Insight, analysis & opinion from Joe Paduda


What would you do with another $8,000?

The US healthcare system is costing you $8000 more than it should.  That’s because you – the consumer – are at the mercy of hospitals, insurers, doctors, device companies, pharma.

You know this.

You know the healthcare “system” is designed to make money for healthcare providers, big pharma, device companies, healthplans – not to help you and your family stay healthy and functional. 

You know the healthcare system makes money – buckets of it.

You know we spend way more than any other country, yet we die younger.

You know  Purdue Pharma made tens of billions of dollars addicting your neighbors and kids, and got away with it for decades.

You know this because the hospital industry has never been more profitable. Oh, and rural communities are losing hospitals because those hospitals aren’t “profitable” – despite the fact that rural Americans are losing access to desperately needed healthcare.

You know this because you can’t “negotiate” with your local hospital, or insurance company, or pharmacy – because they have all the power and data and political influence, and you have none.

You know this because your healthcare premiums and deductibles and out of pocket costs keep climbing – and your wages don’t.

Healthcare is not, and cannot ever be, a free market. A free market requires buyers have the ability to make sellers respond to buyers’ needs – yet we all know we consumers have zero ability to make pharma, hospitals, big doctor groups, device companies respond to our needs.

How dysfunctional is this “healthcare system” that costs you $8000 more than it should?

Well, imagine if air travel was like healthcare…(link opens video)

This is why your family is paying the healthcare industry $8000 more than you should – the industry has all the power, we have none.

What does this mean for you?

This will continue until you decide it won’t


Hospital costs, Medicaid expansion, and workers’ comp

Three pictures tell the story of the biggest problem in workers’ comp medical cost management.

A reminder that facility costs are the biggest chunk of medical spend from Kaiser Family Foundation.

A seemingly-unrelated graphic illustrating the status of Medicaid expansion; blue states expanded Medicaid under ACA, gold-ish states did not.

States where work comp facility costs have risen the most – courtesy WCRI.

This from Captain Obvious – Hospitals in states that failed to expand Medicaid are using workers’ comp as a financial lifeline.

What does this mean for you?

What’s your solution?


Iowans aren’t buying Medicare for All

There’s a big problem with Sen Bernie Sanders’ Single Payer plan. [I think it is Sen Warren’s plan too, but she’s dithering these days.]

Nope, not the cost, not the “gubmint taking over my Medicare”, not the pharma or physician lobbies.

It’s a job killer.

The impact of Single Payer on Iowa’s economy would make the Dust Bowl look like a summer zephyr.

Polling is showing voters’ concerns with Single Payer; here’s the data on the impact on jobs… [Sanders’ version of Medicare for All is pretty much identical to Single Payer]

Somewhere between half a million and 800,000 Americans work for health insurance companies. Most would lose their jobs under Single Payer.

In Iowa, one out of eight workers are in healthcare; a lot of those are clinicians and direct support (med techs, nursing aides etc), most are doing administrative work.

A couple examples of the impact of Bernie Sanders’ Single Payer program on Iowa are helpful.

Wellmark Blue Cross employs 1878 people – adding up the admin costs plus commissions, about $290 million is spent on stuff besides direct healthcare costs – spend that would go away under Single Payer. Sure, some goes to IT, some goes to building maintenance, some goes to paperclips and travel. But much of that $290 million – and 1878 jobs – goes away under Bernie’s plan.

Another 800 folks work for other health insurers;  that’s about $130 million in wages…

Another metric – total healthcare employment. While it’s not possible to tease out the precise number of healthcare administrative jobs – billing clerks, coders, managers, IT support, claim handlers and the like – at least 30,000 Iowans are working in healthcare administration, earning a total of about $1.2 billion.

Some are likely medical billing clerks – the folks who figure out how to bill you and your insurance company for services you receive (these folks); total income for the 5000 Iowans doing billing is just under $200 million.

All this to say there are tens of thousands of Iowans who would lose good-paying, stable jobs if Bernie Sanders’ Single Payer becomes law.  And if they do, those billions in paychecks disappear.

