After a year of badgering other bloggers to host an edition of Health Wonk Review, I've been guilted into hosting the Cavalcade of Risk, a related-but-different grand rounds of things insurance- and risk-management related.

I'm doing this from a beach-side hammock in Puerto Morelos, MX, so if there are garbled sections, blame it on the cervezas.

CoR founder Hank Stern has always used a broad definition of the term "risk" when considering entries, ranging from the personal and limited to the really big broad and national. We're sticking with Hank on this, and to start, we'll explore the meaning and assessment of risk.

JLP at All Financial Matters has a useful quiz to help you assess your own risk taking comfort level. As a kind of/sort of counter point, blogger rmogull's Securosis has insights on how "risk management" has become too nebulous a subject, and some suggestions on how to fix that.

Never heard of Relational Risk? Well, the Burton Group Identity Blog explains what it is, and why it's important. Make sure you have a quiet room and a good dose of focus - this is both entertaining and deep stuff.

Health insurance and related matters
For those who are stuck at home due to a recent layoff or job loss, a most timely post has arrived providing insight and direction into signing up for unemployment benefits.

There were several entries about the State of the Union address and particularly the health care reform proposal from Pres. Bush.

Over at Managed Care Matters, I take issue with the characterization of Bush's proposal as "health care reform", as it does nothing to address the underlying problem - the supply of health insurance is limited.

Jason Shafrin does his typically excellent work analyzing the likely impact, or, more accurately, non-impact, of the new Bush health reform package on the ranks of the uninsured.

Joe Kristan also has something to say about the SOTU speech, opining that the Bush health care proposal is a good first step that we won't be taking soon.

Richard Eskow, one of the smarter folks in the managed care business, notes that the last Congress cut funding for research on traumatic brain injuries in half, despite a flood of soldiers with TBIs coming back from Iraq. Find Richard's perspective at "Veterans Health Issues: Catastrophic and Brain Injuries".

The libertarians at Cato sent in a slew of entries to this edition; here are two of their contributions. Michael Cannon thinks that mandating individual coverage is a bad way to solve a "very small problem" . Being one of those "leftish policy wonks" at whom Mr. Cannon slings a few verbal arrows, albeit one who has spent 20+ years actually working in the real world of health insurance and managed care, I note that one of Mr. Cannon's criticisms is based on the statistic that 30% of all uncompensated care is delivered to folks with insurance; therefore increasing the number of folks with insurance won't help much(?!). There may be a bit of confusion here, as many providers count the difference between what they bill and what they collect as "uncompensated care"; just because they did not get 100% of what they billed does not mean they were not compensated.

Mr. Cannon continues his assault on the "left" with a post on one person's definition of adverse selection and its influence on insurance costs and people's self-interest. Note - the definition is partially accurate, but the end result of Mr. Cannon's prescription is full self-insurance for all health care costs.

Back to the real world. New York's workers comp system is long overdue for reform, and adding to the state's woes is a mammoth fraud problem. Jon Coppelman discusses the urgent need to address the system's unfairness, inefficiency and wastefulness - all of which are imposing a huge burden on the state's honest employers. (I've just finished audits for two WC clients, and Jon's dead on - NY is a WC mess).

Risk Management
The Kinaxis blog points out that "there are risks that you can plan for and there are those that you can't." Self-evident? Maybe. Read about how having a Response Management strategy can help.

It's serendipitous (I've been looking for a spot for that word for ages) when two posts on a subject appear simultaneously, as happens in this instance.Rose Without Thorns explains that risk management doesn't mean risk elimination, and warns about letting risk become a paralyzing force.

Bruce Greig runs an English blog (that's a blog that is not only written in English but also by an Englishman), and has an interesting story of how he turned a 100 page risk management manual into a workable 11 pages.

Perhaps Mr. Greig should host the next edition of CoR???

Over at Securosis, blogger rmogull has some insights on how risk management has become too nebulous a subject, and some suggestions on how to fix that.

For those not yet in the Fortune 1000, Vahid Chaychi recommends you buy a Business Insurance Policy For Your Home-Based Business posted at Work at Home Entrepreneurs.

Lest you, dear reader, think I'm pushing just a bit too hard on the virtues of insurance, click through to The Kinds Of Insurance You Probably Do Not Need posted at My Two Dollars.

Continuing the segue from big biz to small and personal biz, Matthew Paulson thinks Rich Dad, Poor Dad author Robert Kiyosaki Gets it Wrong With Money posted at Getting Green. Matthew has a really good point...

Silicon Valley Blogger hates dealing with medical insurance, bills, and voice mail - hear him roar at The Financial Task I Dread The Most posted at The Digerati Life.

Beware of insurance scams following a major home fire posted at Clever Dude. I can't believe people fall for this; read it and weep.

Henry Stern, founder of CoR, focuses his entry on our northern neighbor's health care system. Saving the integrity of the Ontario health care system InsureBlog's Mike Feehan has a cautionary tale about the risks one Canadian patient faced when in need of a life-saving liver transplant. After traveling to England (of all places) for the procedure, he still faced financial problems with our Neighbor to the North."

David Williams knows the pharma business quite well; he's thinking there may soon be a big pharma LBO posted at his Health Business Blog. David's answer to the question "Is the time ripe to alter the conservative business structure and balance sheets of big pharma?" is intriguing.

Leon Gettler of SoxFirst opines that ecological decline "a greater threat than international terrorism": "The world's CEOs are in an upbeat mood as they meet in Davos, and in his State of the Union address, President Bush pleads with Congress to give war a chance. But European and British business leaders say that protecting the environment is a bigger risk than world poverty, wars, terrorism and future energy supplies."

From global warming to local damming, a real-life and current example of environmental risk is discussed at , where a river keeper laments the fate of his much-loved waterway.

