California cut costs out of its Workers' Compensation system faster than any other among 14 states studied, according to a report issued by the Workers' Compensation Research Institute recently.

The Massachusetts think tank said its research shows California experienced the largest decrease in average Workers' Compensation costs per claim among the 14 study states, after years of double-digit cost growth and in the wake of reforms that took effect 2003 through 2006.

Workers' Compensation costs per claim in California dropped by 15% in 2004/2005, driven mainly by a 24% drop in medical costs per claim.

California's proportion of claims with more than seven days of lost time fell by nearly 2 percentage points in 2004/2005, after several years of small increases, WCRI said. This decrease was larger than in any other study state.

Medical costs per claim with more than seven days of lost time dropped 23% in 2004/2005 after a 4% increase in 2003/2004, and double-digit growth in previous years. This was the major reason for the decline in costs per claim, WCRI said.

The WCRI study, "Early Evidence of the Impact of the Multiyear Reforms in California: CompScope Benchmark, 7th Edition," provides a baseline for evaluating the impact of the reforms implemented from 2003 to 2006 and an early look at their impact, the institute said.

The legislation included revisions to the medical fee schedule; increases in maximum weekly benefits; limits on chiropractic and physical therapist services; the replacement of vocational rehabilitation benefits with the Supplemental Job Displacement Benefit; revised permanent disability schedule and permanent partial disability (PPD) benefits; and a 104-week cap on temporary disability benefits.

WCRI reported that payments for lost wages, known as indemnity benefits, per claim with more than seven days of lost time were little changed in 2004/2005, after growth of 7% in 2003/2004 and increases of 4% to 7% in previous years.

The result masked two opposing trends. Duration of temporary disability fell by 1.5 weeks after increasing by almost one week per year since 1996, except for 2003/2004 when there was little change. At the same time, there was a 6.5% increase in the average weekly temporary disability benefit -- largely the result of a 21% increase in the statutory maximum weekly temporary disability benefit under the 2002 legislation (AB 749).

The average PPD/lump-sum payment per PPD/lump-sum claim rose 8% in 2004/2005 and the frequency of these claims grew more than four percentage points. WCRI noted that the rise in frequency may mean that the transition from temporary disability benefits to PPD benefits was occurring earlier in some claims relative to previous years. However, additional years of data will be needed to determine if that was the case.

WCRI reported that the percentage of claims with vocational rehabilitation services in 2004/2005 was 8%, about half the rate observed in the three previous years (16%) for claims at 12 months of experience.

The average vocational rehabilitation expense per claim grew 17% in 2004/2005, following three years of decreases of 4% to 11% annually for claims with 12 months of experience.

The drop in frequency and increase in vocational rehabilitation expense per claim may reflect a change in timing and nature of payments for vocational rehabilitation services under the reform provisions.

Defense attorney involvement changed little over the study period, including the most recent year. Payments to defense attorneys increased 8% in 2004/2005, about double the growth rate in each of the previous two years.

These results suggest that reforms prior to the 2004 legislation may not have generated a lot of additional litigation, but that somewhat more attorney time may have been needed to address the issues in dispute, WCRI said.