation claims, RAND concluded that expanding the population holding group health insurance could reduce cost shifting to workers’ compensation.

In a May blog posting, Joe Paduda, a principal at Health Strategy Associates, affirmed his belief that the overall effect of the ACA on workers’ compensation would be positive, citing among other things, that it would lessen the motivation for cost shifting and fraudulent claims. Others have argued that increasing access to care and expanding preventive services, coupled with employer-sponsored wellness initiatives, should make the working population healthier overall, leading to a reduction in claim frequency and faster recoveries when injuries do occur.

On the other hand, some speculate that the ACA will increase workers’ compensation costs over time by straining already scarce primary care resources and causing longer wait times for treatment. The projected shortage of primary care physicians could make it more difficult for injured workers to find a physician. This, in turn, could lead to increased costs because of extended disability durations while waiting to see a physician. Others have pointed out that a decreasing supply of physicians and increasing patient demand could drive costs higher. Other factors that could affect cost shifting are significant increases in copayments and high-deductible health plans—costs that employees must bear. This could motivate some employees to file workers’ compensation claims for nonoccupational injuries.

According to findings from a recent study by Assured Research, a connection between increased health insurance coverage and decreased workers’ compensation costs isn’t supported by the data. The study evaluated health insurance penetration rates by state from 1999 to 2011 and corresponding statewide workers’ compensation loss ratios. After adjusting for national workers’ compensation trends, the results showed 31 states with rising health care penetration that resulted in decreased loss ratios. On the other hand, 20 states with rising health care penetration experienced increased loss ratios.

Immigration reform

There are approximately 11 million undocumented people living in the United States. Many don’t file workers’ compensation claims for fear of being deported. The general consensus is that legalizing undocumented immigrants will increase workers’ compensation claims. At the same time, immigrant workers are more prevalent in high-risk sectors such as agriculture, construction, and landscaping. With an influx of workers into a high-risk injury class, the potential impact on frequency and severity in the workers’ compensation system can’t be overlooked.

Anticipate and Plan

British Prime Minister Benjamin Disraeli once quipped, “What we anticipate seldom occurs, what we least expect generally happens.” Still, it’s important to anticipate and plan for the future risk. There’s little doubt that change is looming for workers’ compensation insurers and that actuaries have a key role to play in identifying and managing the transformation.

Authors

Denise Gillen-Algire and Kevin Bingham collaborated with Bill Van Dyke and William Wilt in writing this article.

Bill Van Dyke, an associate of the Casualty Actuarial Society and a member of the Academy, is a specialist leader at Deloitte Consulting LLP in Hartford, Conn. He has extensive actuarial experience in managing and performing workers’ compensation unpaid claim reserve and pricing analyses for state funds, insurers, reinsurers, state agencies, municipalities, self-insured corporations, and captives.

William Wilt, a fellow of the Casualty Actuarial Society, is president of Assured Research, a research and advisory firm focused on property/casualty insurance. Prior to forming Assured, he held diverse roles as an actuary, as a credit and equity analyst, and in corporate development.

This article first appeared in the November | December 2013 issue of Contingencies Magazine and is © 2013 American Academy of Actuaries. Reprinted with the permission of the American Academy of Actuaries.  All Rights Reserved.

10 Strategies to Combat the Rx Abuse Epidemic – An Insurer's Perspective

The misuse and abuse of prescription drugs has taken a devastating toll on communities all across America. For insurance companies, the financial impact of rising opioid costs continues to cause concerns, as medical payments exceed indemnity payments.

In 1987, medical losses represented only 46 percent of the dollars spent on workers' compensation claims. Today, medical losses represent roughly 60 percent of the dollars spent on these claims.1 In the Winter edition of the NAMIC Mutual Insurance magazine, the article “Opioids: A Workers’ Compensation Epidemic” discussed the Accident Fund Insurance’s 60%/40% medical loss/indemnity loss split, in addition to calling opioids workers’ compensation’s current worst enemy.2

With approximately 20 percent of all medical spending going towards prescription drugs, workers' compensation, insurers have been working hard to mitigate these costs. Insurers have negotiated discounts with preferred providers, established comprehensive prescription drug networks, used advanced analytics to identify the most severe claims, promoted evidence-based pain diagnoses, leveraged utilization reviews, and invested in tort reform. All of these measures have been taken with the goal of reducing injured worker reliance on addictive prescriptions drugs and helping workers return to work sooner.

