I’m attending the annual gathering-of-the-property/casualty-industry-tribes, vendor trinket-and-trash -ree-for-all, expense-account-depletion event known as RIMS (Risk and Insurance Management Society’s annual meeting), and will be blogging from New Orleans for the next three days.

Before I dive into the exhibit hall, a quick note complimenting the organizers for their commitment to the local folks. This year RIMS coordinated a volunteer day, wherein insurance types donned working garb (jeans., not suits) and headed out to communities in the city to continue the clean up from Katrina.

This was not only a great thing for the organizers and organization to do, it may well have been a sobering experience for the risk managers. Few have ever seen the likes of the devastation they were cleaning up yesterday. Picking up debris while surrounded by broken glass, trash-strewn streets, empty lots and condemned buildings can’t help but add raw appreciation of the reality of “risk”; risk that in most cases has been viewed solely from a financial perspective.

This Risk:Real World may well be worth repeating.

Posted by Joe Paduda at 1:21 PM | Link to this post

Big pharma woos docs with free food, trips, and samples. Now that's a "dog bites man" story. The reason for the ongoing marketing to docs is obvious - more contact, more drugs sold.

But the world is starting to look much more closely at the pharma-physician relationship, and that examination is likely to bring changes.

A couple years ago big pharma spent over $5 billion on DTD marketing. Over $20 billion if you count the value of the free samples. These are not dumb companies - they would not be spending that kind of money if it wasn't effective.

Although one study indicated that detailer visits and free samples had a negligible effect on prescribing patterns, the study did not consider the impact of travel, payment for consulting services and research assistance, and other pharma activities that are loosely defined as "marketing".

One pharma manufacturer, Cephalon, is quite clear about the benefits of marketing to physicians. Their fourth quarter 2006 report indicated the company was working very hard to get docs to prescribe its pain meds for a variety of patients, and was counting on the succcess of these efforts to dramatically increase sales.

New York is now considering legislation that would require pharma companies to report all gifts over $75 to the state.

If you're looking to find out the latest on pharma marketing, Roy Poses at Health Care Renewal comes across with the goods. For starters, there's the All-Pharma Cheerleading Squad, which is comprised of drug reps who are also NFL/NBA cheerleaders.

Oh, and the winner of the Miss FHM 2006 is (wait for it...) a drug rep who has yet to complete her degree in marketing.

Posted by Joe Paduda at 7:16 AM | Link to this post | Comments (2)

Humana is guaranteeing it will keep customers' medical trend increases under control, or it will refund part of its admin expenses.

Sort of.

Bob Laszewski cuts to the heart of the matter; it isn't much of a guarantee, but it sure makes for good marketing.

Posted by Joe Paduda at 4:39 PM | Link to this post | Comments (1)

The merger and consolidation process continues. Coventry Healthcare is acquiring two small health plans in the midwest and another chunk of the Federal Employee Health Benefit Plan.

Coventry is a strong player in the mid to smaller employer market, and a major player in the FEHBP (due to their First Health acquisition). This deal, which is valued at about $130 million and is all cash, makes sense for Coventry and Mutual of Omaha. MoO has long played at the periphery of group health, never quite getting to any significant mass.

And the consolidation continues...

Posted by Joe Paduda at 9:18 AM | Link to this post | Comments (1)

Just to be clear, I'm talking about the ones used in spine surgery, bone and joint surgery, and other orthopedic procedures. The use of surgical implants has grown dramatically, as have their prices, and the impact of utilization and price means big bucks for WC payers.

Big bucks as in $72 million in California alone. As in adding 11% to 33% to inpatient hospital bills in the Golden State.

While implants may well be useful, appropriate, and in many cases help the patient, they can also be extremely expensive. And even when there are clear guidelines as to what a payer should reimburse, the basis for reimbursement can be rather vague.

Here's the issue. In several jurisdictions (including NY TX CA and FL) the basis for reimbursement is some version of the "documented paid amount" plus a handling fee of 10% or so up to a cap of a few hundred dollars (CA) or a percentage of the invoice amount (FL).

