ACA – a little perspective on who’s going to win

Premiums are SKYrocketing!

Deductibles are HUUUGE!

Insurers are DROPPING OUT!


Can’t we all just chill for a minute?

Truth is, premiums in the individual marketplace today are lower than they were a couple years ago.

Yes, rates are going up, but the proposed rate increases are:

  • lower than historical trend rates
  • still to be approved by regulators
  • not as big a deal as one might think because consumers are shopping around and getting better deals
  • for plans that cover 17% more benefits than pre-ACA plans

To be fair, deductibles and coinsurance costs are much higher than pre-ACA, continuing a trend that’s been around for years.

My take is these economic cost control mechanisms are going to run their course, and we’ll see much more focus around care management and network management going forward.

That said, isn’t this EXACTLY what we were supposed to get from consumer-driven health care plans?  Insurers that are using economic levers to incent consumer behavior, narrowing networks to use buying power to get lower prices and focusing care management efforts on the 5% that generate 50% of costs will succeed, those that don’t understand this market or how to compete will fail.

What does this mean for you?

Expect health plans totally committed to the new health care market to win.  And that success will make them much tougher competitors in the group health market in years to come.

Watch out, Anthem, UHC, and Aetna


More insured via Exchanges is good news for Work Comp

People who obtained private health insurance coverage thru the Exchanges in 2014 were less healthy than those previously insured. A just-published article in HealthAffairs provides details on their medical issues and conditions, more on this below. [sub req]

That’s not surprising; prior to ACA, many individuals and families weren’t able to obtain coverage at a reasonable price, and some couldn’t get any coverage at any price, due to insurers underwriting practices.

Now that medical underwriting and pre-existing exclusions are outlawed, folks with health problems can get insurance.  Before we jump into the implications discussion, here’s the specifics.

among those with individual private coverage, the likelihood of reporting fair or poor health and the likelihood of being obese increased by 1.5 and 4.2 percentage points, respectively (Exhibit 1). We also found that the likelihood of having at least one of ten specific chronic conditions5 increased by 6.7 percentage points for this group—a change that was driven by increases in the likelihood of having hypertension (a 4.0-percentage-point increase) and diabetes (a 2.9-percentage-point increase)

The good news is many of these chronic conditions respond well to relatively inexpensive treatment, and the cost of caring for these individuals is much lower if they have access to good primary care.

For work comp payers, the good news is a bit less obvious – but it is good news – for two reasons.

First, in general the working population will be slightly healthier – because more workers will have insurance, and the least-healthy are more likely to be improving their health status. Thus if they do get injured, they will likely heal faster as their overall health status is better.

Second, work comp insurers won’t have to pay to treat their non-occ medical conditions, as the patients are more likely to have health insurance.


Details matter.

Someone who doesn’t do what you do may think it looks pretty simple.

Carpenters look at a house and see detailed planning, careful material selection, precise measuring, and skilled craftsmanship because they know what it takes to build a strong, sturdy, attractive, functional home. They are experts due to years of experience and hard-earned lessons and mentoring by their elders.

Me? I see walls and a roof. Building looks simple to me; get some lumber, nails, and tools, plus some other building stuff like shingles and wire and concrete, and start slapping stuff together.

Which house would you want to live in?

The same is true for any profession – teaching, medical bill processing, hitting a golf ball…right? Professionals – and we are all professionals in our chosen vocations – understand the complexity in what they do, while outsiders tell us it looks simple to them.

I’m thinking about the Presidential candidates’ positions on health care and health care reform.  Trump wants to “rip out Obamacare root and branch” and replace it with something much “simpler”.

In general, Trump’s calling for:

  • allowing insurers to sell health insurance across state lines
  • repealing the individual mandate
  • requiring insurers to cover anyone regardless of their pre-existing condition.

Sounds great…you don’t have to buy health insurance until you really need it, but the insurance companies still have to sell it to you even if you need a heart transplant or new kidney or are having premature triplets.  (We discussed the across state lines thing here)

Here’s where those “details” matter.

What will insurance companies do if they are required to cover people who don’t need to buy insurance until they get sick?

They have two choices – go bankrupt or stop selling insurance to individual sand families.

What do you think they’ll do?

Of course they will stop selling health insurance to individuals.  When that happens, the Paduda family, and most of the other 11 million folks insured thru the Exchanges will find themselves with no health insurance and no one to buy it from.

Then what?

Here’s the point. We live in an amazingly complex world, one where there are NO simple solutions.   I know, simple solutions are really appealing, but “see the ball, hit the ball” only works until you step up to the plate, when it gets a whole lot more complicated.