To address the opioid epidemic, a number of strategies have been developed at both the national and state levels in consultation with medical professionals, law enforcement, insurance companies, and public health and drug prevention experts. In October 2013, the Trust For America’s Health (TFAH) issued a report titled, “Prescription Drug Abuse: Strategies to Stop the Epidemic” identifying ten strategies being employed at the State level.3 In this article, we will provide a brief recap of the strategies and share our thoughts on some insurance company considerations.

Although no single strategy is a “silver bullet” that will alleviate the opioid epidemic, each strategy must be considered in the context of the unique circumstances that exist in each state. Ultimately, these efforts could play a role in helping insurance companies mitigate opioid related costs going forward.

A Recap of the 10 Strategies

1. Prescription Drug Monitoring Program: Does the state have an operational Prescription Drug Monitoring Program (PDMP)?

The TFAH report noted that 49 states have an active PDMP. These programs hold the promise of being able to quickly identify problem prescribers and individuals misusing and diverting drugs. The Prescription Drug Monitoring Program Center of Excellence at Brandeis University, the National Alliance for Model State Drug Laws, the Alliance of States with Prescription Monitoring Programs and other organizations have stressed the importance of PDMPs in fighting prescription drug abuse and misuse and improving patient safety. These organizations have also issued a variety of recommendations and leading practices for PDMPs including interstate operability, mandatory utilization, expanded access, real-time reporting, use of proactive alerts, and integration with electronic medical records.

On September 13, 2013, the American Society of Health-System Pharmacists web site discussed how PDMP programs are gaining steam.4  Specifically, they mentioned how New York became the first state to require that prescribers consult the State’s PDPM registry before prescribing Schedule II, III or IV controlled substances.   From an insurance company perspective, understanding how effective PDMP programs are with controlling physician prescriber behavior can help claim adjusters and actuaries gain a better understanding of medical costs going forward.

Of note, Missouri is currently the only state without a PDMP. From our perspective, this raises concerns that Missouri could be targeted by individuals looking to illegally sell/purchase prescription drugs and profit from their misuse and abuse. Without the tracking and monitoring of prescriptions, some patients may find it convenient to cross the border in order to fill their medications in Missouri. Not surprisingly, on November 21, 2013, KCTV News (Kansas City) published a story titled “Missouri a hot spot for 'doctor shopping' for Rx drugs” which seems to support this concern.5

2. Mandatory Use of PDMP: Does the State require mandatory use of PDMPs by providers? (i.e., any form of a mandatory use requirement).

The TFAH report found only 16 States require use of the PDMP by providers (and then only in certain situations) and of those States, only eight States require use of the PDMP before the initial dispensing of a controlled substance. From our perspective, it isn’t surprising that some professionals find the lack of enforcement troubling, especially given the recommendation from the Prescription Drug Monitoring Program Center of Excellence at Brandeis University that utilization of PDMPs be mandated for all prescribers.

Some providers have expressed genuine discontent with the mandatory use of the PDMP, since it increases their administrative burden and may reduce the time they can spend with patients.  However, this additional burden has to be weighed against the benefits of mandatory PDMP usage which can help prevent an addict from filling duplicate prescriptions, identify a stolen prescription pad, or highlight a provider who is obviously writing phony subscriptions. 

Ultimately, the majority of health-care providers rank patient health and safety as a priority, and given the undeniable prevalence of the prescription diversion and abuse, their goal can only be furthered by using the PDMP.  Lastly, from an actuarial perspective, the mandatory use of PDMP’s would increase the ability of States to measure the true value/effectiveness of PDMP efforts.

3. Doctor Shopping Law: Does the state have a doctor shopping statute?

Doctor shopping is the practice of seeing multiple physicians and pharmacies to acquire controlled substances — for a person’s own use and/or for reselling purposes. The TFAH report noted that all States have laws in place that either:

a) Make it a criminal offense to obtain drugs through fraud, deceit, misrepresentation, subterfuge, or concealment of material fact.

b) Make doctor shopping illegal.

c) Prohibit patients from withholding information that they have received either a controlled substance or prescription order from another practitioner, or the same controlled substance or one of similar therapeutic use within a specified time interval.

