Insight, analysis & opinion from Joe Paduda


AARP, healthcare costs and drug prices

AARP has rather strange positions on drug prices and healthcare costs.

AARP positions itself as an advocate for seniors (and no, while I’m eligible, I’m not a member). The latest PR effort by the huge organization touts its lobbying to “help Americans afford high healthcare costs.”

Rather than lobbying for extensions on tax breaks for healthcare costs, AARP would serve its members better by doing something to actually reduce the cost of healthcare. Here are a few suggestions:

  • vigorously promote value-based care with reimbursement more closely tied to valid outcomes including functional ability
  • aggressively regulate healthcare system expansion, and specifically require reductions in costs after mergers
  • promote higher reimbursement for primary care, reduced reimbursement for questionable specialty care
  • focus attention on transparency in drug pricing – including rebate payments to plan sponsors

On this last suggestion, I’d note that AARP consistently moans about the retail price of drugs, while refusing to acknowledge the very real impact of rebates on brand drugs – which aren’t passed on to consumers.

Frankly, AARP’s stance on drug prices is misleading.

AARP’s “research” doesn’t discuss rebates – and the fact that plan sponsors are getting rebates, which drastically reduces the prices those sponsors pay for drugs.

As a result, consumers pay the higher retail prices, while plan sponsors – AARP partners among them – keep the rebates.

(thanks to Adam J Fein, PhD, for his work on this.)

I emailed AARP, indicating my concern with this.  This was the response:

“While AARP appreciates the potentially distorting effects of rebates, evidence indicates that plan sponsors are sharing rebates with consumers in the form of lower premiums. For example, a recent CBO analysis of a proposal to eliminate rebates under Medicare Part D that found that premiums would increase for all enrollees and that federal spending would increase by nearly $200 billion, primarily due to increases in federal subsidies for premiums.

“Further, AARP has consistently said that it would be happy to run these analyses based on net prices. Unfortunately, no drug manufacturers have been willing to take them up on the idea.”

Well, no.

First, there’s a megaton of evidence out there that some individual/group health and Medicare Part D insurers are getting rebates, and are NOT passing them on to consumers.

This from the estimable Dr Fein; (note the rebate percentage accruing to Plan D (senior drug card) sponsors):

Second, AARP could easily ask its “partners” (Part D plan sponsors among them) if they are getting rebates (which they are), and if so are they passing the savings along to consumers and what is the impact on those consumers’ drug costs. That would allow AARP to ” run these analyses based on net prices.”

AARP positions itself as an advocate for seniors. I’d suggest failing to address this is not helpful to their members.

What does this mean for you?

Does AARP benefit from rebate payments? I dunno…



Who are those guys?

That’s the question many have asked when told a handful of California physicians file most of the UR and IMR requests. Who are the 122 docs who file 44% of IMR disputes?  The ten physicians responsible for 9.5%? And what are the results of those filings?

Normally when regulators institute UR and associated appeals processes, there are a lot of UR appeal requests in the first few months, after which the volume drops off dramatically.  As providers learn the guidelines and understand the process, they change their practice patterns to comply with those guidelines.

This has been the pattern for decades, ever since UR started with hospital pre-auths in California in the early 1980’s.

Workers’ comp is no different, as the same trend occurred when Texas implemented guidelines and UR, and other states as well. For those wondering how this could be, a few reasons are provided below, courtesy CWCI…

Things are certainly different in California, where the volume of UR filings and IMR appeals actually increased by about 30% in the years since adoption. This makes no sense, as 9 out of 10 times a doc files an IMR appeal, that appeal is rejected. This adds millions of dollars to employers’ and taxpayers’ costs, extends disability, and slows down the patients’ recovery process. [of course, most of these UR/IMR requests are filed by applicant attorneys, based on the treatments are prescribed by physicians)

(chart courtesy CWCI)


Till now, the top offenders, the docs who don’t want to comply with evidence-based treatment guidelines, the ones who slow down the recovery process by continually requesting inappropriate drugs, unnecessary surgeries, unneeded injections and unproven therapies have been able to hide behind a wall of anonymity.