What does this mean for you?

Single Payer is a great idea – if you are starting a healthcare system from scratch. Which we aren’t.


The greatest healthcare system in the world.

No better description of our totally dysfunctional “healthcare” “system” from a good friend and colleague. (this is not my situation)

I thought you might get a kick out of something that happened the other day.  I got a call from the hospital where I’ll be getting treatment over the next few months.  They wanted to let me know that they have an estimate, based on discussions with my medical insurer, as to what my out of pocket costs would be for the treatment that’s so far been prescribed.   After walking me through all the necessary ‘caveats’, the young lady then asked me how I would like to pay my responsible share, which is thousands of dollars.
Here’s how the conversation went:
Hospital Rep (HR):  How would you like to pay these fees that you will be responsible for?
Me:  Are you asking me to tell you that now?
HR:  Yes – we can take a credit card or a check number and routing number right over the phone and get it all taken care of right now.
Me:  But I haven’t even seen the charges or received treatment yet.
HR:  Oh, don’t worry – you’ll receive the treatment and then we can bill you for any other responsible charges
Me:  Is this a joke?  You expect me to pay for something off of a verbal discussion – no documentation, no explanation?
HR:  But I just explained it all to you.
Me:  Ok – let’s try this – how about I go through the treatment, you run the charges through my insurance, and then we can see what my responsible share is?
HR:  We can do that too but we prefer to get confirmation of payment up front.
Me:  So is that required?
HR:  Is what required?
Me:  That I pay upfront, with no documentation or having had the benefit of my insurance actually look at the charges first?
HR:  No, it’s not required, we just prefer it.
Me:  Got it – we’ll do it the old fashioned way.  Send it through insurance and we’ll handle the balance from there.
HR:  We do have payment plans available with no interest.  You could make a payment right now and begin that process right now.
Me:  Will that be available to me after insurance sees the charges?
HR;  Will what be available to you?
Me:  The payment plan option  you just told me about.
HR:  Oh yes.
Me:  Ok – let me try this again – send the charges to my insurance and once they adjudicate the claims I’ll get back to you on any charges I am responsible for.
HR:  Well, we know what your deductible is so why not just pay that amount now?  Again, we can take a credit card or a check number and routing number.
Me:  I feel like I’m in a bad Abbott and Costello routine.
HR:  Who?
Me:  Never mind – let me be blunt – I’m not paying for anything without documentation.  I appreciate you letting me know the estimate but I won’t pay off that either.  If that means you won’t perform the service, I’ll find another provider.
HR:  Oh, of course we’ll provide the service, we just wanted to remove the stress of financial responsibility before the treatment begins.
Me: Well, actually, I think you’ve done just the opposite
HR;  The opposite of what?
Me;  Never mind – I have two questions.  Can I still get treatment without paying any charges before treatment is provided and second, will you bill me after insurance has reviewed and adjudicated the charges.
HR;  Yes we will provide the treatments and yes we will bill you after insurance has handled the
Me:  Ok -thank you (and I ended the call).


This is why media gets a bad name.

The LA Times’ Patrick McGreevy penned a piece on California’s State Fund – one that I contend is highly misleading.

McGreevy – and his editors – did their readers a disservice when “reporting” on executive compensation at the State Compensation Insurance Fund of California, focusing only on complaints about compensation and unsubstantiated claims of nepotism. Fact is, under CEO Vern Steiner, the State Fund has made a remarkable turnaround, one that has literally and figuratively paid dividends for businesses and taxpayers throughout the state.

McGreevy failed to mention anything about the Fund’s 2019 performance ($160 million in dividends paid to policyholders while significantly strengthening reserves) – performance he knew about before he wrote his piece.

Here’s an example of McGreevy’s reporting; an uniformed – at best – comment from one so-called “former industry executive”:

“It’s a very cushy gig…They don’t do much of anything and they get paid a ton.”

[Oh, and the guy who said that worked for a not-for-profit insurer – USAA – that paid it’s CEO 5 times what State Fund CEO Vern Steiner made. And the State Fund had a MUCH better year.]

