Uwe Reinhardt's recent column describes the problem quite well.

Americans want government to make sure that they have at their beck and call the most sophisticated health system in the world, without even a hint of a queue or rationing or balancing of benefits and costs (cost-effectiveness analysis).

At the same time, they rail at town hall meetings and in the voting booth against government intrusions into that health system, and wring their hands incessantly over the height of health insurance premiums and the taxes they pay to support the system.

Of late, many have turned to threats of violence, that is, if they can maneuver their Medicare-funded power wheel chairs close enough to get a shot.

While it's easy to condemn the manipulators (60 Plus et al), their job wouldn't be so easy if their pawns had even a modest grasp of linear logic - A (stuffing yourself with junk food and drink) leads to B (obesity) leads to C (diabetes, heart disease, and the need for a power wheelchair paid for by someone else).

Example:

These goals are mutually exclusive - the deficit cannot be controlled without drastic reductions in health care costs, which some will interpret as rationing. Yet these same pawns that protest against 'government hands on their Medicare' are also screaming about deficits, taxes, and the future burden on their children.

This terminal myopia will not prevent the inevitable - growing deficits driven in large part by their incessant demand for someone else to pay for their lifestyle choices and freedom to get whatever health care they think they want from whomever they want whenever they want.

There's more than enough blame to go around over the demise of health reform; as I've written numerous times, the Dems passed bills that would have done little to actually control costs. But the Republicans didn't offer any serious alternatives, when they could have made a clear and principled argument that the bills under consideration would add to the deficit, resulting in higher taxes and government borrowing.

Instead the GOP rallied around death panels, rationing, and keeping government out of healthcare, torching any pretense of leadership on the altar of political expediency. They've painted themselves into an unescapable political corner; when they once again gain control over Congress, they will be faced with a deficit that includes $8 trillion from the Medicare Part D program (a Bush 2 legacy) along with Medicaid and Medicare costs that are even more unsustainable due to their refusal to confront their supporters with economic reality.

As HL Mencken said, "People deserve the government they get, and they deserve to get it good and hard."

Yesterday's jobs report contained good news for the economy and for the workers comp industry - unemployment dropped 0.3% to 9.7%, a rate that is still way too high, but better than last month's 10% and certainly headed in the right direction.

The details are even more encouraging - the first gains in manufacturing jobs in two and a half years (!) (+11,000) and a small uptick in hours worked per week.

The other good news is a sharp bump in temp workers (+52,000), and a huge drop in the "number of persons who worked part time for economic reasons (sometimes
referred to as involuntary part-time workers) fell from 9.2 to 8.3 million in January. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job." (source BLS)

This last statistic is telling; sometimes called the 'underemployment rate', the data indicated a result of 16.5 percent in January, a welcome improvement from December's 17.3 percent.

Construction and transportation continued to suffer, with both sectors seeing continued declines in employment. However, there are a number of significant projects funded by the American Reinvestment and Recovery Act, including a major nuclear site decommission on the Savannah River that will result in the hiring of up to 3000 workers.

There's also a report that new home construction in the Atlanta area is picking up, improving the fortunes of developers and laborers alike.

Hiring is slowly increasing, and the ever-so-slight uptick in manufacturing, the first in two and a half years, is hopefully a leading indicator.

When employment picks up, so does work comp premium, and inevitably claims. The good work by NCCI indicates the injury rate typically heads up at the end of a recession as employees are working longer hours and more overtime, the pace picks up, and less experienced workers are hired.

What does this mean for you?

Higher work comp premium volume, more injuries, and more work for managed care and claims organizations. I'd expect safety and loss control people to start getting more calls as well.

It's an even better time to be reading about health reform. Is health reform dead, or is it just snoozing, waiting for a Prince Charming to lay on the smooch it needs to reawaken, full of promise and hope?

(hint, this guy doesn't look much like Senator Brown...)

Before we get to the next chapter in the story, we're going to hear from clinicians and politicians, policy gurus and providers, health administrators and educators, insurance brokers and Medicaid advocates, IT pros and pharmacists - in short just about everyone fits under the big wonk tent.

And where better to start than down in the trenches, where the real problems with our health care system are all too visible. Merrill Goozner kicks us off with an excellent summary of the new news on why hospital costs vary so much across the country - hint, NYC is pricey not because of high wages, but because CMS pays hospitals a ton to educate doctors and two tons for dispro. A great example of how unseen factors influence employers' - and taxpayers' - costs.

Drug prices are one source of consternation to many, with price control advocates complaining about big pharma's unfettered ability to set prices, and free market fans countering that without that ability pharma couldn't afford to develop new meds. A post that should get both thinking comes from David Williams, who describes how a pharma company is losing out, while patients are benefiting, without taking sides. A thought-provoking piece to be sure.

Julie Ferguson sends in an a synopsis of what could be a really fun development. Now that 14 states allow medical marijuana, when will it be part of a workers comp drug formulary?

