Year: 2009

Feb
10

Sebelius – probably NOT the next HHS Secretary

Posted by Joe Paduda on Tuesday, February 10th, 2009 | Comments

The New York Observer has a terrific piece on President Obama’s search for an HHS Secretary. Although Kansas Governor Kathleen Sebelius (D) has been mentioned as a top candidate, the NYO thinks not. The reason? She is so popular in her home state that she could well run for the Senate, thereby a) possibly giving the Dems a cloture-proof majority, and b) help expand the Dems further into the ‘Heartland’, thereby forcing the GOP to play defense on formerly-unassailable terrain. Sebelius leads both potential Republican candidates by double-digit margins.
Could Sebelius take the HHS job and then resign to run for the Senate? No. The HHS job has to be a long-term one; shepherding reform is going to take at least four years and likely many more; Obama can’t afford to have to replace an HHS Secretary two years into the job, especially as that will be just as things are really ramping up. This is a slot for someone who wants to be there over the long term; Sebelius is too much a rising star to take four plus years ‘off’ to take on what is going to be a very tough, highly visible job requiring decisions that will undoubtedly antagonize just about everyone.
Controlling the Senate is far too important to President Obama, and running for the Senate is likely a much better choice for Ms Sebelius than taking on what will likely be a thankless task that will alienate just about every constituency and could well end any hopes she might have of future elected office.

Feb
9

Can government deliver quality health care?

Posted by Joe Paduda on Monday, February 9th, 2009 | Comments

The current debate in Washington has more than a few complaining about the expanding role of government in health care. The question should be, can government do a better job than private industry?
Heck yes.
I’ve never been one to buy into the ‘government can’t do anything right’ meme. Sure, government (which, incidentally, is run by people elected by us) can make mistakes – some pretty big ones at times. But it can also perform very well – NOAA, the CDC, the Coast Guard, Head Start, the NIH, the GI Bill, National Weather Service are a few examples.
But perhaps the best is the Veterans’ Administration and the health system run by the VA.
Here are a few factoids…
– compared to commercial managed care plans, the VA provided diabetics with better quality care on seven out of eight metrics by NCQA.
– In 2005, VA hospitals were the highest-rated health system, outperforming other systems including the Mayo Clinic and Johns Hopkins.
– the VA achieves higher scores than private hospitals for patient satisfaction, staffing levels, surgical volume and other significant quality measures
– for six years running, VA hospitals scored higher than private facilities on the University of Michigan’s American Customer Satisfaction Index.
And costs haven’t increased nearly as fast as they have in the private sector. In the ten years ending in 2005, the number of veterans receiving treatment from the VA more than doubled, from 2.5 million to 5.3 million, but the agency needed 10,000 fewer employees to deliver that care – as a result the cost per patient stayed flat. (costs for care in the private sector jumped 60% over the same period).
The VA did this by closing down unneeded facilities, developing an industry-leading electronic health record system, opening clinics, and dramatically increasing the quality of care, especially for patients with chronic conditions.
Oh, and patients can access their own health records – securely – anytime on the web.
It wasn’t always like this; two decades ago the VA’s quality was suspect, to say the least. Yet this Federal government organization has been able to turn itself around from a mediocre outfit to one of, if not the, best health systems in the nation.
In his recent piece in the New Yorker, Atul Gawande offhandedly suggests the Feds open up the VA to anyone who wants to buy in.
Sign me up. I’d be only too happy to ditch the Golden Rule (in the running for most misnamed company…) insurance/HSA policy and head down 95 to the VA facility in West Haven, Conn.

Feb
5

What the SCHIP vote means for health reform

Posted by Joe Paduda on Thursday, February 5th, 2009 | Comments

Passage of the SCHIP expansion came about when several Republican senators joined the Democrats to pass the bill by a substantial margin. Although the bill passed the House easily (290-135), the key was the GOP votes in the Senate.
This is big news – for two reasons.
In the signing ceremony, Pres. Obama said “”The way I see it, providing coverage to 11 million children through CHIP is a down payment on my commitment to cover every single American.” This marks the first step towards universal coverage, a goal set by President Obama during the Presidential campaign, and one many of his supporters are monitoring closely. The expansion of SCHIP continues coverage for seven million kids and provides funding for an additional four million.
Perhaps equally significant was the Senate vote, where nine Republican Senators joined their Democratic colleagues to pass the bill easily last week. This despite GOP complaints that legal immigrants would be eligible for coverage under the SCHIP. (Despite what CNN reported and nativist Lou Dobbs says, there are strong provisions in the bill preventing coverage of illegal immigrants including requirements for verification of immigration status by the states).
Among the GOP Senators voting ‘yea’ were Collins and Snowe of Maine, Alexander and Corker of Tennessee, and Hutchison of Texas (!). While the Snowe and Collins votes are not unexpected, the support of the two Tennesseans and Hutchison in Texas are somewhat surprising. I wouldn’t expect the latter Senators to be very supportive of future health reform legislation. That said, the fact that this initial bill passed with some bipartisan support is a positive signal for reform advocates.
What does this mean?
A much-needed success for the President – and perhaps a little momentum on the heatlh reform front.

