Year: 2009

Oct
14

What you missed on MCM

Posted by Joe Paduda on Wednesday, October 14th, 2009 | Comments

For at least a couple weeks, many of the 1642 people who subscribe to MCM didn’t receive notices when new posts went up. It looks like we’ve figured out the problem (electronic fingers crossed), so here’s what’s been on the blog while we were in a technical hiatus.
Yesterday I opined that the recent AHIP/PwC report is more right than wrong; the report misses a lot – and much of what it misses is less than favorable to the report’s funders – health insurance companies. But the central point is indeed accurate; without a tough, enforceable universal mandate, you can’t force insurers to take all comers without charging more for higher risks or excluding them altogether.
Last week was devoted to the recent report by the state of Texas’ Research and Evaluation Group’s report on workers comp networks. The initial post generated a good bit of dialogue with the report’s authors wherein they clarified a confusing (at least to me and several large payer clients) statement; the follow up post detailed the issue, adn explored another concern; “the report didn’t note that three of the networks are provided by one company – Coventry, which also administers a network that is likely underpinning much of the ‘non-network’ category.”
The ‘Texas Week’ concluded with a post on the larger issue with the report – the fallout in workers comp “C” suites, and the potential damage to managed care.
Two posts the week before covered the AmComp meeting in NYC, with one lamenting the lack of concern about medical costs among work comp execs and another summarizing a talk by industry veteran John Burton.
Before I got all wrapped up in workers comp, i handicapped the health reform odds, saying “If the Baucus bill comes out of committee with unified Democratic support, that tells a lot. And if Snowe signs on, that’s even more telling…The Democrats are almost all-in on health reform; at the end it will come down to some Dems deciding if they’re better off holding their nose and voting in favor or handing the victory to the GOP.”

So far, looks like those Dems are indeed holding their collective nose.
This was preceded by a confession – I’m one of those nerds that actually reads Health Affairs – the latest issue has a great piece on the primacy of price in health care inflation. I don’t necessarily agree, but the authors make a compelling case.
It appears that the problem started just before the end of September; readers can always check the main page, sort by category, or type in key words to find specific posts.
Thanks for the forbearance, and here’s hoping the gremlins are back in wherever gremlins live..

Oct
13

The AHIP study – more right than wrong.

Posted by Joe Paduda on Tuesday, October 13th, 2009 | Comments

The health plans’ lobbying group is out with a new analysis of the Baucus bill, claiming it will dramatically increase costs.
It’s tempting to dismiss this as another industry-biased report produced by a firm bought-and-paid-for by the same industry the report helps. And while the characterization is true, there is some truth to PWC’s analysis.
The PWC report (pdf) claims health insurance costs will increase more if the Baucus bill is passed than if nothing happens – but according to PricewaterhouseCoopers, this claim is based on a review of only four components of the bill.
The components are

  • excise tax on high-cost or ‘cadillac’ plans
  • cuts in Medicare reimbursement that would drive up cost shifting
  • taxes on health industry firms that PwC says would be passed on to consumers
  • Insurance market reforms without an enforceable universal mandate

.
Sure, the PwC report misses a lot – and much of what it misses is less than favorable to the report’s funders – health insurance companies. But the central point is indeed accurate; without a tough, enforceable universal mandate, you can’t force insurers to take all comers without charging more for higher risks or excluding them altogether.
This has been proven in Massachusetts. Health plans have to take all applicants, but there is no real financial penalty for individuals who don’t sign up. Sure, there’s a fine for those who don’t have coverage (but can afford it), but it is so small as to be negligible. Not surprisingly, health plans have seen an explosion in the number of individuals who sign up for coverage, get their problems fixed, then drop out. One health plan has reported that their costs for these ‘drop-in’ insureds are six times higher than their premiums.
And now Senator Baucus et al want to foist this off on the rest of the country?
As much as I want national health reform, the Baucus bill – as currently conceived – makes no sense.

Oct
7

The problem with the Texas work comp managed care report

Posted by Joe Paduda on Wednesday, October 7th, 2009 | Comments

I’m hoping this is the last post on the state of Texas’ report on work comp networks.
Believe me.
As I’ve noted in two posts earlier this week my concerns with various aspects of the REG report, concerns which I – and other observers – believe are real and relevant.
There’s a larger concern and that is the effect of the report on decision makers at work comp payers. Several managed care execs I’ve spoken to since the report came out last week said they are scrambling to explain the results of their HCN and why it
makes sense to continue the program despite the negative implications of the report. Their bosses and some peers are asking why they are spending so much in the way of time and energy and legal resources on a program that doesn’t deliver any better results than their ‘old’ managed care program.
The primary reason HCNs may not deliver better results (although one shouldn’t make that assumption based on the REG report) is simple – the HCNs aren’t much different that those ‘old’ managed care programs. The underlying network, bill review, utilization review and ancillary programs employed in the HCN are all but indistinguishable from the non-HCN managed care programs.
Sure there are differences in denial rates and appeals processes and reporting requirements – but the basic nuts and bolts are identical.
What does this mean for you?
That may be – MAY BE – one reason it’s hard to see how HCNs are more effective than non-HCN managed care programs.