The problem lies in the documentation of the paid amount. Most payers ask for a copy of the invoice, which, on the surface, makes sense - this is what was paid.

Not exactly. What the invoice doesn't show can include:

- volume purchase discounts

- rebates

- "3 for the price of 2" deals

- waste (some surgeons use the cage from one kit and screws from another, so the payer is paying for more hardward than is actually being used)

- internally developed invoices (documents prepared not by the supplier but by the provider)

Reimbursing off the invoice is not consistent with many states' fee schedules, and certainly inappropriate for U&C states.

There's another problem with implants - when they are defective, the patient has to go back in for more surgery. And the WC insurer has to pay. The only way to mitigate risk is to track the model and manufacturer for each implant - yes, it's work, and yes, it's work worth doing internally or at the very least outsource it to a specialist firm.

What does this mean for you?

Don't reimburse based on the invoice. Period. Know and understand the regs in the claim's state. And either use a third party firm expert in this area, or build the expertise internally.

More info -

Several states are in the process of revising their regs to deal with implant costs, but none (at least that I'm aware of) are requiring real "truth in labeling" when it comes to invoices. New York and Florida are two that are in the regulatory process.

Posted by Joe Paduda at 7:15 AM | Link to this post | Comments (3)

A scientific study supports what claims adjusters and case managers have known for years - obese workers incur more workers comp claims and cost way more and are much harder to get back to work than their skinnier colleagues.

Three audits I've conducted over the last six months confirm the stats with anecdotal evidence.

I recently spent three days cooped up in a windowless office looking at workers comp claim files (and I wonder why my kids don't want to take over my practice...) with Pat Gahl, one of the most experienced and smartest case management pros in the business. During one of our infrequent breaks, Pat noted that she could usually predict the outcome of a case just by looking at nurse notes on the claimant's height and weight.

We reviewed dozens of cases, and sure enough, the claimants that were significantly overweight always were tough to get back to work.

Why? Certainly orthopedic conditions take longer to heal if the muscles, connective tissues, and bones have to support too much weight. And, the cumulative effect on that connective tissues of years of obesity is likely harmful - damaging knees, backs, hips, and feet. Add to the mix the high probability that the obese individual is significantly de-conditioned (out of shape) and you have a recipe for a long, expensive, and perhaps ultimately unsuccesful rehab.

What does this mean for yuo?
Case managers and employers should factor weight into their return to work planning. Perhaps guideline developers should as well.

Posted by Joe Paduda at 6:05 AM | Link to this post | Comments (2)

The good folks at the California Healthcare Foundation explain why more information does not necessarily equal better consumerism.

Their main point? Consumers' decision making processes are not linear, simple, or straightforward; the deep complexities of the health care decision-making process do not lend themselves to simple metrics and ranking systems, yet that's what consumers like to use.

A few other misconceptions about information and decision-making...

- more info does not equal better decision-making; too much info can lead to information overload and confusion

- consumers are cynical, doubting and very cautious about the source and provenance of information - chalk it up to advertising's negative effect, the awful state of politics, and the explosion of Doublespeak (Healthy Forests Initiative, anyone?)

- people just need to spend more time studying and learning about health care to be better consumers; on the face of it, a true statement. Practically, impossible. Backup? Ask any physician how hard it is to stay on top of the latest research, then remember that is their job, they spent 8+ years training to do that job, and they have the academic background and access to specific sources.

What does this mean for you?

Yes, we need more and better information to help people make better decisions. No, an educated consumer is not a panacea.

Posted by Joe Paduda at 6:34 AM | Link to this post | Comments (2)

The largest health plan trade group wants to form a new agency to "compare the cost and effectiveness of medical treatments as part of a series of recommendations to reduce health care costs." (California HealthLine from CongressDaily) At first blush that's pretty similar to what the Agency for Health Care Research and Quality is doing today.

