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.

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.

 

 

What Medicare’s reimbursement changes mean for work comp

It isn’t possible to exaggerate the implications of the changes to Medicare’s provider fee schedule.

When Medicare shifts its weight, the foundations of workers comp move – a lot.  Here’s why.

First, around a third of provider reimbursement is governmental – and for some providers well over half of their payments come via Medicare, Medicaid, and other governmental programs which base reimbursement on CMS.

Second, the vast majority of work comp fee schedules are based on CMS therefore the changes  affect not only Medicare and Medicaid, but also many state workers compensation fee schedules. The decreases in reimbursement for imaging have been felt in Worker’s Comp. particularly in California and Florida. Also the increased reimbursement for physical therapy has also worked its way into the Worker’s Comp system.

The new fee schedule is known as MACRA.  Replacing the previous SGR system, MACRA will increase reimbursement 0.5% per year until 2019. At that point reimbursement will be flat until 2026.

While there are many other issues affected by this change, including increased reimbursement for quality and the use of electronic health records, the fee schedule changes themselves will have the most impact on Worker’s Compensation.

Expect continued increases in reimbursement for cognitive services; office visits, physical therapy and the like. I would also expect to see decreases in reimbursement for surgery and possibly ambulatory surgical centers which fare outside of MACRA.

What does this mean for you?

The schedule changes have already been felt in some states’ worker’s compensation systems. If Congress decides to take additional action which is possible but not probable this will also affect Worker’s Comp.

“Obamacare”, Medicaid, and workers’ comp settlements

In a piece in Insurance Thought Leadership, misleading labeledObamacare Expands Into Workers’ Comp”, MaryRose Reaston asserts that

The Affordable Care Act (ACA) was created to expand healthcare coverage. Unfortunately, the act has overstepped its bounds and will dip into the workers’ compensation coffers by requiring mandatory reporting for Medicaid beneficiaries. [emphasis added]

No, ACA has not “overstepped its bounds”.  The efforts by states are just that – state-based – and they are allowed/enabled by Federal legislation that is separate and distinct from the ACA.  Michael Stack has written an excellent summary of the situation, noting that the federal legislation allowing Medicaid to pursue settlements was part of the Medicaid Secondary Payer Act, which in turn was part of the 2013 Budget Bill..

In fact, I find the attempt to link ACA with state Medicaid recovery activity curious and convoluted. ACA expanded Medicaid – in states agreeing to do so. States remain the primary regulatory bodies for Medicaid. There is nothing in Ms Reaston’s argument that indicates how or by what means ACA encourages Medicaid to pursue workers comp settlements. States that expand or don’t expand Medicaid can decide to pursue settlements – independent of ACA.
Make no mistake, there are clear “winners” here – taxpayers. Any taxpayer should demand Medicaid recover any monies necessary to provide treatment paid for by Medicaid that should have been covered by workers comp.

Provider reimbursement changes – painful and necessary

Full or partial capitation, with or without risk withholds.  Per-episode payments or cost caps.  Fee-for-service with or without pay-for-performance.  Ambulatory care episodic payments.  Discount below billed charges.  Packaged prices. Value-based reimbursement.

The list of reimbursement types and variations is long and growing.  As providers and payers struggle to find the right mix of risk and reward, they are tinkering with long-established reimbursement methodologies (think capitation) and coming up with entirely new concepts (value-based pricing).

If there’s a universal, it is fee-for-service is falling out of favor, at least for the big payers – governmental and private.  It encourages overuse and over-treatment.  But it does have benefits.  FFS motivates providers to maximize their productivity, a goal that every health care provider organization is striving for.

Each variation has its plusses and minuses, but there are several common threads.

First, the providers affected need to buy in.  If they think they are being gamed, or worse, screwed, they will instantly figure out how to return the favor.  There’s a lot of skepticism among providers about these new arrangements, much of it well-founded.  Problems with capitation and risk withholds almost killed the entire managed care movement back in the nineties and providers remember those days all too well.

Which leads directly to the next have-to.

Transparency is key.  Price setting, risk-reward formulae, the bases on which capitation is calculated all have to be clear and readily understood.  That way when questions arise, all involved have “equal access” to the methodology and discussions can focus on material issues.

