Healthcare in 2018

2017 will be a very misleading year.

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

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

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

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

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

This is what we’ll get.

Implications are obvious;

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

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

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

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

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

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

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

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

a-punch-in-the-face

What does this mean for you?

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

Workers comp and Medicaid – Implications aplenty!

Workers comp and Medicaid are intertwined.

First, a few factoids about Medicaid.

  • Medicaid accounts for about 17% of US medical spend (work comp is about 1%)
  • It is very state-specific; states have a lot of control over who and what’s covered.
  • both federal and state funds pay for Medicaid, with the Feds covering about 62% of total costs
  • Most Medicaid recipients don’t pay deductibles, copays, or co-insurance. (Indiana is one exception)
  • Medicaid covers millions of people in working families.

Let’s dig into this last datapoint, as it has implications for workers’ comp.

63% of Medicaid recipients have at least one family member working full time. This varies among states, from 77% in Colorado to 51% in Rhode Island. 15% have a part time worker. Only 19% of recipients’ familes have no one working.

Many employers that don’t provide health insurance &/or aren’t required to provide health insurance under ACA recommend workers who qualify sign up for Medicaid.

Implications…

  • More workers are covered by Medicaid now than were pre-ACA
  • Medicaid’s health “benefits” are similar to work comp
  • Claiming behavior may well be influenced by coverage status

Next, employment.

Most credible studies indicate Medicaid expansion increased employment in states that expanded Medicaid.

Implications

More employment = more payroll = more workers’ comp premium and more claims (NOT higher frequency, which is a percentage and not a raw number)

There are a number of other benefits for states that expanded Medicaid – an excellent summary of all available research is here.

What does this mean for you?

Watch what happens with the GOP’s efforts to “repeal and replace” ACA.  Workers’ comp has done quite well since ACA’s full implementation; reductions in Medicaid will almost certainly have the opposite effect.

Note – if you want to argue or discuss, fine – cite sources and data to support your assertions.

Tuesday catch up

Or, what happened while I was/we were in New Orleans at NWCDC

First up, a most excellent report by WCRI’s Olesya Fomenko and Te-Chun Liu on provider fee schedules in workers’ compensation.  Must-reading for investors, bill review entities, networks, and users thereof, the report details:

  • which states use what methodologies,
  • what changes have occurred over the last few years, and
  • trends and developments.

As there is a lot going on with Medicare’s fee schedules, this report provides a sound basis of understanding.

For all those investors, private equity people, and researchers – you can now get – for FREE – what you often pay me for.  Information on fee schedules in workers’ comp and the effects thereof is available here. From WCRI, of course!

Wait…did I just post that? Sometimes I’m such a dumbass.

Fraud

The REAL fraud in work comp is not the odd worker cheating the system – it’s employers misclassifying workers, using labor brokers, under-reporting payroll – you name it.  Bruce Woods, formerly of AIA, brought this to the attention of AIA’s members about a year ago, and I thought of Bruce when I got this from Matt Capece about the millions in damages due to fraud in one state – New Jersey.

Health spending

US spending on health care is approaching 18% of GDP.  CMMS estimated 2015 spending hit $3.2 trillion, or $9,990 per person. The primary driver was “residual use and intensity”, geek-speak for what’s left after age, sex, population changes and inflation are accounted for. In other words, people are getting more services which, given over 40 million didn’t have health insurance until 1.1.2014, and just over half of those poor unfortunates now do, isn’t exactly shocking.

You can expect the folks most likely to lose their health insurance under Trump/Price will get every test, procedure, therapy, script, surgery, and treatment they can now, before the ACA is repealed.

Deflation in work comp medical spend

Workers comp medical expense is now just over 1 percent of total US medical spend. While non-work comp costs were up 5.8 percent last year, NCCI reported work comp medical DECREASED 1 percent last year.

Holy flipping unicorn, Batman. Until someone offers a better explanation, I’ll credit ACA’s reduction in the number of uninsured as the major driver.

Good people sometimes win

Congratulations to friend and colleague Danielle Lisenbey, CEO of Broadspire. Danielle was just named Claim Exec of the Year by the New York Claims Association.

Bravo!

 

NWCDC 2016 – final takes

After the blur that was the NWCDC in New Orleans last week, here are a few impressions.

Tough week

There were fewer insurance types this year, and a couple TPA execs noted they brought fewer people and most of their people only got Expo passes. The timing – after Thanksgiving – seemed to be a bit of an issue.  End-of-year stuff including closing whatever deals they could to make this year’s revenue budget and finalization of budgets and 2017 plans kept some at their offices, while the all-too-common “let’s stop traveling to control expenses” played a part as well.

Next year the show returns to Las Vegas, and it’s another week later.  We’ll see if that helps or hurts attendance.