AHRQ's mandate is to "Build the evidence base for what works and doesn't work in healthcare and develop the information, tools, and strategies that decisionmakers can use to make good decisions and provide high-quality healthcare based on evidence." AHIP is looking to go further, to include cost in the equation.

Cost is something AHRQ and it's antecedent, the Agency for Health Care Policy and Research, carefully avoided. And at the time, for good reason. AHCPR was almost killed off in the late nineties by forces ranging from budget hawks to back surgeons angry at AHCPR's findings to politicians furious over AHCPR's "role" in the Clinton health plan process.

Fortunately, cooler heads prevailed (who says nothing good ever comes out of Washington?) and the Agency was kept alive, although with a different mandate.

Now private insurers are looking to Washington for help managing health care costs. This is not your usual political hot potato, but rather one with a temperature akin to the surface of the sun.

What does this mean for you?

AHIP's request for Federal involvement in health care cost issues is both an indicator of how desperate private insurers are and a recognition by those insurers that government has a key role to play.

Posted by Joe Paduda at 6:32 AM | Link to this post | Comments (2)

Health Wonk Review is well into its second year, and getting bigger with each bi-weekly edition. Jason Shafrin, renowned health care economist/blogger, hosts this fortnight's effort.

Posted by Joe Paduda at 2:32 PM | Link to this post

My post a couple of weeks ago about the RFP process generated a lot of public and even more private comment. It got me thinking about one of the more contentious issues in the vendor-customer relationship - price.

It is rare to read an RFP (request for proposal) that states that price will be an important consideration, much less the primary evaluation criterion. It's always service, innovation, creativity, ability to demonstrate a commitment to the customer, yadda yadda yadda.

And its rarely true.

Here's how it usually goes. The prospective customer receives the RFPs, and the committee immediately flips to the back of the binder, where the pricing pages are. Calculators appear, spreadsheets are consulted, and a flurry of button-punching commences. Rather quickly, the committee members rank the responses according to price.

Now, on to services offered, implementation plans, outcomes reports, cost/benefit analyses, and comparison of deliverables. Again, rather quickly, confusion sets in - services are not directly comparable, metrics are different, and deliverables have unique attributes. Turns out the deliverables are different; a couple of the vendors have come up with creative, solid, unique proposals that have strengths and weaknesses that defy quick-and-dirty comparison. Clearly, the vendors have done their homework.

The committee, struggling to hit its timeline, has to come up with a recommendation. How can it compare the different proposals, each of which is unique, does not exactly fit the specs but is a creative solution to the prospect's problem.

Easy. Price.

And, all too often, that's what they do.

What does this mean for you?

If you are a prospective customer, realize this 'methodology' is short-sighted, burns vendors, and rewards liars. Instead, meet with each prospective vendor, tell them your problem, and have them come up with a creative solution.

And award the business on the basis of their creativity, value, and ability to deliver on same.

Posted by Joe Paduda at 1:57 PM | Link to this post | Comments (4)

OK, another trip down Esoteric Lane, into the wierd world of WC drug management...

When states set high workers comp fee schedules for drugs, WC medical costs go up, and too many dollars are taken from employers and given to pharmacies and PBMs.

That's exactly what an organization with the seemingly innocent title "Workers Comp Pharmacy Alliance" is working towards.

The WCPA was formed some time ago, in part to lobby against a very low fee schedule contemplated by the state of California. Their efforts were for nought, as California adopted a fee schedule based on the Medi-Cal reimbursement rate, which resulted in the nation's lowest reimbursement levels.

From those humble beginnings, the WCPA expanded its efforts, and is now actively involved in lobbying in several states. We're not talking nickels and dimes here; official sources show the WCPA spent almost a million dollars last year on their lobbying efforts in a single state - Pennsylvania.

Yep, a million bucks in one state.