Third, it’s about outcomes and results, not volumes and procedures.  We are seeing a wrenching shift away from paying providers to do stuff to patients, and towards paying providers to maintain and improve health status.  This is going to be ugly, difficult, and painful for all involved.  There will be winners and losers, and some folks are going to be hurt.

What health care is going thru is not far from that experienced by manufacturing and heavy industry over the last forty years.

And, like manufacturing and heavy industry, the US health care “system” has to change if it is to survive.  We cannot continue with fee for service, rewarding providers for doing more and more expensive stuff to fewer and fewer insureds.  And allowing insurers and health plans to make money by covering only those people unlikely to have a claim.

If health care could be offshored, it would be.  As it (mostly) can’t be, we have to fix it right here.

That doesn’t mean it’s going to be any less wrenching.

What does this mean for you?

Huge changes are required.  Avoiding them is not an option.

Consolidation in the real world – implications for workers’ comp

There’s been a lot of mergers and acquisitions in the work comp arena, and certainly more to come.

But the activity in our little corner is minor indeed compared to what’s happening in the “real world” – group health, Medicaid, and Medicare. Make no mistake, these transactions will affect work comp.

You’ve probably heard of some of the activity among payers;

When these deals are completed, there will be three giant health insurers; United, Anthem, and Aetna.  All will have major operations in the Health Exchanges, Medicaid, Medicare, and employer-sponsored health insurance. Anthem, which owns many Blues plans, will have more local dominance in specific markets while Aetna and UHG are bigger players in the employer marketplace.

What you may not be tracking is the provider consolidation – which is equally frantic.  Just a few examples from the last few months:

The ongoing seesaw of market power is playing out nationally and locally – but the local scene is much more relevant for workers comp payers.  Local health systems negotiate with these big payers, with both sides coming to the table from positions of strength.  If Aetna wants coverage in southeastern PA, UPenn-Lancaster must be in their network.  For UHC to compete for employer and/or exchange business in New Jersey, they’ve got to have access to facilities and docs controlled by the two entities listed above.

The bruising battle over access, rates, and exclusivity is what’s driving the move to narrow networks. Health plans have to deliver more patients to specific health systems or those systems will not negotiate on price.

The best way to ensure increased patient volume is to make a deal exclusive – and we will see more and more narrowing of networks as competition heats up among the big three health insurers.

What does this mean for workers comp?

Work comp is incidental to Medicaid/Medicare/group/Exchange business. Health systems are going to get squeezed in these deals. Health plan execs will look to several reimbursement sources to make up margins; out-of-network care being most important but workers comp will be considered quite attractive as well. Comp is quite profitable, particularly as it drives orthopedic and ancillary revenue, services which have traditionally high margins for hospitals.

The other consideration is the care that is delivered via a health system or facility is billed under a hospital fee schedule. And, there can be a facility charge in addition to the physician fee. 

The net is work comp will be seen as a great source of very profitable patients.

Medicaid and Workers’ Comp

21 states have not (yet) chosen to expand Medicaid; one can (and I have) argued that this is nonsensical at best, as

  • the Feds are paying for ALL of the additional cost for another two plus years, and
  • the vast majority of the cost (90% +) thereafter; and
  • the savings to the states for uncompensated care would be anywhere from $4 to $9 billion;
  • health care providers in non-expansion states are in dire straits due in large part to the “non-expansion.”

My sense is the non-expansion states will eventually decide to accept the Medicaid deal as the financial cost to hospitals and health systems will force them to. And, the Feds will work with the states to create different models that will be ideologically palatable, providing cover to those politicians obsessed with such things.

But until – and unless – Texas, Florida, Virginia, Wisconsin and the rest expand Medicaid, there’s a raft of problems created by their principled if (in my view) wrong-headed position.

Mostly, these problems are due to two things.  Over the short term, the cost pressure placed on facilities and health systems and the fallout therefrom will lead to increased pressure to cost shift – and yep, work comp is a pretty soft target.

And long term, the 6.4 million adults who remain uninsured will be less healthy, have more incentive to get care under workers’ comp, and heal more slowly with more complications if they do get injured on the job.

What does this mean for you?

For work comp payers, nothing good.

Florida’s conundrum

Florida’s legislature can’t decide if it does or doesn’t want federal money.  That’s the policy question; it’s discussed in some detail below.

