Reform – whether it happens this year, in ten years, in one big change or a series of smaller steps – is going to have a big impact on workers comp.
That’s the takeaway from one of the sessions yesterday morning at IAIABC’s annual conference.
Greg Krohm, Director of IAIABC, Dr. Dan Juniga, Medical Director of the Minnesota State Fund, Todd Brown, head of compliance for Coventry workers comp, and I were on a panel discussing health reform, universal coverage, and the impact of same on comp.
First, kudos to the other panelists. Dr Juniga gave an excellent overview of the history and impact of Medicare’s Sustainable Growth Rate – the mechanism that in theory determines Medicare physician reimbursement. Dan pointed out that the failure of SGR to be implemented over the last six years means CMS will now have to cut physician reimbursement by 21.5% on January 1, 2010. Of course, this isn’t going to happen – but the failure of SGR to work will result in Congress eliminating the SGR or otherwise significantly changing physician reimbursement.
I noted that essentially every state that has physician fee schedules bases those fee schedules off Medicare – but while some are directly connected, most don’t simply adopt CMS’ changes but go through a process to modify them. Some states haven’t revised their schedules in several years.
That said, when Medicare changes reimbursement, it will affect comp over time.
The most likely scenario is an increase in reimbursement for cognitive services including office visits, a cut in pay for procedures including surgery and a big drop in imaging.
Greg Krohm provided a synopsis of the current Baucus bill, with the trenchant observation that it assumes the 21.5 pct cut will be implemented. In fact that’s part of the ‘cost savings’ the bill is supposed to deliver.
Todd Brown, one of the most knowledgable people I’ve met when it comes to state regulation of comp, gave a lot more detail on state implementation of fee schedule changes; it’s lengthy, complex, and varies significantly from state to state.
I’d be remiss if I didn’t note the audience – for all the presentations – was engaged, curious, involved and very knowledgeable. Regulators are sometimes dismissed as unaware or unconcerned or worse. That certainly doesn’t apply to the folks at this meeting. The level if engagement was significantly higher than I’ve witnesses at most other conferences, a credit to both the organizers and attendees.

The morning panel led off with a talk by WCRI President Rick Victor on the factors impacting workers comp. His view is the economic downturn will have lasting, and deep, effects on the economy. There will be less consumer demand; changes in housing markets as people seek cheaper places to live; and older Americans with drastically reduced retirement portfolios will work for more years in jobs that are likely more physically demanding.
Can’t disagree with any of those points, and his take on the implications for comp.
Older folks take longer to heal, although they (we) tend to have fewer injuries as well. A dropoff in consumer demand may well mean less investment in retail, shopping malls, and logistics – fewer jobs in higher-injury classes. And reductions in the value of housing stock (more sellers in wealthier/northern/older areas than buyers) will in turn reduce the tax base, likely leading to cutbacks in municipal and governmental services.
Some factors will push comp costs down, others are more likely to push costs up. But Rick’s right, the economic downturn’s impact will be felt for at least a decade, and perhaps even longer.
He also mentioned health reform, and specifically the potential issues if work comp medical is included. Fortunately, there is a less-than-zero chance that work comp medical will be included in a final bill, and (as I’ve been lamenting for weeks) I don’t see reform happening this time around.
I know, one of the 564 amendments pending in the Senate is a move to expand medical coverage to cover all care for occupational injuries and illness, and care for auto accidents.
The

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Today at the IAIABC annual meeting