Doctor shopping laws are aimed at deterring individuals from one method of wrongfully obtaining prescription drugs. In Tennessee, the Office of the Inspector General has used these laws very effectively.

In the Long Island Newsday article “State’s new prescription pain pill system snags apparent doctor shoppers”, New York State’s online system discovered 200 instances of apparent doctor shopping in the first three days of use.6   With diversion and addiction on the rise, anything we can do to keep opioids out of the hands of those who shouldn’t access them is a move in the right direction. The more illegal pills taken out of circulation, the less likely an addicted injured worker will be able to further any bad habits.

4. Support for Substance Abuse Services: Has the state expanded Medicaid under the Affordable Care Act, thereby expanding coverage of substance abuse treatment?

The TFAH report noted that in 2011, 21.6 million Americans age 12 and older needed treatment for a substance abuse problem, but only 2.3 million received treatment at a substance abuse facility. This shortfall represents a “treatment gap” where treatment is not readily available for millions of Americans who are in need of assistance. The TFAH report found that 24 states and the District of Columbia have expanded Medicaid under the Patient Protection and Affordable Care Act (ACA), thereby expanding coverage of substance abuse treatment. However, it is unclear whether the remaining 26 States will expand their Medicaid coverage and substance abuse treatment efforts.

The authors have experienced firsthand the need for additional substance abuse treatment during the radio shows we host on Rx Drug abuse issues.  Several callers have expressed frustration over not being able to receive substance abuse treatment either for themselves or a loved one and want to know where they can go to find help.  Sadly, some Americans have resorted to committing a crime so they could receive free treatment while incarcerated.

Fortunately for some workers’ compensation claimants, a number of insurance companies have been proactively leveraging pain management programs to help wean injured workers off of addictive opioids.  This not only improves the quality of life of for the injured worker and his/her family, but benefits the employer through the employee’s return to work and the insurance company’s lower expenditure on medical.

5. Prescriber Education Requirement: Does the state require or recommend education for prescribers of pain medications?

The TFAH report noted it is important to educate providers about the risks of prescription drug misuse to prevent providers from prescribing incorrectly and/or to ensure they consider possible drug interactions when prescribing a new medication to a patient. The report also noted that most medical, dental, pharmacy, and other health professional schools currently do not provide in-depth training on substance abuse and students may only receive limited training on treating pain.

In July of 2012, the Food & Drug Administration (FDA) approved a Risk Evaluation and Mitigation Strategy (REMS) for extended release opioids that require manufacturers to fund voluntary painkiller training programs, at little to no cost, to all U.S. licensed prescribers. The FDA then issued a letter to prescribers, which was distributed by the American Medical Association (AMA), American Academy of Family Physicians (AAFP), the American Academy of Physician Assistants (AAPA), the American Academy of Pain Management (AAPM) and ASAM, which recommended that prescribers take advantage of those educational programs. However, the FDA did not make attendance by prescribers mandatory, a decision which drew criticism from some individuals that believed REMS should be mandatory.

How critical is the need for re-education regarding prescribing of opioids? In May of 2013, Dr. Thomas R. Frieden, the Director of the Centers for Disease Control and Prevention stated in a PBS interview: “When I went to medical school, the one thing I was told was completely wrong. The one thing I was told was if you give opioids to a patient who is in pain, they will not get addicted.  Completely wrong. Completely wrong. But a generation of doctors, a generation of us grew up being trained that these drugs aren’t risky.”7 If Dr. Frieden is correct, then the TFAH’s finding that only 22 States either require or recommend prescriber education for pain medication prescribers indicates that we have a long way to go in stemming the Rx Drug abuse problem. 

However, it is important to note that some insurance companies are doing their part in helping to educate prescribers. As noted on the Employers’ Insurance Company website, the company’s opioid program takes proactive measures to help control the flow of narcotics by involving the workers’ compensation insurance carrier, injured employees, workers’ compensation physicians and pharmacy benefit managers. The first prong of their program focuses on training physicians to recognize the signs of opioid abuse and encourages them to consider other effective pain management alternatives.8 It is insurance company efforts like this, in combination with FDA REMS, Physicians for Responsible Opioid Prescribing (PROP)9, and state and federal efforts that will help stem the Rx drug abuse problem.