Leaving us with something to ponder, Rita Schwab asks an Excellent Question at her MSSPNexus Blog, saying, "A single powerful question can reveal a great deal about an organization's culture of safety."

Posted by at 6:44 PM | Permalink | Comments (3)

If you want to know why the Bush health care plan will not work, you need look no further than the individual insurance cancellation brouhaha in California.

Blue Cross of California and other carriers stand accused of combing through high cost members' application forms to find any mistake, inadvertent or not, and then using that to cancel their coverage.

While Blue Cross' practice (which they have admitted) is reprehensible, it's also understandable in today's dysfunctional insurance market.

Insurance companies work very hard to not cover anyone with a current or past health care condition that may at some point in the future lead to claims. They are not purposely being bad; if they cover everyone their competitors won't, they will soon find themselves bankrupt. Moreover, the individual insurance companies are "insurance" companies - and insurance is the spreading of unforeseen risks among a large number of policyholders.

Anyone with a pre-existing condition does not belong in a pool of those with no pre-ex conditions.

But they still need health care and a mechanism to fairly pay for same.

And therein lies the problem with Bush health care. His plan seeks to use the insurance markets and tax policy to reduce the number of uninsureds, who will use tax credits to fund their new insurance plans.

Except no one will sell them a plan if they have a pre-existing condition.

I am not in any way defending what the California health plans are doing, according to regulators the plans are illegally terminating coverage based on technicalities. When you understand the market and the factors determining success, the health plans' activities are entirely logical.

Instead of paying regulators to police bad actors, we should incent/motivate health plans to devote their considerable resources to improving and maintaining the health of their members.

If we don't, then no plan will make any appreciable dent in the number of uninsured.

Posted by at 8:26 AM | Permalink | Comments (1)

In a move designed to reassert control over the mechanisms of government, Pres. Bush recently signed an executive order requiring all regulatory directives be approved by political appointees. (registration required)

This will have a significant impact on occupational health initiatives, regulations, and enforcement.

Backed by the Chamber of Commerce and other business-focused lobbying groups, the executive order requires agencies to prepare a comprehensive cost benefit evaluation of each regulation, and appears to prevent adoption of any regulations that can't be proved to address a "specific market failure."

While the Chamber was elated at the order, I'm betting workers comp insurance companies are somewhat less than enthusiastic. They will be required to pay claims resulting from injuries and illnesses and other losses resulting from occupational injuries. Thus, the mechanism of insurance will address the problem.

To this layman, it appears that this new executive order substitutes insurance for regulation, as insurance is the market's answer to occupational injuries.

Posted by at 7:34 AM | Permalink | Comments (1)

MSC was sold last year to Monitor Clipper. Brazos invested in Cypress Care (a client). Genex was jsut sold to an investment firm, and another has bought up a big chunk of MSC's debt. Injured Workers' Pharmacy is on the block (and close to a deal), Bank of America is asking several hundred million for Third Party Solutions, and WorkingRx is for sale as well. Health Advocates was just purchased by PMSI/Tmesys, and P2P was recently sold to Fiserv. And execs at good managed care firms are besieged by investors seeking to "be helpful".

Lots of smart money is looking hard at workers comp managed care and related services.

Why?

Investment firms look at a broad spectrum of investment opportunities to find the ones that have the most promise. And right now, the WC services space looks better than a lot of others.

"Better" because there is a potentially greater return on investment.

The investment community's view is the WC services space is inefficient, poorly managed, and ripe for consolidation. There are a plethora of niches, ranging from DME to medicare set aside allocations to networks to bill review to loss prevention, and within each niche there may be a dozen or more companies providing services in a state, region, or across the country.

There is little effective automation. Many bills are touched by at least three humans - in the mail room, at bill review, and by the adjuster. There is a nascent movement to automate this process, a movement hampered by TPA business models, legacy systems, and a lack of strategic thinking on the part of WC payers. Managed care efforts are largely driven by the profit motive, with vendors and claims payers paid for processes, not results.

Medical trend rates in workers comp are increasing twice as fast as overall medical inflation; Medical management, at least the type of medical management delivered by most vendors, has been proven to be largely ineffective.

The entrance of large group health players (Aetna, CIGNA, UHG) into the space has had little impact to date.

And profits are decent to excellent; margins in the MSA business are above 35%, network profits the same or better, bill review companies are in the 20-30% range, DME at 30% and WC PBM at 20% +. Case management is hurting, but then again it has been for years.

There you have it. A cottage, "artisan" industry using old technology delivering poor results while generating substantial margins.

Any other questions?

Posted by at 8:23 AM | Permalink | Comments (4)

The ICD may have not been fully functional when the President was working on his health plan.

Thanks to SST for the tip!

Posted by at 7:26 AM | Permalink

There are over a dozen state and federal health care reform initiatives on the table today. To evaluate the various proposals, we have to agree on what we want to accomplish. Otherwise, we'll spend our time debating which road to take when we don't even know our destination.

What are we trying to accomplish with health care reform?

Lower costs today? A sustainable trend rate so care is affordable for the foreseeable future? Better outcomes, defined as healthier people and/or fewer avoidable deaths and/or higher levels of functionality? Coverage for all so no one goes without? Equitable reimbursement? Less interference in the doctor-patient relationship? Greater self-responsibility on the part of consumers? A reduced financial burden on employers, especially small ones and really big ones with lots of retirees? Ever healthier, longer-lived citizens?

All of the above?

A strawman. We have to begin with the user of the services - the individual and family.

Americans want to be as healthy as possible, they want their kids to be healthy, and they want to have enough money left over after paying for this health to buy food and shelter and education and clothing and an X-box. They also want to have good jobs that pay enough so they can afford the necessities and frivolities, and they want those jobs to be around tomorrow and the next day.

