Medical cost development in worker's compensation

Abstract

The cost of medical care for workers' compensation claims is a significant determinant of the total costs of coverage. In this article the effect of legal representation the evolution of the total medical cost of individuals' claims is examined. Two samples, one of non-controverted claims and the other including both controverted and non-controverted claims, were analyzed. Two important results can be reported for both samples. First, the cost of medical care associated with workers' compensation claims is positively related to representation by a lawyer. Second, although the times series of total medical cost for workers' compensation claims is adjusted by the medical care price index the total cost of medical care for workers' compensation claims increases over the sample period. This suggests that there is a change in utilization patterns or costs of services for workers' compensations claims that is not captured by general medical care costs. The average cost of medical care for workers' compensation is determined by a variety of factors, two of which are of paramount importance. First, rapidly increasing costs for hospital and physician services have caused medical care costs to increase at a rate substantially higher than that for costs in general (see Statistical Abstract of the United States, 1979-1986). Second, more utilization of hospital and physician services also have increased the cost of workers' compensation coverages. Other factors may affect the costs of medical care under workers' compensation. The frequency and severity of work place injuries may change. Technology may improve the effectiveness of