Dec
22

Wildly off-topic #11 – the Will to Fight

Last night, Ukraine President Volodymyr Zelenskyy spoke to both Houses of Congress, both parties, and all of us.  He spoke eloquently and passionately, describing the suffering of his people and their total commitment to defeating Russia and reclaiming all Ukrainian lands stolen by Putin.

What Zelenskyy knows – and I mean KNOWS – is the more Putin bombs Ukrainians, the stronger those Ukrainians become, and the more committed they are to seeing this through to Putin’s bitter end.

Net – Putin’s attack on civilian targets will strengthen Ukrainian resolve, not weaken it.

Here’s why.

I had long thought that the horrific bombing campaigns of World War II helped bring the war to a close by battering Germans and Japanese into submission. [full disclosure – my father was a machine gunner, bombardier, and armorer in the 8th Air Force in England during the second World War.]

Boy was I wrong.

Credible research indicates German production actually increased during the war; while it didn’t reach planned levels (which were likely overly optimistic) it did exceed pre-bombing campaign volumes. Research by the US Strategic Bombing Survey came to the opposite conclusion, however there’s a) big time confirmation bias and b) no evidence that the Survey captured civilian morale data.

Research conducted during Germany’s Blitz (aerial bombing) of UK cities concluded…

the Germans gained nothing from their investment in bombing British civilian targets as part of “The Blitz” (1940-41). Before “The Blitz”, they may not have been happy about having their air force destroyed by the Nazis, but they were also not eager to put their lives on the line to support a hereditary aristocracy that just over 20 years earlier had wasted a substantial portion of a generation of young men in a senseless war. However, as their homes were being destroy and their neighbors killed or wounded by German bombs, ordinary British men and women did not all rabidly support Churchill’s exhortation, “We shall never surrender“, but they continued to work, and they took action to ensure that essential services were provided when their official leaders failed to do so.

long as I get my cuppa tea, dearie…

TO be sure, this was NOT the whole story; there were many instances of looting, bigotry and finger-pointing, panic and social conflicts. That said, definitive research into civilian morale during the Blitz found the bombing produced:

a people who became actively committed to the project their leaders put before them, who cooperated with the drastic re-ordering of daily life that this entailed, and who, on the whole, did so in a spirit of stoical endurance that did not exclude good humour’. [emphasis added]

Further research on the impact of aerial bombing from 1917 to 1999 found:

(1) air power coercion attempts are more likely to work if they exploit military rather than civilian vulnerabilities, (2) the regime type of the target affects the chances of success, and (3) success is less likely if the attacker demands that the target change its leadership. Results show that coercion is more likely to work if the target’s military vulnerability is higher, but higher levels of civilian vulnerability have no effect on the chances of coercion success; that target regime type has no effect; and that success is less likely when the attacker demands the target change its leadership

In his book TRIBE, author Sebastian Junger details how people react to  having a common enemy, using examples from the Serb-Croat war’s effects on teenagers in Sarajevo and data on depression, anxiety, suicide among British citizens during the Blitz…the net is those issues declined rather significantly. Junger concludes that a common enemy draws people together, all working as one to defeat a single threat.

What does this mean for you?

Ukraine will win.

The more support we give them, the sooner this happens and the fewer Ukrainians will suffer and die. 

 


Dec
21

Wildly off-topic #10 – Manpower

It’s been four months since we talked about Ukraine, a period during which Russia put scores of thousands of poorly-equipped, pretty-much-untrained, and wholly incompetent civilian men into army uniforms (or facsimiles thereof) and fed them into the meat grinder that is Donetsk, Kherson, Bakhmut and surrounding areas.

With this result.

With things on the front lines pretty static, it’s time to think through the factors that will decide who wins. In layperson’s terms, I’d say there are three main drivers

People to do the fighting – today’s topic

Will to fight

Stuff to fight with

Yes, this is pretty basic, but stick with me here.

The “people” need to be found, trained, equipped, clothed, fed and led. These are all hard to do – especially in winter, in Ukraine, after 10 months of often-brutal combat dominated by death-by-artillery.

In addition to the usual recruiting efforts focused on patriotism and duty, Putin has resorted to two primary sources – poor men from far eastern Russia, many of whom don’t speak Russian, have never traveled outside their immediate area, are poorly educated and according to some reports not really interested in fighting.