For the real druggies among you, Adam Fein does a deep dive into the world of drug pricing and the future thereof.

Glenn Laffel asks why all the companies fighting over the Feds' $19 billion allocated to electronic health records are offering guarantees that their version will meet HHS' standards (hint - if they don't, users stand to lose big bucks).

And finally, back to the Gooz, who's penned a report on how the once-promising area of personalized, genomicly-specific cancer care is off to a very slow start.

Wrapping up the discussion of health care at the ground level, we welcome the Robert Wood Johnson Foundation to HWR. The RWJF blog team (what, they have a whole team? man I'm some kinda jealous!) posts on over-utilization of diagnostic imaging. Their post is a terrific synopsis of how several communities and provider organizations have reined in MRI spending by using clinical guidelines. Great stuff!

Jaan Sidorov wants the Obama administration to get crackin' and name a head for CMS. He wants a fresh face and strong leadership for the folks who run about 40% of our health spending. Not a bad idea...

And when they do, the new boss should start working on long term care. Kyle Pinion reports that this is one area of health care that is in desperate need of fixing, specifically to address some of Medicaid's deficiencies.

Sleeping Beauty could sure have used a little LTC - can you just imagine the poor gal's bed sores?

At the state level, the purpling of Massachusetts sent shock waves thru the political landscape and got several contributors thinking hard about the 'whys' and 'what nexts'. The general sense is now-Senator Brown is not looking to step into the Prince Charming role anytime soon (although he did vote for Mass' health reform).

Tinker Ready's piece asks if "Voters Reject[ed] the Massachusetts Health Reform Model?, and the sense is - they may have, but not because they didn't want reform, they just didn't want reform 'lite'.

Who needs health insurance?!

All the way across to t'other side of the country, we find Anthony Wright walking us thru Rush Limbaugh's recent encounter with what may be the most 'socialized' medical system in the country - Hawai'i. Limbaugh has a great solution to the health insurance problem - don't buy any. He's figured out how regular Americans can get by without coverage. The man's a geenyus!

But wait, perhaps Rush isn't so bright...I'm betting Jennifer Lyon wouldn't think so, because she was also 'self-insured', at least until she passed away from breast cancer. When asked why she hadn't seen a physician earlier. Lyon said, "I didn't have insurance, which is a big part of it. And it really wasn't changing much. But a year later, I felt another lump, and then I felt something under my armpit." Read more here.

Oops, back to the drawing board, big (and I don't mean tall) guy...

Well, at least Limbaugh doesn't have to deal with insurance companies - lucky guy. Over at the Digerati Life, the Ms DL laments; well, no, that's much too weak an adjective - we'll go with detests - dealing with insurance company claim forms resulting from her family's decision to go PPO instead of HMO.

Roy Poses MD has been a HWR'er since our denouement, and always gets the award for post no one else would have thought of. This ed. it's about three California health centers with notable quality issues, that somehow still managed to pay execs big bucks in the form of incentive payments. Roy says "The rationale for these bonuses, given out at a time when the university system was under major financial constraints, was that they were incentives for exemplary performance and patient care."

Peggy Salvatore weighs in on a study that says people trust their providers more than the government to protect the privacy of their health care data. (don't these people read the news?!)
As we say in New England, Go figure...

So without reform, what happens...

Well, some believe reform is still possible, others don't. We'll start off with a point-counterpoint minus the hair pulling and hurling of invective - courtesy of Health Affairs. Henry Aaron wants the Senate bill enacted and 'fixed' in reconciliation. For those who have dismissed this out of hand, Aaron's piece may well make you reconsider. The counterpoint comes from Joseph Antos; he wants incremental reform including the ability for insurers to sell policies across state lines...

Brad Wright agrees with Aaron, as he also thinks reform may not be dead yet, but it will require passage of the Senate bill by the House and making changes via reconciliation.

And long time HWR'er Hank Stern disagrees with Antos (when it comes to health insurance, Hank's a very knowledgeable guy, so perhaps Antos should be calling Hank).

But wait, Mike Feehan, a colleague of Hank's, agrees with Antos, noting that this might also address the issue of mandates and force more competition.

Joanne Kenen of The New America Foundation laments the lack of primary care, the lack of real funding for primary and preventive care, and the impact the demise of reform will have - more of the same. And costs will therefore increase to deliver care that should never have been necessary. Sigh.

David Harlow opines that all is not lost, and lays out his wish list for reform now that Senator Brown is, well, Senator Brown. David believes reform can happen without the bigwig pols getting involved.

Friend and colleague Maggie Mahar doesn't want any initial reform effort to start with ending the insurance industry's anti-trust exemption, calling the current interest in this move 'pandering'.

Brady Augustine is a bit more - ticked off. In his contribution, he asks the insightful, yet idealistic question; "How can Congress expect providers to work together in interdisciplinary teams and accountable care organizations if it is unwilling to do the same?" Brady believes reform should have come from the middle. Me too.

