The new budget signed by Gov. Tony Evers includes a workers’ compensation fee schedule for hospital charges — a compromise on an issue that for years has pitted the state’s business lobby against the health care industry.
Scott Manley, executive vice president of government affairs for Wisconsin Manufacturers & Commerce, says the fee schedule doesn’t go as far as the group would have liked. But he called it a good first step to “rein in” costs for employers related to workplace injuries, as it would set new maximum fees for hospital care provided to injured workers under the workers’ compensation program.
In an interview this week, Manley noted Wisconsin has some of the highest costs in the country for common procedures in the workers’ compensation space, such as major surgeries and pain management. He argued that’s because the state is currently one of just five that don’t have a fee schedule for workers’ compensation medical costs.
“Although we recognize that the fee schedule that was passed in the budget is not as, you know, comprehensive as we’d like it to be, we think that it’s a very important and necessary first step, in terms of being able to get Wisconsin out of the position of being the most expensive state in the country for work comp medical procedures,” Manley said.
Ultimately, he expects “the rate that businesses pay for their workers’ compensation insurance will go down” to the extent that the fee schedule lowers medical costs in the program in the years to come. A recent study from the Workers Compensation Research Institute focused on the recent inflationary period found fee schedules “ensure similar or lower price growth rates” compared to the overall health care system.
But Kyle O’Brien, president and CEO of the Wisconsin Hospital Association, said “we disagree with some of those assessments of prices” made by WMC, arguing they focus only on one part of the health system rather than the overall cost and value provided.
He said the state has some of the best return-to-work rates and lowest litigation rates in the country thanks to the high-quality care that workers receive. And he added overall workers’ compensation rates have fallen in recent years, noting costs for Wisconsin employers in the system have declined by $1 billion since 2017.
O’Brien also said previous fee schedule proposals in the state would have taken “a sledgehammer” to a system he says is working well. This time around, he said WHA was able to support the overall budget including the fee schedule thanks to “reforms” to the system to prompt faster payments. He also said a separate provision directing more federal dollars to hospitals was key.
“This is different from previous cycles wherein the Workers’ Compensation Advisory Council has pushed the fee schedule onto providers without our input,” he said this week in an interview. “It’s something that has caused us to go to the Legislature and successfully defeat those proposals. This is different, because we actually were at the table negotiating reforms in the system, and that’s why we were okay with this being included in the budget.”
Compromise follows years of debate over the issue
The debate over a fee schedule has percolated in the Capitol for years. The Worker’s Compensation Advisory Council — a body made up of labor and management — proposed legislation in 2014 that included a fee schedule. The legislation got public hearings in both houses, but never made it to the floor amid opposition from the Wisconsin Hospital Association and other providers.
That bill called for the Department of Workforce Development to break the state into five regions and determine the average payment for services included in the schedule. The agency would then have set a maximum fee that any health care provider could charge at 100% of the average cost for each procedure covered.
The provision in the budget signed earlier this month requires the state Department of Workforce Development by mid-2027 to establish the framework for the maximum fees hospitals can charge under workers’ compensation. That means most employers in the state likely wouldn’t start to see the impact through lower workers’ compensation insurance rates until 2028, Manley said.
And unlike other states with such a system in place, Wisconsin’s fee schedule would only apply to hospital charges. Manley notes other states’ workers’ comp fee schedules apply to other eligible care, such as physical therapy and chiropractor services.
WMC would prefer a fee schedule to cover all medical services, he noted. But Manley also added the “biggest, most expensive” workers’ comp medical costs are linked to procedures taking place at hospitals such as a rotator cuff repair or knee replacement surgery.
Most employers in the state are required to have a workers’ compensation insurance policy, and insurance rates in this space are set by the government and based on an analysis of costs in the system. While several hundred companies in the state self-insure, meaning they pay the direct cost of qualifying medical bills for their workers, the vast majority are included in the more common workers’ comp insurance system.