Oct
6

UPDATE – the Texas report on work comp networks

Posted by Joe Paduda on Tuesday, October 6th, 2009 | Comments

New news on yesterday’s post – turns out that ‘costs’ are not based on billed charges, but on payments. Unfortunately, the report doesn’t make that clear – nowhere in the report does it define ‘costs’ as payments, it does state costs are based on billing data, and in the data sources section it explicitly links cost to billing data.
Here’s where the confusion lies.
On page 2, the report reads “Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. Duplicate medical bills and bills that were denied due to extent of injury or compensability issues as well as other outlier medical bills were excluded from the analyses. Cost and utilization measures were examined separately by type of medical service…”
Note there is no differentiation between utilization and cost, and no specific definition of ‘cost’. So, perhaps that’s a bit misleading.
But wait, there is another statement that certainly seems to describe how ‘cost’ figures were derived:
In the data sources section (also on page 2), the report reads “Medical cost, utilization of care, and administrative access to care measures were calculated using the Division of Workers Compensation’s medical billing data [emphasis added]. Seemed pretty straightforward to me.
Unfortunately I wasn’t the only one confused; two large payer clients interpreted the statement the same way I did.
My post generated a good bit of excitement at the REG and among stakeholders. Bill Kidd reported on it at WorkCompCentral, where DC Campbell, director of the department’s Workers’ Compensation Research and Evaluation Group, was quoted as saying “”Paduda expresses concern about the results since Coventry covers ‘much’ of the non-network claim population. It’s not clear from his statements [emphasis added] whether this refers to Coventry’s market share in terms of utilization review activities, bill review activities, contractual discounts outside of certified networks, etc.”
I’m not sure where the confusion lies, as I clearly referred to ‘networks’ in the post yesterday…

For example, several of the networks are based on the Coventry work comp network – Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative “newness” of the claims analyzed – the claims haven’t developed sufficiently to draw ‘conclusive conclusions’.

The net is the report uses payments for all cost calculations. Thanks to Amy Lee and DC Campbell for setting me straight. OK, now that that’s behind us, I’m still not sure what to make of the report’s findings. According to the report, claimant demographics were accounted for, I assume to enable fair comparisons among and between the various networks. Yet the report didn’t note that three of the networks are provided by one company – Coventry, which also administers a network that is likely underpinning much of the ‘non-network’ category.
Consider that Liberty’s average medical costs were lower than non-networks in 4 categories, and Coventry’s in 3, yet the Coventry network was utilized by all three entities. And that’s just one of the findings. Claims in the Coventry network had higher overall medical costs than non-network claims, as well as higher hospital inpatient and outpatient costs. Both Coventry and Travelers network claims had higher inpatient utilization than non-network claims, but Liberty’s was lower. Coventry outperformed non-networks in release to return to work, but Liberty and Travelers underperformed non-networks.
So, what does this mean for you?
It sure doesn’t look like one can draw any meaningful conclusions from the report’s findings.
Kudos to the Texas REG and their supporters for funding and conducting the research. More time for the data to mature, more clarity on definitions, more disclosure about the similarities among the networks being studied, and more discussion about possible reasons for the disparate results from all-but-identical networks and their work will be much more useful.

Oct
5

Texas’ report on workers comp networks – fatally flawed?

