Someone please explain this…

If the medical device tax isn’t repealed, a few dozen Congresspeople are willing to default on our debt, potentially causing international financial turmoil and a major recession.

That’s reality, or at least what passes for reality these days.

Here’s the path we’ve trod to get to this point.

  1. A few dozen Congresspeople refused to pass a budget by October 1 because they wanted PPACA killed.  The Speaker of the House, averse to violating the “Hastert Rule”, went along with their demands.
  2. The Senate refused to comply, and anyway, the President would not have agreed.
  3. As public opinion turned increasingly against the few dozen, and their increasingly untenable position became increasingly obvious they changed their demands, from a delay to:
    • a delay of PPACA implementation, then
    • a repeal of the medical device tax, then
    • a delay of the enrollment mandate, then
    • a demand that Congresspeople and their staffers would have to pay all their premiums themselves; then
    • a delay of the employer reinsurance tax…
    • now PPACA appears to be off the table, and instead there’s a demand for some budget talks around addressing the sequester and long-term entitlement cuts.

Sure, some of these were mixed in together, and others were sorta kinda coupled, but you get the picture.

As some readers have pointed out, the Congresspeople’s actions are, in fact, legal.

They are also mystifying.  Sure, the most vocal come from very safe districts where their actions seem to reflect the current will of their voters, but is delaying the medical device tax really worth defaulting on the national debt – and the all-too-likely consequences of a default?

Medical device tax or… world-wide financial meltdown, immediate return to 2008 recession…

Of course, now that the GOP is on the run and desperate for a deal, any deal that allows them to declare victory (maybe changing PPACA’s health plan colors from bronze silver and gold to red, white, and blue?), Senate Majority Leader Reid is playing his own brinksmanship game, demanding a roll-back of the sequester.

The GOP won’t agree to that, so we’ll likely get just what we would have had if this whole stupid pointless embarrassing mess hadn’t even happened – a short-term deal late on October 16 (that’s tomorrow!) with some nice words about negotiations over long-term entitlement reform and revenue generation.

What does this mean for you?

Elections have consequences.


WCRI’s CompScope – quick takeaways

WCRI’s latest CompScope reports are out – there’s a megaton of info in the 16 state reports (I certainly have NOT read them all), but here’s what I’ve gleaned from an initial review of the reports on several large states.

Reforms often have unintended consequences – primarily increasing, rather than decreasing, medical costs.  Providers and their helpers find ways around the regs or actually use them to generate more profit, and there are a plethora of examples:

    • CA physician dispensing of drugs not on Medi-Cal fee schedule – when the drug fee schedule change drastically reduced payments for drugs, the loophole the dispensing profiteers drove thru was this; if the drug was not listed by Medi-Cal, then it was paid under the old AWP-based fee schedule.  Voila, a huge opportunity for selling repackaged drugs thru dispensing docs;
    • CA cost of compounded drugs went up after fee schedule was imposed, something predicted by several experts, yet ignored by the politicians searching for a quick and easy fix.  They got their quick and easy, but didn’t get a fix.
    • FL outpatient facility costs went up after the change to fee schedule from 75% of billed charges to 60%.  Anyone could have predicted this; all hospitals have to do is increase their billed charges, which, shockingly, they did.

Reform changes that appear to have the most real impact on costs are typically adopting an RBRVS or MS-DRG based fee schedule and adopting binding UR and strong clinical guidelines.  Ideally, both. This addresses the price and utilization issues at the same time, making it harder (not impossible, but harder) for providers seeking to game the system to succeed.

What does this mean for you?

Good reform can be effective. Bad reform is often very counter-productive – and there’s a lot of bad reform.


Health Wonks on the Shutdown, Obamacare, and other matters of great import

It falls to me to author this Shutdown edition of Health Wonk Review.

I’m truly honored to be in this position; the posts below bring a depth of understanding, a diversity of opinion, and a wealth of experience/expertise to this discussion that is sorely needed.

The shutdown’s cause – PPACA

David Williams ledes off (intentional pun alert) with a brief on why some in Congress hate/despise PPACA. David makes telling points; this is a must-read.

