University School of Law. All rights reserved. Commentators have heavily criticized the workers' compensation system for failure to provide sufficient incentives to reduce the costs of workplace accidents. Legislatures and the public view workers' compensation as too expensive and as providing inadequate deterrence to workplace injuries.
Medical expenses account for as much as half of all workers' compensation costs.
During the past decade, medical costs associated with workers' compensation increased more than one and one-half times faster than general health expenditures. Because of the high costs of the health care component of workers' compensation, commentators have recently made a vigorous call for the implementation of managed care. Unlike other health care financing programs, workers' compensation provides complete medical care for work-related injuries and diseases without deductibles or copayments. In the past, state regulators used fee schedules as the major device to limit medical costs. Historically, these rates were low relative to other health financing systems and thus encouraged the participation of a relatively small proportion of health care providers.