6. Good Samaritan Law: Does the state have a law in place to provide a degree of immunity from criminal charges or mitigation of sentencing for an individual seeking help for themselves or others experiencing an overdose?

Per the TFAH report, 17 states and the District of Columbia have a law in place to either provide a degree of immunity from criminal charges or mitigation of sentencing for an individual seeking help for themselves or others experiencing an overdose. These laws are designed to encourage people to actually help those in danger of an overdose, as opposed to walking away or not even making the call to 911.

The TFAH report noted that a study conducted after passage of Washington’s 911 Good Samaritan Law found that 88 percent of prescription painkiller users indicated that once they were aware of the law, they would be more likely to call 911 during future overdoses. Thus, this strategy may well be critical in helping stem the toll of Rx Drug abuse until prescribing practices can be modified.

7. Support for Narcan Use: Does the state have a law in place to expand access to, and use of, Narcan (a/k/a, Naloxone) for overdosing individuals given by lay administrators?

Narcan is an FDA approved drug that can be used to counter the effects of prescription painkiller overdose. It is not a controlled substance; has no abuse potential; and, can be administered by minimally trained laypeople. The TFAH report found that 17 states and the District of Columbia have a law in place to expand access to, and the use of, Naloxone for overdosing individuals given by lay administrators. In addition, Washington and Rhode Island are currently implementing collaborative practice agreements where Narcan can be distributed by pharmacists.

As was noted in the article “Naloxone Expansion in California Will Enable Family, Friends To Save Lives At Home,” Californians are now able to reverse overdoses at home with a lifesaving injectable drug called Narcan, which can be administered through the nose or intravenously to a person suffering from an opiate overdose.10

8. Physical Exam Requirement: Does the State require a healthcare provider to either conduct a physical exam of the patient, a screening for signs of substance abuse or have a bona fide patient-physician relationship that includes a physician examination, prior to prescribing prescription medications?

Per the TFAH, 44 States and the District of Columbia have such a requirement. Unfortunately, the State laws vary regarding the circumstances under which an exam is required (for example, for all drugs or just specified prescriptions) and the consequences for prescribing without a required examination (i.e., whether there is criminal liability). While this is a promising strategy, wouldn’t unanimity between the States make this strategy even more effective?

The authors question whether “a physical exam requirement” is a better strategy than simply requiring a drug screen. While increased costs may be associated with such a strategy, a urine drug screen is the single most useful test to determine if someone is abusing controlled substances or diverting drugs they have been prescribed.

9. ID Requirement: Does the State have a law requiring or permitting a pharmacist to ask for identification prior to dispensing a controlled substance?

Pharmacists, as the dispensers of prescription drugs, play an important part in the distribution chain. Recognizing this role, the DEA took significant enforcement action in 2013 against national pharmacy chains for allegedly failing to recognize unusual sale volumes of controlled substances in several of their pharmacies.

The TFAH report found that 32 States have laws requiring or permitting a pharmacist to request an ID prior to dispensing a controlled substance. These laws vary in type from requiring presentation of an ID in all circumstances versus those where the purchasers are unknown to the pharmacist. In addition, some States require photo identification and others accept a broader range of government IDs.

The authors note that this “strategy” may represent one of the easier hurdles for drug seekers to circumvent given the ease of falsifying ID’s.  However, the battle against opioid addiction is a battle of inches, and the ID check represents one more step a possible abuser has to overcome to support their bad habit.

10. Pharmacy Lock-In Program:  Does the State’s Medicaid plan have a pharmacy lock-in program that requires individuals suspected of misusing controlled substances to use a single prescriber and pharmacy?

The TFAH report noted that in order to help healthcare providers monitor potential abuse or inappropriate utilization of controlled prescription drugs, some States have implemented programs requiring high users of certain drugs to use only one pharmacy and get prescriptions for controlled substances from only one medical office.  Lock-in programs are believed to help avoid doctor shopping while ensuring appropriate pain care for patients.