An excellent counterpoint comes from Jaan Sidorov, who attributes outrage over PPACA to a general distaste for government and government expansion.

I take Jaan’s point, but I’d point out that many of those most outraged are also on Medicare and enjoying the handout that is Part D...and the economic impact of the shutdown and long-term impact on the government workforce – makes the stand of a relatively few Congresspeople even more puzzling/troubling/short-sighted.

A welcome perspective comes from health insurance.org; where Louise Norris reminds us that We are all in this together; sure, her family’s insurance costs are going up, but “We support [reform] because something like this isn’t supposed to be all about us. In the case of healthcare reform, our higher premiums will help ensure that our friends and neighbors and fellow citizens have access to affordable health insurance.”  Thanks for the reminder, Louise! (btw Louise is a broker for small employers; she brings a feet-on-the-street perspective that we wonkers often lack.)

So, what would have happened if the Dems had agreed to delay implementation of PPACA for a year?  Nothing good, says Health Insurance Colorado; an actuarial disaster, adverse selection on steroids, administrative nightmare.  Other than that…


With all the confusion about the government shutdown, many seniors are concerned that their healthcare and prescriptions will be halted.  Chuck Smith of Innovative Health Media says this simply isn’t the case.  Although annoying, seniors with Medicare can continue to get the same coverage as they did prior to the shutdown.

Can we trust officials and legislators to put patients’ care and the health of the population first when they are looking over their shoulder at those who might provide them lucrative employment opportunities in the private sector?   Neither the opponents or proponents of this reform legislation seem concerned about the potential for corruption provided by the “revolving door.”  Fortunately, Roy Poses is. And the consequences have been, and will be, incredibly damaging if we don’t address the “door”.

Some of the lesser-known-but-deadly-serious effects are outlined at Workers’ Comp Insider, where Julie Ferguson delivers a roundup of information about the impact that the government shutdown is having on workplace health & safety and various regulatory and employment–related matters. It’s the second — and with any luck the last — in her series of roundups on how the shutdown is affecting employers and employees alike. Here’s a quick list…

  • Mine safety inspections – required by law to happen 4 times a year for deep mines – are on hold. Think Upper Big Branch, Sago, Aracoma.
  •  Other workplace safety inspections are halted
  • NIH research is on hold, and some projects are going to be severely affected.

Of course, the outrage over PPACA was the trigger for the whole shutdown idiocy, which leads to our next section;

How ’bout them Exchanges?

Glad you asked! Writing on the eve of open enrollment, Dan Schuyler, former Technology Chief at the Utah Exchange, now at Leavitt Partners predicts a rocky start for the exchanges (spot on with that one), explains why, and discusses what metrics to look to, and over what time frames, to determine how well the exchanges are working .  Head to Health Affairs, and read Will Health Insurance Exchanges Work to find out if Dan thinks they will…

The estimable Maggie Mahar digs into one of the most successful Exchanges to date – the one in Kentucky where enrollment is proceeding apace.  Maggie provides advice for those looking into buying insurance via the exchanges; start early, look often, and don’t worry, you’ve got plenty of time. 
More insight into/advice on shopping on the Exchanges comes from Wendell Potter; Potter hits the highlights in his brief, easy-to-read piece.
Another perspective comes from the always delightful Hank Stern; Chad Henderson is, apparently, the only American who’s successfully navigated the Exchange (but still paid too much). InsureBlog’s Bob Vineyard has the details. (ed. note – Hank and I could not be further apart politically, but seem able to disagree amiably…)
Adam Fein discusses the role of Exchanges in pharma, concluding that by 2022, most drug dollars are going to flow thru Exchange-purchased health plans and government.

More great posts…

Thanks to Jason Shafrin for his contribution, wherein he unpacks the recent report that overweight folks live longer.

Continuing on the other weighty matters front, Maribeth Shannon of CHCF and Jen Joynt, an independent health care consultant, have a piece in Health Affairs blog entitled No Method To The Madness: The Divergence Between Hospital Billed Charges And Payments, And What To Do About It in which the authors offer an interesting history of why charges mattered initially and how they became divorced from payments, the remaining incentives for charges to remain high.  For those paying bills at a discount below charges, scary stuff indeed (I’m talking to you, work comp!)