Louise in Colorado (one of the best health insurance bloggers in the 'sphere) has a very interesting suggestion on how to address pre-existing condition exclusions without an enforceable mandate. Go read it.

On the macro-est level, we welcome John Goodman, who believes reform is not about health reform but about collectivism, and more specifically how we shouldn't let government take over health care. Goodman says "in matter of health, private decision-making is socially intolerable". Ed note - I disagree, strongly with the premise and the conclusion.

The Incidental Economist thinks the real problem is political feasibility, and that's where things went so horribly wrong.

Alas, we close this chapter (it's bed time for your faithful author) leaving this story to the next HWR editor - Brady Augustine at medicaidfirstaid.com. He's an old hand at this editor of HWR stuff, and has the honor of hosting the Fourth Anniversary Edition!

He'll let you know if the smooching's started

These people are just disgusting.

In the ad, Koop claims:

"I'm here with two artificial joints, two pacemakers to keep my heart in rhythm, as well as a stent to keep my coronaries open." He then says that "seniors in this country can get the same care I received, but in some places, like the United Kingdom, we would be considered too old and the cost to the state too high."

He's flat out wrong. In fact, 47 patients over 100 years old got pacemakers, Koop's a mere 93.

According to FactCheck,

"NICE [the British health system's National Institute for Health and Clinical Excellence] does have a formula used to assess whether or not a new drug or medical device is worth the cost. But it's not a simple spending cap. And once a treatment is found to be cost-effective, it is available to all patients regardless of age."

So who's doing the lying?

The 60 Plus Association, a pharma-funded astroturf (fake grassroots) organization.

Here's more:

"In 2002, 60 Plus received 91% of its total revenue - $11 million dollars - from one undisclosed donor, which the Washington Post reported lined up perfectly with "an unrestricted educational grant" to 60 Plus from PhRMa, the drugmaker lobby group. Jim Martin, the 60 Plus President, has acknowledged in interviews that it received money from pharmaceuticals, saying "I wish it was more."

There are some very good, responsible pharmaceutical organizations, then there is PhRMa. They are neither.

Ok, pretty geeky stuff I'll admit, but interesting nonetheless. (wait, isn't that contradictory?)

Here's my summary of takeaways you should know.

The Center for Medicare and Medicaid Services (CMS) projects health care as % of GDP will go up one full point to 17.6% this year, driven by a declining economy while the demand for health care decline. US health care costs continue to be the highest in the world, by far.

Unlike group health, there's an increasing disparity between Medicare reimbursement for specialty care, sx and radiology and Work comp fee schedule rates. Comp pays relatively more than group for these services.

One of the (many) issues inherent in basing WC on Medicare is that Medicare rates change for reasons specific to Medicare. As an example, the adoption of changes due to the budget neutrality factor legislation in 2008 changed the basic formula used in setting physician reimbursement. The changes increased relative value units (RVUs) and decreased conversion factors (CF). For those WC states that only adjust CFs, this may well have unintended consequences. The NCCI report stated "simply updating CFs for inflation and not offsetting the RVU change will give MARs that are about 8% higher than is likely to be intended."

One conclusion in the study really stood out: CMS says the vast majority of Medicare patients "have access to specialty care, so it follows that many wc specialty care MARs (fee schedules) are well above what is needed to assure access [for wc patients]".

As an example IL work comp pays 450% of Medicare, AK 510%, CT 360% for surgery.

That does raise a question: If most reimbursement for WC is below the WC fee schedule, does that not at least partially negate the importance of the FS as a price setting mechanism?

Finally here's another finding worthy of consideration. The percentage of comp medical costs subject to physician fee schedules has declined from 58% in 2001 to 53% in 2006 (+/-). And, more and more procedures are being done on outpatient basis, and many states don't have outpatient reimbursement schedules that have limits on utilization or even address it like Medicare's methodologies do.

What does this mean for you?

Watch what happens with Medicare. Closely.

Not that there's a long list.

During the 90 minute dialogue, health care came up many times, first during the President' opening remarks. There's a lot there and much of it is encouraging, positive, and helpful. I've excerpted what I think are the most meaningful and interesting passages below, but for those disinclined to read this much, here's my take.

This was an honest, open dialogue, with a bit of demagoging on the part of a couple (mostly freshman) GOP Congressmen. It was clear that the President had read most, if not all, of their proposals and ideas on health care, had considered them carefully, and some were included in the final bills. But let's be clear - Congress came up with all the legislation, not the President. There was no "ObamaCare", despite the use of that term by some in the media.

There is indeed opportunity for some common ground on health reform - perhaps around establishing national health insurance standards combined with opening insurance markets across state lines and perhaps tort reform, although anyone who thinks tort reform is a magic bullet hasn't looked objectively at the issue.

But that said, both steps would help get something started, a 'something' that might break the legislative logjam currently preventing anything at all from getting done.

