Hawaii has taken its first steps toward applying managed care to an increasingly costly workers' compensation system with legislation signed by Gov. Benjamin Cayetano in June.
Workers' compensation costs in Hawaii rose to $324 million in 1993 from $288 million the previous year, according to Gary Hamada, administrator of the disability compensation division of the state's Department of Labor and Industry.
Currently, there are no managed-care controls in Hawaii's workers' compensation system. Injured workers choose their own physicians, who are reimbursed on a fee-for-service basis.
The new law requires the director of labor and industrial relations and the insurance commissioner to report on the feasibility of "coordinated healthcare delivery systems" for workers' compensation by Jan. 1, 1996.
"We aren't calling it managed care because people sometimes have negative connotations" for that term, Hamada said. "We want it to be a positive change."
But it will, in fact, be managed care, and Hawaii is "studying various alternative programs being used nationally," Hamada said.
"We do want to move into required managed care (in workers' compensation) by Jan. 1, 1997," said state Rep. Noboru Yonamine, a Democrat representing the Pearl City area of Honolulu who sponsored the legislation. Further legislation will probably be required to make that change, he said.
"The question is how to make it equitable," Yonamine said.
Hamada said officials have not made a decision on whether employers will be required to establish managed-care programs for their injured workers.
The timetable "gives HMOs a chance to mobilize" to serve the system, Yonamine said.
Meanwhile, providers are unhappy about the new law's reimbursement schedule, which is pegged at 10% above the Medicare fee schedule. That "will fall short of paying for the basic cost of care," said Richard E. Meiers, president and chief executive officer of the Healthcare Association of Hawaii.
For example, 86-bed Rehabilitation Hospital of the Pacific in Honolulu has already estimated it will lose more than $1 million next year, he said. Other providers expect substantial losses as well, he said.
The new payment schedule will result in provider cost shifting, he predicted.
"This is just round one" of workers' compensation reform, Meiers said. "What the Legislature did was just cut reimbursements to providers" and bring the cost down for businesses rather than address abuses in the system.
The healthcare association will continue to work closely with the Legislature to implement changes such as "gatekeeper-type legislation, where physicians better manage treatment" of injured workers, Meiers said.
However, because labor unions have strong influence in Hawaii, those changes will be difficult to make, he said.