Jan

Why health reform is dead

Posted by Joe Paduda on Thursday, January 21st, 2010 | Comments

Health reform won’t happen this year; ignore all the brave happy talk – there will be no bill that reforms the insurance markets, lowers costs, and/or expands coverage.
You can’t have insurance market reform – ending medical underwriting and risk selection – without a strong mandate. And you can’t force people to buy health insurance they can’t afford without big subsidies. The current budget deficit and recession mean subsidies aren’t a reality. There’s just no way a family making $75,000 can afford a $15,000 health insurance premium (plus out of pocket expenses) without a big subsidy.
As to cost reduction, Congress has shown itself fundamentally unable to enact meaningful cost reductions. The Republicans painted themselves into a corner with their ‘death panels’ and ‘government-controlled health care’ memes. They could have staked out a credible and creditable position as the responsible adults in the debate by getting tough on costs as a way to help business, reduce future costs and thereby deficits and tax burdens.
(But then what do you expect from the party that gave us Part D, the biggest entitlement program since Medicare, along with its $8 trillion ultimate unfunded liability.)
Not that the Democrats gave them much choice. Senate Dems thought they didn’t need the GOP, believing they could ram thru a bill they drafted on the strength of their supermajority. And perhaps they could have, if the Mass Senate race hadn’t interfered. Sadly, the Senate bill showed our political process at its worst, with glutinous Senators selling their votes for heaping helpings of pork larded with political sweets – clauses on abortion, immigration, and taxes.
The cost estimates were misleading at best; none factored in the quarter trillion deficit we are carrying due to the Medicare physician reimbursement fiasco. The quick fix that’s in place today has raised physician compensation by a whole percentage point, making it seven years out of eight that Congress has failed to restrain the growth of Medicare’s physician spending.
Given the present environment, I don’t see a meaningful effort to do anything different. Thus next year we’re going to face an even larger deficit, as our feckless elected officials kick the can further down the path.
No, reform won’t happen this year, and isn’t likely in 2011.
What does this mean for you?
Family insurance premiums of $30,000 in ten years.

Jan

An epitaph for health reform

Posted by Joe Paduda on Wednesday, January 20th, 2010 | Comments

Ten months of effort was blown away yesterday by an unprecedented electoral upset, a most unlikely end to health reform.
Yes, I did mean to write ‘end to health reform’. This afternoon the Senate Democratic caucus is meeting to figure out what to do next, but the outcome was pre-ordained when Senate Majority Leader Harry Reid announced earlier today that nothing would be done on health reform until Senator-Elect Brown (R MA) is seated.
Which means nothing will be done this year.
That doesn’t mean health reform won’t happen at all, but the ‘health reform hangover’ makes it very unlikely anyone will eagerly jump into reform anytime soon.
I’ll admit to being conflicted over the demise of reform. Covering another 30 million Americans would have been good progress towards addressing one of our country’s greatest shortcomings. But the cost of that expansion, the lack of any meaningful cost controls or an enforceable mandate, and the political thievery committed by key swing Senators selling their votes (I mean you, Nelson of NE, Lieberman of CT, and Landrieu of LA) made for a Senate bill just a whit better than no bill at all.
The House bill was better, except for the unfounded belief in the public option; at least it had a better mandate provision.
But the cost reported for both was too low by a quarter trillion, as neither included the cost of reforming Medicare physician reimbursement.
What happened?

The Dems could have had a bill last July, but liberal Senators refused to compromise, convincing Reid they could win without any GOP votes. This forced the more intelligent and intelligible Republican Senators to jump on the death panel/rationing bandwagon. Sure, the compromise necessary to get a bill with at least a few Republicans on board would have been a higher Cadillac tax, lower cuts to Medicare Advantage, and no public option, but a bipartisan bill would have been a huge win for both the Dems and the President.
Instead, we’re left with a wasted year.
What does this mean for you?
Without health reform, we’re looking at family premiums over $30,000 by the end of the teens. Good luck with that.
That’s not to say the House or Senate bill would have made much difference.

