ACA Deathwatch; What to watch for when Congress convenes next week

News reports indicate Speaker Ryan will be moving quickly to pass ACA repeal legislation when Congress reconvenes next week.

While most elected Republicans are in agreement that ACA should be “repealed”, that’s about where the agreement ends.

And therein lies the problem.  Here’s a brief summary of where legislators stand.

First, the kill-it-dead camp.

Some budget hawks want a total repeal and defunding, much of which can be accomplished via reconciliation.  This prevents a possible Democratic filibuster in the Senate.

There are about 40 Representatives in the so-called Freedom Caucus that hew to this line with possibly a couple dozen more votes to repeal-and-be-done-with-it. Make no mistake, emboldened by the election results these people are in no mood to compromise. As these are the same people who refused to fund the government we should fully expect them to push very hard for total repeal and defunding.

Implications: do NOT assume these folks will compromise.  They will fight tooth-and-nail to kill ACA and damn the consequences.

Second, the fiscally prudent

Related to this group are the fiscally-focused.  These Senators and Congresspeople are quite concerned that a repeal will also do away with about a trillion dollars in revenue and taxes over the next decade which will result in:

  • budget shortfalls
  • bankruptcy of the Medicare Hospital Trust Fund
  • elimination of premium support for about 75% of those buying insurance via the Exchanges

Add to that the reductions in Medicare and Medicaid reimbursement embedded in ACA, and you have another $879 million in additional spending if ACA is repealed.

Implication these folks are going to be cautious, and they will likely end up in the “repeal and replace” camp.

Repeal and replace camp

There are two different groups here – one calling for a repeal then construction of a replacement over time, and one that wants both bills passed simultaneously.

In either case the far-righters are going to come up against more pragmatic Representatives and Senators, notably Lamar Alexander, Chair of the Health Education Labor and Pensions Committee, the Senate Committee that will have significant influence on any legislation going thru that chamber. Alexander’s been quoted saying a GOP bill must “do no harm.”

Alexander and his allies are pushing hard for a much more measured approach that couples repeal with a replacement bill, thereby giving insurers and other stakeholders some confidence and predictability.  Essentially their approach leaves much of today’s ACA in place while sunsetting the bill in 3 or perhaps as many as 4 years.

Alexander, Olympia Snowe et al are of the mind that this gives them enough time to work thru the calculations, political and financial, necessary to replace ACA without blowing up the insurance and healthcare industries in the process.  Among the provisions that have been mentioned favorably by this group are:

  • guaranteeing coverage for pre-ex conditions if individuals maintain insurance coverage
  • maintaining some form of government tax subsidies to help different groups of Americans cover their premium costs and
  • funding for expanded Medicaid coverage for low-income adults and children.

Notably, Alexander et al’s position has been challenged by House Majority Leader Kevin McCarthy, who wants to repeal THEN replace.  McCarthy’s colleague, Speaker Ryan has also outlined a replacement plan that keeps many of the popular provisions of ACA. Notice the word “outlined”; there is NO replacement legislation that is ready to be introduced anytime soon.

Implication – the House and Senate leadership have different views, and the House is going to be pretty internally-conflicted. This is a LONG way from being resolved.

Back to the good old days camp

Finally, HHS Secretary designate Tom Price has his own ideas, which include repealing cuts to Medicare and ending much of the financial and practice controls and oversight put in place by ACA.  Price’s bill, while it has not been scored by CBO, will almost certainly result in higher costs.

Implication – I don’t see Price’s proposal going very far.

The wild card – Senate Democrats.

There are 48 Democrats in the Senate, and some will have to be co-opted to get a non-reconciliation repeal-and-replace bill thru.  Leader Chuck Schumer is pragmatic, a bunch of Dems are up for re-election in two years and will likely work hard to keep key provisions in any new bill.  However, there are many of his fellow Democrats who are in no mood to compromise.  Hell, the take-no-prisoners approach worked for McConnell…

And this means…what?