Sources indicate the WCPA is primarily working to keep drug fee schedules high. While this might make sense for two of the WCPA's backers, third party billers Third Party Solutions and WorkingRx, it is a bit more problematic for WCPA supporters that are WC PBMs.

If a WC PBM successfully lobbies for high fee schedules, their payer customers (insurance companies and self-insured employers) will pay more for drugs that don't come through the PBM.

And that's not all of the picture.

The TPBs are asking PBMs to sign contracts that don't allow the PBM to cut the bill for any script (that comes thru the TPB to the PBM) to the PBM's contracted rate for the first 21 days of the claim.

The combination of the two means that payers will be forced to pay a higher rate for drugs, in part due to the lobbying efforts of their PBM.

The good news? Most of the WC PBMs, including Cypress Care, Progressive, MSC, Express Scripts, ScripNet, and FirstScript are steering well clear of the WCPA.

Posted by Joe Paduda at 12:03 PM | Link to this post | Comments (1)

As part of a very good (defined as substantive, open-minded, and comprehensive) discussion on health care reform options going on at TPMCafe, Jonathan Cohn notes:

"a lot of these people don’t understand how precarious their current situation is – because they don’t realize how easily they could lose coverage or the extent to which their insurance might not cover their bills.(emphasis is mine) (Indeed, that’s the whole point of my book.) But for now, anyway, that’s what they think. And if you start telling them you’re going to change their health insurance – even for an alternative as well-liked as Medicare – a lot of them will get skittish."

That's true. But at some point, enough of "those people" who lose coverage or go broke paying bills will decide to do something about it. And that "something" doesn't have to be national; I'm of the opinion that there will be real reform in more than one state years before we do something nationally.

But which ones, and why them?

Massachusetts, Vermont, and Maine (let's hear it for New England!) have already passed enabling legislation. California's making a lot of progress, and recent reports indicate New Jersey might be next.

What's interesting is that the New England states have a lower percentage of people without insurance (12.3%) than states such as Texas (24.6%) and Florida (18.5%) where there appears to be little momentum towards health care reform.

Why? I dunno. Perhaps its something cultural, maybe it has something to do with the Town Meeting form of government up here and/or greater involvement in government and elections. It could be that there is higher per-capita income, and therefore more disposable dollars available for health care.

While it is clear that there are factors that are pushing health care reform to the top of the agenda, it is also clear that different populations have different motivating factors. Politically, those factors will result in higher or lower levels of interest and motivation amongst Congresspeople and Senators.

And that's what will ultimately determine when national health care reform comes to pass.

Posted by Joe Paduda at 9:16 AM | Link to this post | Comments (1)

Richard Eskow has a great synopsis of the historical roots of capitation over at Sentinel Effect - brief, entertaining, and well worth the click-thru.

Posted by Joe Paduda at 7:36 PM | Link to this post

An effort in Connecticut to implement a single payer, universal coverage program is just about dead, after the state's Office of Fiscal Analysis determined it would cost as much as the entire state budget.

Politicians were shocked by the estimated total cost, which ranged from $12 billion to $18 billion.

I'm shocked that they were shocked.

My home state has just over 3 million citizens. At $4000 per person, that's $12 billion; at $6000 per person, it's $18 billion. I don't know what's more troubling - for politicians to not know that health care costs between $4000 and $6000 per person, or that we have about 3 million folks living here.

And it wasn't just the pols; ""Even we were quite shocked [by] the enormity of the cost. ... A lot of people are just scratching their heads and saying, `Wow!,'" said Eric George, associate counsel of the Connecticut Business and Industry Association, the state's largest business lobby.(Hartford Courant, 4/10).

OK, that's just appalling. But don't despair, there's worse.

Amongst all the hand-wringing and slapping of foreheads, few have noted that the $18 billion is less than we're spending today - if the state runs the program and funds it via taxes, that means the present mish-mash of self-pay, individual insurance, and employer-funded programs goes away.

And so does about $5 billion in cost, and the 400,000 uninsured residents get covered, and I get coverage for my uninsurable eyes (cataract surgery five years ago).

