As our country debates who should pay for healthcare, we continue to sidestep a fundamental problem: the U.S. spends more on healthcare than any other country, approximately $3.2 trillion in 2015, but we under perform on all key health outcomes relative to other industrialized nations.1–3 To overcome these challenges, top health economists point to the need for high-value, evidence based care to reduce the 30% of healthcare spending that is wasted on over utilization, unnecessary services, and system inefficiencies.4,5

In previous blog, I described how employers can achieve significant cost savings by utilizing evidence-based disability case management that values returning employees to activity and work as soon as is safely possible. In this blog, I describe ReedGroup’s research to quantify the potential medical cost savings for employees on short-term disability absences. Read the full blog.

Employers are on the hook for about 20% of overall health spending,1 as the primary source of health insurance for the non-elderly population in the U.S. Further, 61% of the 150 million people who receive insurance through their employer are in self-funded plans where the employer assumes direct financial responsibility for the costs of enrollees’ claims.6 Unfortunately, most employers are not equipped to help their employees utilize high-value medical services to achieve better outcomes and reduce unnecessary costs for both the employer and employee.

Estimating avoidable costs: methodology

ReedGroup’s researchers estimated the avoidable medical costs for each of 880,000+ disability cases from the dataset I described in my last blog. First, we estimated the time it should have taken the employee to return to work using a statistical approach that was based on their primary condition and considered each individual’s case characteristics (i.e. comorbid conditions, opioid use, hospitalization, etc). We did this to adjust for the fact that an employee with multiple comorbid conditions and a hospitalization during the disability absence would be expected to have a longer disability duration than an employee with the same condition but who was otherwise healthy and not hospitalized. Using our return to work estimations, we identified all the relevant medical costs that occurred between the actual date the employee returned to work and our estimated date. Ultimately, our analysis allows us to calculate the average avoidable costs for over 1,400 conditions.

Big picture: cost savings for employers

Knowing the average avoidable cost per condition helps employers and case managers target specific conditions that have a high potential for cost savings. On a larger scale, the average avoidable costs-per-case and the claim rate for each diagnosis can be used to calculate the potentially avoidable costs for the entire US workforce. Considering that approximately 40% of the US workforce has STD benefits, our data indicate that approximately $6 billion per year could be saved by utilizing medical care—including evidence-based guidelines and disability duration guidelines—that emphasizes the importance of returning employees to work as quickly and safely as possible.

Beyond occupational health

Patients on short-term disability are not typically treated by physicians trained in occupational medicine and in the return to work, and yet all physicians and their patients could benefit from understanding the value of returning to work so that patients can resume their normal activities as quickly as is safely possible.7 This has clear benefits for employers and employees alike—employees get back to work and activity, and employers realize a reduction in absence and medical costs associated with short-term disability.

Read the full white paper

Sign up for the ReedGroup blog


  1. National Health Expenditures 2015 Highlights. Cent Medicaid Medicare Serv. 2015:2014-2016. doi:
  2. Davis K, Stremikis K, Squires D, Schoen C. Mirror, mirror on the wall: How the performance of the U.S. health care system compares internationally. Commonw Fund. 2014;(June):1-32. doi:10.1002/uog.1825.
  3. OECD. OECD Health Statistics July 2015. (Various Years). 2015:1-2. doi:10.1787/health-data-en.
  4. Wennberg JE, Fisher ES, Skinner JS. Geography and the debate over medicare reform. Health Aff. 2002.
  5. Newhouse J, Garber A, Graham R, McCoy M, Mancher M, Kibria A. Variation in Health Care Spending.; 2013. doi:10.17226/18393.
  6. Kaiser Family Foundation. Employer Health Benefits. 2016:174.
  7. Jurisic M, Bean M, Harbaugh J, et al. The Personal Physician ’ s Role in Helping Patients With Medical Conditions Stay at Work or Return to Work. 2017;59(6):125-131. doi:10.1097/JOM.0000000000001055.