Here's hoping the Baltimore dialogue will be viewed as the first step in meaningful health reform legislation.

The President's opening remarks:

I know how bitter and contentious the issue of health insurance reform has become. And I will eagerly look at the ideas and better solutions on the health care front. If anyone here truly believes our health insurance system is working well for people, I respect your right to say so, but I just don't agree. And neither would millions of Americans with preexisting conditions who can't get coverage today or find out that they lose their insurance just as they're getting seriously ill...I don't think a system is working when small businesses are gouged and 15,000 Americans are losing coverage every single day; when premiums have doubled and out-of-pocket costs have exploded and they're poised to do so again.

I mean, to be fair, the status quo is working for the insurance industry, but it's not working for the American people. It's not working for our federal budget. It needs to change.

This is a big problem, and all of us are called on to solve it. And that's why, from the start, I sought out and supported ideas from Republicans. I even talked about an issue that has been a holy grail for a lot of you, which was tort reform, and said that I'd be willing to work together as part of a comprehensive package to deal with it. I just didn't get a lot of nibbles.

Creating a high-risk pool for uninsured folks with preexisting conditions, that wasn't my idea, it was Senator McCain's. And I supported it, and it got incorporated into our approach. Allowing insurance companies to sell coverage across state lines to add choice and competition and bring down costs for businesses and consumers -- that's an idea that some of you I suspect included in this better solutions; that's an idea that was incorporated into our package. And I support it, provided that we do it hand in hand with broader reforms that protect benefits and protect patients and protect the American people.

A number of you have suggested creating pools where self-employed and small businesses could buy insurance. That was a good idea. I embraced it. Some of you supported efforts to provide insurance to children and let kids remain covered on their parents' insurance until they're 25 or 26. I supported that. That's part of our package. I supported a number of other ideas, from incentivizing wellness to creating an affordable catastrophic insurance option for young people that came from Republicans like Mike Enzi and Olympia Snowe in the Senate, and I'm sure from some of you as well. So when you say I ought to be willing to accept Republican ideas on health care, let's be clear: I have.

Next, in response to a question from Chaffetz, who said "...when you stood up before the American people multiple times and said you would broadcast the health care debates on C-SPAN, you didn't. And I was disappointed, and I think a lot of Americans were disappointed.

Obama
" Look, the truth of the matter is that if you look at the health care process -- just over the course of the year -- overwhelmingly the majority of it actually was on C-SPAN, because it was taking place in congressional hearings in which you guys were participating. I mean, how many committees were there that helped to shape this bill? Countless hearings took place.

Now, I kicked it off, by the way, with a meeting with many of you, including your key leadership. What is true, there's no doubt about it, is that once it got through the committee process and there were now a series of meetings taking place all over the Capitol trying to figure out how to get the thing together -- that was a messy process. And I take responsibility for not having structured it in a way where it was all taking place in one place that could be filmed. How to do that logistically would not have been as easy as it sounds, because you're shuttling back and forth between the House, the Senate, different offices, et cetera, different legislators. But I think it's a legitimate criticism. So on that one, I take responsibility."

Blackburn
"thank you for acknowledging that we have ideas on health care because, indeed, we do have ideas, we have plans, we have over 50 bills, we have lots of amendments that would bring health care ideas to the forefront. We would -- we've got plans to lower cost, to change purchasing models, address medical liability, insurance accountability, chronic and preexisting conditions, and access to affordable care for those with those conditions, insurance portability, expanded access -- but not doing it with creating more government, more bureaucracy, and more cost for the American taxpayer.

And we look forward to sharing those ideas with you. We want to work with you on health reform and making certain that we do it in an affordable, cost-effective way that is going to reduce bureaucracy, reduce government interference, and reduce costs to individuals and to taxpayers."

Obama
"I've gotten many of your ideas. I've taken a look at them, even before I was handed this. Some of the ideas we have embraced in our package. Some of them are embraced with caveats. So let me give you an example.

I think one of the proposals that has been focused on by the Republicans as a way to reduce costs is allowing insurance companies to sell across state lines. We actually include that as part of our approach. But the caveat is, we've got to do so with some minimum standards, because otherwise what happens is that you could have insurance companies circumvent a whole bunch of state regulations about basic benefits or what have you, making sure that a woman is able to get mammograms as part of preventive care, for example. Part of what could happen is insurance companies could go into states and cherry-pick and just get those who are healthiest and leave behind those who are least healthy, which would raise everybody's premiums who weren't healthy, right?

So it's not that many of these ideas aren't workable, but we have to refine them to make sure that they don't just end up worsening the situation for folks rather than making it better.

Now, what I said at the State of the Union is what I still believe: If you can show me -- and if I get confirmation from health care experts, people who know the system and how it works, including doctors and nurses -- ways of reducing people's premiums; covering those who do not have insurance; making it more affordable for small businesses; having insurance reforms that ensure people have insurance even when they've got preexisting conditions, that their coverage is not dropped just because they're sick, that young people right out of college or as they're entering in the workforce can still get health insurance -- if those component parts are things that you care about and want to do, I'm game...