Notably, the Aetna has come out in support of universal coverage in its home state.

Posted by Joe Paduda at 6:53 AM | Link to this post | Comments (2)

TPMCafe has an ongoing debate amongst health policy types about the pros and cons of single payer. There's an all-star cast, and your lunch hour is coming up, and you're kind of wondering why single payer is good/bad...

Posted by Joe Paduda at 11:14 AM | Link to this post

Jason Shafrin reports on the link between physician compensation mechanisms and surgery rates.

Here's the "money quote" -

"When specialists are paid through a fee-for-system (FFS) methodology rather than a capitation or salaried basis, surgery rates increase 155%. There is suggestive evidence that surgery rates fall when primary care physicians are paid on a fee-for-service basis compared to capitation or salaried payments."

Not addressed is the key question - is the rate of surgery appropriate under either compensation mechanism?

Posted by Joe Paduda at 7:24 AM | Link to this post | Comments (2)

I'm having a tough time getting mad at United Healthcare. The huge managed care company is under fire for penalizing docs who use any lab other than UHC's preferred partner, LabCorp. The AMA, regulators, individual physicians, and a few consumer groups are all screaming about UHC's heavy-handed, dictatorial infringement on their right to practice medicine.

They've got it all wrong.

Last fall LabCorp and UHC signed a 10 year deal naming LabCorp the exclusive diagnostic lab provider for UHC's insureds.

The deal makes sense for UHC, UHC's employer customers and insureds. Insureds in an HSA plan will see lower out-of-pocket costs; employers' health care costs will be slightly reduced, and UHC will make more money (which could be used to reduce premium increases...really). By consolidating all lab records with one provider, UHC's data mining and analytics will be enhanced, potentially strengthening the company's disease management efforts. (although UHC is certainly big and smart enough to take in data from multiple partners, this would make it somewhat simpler and more efficient)

Perhaps LabCorp was not getting as much volume as they expected, or maybe this was part of the plan all along. For whatever reason, UHC recently announced that it would consider penalizing it's contracted physicians if they referred patients to other labs - with fines, contract termination, or reduced reimbursement.

Docs are complaining that LabCorp does not provide a few highly specialized tests, could disrupt patient care and could harm the physician-patient relationship.

The docs are missing two key points.

First, the golden rule applies (no pun intended) - he who has the gold rules. And in this case, UHC has the gold. As a dominant health plan, they can make rules, albeit that are legal and ethical, about how they will administer a plan.

Second, each physician contracted with UHC, or for that matter any other health plan, has agreed to comply with the health plan's referral guidelines, including a requirement to refer to other providers within network.

Finally, many (but certainly not all) physicians aren't concerned about their patients' out of pocket payments for these tests.

That's got to change. Physicians simply have to consider costs - their patients' and employers'. This "let them eat cake" mentality is not helping their cause, nor is it enhancing their standing in the health policy debate.

Posted by Joe Paduda at 7:45 AM | Link to this post | Comments (28)

Posted by Joe Paduda at 4:29 PM | Link to this post | Comments (2)

What gets lost in the healthcare debate is the impact of our dysfunctional system on individuals and families. Jon Cohn of The New Republic and elsewhere has gone a long way to personalizing the health care mess in his new book, "Sick".

Jon's also leading a debate on the topic at TPM. Several health care types including your author are arguing to and fro, while others are keeping us honest.

Posted by Joe Paduda at 11:28 AM | Link to this post

Insurance companies, employers, and TPAs rely on vendors to process bills, build and operate networks, manage prescriptions and PT, support litigation, and provide expert advice on problematic medical issues. In many instances the vendors are selected thru a competitive bidding process, wherein the lowest bidder gets the deal, or at the least has a much better chance of landing the business than their more costly competitors.

But in others, the selection process goes on seemingly without end.