Jan

How workers comp and group health differ…

Posted by Joe Paduda on Tuesday, January 19th, 2010 | Comments

I’m often asked how and why workers comp and individual/group health differ; the question comes primarily from investment and private equity firms, managed care vendors, and pharma.
The question is both simple and difficult to answer, as the follow-on query is almost always ‘why are the two so different, and when is work comp going to ‘catch up’?
First, the differences. The biggest difference is in the type of coverage; WC involves both medical and wage replacement while individual/group is only concerned with medical coverage. Of course, individual/group health is far larger in terms of dollars, as WC premium and equivalents are around $80 billion while individual/group health is more than ten times that at $840 billion.
Work comp:
– Regulated by states and mandatory in every state except TX
– Only covers injuries/illnesses occurring during or arising out of the course of employment
– Return to Work is critical
– The insurer owns the claim forever…or until the claimant is back to work, the claim has been settled and/or has reached maximum medical improvement
– Mix of injuries and illnesses is different, mostly Musculoskeletal/orthopedic, trauma and some cardiovascular (public safety in a handful of states
– Coverage is “first dollar, every dollar”; No copays, coinsurance, or deductibles, and no caps
– Drug “Formularies” tend to be fairly open
– Provider types – Occupational Medicine, Physiatry/PM&R, Orthopedics, Neurology, Neurosurgery, General practice
– Relatively few physicians handle most WC cases; 65% of claims in CA handled by 2.2% of physicians (<900 physicians) (source CWCI) - Comp docs only treat the occupational injury, NOT the 'whole person' Individual/Group health:
– Not mandatory or required by law
– Regulated by states (fully insured) and/or Federal government (ERISA)
– Covers all types of injuries and illnesses
– Wide range of provider types
– Physicians treat the ‘whole person’ for all conditions and co-morbidities
– Unconcerned about Return to Work
– Covers treatment delivered during the policy year only
– Employs cost sharing and seeks to affect patient behavior via deductibles, copays, coinsurance
– Drug formularies are dictated by payer and PBM, can be highly restrictive
As to the ‘why’, that’s a longer answer. The question usually assumes work comp is somehow ‘behind’ the group/individual world in terms of care management, reimbursement, and overall sophistication – a view not without some justification. However, the individual/group health world would benefit greatly from the emphasis, if not sole focus, on functionality that pervades and drives work comp medical care, a focus that is sadly lacking in the non-work comp world.
That said, some of the medical management approaches used outside of comp would certainly help address medical cost drivers – some form of financial incentive for claimants, more intelligent disease management and use of expert networks, tighter formularies and much, much more use of clinical guidelines would be a great help (if used appropriately).
Some will never happen – financial incentives for claimants is probably the most obvious example. And for good reason – WC covers employment-based issues, and requiring the employee to pay for care for a condition incurred as a result of employment would be a non-starter in pretty much every state.
What does this mean for you?
Group could learn a lot from comp; and comp still needs to learn more from group.

Jan

How to change health behavior

Posted by Joe Paduda on Monday, January 18th, 2010 | Comments

I’ve been working with a mid-sized self-insured employer on their health benefits plan; they got hit hard with costs from diabetes last year and the (relatively thin) data available suggests it’s going to get worse in the near future; there are many more individuals at high risk for diabetes (among other ills). If they don’t do something to reduce their employees’ risks, their costs are going up, and fast.
While muddling thru the data, we all agreed that if we all exercised, maintained a reasonable weight, ate healthy foods and amounts, drank in moderation, and didn’t smoke, their costs would be much lower; heck, as a nation there’d be no health care financial crisis.
Good luck with that.
Alas, we’re getting fatter, lazier, and many of us are getting sicker as a result. With so much of our health care budget spent on lifestyle-driven diseases, it’s increasingly obvious that getting people to change behaviors – stop smoking, reduce their drinking, get off their duffs and get out for a walk/ski/cycle – would go a long way to reducing expenses.
So I’ve been investigating motivational techniques and results, looking for ways to help my client get their employees to make long term commitments to healthy behaviors/ There’s been lots published about this; Employers try to motivate healthy behavior by paying for gym memberships and smoking cessation, reducing premiums for employees who earn points for maintaining healthy weight levels, and hire fitness and health promotion experts to staff their wellness centers. These efforts have had some positive effect, but only on the margins.
Turns out the positive, reward-based motivation may well be misdirected. Instead of rewarding people for good behavior, the evidence suggests that penalizing them for ‘bad’ behavior by taking something away is much more effective.
Here, from a brief piece in The Economist:

In a new paper Tanjim Hossain of the University of Toronto and John List of the University of Chicago explore a real-world use of these insights. The economists worked with the managers of a Chinese electronics factory, who were interested in exploring ways to make their employee-bonus scheme more effective. Most might have recommended changes to the amounts of money on offer. But Mr Hossain and Mr List chose instead to concentrate on the wording of the letter informing workers of the details of the bonus scheme.
At the beginning of the week, some groups of workers were told that they would receive a bonus of 80 yuan ($12) at the end of the week if they met a given production target. Other groups were told that they had “provisionally” been awarded the same bonus, also due at the end of the week, but that they would “lose” it if their productivity fell short of the same threshold.
Objectively these are two ways of describing the same scheme. But under a theory of loss aversion, the second way of presenting the bonus should work better. Workers would think of the provisional bonus as theirs, and work harder to prevent it from being taken away.
This is just what the economists found. The fear of loss was a better motivator than the prospect of gain (which worked too, but less well). [emphasis added] And the difference persisted over time: the results were not simply a consequence of workers’ misunderstanding of the system.

