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No Fault fee schedule is the car insurance fix Detroit drivers need – not flawed D-Insurance

If Mayor Duggan really wants to lower the price of No Fault, he should be addressing a medical-provider fee schedule that would preserve No Fault PIP benefits, generate big savings, stop price-gouging by hospitals and doctors, combat PIP fraud and discourage ambulance chasing lawyers in Detroit

Detroit Mayor Mike Duggan probably knows what’s really driving up car insurance prices for Motor City drivers.  It’s just a shame that his badly flawed D-Insurance plan doesn’t address it.

With Duggan’s experience as CEO of the Detroit Medical Center – coupled with the facts uncovered by his own D-Insurance feasibility study – he must know that the best way to turn things around is through implementation of truly fair No Fault medical-provider fee schedule.

Not only will a fee schedule – modeled, perhaps, on Michigan’s Workers’ Compensation system but with more generous payouts for medical treatment – immediately stop much of the ambulance chasing and PIP fraud in Detroit, but it will also stop the medical provider lawyers and doctors from price-gouging when No Fault auto insurance is paying.

Fee schedules for No Fault will also generate enormous savings that can be immediately passed along to consumers. It would also preserve vital No Fault PIP benefits and protections for Mayor Duggan’s constituents.  A big part of my exasperation with D-Insurance as an auto accident attorney is that it fails in its stated aim of actually lowering the cost of auto insurance. It also takes away from Detroit drivers who are most vulnerable and most depend upon Michigan auto No Fault insurance when they are seriously injured in automobile accidents.

D-Insurance is the opposite of “Robin Hood” – it takes from the poor and vulnerable and gives to the rich – in this case the highly profitable insurance industry.

What will really help Detroit drivers?

The data from Mayor Duggan’s 2015 “Feasibility Study” makes the case for why a No Fault medical-provider fee schedule – not D-Insurance’s No Fault flawed caps and ugly managed care – is the auto insurance fix that Detroit drivers really need.

Specifically, the “Feasibility Study” shows the extent of the price-gouging that Detroit doctors and hospitals are engaging in when a No Fault auto insurer is paying for a car accident victim’s medical services:

  • Detroit medical providers charge No Fault auto insurance companies 500% more (or 5 times more) than what they charge Medicare for the same procedure;
  • Detroit medical providers charge No Fault auto insurance companies 340% more (or 3.4 times more) than what they charge to Workers’ Compensation for the same procedure.

Additionally, Mayor Duggan’s “Feasibility Study” shows the savings that could be generated by implementing a No Fault medical-provider fee schedule:

  • A No Fault fee schedule modeled on the Medicare fee schedule could generate savings of approximately 80% on No Fault medical claim costs in Detroit.
  • A No Fault fee schedule modeled on Michigan’s Workers’ Compensation fee schedule could generate savings of approximately 71% on No Fault medical claim costs in Detroit. A more generous schedule for reimbursement of medical providers – based on the Workers’ Compensation fee schedules for medical providers – is what I’ve encouraged on the pages of this Auto Lawyers blog for the last several years.

Mayor Duggan knows very well what’s driving up Detroit auto insurance rates

A quote attributed to Mayor Duggan in 2015 by No Fault Reform and the Michigan Insurance Coalition lays it out pretty clearly:

“I spent nine years running the Detroit Medical Center. What I’m about to tell you is something I understand intimately. If you come in to the doctor or a hospital and the bill is being charged to car insurance, they are paying 300 percent. This is what is driving up the rates and everyone in the health care industry understands that.”

Consistent with the quote reported by No Fault Reform and the Michigan Insurance Coalition, Mayor Duggan has made other statements indicating his awareness of the connection because the high prices being charged to No Fault insurers by Detroit doctors and hospitals and the high auto insurance rates that Detroit drivers are forced to pay:

  • “[T]he predominant cause of the higher [auto insurance] premiums charged to Detroiters was expense associated with medical usage from Detroit [No Fault] policy holders. … [T]he higher rate of [No Fault] medical claims filed and the higher cost of these claims are the primary cause of the higher premiums paid by Detroiters.” (June 9, 2015, City of Detroit press release announcing the completion of the “D-Insurance: City of Detroit Insurance Company Feasibility Study”)
  • “Detroiters are ‘getting ripped off by the health care industry.’ … Detroiters pay far higher rates, in large part, because health care providers charge more to auto insurers for certain care and services such as MRIs than they do to Medicaid or private health care insurance.” (2016 State of the City address, as reported by the Detroit Free Press)

Detroit hospitals and doctors charging No Fault 500% and 340% more than Medicare and Workers’ Compensation for same procedures providing to automobile accident victims

Data from the Mayor’s 2015 D-Insurance “Feasibility Study” shows a fuller picture of the extent to which Detroit doctors and hospitals are price-gouging when No Fault insurers are footing the bill for medical services provided to Michigan motor vehicle accident victims:

  • Detroit medical providers charge No Fault auto insurance companies 500% more (or 5 times more) than what they charge Medicare for the same procedure;
  • Detroit medical providers charge No Fault auto insurance companies 340% more (or 3.4 times more) than what they charge to Workers’ Compensation for the same procedure.

