Menu Close

The National Council on Compensation Insurance (NCCI) published the first of four installments in its series on inflation and workers compensation medical costs. It explores price and utilization trends in medical services, and how each contributes to workers compensation costs in the four US geographical regions. This article also provides state-specific results.

An updated Consumer Price Index (CPI) for All Urban Consumers in August 2022 increased by 8.3 percent over the previous 12 months. This raises the key question “How is the current inflationary environment affecting WC medical costs? In short, “it’s complicated.” The NCCI article explores this question by showing how different types of medical services contribute to countrywide (CW)1 and regional WC medical cost trends. Its key observations include:

– – Medical inflation in WC has been moderate for the past decade. But with the recent dramatic rise in consumer prices, concerns have emerged about medical inflation rising at similar levels.
– – Two factors drive changes in medical claims costs: the price of medical services and utilization, which measures the mix and number of services provided to an injured worker.
– – NCCI’s most recent medical data shows that drug costs are declining, physician costs are up slightly, and facility costs are rising in the WC system.
– – In recent years, facility services are the dominant contributor to changes in WC medical costs across regions – most prominently in the Southeastern region.

Between 2012 and 2021, countrywide WC medical costs increased at 2% per year. The Southeastern and Midwestern regions grew the fastest at 2.3% and 2.0%, respectively. The other regions, Northeastern and Western, saw overall medical costs per claim growing at a slower average annual rate of 1.5% and 1.4%, respectively.

The regional comparison charts indicate that, in all four regions, the WC paid medical trends have been increasing at a slower pace than the corresponding regional CPI-M indexes. This is particularly the case in the Northeastern and Western regions.

WC medical costs in the Northeastern and the Southeastern regions each increased by an estimated 3%, while the Western and Midwestern regions increased by 2% and 1%, respectively. Every region except the Midwestern region had a slightly larger increase in 2021 WC medical costs relative to those observed between 2012 and 2019.

Future installments will expand on each of the different types of medical services discussed here – physicians, facilities, and prescription drugs. Subsequent articles in the series will include more in-depth regional differences in cost changes, and details about the make-up of the underlying services.