A recent edition of Joe Paduda’s Managed Care Matters newsletter absolutely nails the systemic issues that plague California workers’ comp. The only twist? Mr. Paduda wasn’t writing about California workers’ comp.

The article brutally (and accurately) takes down Medicare Advantage and the severe threat to public health that would result from privatizing Medicare and forcing seniors to enroll in Medicare Advantage plans. Unlike publicly-funded traditional Medicare, Medicare Advantage enrollees get coverage from private companies contracted with Medicare.  

However, as daisyBill explained recently, everything that makes Medicare Advantage a dumpster fire is precisely what makes California workers’ comp an unmitigated disaster.

While this edition of Mr. Paduda’s newsletter is an apt warning about expanding Medicare Advantage, below we demonstrate how every word of it applies perfectly to California workers’ comp.

Paduda Warnings re: Medicare Advantage

In a newsletter article titled “Who do you trust with your healthcare?,” Paduda describes presidential candidate Donald Trump’s problematic plans to transition the management of Medicare to private and for-profit insurance companies:

“In a nutshell, Medicare would be turned over to private and for-profit insurance companies. There are a whole lot of problems with this.”

As Mr. Paduda explains in his blog post on the same topic, privatizing Medicare entails making Medicare Advantage (which Mr. Paduda initializes as ‘MA’) the “default enrollment option” for seniors, according to Project 2025. This essentially means allowing private insurers to dictate seniors’ care—a frightening proposition, according to Mr. Paduda.

But in California workers’ comp, injured workers’ care is already dictated by private and for-profit insurance companies and Third-Party Administrators (TPAs), often owned by private equity firms; there are certainly a “whole lot of problems with this.”

Mr. Paduda continues:

“First, unlike traditional Medicare, MA members have little control over their health care…MA members have to:

• go through hoops to get needed care…the insurer decides if the care is necessary and if they will pay for it,

In 2021, patients and their providers had to file 35 million PA (Prior Authorization) requests in order to receive medical care... Eighty percent reported that PAs caused the abandonment of recommended treatment, and 33% reported that they caused a serious adverse event for their patients.”

In California, workers’ comp physicians must submit a formal Request for Authorization (RFA) for all treatment, according to strict regulatory requirements. The mandatory Form RFA is a lengthy paper form that providers must fax to claims administrators to beg for everything from a Bandaid to physical therapy to spinal surgery.

Failure to submit these RFA forms allows insurers and other payers to deny payment for all unauthorized treatment.

Worse, the Utilization Review (UR) system, by which claims administrators decide whether or not to approve the treatments requested on RFAs, is effectively ungoverned, leading to needless delays and denials of care.

daisyData reveals that for our provider clients, claims administrators approved only 71% of requested treatments in 2024 through July. Until recently, TPA Sedgwick openly advertised denying 54% of requested treatments, promising a “5:1 return on investment.”

It’s impossible to quantify the number of “adverse events” that have resulted from these absurd denial rates, but the number is definitely higher than zero.

Mr. Paduda goes on to describe how current MA enrollees must:

• “go only to those hospitals, health systems, doctors and other healthcare providers that are in the insurance company’s network…

• …and keep up with changes to their insurer’s network of providers…there’s been a lot of providers leaving MA plans due to the very low reimbursement.”

As we’ve written about in great detail, California’s Medical Provider Network (MPN) system restricts injured workers to providers chosen by the workers’ comp (for-proift) insurers, or one of the opaque and nebulous “entities providing physician network services” that establish MPNs on behalf of insurers.

Like the UR system, the California MPN system is barely regulated, leading to systematic reimbursement denials to providers who are allegedly not members of the right MPN—even when the MPN in question is inactive, not applicable to the insurer or employer, or simply non-existent.

As for the “very low reimbursement” driving providers away from Medicare Advantage, one look at our workers’ comp Reimbursement Data Page reveals an ugly reality: while state fee schedules establish reasonable reimbursement rates for treating injured workers, Preferred Provider Organizations (PPOs) reduce reimbursement rates drastically—often to below Medicare rates.

Sound familiar, Joe?

“Incentivized to spend as little as possible, MA plans pay healthcare providers less than Traditional Medicare. As a result, an increasing number of doctors and providers are declining to accept MA patients, further restricting MA networks and access to care…”

California providers are giving up on treating injured workers because the MPN/PPO “pay to treat” system reduces reimbursements for treating injured workers to sub-Medicare rates. MPN access standards require MPNs to include enough physicians and specialists to ensure proper care for those restricted to MPNs—but of course, those MPN access standards are (you guessed it) not enforced by the Division of Workers’ Compensation (DWC).

Bring it home, Joe:

“Second, MA is pretty darn expensive for taxpayers mostly because it has generated gargantuan profits for insurers. In 2021, MA companies had a gross profit margin of $1,730 per enrollee, which is more than double their profit margin on the individual market ($745)...”

In this case, substitute “taxpayers” for “employers,” and you’ll have a pretty good idea of how workers’ comp (dys)functions in California. Employers are sold on restrictive MPNs and high UR denial rates under the guise of “cost savings,” while their employees’ injuries remain un-and-under-treated.

In fact, the most recent (if flawed) statewide data indicates that California spends twice as much as the national median to deliver benefits to injured workers and takes twice as long to close their claims.

This appalling waste and inefficiency is bleeding unsuspecting employers, who are led to believe that denials of care save money. In truth, excessive denials needlessly prolong recovery, which is terrible for injured workers and employers—but fantastic for private equity firms invested in third-party claims administration, UR, bill review, and other friction-generating activity.  

Joe, we couldn’t have said it better ourselves. Next time, just say it about workers’ comp in California—and we can take the day off.

Nationwide, daisyBill increases revenue and decreases hassle for providers who treat injured workers. Get a free demonstration below.

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