Prisoners who, in exchange for a release from jail, agree to enter the army, often in mercenary units set up by the Wagner Group make up a large portion of the new recruits.

Reports from these new “soldiers” indicate they are mostly cannon fodder, placed on the front line to be killed by Ukrainian forces while the regular Russian army sites in relatively safe trenches in the rear.

This is typical (from Ukrayinska Pravda)

Quote from Agafonov: “We were dumped into the forest and ordered to entrench; we had only three shovels for the battalion, and there was no support at all. We entrenched as best we could, and in the morning the [Ukrainian] attack started. [Ukrainian forces used] artillery, Grad MLRS, mortars and copters; we were just shot.

What is disturbing is the lack of information about casualties and replacements in the Armed Forces of Ukraine (AFU). After way too much time spent searching the interwebs I was unable to find any credible data on recent losses, replacements, or changes in AFU manpower.

It’s highly likely that Russia has more men, even after both sides have suffered horrendous losses. (while there are women in both countries’ armed forces, men make up the vast majority of the fighting forces) It’s also clear that many new Ukrainian recruits are not exactly fully trained.

However, 5 weeks training by professional soldiers in Britain is a lot better than a few days with minimal training on how to actually shoot, load, and clean a rifle, bandage a wound, use a radio, read a map, and recognize a Russian or Ukrainian fighter jet.

Oh, and the UK and other European countries supporting the training give every trainee “combat clothing, body armour and ear defence, waterproofs and sleeping bags plus a fully stocked individual first aid kit and extreme cold weather kits…”

(for more on this I suggest you review multiple sources, as this will enable you to question each of them and arrive at your own conclusions…  War on the Rocks, Phillips Payson O’Brien, Institute for the Study of War are three I’ve found useful)

Tomorrow – the will to fight.


Dec
20

Congress actually gets good stuff done!

I know – who woulda believed it?

Nothing like an end-of-the-year deadline and a looming change of power in the House of Representatives to motivate elected officials.

Here are the big items and what it means for you. Hint – work comp stuff is at the end…

  • a bipartisan bill to greatly increase our ability to prepare for and deal with future pandemics will become law this week.  The Prevent Pandemics Act was pushed by Democratic and Republican Senators…details at the link above.
    This means – the Feds will be much better prepared, activities will be better coordinated, and (hopefully) fewer of us will be affected by the next pandemic.
  • Improvements to Medicaid are great news for new moms and infants, (quoting WaPo) including:
    • allowing states to permanently extend postpartum Medicaid coverage for 12 months and
    • barring children from getting kicked off Medicaid or the Children’s Health Insurance Program for a continuous 12 months
      This means – kids will be healthier and off to a better start  – with big time implications for their future (and ours)
  • and good news for our fellow citizens in Puerto Rico...federal funding for Medicaid in the territory has been extended for 5 years, welcome news for an island that has been devastated by hurricanes and other weather-related disasters.

But all is not good news…the really dumb way we pay providers treating Medicare patients leads to unnecessary, counter-productive, and completely waste-of-time fist fights pretty much every year. Physicians face a 4.5% cut in Medicare reimbursement starting January 1st, and boy are they mad.

I doubt the entire 4.5% cut will go into effect…and the latest news indicates the cut will be 2% in 2023 with a smaller reduction in 2024.

What this means…

Work comp fee schedules tend to be driven or at least affected by Medicare’s fee schedule. States such as California will see an almost-immediate impact.


Dec
16

Friday catch-up

Lots happened this week while I was hunting, driving, and finishing up the annual survey of pharmacy management in work comp.

A quick update on pharmacy data points…

  • across the 30 respondents we have so far (a few more to come), drug spend was down one percent...however
  • there’s a ton of variation between respondents with some seeing big jumps and others steep drops in spend.
  • 91% of all scripts are generic…that’s a big increase from a few years back
  • pharmacy is viewed as being just a bit more important than other medical categories such as facilities, surgery, E&M.
  • and opioid spend is down again (YAY!!)

From HBR comes this trenchant observationIn Supplier Negotiations, Lying Is Contagious

“Lying once can be contagious. It can pave the way for lying again in other interactions or negotiations with people at other companies.”