Posted by Joe Paduda on Monday, October 5th, 2009 | Comments

Texas’ Department of Insurance has been analyzing the performance of workers comp networks for the last couple of years, and the latest report has some pretty interesting results.
Unfortunately, those results look to be based on a faulty analysis, making the whole report questionable.
Before we delve into the results, here’s the problem. On page 2, it reads “Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. [emphasis added].” Thanks to a comp insurer’s managed care exec for the tip – should have caught this myself, but really, who would have thought they’d count ‘charges’ as ‘costs’?
There is little to no correlation between medical charges and actual costs – defined as amount paid. Providers, especially facilities, charge much more than they’re reimbursed. Reimbursement is affected by fee schedules, medical management determinations, network discount arrangements, prompt pay deals, and bundling/unbundling edits, among other factors.
The findings from the report are also somewhat misleading. For example, several of the networks are based on the Coventry work comp network – Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative “newness” of the claims analyzed – the claims haven’t developed sufficiently to draw ‘conclusive conclusions’.
I contacted Coventry in an effort to get their take on the report – which at first blush was pretty damning. I was quite surprised to get a call back from one of their execs – as loyal readers know I’ve been trying – till now unsuccessfully – to get Coventry to talk with me for as long as I’ve been writing this blog – which is now more than five years. This is the first of what I hope will be an ongoing dialogue.
We’ll see.
Coventry’s take on Texas’ report was rather limited as it was just released. They were pleased with the return to work results; but noted their medical resutls (which, according to the report, were not good) may have been tainted by seven outlier cases. Perhaps, but the other networks and the non-network results may suffer from the same issue.
More compelling was the Coventry exec’s observation that much of the “Non network” business actually is handled by the Coventry network. That adds a bit of wonder to the report’s first finding: “Overall, networks had higher average medical costs than non-networks.”
I asked the Coventry exec to get back to me asap with a more complete analysis, but I’ll suggest he save the dime. I may be missing something here (and if I am I’m sure you’ll tell me), but I’m hard-pressed to see how anyone can draw any meaningful conclusions from an analysis based on medical charges.
Lest my comments be construed as damning Texas for their efforts – absolutely not. I applaud the Texas REG for the efforts. I don’t know what limitations they have in terms of resources, access to data, or access to payment data. I do know that they are one of the few states making a serious effort at analyzing cost drivers and the impact of managed care programs. I’ve done enough data analysis to understand you’ve got to use what you can, even if it is far from perfect. Here’s hoping the REG continues to improve their analysis.
What does this mean for you?
An object lesson in not jumping to conclusions, and why abstracts and executive summaries can be misleading.

Sep
30

Workers comp results are going to get worse. And medical will drive the decline.

Posted by Joe Paduda on Wednesday, September 30th, 2009 | Comments

The property and casualty industry will get worse before it gets better, led by the work comp business. That’s one of the key takeaways from a session at AmComp yesterday.
The session featured a panel of CEOs from workers comp insurers asked to tell the audience at the AmComp NY meeting what keeps them up at night. None of them mentioned medical costs, although in a response to a question (from your reporter) they all said it was a big problem.
How are they addressing it? One said they just factor 6-9% of medical trend into their rates, another said it was up to the health insurers and the third said you had to have good claims and medical cost control.
With all due respect, I’d suggest that medical is a very big problem in comp, that very few insurers or TPAs have anything approaching effective medical management programs, and there are any number of programs, tools, processes, vendors, and methods that can have a dramatic impact on medical expense.

Which will impact claIms costs which in turn affects losses and reserves and premiums and profits.
I have no knowledge of these insurers’ managed care/claims programs; t is entirely possible that one – or perhaps even all – of these insurers have strong, outcomes-oriented medical management programs built around small, workers-comp focused physicians, specialty programs for PT, facility, drug, and imaging, and evidence-based clinical guidelines. If they do, they’re well ahead of the market.
As one who started out working in HMO consulting decades ago, the CEOs’ statements were reminiscent of what we heard from executives at big indemnity insurers – medical costs were medical costs, they had cost containment programs. They dominated the health insurance industry back in the mid-eighties.
They are all out of business, with one exception. And that exception – Aetna – is the only one that successfully transformed itself into a health plan company.
Workers comp is becoming has become a medical management business. Some smart insurer will figure this out, and when they do, they will win.
And win big.

Sep
29

John Burton on the history of Federal oversight of workers comp

Posted by Joe Paduda on Tuesday, September 29th, 2009 | Comments

John Burton is one of the true experts in workers comp. He has a long record of invilvemt in the comp system including participation on the Federal comp review
conducted back in the early nineteen-seventies.
Dr Burton spoke at today’s AmComp meeting in New York, giving details about that experience and sharing data about the decline in wage replacement adequacy over the last twenty-five years. He noted that standards of eligibility for comp claims have been steadily tightened over that time; reported that his data indicates well over ninety percent of medical costs for occupational diseases are missed by workers comp; and lamented the end of the second injury fund system.
With tongue firmly in cheek, Dr Burton said the myriad failures of states’ workers comp systems can only be attributed to a conspiracy on the part of mysterious forces with the goal of forcing Federal regulation of workers comp. There is no other explanation, except, Burton noted, inattention on the part of legislators and regulators.
In response to a question Burton lamented the lack of research done by states, many of which don’t have any formal research function.
This was written ony iPhone. Apologies for typos.