That’s over; SB 537 is why you’re about to find out who these bad actors are.

Specifically, Section 3, 138.8 requires DWC report individual providers’ UR and IMR filings and the results thereof.

From the Senate Analysis of the bill:

Recent research from the California Workers’ Compensation Institute suggests that medical disputes in the workers’ compensation system are not widespread: rather, they are uniquely concentrated among a few providers. For example, in 2015-16, the top 1% of providers who filed IMR requests (97 providers) filed twice as many requests as the bottom 90% of providers (approximately 40,000 providers). [emphasis added]

the strict protections on the use of individually identifiable information means that it is likely illegal for the DWC to reach out to these providers and find out why there is such a concentration of medical disputes among such a small provider group. SB 537 will address this concern by implementing the same data reporting requirements as are in the federal Medicare system.

DWC is tasked to do this on or before January 1, 2024; sources indicate DWC will likely publish data well before that date.

And when it does, we’ll know the name of the PM&R doc in northern California who filed IMR requests resulting in 2,800 IMR letters and 4,441 Medical Decisions. Oh, and 85% of those appeals were rejected. For those keeping score at home, that’s 11 letters per working day.

What does this mean for you?

Employers and insurers, make darn sure your MPN is on top of this.





Time for an effective workers’ comp opioid solution for Louisiana

Today’s WorkCompCentral arrived with William Rabb’s report on the use of opioids by workers’ comp patients in Louisiana. [subscription required]

A few notable findings:

  • Louisiana work comp patients get more opioids, and they get them for longer periods of time than any other state studied
  • Employers and taxpayers pay significantly higher prices for drugs than in other states
  • 7 out of 10 claims included an opioid prescription
  • Louisiana patients get twice as many opioid scripts than the average state.

For some reason, some “claimant attorneys” don’t see the wisdom of formularies/guidelines intended to reduce inappropriate opioid use, citing spurious claims from the pain industry in attempt to validate their complaints.

Louisiana has had treatment guidelines in place for several years, however they have not been revised or updated in memory and are very difficult to enforce. Compared to other states, the Pelican State has made little progress reducing inappropriate opioid use by work comp patients.

Back in 2017 I cited Sheral Kellar, Director of Louisiana’s Office of Workers’ Compensation Administration discussing the opioid issue in her state.

Ms Kellar knows a formulary is NOT a panacea, rather a critical tool in the armamentarium which includes:

  • Prescription drug monitoring programs that require and facilitate pharmacist and physician participation,
  • Strong and well-designed utilization review programs,
  • Flexibility for PBMs and payers to customize medication therapy to ensure patients get ready access to appropriate drugs and reduce risks from inappropriate medications,
  • Carefully-planned implementation,
  • Drug testing, opioid agreements, and addiction/dependency treatment

Over the last decade I have spoken with many individuals heavily involved in Louisiana workers’ comp; each frustrated and saddened by the lack of meaningful progress in attacking the overuse of opioids by workers’ comp patients. 

What does this mean for you?

Here’s hoping Louisiana is able to make real progress on reducing opioid usage. Families, communities, employers, and providers have all waited long enough.




What’s up with Paradigm?

Paradigm is evolving rapidly – and none too soon.  A data-driven firm known for taking risk on catastrophic claims, Paradigm has strengthened its behavioral health offerings, and added case management, specialty and network services, all intended to make the company one of the major players in workers’ comp medical management.

I’ve tracked Paradigm for more than two decades, watching the company evolve from one stubbornly stuck in a business model that precluded growth to a diversified provider with a broad array of service offerings. In conversations with Paradigm execs several years ago, I wondered why the company wasn’t solving client’s problems, instead focusing narrowly on a highly-selected group of catastrophic claims.

While this made sense from Paradigm’s perspective – it wanted to focus its expertise on a very select type of claim – there was a big problem with this approach.