Notably, NONE of the GOP bills presently under consideration will address the fundamental, underlying issue – cost.  US health care costs average almost $10,000 per person. In fact the Alexander-Snowe approach and Price’s bill would increase health spending. 

Notably, there is another option.  Republicans could come up with whatever changes they want, and not bother to fund them or do anything about the increased deficit.  While that may seem heretical, one must remember that a Republican House, Senate, and President gave us Medicare Part D, a totally unfunded benefit that the Medicare Actuary calculates has added $16 trillion to the federal deficit.

Note – Paul Ryan was one of the “Yes” votes on that bill.



For the GOP, the problem with repealing ACA is not practical, legislative, or financial.

It’s psychological.

Humans are hard-wired to hate losing stuff, a principle known as loss aversion. We humans strongly prefer avoiding losses to acquiring gains: We get much more upset if we lose a five dollar bill than happy if we find $5.  

With over 20 million more Americans insured now due to ACA and record enrollment going on now, there are millions of voters who will be enormously upset if they lose their health insurance.

The five states with the most people enrolling for coverage on through Monday were ones Trump won: Florida – 1.3 million plan selections, Texas (776,000), North Carolina (369,000), Georgia (352,000) and Pennsylvania (291,000). (thanks to NYT).

The GOP has boxed itself in, and has an impossible task ahead – how to

Not surprisingly, many Trump backers who gained health insurance under ACA are now scared he’s going to deliver on his promise to kill ACA. And not nervous scared – really, really scared.

This adds a whole new dimension to loss aversion – this isn’t a five dollar bill, this is a new liver, diabetes medications, knee replacement surgery.

There’s no way any ACA “replacement” that doesn’t require coverage of pre-existing conditions, have significant subsidies for the poor and near-poor, and mandate insurance is going to prevent these people from losing coverage. Oh, and do that while reducing medical costs and not increasing the national debt.

That’s why the GOP isn’t going to repeal ACA.

For a very thorough discussion of just how many – and who – stand to lose coverage if the GOP does repeal ACA, there’s no better source than Charles Gaba.


ACA Deathwatch: Hospitals, bankruptcy, and chicken-killing dogs

For those wondering why the GOP appears to be walking back its promise to “rip out Obamacare root and branch”, here’s why this is a whole lot harder than one might think.

And why the political realities make this picture far too real for the incoming Congress.


The GOP has long prided itself as the party of fiscal responsibility; Speaker Ryan and Majority Leader McConnell have assailed ACA as unaffordable and a budget-breaker. However, among the myriad issues inherent in healthcare reform is this – repealing ACA would bankrupt Medicare’s hospital insurance fund next year.

(It would also alienate many who voted for Trump...but that’s another story.)

When ACA was passed, there were financial trade-offs put in place to address winners and loses in an attempt to make the law as budget neutral as possible.

Insurance companies, drug companies, device manufacturers, and hospitals paid higher taxes or got lower reimbursement because they were going to get a whole lot more business as millions more people got insurance. Specifically, hospitals’ Medicare reimbursement has been changed – in part to eliminate payment for medical mistakes and re-admissions, and in part by altering reimbursement mechanisms and formulas.

ACA also included a 0.9 percent payroll tax on the wealthy individuals earning more than $200k or couples making more than $250k.  This raised $63 billion, which went to fund Medicare’s Hospital Trust Fund.

The combination of lower total reimbursement and more revenue extended Medicare’s solvency by 11 years. Without ACA, the Trust Fund is bankrupt next year.

If the GOP repeals the ACA or eliminates the 0.9 percent tax on the very wealthy, Medicare Part A is technically bankrupt.

The incoming President, Congress, and HHS Secretary are facing the very same tradeoffs and complexities their predecessors faced in 2010 – health care is horrendously complex and inter-related.  There are no simple, easy answers.

What does the GOP do?

From here, it looks like they have a couple options.