But about that comment; specifically “they don’t do much of anything”.

I called Steiner to ask how the State Fund has delivered those results. Here’s what he said.

MCM – Talk about the Fund’s financial performance.
VS – ” [We] went into this year knowing that the Fund’s financial strength was exactly where California needed it to be to handle the market no matter what comes. Reserves are very strong; surplus is what we need to withstand any catastrophe; biggest risk is significant negative reserve development from unexpected system changes – we can handle this.”

“For 2019, we planned to break even, instead, investment performance was so strong that we realized $100mm in capital gains due to equity investment performance.”

MCM – What are the factors that drove this?
VS – There have been several transformative initiatives at the Fund, largely driven by claim performance and investment performance.

This could not have happened several years ago. A few years ago the State Legislature authorized additional executive positions at the Fund and allowed the Fund to invest in equity. We hired a Chief Investment Officer, and the equity investments have generated much more in unrealized cap gains. Our state insurance code only allows us to invest 20% of unrestricted surplus in equity; as our equity portfolio increased in value, it exceeded that 20%, so we had to sell off equity to get under 20%. This happened several times in 2019, creating a large capital gain. We didn’t need this money for surplus or reserves and we are not for profit, so we are giving them to our policyholders.

Since we were given the authority to invest in equities we have generated $433.8M in capital gains.

MCM – Has the Fund’s medical management of claims affected results?
VS – “The Chief Medical Officer position was also created by the Legislature. After Dinesh Govindarao came on board we created a comprehensive approach to the opioid epidemic; the work that was started in 2013 is impacting reserves for claims going back to 2008.  About $60 million dividend is from claims improvement…[there] may be as much as several hundred million more in dividends from our opioid initiatives alone.”

“After the Palm Medical case, we had not removed any physicians from our previous network, so we closed it down, rolled out a new network in 2016, and did not include physician offices in our pharmacy network.  That had a massive impact on lowering claim costs and reducing inappropriate compound medicine and opiate prescriptions.”

MCM – Any significant changes to claims handling?

VS – “When the Chief Claims Officer joined at the end of 2015 we redesigned the claim model to move the 1/3 of open claims that were from early 2000s to a dedicated group of adjusters specializing in resolution. We had (received) a million claims over a 5 year period [this happened back when the California work comp system was in crisis and the State Fund had over 50% market share]

In 2015 a third of our open claims inventory was from that period, managing these claims was taking a lot of attention away from focusing on the 20,000 new claims we get every year. We separated the old and new claims, have different people working those and as a result we are closing claims at faster rate than ever and this continues to improve.”

The result of all these people in “cushy jobs not doing much” is a State Fund that’s:

  • never been stronger financially,
  • returned $160 million to policyholders, and
  • one of Forbes’ 500 best mid-sized employers to work for.
    [btw USAA – where that “former exec” worked, the one where the CEO makes five times what Steiner does – didn’t make Forbes’ list.]

What does this mean for you?

Kudos to the State Fund for delivering remarkable results for patients, policyholders, and taxpayers. 

Note – I emailed Mr McGreevy early today asking for an explanation as to his article didn’t include information re the improvements in financial and claim outcomes. If he responds I will keep you posted.


Failure isn’t.

If the insurance industry – and your organization – is going to a) make real progress and b) survive the next hard market its/your leaders must reward those who take risks – not fire them. (this is a follow-up to my last post)

In order to do that, our “leaders” must understand the value of failing.

A C suite exec with decades of success in work comp claims and executive leadership sent me this:

the lack of innovation is as much about penalizing those with ideas as it is anything else.  Whether my own direct experience as an individual contributor or member of a team, or watching others, I’ve seen way too many ideas be dismissed out of hand, ignored, or simply not advanced because of a culture that is just too harsh when it comes to ‘failure’.  The industry has, generally speaking, failed to realize that great innovation often comes from failed innovation.  I can think of multiple executives I’ve worked for where I simply gave up on advancing ideas because of their reaction to suggestions from me and others.

An example.