Forty-six states and the District of Columbia were noted to have a pharmacy lock-in program under the State’s Medicaid plan where individuals suspected of misusing controlled substances must use a single prescriber and pharmacy.  From discussions with pharmacists, it isn’t always easy for a pharmacist to question a treating physician about whether a prescription is valid.  From the authors’ experience, we have received a number of anecdotal reports of physicians treating pharmacists in a less than respectful manner when a pharmacist questioned whether a prescription was valid.  In these cases, the pharmacists are simply trying to do their best to help curb prescription drug diversion.  In our view, the Lock-In strategy helps strengthen the professional relationships between doctors and pharmacists.

How are the States Doing with Implementing the Strategies?

The TFAH report found that the States’ implementation of the 10 strategies vary widely. For example, 11 States have implemented at least 8 of the 10 strategies. 4 States have implement at least 9, and only New Mexico and Vermont have implemented all 10. Interestingly, in 2010 New Mexico ranked #2 in drug overdose mortality rate per 100,000 residents (which includes both prescription drug and illicit drug overdoses) while Vermont ranked 42nd. It will be interesting to see what advances, if any, New Mexico makes in the Rx drug abuse/misuse war during the next several years with all 10 strategies in place.

On the flip side, South Dakota is the only state with just 2 of the strategies in place.  However, it ranked 50th in drug overdose mortality rate per 100,000 residents in 2010, suggesting the State may not have a misuse/abuse problem of significance. However, two states, Missouri and Nebraska, have only three of the promising strategies in place. In 2010, Missouri ranked 7th in drug overdose mortality rate per 100,000 residents, while Nebraska ranked 49th. With no PDMP, it will be interesting to watch where Missouri ranks in future studies.

With over 60 percent of workers’ compensation payments going towards medical costs, it will be important for insurers to pay close attention to state specific efforts to combat prescription abuse. With the right amount of actuarial research and advanced analytics, workers’ compensation insurers can develop a better understanding of their opioid exposed population and the prescribing habits of the physicians treating their injured workers.  To the extent insurance companies can leverage the above strategies in combination with their own analytics, physician educational efforts, evidence-based pain diagnoses, utilization reviews, and tort reform efforts (e.g., In 2011, the 79th Texas Legislature adopted a closed formulary system which led to a 70 percent decrease in Schedule II narcotic costs11), we believe insurers can move the needle on reducing opioid abuse and addiction.

In the end, these opioid risk management strategies may not only generate dollar savings to workers compensation insurers as workers return to work sooner, but will help improve the quality of life for the injured worker and his/her family.

Footnotes

1 http://www.ncci.com/

2 http://www.namic.org/in/13winterpre.asp

3 http://healthyamericans.org/reports/drugabuse2013/TFAH2013RxDrugAbuseRpt12_no_embargo.pdf

4 http://www.ashp.org/menu/News/PharmacyNews/NewsArticle.aspx?id=3951

5 http://www.kctv5.com/story/24039604/missouri-a-hot-spot-for-doctor-shopping-for-rx-drugs

6 http://www.newsday.com/news/region-state/state-s-new-prescription-pain-pill-system-snags-apparent-doctor-shoppers-1.5995395

7 http://www.pbs.org/newshour/extra/daily_videos/prescription-drug-abuse-can-have-fatal-consequences/

8 http://www.employers.com/AGENTS/BLOG/post/2013/10/07/Opioid-Program-Shows-Results.aspx

9 http://www.supportprop.org/

10 http://www.huffingtonpost.com/2013/10/11/naloxone-expansion-california_n_4081044.html

11 http://www.riskandinsurance.com/story.jsp?storyId=533355286

Authors

Kevin Bingham collaborated with Alix C. Michel and David J. Ward in writing this article.

Alix C. Michel is an attorney at Michel & Ward, a firm based in Chattanooga, TN specializing in the defense of all types of healthcare professionals, hospitals, longterm care facilities, and educating society on the dangers of RX Drug Diversion and strategies to help in the fight against same.

David J. Ward is an attorney at Michel and Ward, a law firm based in Chattanooga, TN. Michel and Ward defends and advises physicians, healthcare providers, longterm care facilities, and others in professional malpractice litigation, professional licensing investigations, and healthcare practice issues.

This article first appeared on December 2, 2013 on PropertyCasualty360.com. © 2013 PropertyCasualty360, A Summit Professional Networks website.