  1. Repeal it, pass their own health care reform legislation that makes major changes, and claim success.  
    As noted above, and as we’ve seen over the last five years, changing the US healthcare system is brutally hard, there are way more unintended consequences than anyone could predict, and there are no simple answers. There is just no way they can cobble together legislation anytime soon that will address ACA’s issues and not result in a gigantic clustermess.
  2. Repeal ACA in two or three years, with the promise they’ll come up with a replacement in a year or two.
    Without a credible replacement, insurers and healthcare providers are going to panic. Expect insurers to exit the individual and small group health insurance markets in droves. Democrats will use Medicare’s pending insolvency to bludgeon Republicans in the mid-term elections.
  3. Rebrand ACA as TrumpCare, make a couple tweaks around the edges, declare victory, and go home.
    This gets my vote as most likely, primarily for the reasons noted above. Now that the GOP owns health reform and Medicare solvency, Democrats are going to tie the issue around their necks like a dead chicken.

For a more detailed discussion of the issue, here’s a good synopsis from Politico.

Later – Hospitals and Medicaid – it’s pretty scary. 

What does this mean for you?

Don’t be lazy. Healthcare reform is hugely complicated, and for those of us – that means you – invested in the industry, what’s about to happen is far too important for you to ignore it or pay it little heed.


Whither work comp in 2017 – Part Two

Yesterday’s post prognosticated about macro-drivers of workers comp; employment, investment returns, medical costs.

Today’s focus is on what those macro-drivers mean for discrete parts of the work comp world – so here are the next five predictions.

6.  Winners will focus on execution.
Execution – customer service and end-user experience, defining and delivering the service customers want in the way/when/how they want it; accuracy in reporting/billing/communicating; integration between vendors and customers – will continue to determine which work comp service providers win and who they beat. Notice I lead with customer service – for without focusing on the customer and their experience with your company, the rest doesn’t matter.

7. Telemedicine is coming fast
What it will look like; who will win (see above); how it will impact patient care and outcomes; what types of medical services are most likely/suitable for telemedicine are all going to be clearer in twelve months. What we do know now is there is a lot of experimentation going on today, much of it driven by smaller companies. Among the models, there’s work comp specific company CHC Telehealth, a partnership between clinic giant Concentra and American Well, and giant TPA Sedgwick is deep into developing a telemedicine initiative.

Several other entities are quietly working on different approaches.

8.  Mitchell will continue to add work comp services businesses via acquisition.
The tech company is working hard to expand beyond its traditional auto insurance business, with acquisitions in pharmacy benefit management and specialty bill review in 2016. Expect Mitchell to keep looking for “tuck-in” businesses in PBM and cost management in work comp and other P&C lines.

9. Drug cost decreases will flatten out somewhat, while reductions in opioid spend will continue to increase.
Regulators, payers and PBMs are slowly getting their arms around the issue; kudos to work comp for being in the forefront of this issue.  The group and public sector health insurers will learn a lot from you.

10. More value-based payment pilots will hit work comp.
That’s a really easy prediction, so I’ll quantify it – there will be more than five new pilots or program seeking to deliver care via bundled payments or similar mechanisms that will start in 2017.

11. Bonus pick – more consolidation in case management
As frequency and severity continue to slide, field case management businesses are going to have to find new revenues from new services they can offer to current clients/cases and get more revenue from current cases.

That’s a really heavy lift. A much easier way to grow revenue is to buy other CM companies, cut expenses…you know the drill.

There you have it – Paduda once again standing out on a limb.


Whither Workers’ comp in 2017?

It’s time to polish up the HSA crystal ball and prognosticate on what the next year will bring for workers’ comp.

Today we’ll keep it at a high level, examining 5 key drivers that will affect insurers, employers, regulators.

Tomorrow we’ll predict how those high level drivers will affect different stakeholders.

