ACA Deathwatch: the GOP’s “repeal”

If you are confused and frustrated with the Republicans’ moves to repeal and replace ACA, rest assured they are way more frustrated – and more than a little concerned – than you are.

10152012_wileecoyote1_article

Here’s what’s going on.

There are two main issues.

  1. Repeal without replacement is a budgetary and political minefield.
  2. Congressional Republicans aren’t even close to agreeing on what a replacement bill would look like

Republicans are working to finalize a bill that would defund major parts of ACA. There is NO consensus among Republicans on the details of this bill – and won’t be until at least January 27 (don’t be surprised if the replacement bill isn’t ready till well after January 27…). This won’t require any Democratic support as it is a budget bill. The GOP will own the bill – and the bill’s repercussions.

Earlier this week the CBO gave us a taste of what a repeal without credible replacement would look like, and that taste was bitter indeed.

  • 18 million would lose health insurance within twelve months
  • Premiums would jump by 20 percent to 25 percent immediately

BTW the CBO’s Director was appointed by Republicans in 2015.

If the GOP moves forward with repeal without a replacement bill – which looks highly likely – it will get hammered by Democrats in what will be reminiscent of the Tea Party’s assault on Democrats during ACA’s passage. Dems will turn the tables on Republicans, and with voters primed to fear losing coverage, the message will resonate.

The GOP’s problem is simple – ACA funding is very complex and cutting funding (which is how Republicans are “repealing” ACA);

  • decreases the number of people with insurance and/or
  • increases state government budget deficits and/or
  • increases the federal deficit and/or
  • hurts Medicare, and/or
  • hurts hospitals, and/or
  • hurts insurers.

There’s intense lobbying going on as device manufacturers, hospitals, governors, insurance companies, the very wealthy and other special interests seek to protect themselves.

While Republicans do have “plans” to replace ACA, they do NOT have consensus on “A plan”.  There’s a plan from HHS Secretary nominee Tom Price, another from Speaker Ryan, other plans based on prior GOP bills, plus lots of ideas from GOP-affiliated think tanks and lobbying groups. Make no mistake, there’s a lot of ideological division among Congressional Republicans.

When the GOP does write a replacement bill, it will be scored by the CBO.  A part of that scoring has to do with the definition of health insurance. Up till now, CBO used the ACA’s definition; now that ACA is going away, it will revert to the previous definition.  Not to get too deep in the weeds here, but that’s NOT good news for the GOP.

The dilemma facing Republicans is simple; there’s no way they can deliver on their promises to ensure people don’t lose coverage, reduce costs, and improve access.

Republicans are about to pull a Wile E Coyote, running full speed off the cliff. Given Democrats’ amazing ability to turn certain victory into crushing defeat by losing the messaging battle, the GOP may make it to the other side unscathed.

What does this mean for you?

The CBO is the key.

Friday catch-up

2017 is starting off to be the most interesting/bizarre/entertaining/terrifying year in memory.

As one who tracks the goings-on internationally and in DC with some diligence, it’s been impossible to keep up with the craziness. Here’s my attempt to summarize the week that was.

The one thing you missed – and why you shouldn’t have

Trying out a new mini-post on the most important thing may have missed this week. Today’s it’s UnitedHealthcare’s acquisition of a big outpatient surgical clinic company.

This is important because the giant ($175 billion) healthcare company is investing more in care delivery – likely to better control its “cost of goods sold”.  As vertically integrated healthcare systems (think Kaiser, UPMC) get better at insurance, insurers have to get better at care delivery.

ACA Deathwatch

The reports of ACA’s death appear to have been greatly exaggerated. 

Yes, the Senate passed a bill that is the first step in a repeal process.  But it is ONLY a first step. Without diving too deep into the nerdy details, the bill just instructs Senate Committees to begin drafting a repeal bill and lays out general principles.  But there’s no consensus on when the repeal would take effect, what a replacement would look like, or even how it would be funded.

Things are going to get pretty complicated, especially in the Senate. There’s a lot of concern among Republicans in key leadership positions that quick movement on a bill would lead to a considerable backlash – and major political damage.

For freemarketers and Libertarians, there’s this:

“We did have the government out of the individual market up until 2014 [when most of the ACA provisions went into effect], and we know exactly what happened: There were millions of people who couldn’t get coverage,” Field said.

The ACA created a market that did not exist before — one that insures sick people. Field says it’s a market failure that the industry on its own will not cover the highest-risk customers. “If you want to cover everyone, the government has to do something.”

Town said pushing the government out of the equation will leave many citizens without access to health care.

“If you want to live in that world, so be it,” he said. “But I think we as a society have made the joint decision that having a vast part of a population uninsured and having limited access to health care is not a route that we want to go. Getting rid of the ACA is not going to get rid of the government’s role in health care.” [emphasis added]

Here’s a good summary of some of the issues the Republicans face – and why they are treading carefully…key quote:

The real reason health care premiums and deductibles are so high is that medical care is very expensive in the United Statesfar more costly than it is anywhere else in the world. The United States pays very high prices to doctors and hospitals and drug and device makers, and Americans use a lot of that expensive medical care. [emphasis added]

And here’s why keeping only the popular parts of ACA won’t work.  Alas.