While that small group of employers that self-insure will benefit from the fee schedule directly, most are expected to see an impact indirectly as workers’ comp insurance rates are adjusted to account for the fee schedule.
“To the extent that we’re able to reduce medical costs with the fee schedule that passed in the budget, that actuarial analysis will take into account those savings and the rate that businesses pay for their workers’ compensation insurance will go down,” Manley said.
Earlier this year, WMC and more than 100 employers sent a letter to legislative leaders calling for a workers’ comp fee schedule. It referenced findings from the National Academy of Social Insurance showing Wisconsin’s workers’ comp insurance costs are the highest in the Midwest, and a Worker’s Compensation Research Institute study that found the state’s average medical payment is 35% higher than the median state and 10-21% higher than other Midwest states.
In developing the fee schedule, the DWD will divide the state into five regions and contract with a third party to set maximum fees for items and services for each based on an assessment of insurance data for those areas. That maximum amount will be equal to 120% of the 75th percentile for commercial, in-network negotiated amounts in that region.
Another provision notes that to qualify for that set fee cost, the insurer or self-insured employer must pay it within a defined period. For billed amounts less than $65,000, that’s 60 days. For any amount equal to or higher than that, the period is 90 days.
Wisconsin Insurance Alliance President Andy Franken said the budget’s version of a fee schedule is a good step forward and noted his organization backs its inclusion. He said workers’ compensation insurers help “facilitate a workable and cost-effective” system.
“We have agreed with WMC for … the last couple decades that Wisconsin needed to join the vast majority of states that have a medical fee schedule for workers’ compensation,” Franken said.
Fee schedule inclusion comes amid concerns around payment timeliness
Franken said “the vast majority of claims” are already paid within the timeframes specified for the fee schedule, and the legislation allows for extensions if the employer or insurer needs more time to determine compensability.
But O’Brien said workers’ comp cases are among the slowest to pay, based on a review of WHA data and what the group hears from hospitals. That’s due in part to the system being different from typical group health insurance, he said, noting the process of checking compensability can slow things down.
“If there are claims that are made, once the provider sends the bill, once they send medical records to the workers’ comp carrier, if they pay within a certain time period, they’re eligible for the discount,” he said. “If they don’t pay under that time period, then they’re not. And so that’s again the trade-off as designed under this proposal.”
If a payment is made outside the specified period, the state’s existing fee dispute resolution process would kick in, he explained.
“It’s not like there’s no limit,” he said, adding “I think there are other people that felt like there was no limit at all, that providers could charge whatever they want. That’s absolutely not true. There already was a process. This just creates a separate kind of mechanism, that again, is designed to reform the system so these claims are paid in a more timely fashion.”
He also noted a budget provision that directs more funding to Wisconsin hospitals was key for getting hospitals’ acceptance of a workers’ comp fee schedule.
Under an agreement reached between GOP legislative leaders and Evers, the state’s assessment of hospital patient revenues would be raised from 1.8% to the maximum level of 6%, drawing down more matching funding from the federal government. The Evers administration estimates hospitals would see more than $1 billion in additional funding from the higher assessment, while the state would retain 30% of the funds for Wisconsin’s Medicaid trust fund.
When asked if WHA supports the workers’ comp fee schedule included in the budget, O’Brien said “we were supportive of the overall package” and emphasized the importance of the higher assessment level that would direct more federal revenue to hospitals.
“It’s important to note that this is all contingent upon the payment increases that are funded through the hospital assessment actually coming to fruition,” he said, adding “it only occurs after approval and when payments begin to go to hospitals, that’s when the fee schedule comes into effect.”
O’Brien said it became clear during budget discussions that getting something done in the workers’ compensation space would be necessary in order to secure enough votes to get the budget passed.
“You need the votes necessary to get the bill across the finish line and onto the desk of the governor, and you need the governor’s support to get it signed into law,” he said. “So, you know, I think that there was give and take from us, there was also give and take from WMC … the idea was, hey, we need to build out a package that can garner support by Republicans and Democrats and then ultimately the governor.”