What does this mean for you?
For managed care companies and employers, think of basing benefits on a plan with relatively modest employee coinsurance/contribution level, adjusted upwards for failure to comply with health standards. Yes, there will be complaining about what constitutes lifestyle issues v genetics, and how it may be unfair to penalize this or that lack of compliance, but while you’re dickering around with these points, your costs are continuing to escalate.

Jan

A must-read workers comp blog

Posted by Joe Paduda on Friday, January 15th, 2010 | Comments

Workers’ Comp Insider is one of the best-written, most topical, and entertaining blogs I’ve read, despite its focus on the mundane, usually unexciting world of workers comp.
Along with co-author Julie Ferguson, Jon Coppelman is the person behind the keyboard for many of WCI’s posts, and a better pair you won’t find anywhere (except at Colorado Health Insurance Insider where Jay and Louise do stellar work).
Jon’s skill is evident in his post earlier this week about the new head of New York’s work comp department – a (get this) former hedge fund exec.

Jan

Louise’s Cavalcade of Risk – boy can she write!

Posted by Joe Paduda on Thursday, January 14th, 2010 | Comments

Colorado Health Insurance Insider is one of the gems of the blog-o-sphere; written by two people who are in the health insurance trenches every day, it brings a much-needed real-world perspective to the health reform, insurance, and policy discussion.
Yesterday’s post was no exception – for a great summary of the best of the risk and insurance blogs, read Louise’s latest.

Jan

The ‘Cadillac’ health plan tax – wrong solution, right problem

Posted by Joe Paduda on Thursday, January 14th, 2010 | Comments

The growing furor over the tax on high-cost healthplans is welcome indeed, as it is exposing the tax for what it is – an unfair burden on some based on a superficial understanding of cost drivers.
First, lets clear up a common misconception about the tax. It only affects the value of your health plan above a specific level – the benefit value below that level is not taxable income. Here’s how it works in dollars.
The tax, which is in the Senate bill but not the one passed by the House, taxes the value of health benefits above $8500 for individuals and $23,000 for families. If you have an individual policy valued at $10,100, the amount subject to tax is the difference between $8500 and $10,100 – $1600. The Senate plan taxes that $1600 at 40%, so you would have to pay $640 in taxes.
I have no problem with instituting a tax on health benefits, but it should either be on all plans, or on those plans that fail to keep costs under control.
The Cadillac tax does neither, instead taxing benefits on two groups:
– bargaining units that have substituted benefits for wages in negotiated agreements with management; and/or
– individuals and families that live in high cost areas.
The ‘benefits’ themselves have little to do with whether or not you’ll hit the tax threshold; much more important is where you live.
For example – the interstate variation in health care costs – not insurance premiums, but per-capita costs – ranged from $3972 in Utah to $8295 in Washington, D.C. in 2004.
So a company in Utah could cover cosmetic surgery, private hospital rooms, laser eye surgery, $10 copays for office visits and $5 copays for all drugs, all without coming anywhere close to the ‘Cadillac tax threshold’. But an employer in the District with a high-deductible plan, $50/$100 drug copays, limits on PT and outpatient therapy, and high copays for out of network services would already be over the threshold.
The idea behind the Cadillac tax is a good one – make consumers more cost conscious of the value of their benefits, and hopefully more careful consumers. And there’s no question the additional tax revenue will help offset the costs of the reform bill. (I’ll not comment on whether that’s good or bad).
Instead of this blunt instrument, that forces people in DC to help fund health reform for no other reason than they live in the District, while doing nothing to encourage Utahans to control costs, Congress should institute a tax on health plans that fail to keep costs under a threshold – thereby motivating all health plans, employers, and individuals to work to keep costs down.
Such an idea was proposed last summer but didn’t make it into the Senate bill. It makes much more sense than the current proposal, would give President Obama and Democratic legislators political cover, and would not give the opposition any ammunition.
What does this mean for you?
Watch what happens in the reconciliation process; it looks like the C-tax is on shaky ground, and the Dems will have to find an alternative funding source.

Jan

Work comp managed care – where’s the value?

