Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred S.B. No. 16, S.D. 1, H.D. 1, entitled:

begs leave to report as follows:

The purpose of this bill is to revise Hawaii's workers' compensation medical fee schedule from a baseline of 110 percent of Medicare Resource Based Relative Value Scale system fees (Medicare) to an unspecified percentage.

Your Committee received voluminous testimony on this measure. Testimony supporting the bill was received from the Hawaii Medical Association, Hawaii Chapter American Physical Therapy Association, Hawaii Nurses' Association, Hawaii State Chiropractic Association, Hawaii State Teachers Association, the Anesthesia Medical Group, Inc., and numerous consumers and health services providers including physicians, physical therapists, orthopedic surgeons, acupuncturists, and chiropractors.

The Department of Commerce and Consumer Affairs, Department of Budget and Finance, and others commented on the bill.

Testimony in opposition was submitted by the Department of Labor and Industrial Relations (DLIR), City and County of Honolulu, WorkComp Hawaii Insurance Company, Inc., Hawaii Insurers Council, Hawaii Employers' Mutual Insurance Company, Inc., Retail Merchants of Hawaii, Building Industry Association of Hawaii, and many others, most of them contractors or suppliers doing business in the construction industry.

Your Committee heard testimony that the medical fee schedule baseline of 110 percent of Medicare, which was enacted in 1995, is inadequate to cover the cost of treating patients and processing the large amount of paperwork necessary for workers' compensation reimbursement. This has resulted in the scarcity of health service providers willing to take workers' compensation cases, reduced quality of care, delayed provision of care for injured workers, increased outlays to indemnify workers who are unable to return to work, and the emotional and physical suffering of injured workers who are frustrated by the process.

Concerns were raised that increasing the fee schedule to 130 percent of Medicare, as recommended by the Legislative Reference Bureau in a recent study, would result in a drastic increase in the premiums paid by businesses. Your Committee understands there is some question about the actual increase in premiums that would result, and that even at 130 percent of Medicare, Hawaii's fee schedule would fall below the national average.

Those opposed to the measure also questioned the need to adjust fees by increasing the Medicare baseline, which would result in an "across the board" increase in the fee schedule. This increase would also affect auto insurance premiums, which reference the workers' compensation fee schedule.

Existing law already provides for the review and adjustment of individual rates for selected providers through rulemaking by DLIR. However, because of the lack of provider input, limited departmental resources, and the effect of the Small Business Regulatory Flexibility Act, which has increased the rulemaking delay from nine months to two years, this rulemaking mechanism cannot be relied on to effect needed change.

Your Committee recognizes that the complex issues presented by this measure require additional consideration and a comprehensive solution. Accordingly, your Committee has amended this measure by changing the effective date of this bill to July 1, 2050, to facilitate continued investigation and discussion of these issues.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 16, S.D. 1, H.D. 1, as amended herein, and recommends that it be referred to the Committee on Finance in the form attached hereto as S.B. No. 16, S.D. 1, H.D. 2.