Population health matters a lot – if you aren’t up to speed, read this piece on electronic health records and their interaction with population health.  Thanks to Healthcare Talent Transformation’s Peggy Salvatore for the contribution.

That’s it for this edition; thanks to the contributors and see you in a fortnight – when hopefully sanity will have prevailed.

If not, it will be the default edition…


On work comp back surgery, Minnesota gets it right

Back surgery is far too common, far too risky, and far too costly – it’s also far from proven effective for most conditions.

That’s why Minnesota’s decision to educate workers’ comp claimants contemplating back surgery is a great example of legislators and regulators getting it right.  The legislature passed SB1234 which among other things called for a two-year pilot program:

“for employees with back injuries who are considering back fusion surgery. The purpose of the program is to ensure that injured workers understand their treatment options and receive treatment for their work injuries according to accepted medical standards. The services provided by the patient advocate shall be paid for from the special compensation fund.”

The program’s Patient Advocate helps claimants determine if lumbar fusion surgery is appropriate, educates them about the risks (only half get better after surgery, about a third have a “poor” result), complications, likelihood of repeat surgery (about 25% get another surgery), and poor outcomes (less than half return to work).

This makes so much sense on so many levels. The research indicates PT and anti-inflammatories deliver better outcomes than surgery for degenerative disk disease, probably the most common cause of low-back pain.  That’s not to say surgery isn’t the right treatment for some; a government research project indicates patients getting surgery for herniated disks have better outcomes in all categories except one – return to work.

Leaving aside that rather big caveat, this is exactly what the workers’ comp system needs – more science, better educated claimants, and a clear and understandable discussion of potential risks and benefits prior to aggressive treatment.

I’d be remiss if I didn’t note the State of Washington dealt with lumbar fusion some years ago, requiring conservative care before contemplating surgery and banning multiple level lumbar fusion for patients with no prior lumbar surgery.

Hat tip to WorkCompCentral for the head’s up.

What does this mean for you?

See, legislators and regulators can – and do – get it right.


Workers’ comp PBMs; what’s happening and why

The workers’ comp pharmacy benefit management (PBM) industry is consolidating, with two recent transactions accelerating a trend that started several years ago.

This trend will continue.

There are several inter-related things going on here.  Every payer uses a PBM, so market share can only be gained by taking business from a competitor or buying it by acquiring the competitor.

Competing for business puts a premium on price and service, and squeezes margins.  Now, price is important, but so is buying power (leverage over the retail chains that are suppliers), technology (especially adjuster/case manager interfaces) and, more and more, clinical expertise and the ability to make that expertise actionable.

The latest deal involves industry founder PMSI and long-time rival Progressive Solutions.  Progressive Solutions is itself the product of the acquisition of Progressive Medical (one of the other early entrants in the WC PBM business) by Stone Point Capital. Stone Point owns Stone River, the leading third party biller (they are a factor, buying workers’ comp scripts from retail pharmacies and billing the right employer or insurer). Stone River had long sought to be thought of as a true PBM; buying Progressive Medical fixed that need.

The PMSI-Progressive transaction is not as simple as Healthcare Solutions’ purchase of Modern Medical, which appears to be a straight purchase to gain share, expertise (Modern’s clinical pharmacy program is strong, as is their government affairs function), and strength in DME and home health business.

In contrast, the PMSI/Progressive deal is anything but straightforward.  Kelso and Company is in the lead position on the deal, while Stone Point “will continue to be a significant shareholder in the combined business.” Kelso’s entrance into the PBM business  is significant, as is their lead position.  While some in the industry see this as Stone River acquiring PMSI, that is clearly not the case.

Industry followers may recall Healthcare Solutions purchased ScripNet a couple years back, and industry leader Express Scripts bought rival MSC several years prior to that transaction.

When the Kelso/Stone Point deal closes, there will be six PBMs with significant market share; Express, PMSI/Progressive, HealtheSystems, myMatrixx, Coventry/FirstScript, Healthcare Solutions.  The dominant third-party network supplier is Catamaran, a position the company assured with their purchase of rival Restat.

