New NCCI Study Focuses on Medical Services

According to a new research report from the National Council on Compensation Insurance (NCCI), the slowest payout rate of any workers’ compensation service category is for prescription drugs. Overall, less than 20 percent of prescription drug costs for lost-time claims are paid by the end of the sixth relative service year.

The report, Medical Services by Size of Claim—2011 Update, provides insight into an area that constitutes a major cost driver in workers’ compensation. Medical services now account for almost 60 percent of workers’ compensation claim costs, up from about 40 percent in the early 1980s.

Through narrative and charts, the NCCI research study quantifies how the mix of medical services for a more serious injury or illness differs from the type of care required to help a worker heal from a minor mishap. It also shows how the medical services profile for workers with serious injuries is markedly different in the later years of their treatment from the mix of services required early on.

In the study, NCCI looked at nine different service groups and found that the mix of medical services differs by service group between small and large claims:

  • Office visits and emergency services dominate the service mix for smaller claims
  • Surgery and anesthesia are a larger share of the services for mid-range ($5,000 to $100,000) claims than for other claim sizes
  • Hospital services and prescription drugs comprise more than 40 percent of the cost of claims greater than $100,000.

Large claims, in general, are subject to greater inflation than smaller claims. The CPI for the prices of hospital services has recently been growing at a faster rate than the CPI for office visits or physical therapy.

In other key findings, the report notes that the varying mix of services by claim size has implications for the payout rates by type of service:

  • Office visits, physical therapy, and emergency services all have relatively fast payout patterns
  • Hospital services and prescription drugs have relatively slow payout patterns
  • For every claim size range, prescription drugs are a substantially greater share of total medical costs paid after the sixth relative service year than they are up through the first 6 relative service years
  • Physical therapy, hospital services, and surgery and anesthesia are greater shares of total medical costs paid through the sixth relative service year than they are of the seventh and subsequent relative service years.
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