I've come across many instances where a large payer publishes an RFP for managed care services - networks, PBM, case management, physician adviser services, or some combination of the above. And in far too many, the selection process appears to be arbitrary, biased, or designed to find a lower price to use in negotiations with the incumbent.

In others, the decison is never made. After the RFP responders spend countless hours putting together presentations, submitting financials, designing programs and staffing models, analyzing data and flying to meetings (often in Chicago in February), the process appears to just fade away, with no decision made and no justification given.

I've been on both ends of this process, working on behalf of clients who could not get to a decision, and for vendors doing their level best to win the business on the basis of their hard work and creativity.

The non-decisions, the endless rounds of Q&A, "evolving" criteria, frequent changes in personnel involved in the decision process, and often dictatorial tone employed by the "customer" can be enormously damaging, all the more so because the customer does not even realize the damage they are doing to their own cause.

This behavior leads many vendors to avoid the RFP process, or to minimize the amount of effort they put forth when responding, or to back out of these processes when they start to drag out. The result is the "customer" ends up selecting from the vendors with the intestinal fortitude, or outright desperation, required to see the process through. Then the customer is often frustrated with the result - the vendor can't deliver for the agreed-upon price, or there are costs that "pop up" after the deal is done, or the level of service is unsatisfactory.

The customer now believes all vendors are liars or cheaters, out to "get" the customer.

What does this mean for you?

It doesn't have to be that way. But until and unless "customers" treat "vendors" with respect, honesty, and openness, it will be.

Posted by Joe Paduda at 8:20 AM | Link to this post | Comments (6)

If watching the legislative process in DC is akin to watching sausage made, the passage of the Medicare Drug bill might be akin to the composting process. Roy Poses at Health Care Renewal reflects on "60 minutes'" recent piece on the making of Part D; Roy's deep experience with big pharma adds a good bit of perspective.

Health care reform is coming; read Roy's piece for a heads' up on what the legislative process may look like.

Posted by Joe Paduda at 10:47 AM | Link to this post

Bob Laszewski weighs in on the Wellpoint insurance cancellation debacle. As a former health insurance company president, Bob's perspective is unique.

Posted by Joe Paduda at 8:53 AM | Link to this post

California, New York, and Texas are all in various stages of reforming their workers comp systems. Florida's reforms have been in place for several years, and rates have dropped thru the floor. WC premiums have decreased even more, with some employers seeing cuts of 50%. South Carolina may also see changes, and there are initiatives on the table in several other states as well.

Lower costs are great, for the buyer. Employers can move on to other important issues, shoving risk management initiatives to the bottom of the pile. They can move their business easily, as there are more work comp insurers clamoring for their business, eager to lower premiums even further in an effort to capture market share.

But there can be a significant downside to successful reform efforts.

When rates drop, so do the dollars available for loss prevention, internal medical management, and regular old-fashioned claims handling. If an employer is paying $1 million in premium, and over three years that premium declines to $600,000, their insurer's admin fees drop proportionally - from about $220,000 to $132,000.

That kind of decline pressures claims shops to increase case loads, short-cut processes and systems, and push work out to vendors (who can bill the file separately, taking work off the adjuster).

There is typically a decline in self-insurance, as employers can often get fully-insured programs for less than they are paying a TPA for their entire program (claims, claims handling, reinsurance and fees). This in turn puts pressure on TPAs to cut their prices.

Don't get me wrong, competition is great. It forces suppliers to get better, cheaper, faster. But when customers stop buying smart and force their suppliers to cut into bone, the result is inevitable. The suppliers will have to make up that lost revenue and margin somehow. Cutting staff (and that usually means the most expensive, longest-tenured, best workers), off-loading claims handling to case management firms (and getting a commission for the referral), and reducing investment in systems and training are all common responses to price pressure from buyers.

What does this mean for you?
Sometimes the best deal is not the cheapest. Actually, it's probably most times.

Posted by Joe Paduda at 8:12 AM | Link to this post

Jane Hiebert-White at Health Affairs has just posted the latest and greatest of the health policy blogosphere. Her edition is rich with the latest on policy, with compelling posts for and against "socialized medicine".