Here goes…

  1. Premiums will rise as employment and wages continue to grow.
    GDP is growing strongly, (predictions are for growth above 3.2% for the last half of this year) employment and wages are up, consumer spending and housing prices are increasing. As long as as the new administration doesn’t start a trade war, things are looking good for employment and payroll, which are key drivers of work comp premiums.
    Note – this is NOT to say work comp insurance rates will rise, but rather there will be more payroll and more people working, so the impact of flat or lower rates will be overcome by higher employment.
  2. Medical costs will remain flat or close to it.
    The first “official” indicator will come when NCCI Chief Actuary and all-around really smart person Kathy Antonello reports preliminary data on WC medical inflation at the Annual Issues Symposium in May. My bet is we’ll see inflation in the very low single digits – or even less.
  3. Frequency will continue to decline.
    Because it always does.
  4. Insurers will double down on efforts to reduce administrative expenses.
    With frequency down, investment returns decreasing, and medical costs flat, premium rates are headed down as well. Many work comp insurers seem to think the only thing they can really control is admin expense.
    So, we will see increased efforts to cut Unallocated Loss Adjustment Expense – cost categories such as general office expense, staffing, IT. And, payers will look to assign admin expense to individual claims whenever and wherever they can (more on this in a later post).
    That’s not to say they won’t be working on reducing Allocated Loss Adjustment expense (costs that are allocated, or assigned, to specific claims).  They will.
  5. More payers will move their claims adjusters to home offices.
    Okay, one not-macro-level prediction.
    A good friend and colleague reminded me of this trend; I’ve been seeing it for some time, but didn’t realize how widespread the trend is until he made that observation. There are many reasons for this trend; lower administrative expense, easier to hire and retain good staff, dramatic improvements in technology and communications,

What does this mean for you?

Methinks this is the calm before the storm. The new administration may well be highly disruptive, however we won’t see any real impact until 2018 at the earliest.

Fortune favors the prepared. (quoting Dr Louis Pasteur)


2016 predictions – how’d I do?

Way back in February I finally got around to making my annual “here’s how I make a fool of myself publicly predicting what I think will happen this year” post.

It’s that time of year – when I have to own up to reality.  So, here’s how I did.

  1. The comp market will soften pretty much everywhere*.
    Rate this a Yes, altho it was a gimme.
  2. *Except in California, where rates are up – and will stay there.
    Nope.  Effective rates are down this year – welcome news indeed.
  3. Liberty Mutual will continue to de-emphasize workers’ comp.
    Looks that way.  Mother Liberty dropped to number 7 on the list of largest workers’ comp insurers in 2015. The move away from WC and towards personal lines has helped Liberty’s financial status, with rating agencies improving the company’s status.
  4. Private equity’s role in the vendor market will decrease – a lot
    Yup. A couple PE firms have been looking hard but these are relatively new entrants to the space.  While there are a bunch of small (<$2 million in earnings) companies doing well, they aren’t big enough to hit the radar of private equity investors.  Yet.
    And, there’s been so much consolidation that the big companies are too big for any but the largest investment firms.
    And OneCall’s struggles have made PE firms leery of the space.
  5. A half-dozen – or more – states will adopt drug formularies
    Wrong.  This is taking far longer than I anticipated.  While a few have moved forward, many others are moving pretty slowly. Tennessee adopted a formulary, California is working on theirs, while things have stalled in Louisiana, North Carolina, Nebraska, and other states. Arizona implemented their chronic pain guidelines in October, which cover all the meds dealing with that condition.
  6. Opt-Out will not gain much traction
    True.  Yeah, I know a bill was introduced in Florida, but that’s the only new news in opt-out this year besides the demise of the Oklahoma experiment.
  7. We will see a couple/several bundled payment pilots
    Rising Medical has initiated one program in a handful of states, UCLA is working on a bundled treatment plan for opioid addiction, Wisconsin state employees are accessing programs (this started last year). So, this is a Yes – albeit not a loud one.
  8. PBMs and payers will make even more progress reducing the use of opioids
    Yes.  Kudos to all for making significant gains in the fight against overuse of opioids.  This has been especially notable in the reduction of opioid scripts for new claims.  We’ve still a loooooong way to go in addressing legacy claims.
  9. A couple of large, vertically integrated delivery systems will make significant moves into occupational medicine
    While there have been a couple reports of joint ventures and expansions, I haven’t seen evidence of much movement here. So, count this as a No.
  10. There will be big changes at OneCall
    Yes.  New senior management; a reduction in sales staff; automation, offshoring and outsourcing of key functions have kept folks in Jacksonville hopping all year.