If that makes sense (and it's so mom-and-apple-pie and basic it has to), we have a basic premise from which we can start.

And when we disagree, we go back to this basic premise and use that as the basis for discussion.

Can we start from here?

Posted by at 7:37 AM | Permalink | Comments (8)

Confirming my long-held opinion that Jason Shafrin is the smartest health care economist blogging these days is his post on the implications of Bush's tax cuts...I mean health insurance reform policy.

Jason's insight on the trillion dollar excess policy is brilliant.

He also provides a chart illustrating the financial implications of Bush's plan - no surprise here; "the value of the health insurance tax deduction is worth more than 2x the value for the individual making $10,000,000 as for the person making $10,000."

Posted by at 7:41 PM | Permalink

Genex, the work comp anaged care subsidiary of UNUMProvident, has been sold to an investment firm. Unum had had the company on the block for quite a while, so the transaction is not a surprise.

Unum had purchased Genex years ago, in what was touted at the time as a way for the disability insurer to gain expertise in managing disability. Insiders noted that after the initial synergy discussions, there was not a lot of knowledge transfer from Genex to Unum's disability management unit.

Posted by at 1:42 PM | Permalink | Comments (1)

Health Wonk Review's list of contributors is expanding edition-to-edition, and the latest hosted by Health Affairs' Jane Hiebert-Smith continues the trend. There's solid material from the State of the Union address and the various state reform proprosals, not to mention drug pricing and the new Congress.

Posted by at 10:45 AM | Permalink

Elected officials considering health care reform would do well to adopt the "first, do no harm" rule. So far, they haven't.

Health care reform proposals circulating among the States run from the broad and all-encompassing (California) to the very narrow (Texas). The big ones suffer from an inherent problem - the broader they are, the more oxen they will gore. As every constituency works to protect and advance their agenda, the big proposals run the very real risk of the death by a thousand cuts (a particularly gruesome, excruciatingly painful Chinese execution, and therefore a perfect analogy).

Narrow, specific initiatives to address discrete issues have the opposite problem - they tend to fix problems caused by the system, instead of fixing the underlying problem.

Look at Texas.

Harvey Kronberg's synopsis of political happenings in the Lone Star State reports Gov. Perry will ask for a 3% tax on all hospital bills, with the proceeds going to increase reimbursement for providers hammered by much-too-low Medicaid reimbursement rates and/or provide health savings accounts to Medicaid recipients and/or fund an insurance puchasing pool to help employers and employees obtain coverage.

Let's focus on the reimbursement motive. Reimbursement rates for Medicaid and Medicare are held ridiculously low because the Feds can't control utilization. And if providers treat too much, the Feds slash reimbursement, which causes providers to deliver more services to make up for the revenue shortfall, and the vicious cycle continues.

To "fix" the problem of low reimbursement, Gov. Perry will tax hospitals,

who will pass along this cost to their insured populations,

who will have to raise premiums to cover the additional cost,

thereby making insurance even less affordable,

causing more employers to drop insurance,

increasing the number of uninsured,

who will still need medical care,

but since they can't afford it and don't have insurance, will get it for "free"

from providers who will then have to charge their insured patients more,

accelerating the death spiral.

And that's why Gov. Perry's reform is a really bad idea. It doesn't solve a problem, it makes it even worse.

Note - those of us with insurance are already paying over a thousand bucks a year in higher premiums to cover the costs of the uninsured.

Thanks to Anthony Haley for the head's up.

Posted by at 7:10 AM | Permalink | Comments (1)

So a lot of folks are finding good things in Pres. Bush's plan to use tax policy to help uninsured people get health insurance.

Not me. I see it as the worst kind of incrementalism, on a par with consumer-directed health care. To the naive, it promises a quick solution using financial gimmickry that will not cost anyone very important much of anything, and may help a few folks get coverage thru a state program.

But it won't do anything to fix the underlying problem - people who need insurance can't get it, and if they can, many can't afford it, leaving the rest of us to pay for their health care. Meanwhile, insurance companies compete not on the basis of how healthy they can keep us, but on how good they are at denying coverage to anyone who may have a claim.

Arrggh!

Bush's plan relies on the incredibly screwed up individual health insurance market. You know, the market that won't cover your eyes if you had pink eye, or your ankles if you sprained one a few years back, or your heart if you take Lipitor. I'm not blaming the insurance companies; they operate in the Alice-in-Wonderland system as best they can. And if they start acting altruistically they go bust.

Bush proposes tax credits to help poor folks buy coverage. This when the average cost of family health insurance is above $11,000. To quote Karen Davis of the Commonwealth Fund; "Ninety-five percent of the uninsured wouldn't get a significant amount of money from this deduction because they earn so little," (newsday, 1/22)

If there isn't supply, creating demand won't solve the problem. And if there is supply, it has to be at a price level that consumers can afford.

Two points which Bush's plan blithely ignores.

The best thing about this plan is it doesn't stand a hope in hell of passing.

Posted by at 6:00 PM | Permalink | Comments (4)

After the original post (below) I had a chance to review more carefully the recent releases from Texas re the adoption of medical treatment and guidelines and to gain more insight into the guideline selection process.

First, a clarification. ODG guidelines WILL be used for management of physical medicine, including physical therapy.

That said, if physicians or other stakeholders want to provide any type of treatment that differs from that recommended by ODG (surgery, therapy, etc), they can provide information to the payer/state justifying their position. And if their treatment plan is supported by other evidence-based medical guidelines, my sense is it will be approved.

Sources also indicate that MDA's disability duration guidelines were selected primarily due to their accessibility; they are easier to comprehend and more "usable" for laypeople, while still backed by solid research and data. This accessibility may well make conversations among the stakeholders more productive and reduce confusion and mis-interpretation.
That's good, as it allows providers and payers to have a discussion about treatment options with science-based guidelines as the ultimate test of appropriateness.