If health care reform was easy, it would have been done decades ago. It’s messy, complex, and there are no simple solutions where everyone wins. It requires consideration of the “what then” issues. When you move one lever, it triggers a whole bunch of reactions that, if not anticipated, will create way more chaos.

Yes, the ACA is messy and needs fixing. Yes, we need our politicians to engage, debate, argue, and work it out. What you and I do NOT need is a sound-bite solution that is NO solution at all.

What does this mean for you?

If you think health care is a mess now, can you imagine what it would look like if people could wait to buy insurance till they were sick, and insurers had to either sell it to them or stop selling insurance altogether?

It would look like this


Work comp drug spend is going down

On average payers’ drug spend dropped 6.5% from 2014 to 2015.

And the bigger payers saw bigger reductions, with several cutting spend by double digits.

Those are the results for 30 large and mid-sized work comp payers I surveyed for CompPharma’s annual Prescription Benefit Management in Workers’ Compensation Survey.  State funds, large and mid-sized insurers, TPAs, self-insured trusts, and very large employers all participated in this, the 13th annual Survey.

The big question is – why?

Before we jump into that, allow me to address a potential criticism of payers’ drug management efforts.  This reduction is NOT because payers want to prevent their patients from getting the care they need.  Rather, payers – and their PBM partners – are focusing on ensuring patients get the drugs they need quickly and with minimal hassle, while blocking potentially problematic drugs.

This effort has paid off in the near term in lower costs for employers and taxpayers, and will almost certainly result in quicker healing and return to functionality; patients who don’t get unnecessary opioids get better a lot faster than patients prescribed these dangerous and often-misused drugs.

The Survey report, which will be out in August, will have details.  At this point in our analysis, several drivers seem to be at play here.

By far the most significant is the depth and breadth of pharmacy clinical management programs now in place at most payers.  The vast majority of payers rely on their PBM partners for most clinical management functions, with responsibility delegated to PBMs for some/most/all functions including:

  • patient enrollment
  • formulary development and management
  • prior authorization
  • pharmacist review of claims
  • prescriber outreach and follow-up
  • peer review and interaction
  • reporting
  • high cost claim assessment and intervention

This is somewhat unique in the work comp medical management world.  Unlike surgery, hospitalization, and other service types, most payers have delegated pharmacy management to PBMs.  There are several reasons for this.

  • Unlike other medical services, pharmacy is highly automated, requiring a unique electronic communication capability and expertise to accept, approve, process, and pay for the service.
  • Few payers want to invest the funds and management resources necessary to effectively manage pharmacy.  With the continued focus on reducing administrative expenses, overhead is an evil word at most insurers, so outsourcing it just makes financial sense.
  • PBMs have a lot more knowledge about pharmacy management as this is their core business.  Insurers, TPAs, and state funds have many other priorities on their collective plate, priorities that most view as more central to their core business.  They are insurers and claims handlers, not pharmacists.

That said, a handful of large payers have internalized pharmacy management – hiring pharmacists and nurses, instituting workflows specific to drug authorization, focusing on long-term opioid users, and tightening up drug formularies and approval processes.  These entities are also seeing solid payback on that investment, with costs dropping by double digits for these big payers too.

A final point that bears consideration.

Work comp PBMs, most of which are members of CompPharma (I am president of CompPharma), are doing a really good job and thereby reducing their income and profits.

They do this because this is how they win additional business; their value proposition is to ensure patients get the right medications and don’t get the wrong ones.

What does this mean for you?

PBMs are getting it done.

Steve Anderson’s Health Wonk Review

Steve Anderson’s edition of Health Wonk Review somehow manages to find new news from last week’s Republican convention.

That would be impressive enough, but wait, there’s more!

David Williams’ deep dive into dialysis – an industry that exemplifies the conflicts and adverse motivations inherent in our health care system.

A revealing look at healthcare “ministries”; a business which, at the very least, requires a leap of faith across a very deep chasm.

And a critical de-construction of President Obama’s JAMA article about ACA.

A great way to start your week!


Work comp pharmacy – different indeed

The US spent $322 billion on outpatient drugs in 2015 – an 8.1% increase over the year before. (subscription required)

Over the next decade, CMS expects drug spending increases to outpace overall health care inflation by a significant margin at an average annual jump of 6.7%.

Things look remarkably different in the work comp world.

I’ve been surveying workers’ comp payers (insurers, state funds, TPAs, and large employers) for 13 years and the latest data indicates most are seeing a year-over-year decrease in drug spend.  I haven’t finished aggregating the data and checking the details, but this year looks like a continuation of the decreasing drug cost trend we’ve seen over the last several years (past Surveys available here).