The component parts of this thing are pretty similar to what Howard Baker, Bob Dole, and Tom Daschle proposed at the beginning of this debate last year...

But if you were to listen to the debate and, frankly, how some of you went after this bill, you'd think that this thing was some Bolshevik plot. No, I mean, that's how you guys -- (applause) -- that's how you guys presented it.

And so I'm thinking to myself, well, how is it that a plan that is pretty centrist -- no, look, I mean, I'm just saying, I know you guys disagree, but if you look at the facts of this bill, most independent observers would say this is actually what many Republicans -- is similar to what many Republicans proposed to Bill Clinton when he was doing his debate on health care.

So all I'm saying is, we've got to close the gap a little bit between the rhetoric and the reality. I'm not suggesting that we're going to agree on everything, whether it's on health care or energy or what have you, but if the way these issues are being presented by the Republicans is that this is some wild-eyed plot to impose huge government in every aspect of our lives, what happens is you guys then don't have a lot of room to negotiate with me.

I mean, the fact of the matter is, is that many of you, if you voted with the administration on something, are politically vulnerable in your own base, in your own party. You've given yourselves very little room to work in a bipartisan fashion because what you've been telling your constituents is, this guy is doing all kinds of crazy stuff that's going to destroy America.

And I would just say that we have to think about tone. It's not just on your side, by the way -- it's on our side, as well."

Price
"Mr. President, multiple times, from your administration, there have come statements that Republicans have no ideas and no solutions. In spite of the fact that we've offered, as demonstrated today, positive solutions to all of the challenges we face, including energy and the economy and health care, specifically in the area of health care -- this bill, H.R.3400, that has more co-sponsors than any health care bill in the House, is a bill that would provide health coverage for all Americans; would correct the significant insurance challenges of affordability and preexisting; would solve the lawsuit abuse issue, which isn't addressed significantly in the other proposals that went through the House and the Senate; would write into law that medical decisions are made between patients and families and doctors; and does all of that without raising taxes by a penny."

[editorial comment - this is bald-faced BS. health coverage for all Americans that doesn't raise taxes by a penny? What utter nonsense!]

Obama
" It's not enough if you say, for example, that we've offered a health care plan and I look up -- this is just under the section that you've just provided me, or the book that you just provided me -- summary of GOP health care reform bill: The GOP plan will lower health care premiums for American families and small businesses, addressing America's number-one priority for health reform. I mean, that's an idea that we all embrace. But specifically it's got to work. I mean, there's got to be a mechanism in these plans that I can go to an independent health care expert and say, is this something that will actually work, or is it boilerplate?

If I'm told, for example, that the solution to dealing with health care costs is tort reform, something that I've said I am willing to work with you on, but the CBO or other experts say to me, at best, this could reduce health care costs relative to where they're growing by a couple of percentage points, or save $5 billion a year, that's what we can score it at, and it will not bend the cost curve long term or reduce premiums significantly -- then you can't make the claim that that's the only thing that we have to do."

What does this mean for you?

A glimmer of hope for change.

Chris Watson is now COO, moving up after a stint of less than a year as COO of Coventry's bil review operations (and a prior position as head of Coventry's First Script PBM business). Derrick Amato, formerly COO, Clinical Services in the company's New England offices) has moved out of Coventry, as has Peter Harn, who's accepted a position as VP Corporate Sales at PMSI in Tampa.

Yet to be announced is the departure of one more senior member of the sales staff, who will be heading to a top slot at a regional work comp managed care company. (this is one of the worst-kept secrets in the industry as I've heard it from no fewer than three sources this week).

UPDATE - The individual who departed, Tom Shivers, has been named EVP of Healthcare Solutions Inc., a comp and auto managed care firm owned by Brazos.

Finally, Pat Sullivan, the well-regarded former head of marketing for Coventry Work Comp, has left as well.

So, what does this mean?

'Big' Coventry is continuing to look to reduce overhead and increase profitability, a path clearly and bluntly laid out by CEO Allen Wise when he took over what was then a struggling company a year ago. I have no idea if these changes were part of a bigger plan, or just coincidental, although the departure of four senior staff certainly reduces overhead, probably by a million bucks all in.

Regardless, FDB's publication of AWP is going to cease. Sources indicate the National Association of Chain Drug Stores (NACDS) is suggesting a move to a new pricing methodology based on Wholesale Acquisition Cost, or WAC.

What's with WAC?

WAC is the manufacturer's list price for drug wholesalers and direct purchasers, excluding prompt pay or other discounts. (Note WAC may not bear much resemblance to the actual price paid, a problem it shares with AWP...)

NACDS and drug retailers would like to see a conversion to WAC; in fact NACDS has been advocating WAC for at least five years. WAC is generally accepted in broad swaths of the payer community; around ten states use WAC in their Medicaid pricing; the huge TriCare program is also WAC-based.