What does this mean for you?

A fiercely competitive business is driving more value for buyers – and buyers are demanding more value. 


Status report: Obamacare implementation

Here’s where things are.

Briefly, my best guess is less than a hundred thousand folks have enrolled in insurance via the Exchanges so far.  That’s based on reports I’ve seen from several sources identified below.

And, there are a lot of health plans participating, with 2/3 of states offering 4 or more health plans, each with multiple benefit plans.

Not surprising, as Massachusetts’ experience with their “exchange’ indicates people accessed their system about 18 times before actually enrolling.

Those shopping for coverage are finding lots of options, as 2/3 of the states have four or more health plans selling thru the Exchanges, while eleven of the most populous states have ten or more plans participating.

Carrier Participation Map - Final

Of course, PPACA implementation started back in 2010, with the elimination of lifetime caps on medical expenses, extension of coverage to dependents up to age 26, increased reimbursement for primary care under Medicare and other interim actions.

What does this mean for you?

Not surprisingly, there’s far more shopping than buying, and a raft of technical and capacity problems on the Exchange servers.  As the tech issues get fixed, we’ll see more traffic and more enrollees, especially in late November.

Until then this will quickly become yesterday’s news.


Is killing Obamacare worth this?

A couple or three dozen Congresspeople – and the House Speaker – have shut down the federal government because they object to PPACA.  And the shutdown may well extend to a refusal to raise the debt ceiling.  The economic impact is significant:

  • The economy is losing $300 million a day.
  • A three-week shutdown will decrease GDP by almost 1%, this in an economy that has struggled to keep growth at 2%.
  • 2 million federal workers’ paychecks are delayed; 800,000 may never get paid.  They have mortgages, tuition payments, credit card bills to pay.

That’s the economic picture; the effects on individuals are diverse, but the longer this goes on, the more painful it will become.

I’d suggest there’s a longer-term problem, one that will have an unquantifiable but nevertheless profound negative impact on the US; the vilification of federal government employees by politicians and pundits who denigrate those workers and the work they do.

After three years of no raises, continued demonization by strident and powerful talking heads and politicians, after being told they are the problem, the morale of the average government employee has got to be pretty low.  These are the people who put out fires, keep airplanes from hitting each other, ensure our food is safe, pay our parent’s Social Security and Medicare bills, lock up bad guys, prevent Iran from funneling money to their nuclear program.

Sure, some are pretty unproductive, but most work hard, are proud of what they do, and do it well.  

I can’t see how the ongoing “they are the enemy” meme helps our country.  Sure, it makes for great theater, but who would want to take a job where you’re constantly told you are lazy, overpaid, feckless, and a leech?

I may be biased as I have quite a bit of experience with federal workers; my Dad was in the CIA and its predecessor organization for 25 years; my Mom worked for the Agency – and managed fingerprint files for the FBI during WW II. Both were very proud of the work they did, did it very well, and made a difference. My aunt was responsible for all Navy payroll for a decade; and woe to anyone who screwed up any of “her boys'” paychecks.  Other family members are in federal law enforcement, and I cannot begin to describe the sacrifice we have paid for that commitment.

It angers and saddens me to see and hear the derisive, uninformed, and flat out wrong comments by the Bachmans and Issas of the world.  But more importantly, it shows that they really don’t understand, or perhaps don’t care, that their grand-standing will do lasting, and real damage to our country.  

If we can’t attract hard-working, intelligent, competent people to work in public service, we’re screwed.

And we have no one to blame but ourselves.


There’s just not much to say, so we’ll talk about devices

About a group of people that refuses to fund the government because it objects to a law passed by both Houses, signed by the President, and upheld by the Supreme Court.

So we’ll focus on the one thing that people in both parties seem to agree on – a desire to repeal the medical device tax.

The 2.3 percent excise tax:

  • went into effect this year,
  • applies to things like catheters, MRI machines, surgical implants – but not toothbrushes and other personal care items, and
  • will raise about $29 billion over ten years, funds that will be used to offset some of the insurance subsidies enjoyed by folks who don’t make a lot of money.