A quicker explanation by way of metaphor was conveniently provided by a native Floridian; Austin Hatfield adopted a pet water moccasin, one of the most aggressive and poisonous snakes in this Hemisphere.  He liked it.  Then it bit him in the face when he kissed it.  Now he’s in critical condition.

hatfield

Kinda like what’s about to happen to Florida’s health care system.

While Florida’s Senate wants to expand Medicaid, the state house has said NO to Medicaid expansion under PPACA, but wants the billion dollars of federal money that has been supporting struggling hospitals; these dollars will disappear at the end of June.

Governor Rick Scott (former CEO of HCA, which paid a $1.7 billion fine for Medicare and Medicaid fraud, and involved in at least one more company alleged to have committed Medicare fraud) is outraged that Florida can’t get the money that no longer exists, even if the Sunshine State doesn’t want to expand Medicare.

The reason the hospital dollars were cut is simple; by expanding ALL coverage, hospitals would have far fewer uninsured patients and thus wouldn’t need federal taxpayer dollars to cover their costs.

What Florida’s House and Governor are saying is they don’t want Medicaid, but do want the “lost” dollars replaced.

I don’t get it.

Remember the Feds are paying ALL of the Medicaid expansion costs thru 2017, then their support ratchets down gradually until they are paying 90% of the costs.

Ninety percent…

For some reason that doesn’t make sense to the House; but they DO want the billion plus dollars for hospitals, dollars that no other state gets. Of course, the legislators didn’t THINK about this when they adopted their principled stand against federal largesse, but quickly changed their tune – somewhat – when hospitals screamed about the financial disaster the House’ position would bring upon them.

To their credit, the Florida House and Senate seem to have figured out they have adopted a water moccasin, and it is about to bite them in the face.  Now, they want the Feds to defang their beloved friend before it kills them.

I was at a Florida Chamber meeting a couple years back when Scott and an Orlando hospital system CEO talked about the need to expand Medicaid; At that point the unindicted former CEO of the company convicted of the biggest Medicare/aid fraud in history was kinda sorta in favor of Medicaid expansion.  The business people in the room got it; the ideologues didn’t.

Hidden in this mess is the damage caused to the 800,000 or so lower-income Floridians who won’t get coverage. [sub req].  Orlando Sentinel columnist Scott Maxwell said it very well:

…the feds are basically saying: We’re giving you the money to provide citizens cheaper, preventive health care. If you won’t give them that, we’re not going to clean up your mess by spending tax dollars on costlier ER care.

This is what fiscal conservatives should want.

It’s like offering to pay for your daughter’s insurance plan and having her say: No thanks, Dad. I’d rather you just pay for my ER bills instead.

You’d tell her: No way. Well, Rick Scott is that defiant daughter, suing federal taxpayers to keep welfare-for-hospital-ER’s going.

What does this mean for you?

Either you want federal taxpayers to subsidize your health care system, or you don’t.

And if you don’t, you can’t complain when your head blows up to the size of a prize watermelon.

Which better controls spending – Private insurance or Medicare/Medicaid?

Before you read further, cast your vote…

Okay, a couple initial thoughts.

First, when comparing health care systems’ ability to control cost over multiple years, the best metric is the cost trend per member; this accounts for differences in demographics and membership growth.

Second, this only accounts for cost growth; not outcomes, patient or provider satisfaction, or efficiency.

That said, cost growth is the best metric to use when thinking about long term cost control, governmental budgets debt and deficits, and tax implications.

Drew Altman at the Kaiser Family Foundation has a simple graphic here that tracks cost growth over time.  The net – from 2007 to 2013, private insurance costs increased 29%, more than twice Medicare’s growth and five times higher than Medicaid.

(side note – the most recent data indicates Medicare has higher member satisfaction than private insurers…)

What does this mean for you?

If your goal is cost control, the answer is obvious.  However, personal and policy decisions are never simple.

Where are the other insurers?

Noticeably absent from the Rx Drug Abuse Summit are non-work comp or Medicaid payers.  The third-party payer track is dominated by workers’ comp PBMs, payers, and researchers.  Sessions are well-attended, well-done, and worth while.

One wonders if private insurers selling group health or individual coverage don’t have problems with abuse of prescription drugs, or perhaps more precisely, don’t think it’s a problem for their business.

Well, it is.

Kudos to work comp for taking the lead on this critical issue.  Here’s hoping the rest of the world follows your lead; the chances for success are going to be much greater, and that success will come much faster, if private and public health insurers get involved.