Posted by Joe Paduda on Wednesday, September 23rd, 2009 | Comments

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From comments made by management at Coventry’s presentation at Morgan Stanley investor day last week, the company’s efforts to refocus on core businesses appears to be working.
Of he two key takeaways one was wildly obvious while the other much less so. The company’s tight, almost monomaniacal focus on medical loss ratio (MLR) was quite noticeable; CFO Shawn Guertin’s comments about Coventry’s investment in clinical management was not, yet perhaps no less important.
First, the results for the first half of 2009. It went well. Commercial MLR looks to be coming in about 50 basis points better than initially projected, Medicare growth has been very good and MLR looking OK. And no surprise, Commercial membership and specifically risk membership (fully insured, mostly small group business) is ‘under pressure’.
Projecting forward, Guertin said for the second half of the year, commercial MLR is top of mind, with an expectation of some increase in COBRA takeup due to the Federal subsidy in ARRA, swine flu and deductible seasonality (as the year ends, more members have hit their deductible so medical costs payable by insurers increase). They are most concerned about COBRA’s impact on MLR, and have pushed projected MLR up 50 basis points due to the increased uptake.
Coventry ‘grew tremendously this year in Medicare’, and that is good, but they are not yet entirely comfortable with the growth and are ‘still watching and tracking pretty closely’ to try to identify potential cost spikes.
What’s going to happen with goig forward? Coventry is seeking to strike a balance between membership loss and price. Still focused on managing SGA broadly under CEO/Chairman Allen Wise’ direction.
One question asked if there is anything they are looking at exiting; Guertin said no, they are pretty much completed with the process of cutting non-core businesses. Don’t look for them to sell businesses, including the Workers Comp business. In fact Guertin highlighted the WC business as different piece that has ‘performed very well this year and continues to perform well’ and will continue to grow going forward.
Regarding reform, if reform includes community rating and universal mandate that will remove what Guertin believes is a competitive advantage for Coventry.
They’ve done a lot to improve their underwriting skill, he sees this as a loss of an advantage they had but if these changes occur they will be left with a level playing field, These days the company is doing a lot of thinking about the cost proposition of the product and value, and how best to compete in a post-reform market. In what was a bit of a rambling comment on Coventry’s strategy, Guertin said they are asking ‘Should we tailor a high performance network; we can’t change plan design but truly need to manage cost, we are investing in clinical programs and network design will be key to that.’ (not verbatim but pretty close)
Guertin got back on track responding to a question about reform scenarios, saying words to the effect that their ‘basis for competition has always been about cost and thinks that may help them as it is the ‘core of what they are’. They would spend their money on clinical and network management as opposed to brand or marketing due to the overwhelming marketing advantage of blues. Coventry wants to be positioned as a high quality but really cost effective player; think of Coventry as the Southwest Airlines in an insurance exchange, and they are trying to drive company in that direction.
What does this mean?
Coventry has never been about medical management. They are a pricing arbitrager and risk selector, priding themselves on managing the delta between insurance premiums and medical costs. They have not ever claimed to be expert in managing the medical costs themselves.
If reform comes, they will need to get really good at managing medical really fast. Coventry’s competitors aren’t exactly fully prepared for the new world either, but many of the Blues, along with Aetna, are a lot further along than Coventry. They also have market share (which Coventry doesn’t), solid brand images (which Coventry doesn’t), and in some instances substantially better relationships with providers.
I still don’t think we’ll get comprehensive reform this time around, and if we don’t Coventry may think they’ve dodged a bullet. But sooner or later reform will happen, and those healthplans that aren’t very good at managing medical are going to be toast.

and a more complete and diverse analysis won’t be found. Read this week’s edition to understand what worked, what didn’t, and what the future will hold for reform

The Baucus bill is out, and despite multiple concessions made in an effort to garner some GOP support, not a single Republican Senator has voiced even equivocal support. While Sens Snowe Grassley and Enzi allow that they’re still negotiating, the list of objections likely precludes endorsement by all three. The only potential R supporter at thus juncture is Olympia Snowe who is said to be waiting for CBO’s scoring (assessment of the bill’s cost).
Without any GOP support some Dems will likely wonder why the bill contains provisions that are not viewed favorably by many of their supporters. The question is a fair one. If the Baucus bill isn’t enough to capture a few GOP votes, anything more will be so unacceptable to liberal Democrats that they may withhold their support from any bill with additional concessions to Grassley et al.
We may well see a game of brinksmanship begin soon as the more liberal Dems seek to strip out the co-op, add a public option and universal mandate along with higher subsidies for lower income folks.
We’re about to find out just how serious the Democrats are about health reform, and just how much the GOP wants to block it.

Today’s Washington Post reports that Sens. Enzi and Grassley have asked Sen Baucua to consider a lengthy list of changes to his health reform bill, changes that include elimination of state funding for the expansion of Medicaid, reduction or elimination of the penalty for failure to obtain health insurance, and myriad other modifications.
As I noted before the President’s speech last week, these two Senators are the key to health reform’s passage. With the revelation that there’s much they don’t like about the Baucua effort, it is growing increasingly clear that reform’s chances are grim indeed. Recall that the Baucua bill doesn’t have a public option, specifically prohibits the use of tax dollars to fund care for undocumented workers, and is not exactly abortion-friendly either. In sum, this is NOT a liberal bill.
Yet the gang of two remain unsupportive despite Baucus’ efforts to present them with a bill that avoids most of the really contentious issues.
The net is this. If two of the more moderate GOP Senators are this unhappy with the Baucus bill, the Dem choices are stark. Either compromise so much that the final bill becomes all but meaningless or pick the reconciliation option.
Come to think of it, there is a third choice; use the reconciliation process to ram thru narrow, specific bills targeted to drastically cut reimbursement for pharma, hospitals and , medical devices; slash Medicare Advantage funding; and revamp Medicare’s provider reimbursement to end fee for service and move to episode of care over time.
That may be the best option. The threat alone may force stakeholders to get serious.
And it sure would be fun to watch!