Waltham, MA, June 13, 2024—In recent years, inflation in the workers’ compensation system has been a concern, as inflation in the overall economy spiked at 9 percent in June 2022. This new report from the Workers Compensation Research Institute (WCRI) examines the most recent trends in medical inflation to assess whether there was any accelerated medical price growth in workers’ compensation due to a potential lagged effect of the overall inflationary trends.

“As of 2023, general inflation has slowed down, while medical inflation in health care has remained low, without evidence of a lagged effect for the health care sector. However, prices paid for workers’ compensation medical professional services grew faster in some states than in others during 2022 and 2023. This reflects the different approaches to updating fee schedules in response to inflationary changes,” said Ramona Tanabe, president and CEO of WCRI.

According to the study, higher inflation in the general economy led to faster growth in workers’ compensation prices in states that update their fee schedules based on measures of price changes in the general economy rather than price changes within the medical sector. The effect of these inflationary updates on the workers’ compensation fee schedules may continue to contribute to the workers’ compensation medical payment growth in the near- and medium-term.

The study, Medical Payments in Workers' Compensation During the Recent Inflationary Period - A WCRI FlashReport, offers a framework for workers’ compensation policymakers and stakeholders when considering changes in medical payments in the near- or medium-term.

• Workers’ compensation fee schedules, which are effective tools to mitigate medical inflation for professional prices, ensure similar or lower price growth rates compared with those in the general health care system.
• Various approaches to inflationary updates in workers’ compensation fee schedules lead to widely different price growth rates, especially during periods of high inflation.
• Hospital payments have been and will likely continue to be the main driver of medical cost growth in workers’ compensation and in general health care, especially in the face of ongoing provider consolidation trends and medical labor shortages.
• Utilization of medical services, which started to recover from the disruptions at the beginning of the pandemic, is likely to remain a key factor behind the growth in workers’ compensation medical payments.

In this report, we primarily focus on the period from 2012 through 2023 for the discussion of general inflation in the overall population and in the health care sector, as well as the growth in the price component of workers’ compensation medical costs. For the discussion of trends in workers’ compensation medical payments per claim, WCRI studies provide information for claims from 2012 to 2022, with experience through March 2023.

Click here for more information about this report or to download a copy. The report was authored by Dr. Olesya Fomenko and Dr. Rebecca Yang.

ABOUT WCRI

The Workers Compensation Research Institute (WCRI) is an independent, not-for-profit research organization based in Waltham, MA. Organized in 1983, the Institute does not take positions on the issues it researches; rather, it provides information obtained through studies and data collection efforts, which conform to recognized scientific methods. Objectivity is further ensured through rigorous, unbiased peer review procedures. WCRI's diverse membership includes employers; insurers; governmental entities; managed care companies; health care providers; insurance regulators; state labor organizations; and state administrative agencies in the U.S., Canada, Australia, and New Zealand.

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