The latest state to adopt clinical guidelines for the treatment of workers comp injuries is Texas. While the adoption of guidelines is a good thing, Texas is clearly marching to its own mariachi band.

The state's Workers Comp Commissioner, Albert Betts, actually selected guidelines from two sources - ODG and MDA. ODG will provide the medical treatment guidelines, while MDA will be the source for disability duration information.

This is a little unusual, as both guideline purveyors incorporate both medical and return-to-work information in their products, and they are designed to work in concert - you have this condition, you need this treatment, and you should be out of work for this long if your job requires this level of activity.

ODG will be used for management of rehabilitation, defined as physical therapy and chiropractic. Texas has a big big problem with overutilization of physical therapy and chiropractic services; this may well help.

LIke every other state, Texas suffers from widely varying medical practice patterns. The adoption of these well-regarded tools should help add a little more consistency by bringing a bit more science to the art of medicine.

Perhaps most importantly, the guidelines will establish a benchmark against which treating providers can be assessed. This is a breakthrough that is long overdue.

Posted by at 4:55 PM | Permalink

13,000 American civilians have suffered compensable injuries in Iraq and Afghanistan. These are handled through the Federal system, with the Department of Labor having jurisdiction. The volume of cases has grown steadily since 2002, with the DoL now seeing about a thousand cases a month from employers such as Halliburton, Dyncorp, Bechtel and others.

And many of these are not your typical lower back strains. Post-traumatic stress disorder, closed head injuries from IEDs, and shrapnel and concussion injuries, all injuries once limited to soldiers are now suffered by civilians. These injuries are not commonly handled by civilian providers or hospitals, and many claimants are finding it difficult to obtain adequate care for their condition.

Outside of the human cost, the financial implications are staggering. Truck drivers are making upwards of $100k a year, and their workers comp premiums can be as high as $25 - $40 per $100 of payroll. While there is no accurate count of the total number of contractors, at the low end it is 50,000.

Workers comp costs for contractors in Iraq and Afghanistan are over a billion dollars.

Way over.

thanks to the Workers Comp Executive News Digest for the original idea.

Posted by at 3:08 PM | Permalink

It looks like Pres. Bush is going to announce a major new health plan initiative during his State of the Union address, one that actually may make some sense. The pre-views indicate the plan will be individually-focused (not employer-focused), say very little about cost control, underwriting, or health care providers, and concentrate instead on tax policy.

I don't like to disagree with people whom I highly respect, but I don't see how Bush's plan will work (defined as increase coverage and control expenditures).

The plan is based on a tax deduction - everyone gets a flat rate tax deduction of $15,000 for a family/$7500 for an individual. No matter how much you spend. So, if you have insurance, you get to deduct the premiums plus, up to that cap. Nice. But first you have to qualify for insurance, and next you have to be able to afford the premiums. And a lot of folks can't get coverage due to pre-existing conditions and others don't make enough money to afford the average family premium of $13,000, deduction or no.

There's some help here, at least for those who can't afford premiums. Folks lucky enough to have insurance that costs more than the cap will lose the deduction for the amount over the cap, and this will be used to subsidize insurance for lower-income folks. I don't know if the "overage" will provide enough tax revenue to fund the poor folks...

Next, as colleague Bob Laszewski points out, the individual health insurance market is a mess.

The hole in the US health care insurance and delivery systems is way bigger than the patch provided by Bush's plan.

Bush's plan will not help those with pre-existing conditions, nor does it address medical underwriting or risk selection, nor will it ensure universal coverage.

Posted by at 4:26 PM | Permalink | Comments (2)

You have to love idealistic students. Medical students in California, working with a prominent legislator, are pushing for a state-run single-payer system that would end the health insurance industry's role in the system.

The students have a solid case, but single payer will never succeed in the US.

The insurance industry, medical providers, politicians, employers, and libertarian-leaning polis just won't have it. That isn't stopping the students or bill sponsor Sheila Keuhl, who has been a tireless advocate of single payer.

These irresistable forces make it much more likely that a hybrid system, rather than a monolithic one, will be the one we end up with.

The best answer I've seen so far is Sen. Ron Wyden's Healthy Americans Act.

Posted by at 7:44 AM | Permalink | Comments (2)

California is much better, Florida is doing great, heck, even Texas is really trying to fix its workers comp system. Among the larger states, that leaves NY as the leader in the "state that needs workers comp reform the most" contest.

And boy does it.

Manufacturers in NY rated workers comp as their "most onerous regulatory burden", worse than taxes and unemployment insurance. 95% of respondents said WC in their state was much worse than in others, and 60% said it has gotten worse over the last few years.

But there appears to be hope. The Business Council is working with state GOP leaders and new Gov. Spitzer in an effort to address some of the more problematic issues. The Governor has made work comp reform one of his priorities, although it may not be at the top of the list.

Having recently completed audits of workers comp claims (focusing on medical management) in New York for two clients, here are the issues I see as most important.

1. Allow employers to direct injured workers to physicians with expertise in treating workers comp patients.

2. Require the workers comp board to consider evidence-based medical guidelines when evaluating treatment, and not just the treating physician's or IME physician's opinions.

3. Require payers to utilize evidence-based clinical guidelines in managing the medical component of work comp claims. And require those payers to share the guidelines with treating physicians.

4. Require payers to provide data to the state pertaining to medical treatment, including diagnoses, physician identifiers. procedures, costs, and outcomes. Require the state to provide access to these data in a format that enables all users to analyze the data to assess providers, treatments, and outcomes. Specifically publish data on variations in practice patterns.