The brief article is intended to provide guidance to buyers, but sellers would do well to internalize the researchers’ observations.

Health spending in the US is almost twice (as a percentage of GDP) as high as other developed countries’.

The graph is here if the pic above is hard to read.

Which means far fewer dollars to spend on wages, R&D, IT investment, and stock dividends – and much higher taxes to pay for civil servants’ health benefits.

Oh, and costs zoomed up in 2020 and 2021 due to COVID…due in large part to staffing shortages and concomitant labor costs.

What does this mean for you?

Next time someone starts comparing US healthcare to those with national systems, ask them if they have any idea how much more money we spend than those “socialists” do.


Dec
9

Solving “problems” by making bigger ones

Leave it to some misguided folks in the California legislature to come up with solutions to non-problems, solutions that will do more harm than good.

That’s just what AB1127 does…shortening the time period for employers to determine the compensability of claims, a change which will lead to – among other problems – more initial denials and less time for injured workers to receive medical care while their employer researches the claim. Further, AB1127 appears to allow for penalties of up to $50,000 for claims that are “unreasonably rejected” by the employer – but the bill a) doesn’t define what constitutes an “unreasonable rejection” and b) doesn’t exclude claims that are already closed.

That last is pretty bizarre – then again the entire thing is a mishmash of unfounded assumptions and poorly conceived “solutions” that will add litigation expense while doing little to improve the lives of injured workers.

One of the major problems is the timeframe to investigate some claims is shortened – but much of what happens during that investigation is beyond the control of the employer/adjuster.

As a result, payers facing down a deadline may have to issue a provisional denial if they can’t get evaluations scheduled, obtain medical records or med-legal reports or those records and reports are incomplete.

There’s a lot to unpack here – the fine folks at CWCI have provided a detailed analysis of AB1127 here – free to members and at nominal cost for others.

What does this mean for you?

How this benefits injured workers is a mystery indeed, how it benefits applicant attorneys is crystal clear.


Dec
5

Pandemic’s impact on workers’ comp financials has been…

A new report ($25 to download) from the National Foundation for Unemployment Compensation and Workers’ Compensation sheds light on the pandemic’s impact on work comp financials.

MCM readers will not be surprised that the impact has been pretty positive – Mark Priven and I predicted this back in September of 2020.

Several key takeaways.

  1.  Medical costs plummeted  – by over $3.5 billion – almost 12%, likely due to lower employment resulting in fewer claims, coupled with the relatively lower cost of COVID-related claims (much more on this here).
  2. Total benefit payments dropped by almost $3.9 billion…
  3. Over the last decade, the national average benefit cost per employee dropped by 10.2% – BEFORE adjusting for inflation. After adjusting for cumulative inflation of 17%, the real decline in benefit cost per employee was 27.3%. 

What does this mean for you?

Workers’ comp financials are pretty strong…for insurers and employers.

Mark Priven is a really insightful actuary. 

 


Nov
30

The state of work comp pharmacy

is pretty good.

Here are the very preliminary takeaways from the latest Survey of Prescription Drug Management in Workers’ Comp...so far 21 phone interviews completed and several more still to go.

[if you’re new to MCM, we’ve done an annual Survey since 2004, past public reports are here (respondents get a much more detailed version)]

  • Drug spend continues to decline, although at first blush it looks like the drop is less than we’ve seen in recent years
  • Opioid spend is also continuing its downward trend
  • Generic efficiency – the percentage of scripts that could be filled with generics that are filled with generics – is just shy of 100%
  • Payers are still struggling with legacy opioid patients with respondents identifying patient resistance (mostly fear driven), recalcitrant prescribers, attorneys and the lack of regulatory/legislative support as key obstacles
  • Physician dispensing is once again rearing its ugly/profiteering/self-serving/taxpayer-abusing head.
  • Payers want more transparency while fully understanding PBMs need to make a profit.
  • Topicals seem to be the latest in the scam-a-rama that is the physician dispensing industry.
  • Respondents are generally very open to non-pharmaceutical approaches to pain management – much more on this in a future post.

What does this mean for you?

PBMs and payers  – well done. Your work has saved countless lives while helping countless others regain control of theirs.