The net – 7 out of 10 predictions were correct.

Later, I’ll do my prognostications for 2017 – a year that is shaping up to be increasingly hard to predict.


Jobless construction projects

Yesterday’s post re the Jobless Economy triggered multiple thoughtful responses, including one from a colleague noting construction may be somewhat insulated from automation.

I did some quick research, and here’s what I found.

Briefly, it looks like we will see more and more construction automation using 3D printing in the near future, especially for small projects (think small houses) and components of larger buildings and structures.

One Chinese company built 10 single-family dwellings in a day using 3D printing. More recently, they built a five story apartment building and large villa using a 3D printer that measures 6.6 meters in height, 10 meters in width, and 150 meters in length. This is China, where labor costs are a small fraction of what they are here in the US…

A company in Holland is building a pedestrian bridge using six-axis robots.

In Chicago, a machine built a mini-tower out of gravel and thread.

And here’s a luxury hotel in the Philippines built in large part by 3D printing.

But construction automation is by no means limited to 3D printing.  Drones, automated construction equipment and vehicles,

Here’s a video of drones building tall structures out of bricks.

Komatsu is investing heavily in automated heavy equipment, what some might call “ground-based drones”.

A big player in this business is Skycatch, a U.S.-based company that allows for precise mapping of construction sites and integration with automated equipment.

And here’s your construction project of the future…workers operating computer pads and joysticks, not hefting shovels and hammers.


Here’s a very good detailed discussion of construction automation – required reading for work comp underwriters, construction defect insurers, GL writers.

So, what does this all mean?

6.7 million people were employed in construction jobs in November, 2016. If Congress approves a new infrastructure investment initiative, we can expect to see that go up significantly.

We will also see construction companies dramatically ramp up their investments in construction automation, robotics, drones, and automated vehicles.

What does this mean for you?

As with all automation, we’re going to see:

  • much higher productivity per worker
  • fewer workers
  • much less opportunity for low-skilled workers
  • much more opportunity for high-skilled workers
  • a much safer workplace.


Workers comp and the jobless economy

Service workers are VERY replaceable.

Amazon just opened the first cashier-less grocery store.

2 million trucking-related jobs are likely to disappear within a decade. Consumers’ costs for goods will go down significantly, driven by lower labor, fuel, insurance, and maintenance costs.

What is only just beginning to happen in the service economy is already well underway in manufacturing. Despite all the blather about US manufacturing’s decline, the fact is we remain the second largest manufacturer in the world, not far behind China. Yes, employment has declined dramatically, but productivity has increased by leaps and bounds.

US manufacturing:

  • is over a third of our GDP
  • is valued at over $6 trillion annually in output
  • is larger than the next three countries – Japan, South Korea, German – combined.

Since 1947, we’ve figured out how to make five times as much stuff with 13% fewer workers. 


source –

I bring this to your attention, dear reader, to pose the following questions.

  1. What happens when trucking jobs disappear? Higher work comp claiming rates? Much more difficult re-employment?
  2. What happens when cashier jobs disappear? Same thing?
  3. As automation gets cheaper, takes on more human functions, and extends into more and more areas, wage growth is very likely going to suffer – people don’t compete well with machines. What happens to work comp premiums?

In all the talk about the need to reform workers’ comp, there’s been very little discussion about these existential threats to the industry.

What does this mean for you?

You don’t need to “reform” an industry that won’t exist in a dozen years.




Friday catch-up

Holy bejeezus this has been a crazy week.

Labor Secretary Nominee

First up, the nominee for Labor Secretary is fast food executive and avowed billionaire Adam Puzder. Puzder’s likely to face tough questioning from Democrats for his stance on the minimum wage, automation, mandatory sick leave, and ACA. He’s also been a vocal critic of the overtime rule.

His restaurants paid a $9 million fine re class action lawsuits involving overtime pay in 2004.

