May 29, 2023

Industry Update: How Inflation Is Affecting Medical Transportation

By Cliff James, VP, Program Performance and Analytics

Inflation has affected everyone. We don’t have to look far to be reminded of it. It cuts into employees’ incomes, and it has touched every service in some way. We see it in the cost of materials to make medical equipment and supplies, and we see it in the costs to run the thousands of businesses that fulfill workers’ comp services. One such area is non-emergency medical transportation (NEMT), a vital service in helping injured workers attend medical appointments, pharmacies, and lab visits related to workplace injury.

Transportation services are especially important because they help injured workers overcome barriers that would otherwise impact health outcomes – lack of access to a vehicle or driver’s license, an injury that prevents driving, or medication that prohibits driving. In fact, nearly 5.8 million Americans miss or delay their healthcare due to a lack of transportation, according to a study in the American Journal of Public Health. And the RAND Corporation notes that NEMT is associated with greater use of preventive and primary health care, lower use of emergency services and inpatient services, and timely medical care among certain health conditions.

A good market indicator of the impact of inflation on transportation is the rising cost of rideshare services such as Uber and Lyft. According to a CNBC report, average prices rose 92% between January 2018 and July 2021. On top of that, cars themselves have become more expensive, with a record 82% of car shoppers paying above sticker price for a new vehicle in January 2022, according to Edmunds.

Used cars are also costing more; the U.S. Bureau of Labor estimates that the average price increased by 40.5% between 2021 and 2022. And payments on both used and new vehicles have skyrocketed due to increased interest rates. Inflation also means car parts are more expensive and more difficult to obtain and repairs are more costly, forcing insurance prices up. Nationally, car insurance rates are increasing by an average of 4.9 percent, according to a Bankrate report. At the same time, commercial insurance for rideshare companies is also increasing, and their coverage for hired and non-owned vehicles starts at $1 million per occurrence.

No area is left unaffected by inflation, and that includes the labor market for drivers – many of whom provide medical transportation services. Full-time drivers can demand more money because of the strong market and income alternatives. Drivers have begun delivering things like groceries rather than transporting people, making medical transportation less readily available. And 70% of new Uber drivers say they are driving to help with the cost-of-living increase imposed by inflation.

There’s also a driver shortage at play. Nearly every industry has grappled with employee shortages in the past few years, and transportation is no different. Data from the American Trucking Associations shows that over the next decade, the industry will have to recruit nearly one million new drivers to keep up with demand. Uber and Lyft also experienced a driver shortage; a CNBC report says that in July 2021, they were at 40% below capacity. With the professional driver shortage occurring across all industries, NEMT providers are working harder than ever to secure reliable drivers.

Ambulance services, too, have been affected by inflation. According to NCCI, payments for ambulance services account for more than 75% of total medical transportation costs and the average payment per episode for ambulances, both ground and air, has increased since 2013. In 2019, a single trip could exceed $45,000 for an air ambulance service and $1,400 for a ground ambulance service. While these costs are reflective of both emergency and non-emergency ambulance services, emergency episodes do typically comprise the lion’s share of ambulance services – and come with an even higher price tag.

While many of the inflation-related factors, such as the cost of gas or cars, are uncontrollable, Healthesystems is working closely with our vendor partners to control transportation costs and reduce abuse of service through all available capabilities. This includes using analytics to determine whether the most cost-effective transportation mode is being used and monitor cost and fee trends. One outcome of our analysis is a goal to utilize ridesharing where possible. Despite increases in rates across transportation, ridesharing is more economic than traditional sedan services for shorter trip lengths, in most cases.

As inflation rates are on the rise – they are up 6.4% for the 12 months ending in January 2023 – Healthesystems will continue to monitor inflation and other trends and provide updates on how they affect the workers’ comp industry.

Related Articles