Feb
4

Ron Wyden for HHS Secretary?

Posted by Joe Paduda on Wednesday, February 4th, 2009 | Comments

Now that the Daschle era at HHS is over before it began, who should ‘take over’?
Bob Laszewski recommends President Obama consider Oregon Senator Ron Wyden (D) for the post.
I agree.
Bob points out that Sen Wyden is respected on both sides of the aisle, has demonstrated an ability to subordinate his own ego when needed, and thoroughly understands health care. I met with the Senator in his offices early last year, and came away quite impressed with his deep understanding of the payer community, their motivations and limitations. Sen Wyden has taught gerontology and has been a nursing home regulator. He understands the new media (Wyden introduced his Healthy Americans Act to health care bloggers very early in the process) and communicates quite well.
The Healthy Americans Act remains my personal choice as the best solution on the table. It has:
– broad bipartisan support,
– is revenue neutral,
– eliminates most of the problems in the current system, and
– requires universal coverage.
There’s one other factor that may be just as important to the President in the selection process. Wyden is quite the basketball player; he was a scholarship athlete at UC-Santa Barbara.

Feb
3

Daschle withdraws nomination

Posted by Joe Paduda on Tuesday, February 3rd, 2009 | Comments

Politico.com just announced that Tom Daschle withdrew his name from nomination for Secretary of Health and Human Services. The former Senator’s failure to pay taxes on his multi-year use of a car and driver and huge income from his work on behalf of insurers and providers have raised a political wall too high for Daschle to overcome.
Reports indicate Daschle made the decision this morning after reading an editorial in the New York Times. The editorial said, in part,
“Mr. Daschle, who failed to pay $128,000 in taxes, primarily for personal use of a car and driver provided to him by a private equity firm for which he consulted. Although the firm — headed by a major Democratic donor — had not issued a form 1099 for the value of the car service, Mr. Daschle said he became concerned last June that he might owe taxes on it and instructed his accountant to investigate. Neither was concerned enough to actually pay the taxes.
Only after the Obama transition team flagged unrelated tax issues that would require filing amended returns did Mr. Daschle and his accountant address the need to report the personal use value of the car service — more than $255,000 over three years — as income. Only after he had been chosen to be the health secretary did Mr. Daschle tell the transition team about the unpaid taxes. He paid some $140,000 in back taxes and interest on Jan. 2 to settle several tax problems — and he acknowledges owing more.
In both the Geithner and Daschle cases, the failure to pay taxes is attributed to unintentional oversights. But Mr. Daschle is one oversight case too many. The American tax system depends heavily on voluntary compliance. It would send a terrible message to the public if we ignore the failure of yet another high-level nominee to comply with the tax laws.
Mr. Daschle’s financial ties to major players in the health care industry may prove to be even more troublesome as health reform efforts proceed. Like many former power players in Washington, Mr. Daschle cashed in on his political savvy and influence to earn $5 million in recent years, including more than $2 million from Alston & Bird, a law and lobbying firm; more than $2 million from the private equity firm, InterMedia Advisors, which provided the car and driver; and hundreds of thousands of dollars for speeches to interest groups, including those representing health insurance plans, medical equipment distributors and pharmacy boards.
Although Mr. Daschle was not a registered lobbyist, he offered policy advice to the UnitedHealth Group, a huge insurance conglomerate. He was also a trustee of the Mayo Clinic in Minnesota, on whose behalf he voiced opposition to a federal loan for a freight rail line near the clinic’s headquarters in Rochester, Minn. The loan was subsequently denied by the Federal Railroad Administration.”