5. Require payers to work together with providers and regulators to publish provider practice analysis results.

6. Adopt a mandatory generics law for drugs, similar to the one in Michigan.

If I had to settle for one of the above, I'd choose #5.

Posted by at 8:37 AM | Permalink | Comments (3)

Despite what some Congressional Dems say, requiring CMS Secretary Mike Leavitt to negotiate drug prices with big pharma is not going to save us gazillions of dollars.

It also won't lead to a sudden decline in pharmaceutical research (sorry, Manhattan Institute). It's good political theater, but the real impact will be minimal.

Unless...

...Leavitt gets the authority to select which drugs are bought.

There are lots of multi-source brand drugs, drugs that have very similar therapeutic benefits and chemical composition, and therefore in many instances are interchangeable. (OK, not in all, but in many). Every other country pits manufacturers of these multi-source brand drugs against each other, to good effect. This strategy is a primary reason brand drug costs for European countries are 40% below what we Americans pay.

Yes, this would reduce the variety of drugs available, but there is ample precedent for the effectiveness of formulary management. And an oversight board would ensure patient safety is not compromised.

So, if the Democrats are really serious about lowering prescription drug costs, they will have to provide Sec. Leavitt with the negotiating leverage to do so. And to do that they will need a good bit more intestinal fortitude to pass a bill that will be more contentious, but much more effective, than the one on the table today.

Posted by at 11:25 AM | Permalink | Comments (2)

I'm continuing to follow the fortunes of Revolution Health, the Steve Case venture into health care, consumerism, education, wellness, and peripheral matters. Not much new news since my last query; the website is still under construction, but you can enter as a "test guest" here.

The tech community seems underwhelmed.

Once you go thru the registration process, you can -

-- get patient ratings on doctors and hospitals, but no objective measures of quality So, you're relying on what other named and nameless people think about docs. Not sure I see the value there

-- chat with other folks on the web to get their advice about your health situation. Yikes.

-- enter data to track your health care expenses

-- not buy insurance (although they seem to be working towards that)

-- figure out your body mass index (I'm overweight!)

-- shop (gee, that's a surprise)

-- learn about drugs (although there's no info on uncommon ones like Fentora and Actiq)

One commenter was particularly acerbic - "What’s being built is MySpace for hypochondriacs"

Posted by at 8:25 AM | Permalink | Comments (4)

David Williams at Health Business Blog is hosting the latest edition of the Cavalcade of Risk.

Check out the entry on physicians who direct some "risky" patients to the ER, and the reasons they do.

Posted by at 7:53 AM | Permalink

In response to my post on new narcotic Fentora, which was picked up by Kevin, M.D. over at his blog, a physician reads the riot act to a commenter who said that docs should be blamed for any misuse.

Posted by at 7:06 PM | Permalink | Comments (4)

Pundits and experts on the right side of the political spectrum are claiming that giving CMS the authority to negotiate drug prices will cost Americans $500 billion in lost productivity due to an annual loss of five million life years.

There are so many flaws in their arguments it's hard to know where to start, but let's plunge in.

Conservative think-tank Manhattan Institute is the source of these statistics, which are based on their analysis of the financial impact on big pharma if CMS adopts the VA's pricing. The analysis is based on a faulty premise, uses a flat-out wrong methodology, and produces results that are, in a word, hysterical.

MI's lead expert, economist Benjamin Zycher, claims that drug companies would lose the incentive to do research if the Feds based their prices on the VA, and investment in new drug research and development would (therefore) decline by approximately $10 billion per year. In turn, this would mean about 10 fewer drugs per year.

In all of his research efforts, Zycher evidently did not bother to look at pharma investment in Europe, where countries negotiate for drugs directly with manufacturers (like the VA does, and restrict the formularies to boot). As a result their costs for brand drugs are about 60% of US costs. One would think that European pharma companies would therefore spend less on R&D. And one would be wrong; there's more investment by European companies, not less.

Zycher's methodology makes some wild assumptions as well, noting that "If the average expected return in the absence of federally mandated price discounts is at the market rate of interest, the introduction of discounts must yield a reduction in investment, and perhaps zero (or near zero) investment....This case of zero investment may seem extreme, but it is highly plausible under a broad set of conditions." Boy, that's a big "if".

The average rate of return for pharma (24.4%) is five times higher than the market rate of interest (4.77% for the 10 year bond).

Zycher also seems to ignore the innovation that comes from taxpayer-funded research, which provides pharma manufacturers with much of the data and information they use to come up with marketable drugs. There is no question big pharma, and their stockholders, are benefiting from subsidies from taxpayers, which amounted to over a billion dollars a year in 1996. For all this research, pharmaceutical manufacturers paid taxpayers a princely $27 million in royalties.

Unfortunately, the mass media seems to have swallowed this castor oil without even holding their collective nose.

What's really disappointing here is the use of a faulty methodoloogy and selective data to promote a perspective. Undoubtedly Zycher is a smart guy who knows his science; it is troubling that he uses it so selectively. And it just doesn't stand up to even superficial scrutiny.

Posted by at 7:44 AM | Permalink | Comments (2)

Workers comp payers will be seeing a new drug on their top 25 lists soon - Fentora. While it may take a couple of years to attain Actiq's top-five status, it will.

Manufactured by Cephalon, who is also the manufacturer of Actiq, Fentora is an effervescent tablet that dissolves next to the cheek. According to Jim Andrews of Cypress Care (a consulting client) "It will be used as an alternative to Actiq lozenges, for breakthrough pain in patients on chronic opioids. Doses of Actiq and Fentora are NOT equivalent. Fentora doses are lower because fentanyl absorption is higher and faster with this buccal tablet than with Actiq."

Like Actiq, Fentora has only been approved for breakthrough cancer pain. That won't stop doctors from prescribing it for musculoskeletal injuries.

