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4 Factors Associated with Increasing Catastrophic Claim Costs

Catastrophic claims can often bear a disproportionate burden of the rising healthcare costs due to the complexity of care and long-term medical needs. We review a few of the elements adding to these rapidly increasing costs.

March 26, 2024

The medical cost of treating injury severity has been steadily increasing as the rise in medical technology is extending life expectancy. While this has proven to be extremely beneficial in helping patients survive accidents, the associated costs of long-term care, advanced surgeries, and home health have driven a sharp increase in claims costs.

“In the past, a million-dollar work injury was practically unheard of, but they have become commonplace these days,” said Stephen Peacock, Assistant Vice President – Client Engagement at Safety National. “These cases require lifetime care for the injuries, so medical inflation significantly impacts claim cost.”

Here are a few of the causes behind rising medical inflation.

1. Services Not Covered by Fee Schedules

Catastrophic work injuries often include medical care or needs that are not covered under state fee schedules or reasonable and necessary rules. These services include extended intensive care unit stays, durable medical equipment, prosthetics, transportation, and professional home nursing. The costs of these are increasing at rates far greater than average medical inflation. For example, some home healthcare rates have more than doubled in the last 10 years. In some cases, fees can be up to $65 to $70 per hour for 24 hours a day, seven days a week. That equates to over $550,000 a year for in-home care alone.

2. Accident Survivability

Catastrophic cases require higher medical costs early on due to the complexity and intensity of the injuries. Medical care at the accident scene is significantly better for these severely injured individuals, leading to better chances of survival. Air ambulances are deployed faster, and the care provided by Level 1 trauma centers has vastly improved. Injured workers are now, thankfully, surviving accidents that would have been fatal five years ago, yet significant costs are associated with this initial treatment.

3. Life Expectancy

Severely injured individuals are living much longer with advances in medical technologies, timely intervention, medical care access, specialists, and home health. Complications can now be prevented when, not that long ago, they significantly reduced life expectancies. This means that a person with quadriplegia in their twenties could live 30-40 years, all while requiring round-the-clock professional nursing care. Long-term exposure can be significant for catastrophic claims when the injured worker requires lifetime medical care and equipment.

4. Advances in Medical Technology

Advances in medical care, along with the increased use of artificial intelligence in medical equipment, are dramatically changing accident survivability and prolonging life expectancies for severely injured workers. These advances are  also significantly improving their quality of life and independence. While this is great, all of this progress in medicine and technology comes at a price. New technology is very expensive, which is carried down into the costs of medical services. The medical devices used for these services seem to have shorter lifecycles and require constant improvements and replacements, often making them more costly.