Namely, Paradigm wasn’t thinking about this from its customers’ perspective. Customers gave Paradigm a big list of claims which Paradigm winnowed down; typically relatively few were actually “accepted” by Paradigm.  The customer had a bunch of problematic claims, but Paradigm wasn’t interested in solving the customer’s problem, it just wanted to cherry-pick claims.

That’s changed.

I caught up with Paradigm Catastrophic Care Management CEO Kevin Turner a couple weeks back to get updated on the company.  Here are my takeaways (Paradigm Outcomes is one of three divisions).

Paradigm is moving down the severity scale, applying the expertise and experience it has gained handling big cat claims to less-complex claims. In so doing, the company is embedding itself deeper and broader into its clients – and growing revenues.

Turner spoke at length about Paradigm’s core asset – the wealth of data the company has amassed over the last three decades – and how that informs the company’s approach to managing cat – and “near-cat” claims (my words, not his).

We also dove into bio-psycho-social issues, including the patient’s “whole family situation” (again, my words) and the critical importance of the family in the recovery process. Marital status and satisfaction, financial stability, relations with children are all key considerations that can impact the recovery process. That just makes sense; if a patient has a difficult home life and kids with issues, it is going to be that much harder to get better.

The company recently launched a home-grown IT application – EDDG – designed to help care managers use the company’s historical data and lessons learned along with bio-psycho-social indicators to manage claims.

Of note, Paradigm is no longer the only company in the cat claims risk taking business. Carisk Partners has gained traction with its Pathways 2 Recovery program, leveraging the company’s deep expertise in behavioral healthcare and workers’ comp experience. Carisk takes risk both on individual claims and for entire portfolios of claims. (disclosure; I work with Carisk)


Workers comp is A) doing great, or B) a big problem

Where you sit determines what you see; this adage applies to the work comp industry.

For payers, employers, and taxpayers, all is great.  Rates are low and dropping, insurers are enjoying record profits, frequency continues to trend down, medical costs are flat.

The very things that make payers happy have the opposite effect on service companies. For most entities involved in medical management, pharmacy management, investigations, technology, claims systems, Medicare Set-Asides, and litigation defense the drop in frequency and flat medical costs are unwelcome news.

The trickle-down effects of this dichotomy are many and varied.

  • There is little-to-no pressure to revise state workers’ comp laws and regulations.
  • Insurers are looking to increase their work comp business as it is a big profit maker.
  • Claims execs are trying to balance hiring and training new claims adjusters while planning for long-term decreases in claim volume.
  • Execs are also extremely careful about investments in new IT projects, as the long-term payoff is also challenged by structural declines in claims.
  • The consolidation of service companies continues unabated; IMEs, bill review, specialty networks, PBMs, investigations, case management, cat case management services are all subject to this consolidation.
  • Selling services to payers is getting increasingly difficult.  Payers aren’t seeking solutions to major problems; they are reluctant to switch vendors unless there are serious service problems.
  • Work comp conferences are struggling due to the structural issues above; the lack of big problems driving intense interest in solutions and an arguably-over-saturated conference market is hurting attendance.

So, what to do?

If you are a service entity, you’ve got to differentiate. You must also deeply understand what individual buyers want, why they want that, what their decision process is, and who else is involved.

Unfortunately many service entities are cutting marketing budgets and pressuring sales staff to deliver deals. While sales targets are important indeed, they must also be realistic.

If you are a payer, I’d echo the last sentence above. Many payers are planning to write more workers’ comp, an obvious impossibility.



In which I read current research and summarize key takeaways so you don’t have to…

Stress over healthcare costs doesn’t go away when you are on Medicare

HealthAffairs reports that more than half of Medicare recipients with a serious illness reported “serious financial distress” due to medical bills. Drugs are the most common cause, followed by facility bills.

This is important because:

Medicare for All is NOT a panacea; politicians advocating for MFA should understand Medicare needs major improvements before it is “ready for prime time.”