For those in the workers’ comp world concerned about a new Commission on work comp, your concerns are gone.

Puzder’s points on automation aren’t crazy – in point of fact there’s a lot of research on the impact of automation on jobs, with one very credible group estimating 47% of jobs will be automated within 25 years.

Drug prices

Adam Fein has an excellent post on drug pricing, diving into the list v actual price.  Adam uses the EpiPen and insulin products as examples.  For those involved in pharma, this is a must read.

Heroin deaths just surpassed deaths by gunshot.  Congratulations, opioid-shilling pharma companies! 



For those looking for more insights into Medicaid, I highly recommend a few articles that provide perspective on post-election changes, hospital payments from Medicaid.

ACA repeal

Billy Wynne has a really thoughtful piece on why ACA will not be repealed.  Certainly made me think differently about a few issues. FWIW, I’ve heard from a colleague who is Chair of a large health plan that the repeal language is already written.

These perspectives may both be right; I expect a re-branding of ACA and not a total repeal. The impact on the health system, hospital finances, the individual insurance market, and the number of insureds of a complete and sudden repeal would be disastrous.

Rather, the GOP will pass a bill ostensibly “repealing” ACA while in fact keeping many of its changes in place for at least three years.

How will Democrats handle this?  Here’s one perspective.

Enjoy the weekend.  Gonna get a load of snow up here in upstate New York – can’t wait.


Healthcare in 2018

2017 will be a very misleading year.

There will be no changes to health reform, markets, Exchanges, Medicaid, or Medicare. More people will be insured, hospitals and health systems will enjoy financial stability, and while losses in the individual market for the big five insurers will increase somewhat, work comp will prosper.

This will lead some to think everything’s fine, there’s nothing to worry about, it’s all good, I and others worrying about health care’s future are hysterical Chicken Littles.

Let’s summarize.  There are two general scenarios; GOP repeals ACA’s main components without addressing system-wide fallout, or GOP essentially re-brands ACA (TrumpCare, anyone?) leaving much of the current ACA in place.

If the GOP repeals ACA via reconciliation and/or without:

  • replacing it with an enforceable mandate,
  • maintaining changes to Medicare fee schedules and reimbursement,
  • maintaining the Medicaid expansion,
  • maintaining cost-sharing subsidies for the near-poor, and
  • restoring DSH and other supplemental hospital/health system funding.

This is what we’ll get.

Implications are obvious;

  • cost-shifting to private insurance, workers’ comp, and other property and casualty insurance increases
  • claim shifting increases
  • job lock increases as people don’t leave their employer for fear they won’t be able to get or afford health insurance
  • individual bankruptcy rates increase

I must admit to a morbid fascination with the game that’s playing out.  I’m both embarrassed to admit that fascination and appalled by the damage that will be done to people, businesses, cities and states by the combined ideology and ignorance of our newly-elected House, Senate, and President.

As friends and colleagues keep telling me, we don’t KNOW what these worthies will do.

True, but we can read policy papers, previous proposed legislation, and statements of incoming officials, all of which point to dramatic changes to healthcare. This may well not happen, as those now in positions of power may decide ACA isn’t so bad after all. 

Their constituents have certainly changed their tune, with barely half of the Republicans surveyed looking to repeal “Obamacare”.  Then again, many didn’t know that “Obamacare” and ACA are one and the same.

I don’t think the “repeal and destroy” scenario indicated by those papers and statements will happen, because the real-world impacts would be so damaging.  It appears most on the Hill are leaning towards leaving much of ACA alone, tweaking around the edges, declaring victory and moving on.

Then again, I didn’t think Donald Trump would be President.

If the “tweak and rebrand” strategy wins out, there’s still an awful lot of uncertainty.  The healthcare “system” is a Rube Goldberg contraption like the one where you hit one button and out pops a dollar bill, but if you hit that button while holding down the shift key, you get punched in the face.


What does this mean for you?

Yes, this is really complicated and sometimes hard to unpack.  Don’t fall into the trap of willfully ignoring what’s going on in healthcare, as the implications for you and your business are huge indeed.