Here's a bit of history.

The original legal case rested on FDB's selection of McKesson as the sole source of drug pricing data. FDB's AWP was based on the actual price that McKesson paid for the drug, plus a margin. For years the typical margin was 20%; six years ago McKesson changed the margin to 25% to make it 'simpler to administer pricing internally'.

The price increase also earned McKesson points with its customers, retail pharmacies, who saw an immediate increase in profitability - profits on Lipitor immediately jumped three-fold after the 2002 increase. As part of the settlement in the 2006 case, FDB agreed to stop publishing prices two years after the finalization of the settlement (which is March of next year).

As cognoscenti are well aware, the suit has already had repercussions. On September 26, 2009, First DataBank and MediSpan, the firms that publish Average Wholesale Pricing tables changed their methodology to revert to the 20% margin, thereby reducing the drug's AWP cost by almost four percent.

Wait, it gets more complicated. FDB is not the only publisher of AWP, and AWP, as published by RedBook and MediSpan, may be around in some markets for a while. The case for the persistence of AWP is that it is broadly used today, and RedBook and Medispan have not been charged with the kind of pricing manipulation that led to the FDB settlement.

Conversely, for some time AWP has been disappearing in generic pricing, where it is being replaced by MAC (maximum allowable cost), FUL (Federal upper limit), and other methodologies that seem to provide a more objective and less fungible baseline.

There's another reason AWP may be on life support; it is broadly reviled as few payers believe, and with good reason, it has any real objective basis.

Implications for workers' comp

As I reported several months ago, work comp regulators are wrestling with the issue, as 33 states base their work comp fee schedule on AWP (California doesn't). Where they end up will be heavily influenced by the metric chosen by group/Medicare/Medicaid; drug spend in comp is about 2% of the nation's total bill of $220 billion.

Because the most serious charge against Blunt was based on Blunt authorizing sick leave for and not getting expenses repaid by an employee who was terminated. Turns out the North Dakota state auditor had reviewed the situation and given Blunt a pass, and reported as much to prosecutor Cynthia Feland well before she went to trial. In fact, these 'crimes' were what enabled Feland to increase the charges leveled against Blunt from misdemeanor to felony status.

Sure, the misdemeanor charges were ludicrous; authorizing the purchase of small gift cards, balloons, and food for employee meetings and celebrations, and a raft of other contrived accusations which together wouldn't amount to enough to give even the squeaky-cleanest among us any pause. In total, Blunt 'signed for' $2,693.15 over three years; all of it with the consent of the fund's legal and financial departments.

But this is an entirely different situation - this isn't just piling up a bunch of ridiculous charges in an effort to bring down a CEO, no, this is outright fraud on the part of the prosecutor.

This is a bit complicated, so stick with me here. The players are Cynthia Feland (prosecutor), Sandy Blunt (defendant), Jason Wahl (state auditor), Mr Spencer (ND state fund employee terminated by Blunt), and your faithful author (me).

Here's an excerpt from communications from Blunt's attorney and Feland's office discussing the memo (authored by Wahl) which stated Blunt's authorization of moving expenses and sick leave for Spencer, was not a violation of state law. First, from Blunt's attorney to the prosecutor:

(paraphrasing the first part) "the Wahl memo read, in part, "we determined, in consultation with a representative of the Attorney General's Office, there was not a voluntary resignation". In the context of the specific allegation of failure to recoup moving expenses of Mr. Spencer, this quoted language is virtually controlling in Mr. Blunt's favor. In the context of the entire case, its importance would have permeated virtually every aspect of the case, procedurally and substantively.

It is difficult for me to fathom the prosecutors in this case not knowing or not remembering the above quoted language of the memorandum when the decision was made in September, 2008, to add the allegation of failing to recoup the Spencer moving expenses to Count I in this case. How could the State believe that was a legitimate action in the face of the subject language in the memorandum? Rule 3.8(a), North Dakota Rules of Professional Conduct, provides, "The prosecutor in a criminal case shall ... refrain from prosecuting a charge that the prosecutor knows is not supported by probable cause". The subject language of the memorandum, in my opinion, rises to the level of no probable cause for the allegation of failing to recoup the Spencer moving expenses."

When I got this transcript, I contacted Feland several times over the last few weeks, asked her directly about this situation, and she refused to address the key question - had she provided Blunt with a copy of the State Auditor's memo which cleared Blunt of any malfeasance related to Spencer?

To her credit, the Prosecutor (who is actually running for District Judge (!!)) initially responded to my queries. Here's the detail.