One of our daughters works for a huge tech firm that does data storage, backup, and a lot of other stuff I don’t pretend to understand. Molly (daughter 2) and her team are responsible for some really big accounts, one a huge business application company. Long story short, the team is always looking for ways to provide increased value, deliver more services, and help the client grow. Her company was working on a new tech platform/capability/service, one which might help Molly’s client speed up its development cycle and improve service delivery.

This was new, not-tested, bleeding-edge stuff. The team debated if they should pitch it to their client, as there was a better than 50/50 chance it would not meet the objectives.

Throwing caution to the winds, they pitched the $15 million+ project to the buyer, telling the buyer that it would likely “fail”.

The client bought it.

She asked why, given it might well fail to deliver, which would mean her client blew $15 million, which might be pretty awkward for the decision maker.

Nope – the client said there was every reason to go forward.

First, it might actually work, which would dramatically improve a couple key metrics;

Second even if the project “failed”, it would be well worth it because the client would:

  • gain really valuable experience and insight into new technology;
  • improve the client’s ability to implement new and unique technology; and
  • help Molly’s company get better faster, increasing her company’s value as a partner.

Yeah, I can hear all the reasons this is fine for tech but not for workers’ comp. But those aren’t reasons – they are excuses – and lame ones at that.

Tech can do this because they have a lot more money than we do.

BS.  The work comp industry is making more money now than it ever has – there’s never been more dollars available for innovation.

We are doing great now, so no need to do anything different (if it ain’t broke…)

BS. The time to prepare for the storm is when the sun is shining, because sure as hell you won’t be able to patch that roof during the inevitable hail storm.

We don’t have the ability/expertise/employees we need to innovate.

And…whose fault is that?

You need to build a culture that rewards smart failure, that values innovation – which by definition includes failure, that is excited about doing stuff better, faster, and more efficiently, that recognizes risk-taking as critically important to growth in revenues and margins.

That’s the single most important change we need to make – and those who do will win.


A wake-up call for the insurance industry

We are stuck in a self-destructive cycle, namely an industry-wide culture that rejects true innovation that leads to a huge talent deficit that prevents innovation.

With few exceptions, there is little in the way of innovation, effective marketing, risk-taking, creativity and substantive investment in systems and technology in the insurance industry. That will be the death of many insurers and healthplans.

As a result, we can’t get enough brilliant, impactful people to work in our business because our culture is anathema to most of them.

So, there’s no innovation.

The most important part of any organization is its people. Yet our industry’s talent deficit is as wide and deep as the Marianas Trench. Sure, there are some very smart folks doing great work – in healthplans, State Funds, private insurers, TPAs, and service companies.

They are the exception, not the rule.

Don’t agree?

How many of your brilliant college classmates chose a career in insurance? In your career, you were blown away by someone’s acumen, insight, brilliance, thinking how many times? How many execs in this business came out of top business or other schools?

Why is this?

I’d suggest it is the very nature of our industry; it isn’t dynamic, doesn’t reward innovation, hates self-reflection, abhors risk-taking, and doesn’t invest near enough in people or technology.

Proof statements, courtesy of The Economist 

  • No insurer ranks among the world’s top 1,000 public companies for R&D investment – yet dozens of insurers are in that top 1000.
  • On average insurers allocate 3.6% of revenue to IT —about half as much as banks.
  • In a study of 500 innovation topics across 250 firms, many insurers are working on the same narrow set of ideas.
  • Many property insurers, whose fortunes rely on forecasting climate-induced losses, are still learning how to use weather information.

Tough to recruit talent to an industry that – for Pete’s sake, invests half what banks do in IT…

  • Or for a property insurer that hasn’t figured out weather is kinda important?
  • Where all your competitors define “innovation” as doing the same stuff you do?
  • That probably spends more on janitorial services than R&D? (Ok, that may be a bit of an exaggeration.)

Many of the big primary insurers in today’s market will be overtaken by the Apples, Amazons, Googles, Beazleys, Trupos, and Slices tomorrow. The names you know are brilliant innovators and have billions upon billions of cash to invest. The names you don’t know have figured out and are diving into markets that the traditional, stodgy, glacially-fast insurers can’t even conceive of – reputational risk, very short-term insurance for specific items, disability coverage for gig workers, and a host of other opportunities.