Feb
2

The horrors of effectiveness research

Posted by Joe Paduda on Monday, February 2nd, 2009 | Comments

Horrors! Those big-government Democrats are at it already, actually trying to get taxpayers to fund medical effectiveness research!
How dare the government actually fund research. The nerve! The gall! The (sputter sputter) utter brazenosity! (I know it’s not a word but it fits)
Why, doctors would actually know what works and what doesn’t! Care would improve, costs would drop, people would be healthier, there would be fewer medical errors; oh, the horror of it all!
And worst of all, taxpayers would get better results for their tax dollars!
Everyone knows there is just nothing more to learn about medicine, disease, physiology. We have learned all there is to know, and any money spent on effectiveness research would be wasted.
That, and the government might actually use that information to decide what types of care to pay for, and what types will not be reimbursed. Wow, what a concept. Why would the government ever contemplate basing reimbursement on effectiveness?
We would never want the government to be careful how they spend our tax dollars. Why, we never want to use taxpayer dollars to study the effectiveness of, say, military equipment. Or air traffic control. Or emergency preparedness. Or flood control. No, we should just pay vendors for any services they provide, regardless of whether or not those services actually work.
OK, forgive me for the over-the-top sarcastic rant. I’m completely disgusted with the hypocrisy of the libertarian right; those who have screamed for years about the ineffectiveness of government, ranting nonstop about how government can’t do anything right, yet are now screaming even louder as government attempts to make sure they are responsible stewards of the public’s funds.
Here’s an example from the health care experts at the National Review. “The [stimulus] bill provides $1.1 billion for a new program of comparative effectiveness research. The idea is to study medical practice patterns, new products, and new technology to determine what is “cost effective.” In the UK, a similar program run by the National Institute for Clinical Evidence (NICE) is used to deny payment by the government for certain drugs and procedures that are said to be “cost ineffective.”
Democratic lawmakers will deny that rationing is their intent, but that is not credible. Why create a government program to study what’s cost effective if not to use the information to inform payment and coverage decisions?”
Notice the use of the scary word ‘rationing’ to define appropriate coverage and payment. Using the author’s (James Capretta) reasoning, Medicare should pay for voodoo, cancer treatment with peach pits, snake oil, rhino horn, and universal cancer vaccines.
Why, not paying for these ‘treatments’ would be ‘rationing’…at least according to Capretta.
Capretta has zero experience in the real world of health insurance. Insurance companies make decisions every day to not pay for treatments that have been proven ineffective. If Mr Capretta had ever worked in the insurance or health care industries, he would know that. But he hasn’t.
That’s not ‘rationing’, it’s good business. Would you not want your government to only pay for services that work?

What does this mean for you?
Everyone knows government is the problem; how dare they try to be part of the solution?

Jan
30

Health plans in the hunt for acquisitions

Posted by Joe Paduda on Friday, January 30th, 2009 | Comments

The low share prices of health plans make for cheap deals – that’s the growing sense among the larger health plans, who see the current dip in values as a buying opportunity.
Among the big boys likely to be looking are Wellpoint, United, and HealthNet. While Cigna and Humana would love to be growing via acquisition, that’s not in the cards as they are struggling mightily. In particular, Cigna is in the midst of layoffs, an event that likely precludes any deals over the near term.
Wellpoint is among those looking to do deals. CEO Angela Braly was quoted recently saying “I even feel stronger about that [their ability to acquire health plans] in terms of the execution that we’ve really displayed over this past year…We really have a much more stable and efficient and effective claims operation, and we can bring that to new partners in an acquisition.”
UnitedHealthcare was built on acquisitions; the once-small midwest health plan grew by buying up other health plans in regional markets, later getting big enough to snap up giants including Pacificare. I expect United is already talking with Coventry CEO Allen Wise.
California-based Healthnet is the big health plan least likely to be looking for acquisitions. It has been hit hard by scandal and operational problems, and appears to be working on straightening out internal operations.
Aetna is a bit of a wild card. The most conservative of the big plans, it typically does not look to buy plans, but rather grows organically and through strategic acquisitions of companies with specific expertise in targeted markets. Lately that has meant Medicaid and specialty business. I don’t see that changing. That said, there may be some very good deals out there; low stock prices may cause even the staid ‘mother Aetna’ to open her pocketbook. In the end, the cautious nature of Aetna senior management will likely stop any deal before it goes too far. And who can blame them?; there’s a lot of damaged goods out there.
What does this mean for you?
The big will keep getting bigger.