Notably, overall attendance was reported as flat – after a couple years of record high numbers, that’s good news for conference owner LRP.

Presenters

Folks, please please please don’t be so damn dull. Workers comp is boring enough without we presenters making it even worse.  If you aren’t used to presenting, get coaching. If your slides just include a bunch of bullet points, get your design folks to translate words into pictures. DO NOT READ YOUR PRESENTATION. Do not read your slides. Engage, entertain, focus. Make damn sure you tell them why what you’re talking about is important TO THEM. 

No matter how important your points are, if your audience is asleep or playing words with friends you might as well be singing in the shower.

There are many, many people with different approaches and styles who are really effective. Friend and colleague Alex Swedlow, President of CWCI, uses a lot of charts and graphs – and a sardonic style and dry wit – to make complex issues understandable.

Bob Hartwig PhD has way too many slides, talks way too fast, presents way too much information – and is a terrific presenter.  Why? Because he’s found a style that works for him.

Some need a lot of practice, others shouldn’t as it makes their talk seem wooden and stilted. Some can ad lib, others can’t.  Find what WORKS well for you, and stick with it.

And always ask what you can do better.  People will always blow smoke up your shirt about how great you were – ignore that.  Sure, take away the things you did well, but seek out what you can do better. We can always improve.

Execution

There are few new ideas in the industry, few real innovations – but lots of talk about innovation. What there is – is a very real and very strong focus on execution by some vendors, TPAs, brokers, and service providers.  The people and companies that impressed me were mostly the ones that were “innovating around execution”. What can they do to make their customers’ jobs, lives, operations, functions easier/smoother/less stressful? How can that be measured? And who are their customers – what do they do every day? How are those individuals measured and rewarded? What do they need, want, and have to have? What makes their job harder? Where’s the nuance, the small difference, the unseen need that can be exploited to differentiate?

Figuring out the “execution opportunity” is a big part of success, but it’s a total waste of time if it isn’t translated into different workflows, services, business practices.  This can be tedious and frustrating and appear to be marginally rewarding at best.

But the whole is greater than the sum of the parts. Customers – buyers, front-line staff, employer supervisors, work comp patients – notice and appreciate the effort. More business comes your way. And competitors find it hard to get a foot in the door.

In several deep dive conversations with a wide variety of folks, I kept noting the ones that are doing well are relentlessly probing, asking questions, wondering why?. This isn’t flashy or in many cases really obvious – but it sure is working.

Industry Isolationism

The conference is useful in many ways; one can get lots of meetings done in a brief period; new, intriguing approaches/vendors/programs are on display; and reconnecting with colleagues is always rewarding.

What stuck out for me this year was something that is both troubling and encouraging: the insularity of the work comp industry is receding.  Perhaps it’s the election, a vastly improved economy, or just more awareness; for whatever reasons, many of the people I spoke with are more attuned to and aware of external factors that may well impact work comp.  A few examples:

  • Inflation rates will affect investment income, which in turn moves reserve adequacy
  • Automation decreases risk for industrial workers, while reducing re-employment opportunities
  • Changes to health insurance status may increase or decrease claiming patterns, cost shifting, case shifting

This is good news indeed.  However, there’s a lot of misinterpretation due to misunderstanding or just plain ignorance (not saying that pejoratively, but rather noting the fact that a lot of folks just aren’t very aware) about some of these issues.  I’d suggest it’s always best to try to understand what’s really going on before jumping to conclusions about what “that” means.

A lesson I try to keep in mind myself…

 

NWCDC Quick recap

It’s been a blur – here are the quick takeaways from the last 3+ days in New Orleans

The new new thing is…

Telehealth.  Several entities are either specializing in telehealth, telemedicine, or some aspect thereof.  Provider organizations have proprietary applications, independent third parties have theirs (CHC is one I met with), and others are talking about what they’re going to do.  Seemed like there was a lot of product development happening on the fly – which is fine – and a good thing.  Hearing from lots of stakeholders is always productive.

Blockchain.  When asked to name one thing that people aren’t talking about that they should be, I named Blockchain.  Here’s what this is – and why you need to know about it. That was actually one of two things I discussed – the other is admin expense – which we’ll dig into next week.

What wasn’t there?

More accurately, who wasn’t there.  Young executives in positions of significant responsibility were noticeably rare.  BTW “young” is a very relative term in workers’ comp; people who I think of as “young” are 51-52.

In other industries, I’d guess young is rather…younger than that.

As many have been noting, we’ve got a real dearth of young talented professionals in positions of responsibility.  That’s pretty damn scary, as the work comp world is in for massive changes over the next decade, and old guys like me aren’t nearly as prepared to anticipate and address these changes as younger people are.