Fentora will cost about the same as equivalent doses of generic Actiq, but much more than immediate release morphine or Oxycodone. While that sounds OK, remember that prices for generic Actiq are about two times what the brand drug was selling for twelve months ago.

This drug is supplied in cartons containing seven blister cards of four tablets each, and the stuff is pricey - Fentora 100 mcg tablets have an AWP of $13.08 per tablet, 200 mcg is $16.56, 400 mcg is $24.02, 600 mcg is $31.25 and the 800 mcg is $38.53.

Posted by at 6:27 AM | Permalink | Comments (68)

The outcome of the "can we or can't we negotiate with drug manufacturers?" discussion is becoming clearer, as political realities appear to be saying "we can in some limited circumstances."

The key is in the Senate, where Finance Committee Chair Max Baucus will not support the House's drug price negotiation bill; without his support the House initiative is dead.

But Baucus and ally Chuck Grassley appear to be interested in writing a bill that would require/allow CMS to negotiate pricing for sole-source brand drugs - the medicines that are unique and thus can bring hefty prices. Good idea, but it's really tough to see how that could be done.

But if it could, the savings might be significant. In a letter to Sen Ron Wyden (D OR), Congressional Budget Office Director Douglas Holtz-Eakin said "Giving the Secretary an additional tool--the authority to negotiate prices with manufacturers of such drugs--would put greater pressure on those manufacturers and could produce some additional savings." (letter provided by Sen. Wyden's staff)

While not a ringing endorsement, this is quite a bit more positive than the CBO's previous views on the price negotiation. The Democrats have been very public about their determination to do something about drug pricing, and a failure to deliver on that promise would be unacceptable to their leadership.

That alone makes it more likely some version of legislation enabling/requiring CMS to negotiate with pharma will pass.

Posted by at 9:10 AM | Permalink | Comments (3)

One of the more thoughtful articles I've seen on medical tourism is at the Miami Herald.

Posted by at 7:46 AM | Permalink | Comments (3)

Roy Poses MD has done just a bang-up job on today's edition of Health Wonk Review. It's just stuffed with great material!

Posted by at 5:01 PM | Permalink

Coventry CEO Dale Wolf presented at the JPMorgan Healthcare Investment Conference earlier this week; I was particularly interested in his comments re the business opportunity in Medicare and Medicaid.

Medicare Advantage (MA) programs are likely to suffer a significant cut in funding this year as the Democrats, led by Rep. Pete Stark (D CA) take a chain saw to the subsidies paid to MA plans.
Coventry will be close to a $9 billion business in 2007.

The loss of a good chunk of the subsidy will make the MA business less attractive for many health plans; Wolf believes there is a significant opportunity for Coventry as it has successfully become the low cost producer in their markets, an achievement of which Wolf is quite proud.

When asked for his views on the risks inherent in today's political climante, Wolf noted that the political risks concerning a possible change in funding levels are significant. However, he also stated that there are better growth opportunities in Medicare than in Coventry's commercial business due to demographics and Coventry's demonstrated ability to grow in this space.

That said, Wolf knows they need to operate as a low cost producer as funding for governmental programs will be squeezed over time.

Here's a detailed discussion of the reasons MA subsidies are vulnerable.

Posted by at 2:21 PM | Permalink

Health care outsourcing to India was a $300 million business last year. And a just-released Health Affairs article indicates that the total market may be a lot, and I mean a LOT, bigger.

Health Affairs' estimate covers all types of medical stuff, from data entry to clinical trials to CABGs (coronary arterial bypass grafts for the non-geeks). But, that's just India. There are a few other countries that are also providing support via outsourced services - Ghana does data entry for claim forms, surgeries in Thailand, IT support in Ireland, internal organs from China (sorry about that last one).

But the really threatening outsource is the delivery of health care procedures to those who fly to far away places to get surgery. Quality looks to be high (mortality rate for CABG is <1%, compared to almost 3% for high volume CA hospitals. 88 overseas hospitals are accredited by the Joint Committee. Prices are excellent (JCI accredited facility in India - $5000 for a CABG; California high volume facility - $50,000). Patient satisfaction is really good.

The market share that looks to be on the table is pretty significant - by my calculations, over $5 billion in procedures that are now done in the US could be, and may well actually be, done overseas.

Posted by at 12:09 PM | Permalink | Comments (1)

Voting for the 2006 Medical Blog Awards is open; Managed Care Matters is up for Best Health Policy/Ethics Weblog.

There's lots of competition; support the blog you like best.

Posted by at 10:02 AM | Permalink

The number of health policy blogs is going thru it's expansion phase; with new entrants jumping into the fray every nano-second. The best of the (relatively) recent efforts include Health Affairs, Bob Laszewski, and a brand spanking new blog, The Sentinel Effect.

Richard Eskow, one of the smartest people in the managed care business and has been posting at the Huffington Post for quite a while with much success. Richard has been in the business on the payer side for over 20 years, consulting with HMOs, tech companies, politicians, workers comp insurers, and providers. He's especially good on the data analysis stuff.

He also plays a mean guitar.

Posted by at 9:48 AM | Permalink

"Regular" economic theory doesn't apply to health care in this country. After much debate, some of it acrimonious, I decided it's time to lay out my case.

Why? Well, over the next couple of years there's going to be a growing discussion about health care coverage, universal access, cost containment, yadda yadda. With a whole lot of luck, some of it will be educated, informed, and thoughtful. And with an incredible amount of luck and hard work, we'll actually reach a solution that works pretty well.

But, if we don't start with a solid understanding of the underlying issues in health care, we're dead before we start.

The biggest problem in health care is the value question. Or, why are we spending so much, and what are we getting for it?