Shockingly, some Rs and Ds agree that the tax should be repealed. Not shockingly these Senators and Congresspeople are from districts where big device companies operate – companies such as Medtronic, GE, Phillips.

Not surprisingly, the device industry is in full voice over the issue, claiming the tax will cost 45,000 jobs (really!), increase consumers’ costs, be hard to implement, and distort the market.  What is really happening here is the industry refused to go along with an initial request from PPACA backers to pony up some funds to help pay for the bill – a request acceded to by the insurance industry, pharma, and hospitals.  Thus the device folks were on the outside looking in in the final days of negotiations.

It’s understandable that they’d want to undo the tax – it’s also unrealistic and a bit weird.  After all, the industry is going to get a LOT more revenues from the newly-insured next year, growing their top line and increasing profits as well.  And this for an industry that already generates profits in excess of 15 percent of revenues…

The other industries that are going to benefit from PPACA are contributing to the cost, so it seems logical that the device manufacturers should too.

What does this mean for you?

It is unlikely the device tax will be repealed, as the President and Senate Majority Leader are bot adamantly opposed to a repeal.

But even if it is, it isn’t going to have much – if any – effect on consumers or payers.



Exchanges open tomorrow – what does this mean?

Come hell or high water – or even a government shutdown, the Exchanges are going to open tomorrow.  Here’s what it means.

  • Some will not be “fully operational” – Spanish language options won’t be on-line in Nevada for some weeks; Medicaid and subsidy eligibility can only be accessed via phone in some states; small businesses can’t buy coverage till November.
  • Estimates are that only about 7 percent of the population will obtain coverage thru the Exchanges – or about 23 million people.  The rest will be covered via Medicare, Medicaid, and employer plans, and other means.
  • The open enrollment period is six months; don’t expect all 23 million to sign up tomorrow, or even this time around.  This is especially true as enrollees have to pay their first month’s premium within 30 days of enrollment; I wouldn’t expect a lot of folks to sign up tomorrow and pay a month’s premium on coverage that won’t kick in for 90 days.
  • Coverage begins January 1, 2014.
  • By the end of the initial enrollment period an estimated 7 million will haver purchased coverage thru the Exchanges.


NCCI’s latest pharmacy report – the highlights

The good folks at NCCI just published a new study of prescription drugs in workers’ comp; here are a few highlights; the data is from 2011.

  • Narcotic usage increased significantly, from 21% of costs in 2010 to 25% in 2011.
  • Physician dispensing increased as well, along with the average cost for physician dispensed drugs.
  • NCCI estimates drugs account for 18% of all medical expenses; note that this is based on total incurred cost, or for the layperson, their estimate of what the total including already-paid and future drug costs.
  • The older the claim, the greater the percentage of total medical costs due to drugs – up to 40 percent.
  • On a cost per claim basis, NCCI indicates drug costs increased six percent in 2011.
  • Generics account for 76 percent of the scripts, but only 44 percent of the cost.

So, what does this all mean?

Couple things stand out.

First, NCCI’s numbers are based on total incurred, therefore there’s a bit of forecasting involved. I note this as the 18% figure (drug costs as a percentage of total medical spend) is significantly higher than most payers I work with; the range is around 12% – 14%.

Second, drug spend declined in 2011 according to CompPharma’s annual Survey of Prescription Drugs in Workers’ Comp.

Why the difference (NCCI indicates a 6 percent increase)?

  1. CompPharma looks at total, not per-claim cost, so claim frequency has some impact.
  2. NCCI uses incurred (there it is again), the Survey is based on actual paid amounts.
  3. CompPharma is a survey of 23 payers, all of which use PBMs.  These are generally fairly-to-very sophisticated payers.  In contrast, NCCI’s data comes from a much broader spectrum of payers, some of which don’t use PBMs, and others don’t use them effectively.

What does this mean for you?

Drug cost increases are moderating, but physician dispensing remains a big problem, and opioid usage increased almost 20% (four points) year over year.

That’s really bad.