Historically, the consumer price index (CPI) for all goods and services grows at a slower rate than the CPI for medical costs, according to Sean Cooper, practice leader and senior actuary for the National Council on Compensation Insurance (NCCI). However, the balance between the two pricing indexes shifted this past year. "For the first time in 20 years, the 'all items' CPI grew significantly fast than the CPI for medical. We are seeing medical inflation, but nowhere near the levels of general inflation," Cooper said during the NCCI's Annual Insights Symposium. NCCI reported drug costs are declining, while physician costs are up slightly and facility costs are rising. He said there are two reasons for this. First, around 40% of health care costs in the U.S. are paid by Medicare or Medicaid, which have regulated prices similar to fee schedules. The second factor slowing medical inflation are things such as provider networks and generic drugs. "While general inflation is up, workers' compensation medical trends have been moderate and the forecast remains relatively moderate in the near future," Cooper said. He noted that during 2021, medical costs per workers' comp claim increased around 2%, which is slightly above the 2012-2019 average of 1.5% gains. The increase in medical costs per workers' comp claim in 2021 was also much in line with results from 2020. While the average payment per claim increased 5% in 2020, Cooper explained the increase was distorted by the pandemic. "What we saw in 2020 was roughly 15% fewer claims than in 2019, and the decrease was more pronounced for new claims versus existing claims," Cooper said. "If you remove that 3% distortion, medical costs per claim only rose around 2% in 2020." When it comes to medical claims costs, two factors act as primary drivers: The price of medical services and utilization, which includes the mix and number of services provided to an injured worker. "Prices are only half the story. Prices matter. Utilization matters also," stressed Raji Chadarevian, director, medical regulations and informatics, at the NCCI. For example, there have been meaningful reductions in the use of evaluation and management services, according to Chadarevian. "This maybe a reflection of improved triage at the onset of workplace injuries. Think for example if an injured worker is directed to a clinic rather than an emergency room," he said. Related: |

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