Oh, and they are doing it without all the paperwork, hassle and nonsense that keeps insurance admin expenses at 20% of premiums while frustrating the bejezus out of potential customers. (having just spent hours on the phone fixing a problem with flood insurance, count me as one)

And no, with rare exceptions health insurers aren’t any better. With structural inflation that guarantees annual growth of 5-8% and an employer customer that has to provide workers with health insurance, plus governmental contracts that pay on a percentage of paid medical, and record profits across the entire industry, there’s every reason to NOT control costs.

Those record profits may well continue till a Cat 5 storm hits the Jersey shore and/or a deep recession hits and/or investment portfolios are crunched by macro factors.

In the meantime, Jeff Bezos will be looking for places to plow some of his hundreds of billions.

Tomorrow – what to do about this.

What does this mean for you?

Critical self-reflection is really hard, and really necessary. This industry is ripe for disruption and it will happen. The question is, what will you – and your company – do?




Predictions for workers’ comp in 2020, Part 2

My last post covered the first five of my annual prognostications; today we look a bit deeper into the crystal ball…

6. California’s crooked docs will be outed.

With SB 537 signed into law, it looks like we’ll know which docs are the bad actors later this year. Kudos to the behind-the-scenes folks who made this happen; thanks to them 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.

(while the law doesn’t require this outing to happen before 2024, I’d expect we’ll know the names of the worst offenders in 2020.)

Word of warning – network providers would be well advised to do their own research to identify and remove problematic providers before the list becomes public. Failing to do so will show you’re just a box of contracts.

7.  More effective approaches to chronic pain and opioid abuse disorder are here – and will gain a lot of traction in 2020.

Behaviorally-focused treatment, medication-assisted therapies, long-term clinical support and individual-specific treatment plans are all essential to solving the biggest problem in workers’ comp – chronic opioid use disorder [OUD]. Payers are recognizing that discounted-network approaches to pain and OUD are nothing more than revenue-generators for vendors. Carisk’s Pathways 2 Recovery is getting significant traction; Paradigm is shifting to more of a behavioral approach as well. (Carisk is an HSA consulting client).

8.  Don’t expect any meaningful state legislation/regulatory changes.

Significant change doesn’t happen unless there is a lot of pressure to make that change. And there isn’t – With workers’ comp anything but a problem for employers and insurers, constituents aren’t pressuring legislators to take action and regulatory activity will be mostly clean-up stuff.

Word of warning – beware of folks hyping relatively minor stuff like medical marijuana. Compared to the California crisis and Illinois’ past work comp disaster these issues are pretty insignificant.

9. Benefit adequacy will gain some traction.

I’ll admit this is much more of a hope than an actual prediction.

As reported by NASI, worker benefits have declined dramatically over the last two decades. Sure, some of this is due to the drop in frequency, but workers are getting less in benefits than they have in the past – and that’s bad by any measure.  It’s great that employers’ costs are declining, but that shouldn’t be at the expense of injured workers and their families.

With employers’ work comp costs at an all-time low, it’s long past time we focused on making injured workers whole.

This does NOT mean I support the self-described “worker advocates” who make their living off injured workers. If anything these leeches do more harm than good.

10. Conferences will continue to struggle

look familiar?

The work comp conference industry is suffering from over-supply; as a result many conferences are seeing drops in attendance, revenues, and exhibitors.

For some conference planners, the fix is pay-to-play.

While a possibly-useful short-term fix [pay-to-play generates much-needed revenue and profit] the long-term impact will be to further reduce the value of conferences.

Another “solution” is to require each session include an employer, ostensibly to provide real-world examples that other employers can use to improve their programs. The problem with this is obvious; while it will drive more attendance from brokers, TPAs and insurers, it doesn’t deliver much value for other employers. Here’s what I said back in August..

