One of the reasons the no-fault auto insurance system, as we know it, is unsustainable is the wide range of costs charged for medical services. The accompanying chart shows the average costs for 21 different healthcare reimbursements by market (Detroit, Lansing and Grand Rapids) and by program (Medicare and Workers’ Compensation). From the chart, it is apparent that on average, the cost for both high-cost medical procedures and lower-cost office visits are considerably higher for No-Fault policies than Medicare and Workers’ Compensation.
On average, reimbursement costs for No-Fault claims are roughly three times the reimbursement costs for Workers’ Compensation and four times the reimbursement costs for Medicare. Even one of the most basic (and frequently used) of today’s diagnostic tools, an X-Ray, is billed nearly three times the rate under No-Fault than it is billed under the Workers’ Compensation fee schedule. This has a significant impact on auto insurance premiums paid by Michigan drivers and businesses.
The Workers’ Compensation system has a medical fee schedule that works. No matter what hospital you are in, or which doctor is treating patients, the Workers’ Compensation reimbursement is at a set, established rate.
A medical fee schedule is one of the most common cost containment tools used in the Workers’ Compensation insurance system. Forty-two states use some sort of medical fee schedule. In fact, the Workers’ Compensation Research Institute (WCRI) found in a 2010 study that costs per workers’ compensation claims in Michigan were lower than typical, compared to 15 other large states. One of the factors that contributed to the lower claims cost, according to WCRI, was Michigan’s ability to control medical payments.
By establishing a similar fee schedule for auto insurance medical coverage, Michigan can ensure that the costs of offering the new choice level of coverage will remain as low as possible and that medical costs for the for people already receiving unlimited benefits will be reigned-in.