Roemer's Law holds that the "ultimate determinant of the amount of hospital (patient) days is the supply of beds available." Developed by Dr. Milton Roemer, the Law was based on his decades of research in dozens of countries. Roemer's law has been used to explain variations in neuroimaging, use of specialists, and hospitalization for COPD.

While superficial analysis of Roemer's Law would indicate that consumerism in health care would be a quick and easy solution to the question of how can we be assured we're getting value for our health care dollars?, a more careful consideration indicates that there is much heavy lifting to be done before people can become true "consumers" of health care.

Here are a few of the weighty problems inconveniently obstructing consumerism (defined as the free choice of consumers (i.e. patients) dictating the economic structure of health care).

1. Physicians are the "consumers". Decisions are made by physicians on most expensive, important procedures. Few patients have the time, expertise, intellect and wherewithall to research which treatment plan is best for them personally. Very few. And people defer to their docs.

2. Most of the procedures performed in the US have not been proven to be effective for the conditions for which they are prescribed. And almost none have been proven to be cost-effective. That doesn't mean they aren't, it does mean that medicine is at least as much art as science.

3. Most of the dollars are spent on people who spend a lot of dollars. (75% of health care dollars are spent on 15% of the people) Once these folks have emptied their pockets to cover their deductibles and copays, their health care is free. Which doesn't do much for consumerism.

4. There is very little good data available on "quality". Yes, there is some, and yes, it is growing, but we are a mighty long way from being able to inform most consumers about the best path to take, providers to use, and facilities to access in a way that is easy to access and understand.

There we have it. Supply drives demand. The demand is for procedures that are unproven. Most procedures are performed on patients who have no financial stake. And patients have little ability to find and use health care information.

For more discussion, see Jason Shafrin and the Dartmouth Atlas project.

Posted by at 5:46 AM | Permalink | Comments (12)

This is a pretty esoteric workers comp post, so if you aren't so inclined, click on something else now before your eyes glaze over and it's too late.

In workers comp, employers have the ability to make claimants go to specific physicians or lists of physicians in some states and don't in other states. The former are "employer direction" states, the latter are "employee choice" states.

Except that's not really true.

Example. In Florida, an employer direction state, if an injured worker is directed to go to a network provider and does not, the insurer does not have to pay the bill. Pretty strong stuff. Despite that strong stuff, there are many examples of claimants seeking care outside the network, and very few of them got stuck with the bill. Why? The insurer didn't want to get wrapped up in a legal battle.

In Illinois, injured workers can go to any provider they want. Employers can suggest they go to specific docs, but can't "force" them to.

So in reality, what's the difference between employer direction and employee choice states?

Perception and attitude.

Most of the difference lies in the attitudes and business practices of adjusters, case managers, and employers. Because in reality, you can "direct" in Illinois just like you are in Florida. Practically speaking, the two states are the same.

Which begs the question - why aren't workers comp payers doing a better job of getting injured workers into networks? Most payers see penetration rates in the 60% range, which when you really think about it, is not very good.

What does this mean for you?

Food for thought. And for you WC professionals, stop thinking about how hard it is, and start thinking about how to do it.

Posted by at 4:38 PM | Permalink | Comments (1)

Bob says it better than I could.

Posted by at 4:35 PM | Permalink

Boston's Mayor is outraged at Humana's decision to raise premiums on it's basic Part D plan by 130%. Humana's stockholders should be equally upset.

Mr. Mennino has said Humana's price increases are "bait and switch" and "gouging". The reality is Humana lost a ton of money on Part D in the third quarter of 2006, and has to do something to stop the bleeding. By Bob Laszewski's estimate, Humana's combined ratio on its Part D program was 108% for that quarter; for every dollar in premium they spent a dollar and eight cents on claims and administration.

The biggest contributor to Humana's Part D red ink has been their Cadillac "Complete" Plan - the top-of-the-line. The Complete Plan's loss ratio was 133%. (don't forget, that does NOT include administrative expenses, which are typically about 15%)

Two key points.

First, the third quarter was supposed to be the one where Part D plans hit profitability as the doughnut hole kicked in and insureds' out of pocket expenses went up while insurer's payouts decreased. Clearly that didn't happen, at least not to the extent that Humana thought it would.

Second, as I've been trumpeting since the inception of Part D, adverse selection had a huge impact. Seniors who used a lot of drugs, and therefore knew the doughnut hole would be a big problem, bought the plan that covered the doughnut hole - the Complete Plan. Surprise! They used it, too.

Tough to survive with that business model; therefore the solution is to raise prices.

Clearly Humana's actuaries and underwriters made a few wrong assumptions; in any new product launch that is to be expected, and the premium increase is certainly appropriate. And my sense is Humana is not alone, as United Healthcare's early statements indicate their once-rosy outlook for Part D has faded somewhat.

Thanks to Fierce Healthcare for their tip on Mennino's angst.

Posted by at 6:57 AM | Permalink | Comments (8)

Among the health reform plans likely to be considered is an expansion of Medicare, allowing non-seniors to "buy in" to Medicare.

This is a bad idea.

Space, my time, and your patience prevents a complete discussion of the myriad reasons "Medicare for all" won't work well. Here are the two main issues.

While Medicare has succeeded admirably in ensuring seniors and the disabled have adequate medical care, it has done so on the backs of treating physicians. One of the primary reasons physician income has declined steadily over the last several years has been the drop in Medicare reimbursement (adjusted for inflation). If Medicare for all is a success, physician income will decline even more precipitously, leading to higher utilization, angry docs, unsatisfied patients, and howling politicians.

Political realities make Medicare for all highly unlikely. It would be perceived as a big-government, socialized medicine (whatever that is) approach, which is anathema to many. It's just a political non-starter. And, Medicare for all would bring out the long knives of the managed care industry, health plans, and other stakeholders (AMA, AHA). These are well-funded and effective lobbyists, and will be very hard to overcome.

