SELECTED INDICATORS IN WORKERS’ COMPENSATION: A REPORT CARD FOR CALIFORNIANS
Sources of Improvement in Medical-Legal Costs
The decline in total medical-legal costs for insurers reflects improvements in all components of the cost structure during the 1990s. As discussed in the previous sections, this substantial decline in total medical-legal costs for insurers results from significant decreases in all of the components of the cost structure. The following chart shows how the cost savings break down by component since the beginning of the decade:
About half (45 percent) of the cost savings is due to improvements in the medical-legal process that reduced the number of examinations performed per claim.
Twelve percent of the improvement is due to changes to the medical-legal fee schedule and treatment of psychiatric claims that reduced the average cost of examinations per claim.
Forty-three percent of the improvement is a result of the overall decline in the frequency of reported PPD claims.