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Annual Spending Increases over the 2007–2012 Period Are Largely Unexplained After Accounting for Inflation and Changes in Workers' Compensation (WC) Claims Incidence and Injury Mix

• Medical service spending increased 9.9 percent from 2007 to 2012. After accounting for the measured cost drivers in RAND's framework (inflation, new WC claims, and injury mix), the predicted change over the period is –2.4 percent. This creates a residual spending increase of 12.3 percent in 2012 that is attributable to unmeasured changes in intensity of services and injury mix.
• The residual change in systemwide spending is large: $1.5 billion. This represents about 23 percent of total 2012 service year spending and nearly all of the increase in spending in service year 2012 relative to 2007. The increases in payments to individuals account for 65 percent of the residual. To a large extent, these increases may be attributable to improved reporting of further medical expenses in claims settlements.

The Workers' Compensation Information System (WCIS) Can Be Used Both to Monitor Overall Trends in Spending and Utilization of Medical Services Provided to Injured Workers and to Examine Specific Issues

• However, there are limitations to using these data because not all WC claims are reported into the system, and among the reported claims, there is further underreporting of medical bills.
• Until there is greater compliance with reporting requirements, estimates of total spending and utilization cannot be generated from the WCIS data without supplementing the WCIS with external data.