Medicare influences workers compensation medical cost containment in several important ways, including:

• Medicare pays a significant share of overall US medical costs. As a result, Medicare reimbursement rates influence prices generally paid for medical services, including prices paid for medical services for workers compensation.

• Many states base their workers compensation medical fee schedules on the Medicare physician reimbursement schedule.
• Some states control costs for services provided by facilities through systems based on either Medicare’s DRG system for hospital stays or Medicare’s APC system for services provided at ambulatory surgical centers.

• While there are administrative efficiencies from referencing the Medicare reimbursement formula, workers compensation fee schedules that do so must react appropriately to ongoing changes in Medicare methodology.
• Some workers compensation fee schedules have not been adjusted to account for changes in the relationships between Medicare reimbursements and prices paid by private payers or Medicare reimbursement relativities between service types. In some cases, this has allowed excessive reimbursements to specialists by workers compensation insurers.
• The proportion of workers compensation medical costs that are subject to physician fee schedules is declining, with proportionally more billings by facilities. To maintain the effectiveness of medical fee schedules, workers compensation might consider using Medicare billing approaches for hospital stays (DRG) and ambulatory services (APC), but in doing so should adapt Medicare models to workers compensation priorities.
  
  As the workforce ages, workers compensation might focus safety initiatives toward falls and hip injuries, where Medicare protocols should provide valuable insight in designing treatment guidelines.

• Medicare faces enormous demographic and fiscal challenges. Workers compensation shares some of those challenges, and Medicare’s response might offer suggestions to enhance workers compensation medical cost containment.