From me to Ms Feland on January 16, 2010:
Thanks for the response, but I'm not sure it answered my question. [I had asked in two previous emails if the Wahl memo was provided to the defense] I don't want to mischaracterize or misunderstand your statement. Specifically, was the Wahl memo of November 2007 provided to the defense? [emphasis added]

Ms Feland's response on January 19, 2010:
"All information in the Wahl memo has been disclosed to the defense. Given the extra large volume of discovery in the case, I have no way to provide to you the exact date of disclosure of the memo itself. The Wahl memo was also a public record at the auditor's office. [emphasis added] Therefore, as I stated, there is no issue with it and it is a waste of time."

Here's what this means. The prosecutor has no record of providing the defense with a document that would have allowed the defense to prove that the prosecution's main charge was not a crime. Not only that, but she infers that somehow the defense should have checked with the state auditor? This is incredible, unbelievable, and appalling. What other documents is she unaware of?

In this country, and in North Dakota as well, the prosecution must provide the defense with any and all potentially exculpatory evidence.

That is not a suggestion, or a recommendation, or a 'if you remember to do it', it is a legal requirement.

Failing to do so is prosecutory misconduct. The defense is not required to check with the state auditor, the county clerk, the registrar of voters, the town librarian or dog catcher - the prosecutor must turn over any and all information relevant to the case to the defense. Especially if that information destroys a central charge against the defendant.

What in the hell is going on in North Dakota?

And why are they persecuting a guy who's performance at the ND state work comp fund was exemplary?

Blunt's case is on appeal at the ND Supreme Court, and he is waiting for their ruling which could come any time. I fervently hope they reverse the charges and reprimand Feland.

First the what, then the why.

The latest data from NCCI indicate comp medical inflation (based on lost time claims) was 6% in 2008, just a bit more than the previous year. While I've no doubt the figure is accurate, it is important to understand that NCCI's figure is derived from data that doesn't include some fairly significant states - CA and NY being two of the more important.

Another data point comes from an admittedly highly selective source: from conversations with large payer clients, I get the distinct impression that their 2009 medical expenses are trending much closer to ten percent higher than 2008.

Add these data to the latest data from WCRI [subscription required] that indicates California's trend is hitting 9% - a number that may well undervalue the latest figures as WCRI's data is somewhat dated, and the picture gets a bit clearer. In fact, more recent data suggests the inflation rate is well into double digits, with the WCIRB reporting comp medical trend at 16%.

To be sure, California is a unique environment, with unique fee schedule quirks (including allowing hospitals to charge twice (!!) for surgical implants), a recent history of ever-lower work comp premiums, and a mix of managed care programs and providers that is quite diverse. Add those factors to the significant increase in ultimate medical costs due to the Ogilvie and Almarez/Guzman decision and California looks particularly problematic. Yet it also has a reputation as a 'leading indicator', a reputation that work comp observers would do well to respect.

What's driving the increase?

There is a very long answer to this, which involves cost-shifting, increases in the number of individuals without health insurance, reduced Medicaid and Medicare reimbursement, ineffective fee schedules, physician dispensing of repackaged drugs, the growth of narcotic opioid usage, Part D, the nursing shortage and a host of other macro and micro influences, most of which are addressed elsewhere in other seventeen hundred posts on MCM (this blog, to the newcomer).

There's also a shorter answer - misaligned incentives for work comp managed care programs, and payers' increased reliance on managed care program revenue and profits. This leads to a focus on processing bills (which generate fees) and doing utilization review (which generate fees) and using huge provider networks (which generate fees) and sending lots of claims to case management (which generates fees), instead of actually managing the medical components of the claim.

Here's one blatant example of this situation:

Workers comp payers spend hundreds of millions of dollars each year on medical management - pre-cert, utilization review, peer review, case management, clinical guidelines, and the variations and permutations thereof. Dozens of companies from mom-and-pops to regional players to industry giants like Coventry and Genex employ highly trained professional medical personnel to watch over the care delivered to injured workers, carefully reviewing and approving or not approving thousands of medical procedures.

Then, the medical bills come in to the payer. The frightening/amazing/unconscionable truth is that many non-approved medical treatments actually are performed, and billed for, and likely paid - because those determinations are not automatically fed into the bill review system's database, and/or the bill review system can't link the determination to the bill/provider/claimant.

How much of this actually occurs on a national basis is impossible to say, and there's no doubt some payers have the links in place to ensure most if not all medical management determinations are linked to the right claimant/provider/event.

And because many (not all, but many) payers rely on managed care to generate departmental and corporate margins, they aren't focused on the results of UR and bill review, but rather the dollars generated by those functions.

What does this mean for you?

Time to ask what's important and what isn't, and why you are in business, and how you produce results, and whether or not your incentives are aligned with employers'.

With apologies to House Speaker Pelosi; (she may be many things but fat she is not) she's just finished her aria on health reform, and it is officially over. Pelosi's recent remarks confirm what I've been saying; health reform is dead.

Specifically, Pelosi said there aren't enough House votes to pass the Senate bill (good on them), leaving two options - passing a slimmed-down bill or a completely different bill with some reform components. Here's how Pelosi characterized those options (according to Talking Points Memo):

"I don't see the votes for it [current Senate bill] at this time," Pelosi said. "The members have been very clear in our caucus about the fact that they didn't like it before it had the Nebraska provision and some of the other provisions that are unpalatable to them."

