California Workers' Compensation Medical Costs Rose in 2025
Rising service utilization and higher transaction prices drove a five percent increase in medical costs last year.
Updated on Sept. 21, 2026 in Employment
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Medical service costs within California's workers' compensation system climbed 5% in 2025. This growth resulted from a combination of a 4% increase in payments per transaction and a 1% rise in the volume of services used per claim.
Why it matters
Medical payments now constitute 52% of all loss payments in the state system, making cost trends a critical factor for employers and insurers. Expenses were notably pushed higher by medical-legal services and equipment not constrained by standard fee schedules.
Physician services currently represent 48% of total medical payments, while medical-legal services account for 17% and equipment for 13%. Annual medical costs per claim have climbed steadily in every year since 2020.
The details
The cost escalation was driven by rising transaction prices and increased service utilization, particularly in Southern California where growth outpaced Northern California. Cumulative trauma claims and services outside of regulated fee schedules were significant factors contributing to the upward pressure on total system payments.
Timeline
Medical paid per claim has consistently increased every year since 2020.
Medical service costs rose by 5% during the 2025 calendar year.
Macro View
The current cost trends mark a continuation of rising medical expenditures that have persisted since 2020. This trajectory contrasts with historical periods where fee schedule adjustments successfully stabilized total medical payout volumes.
Rising medical costs can lead to higher insurance premiums for California businesses, potentially affecting payroll budgets and hiring capacity. Employees may also face increased scrutiny regarding service utilization and the validation of claims involving cumulative trauma.
The takeaway
The sustained rise in medical expenses highlights the influence of unregulated service categories within the compensation system. Stakeholders should monitor transaction volumes and the prevalence of cumulative trauma claims as primary drivers of future financial pressure.
Further reading
For more context on the state labor market, visit California Employment.
Source note: This article includes information reported by Insurance Journal.
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