Read on!

Posted by Joe Paduda at 7:03 AM | Link to this post

Consumer directed health plans will make all of us better users of the health care system. We'll shop for price, be careful about what procedures we get from whom for how much how often. We'll bargain, examine data, and carefully compare providers.

And as a result, we'll all save a bundle, and the US health care system to boot.

Sort of.

We have a health savings account.

And three teenagers, one of whom has a bad elbow from football/wrestling/snowboarding/lacrosse/not doing his homework. Two months after the initial exam and xrays, and tests for Lyme disease, it is still not straightening out like good elbows should. So, the orthopedist (a very good friend) recommended an MRI, gave us several referral sheets, and off we went to check the provider list and price shop. I called our health insurer, Golden Rule/United Healthcare, who gave me the name of the only par provider in our area. I then asked what the allowable amount would be. They could not tell me, saying that I had to ask the provider what the reimbursable amount would be.

That made no sense. Golden Rule is the largest provider of CDHPs, touting their ability to reduce expenses etc. So their inability to tell me what they would reimburse is puzzling. GR has access to U&C databases, historical data on reimbursement in my area, and an MRI is pretty clear cut from a coding perspective.

As we're nowhere close to the $5500 deductible (and hopefully won't be, although with teenagers and my own aging...), I got on the phone and shopped around. Retail prices ranged from $2400 to $875; the par provider offered to cut the retail price to $600 if I paid cash. When I asked the par provider what the allowable amount would be, they couldn't tell me either. Their billing office said they had no way of knowing what the reimbursement would be.

Neither response makes any sense. Golden Rule has the data, processes these bills all the time, and knows full well what the reimbursable amount is. The provider likely also knows what they get from managed care contracts.

So I'm left with one firm price of $600, and no clue what GR will credit towards our deductible.

And this is for a basic, easily priced, clear cut procedure, for a policyholder who is pretty knowledgeable about the health care system.

Tell me again, how exactly in the brave new world of consumer-directed health care are regular consumers supposed to negotiate the health care system and become better buyers?

Posted by Joe Paduda at 6:58 AM | Link to this post | Comments (9)

More evidence is emerging about the rather minimal impact medical malpractice has on medical costs.

The majority of lawsuits are dropped with no payment made to the plaintiff.

Meanwhile, the lobbyists are reaching for their lances as they prepare to charge the Tennessee med mal windmill.

I'm continually puzzled about the kerfuffle surrounding medical malpractice. Yes, it has caused physicians to practice more defensively, but the impact on costs has been minimal. Meanwhile, the amount of mis- and dis-information out there in the media is just stunning.

Fortunately, some are beginning to realize that the med mal 'crisis' is largely manufactured, and appears to be an insurance industry creation.

Here's hoping that this stinky red herring is tossed in the trash so we can engage on real problems in health care.

Posted by Joe Paduda at 5:49 AM | Link to this post | Comments (14)

The financial reporting season for publicly traded companies using the calendar year is just about over. AIG's numbers look rather good, with a 34.1% improvement in net profits on revenue growth of 3.9%. Sure, the company has had its struggles with regulators, but the overall results are quite impressive.

The increase in profits came on the heels of a $1.8 billion increase in reserves for workers comp claims over 2005. The reserves were bumped up despite an improvement in the loss ratio for the DBG operation (domestic business group, the home of most of AIG's work comp business) from 82.5% in 2005 to 69.1% in 2006.

One analyst believes there is a link between the financial data, AIG's improved profit picture, and anecdotal information that the company has "stopped paying claims".

I don't see it.

WC loss ratios have been improving for several years, and it is entirely possible that AIG has not changed its reserving practices, but has learned a lesson from the late nineties and is socking away extra dollars in case work comp medical inflation jumps back into the teens.

Posted by Joe Paduda at 6:19 AM | Link to this post | Comments (5)