Jan
29

A letter to Coventry employees

Posted by Joe Paduda on Thursday, January 29th, 2009 | Comments

Among the loyal readers of ManagedCareMatters are more than a few with Coventry email addresses. I consider a few to be personal friends, know some quite well, worked with others, and have heard good things about many.
I know Coventry has a strict don’t-do-it-or-you’re-fired policy against talking with the media – a category that includes yours truly. That’s dumb.
This is a big mistake on the part of Coventry management. In the four and a half years I’ve been publishing this blog, I have reached out to several individuals within Coventry, as well as soon-to-be former CEO Dale Wolf many times in an effort to get their side of the story – and have been rebuffed each time. So, I’m left with what I gather from customers, competitors, investor calls (I own stock in Coventry), and my own intuition and interpretation thereof. Most of that isn’t pretty, or more accurately hasn’t been pretty lately. But there is another side to the story, and Coventry management’s myopic media strategy means the fifteen hundred readers stopping by every day don’t get to hear that side.
The company is going through a very tough time, and may well be broken up and/or sold off. Customers on the work comp side are none too pleased with management’s ‘my way or highway’ approach, and many are looking hard for alternatives. Brokers are frustrated with what they perceive to be a “screw everything but the medical loss ratio” marketing ‘strategy’, which they view as nothing more than an attempt to show Wall Street that management is fixing the problems created by underlings. Employees from among Coventry’s acquisitions have found things to be much different than they were led to believe (or perhaps than they led themselves to hope).
All this hides what would otherwise be a decent success story. The secondary market strategy for the small group HMO business made, and makes, sense. The distribution strategy worked reasonably well, as did pricing discipline. Some of the work on Medicare Advantage was creative and intelligent. The forays into the individual market boded well for the coming of national health reform. Unfortunately, these good moves, and the people who drove them, have been overshadowed by the big mistakes made by management.
Here’s the ugly truth – and it reflects not on you, but on Coventry management. Their arrogance and hubris has been the cause of their downfall. So confident were they in their abilities that they ignored the basics of the business – issue cards on time, monitor IBNRs, track medical trend and all its components, stick to what you know, treat customers as you would like to be treated. Now that it’s too late, we finally hear a chastened, perhaps even humble tone from Coventry management.
Fortunately the experts on Wall Street finally removed their heads from wherever they were storing them and figured out these guys (and they are almost all guys) didn’t have a grasp on their business.
There’s plenty of talent at Coventry, and whatever happens to the company, that is recognized in the industry.

Jan
28

What now for Coventry?

Posted by Joe Paduda on Wednesday, January 28th, 2009 | Comments

Friday will be Dale Wolf’s last day at Coventry. After diversifying the company into workers comp, Medicare Part D, Medicare Advantage and private fee for service, and individual insurance, he leaves behind a much different Coventry than the one he took over in 2005. Don’t shed too many tears for Mr Wolf, he leaves after earning over $13 million last year alone.
The health world is also much different. Insurance itself is rapidly approaching the unaffordable level, participation rates are dropping (fewer employees signing up at companies that offer insurance), the Bush administration’s massive attempt to privatize Medicare and Medicaid will likely be reversed, hospital costs are exploding, and national health reform is around the corner.
And Coventry’s stock is a quarter what it was a year ago, while solutions to the company’s problems look ever further away.
Lots to consider, but I offer these thoughts.
The CEO is out, two weeks before the company releases its 2008 earnings report. The 65 year old former CEO is back. The company is not looking for a new CEO. Coventry’s commercial business is hamstrung by the factors noted above. It is not doing so well in Medicaid and Medicare growth will likely slow considerably. The company has not shown any expertise in managing care; it appears to rely solely on price increases to manage medical inflation. It has stumbled badly twice in the last year, both times failing to accurately forecast medical costs.
There is some thought that the company may be for sale. I’m one who leans in that direction. Recent news makes it more likely the company will not be sold in its entirety, but rather sell off pieces/markets/health plans. There are just too many moving parts in the 2009 version of Coventry; this complexity would make a comprehensive due diligence effort long and miserable – and given Coventry’s historical inability to predict health costs, potentially inaccurate.
But it is cheap.
Never one to forgo an opportunity to say something that will come back to haunt me in the future, I’m going to go out on a thin and ice-bound limb and opine that Coventry will sell off some health plans, and perhaps the work comp and other specialty businesses (e.g. mental health). A little less likely is a sale of the entire company.
What is unlikely is Coventry is essentially unchanged a year from now.