Work comp

The M&A activity level has dropped off considerably – if not precipitously. The WLDI sale – a relatively small transaction – is one of the very few recent deals. Don’t expect activity to ramp up as the industry is:

  • pretty consolidated already, so there are fewer companies available to buy;
  • work comp is a declining industry with negative growth – not very attractive to investors;
  • prices were really high for a long time, and company owners still expect to get paid a lot. Sellers still expect to get those high prices, but…
  • buyers are much more cautious due in large part to the “OneCall Effect” (financial returns haven’t met expectations).

Don’t miss the Rx Drug Abuse Summit – April 17-20 in Atlanta.  It’s the most comprehensive and focused event on the biggest issue in workers’ comp.

Nothing is more important to work comp than the overall economy.  Read this – when you have time – for a solid grounding on what to watch for in 2017.  Spoiler alert – economic growth, which has trended up significantly over 2016, is likely to moderate over the next two years. And watch out for inflation.

 

Finally, for management wonks, here’s a great piece on execution from Harvard Business Review.

Cutting thru the ACA repeal confusion

Today’s HealthWonkReview has a series of posts on:

  • the current status of the ACA repeal process, implications thereof,
  • GOP plans to pass a replacement and
  • Dems’ plan to thwart Reps’ moves to kill ACA
  • insurers’ reactions,
  • providers’ reactions,
  • and what it all means to consumers.

The posts are all briefly summarized and you can click thru for more details…

Then there’s an expose on HHS Secretary nominee Price’s ethical problems from trading stocks in companies affected by legislation he was working on.  Yeccch.

And lots more…

Of course, the posts have citations and backup info.

Thanks thanks thanks to Julie Ferguson for collating all this for your edification!

ACA Deathwatch – UPDATE on budgetary block

UPDATE – There’s some confusion about what the pending vote to defund ACA will mean

  • defunding essentially repeals a big chunk of ACA by ending funding for key components
  • “repeal” will NOT go into effect for at least 2, and perhaps 4 years.
  • there is NO replacement legislation ready to go – don’t expect to see legislation for months

As reported last week, public and private sources indicate the new Congress will start the push to defund ACA as early as this week as part of the Fiscal Year (FY) 2017 budget.  The Federal government has been funded under continuing resolutions, with the latest set to expire in late April.  The FY runs from October 1 to September 30.

Here’s how this would work. (caveat – as noted last week, this is way more complicated than one might think, and there is NO consensus within the GOP on how to handle critical “details”)

House passes new rules next week that will allow it to defund ACA.  There’s some complex stuff involved here which may well make this a difficult and protracted process.

Late in January the House and Senate will work on a bill to repeal much of ACA – including:

  • eliminating premium support and cost-sharing subsidies (helping lower-income people buy insurance and pay deductibles and copays)
  • ending Medicaid expansion
  • eliminating ACA taxes (medical device, surcharge on very high incomes, etc)
  • increasing Medicare and Medicaid reimbursement

This is where things may well fall apart.  A key problem is a repeal will increase the Federal deficit, a major issue for many Republicans.  Also, there’s a real fear among some Republicans that changing ACA will cause major market disruption – and Republicans will own that.  That’s why the GOP will delay implementing the “repeal” for several years.

I spoke with friend and colleague Bob Laszewski on this – here’s his take:

they will vote budget instructions early Jan. Some may claim that is the vote to repeal but it’s just a procedural vote with budget instructions for the committees with jurisdiction—Senate HELP and Finance. Then HELP and Finance pass a 2016 budget with ACA defunded. The House is the easy part but they will have to reconcile any differences in the 2016 budget with Senate. Then both houses pass the final. Then Trump signs that. The timeline is about 6 weeks from reconvening to actually defunding.

Here’s where it gets really messy.  Laszewski:

they [the GOP] only have 50%+1 for defund (repeal). They have no consensus for anything thereafter. Some have talked about don’t defund unless they have the replace deal in place.

Replace will take 60 in the Senate. They have 52 seats. They don’t have 52 Senate votes or even a simple majority in the House for any replacement plan right now—or likely anytime soon.

I think we are headed to one hell of a “cliff” as time ticks down on the two or three year extension of the current system.

The summer and fall of 2017 will be frantic to get a deal of some sort. Odds are not great with a few on the right in the Republican Party, and the Dems closing ranks [and] not motivated to cooperate.

Key issues:

  1. don’t buy into press reports sure to come next week that will describe these preliminary rule-change steps as a “repeal”.  ACA repeal will take 60 votes in the Senate, and that is NOT going to happen anytime soon.
  2. IF a defunding bill is rammed thru via reconciliation and signed it will happen quickly. But there are major issues with that – market disruption and voter backlash the two most critical.

What does this mean?

Opposing an administration is easy and has no risk; actually passing legislation that will directly affect people and business is hard and very risky.

Oh, and there’s this…

Jobless construction projects

Yesterday’s post re the Jobless Economy triggered multiple thoughtful responses, including one from a colleague noting construction may be somewhat insulated from automation.

I did some quick research, and here’s what I found.

