Lost-Time Medical Costs Approaching $30K: When Will You See the Light?

Introduction

For the past five years I have been keeping track of the Average Medical Cost per Lost-Time Claim, as reported every year in May at the NCCI Annual Issues Symposium in Orlando, Florida.

The Chief Actuary for NCCI, Kathy Antonello, presented the 2015 State of the Line Report to the Symposium’s attendees this morning.

That is where many folks in the workers’ comp industry are today and tomorrow, including fellow bloggers, David De Paolo and Joe Paduda.

It is thanks to Joe that I was able to find the slides presented today at the Symposium.

Much of what the State of the Line discusses has to do with the financial health of the workers’ comp industry from the standpoint of premiums and other cost drivers.

But it is the Average Medical Cost per Lost-Time Claim that has always grabbed my attention, and what I have cited in my original paper for my MHA degree program class on Health Law and my White Paper.

In addition, I have cited it in my previous posts, Average Medical Claim Costs Still Rising for Workers’ Compensation and Average Medical Claim Costs Still Rising for Workers’ Compensation: 2014 Edition.

What you will notice in the following article is that the Average Medical Cost per Lost-Time Claim is still rising, despite the fact that from year to year, there may be a slight decrease, but on the whole, the Average Medical Cost is slowly approaching $30,000.

What that means as far as actual cost of medical care for each and every claimant is unclear from the data NCCI provides. For example, does that include the cost of surgery? Does it include the total hospital bill for each patient, because we all know that hospital bills can run into six figures.

What it does not include, and that is made very clear at the bottom of the slide, is any high-deductible policies.

So the Average Medical Cost per Lost-time Claim is only an estimate of the average workers’ comp claim that is reported to NCCI. And bear in mind, that not all fifty states report data to NCCI. Some states only report to state bureaus, and only report to NCCI on interstate rated policies, so again it is not completely accurate.

To illustrate just how bad things have gotten, I am going to show you the previous five Average Medical Cost per Lost-time Claim slides, plus this year’s slide, and my own chart with a trendline that shows the medical cost continuing to rise.

I could have done this for all of the past five years, but even without a trendline, the reader can tell that costs are going up. After all, this is not rocket science, and after having worked at NCCI and doing workers’ comp statistical reporting, I can tell you that there are no geniuses there.

So since this is not rocket science, and since going to the Moon is way more complex than sending workers’ comp claimants to medical tourism facilities abroad where the costs are cheaper, but the quality is equal to or better, then it will be quite clear that the trendline will not change until an alternative is found. That alternative is medical travel.

Average Medical Cost per Lost-time Claim 2009

At the 2010 Annual Issues Symposium, the Average Medical Cost per Lost-time Claim was estimated to be $27,200. As you will see in the slide below, the annual change from years 1991 to 1993 was +1.9%, from 1994 to 2001, it was +8.9%, and from 2002 to 2008, it was +6.6%.

The Average Medical Cost in 1991 was just over $8,000, and by 2009, the preliminary figure was nearly $28,000, which was an increase of 232%. That is a big increase in less than twenty years.

Chart 1

NCCI SOTL_0001

Medical losses amounted to 58% of all total losses in 2009, as seen in Chart 2, and had increased since 1989. For those of you not familiar with workers’ comp. Indemnity refers to the payments made to claimants for lost wages.

What this means is that for each claim, the medical costs represent more than half of the total of the entire claim payments. Lost wages are no longer the main cost driver for the increasing costs of claims.

Chart 2

NCCI SOTL_0002

Average Medical Cost per Lost-time Claim 2010

The following year, the Average Medical Cost per Lost-time claim went up slightly to $27,700, a 70% increase from 1991, or a modest 2% from 2009, as seen on the chart.

The Annual Change for years 1991 to 2001 showed no change, but did show a tenth of a percent increase for the years 2002 to 2008.

Chart 3

NCCI SOTL_0003

Average Medical Cost per Lost-time Claim 2011

One year later, NCCI reported that the Average Medical Cost had a slight increase in 2011, and had reached $28,000. This was a 71% increase from 1991.

The Annual Change decreased for the years 2002 to 2010, to +6.0%, a .6% decrease.

Chart 4

NCCI SOTL_0004

 Average Medical Cost per Lost-time Claim 2012

2012 saw the Average Medical Cost inched up a bit to $28,500, however, the Annual Change for years 2002 to 2011  decreased .3%, probably due to lower year by year rise in medical costs from 2010 to 2012.

Chart 5

NCCI SOTL_0005

Chart 6

Chart 5

Average Medical Cost per Lost-time Claim 2013

Starting in 2014, NCCI dropped the years 1991 to 1994 from the State of the Line report data on Average Medical Cost per Lost-time Claim. There was no explanation given, but there was a moderate increase in the medical claim severity, and medical cost was estimated at $28,800,

Chart 7 and Chart 8, the chart I used in my post, Average Medical Claim Costs Still Rising for Workers’ Compensation: 2014 Edition, are shown below, and with the aid of the treadline, you can see that medical costs are not showing any signs of decline, despite the minor year to year increases.