Oh, and a third of all credit card holders are in debt due to medical bills.

Immigration and healthcare

If you or a parent have a healthcare aide, listen up. The bruising battle over immigration and the “Dreamers’ will affect healthcare – particularly for older Americans who rely on home health aides and other lower-level clinical support.

27,000 Dreamers work in healthcare and healthcare support, many providing individual care. The Trump Administration is trying to end this program and force Dreamers to leave the U.S.

The shortage of home health workers is particularly acute in older states such as Maine and the upper midwest. With immigrants filling one of every three home health positions, ending DACA and further restricting immigration would leave thousands of older Americans without care. 

What does this mean for you?

When a politician says something is simple, or their claims just seem to make sense, your alarm bells need to ring.

Medicare will need huge and expensive changes to work for all of us. 

If you don’t want immigrants in the US, then you get to care for your parents without any help.


Work comp rates are still too high – and will continue to drop

Today, I’m going to convince you that despite years of continued decreases, work comp premiums are still too high.  And will likely remain too high for the next few years.

That’s how long it will take the impact of reduced opioid consumption to work its way through comp financials. Sure, continued declines in frequency and high employment along with declining worker benefits are also factors – but I’ll argue what’s way more important is the drop in opioid prescriptions.

A decade into this, the dramatic drop in work comp opioid prescriptions is continuing unabated.

  • CompPharma’s 16th Annual Survey of Prescription Drug Management in Workers’ Comp [free to download] shows payers have slashed opioid spend by 40% over the last two years.

  • myMatrixx [HSA consulting client] reported a 15% drop in opioid spend in 2018.
  • Optum Workers’ Comp reported a 2.9% reduction in opioid spend for the first half of 2019 compared to the first half of 2018.
  • CWCI’s just-released report analyzes data from lost time claims incurred between 2008 and 2017:
    • the percentage of claimants receiving opioids dropped 51% over that time period
    • chronic opioid use dropped by 77 percent, from 13% of claimants to 3%
    • acute use declined by 40 percent

My key takeaway from CWCI’s report isn’t the drop in opioid usage, it is that claims without opioids are much less costly, therefore the drop in opioid prescriptions is driving lower claims costs.

Those reductions have yet to be fully factored into work comp rates – so rates will continue to drop.

Key data points:

  • Average benefits for claims without opioids were 30% less than for claims with opioids (at 12 months).
  • Claims without opioids had 25% fewer TD days than claims with opioids.

The net – “Cumulative savings from the decline in opioids are projected at $6.5 billion for 2010 – 2017 claims.”

Report authors Steve Hayes, Kate Smith, and Alex Swedlow provide suggestions for actuaries on page 15 and in Appendix 4.

What does this mean for you?

Rate reductions haven’t caught up with the reality on the ground. 

Barring major unforeseen events, work comp rates will continue to drop for several more years. 

For those so inclined, an extensive discussion of rate-making is here.




The most important thing you aren’t paying attention to

Is the ACA case in Texas.

Briefly, Republican Attorneys General have sued to overturn the ACA.  The AGs’ claim the entire law must be thrown out because the individual mandate — a penalty imposed on people who chose to remain uninsured – was killed by Congress in 2017.

You may recall that, in addition to the mandate, the ACA:

  • expanded Medicaid to more low-income families and individuals
  • reduced seniors’ drug costs by closing the “Donut Hole” in Part D plans
  • reduced insurance costs for older Americans
  • increased funding to fight healthcare fraud
  • increased funding for rural healthcare
  • increased tax credits for small businesses providing health insurance
  • provided insurance subsidies for families making less than $88,000
  • required insurers to offer complete insurance coverage to all without discriminating by medical condition, age, or sex

If the Republican Attorneys General prevail, the ACA will be overturned, and health insurers will be allowed to:

  • stop covering pre-existing conditions; 
  • stop covering your adult kids;
  • limit your maximum dollar benefit;
  • exclude different types of medical care
  • medically underwrite small groups; and 
  • subsidies for folks buying health insurance go away.