I can’t count the number of times I’ve heard “well, if I had a thousand workers in XYZ city I could negotiate with an occ clinic too”, or “how do I apply that to my interstate trucking company” or “yeah that’s not going to fly with my unionized workforce”.

That said, conferences put on by CWCI, NCCI, WCRI and those focused on self-insureds are content-rich and well worth your time.

That’s it for this year – may you do well by doing good.


Predictions for workers’ comp in 2020

Well, proving once again that I can’t/won’t learn from past mistakes, here are five of my predictions for 2020.

  1.  The work comp insurance market will stay soft.

    As in mushy, pillowy, baby rabbit fur soft.
    Multiple factors make a strong argument for a continued soft market. (that’s a market where prices decline and it’s very easy to get insurance)
    First, insurance rates and prices continue to drop in pretty much every state. Second, outside of California self-insureds I haven’t seen any significant uptick in – or even leveling off of – claim frequency.
    Third, see prediction #2.
  2. Work comp medical trend will remain flat.

    Trend has been flat for several years now; as a result, medical severity (that’s a financial term, not a clinical one) remains well under control as well.
    The biggest factor may well be the industry’s ongoing success in reducing inappropriate opioid usage.  Also, frequency declines will likely continue, helping drive down medical costs.
  3. Facility costs will gain a lot more attention.

    This is the biggest cost problem payers are facing; hospitals and health systems have figured out work comp payers are a very soft target, and are hoovering dollars out of payers’ pockets.
    We’ll see more payers take specific actions to address facility costs; payment integrity will gain significant traction among payers and service providers. (PI firm Equian is an HSA consulting client)
  4. Consolidation in the work comp services industry will continue, with more of the big players merging/acquiring each other.
    A few years ago there were ten or a dozen PBMs, now there are 4 with any measurable share. Paradigm and Genex have consolidated the case management sector. There are now a handful of bill review application vendors; that could decrease if Conduent’s Stratacare/ware goes up for sale early in 2020. Same thing has happened in the TPA space driven primarily by Sedgwick.
    The consolidation has been both horizontal, that is across different sectors (e.g. Paradigm buying CM and network companies) and vertical (TPAs buying other TPAs); as there are fewer assets for sale
    Sure there is a proliferation of start-ups and smaller players but it is going to take a while for these to break thru and gain major share in one of the verticals.
  5. OneCall will be sold. 

    And possibly broken up by the buyer. After KKR and GSO’s takeover of the near-bankrupt company two months ago, not much has been heard from Jacksonville HQ.  After the balance sheet clean-up and Polaris review are completed, expect the new owners to put it up for sale. KKR and GSO will turn a handsome and quick profit, prior debtholders won’t have to write off their entire portfolio.
    No word on whether employees will get something back as well; that would require action by the current owners as “old” stock is essentially worthless.Next time – the next five.


The ACA is ruled un-Constitutional, which means….what?

Two Republican-appointed judges on a Federal appeals court struck down a key provision of the ACA.  So what?

Well, if you or a family member are a bit heavy, have high blood pressure, are pre-diabetic, had a bout of cancer, may need long-term care, make less than $103,000, are pregnant, pay attention.

Another judge will decide if the entire ACA or parts of the very broad law are struck down. Among the provisions at risk are:

  • guaranteed coverage for pre-existing medical conditions
  • guaranteed healthcare for your kids up to age 26
  • long-term care benefits for you and your parents.
  • no lifetime caps on medical benefits
  • reduced premiums for families that make less than $103,000
  • financial support for small business’ healthcare premiums
  • coverage for prescription drugs and behavioral health
  • limits on what insurers can charge older folks
  • Medicaid expansion in two-thirds of the states

SOME of the pre-existing health conditions that would not be covered if the ACA goes away…

This would have different effects in different areas… click here to get an interactive map.

What’s puzzling is the Republicans who want to blow up those protections have no plan to deal with the consequences. The end of all or some of the ACA will have huge effects on families, and there’s NO plan to help families when this happens.

What does this mean for you?

Check the list up top.

More on potential implications here.

A detailed discussion of the lawsuit and where things stand is here.

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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