Briefly, it looks like we will see more and more construction automation using 3D printing in the near future, especially for small projects (think small houses) and components of larger buildings and structures.

One Chinese company built 10 single-family dwellings in a day using 3D printing. More recently, they built a five story apartment building and large villa using a 3D printer that measures 6.6 meters in height, 10 meters in width, and 150 meters in length. This is China, where labor costs are a small fraction of what they are here in the US…

A company in Holland is building a pedestrian bridge using six-axis robots.

In Chicago, a machine built a mini-tower out of gravel and thread.

And here’s a luxury hotel in the Philippines built in large part by 3D printing.

But construction automation is by no means limited to 3D printing.  Drones, automated construction equipment and vehicles,

Here’s a video of drones building tall structures out of bricks.

Komatsu is investing heavily in automated heavy equipment, what some might call “ground-based drones”.

A big player in this business is Skycatch, a U.S.-based company that allows for precise mapping of construction sites and integration with automated equipment.

And here’s your construction project of the future…workers operating computer pads and joysticks, not hefting shovels and hammers.

c4dc318aaa08811f559c921246c6a963

Here’s a very good detailed discussion of construction automation – required reading for work comp underwriters, construction defect insurers, GL writers.

So, what does this all mean?

6.7 million people were employed in construction jobs in November, 2016. If Congress approves a new infrastructure investment initiative, we can expect to see that go up significantly.

We will also see construction companies dramatically ramp up their investments in construction automation, robotics, drones, and automated vehicles.

What does this mean for you?

As with all automation, we’re going to see:

  • much higher productivity per worker
  • fewer workers
  • much less opportunity for low-skilled workers
  • much more opportunity for high-skilled workers
  • a much safer workplace.

Workers comp and the jobless economy

Service workers are VERY replaceable.

Amazon just opened the first cashier-less grocery store.

2 million trucking-related jobs are likely to disappear within a decade. Consumers’ costs for goods will go down significantly, driven by lower labor, fuel, insurance, and maintenance costs.

What is only just beginning to happen in the service economy is already well underway in manufacturing. Despite all the blather about US manufacturing’s decline, the fact is we remain the second largest manufacturer in the world, not far behind China. Yes, employment has declined dramatically, but productivity has increased by leaps and bounds.

US manufacturing:

  • is over a third of our GDP
  • is valued at over $6 trillion annually in output
  • is larger than the next three countries – Japan, South Korea, German – combined.

Since 1947, we’ve figured out how to make five times as much stuff with 13% fewer workers. 

p36-1

source – https://audiotech.com/trends-magazine/the-american-manufacturing-renaissance-becomes-a-reality/

I bring this to your attention, dear reader, to pose the following questions.

  1. What happens when trucking jobs disappear? Higher work comp claiming rates? Much more difficult re-employment?
  2. What happens when cashier jobs disappear? Same thing?
  3. As automation gets cheaper, takes on more human functions, and extends into more and more areas, wage growth is very likely going to suffer – people don’t compete well with machines. What happens to work comp premiums?

In all the talk about the need to reform workers’ comp, there’s been very little discussion about these existential threats to the industry.

What does this mean for you?

You don’t need to “reform” an industry that won’t exist in a dozen years.

 

 

Friday catch-up

Holy bejeezus this has been a crazy week.

Labor Secretary Nominee

First up, the nominee for Labor Secretary is fast food executive and avowed billionaire Adam Puzder. Puzder’s likely to face tough questioning from Democrats for his stance on the minimum wage, automation, mandatory sick leave, and ACA. He’s also been a vocal critic of the overtime rule.

His restaurants paid a $9 million fine re class action lawsuits involving overtime pay in 2004.

For those in the workers’ comp world concerned about a new Commission on work comp, your concerns are gone.

Puzder’s points on automation aren’t crazy – in point of fact there’s a lot of research on the impact of automation on jobs, with one very credible group estimating 47% of jobs will be automated within 25 years.

Drug prices

Adam Fein has an excellent post on drug pricing, diving into the list v actual price.  Adam uses the EpiPen and insulin products as examples.  For those involved in pharma, this is a must read.

Heroin deaths just surpassed deaths by gunshot.  Congratulations, opioid-shilling pharma companies! 

screen-shot-2016-12-09-at-7-47-51-am

Medicaid

For those looking for more insights into Medicaid, I highly recommend a few articles that provide perspective on post-election changes, hospital payments from Medicaid.

ACA repeal

Billy Wynne has a really thoughtful piece on why ACA will not be repealed.  Certainly made me think differently about a few issues. FWIW, I’ve heard from a colleague who is Chair of a large health plan that the repeal language is already written.

These perspectives may both be right; I expect a re-branding of ACA and not a total repeal. The impact on the health system, hospital finances, the individual insurance market, and the number of insureds of a complete and sudden repeal would be disastrous.

Rather, the GOP will pass a bill ostensibly “repealing” ACA while in fact keeping many of its changes in place for at least three years.

How will Democrats handle this?  Here’s one perspective.

Enjoy the weekend.  Gonna get a load of snow up here in upstate New York – can’t wait.

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!

 

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!