Sep
28

Handicapping health reform

Posted by Joe Paduda on Monday, September 28th, 2009 | Comments

The odds that comprehensive health reform will pass are up – a bit. Word from Washington is the Democrats in the Senate Finance Committee are ‘coalescing’ around Baucus’ original bill’s provisions. While there’s been much discussion, few of the 564 amendments have passed.
While the public option will be offered up as an amendment, odds are it won’t become part of the Finance Committee’s bill – but may be added when that bill is combined with the Senate HELP Committee’s version later on.
The Democratic strategy appears to be focused on maintaining unity, while peeling away the one Republican Senator (Snowe, ME) that has voiced some support for Baucus’ bill. The White House is working every angle, including schmoozing Snowe’s fellow Maine Republican Senator, Susan Collins. Whether they can keep the Dems together is anyone’s guess, but with White House Chief of Staff Rahm Emanuel focused on this issue, it would be difficult indeed for the Democrat who wavers.
Meanwhile, the for-the-moment-still-unified GOP is facing dissension among the ranks of traditional supporters. Big business, and small business as well, appear to be rallying behind the Baucus bill, due in large part to the lack of an employer mandate. What’s pushing the usually-reliable GOP base to back reform is a recognition that health care costs are out of control – one statistic released by the Business Roundtable has focused attention on the issue: “the cost to insure a single employee, including the person’s own out-of-pocket expenses, would jump to more than $28,000 a year by 2019, from around $11,000 a year now.”
Even the US Chamber of Commerce said nice things about Baucus’ effort, notably that the bill: “will actually…get health-care costs under control.”
“The reality with the business community is that we want reform, while some Republicans want to stop this train and start over,” said Bruce Josten, the chamber’s chief lobbyist. “That is just not going to happen.” [emphasis added] (WSJ)
THIS IS BIG NEWS.
The traditionally fractious Dems are banding together, while a critical GOP constituency is breaking with the Party.
What to watch for
If the Baucus bill comes out of committee with unifed Democratic support, that tells a lot. And if Snowe signs on, that’s even more telling.
But remember, nothing gets passed without sixty Senators voting ‘aye’. And right now there are exactly 60 Democrats in the Senate. The two Senators from Maine are possible supporters, but there may be defections among the Dems.
What’s going to be the most important single factor? Likely the political calculation on the part of the Democrats, many who clearly remember the disastrous fallout after the failure of the Clinton plan, when the GOP won control of both Houses for the first time in forty years. The Democrats are almost all-in on health reform; at the end it will come down to some Dems deciding if they’re better off holding their nose and voting in favor or handing the victory to the GOP.

Sep
25

The role of price in health care cost inflation

Posted by Joe Paduda on Friday, September 25th, 2009 | Comments

I’ve been accused of being one of the few that actually reads the bimonthly journal Health Affairs. Well, guilty as charged, although the pub has a lot more than a ‘few’ devotees. What it does particularly well is challenge core beliefs.
The latest edition focuses on bending the cost curve – a phrase likely to inspire William Safire to dissect it in detail in one of his discourses on language. The idea is to find ways to reduce the rate of growth in health care costs, and this edition has plenty of ideas.
One of the most thought provoking articles contends that price controls are “central to curbing cost growth”. I’m going to comment on the article next week in detail, but here are a couple of points made by the authors.

  • “out of pocket spending in the United States is roughly twice the OECD median. If some Americans have “Cadillac coverage,” than most workers in Germany or France must have “Mercedes coverage” – and they would likely view many American insurance policies as “Yugo coverage.”
  • patients in OECD countries average more hospitaldays, more physician visits, and greater consumption of prescription drugs than American patients do. Higher US spending is not primarily explained by greater volume of services.
  • analyzing data from Massachusetts, David Cutler and colleagues found<, for example, that virtually all of the savings that managed care plans achieved for heart disease treatment, relative to indemnity insurance, came from price reductions./li>

I’ve long believed, and still do, that utilization is a more significant cost driver than price. I’ve seen this time and time again – in data on physician in-office utilization from CMS (up 11% in 2006), in NCCI’s analysis of workers comp prescription drug costs, in analyzing client physical medicine experience, in the correlation between workers comp medical expenses and state fee schedules – or rather lack thereof, and a host of other examples.
What doe this mean for you?
The authors make a compelling case – not just for price as a cost driver, but to always question your assumptions.