More than 2/3rds of payers surveyed reported a drop in drug costs in 2015, and those that saw increases usually cited unique situations as primary drivers for those increases. Conversely, payers with decreases generally attributed their success to the same factors:

  • a strong focus on clinical management 
  • particular attention paid to opioid usage
  • ongoing, concerted effort to drive generic utilization

One other key driver – payers that work closely with PBMs on a variety of programs – retail network penetration, high risk patient identification, peer review, and outlier-prescriber outreach are seeing significantly better results.

I would note that work comp PBMs are spending a lot of money and resources to cut their revenues.  [I am president of CompPharma, a consortium of worker’s comp PBMs]

While there’s no question work comp can learn a lot from group health and other payers, the remarkable success workers comp payers have had in reducing the utilization of opioids shows that Medicaid and group health could and should carefully study what we’ve been doing.

What does this mean for you?

We are making progress, and work comp PBMs are leading the way.


Workers’ comp fast facts

Over the last few years I’ve had quite a few calls and meetings with folks in the investment community  looking to get up to speed on the workers’ comp industry and various aspects thereof.

While the volume of calls ebbs and flows, of late there’s been increasing interest, likely due to the credit market’s interest in OneCall Care Management and other transactions.

So, here are some key datapoints for anyone looking for basic information.

  1. Total workers’ comp premium and equivalents is about $85 billion.  That includes insurance premiums from private carriers and state funds, claims, administrative, and excess insurance costs for self-insureds, governmental programs e.g. FECA, and claims costs for minimum-premium or other “deductible” type insurance plans.
  2. Workers’ comp medical costs will be about $33 billion this year.
  3. That’s about 1.25% of total US medical spend.
  4. Medical costs account for about 60% of claims expense, with indemnity expense accounting for the remainder. (adding administrative costs to claim costs gets you close to total WC premium and equivalents)
  5. Claim frequency has been dropping by about 2-3% per year for more than two decades.  That will almost certainly continue.
  6. Drug costs will account for around 15-17% of that spend, with physical medicine in the same ballpark.
  7. Most states have some sort of medical fee schedule (FS) in place, however there’s MUCH variation among and between the states.  Some only have provider FS, others have provider, drug, facility, DME and other services covered by fee schedules.
  8. Almost all provider fee schedules are based on Medicare.  However, few states directly link their FS to Medicare, so when Medicare’s FS changes, it may – or more likely may not – change that state’s reimbursement.

There’s a lot more here; if you are looking for more information, try the search box on this page – it’s up there to the right.  With about 3000 posts on MCM, chances are pretty good there’s some discussion of pretty much every comp-related topic.

btw, good sources are: – see the workers compensation tab – everything workers’ comp – California-specific – their Annual State of the Line is really good.

Life is short. Live it like David did.

A few hours ago I found out David DePaolo was killed in a motorcycle-related accident over the weekend.  Friends, colleagues, business associates all have attempted to express their feelings at this shocking news, news that anyone who knew David finds tough to believe.

Because he lived life to the fullest.

Flying his plane, riding his bike at zero-dark-thirty, cruising on his motorcycle, opining on the weighty issues of the day, confronting us with the uncomfortable truths, all attacked with passion and energy.  David delighted in disagreeing without being disagreeable, a skill he exemplified.  Even if you really disagreed with his perspective, it was always impossible to ignore him.

His last post, a brutal and much-deserved takedown of pharma giant Purdue, is classic David.

There are so many battles left to fight, so many problems demanding our attention, so much left to do, and now we have to do it without him.  Suddenly it just seems a lot harder.

We all have lost a unique person, one that made the world a better place because he cared deeply.  I’m so sorry for his family and close friends, for they knew David far better than I ever did, and thus will miss him so.

The takeaway for me is simple – at the end of life, you have only your reputation, the good you’ve done, the life you’ve led.

David left more than most of us ever will.

The VA head smack

A few weeks back I posted on the incomprehensible decision by the Veteran’s Administration to award almost all of a $6.8 billion contract to two “different” companies that are actually very closely related.

Last week came the news that the Government Accountability Office delivered an official head slap – with a 2×4 – to the VA.

Politico reported [subscription required]

the GAO “citing “prejudicial errors” has directed the Department of Veteran Affairs to go back to the drawing board…the office “recommended that the VA reopen negotiations with the offerers, solicit, obtain, and evaluate revised proposals; and make new source selection decisions” [emphasis added]

Oh, and the VA “misled two of the protestors during the conduct of discussions or negotiations.  These errors led the VA to make source selection decisions…that were unreasonable…” [emphasis added]

Here’s my take.

