Workers’ Compensation Mega Losses

At the 2018 NCCI Annual Issues Symposium, Michael Choo and Scott Goll from Paradigm Outcomes discussed trends in mega losses (defined as claims with total incurred greater than $1 million).

The types of claims Paradigm sees are catastrophic injuries, including spinal cord, brain injuries, multiple amputations and severe burns. They receive over 1,000 claims per year with an average total projected medical incurred of over $3 million. The range is high with some claims having medical costs up toward $20 million.

It was not that long ago that a single-person workers’ compensation claim with a total incurred above $5 million was rare. Now they are seeing claims with total incurred up to $30 million, with claims above $10 million being commonplace.

The biggest contributor to mega loss claims is trends in injury survivability. People are surviving accidents that used to be fatal. According to information from JAMA, the survivability rates for unintentional injuries has increased by 40% since 1978. This is due to multiple factors, including significant advances in onsite medical triage, faster transportation to medical facilities (i.e. helicopter) and also significant advancements in emergency medical care in the hospital settings. Burn survivability has also increased dramatically with the development of synthetic skin and other techniques that aid in the injury recovery.

Another significant factor in the rising costs is how long people with catastrophic injuries are living. Not long ago the life expectancy for a patient with quadriplegia was no more than 10 years. Due to advancements in controlling the complications of such injuries (infections, respiratory issues, blood clotting), people with these injuries can live a near-normal life expectancy. Brain injury patients also commonly live a near-normal life expectancy.

The final piece driving costs on mega claims are treatment costs. New treatments are very expensive, and specialized treatment programs can be very costly. A severe burn patient can have over $10 million in hospital charges in the first year. Long-term care programs for brain and spinal cord injuries can run several hundred thousand dollars per year. High-tech prosthetics are now replaced every 2-3 years, when they used to last 5-7 years. People often have multiple prosthetics for different functionality. These new higher-functioning prosthetics are much more expensive than the older models.

Medical innovation saves lives, prolongs life expectancy and can increase functionality. However, all this means that the costs of catastrophic injury claims is higher than ever before and will continue to rise.