(Source: “Attachment 1” (“City of Detroit – Insurance Reform Pricing – Medical Procedure Reimbursement Amounts”) of the June 8, 2015, “D-Insurance: City of Detroit Insurance Company Feasibility Study,” which compared the prices that Detroit hospitals and doctors charged to No Fault (which has no medical-provider fee schedule), Medicare and Workers Compensation (both of which have medical-provider fee schedules) for the same 21 procedures – ranging from surgery to MRIs, CT scans, X-rays, physical therapy and emergency room visits.)

Examples of the glaring disparities in pricing by Detroit medical providers (depending on whether No Fault, Medicare or Workers Compensation is paying) include:

  • Surgery – Shoulder: No Fault pays $2,806.13; Medicare pays $730.70; and Workers Compensation pays $939.98
  • MRI – Low Back: No pays $3,278.55; Medicare pays $484.31; and Workers’ Compensation pays $765.57.
  • CT Scan – Pelvis: No Fault pays $1,828.04; Medicare pays $305.65; and Workers’ Compensation pays $477.59.
  • X-Ray – Spine: No Fault pays $227.55; Medicare pays $55.89; and, Workers’ Compensation pays $77.06.
  • Manual therapy (15 minutes) – physical therapy: No Fault pays $60.80; Medicare pays $28.91; and Workers’ Compensation pays $38.03.
  • Emergency department visit; severe medical complexity: No Fault pays $443.68; Medicare pays $124.98; and Workers’ Compensation pays $170.35.

Don’t forget, there is a reason why No Fault payments are currently higher – but provider fee schedules would remove this reason

One word of caution here. A big reason for why payment has been higher with auto No Fault is based upon how dilatory the auto insurance companies are in paying valid and clear-cut claims. It can literally take years to get payment, and these frustrated medical providers often have to hire provider lawyers to sue for bills that should have been paid in 30 days, as the No Fault law demands.  None other than Oakland County Republican L. Brooks Patterson made this case quite clearly.

No Fault fee schedule could generate savings of 71% to 80% on medical procedures for auto accident victims in Detroit

Based on same “Feasibility Study” data used to calculate how much more Detroit medical providers are charging to No Fault than Medicare and Workers’ Compensation, one can see the savings that could be generated – and, hopefully, passed along to consumers in the form of lower car insurance prices – if a No Fault medical-provider fee scheduled (modeled on the fee schedules for Medicare and Workers’ Compensation) were implemented:

  • A No Fault fee schedule modeled on the Medicare fee schedule could generate savings of approximately 80% on No Fault medical claim costs in Detroit.
  • A No Fault fee schedule modeled on Michigan’s Workers’ Compensation fee schedule could generate savings of approximately 71% on No Fault medical claim costs in Detroit.

Aside from ending price-gouging and generating savings, fee schedules will clean out the No Fault riffraff

As I noted in my blog post, “How I would change Mayor Duggan’s D-Insurance Plan to actually protect Detroiters,” the benefits of a No Fault medical-provider fee schedule go beyond generating savings by putting an end to Detroit hospitals’ and doctors’ price-gouging.

Indeed, a “truly fair fee schedule … would meaningfully lower the price of auto insurance for Detroiters and it would keep the critical legal protections and insurance benefits of our No Fault system intact” by doing the following:

  • Remove a lot of the ugliness and PIP fraud that we all see from a small but growing number of lawyers and law firms.
  • Streamline billing for medical providers, doctors and hospitals; facilitate prompt payment and eliminate the need for costly litigation.
  • Eliminate most of the lawyer provider lawsuit industry entirely, as doctors and medical providers would be paid reasonably charges promptly.
  • Remove the financial incentive that drives many “billboard lawyers” and “ambulance chasing” lawyers that are currently violating Michigan law and committing insurance fraud by participating in medical-legal referral services that drive up medical costs unnecessarily, with the lawyer then taking a one-third attorney fee on the medical bills.
  • End the networks of runner, cappers, soliciting “case managers” that are currently camped out in many Detroit-area hospital waiting rooms and who walk into patient’s rooms handing out lawyer business cards.
  • End the misuse and abuse of our No Fault system by “ginning” up costly PIP claims and flooding the courts with needless first-party no fault lawsuits.

 

This entry was tagged Tags: No-Fault Insurance Blog
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Blog Author Steven M. Gursten
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