Annual Change from 1995 to 2012 went up +6.7%.

Chart 7

NCCI SOTL_0006

Chart 8

Chart 6

To drive home the point about the numbers and the slower increase year by year, I provided the reader with the following example:

Doctor:       “Good news, Mr. Jones. We’ve managed to slow the progression of your disease.”

Mr. Jones:   “What’s so good about that? I’m still dying, only slower.”

Average Medical Cost per Lost-time Claim 2014

Finally, we have today’s data, as reported by Kathy Antonello, and we can see that the Average Medical Cost per Lost-time Claim has risen to $29,400, an increase of 69% from 1995, and overall, the Annual Change from 1994 to 2013 has been a whopping +226.7%.

Chart 9

NCCI SOTL_0007

Chart 10

Chart 4

Obviously, something is terribly wrong here, and it is obvious that whatever the workers’ comp industry is doing is not working. Medical costs are still going up, and from the trendline, will continue to go up even further, eventually passing $30,000, perhaps as soon as next year.

Joe Paduda even reported today that the President and CEO of NCCI, Steve Klingel said that there may be storm clouds in the near future for work comp, and his comment was predicated on the reports earlier this year by ProPublica/NPR and OSHA.

Even with all of this data, folks in the workers’ comp world, their employer clients, and many others, refuse to see what is staring them in the face: MEDICAL CARE IN THE US IS TOO EXPENSIVE.

Yet, they refuse to seek out alternatives to high-cost medical care. And what would be so terrible if they did so?

Would they lose money on it? Perhaps the leeches who are draining the system or who have wrapped both the claimants and the system itself in a straitjacket, thrown them both into the padded cell called “workers’ comp” won’t be able to profit from the unfortunate injured workers who are being subjected to all kinds of horrible experiences, as evidenced by the ProPublica/NPR and OSHA reports, by my articles, and by articles by people like David De Paolo, who are bringing to light the dark side of workers’ comp.

The prospect of opt-out on the horizon is a double-edged sword. It promises to save money for employers, but as has been stated by Mother Jones and others, it could be worse for the employee. Like David De Paolo, I too, almost drank the kool aid on opt-out, but still believe that if it is fair to both the employer and the employee, it offers the opportunity to provide better medical care at lower cost to their employees.

But the attendees at this week’s two conferences, and all the other workers’ comp and insurance conferences will go on ignoring the truth, ignoring reality, will drink their favorite cocktails, tell funny stories, play a round or two of golf, etc.; yet, will not listen to me or anyone else when we tell them how things really are.

It is a case ‘see no evil, hear no evil, speak no evil’, but that only means that they are deaf, dumb and blind to the truth. It doesn’t have to be that way. It can be better.

————————————————————————————————————————————–

I am willing to work with any broker, carrier, or employer interested in saving money on expensive surgeries, and to provide the best care for their injured workers or their client’s employees.

Call me for more information, next steps, or connection strategies at (561) 738-0458 or (561) 603-1685, cell. Email me at: richard_krasner@hotmail.com. Ask me any questions you may have on how to save money on expensive surgeries under workers’ comp. Connect with me on LinkedIn and follow my blog at: richardkrasner.wordpress.com. Share this article, or leave a comment below.

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This entry was posted in Claims, Conferences, MEDICAL COSTS, Medical Tourism, Medical Travel, NCCI, Workers' Comp, Workers' Compensation and tagged , , , , , , on by .

About Transforming Workers' Comp

Have worked in the Insurance and Risk Management industry for more than thirty years in New York, Florida and Texas in the Claims and Risk Management spheres, primarily in Workers’ Compensation Claims, Auto No-Fault and Property & Casualty Claims Administration and Claims Management. Have experience in Risk and Insurance Business Analysis, Risk Management Information Systems, and Insurance Data Processing and Data Management. Received my Master’s in Health Administration (MHA) degree from Florida Atlantic University in Boca Raton, Florida in December 2011. Received my Master of Arts (MA) degree in American History from New York University, and received my Bachelor of Arts (BA) degree in Liberal Arts (Political Science/History/Social Sciences) from SUNY Brockport. I have studied World History, Global Politics, and have a strong interest in the future of human civilization in all aspects; economic, political and social. I am looking for new opportunities that will utilize my previous experience and MHA degree. I am available for speaking engagements and am willing to travel. LinkedIn Profile: http://www.linkedin.com/in/richardkrasner Resume: https://www.box.com/s/z8rxcks6ix41m3ocvvep

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