What does this mean for you?

There are lots of better ideas out there today, and more likely to come. By understanding the limitations of some of the trial balloons, we'll be better equipped to assess the good ones.

Posted by at 7:18 AM | Permalink | Comments (4)

Hey, Managed Care Matters was nominated for one of the Best Medical Weblogs of 2006!.

Thanks to whomever entered the blog, and I'll send out info on voting when it starts (tomorrow, I think).

Also in the running for the "Best Health Policy/Ethics Weblog" are Hank Stern's InsureBlog, Health Business Blog, Rita Schwab's MSSPNexus, Kevin, M.D., Roy Poses' Health Care Renewal, and Effect Measure.

Now that's SOME competition!

Posted by at 6:12 PM | Permalink | Comments (1)

Ezra Klein opines in his recent editorial in the LA Times that conditions are, if not ripe for a move towards universal coverage, at least we're getting closer to harvest time.

A couple of (relatively) minor nits. Hospital profits are not exactly "skyrocketing". Yes, they're healthier than they have been of late, but low-single-digit margins are not even out of sight, much less out of the troposphere. Second, Ezra claims that the nation won't countenance a continuation of today's health care mess. I disagree - as one who said "we can't take it anymore" ten years ago, I've been amazed by Americans' ability to take it, at least when it comes to over-priced health care of mediocre quality.

Those points aside, Ezra's inventory of environmental and political factors is compelling. There is no doubt that we are getting closer. There is also no doubt (at least in my mind) that Americans' ability to tough it out, endure, and/or ignore this problem is akin to the legendary endurance of the Russian peasant.

Until and unless a plurality of major corporations, labor groups, and middle-class voters decides this is really important, it's highly unlikely we will have a major move towards universal coverage in the next year or two.

Therefore, I'll stick with my prediction of last year - we'll have some form of universal coverage before 2011. And not too much before.

Posted by at 1:20 PM | Permalink | Comments (8)

One of the better reviews of the current push for transparency in drug pricing was published by the Napa Valley Times (with assistance from the WSJ).

Huge employers - Caterpillar, Perdue Chicken, the University of Michigan to name a few, are forcing their PBMs to pass thru rebates, fully disclose pricing and the basis thereof, and in some cases charge for their services on an administrative-fee only basis.

If this sounds familiar, it is. Think of the growth of self-insurance in the nineties, the focus on physician reimbursement and hospital profit margins and the efforts by large employers to contract directly with providers (that waxes and wanes).

But there's something deeper going on here. Employers don't see that intermediaries - PBMs, HMOs, insurers, managed care firms deliver much in the way of "value". For that matter, the continuing decline in physician income clearly illustrates that payers don't think they are getting their money's worth there either.

And if the value perception is low, then it comes down to price - buyers just want it cheaper.

That's how commodities are sold. And if intermediaries - HMOs, PBMs, managed care firms, insurers - can't effectively demonstrate value, then they will become commoditized.

Just like physicians have.

What does this mean for you?

Figure out how to demonstrate value - by asking payers what they want in terms of outcomes. Then provide it to them and document it.

Posted by at 7:56 AM | Permalink

Ten days away does wonders.

My real job was rather hectic last year, so I missed out on a few notable events, and finally got a few minutes to warap up some of 2006's more interesting developments.

I reported that Sen. Bill Frist, erstwhile Presidential candidate, launched a blog in 2006. It seems to be stuck in the sand, as the Senator has not been able to update since September. So much for the great leap into the new media...

On the good news side, Health Affairs launched a new blog and looks to be learning quickly. Bob Laszewski's new blog got in under the wire, adding a Bob's 30+ years in the insurance industry to the discussion. Bob's not wasting any time joining the fray...

Ethics - my very un-scientific review of MCM over the last year says there were more posts about ethical issues than any other topic. Either I'm too picky, or there are too many ethically challenged folks in our business.

Ethical problems dogged large payers, with the biggest problems appearing to bite the biggest payer. Some of these payers also got their imaginary behinds bitten by consumer groups in California. And the new-Guv'nor, then Attorney General of NY Spitzer took down some mighty big names; the latest to cave is MetLife, who just agreed to pay $19 million in penalties.

On the lite side, we got a much-needed infusion of humor and wonderment from the various debacles in Ohio. From lost gold coins, to illicit campaign contributions, to the flat out blindingly incompetent, the Buckeye folks outdid themselves. (muted applause) And they look to be ending the year on a bang, as the latest indicates 27 apparently well-connected employers got (very) favorable insurance rates from the Ohio Workers Comp department

There was much talk about the pros and cons and reality and hyperbole surrounding Consumer Directed Health Plans - with advocates noting their ability to get people to think about how much care costs, and detractors noting the propensity of folks in high-deductible plans to not get routine care. The most recent and best research to date makes it look like we're not arguing about much, as CDHP plans have not grown at allover the last year.

The CDHP mumbo-jumbo found its way into Pres. Bush's agenda for health care reform, an agenda that went exactly nowhere. So, while there was precious little done to improve things in 2006, there have already been several initiatives announced by politicians, industry groups, and states looking to do SOMETHING about health care reform. So far, Sen Ron Wyden's Healthy Americans Act makes the most sense.

Finally, as if I needed any more proof that I have no idea how people make money in the stock market, there's the CorVel story. CorVel's stock hit another 52 week high, a mere 11 days after analysts cut earnings forecasts for 2007. Benjamin Graham, where are you?

Oh, and Managed Care Matters is now 2+ years in existence (as much as anything in the blog-o-sphere exists...). Thanks to all - those who agree and those who don't, and especially to those I can't thank for their insights and info because their present employers would be really ticked if they knew...

Posted by at 8:16 PM | Permalink