Calculating employee injury, illness costs? Just add zeros

When a dollar sign is followed by a slew of zeros, it can be hard to grasp the implications in economic and human terms.

Maybe that helps explain why employers don’t seem to be as outraged or policy-makers as strident as one might expect considering the total annual cost of work-related injuries, illnesses and fatalities in the United States?

J. Paul Leigh, Ph.D., a professor at the University of California, Davis who studies health and labor economics, estimates the cost is $250 billion – that’s right, $250,000,000,000 – a sum far greater than generally assumed and one that exceeds yearly costs associated with cancer, diabetes or stroke.

Workers’ compensation covers about 25 percent of the $250 billion total. Leigh notes the bulk of expenditures are absorbed by employer-provided medical insurance, Medicare and Medicaid, increasing healthcare costs for everyone and leaving many work-related cases unresolved.

His comprehensive analysis corroborates my long-held view that many more employers could save money while improving business performance and workforce health outcomes by sending (or referring in choice states) their employees to designated clinical facilities with expertise in:

  • managing occupational exposures and injuries;
  • workers’ compensation and the workplace regulatory environment;
  • targeted wellness and safety training programs;
  • functional restoration and early/safe return-to-work practices.;
  • data collection, trend analysis and other reporting and communication practices.

Leigh believes the data verify the need for a federal policy emphasis on prevention, especially since costs increased by more than $33 billion – that’s $33,000,000,000 – between 2007, the study year, and 1992, when he last conducted such a comprehensive analysis.

“It’s unfortunate that occupational health doesn’t get the attention it deserves,” he said. “The potential for health risks are high, given that most people between the ages 22 to 65 spend 40 percent of their waking hours at work.”

As a starting point, he suggests basing workers’ compensation premiums on injury and illness costs in specific business or government categories rather than on industry-wide numbers. His thinking: “If premiums were more experience-based, organizations would be much more motivated to invest in prevention campaigns or eliminate hazards because they would see the benefits of those changes in reduced premiums.”

For the study, Leigh assembled information on U.S. civilian workers from more than 40 datasets. He multiplied the total number of cases by average cost per case and adjusted for inflation and under-reporting. He came up with an estimate of 8,564,600 fatal and non-fatal work-related injuries at a cost of $192 billion and 516,100 fatal and non-fatal work-related illnesses at a cost of $58 billion.

His sources include the U.S. Bureau of Labor Statistics, the Centers for Disease Control and Prevention, the National Council on Compensation Insurance, the Healthcare Cost and Utilization Project, the National Academy of Social Insurance and epidemiological research on occupational diseases.

The research was funded by the National Institute for Occupational Safety and Health (NIOSH). “Gaining a better understanding of the burden helps NIOSH and our partners make the case that preventing work-related injuries and illnesses is part of a wise national strategy for economic recovery and growth. Such data also may inform innovative approaches for building or enhancing corporate safety and health cultures,” said NIOSH Director John Howard, M.D.

The study was published in Milbank Quarterly, Volume 89, Issue 4, December 2011. To access the online version via the Wiley library, click here.