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Workers’ Comp Payments for Medical Care Exceed Cash Benefits in 2008

The rising cost of medical care and increased use of medical services led to a jump in workers’ compensation payments for medical care and cash benefits for U.S. workers in 2008.

Workers’ comp payments for medical care and cash benefits for workers injured on the job increased 4.4 percent to $57.6 billion in 2008, according to a study released by the National Academy of Social Insurance (NASI). Workers’ comp payments for medical care and cash benefits for workers injured on the job increased just 2.0 percent to $55.4 billion in 2007.

NASI reported that for the first time, medical benefits accounted for over half (50.4 percent) of all benefits paid. An 8.8 percent increase in payments for medical care drove medical spending to $29.1 billion in 2008 (the most recent year with complete data), while wage replacement benefits paid directly to injured workers rose by 0.3 percent to $28.6 billion.

“The growth in medical spending may reflect both higher prices for medical care and greater use of services,” said John F. Burton, Jr., chair of the panel that oversees the report. “The increase is the continuation of a long-term trend since 1980, but this is the first year that payments for medical care were more than half of all workers’ compensation benefits.”

Even so, employers paid a total of $78.9 billion nationwide for workers’ compensation, a decrease of 6.7 percent from the previous year.

For long-term trends, NASI says it is useful to consider workers’ compensation benefits per $100 of payroll covered by the program. By this measure, cash benefits were $0.48 per $100 of payroll in 2008. This is the lowest level since 1980 (the earliest date with comparable data).

As workers’ compensation cash benefits as a share of covered payroll declined over the years, Social Security benefits continued to rise. The opposite trends in workers’ compensation cash benefits and Social Security disability benefits during much of the last 25 years raise the question of whether retrenchments in one program increase demands placed on the other, and vice versa.

“The substitutability of Social Security disability benefits and workers’ compensation cash benefits for workers with severe, long-term disabilities that are work-related or might be exacerbated by the demands of work is an important question for researchers and policy makers” according to Burton.

The new report, Workers’ Compensation: Benefits, Coverage and Costs, 2008, is the 13th report in the NASI series that provides the only comprehensive data on workers’ compensation cash and medical payments for the nation and for each state, the District of Columbia, and federal programs.

Workers’ Compensation Spending, 2008

Source: NASI