 


Nov
29

Work comp and P&C – diabolical opposites

The property and casualty insurance industry is looking at increasing underwriting losses in 2022...while workers’ comp (which represents perhaps 1/10 of total P&C premiums) continues to be hugely profitable.

Which begs the question..will multi-line insurers try to use work comp to offset lower profits in other lines?

According to the Insurance Information Institute;

The (P&C) industry’s combined ratio — a measure of underwriting profitability in which a number below 100 represents a profit and one above 100 represents a loss – is forecast to be 105.6, a worsening of 6.1 points from 99.5 in 2021. [emphasis added]

Amidst troubling trends from other P&C lines – personal and commercial auto, property, multi-peril and homeowners, workers comp stands out…this from Milliman’s Jason Kurtz:

“The workers compensation line continues to stand alone, with its multi-year run of strong underwriting profitability forecast to continue for 2022 and into 2023-2024.”

Premium rates are increasing for pretty much every P&C insurance sector – except workers’ comp – where rates in almost all states are headed in the other direction.

Actuaries at III and Millman project an overall P&C combined ratio of 105.6 for 2022 – while work comp’s looking a combined of 87.2…almost 20 points better (yeah I know those are different years, but not that different).

courtesy NCCI

What does this mean for you?

While multi-line insurers may try to jack up work comp rates to offset losses in other lines, the soft work comp market makes it extremely unlikely that will work…employers will find plenty of carriers very willing to write their business.


Nov
28

Happy Monday – for my American readers, hope your holiday was most excellent.

here’s good stuff you might have missed…

WCRI is hosting a no-cost webinar on Behavioral Health in Workers’ Compensation Thursday Dec 15 at 2 pm eastern. The webinar will discus their recent primer on BH in WC (available here for download)

The good folks at NCCI published their latest take on work comp industry financials...suffice it to say the party continues…although it may be getting close to ending.

courtesy NCCI

The final countrywide analysis of 2021 results shows:

      • WC Calendar Year 2021 private carrier net written premium (NWP) increased from 2020 by 0.5% to $38.2 billion
      • The WC Calendar Year 2021 private carrier combined ratio was 87.2%, and the operating gain was 23.7%

Meanwhile early data makes 2022 look even better; direct written premiums were up almost 10% over 2021, while the loss ratio for the first two quarters of 2022 is even lower (!!!) then 2021 (no figures cited).

Unpacking this –

  • If 2022 numbers hold up 2022 will be the tenth year in a row profits exceeded the historical average…
  • And the sixth consecutive year the operating margin was above 20%
  • Oh, and this all happened while rates decreased every year since 2014

My take…insurers are still enormously profitable because rate declines aren’t accurately accounting for the opioid hangover.

[A CWCI report addressed this issue; my informed opinion is claims without opioids are much less costly, therefore the continued drop in opioid prescriptions is driving lower claims costs…actuaries develop rates based on historical data – which is not keeping up with what’s actually happening.]

Former Labor Secretary Robert Reich believes organizations aren’t valuing workers correctly…Reich notes workers are considered “costs” instead of assets, a mis-characterization that leads to all manner of bad executive decisions.

Key line –

“increasingly, corporations aren’t just production systems. They’re systems for directing the know-howknow-whatknow-where, and know-why of the people who work within them.”

Hat tip to a very good friend for the head’s up.

What does this mean for you?

  1. It’s great to see behavioral health get more exposure – it is a key driver of recovery.

  2. Actuaries use historical data to project the future; execs should factor in what’s really happening to understand where things are heading.

Nov
22

Work comp pharmacy…

has changed dramatically in the last 18 years.

Costs are much lower, brand drug usage has fallen off a cliff, PBMs are by far the dominant delivery channel, and there aren’t any real problems these days/

At least that’s what I’ve gleaned from doing 15 surveys of work comp execs on their perspectives and quantitative measures related to pharmacy.

Way back when:

Expect we’ll have the latest version of our annual survey in late January; in the meantime (and VERY preliminary:

  • generic fill rates are around 90%
  • generic efficiency is north of 98%
  • inflation trends appear to be negative – for about the 7th straight year.

Yet payers are still concerned about drugs, mostly because they are seen as major contributors to disability duration and recovery.

What does this mean for you?

Its not just the cost – it’s the knock-on effects.