There was also a noticeable lack of insurance folks at the gathering. Im hearing this is due to end-of-the-year cutbacks on travel to make those 2016 financials just a little rosier.  TPAs were also a little light on staff this time around.

Deals

While the pace of acquisitions has tapered off significantly, I spoke with several owners who are in the process of working on transactions.  Not big ones, but what we’re going to see is more small transactions beefing up a company’s core capabilities or expanding its product lines.  Prices are also down, as at least two investors told me the OneCall situation has significantly affected valuations.

 

 

Heading to New Orleans..

It’s the annual gathering of the work comp tribes time.  This year the National Work Comp and Disability Conference is in New Orleans, and I’m really looking forward to the great food, wonderful music, and Southern hospitality. As I’m sure many of you are.

I’m honored to be speaking twice – Thursday morning’s a discussion of chronic pain guidelines with Steven Feinberg MD.  Steve is compassionate, very knowledgeable, and highly experienced and I’ve learned much from him. Thursday afternoon is the Bloggers’ Panel; get there early as this session is always well-attended.  Any bets on how long before I get grief over the election results from Bob Wilson? (Bob was right and I was wrong in our predictions)

A couple years back I listed a few recommendations based on my far-too-many-years attending work comp conferences.

1.  Realize you can’t be everywhere and do everything. Prioritize.

2.  Leave time for last-minute meetings and the inevitable chance encounters with old friends and colleagues.

3.  Unless you have a photographic memory, use your smartphone to take voice notes from each meeting – right after you’re done.  Otherwise they’ll all run together and you’ll never remember what you committed to.

4.  Introduce yourself to a dozen people you’ve never met.  This business is all about relationships and networking, and no better place to do that than this conference.

5.  Wear comfortable shoes, get your exercise in, and be professional and polished.  It’s a long three days, and you’re always ‘on’.

6. Finally, what happens in New Orleans gets posted on Instagram.  Don’t be stupid. Like these guys. Alcohol is not your friend, and this is not spring break.

Travel pleasantly!

The future of Managed Care Matters

MCM has been up and running for more than a dozen years, over 3,000 posts, and multiple iterations. We average about 1400 visitors each day we post.

It’s time to review what we do and see what needs to change.

Not to worry (or cheer, depending on your view) It’s not going away.  Nope, we’re going to continue doing what we do – reporting what we think is important; calling out the bad actors; applauding the good folks; digging into the details; and challenging you, dear reader, to think more deeply.

This is more important now than ever.

The American health care system  – patients, providers, payers, suppliers, intermediaries – accounts for one out of every six dollars in our economy.  17 percent plus of our GDP. Almost three trillion dollars. Likely 20 million + jobs, many of them well-paid.

As we’ve seen with ACA, changing this “system” is wrenching indeed. It’s incredibly politically charged, stupidly expensive, delivers poor results for what we pay, brutally hard to explain, and stuffed with great reasons to not change. Oh, and there are more lobbyists focused on pharma, medical devices, insurance, providers and health systems than for everything else combined (I kinda guessed at that last one, but it’s likely true).

After the most bizarre and unpredictable election in memory, it’s now the Republicans’ turn.  Reforming 1/6th of the nation’s economy is challenging indeed, and we all hope they get it right, as there is so much at stake.

For my work comp readers, we’re used to being the flea on the tail of the elephant. When you buy just 1.25% of all the health care services in the country, you get used to being whipped around and having almost no ability to choose where you go.

Make no mistake, the “reform of health reform” will dramatically affect workers comp.

Here’s what’s happening at MCM.

  1. All comments will be moderated.  After a raft of nasty comments from a very few posters it’s no longer advisable to let comments go “live” without moderation.
  2. We’re adding a new category – Health reform’s impact on worker’s comp. You can see those categories on the right side of the home page, where all posts are neatly categorized. Just click on the one you want and voila!
  3. As always, courteous, intelligent, and fact-based disagreement is welcome. If you want to take issue with a post or specific content cite primary sources to back up your statements and claims. Unsupported rants will not be posted.
  4. Anonymous comments may or may not be posted.  You know who I am, it’s only fair I – and other readers – know who you are.

In January, we’re launching a periodic podcast which will focus on key issues, update you on deals and transactions, provide context on health reform, and answer your questions.  Will keep you updated on that – it’s been a long time in coming!

 

 

 

Getting serious about health reform, part two – Medicare

As the GOP goes about repealing and replacing ACA, they’ll have to carefully consider how  Medicare will be affected, because it absolutely will be.

Briefly, reimbursement, senior drug benefits, hospital funding, and private Medicare Advantage programs were all altered by passage of ACA. Outright repeal of ACA will, according to most experts, result in higher Medicare costs in the future.