First, there’s obviously some backroom dealing going on here.  When a giant defense contractor – Lockheed Martin – that has a documented record of failing to deliver a service and its “partner” are awarded most of a “competitive” $7 billion contract, while a much smaller competitor that happens to have a far better record of delivering that service on time and to specifications is awarded a tiny piece of the contract, something stinks.

Kudos to the GAO for the investigation.  HOWEVER, it’s unknown if this investigation would have happened at all if the three competitors who were screwed on the initial deal hadn’t spent hundreds of thousands of dollars preparing a protest within a really short time frame – a time frame that, to this observer, looks like it was designed to make it damn near impossible for the losers to react to the initial contract award to Lockheed Martin.

Second, and more important, this is outrageous, and demands further investigation.

There are thousands of veterans waiting on disability evaluations, a wait needlessly prolonged by what smells like corrupt contracting by someone or someones in the VA.

One just has to listen to calls from vets whose disability evaluations are delayed for months, vets in limbo because they have no idea if they will ever get any benefits, help, or the right treatment. These are men and women suffering from PTSD, missing limbs, burned, scarred, traumatized, now subjected to the mental anguish of not knowing when or if they will ever be taken care of by the country they fought for.

I would encourage you to email the GAO and ask it to continue the investigation to determine if this should be turned over to the Department of Justice.  Here’s the email address – 

Because the individual or individuals responsible for this unconscionable delay deserve more than a head smack.

[disclosure – I’ve consulted in the past for one of the protestors – Veterans Evaluation Services]

The success killers

Sometimes you read things that make you squirm a bit; this article was one of those times for me.

The piece, entitled “How to Stop People Who Bog Things Down with Bureaucracy”, had me nodding my head as I replayed past experiences working for big insurance companies. We’ve all had them; there’s a problem that is readily apparent to everyone.  Maybe it’s a customer’s repeated complaints about a process or missed target or service change requirement.

A meeting is convened to figure out how to address the problem.

The discussion quickly expands the issue to identify underlying causes – changing the process means several departments have to communicate differently, share information faster, streamline a well-established workflow that will disrupt current operations as staff is re-trained.  Management metrics will be affected, and dashboards altered.

As the discussion progresses, you can feel the oxygen leaving the room.


(Scott Adams has a brutally funny understanding of management)

It’s just too big, there are too many people who need to buy in and take action to fix the problem, there are other priorities, no single person can own it and fix it.  An “action” plan may be agreed upon, which usually involves more meetings and memos and prioritization and risk assessment – and little action that actually addresses the original problem.



Fact is, the people who point out that this or that change will require lots of other changes may well be right.

But, while they may be technically correct, when you think about what they’re really saying, they are most definitely wrong.

Wrong because organizations – for-profit, not-for-profit, governmental – all exist to serve their “customers”, and the people who focus on the obstacles to delivering for customers are coming at this bass-akwards.  Instead of thinking about the issue from their organization’s perspective, they should be looking at it from their customer’s.

Here’s how the HBR article described these well-intentioned managers…

Energy vampires are often smart, well-intentioned managers who inadvertently slow the company down with too many questions, too much analysis, too much process—and not enough action. They exist in the organization to administer various systems and processes that in isolation seem necessary, but in aggregate simply clog up the works and slow the company down.

Customers don’t give a rat’s rear end about your internal processes or metrics or management meetings.  They have a need – get this service delivered this way to me in this amount of time – and successful organizations attack problems from that external perspective.

What caused me to squirm is this.  I’m really good at the strategic view, at understanding customer needs and verbalizing them, but I can also be too quick to point out the potential obstacles and organizational changes and issues involved in meeting those needs. That can flip the discussion from where it should be coming from – the customer’s side – to what’s best for the organization.

In so doing, one concedes the field to the energy vampires, the “this is the way we do it here” people who keep things running smoothly – and directly away from success.

A few relatively simple things you can do to address this very real problem.

  1. Keep problems simple.  Don’t overcomplicate things.
  2. Eat the elephant one bite at a time.  Sometimes there are issues that require lots of organizational change; don’t try to do it all at once.
  3. Start with high-value changes with a very high chance of success.  This builds momentum and credibility and support.
  4. Reward intelligent risk-taking, and dis-incent the overly cautious.
  5. Accept some downside, understanding that overall, the net result is what matters, not ensuring every effort is a successful one.

What does this mean for you?

Think about the last meeting you had about a customer issue, and what is happening as a result of that meeting.  I’m hoping your organization focused on the “how” and not the “why we can’t.”