Heavy Contributors to High-Cost Developmental Claims

The goal of any workers’ compensation claim is to provide care, restore a sense of normalcy to an injured worker, and get them back to work when possible. However, workers who experience catastrophic (serious spinal or brain injuries, burns, or amputations) or chronic degenerative (soft tissue-type injuries that deteriorate or become complicated over time) injuries undergo a lengthy life-altering experience, rarely return to work, and the costs associated with these types of claims tend to increase over time.

“Factors specific to the injured worker, such as age and comorbidities, can greatly influence the cost of a claim, but external factors such as inflation and advances in medicine also significantly contribute to those costs over time,” said Stephen Peacock, Assistant Vice President, Client Engagement at Safety National. “Most workers’ compensation claims are affected by these factors, but catastrophic and chronic degenerative claims are more significantly influenced due to the extended duration of medical treatment.”

Here we look at how these factors can lead to adverse claims development.

Inflation Trends

In the last few years, you cannot escape the discussion of rising inflation. While news outlets speak in more general economic terms, workers’ compensation is more specifically impacted by medical inflation, where there may be upwards of a 10% annual increase in costs associated with some medical care and prescription medications on a year-over-year basis.

As the annual increase in costs holds true over time, this results in a doubling of annual medical spending approximately every seven years. In developmental claims cases that reach “old dog” status, medical spending can often reach upwards of $30,000 or more per year. Couple annual spend with an injured worker that has a 21-year life expectancy, and these costs can easily approach $100,000 annually. That cost does not even account for changes in the various modalities or advances in medicine. So, while inflation has a general effect on our day-to-day expenses, it has an enhanced effect on those expenses associated with medical care in workers’ compensation.

The Aging Process and Comorbidities

Aging is inevitable, but unfortunately, it limits our ability to recover from physical activities nearly as quickly as we once did. Combine these potential age-related complications with a significant workplace injury, and the effects can be catastrophic. The ability to undergo various procedures may be limited or impossible due to certain medical conditions that are unrelated to the original injury. Often, recovery from surgery is delayed due to these circumstances and the inability to properly rehabilitate.

Similarly, various non-industrial medical conditions, such as diabetes and hypertension, can arise and develop as a result of genetics and lifestyle choices. These are typically not covered under the workers’ compensation claim, so they cannot be managed by a claims professional. However, they can certainly affect a claim, significantly delaying recovery and increasing claim cost as well as exposure.

Some jurisdictions take a more drastic “you break it, you buy it” approach. If the workplace injury aggravates a non-industrial condition, the employer becomes responsible for the maintenance of the unrelated condition, which could be a lifetime exposure. For example, in a case where an injured worker incurs a work injury and has a pre-existing diabetic condition, the employer may be forced to pay for ongoing diabetes maintenance medications.

Medical Advances

As a society, we marvel at new ideas, inventions, and advances in medicine that can provide us with a better standard of care and quality of life. These advances make it possible to provide a higher level of care for injuries and conditions, thus extending life expectancies for injured workers. However, the associated treatment can come with a heavy financial cost.

Total knee replacements were once performed exclusively with the deft hand and extreme talent of a surgeon. Now, robot-assisted joint replacement surgeries produce a less invasive, more precise approach, with a decreased infection risk, but also come with a higher price tag. A robot-assisted joint replacement surgery can cost 25% more than the traditional approach.

Improvements in prosthetics over the past 10-15 years are inspiring. Yet, these advancements come with a steep price tag. In years past, upper extremity amputees may have only received the benefit of a two-pronged claw-type hand. Now, technology allows for the use of fingers for fine manipulation, gripping, and grasping. These prosthetics can cost over $150,000 each and, with maintenance and repairs, can significantly contribute to the lifetime medical cost of a claim.

In certain circumstances, it may be best to settle complex workers’ compensation cases with a resolution that satisfies all parties. It is difficult to approach a claim with future exposure and inflation in mind. Still, it is important to understand that while medical costs are expensive today, it is likely that those same costs will be exponentially higher in the future. It is important to have the right people on your settlement team who can recognize reasonable future exposure and develop a strategy to mitigate risks. It may cost more to settle those work injuries now, but doing so can save costs resulting in a healthier and more successful workers’ compensation program.