Workers' Comp "tail" continues to grow

In insurance lingo, Workers' Comp has a long tail. When an injury occurs, the insurance company sets aside reserves to cover the estimated cost of the injury until the case is closed. In many situations, a case can go on for years--and sometimes even longer. And the employer pays and pays more.

The bad news for employers is that the percentage of total claims for "late-term" costs - those that will be incurred 20 to 30 years in the future - has been growing and could continue to do so, according to the latest research from the National Council on Workers' Compensation Insurance (NCCI). As the study indicates, more than 10% of the Workers' Compensation medical benefit costs for injuries occurring this year will be paid for services provided more than two decades from now.

The new NCCI study, "Medical Services for Claims 20 or More Years Old," looks at Workers' Compensation medical services provided beyond 20 years after the injury, to project what medical service categories will account for the largest shares of costs and the future treatment and utilization that will drive those costs.

The report contains a wealth of information that can be helpful to those with legacy claims and those working to avoid the problem. Some key findings concerning services provided from 20 to 30 years following the date of injury include:

• Patients are predominantly male, more so than can be explained by historical gender differences in the workforce. They incur about 75% of the costs of Workers' Compensation late-term care, even though they represented less than 60 percent of the workforce at the time of injury.
• Deteriorating medical conditions of the more elderly claimants is NOT a main cost driver.
• Less than 40 percent of Workers' Compensation late-term-care claimants are younger than age 60, but this cohort incurs nearly half the cost of late-term care.
• Drugs, home health services, orthopedic devices (e.g., implants, prosthetics, and orthotics), and medical supplies stand out as the four broad service categories with the greatest increase in their payment share between services provided within 20 years of injury and services provided 20 to 30 years after injury.
• The drugs category shows the greatest difference between early and late-term care, increasing by almost 30 percentage points late-term. The shifts reflect a change in the focus of care from return of function to relief of pain.
• Disease cases, together with those with complications from a medical procedure, account for more than three-fourths of late-term payments (75% for men, 80% for women). By contrast, treatments for traumatic conditions (other than complications) account for less than one-fifth of the cost of late-term care.
• There has been a dramatic growth in pain management. Pain medication accounts for the largest portion of prescription costs to treat injuries more than 20 years old. Specifically, the top drug, OxyContin, accounted for 6 percent of Workers' Compensation medication costs in 2009. That share rises another 5 percentage to 11 percent for late-term care.
• While emergency rooms account for only a very small share of late-term care, the share of costs for hospital-based care is more than double the share of costs for services provided at home. The small percentages billed by sub acute facilities (skilled nursing, assisted living, etc.) combined with the high percentages billed by hospitals and the shift in focus from return of function to relief of symptoms, all combine to suggest that hospitals direct acute-care patients to continue treatment within a hospital-based sub acute program, either as an inpatient or outpatient.

These findings should help make it clear that proactive claims management is essential to controlling Workers' Comp costs over the long term. When it comes to employee injury claims, it's the tail that wags Workers' Comp costs. How new claims are handled will have a significant impact on long-term costs. Failing to assign adequate resources to a newly reported claim, or assuming such claims will be appropriately handled is a major reason why otherwise typical employee injury cases spiral into legacy claims. Processes thwarting poor medical care, unnecessary complications, opioid prescriptions and excessive hospitalization will help to shorten the tail.