Ohio Workers’ Comp Costs Rise Despite Drop in Claims

Payments from Ohio’s investment fund for injured workers to companies that manage cases have jumped more than 40 percent since the arrangement began, though the state is seeing about half as many claims, according to published reports.

Changes that were supposed to cut costs have increased them instead, and companies that have received millions of dollars from the state have contributed hundreds of thousands to political leaders, newspapers reported Friday.

The Bureau of Workers’ Compensation, funded by fees charged to employers, paid about $1.4 billion from 1998 through the fiscal year that ended last summer to the companies, called managed care organizations.

The bureau, which has a $14 billion portfolio, is still being overhauled after a scandal over a $300 million loss in a high-risk investment fund and an ill-fated $50 million investment in rare coins. The major GOP fundraiser who managed the coin investment, Tom Noe, is set for trial next month on charges of taking at least $1 million from it.

Since the managed care system began, the bureau’s total operating costs have increased at more than twice the rate of inflation, The (Cleveland) Plain Dealer reported. The newspaper said its analysis showed that the bureau has spent about $1.6 billion more under managed care than it would have if costs per claim had been kept to inflationary increases. Costs per claim have more than doubled, with inflation taken into account.

William Mabe, who took over as bureau administrator last fall, has called a meeting next week with some of the largest managed care organizations. The meeting is aimed at cutting those costs, a message Mabe said the companies likely won’t want to hear.

“The question I will put to them is that claims are down and costs are up substantially, and we have to take a hard look at that,” he said Thursday. “Is the reimbursement connected to the amount of work you are doing? At first blush, it doesn’t appear so.”

In 1998, active claims numbered 669,597, and management of the claims cost employers $118.9 million, or an average of $178 per claim, The Columbus Dispatch reported. In the fiscal year that ended June 30, 2005, managed care organizations charged $171.3 million to handle 387,830 active claims, for an average of $442 for each claim.

Executives at some of the companies said comparing management fees to caseloads is misleading because the bureau keeps unreliable data and has changed its definition of a claim. Other supporters of privatized management of bureau work said it has saved tax dollars because it helps get workers back on the job faster, meaning the state spends less on benefits.

George Smith III, executive director of the MCO League of Ohio, said The Plain Dealer’s analysis was “false and misleading” because it is based on unreliable bureau data.

Early medical intervention by managed care organizations cut payouts for lost-time claims by 20 percent from 1997 through June 2005, said John Brinkman, a spokesman for CareWorks, the largest recipient of the bureau’s case management fees.

In that time, the bureau has paid $368 million to CareWorks, which is based in the Columbus suburb of Dublin and whose founder, president and chief executive, William Pfeiffer, was an interim bureau administrator and a top aide to former Ohio House Speaker Vern Riffe.

Managed care groups have collected $1.37 billion from the bureau since the program began, The (Toledo) Blade reported. Executives and associates from 26 of the remaining companies have contributed about $610,000 to statewide candidates and officeholders.

Gov. Bob Taft has received $127,000. CareWorks officials have donated about $208,000 into various campaigns.

Cleveland-based 1-888-OhioComp and its parent company have contributed more than $218,000 to state candidates and have received about $29 million from the bureau, The Blade reported.

Sen. Marc Dann, a Democrat running for attorney general and a critic of the bureau, accepted $60,000 in contributions from the family that runs 1-888-OhioComp. He said he now plans to return the money.

Dann on Friday called on his Republican opponent in the attorney general’s race, state Auditor Betty Montgomery, to conduct performance audits for the bureau’s medical finances and the managed care companies.

The bureau would need to request an audit and has not done so, but Montgomery would offer assistance if the bureau decided to conduct one on its own, Montgomery campaign spokeswoman Jen Detwiler said. Montgomery has no authority to audit private companies, Detwiler said.

Mabe wrote a letter to the top managed care organizations this week informing them he expects to see costs begin to fall in line with case loads.