The GOP will have to walk a very narrow and tortuous path between increasing the deficit, something unacceptable to many legislators, and reducing benefits thereby angering its key constituency – seniors.

Not only did ACA make substantive and far-reaching changes to Medicare, but Medicare, Medicaid, group health and individual coverage are all inextricably linked. Reimbursement mechanisms and drivers, systems connectivity and protocols, coverage determinations and benefit design are related to, and influenced by, other payment sources.

Among the changes ACA made to Medicare are:

  • transition from strict fee for service to value-based purchasing
  • close the drug benefit’s “donut hole” (big out of pocket costs for recipients)
  • restrain increases in Medicare Advantage premium increases until the MA programs’ performance is on par with Medicare
  • fund ongoing and much-needed research

There’s been little detail from the incoming administration about future plans, however Speaker Paul Ryan’s “A Better Way” has a plan to address Medicare. It relies on privatization.  While Ryan’s website is outdated (still referring to the SGR), the “A Better Way” Plan, and recent press statements, provide some details on Ryan’s thinking about “repeal and replace”.

Before we jump into that, a word about ACA’s impact on Medicare. If ACA is repealed, there will be financial fallout for Medicare. In fact, as currently implemented, ACA’s passage has helped Medicare‘s viability.

Per Fact Check;

The law [ACA] both expanded Medicare fundingadding a 0.9 percent tax on earnings above $200,000 for single taxpayers or $250,000 for married couples — and cut the growth of future spending…The trustees’ 2010 report estimated that the ACA had added 12 years to the life of the Part A trust fund.” [emphasis added]

ACA also reduced some reimbursement (payments for imaging is one example), which many Republicans defined as “cutting” Medicare. That played well with seniors then, as most were highly protective of the system they’d been paying into for decades.

So, if ACA is repealed in its entirety, Medicare’s costs are going up.

Ryan’s solution

While there’s little in Pres. Elect Trump’s platform addressing Medicare, other GOP stalwarts have weighed To his credit, Speaker Ryan wants to improve Medicare’s future financial position; he proposes to do so by:

  1. Raising the eligibility age to 67 by 2020, and
  2. Dumping the current CMS-run system in favor of giving seniors vouchers they will use to buy coverage from private insurers. (currently private insurers administer the Medicare program under contract from CMS)

Financially, baby boomers MAY come out OK on the second point (except for those of us who are going to have to rely on the post-ACA private insurance market for two more years). But the Millennials and Gen Exers may well be looking at higher out-of-pocket costs if elected officials decide Medicare vouchers are just too expensive.

However, all seniors would be affected by a privatization of Medicare, and therein lies (one of) the issues.  Medicare is almost universally well-regarded and jealously guarded by seniors

  • 77% of seniors say Medicare is “very important” (that’s higher than the military)
  • more than 2/3rds say Medicare needs to make some changes to remain viable – but the overwhelming favorite “change” (87%) is for the Feds to negotiate drug prices
  • 75% of Medicare recipients believe it is working well

Most telling for Speaker Ryan, only a quarter of respondents thought Medicare should switch to the key plank of the Ryan plan – premium supports.

Reports indicate the GOP is going to move aggressively on repealing ACA and replacing it with something else.  Given the demographics of Trump/GOP voters (mostly older), their favorable views of today’s Medicare, and their lack of enthusiasm for higher premiums or cost share, this is going to be quite the challenge.

It will also be a clear indicator of how serious the GOP is about “reform”.

What does this mean for you?

The first 100 days are going to be quite interesting- watch for the battle between those focused on their core constituency and those seeking to fundamentally change health care.

 

 

Getting serious about health reform, part one

Selling health insurance across state lines is one of the central planks of the GOP’s plan to replace ACA.  Intended to foster competition and reduce costs, the idea is the more insurers competing for customers, the lower the price and better the product. And by eliminating the requirement that insurers comply with state mandates, costs would be lower because some services, conditions, and treatments would not be covered

In addition to these issues there is one real example that should sharpen our thinking.

Today three states allow citizens to buy insurance offered by out-of-state insurers. Maine, Wyoming, and Georgia have all allowed this for over a year, yet no out-of-state insurers are offering plans in those states.

the question is why?

Folks advocating this idea base their view that selling coverage across state lines will reduce costs by eliminating mandated benefits, which some think would reduce costs 30-50 percent.

That view reflects a lack of understanding of the cost drivers in health insurance, the primary driver being – you guessed it – the cost of medical care.  While mandates do influence costs, the underlying cost of insurance is the cost of care. And health care just costs more in Portland Maine than it does in Boise Idaho

There’s another concern that hasn’t been broached, perhaps because it is politically charged. States have significany regulatory authority over benefit design and mandates. Allowing the sale of non-compliant insurance in a state may well be anathema to those strongly supporting state sovereignty.