Meanwhile, there is NO alternative plan if the judge rules in favor of the AGs. While HHS Secretary Seema Verna says there will be a replacement plan, there are no details about this “plan“, and no information whatsoever from the President or Congress.

photo credit Leslie Boorhem-Stephenson for the Texas Tribute,

I don’t understand how the entire law can be overturned because one part of it is no longer in effect – but I’m no attorney and will leave that to those readers who are.

From a political perspective, this doesn’t seem too smart on the part of Republicans.  People hate losing things they already have – much more than they don’t like not getting things they wish they had. And if the ACA is overturned, millions of voters – including millions of seniors – will be really mad.

What does this mean for you?

If you’re a Medicare recipient, parent, make less than $88,000 a year, are a small business owner, have pre-existing condition, and/or need comprehensive insurance coverage…

nothing good.


Opioids and work comp premiums

Two seemingly-unrelated papers hit the inbox yesterday; CWCI’s just-completed analysis of opioid usage in the Golden State, and NCCI’s report on 2019 workers’ comp financials.

The key takeaways from NCCI’s report include:

  • Premiums are expected to drop 10 percent in 2019, driven by rate/loss cost filings. In other words, losses are declining which leads to lower insurance costs.
  • This marks the sixth consecutive year of decreased premium levels.
  • Not coincidentally, 2019 is the sixth consecutive year of underwriting profitability.

So, even though premiums are dropping like a rock, insurer profits are better than they’ve ever been.


Well, declines in frequency are certainly a big contributor. Reduced worker benefits are likely a factor as well – and a big problem we’ll address in a later post.

If anything, investment profits are a drag on profitability (NCCI reports 2018 investment gains averaged 9.2%.

Which brings us to CWCI’s report “The Impact of Declining Opioid Use on Lost-Time Claim Development & Outcomes in California Workers’ Compensation” [emphasis added; disclosure – I provided input as a peer reviewer for the final report]

Key takeaways:

  • “from 2008 to 2017, chronic opioid use…declined from 13% to 3% of all lost-time claims (a relative decline of 77%)”
  • the strength of the opioids dispensed within the first 12 months of treatment, measured in cumulative morphine milligram equivalents, declined 59% for chronic opioid use claims

Tomorrow – the connection between opioid reductions and premium levels – and what it means for the industry and you.



Haven Healthcare’s next step

Is partnering with two big insurance companies to offer creative plans to two of its owners’ employees.

30,000 JPMorgan workers in Ohio and Arizona covered by Cigna and Aetna will be offered a plan that has no deductibles, with copays ranging from $15 to $110 depending on the service; facility copays will likely be higher.

Amazon’s also offering a Haven Healthcare plan in a handful of states. The giant seller-of-everything also just bought Health Navigator for an undisclosed sum.

From Motley Fool:

it will fold [Health Navigator] into Amazon Care, its new employee healthcare benefit that gives users access to virtual doctors and nurses…Amazon Care users (currently limited to employees in the Seattle area) can fill prescriptions through the e-commerce giant and choose between having them delivered or picked up at a participating pharmacy. By providing healthcare services to its employee base Amazon gets to test the waters and make fixes before the program is offered to a wider market.

Evidently Health Navigator uses an AI-based health bot which helps members diagnose illnesses, determine the right course of care, and then routes the member as appropriate.

While JPMorgan and Berkshire are likely funding Haven to help reduce their healthcare costs, Amazon’s got bigger plans.

With annual revenues around $340 billion, the giant company needs a really, really big market to keep growing. Healthcare is $3.4 trillion, massively screwed up, and just the kind of target Bezos et al need to keep the good times rolling.

What does this mean for you?

If you think Haven won’t succeed, did you ever think you’d be getting your groceries, tools, video, toiletries, prescriptions, car parts, medical devices, batteries, dog food, shoes, and music from an on-line bookseller?

Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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