"In every meeting that we have had, there would be nothing to give me any thought that that bill could pass right now the way that it is," she said. "There isn't a market right now for proceeding with the full bill unless some big changes are made."

There is a third 'option'; no bill at all. And that's what is going to happen.

Any bill will have to get thru the Senate, and Sen Elect Brown (R MA) is not going to vote for anything like the current Senate bill, nor are any of his fellow Republicans. As Merrill Goozner reports: "...In other words, if President Obama and the Democratic Party leadership had an inkling to reengage the leadership of the Republican Party, there wasn't much evidence on display to suggest anyone on the other side would be offering a receptive ear.

New York Times columnist David Brooks attended the session. He prefaced his question by commenting that the common ground between the two parties appeared to be more like "common pebbles."

More like common grains of sand, I'd say."

On the other side of the aisle, there just isn't the energy in Congress to re-do another bill; there's too much on the calendar, it is an election year, and the Dems darn well better focus on issues more central to voters' concerns.

It is possible the Dems will work on Medicare physician compensation, do something about pharma prices for Part D, and perhaps push some mild form of insurance underwriting reform, but not terribly likely. Instead, look for much more populist rhetoric and politicking, starting with the State of the Union address.

Read them here.

This is just a great edition - thanks Jaan.

You can't have insurance market reform - ending medical underwriting and risk selection - without a strong mandate. And you can't force people to buy health insurance they can't afford without big subsidies. The current budget deficit and recession mean subsidies aren't a reality. There's just no way a family making $75,000 can afford a $15,000 health insurance premium (plus out of pocket expenses) without a big subsidy.

As to cost reduction, Congress has shown itself fundamentally unable to enact meaningful cost reductions. The Republicans painted themselves into a corner with their 'death panels' and 'government-controlled health care' memes. They could have staked out a credible and creditable position as the responsible adults in the debate by getting tough on costs as a way to help business, reduce future costs and thereby deficits and tax burdens.

(But then what do you expect from the party that gave us Part D, the biggest entitlement program since Medicare, along with its $8 trillion ultimate unfunded liability.)

Not that the Democrats gave them much choice. Senate Dems thought they didn't need the GOP, believing they could ram thru a bill they drafted on the strength of their supermajority. And perhaps they could have, if the Mass Senate race hadn't interfered. Sadly, the Senate bill showed our political process at its worst, with glutinous Senators selling their votes for heaping helpings of pork larded with political sweets - clauses on abortion, immigration, and taxes.

The cost estimates were misleading at best; none factored in the quarter trillion deficit we are carrying due to the Medicare physician reimbursement fiasco. The quick fix that's in place today has raised physician compensation by a whole percentage point, making it seven years out of eight that Congress has failed to restrain the growth of Medicare's physician spending.

Given the present environment, I don't see a meaningful effort to do anything different. Thus next year we're going to face an even larger deficit, as our feckless elected officials kick the can further down the path.

No, reform won't happen this year, and isn't likely in 2011.

Family insurance premiums of $30,000 in ten years.

Yes, I did mean to write 'end to health reform'. This afternoon the Senate Democratic caucus is meeting to figure out what to do next, but the outcome was pre-ordained when Senate Majority Leader Harry Reid announced earlier today that nothing would be done on health reform until Senator-Elect Brown (R MA) is seated.

Which means nothing will be done this year.

That doesn't mean health reform won't happen at all, but the 'health reform hangover' makes it very unlikely anyone will eagerly jump into reform anytime soon.

I'll admit to being conflicted over the demise of reform. Covering another 30 million Americans would have been good progress towards addressing one of our country's greatest shortcomings. But the cost of that expansion, the lack of any meaningful cost controls or an enforceable mandate, and the political thievery committed by key swing Senators selling their votes (I mean you, Nelson of NE, Lieberman of CT, and Landrieu of LA) made for a Senate bill just a whit better than no bill at all.

The House bill was better, except for the unfounded belief in the public option; at least it had a better mandate provision.

But the cost reported for both was too low by a quarter trillion, as neither included the cost of reforming Medicare physician reimbursement.

What happened?

The Dems could have had a bill last July, but liberal Senators refused to compromise, convincing Reid they could win without any GOP votes. This forced the more intelligent and intelligible Republican Senators to jump on the death panel/rationing bandwagon. Sure, the compromise necessary to get a bill with at least a few Republicans on board would have been a higher Cadillac tax, lower cuts to Medicare Advantage, and no public option, but a bipartisan bill would have been a huge win for both the Dems and the President.

Instead, we're left with a wasted year.

What does this mean for you?

Without health reform, we're looking at family premiums over $30,000 by the end of the teens. Good luck with that.

That's not to say the House or Senate bill would have made much difference.