The Critical Causes of Catastrophic Claim Costs

Necessity breeds invention, which certainly rings true throughout the evolution of medicine. But with advances in medical technology come higher costs to maintain and develop equipment, and skilled medical professionals to operate this equipment. Unfortunately, a dwindling supply of medical professionals is straining a healthcare system already struggling with the effects of inflation and COVID-19. Catastrophic claims can often bear a disproportionate burden of the rising healthcare costs due to the complexity of care and long-term medical needs.

“Catastrophic claims have incurred rapidly increasing costs in medication, durable medical equipment (DME), disposable supplies, home health rates, and vehicle modifications, with no signs of letting up,” said Stacy Whalen, Senior Medical Manager at Safety National. “For the purchase of a modified wheelchair-accessible van, we’re seeing quotes with a 30-40% increase from just a few years ago. This is just one example of why cost negotiations are imperative to mitigating overall claims costs. Maximizing accessibility to quality healthcare and developing independence for catastrophically injured workers is our top priority.”

These are just a few causes leading to significant cost increases in catastrophic claims.

Catastrophic Care Needs

Every catastrophic claim requires varying levels of intervention and care. Many will require specialized medical care, extensive rehabilitation, advanced medical equipment and potential vehicle and home modifications. The rising costs of the following care needs have directly impacted the increase in catastrophic claim costs.

• Staffing shortages – A severely injured worker may need extensive therapy services, home healthcare and access to a post-acute rehabilitation center. Unfortunately, the staffing shortages in healthcare have extended rapidly, creating a greater demand than the available supply. This increased demand for limited medical staff has driven costs in catastrophic claims, particularly in home healthcare with an attached long-term need.
• Increasing medical equipment costs – Supplies ranging from a few dollars to thousands of dollars have all been subject to rising costs. Supplies and equipment have become more expensive to ship and produce with fewer employees to assist manufacturing. Additionally, equipment needed for long-term care frequently needs replacing, which can quickly add up over time.
• Rising home modification costs – The labor and supplies necessary to complete home modifications have significantly increased. Driven by a shortage in trade workers and supply chain issues, this can drive costs while delaying construction completion timelines.

Medical and Price Inflation

Due to ongoing staffing issues, not all healthcare facilities have returned to operating at a pre-pandemic capacity. COVID-19 diagnoses in staff still require additional time out of work leading to further constraints. Higher demand in the market for these positions creates more competition within health systems for the same roles. As a result, medical staff may pursue other roles or simply leave the industry. This can strain access to care for injured workers and lead to increased demand and costs for services, adding to claims costs.

Like consumers, healthcare is experiencing much of the same pressures created by price inflation. Facilities pay significantly more for the equipment and supplies they need, and those costs are ultimately realized in catastrophic workers’ compensation claims. The compound costs created by medical and price inflation have led to a more substantial bill review process, ensuring that charges are appropriate and negotiated where possible.

Injury Survival and Life Expectancy

Many of the same catastrophic injuries seen just 15 years ago are experiencing drastically better outcomes and longer life expectancies thanks to advances in medical technologies, timely intervention, access to medical care, specialists and home health. Catastrophic injuries often have higher associated costs early on in the claim due to the complexity and intensity of early medical intervention. Subsequently, long-term exposure can be significant for catastrophic claims when the injured worker requires lifetime care, equipment and services.