Posted by Joe Paduda on Wednesday, January 13th, 2010 | Comments

Over the last couple of months I’ve spent considerable time with work comp managed care companies and investors therein, and one of the questions that persists in every conversation is ‘how do we/they demonstrate value to our/their customers?’
That one question has as many answers as there are ‘customers’, defined as individuals who have some role in the buying/decision. And that is why the definition of ‘value’ is so elusive and ephemeral.
For the managed care exec, value can be easily defined as costs that are lower, usually on a per-service basis, than they would otherwise pay. X% less than current pricing is better than current pricing, so the benefit is obvious and clear.
For the adjuster, the definition isn’t quite so apparent. With a desk swamped under case files and a screen stuffed with flashing ‘red flags’ on critical diary entries, there’s less focus on finding the cheapest wheelchair and more interest in picking a vendor that can take work off the adjuster’s desk, do it competently and without claimant complaint, and provide documentation that, at a maximum, is readily cut-and-pasted into the claim file.
For the claim manager, it’s about closing files, minimizing litigation, and avoiding those calls from Home Office management about low network penetration and excessive use of non-authorized vendors, while struggling to keep overworked, underpaid, and unappreciated adjusters on the job and out of the clutches of headhunters.
For the employer, value is fast, thorough medical care that gets the injured worker back on the job and keeps her/him there…unless the employer is dealing with declining revenues, in which case they don’t want John/Jane Doe back at work no matter what, as there isn’t any job for her/him and they sure don’t want to yet another unemployment claim.
For the TPA, value is defined as the savings below fee schedule or U&C, which is the basis for calculation of their managed care fees, typically around 25 – 30%. The more services, the bigger the bills, the more ‘savings’ generated and the more fees ‘earned’.
So the next time you take your vendor to task for lousy cost savings reports, think about all the masters they are serving, and ask yourself if you could do any better.
And be honest…
What does this mean for you?
Walk a kilometer in the other gal/guy’s shoes.

Jan

Fact checking – North Dakota style

Posted by Joe Paduda on Tuesday, January 12th, 2010 | Comments

It appears I’ve upset at least one of the good folk of North Dakota.
In an article published yesterday in WorkCompCentral about the prosecution of former North Dakota state workers compensation boss Sandy Blunt (subscription required), Bill Kidd quoted prosecutor Cynthia Feland:
“In an e-mail reply [presumably to Kidd’s query], Feland said that “I find it unfortunate that the authors [yours truly and Peter Rousmaniere of Risk and Insurance] have chosen to print information without checking their facts.”
“A transcript of the trial is available and if they would have reviewed it, it would have been obvious that the information they received and used to write their stories and base their opinions was inaccurate,” Feland wrote.”
I’m assuming Feland was referring to this comment in a post from last year; “Blunt was charged with authorizing sick leave for and failing to collect moving expenses from a Fund exec who was terminated within two years. In theory, if he left within the two years, the moving expenses paid by the Fund should have been reimbursed.
Turns out that the prosecutor who brought the charges, Cynthia Feland, knew that failing to collect the moving expenses was not a crime – yet she brought charges anyway.
She had in writing that the ND Attorney General advised state auditors in October of 2006 that the exec did not voluntarily leave and thus there was no legal authority to collect. This fact was then put in writing to Feland a year before the trial and she
– added it as a crime just weeks before the trial and
– withheld the memo proving it was all legally done, thereby not giving the defense exculpatory evidence she was legally required to provide.”
That’s a big assumption, as her comments could have referred to any of the other posts I’ve written about the Blunt case, but as the possible withholding of exculpatory evidence is the most egregious of the prosecutor’s actions, I’ll focus on it.
Ms Feland made an assumption of her own in her note to Kidd; in fact I have read the relevant parts of the transcript, and searched the entire transcript for any mention of the memo in question. Couldn’t find any reference to it anywhere. Now, I’m certainly no attorney, so it’s possible I didn’t look for the right words. So I’ve asked Ms Feland to tell me exactly where the memo is mentioned in the transcript, when it was placed into evidence, and/or any other official documentation that it was shared with Blunt before or during the trial.
I’ll keep you posted.

Jan

Sixth Annual Survey of Prescription Drug Management in Workers Compensation

Posted by Joe Paduda on Monday, January 11th, 2010 | Comments

The decrease in the workers comp drug cost inflation rate that persisted for five years appears to be over. According to HSA’s Sixth Annual Survey of Prescription Drug Management in Workers Compensation, the five-year ‘decrease in the rate of drug cost increase’ is over, as drug costs across the industry were up 7.5% in 2008, compared to 7.7% the year before.
Workers comp payers, including large and mid-tier insurers and TPAs, are increasingly knowledgeable about drug costs, utilization, drug management approaches and programs, and cost drivers. However, while some are quite sophisticated, a few continue to exhibit little understanding of this cost area; unsurprisingly these are the payers with the highest drug cost inflation rates.
In contrast to prior years, the drug cost inflation rate tended to be lower at smaller payers than their larger competitors, as smaller payers seem to be ‘faster to market’ with utilization controls, adjuster education, and data sharing with their PBM partners.
Once again, utilization is seen as the key driver, with respondents citing over-prescribing, over-use of pain medications, and physician prescribing patterns as key reasons for cost increases.
The recent URAC initiative to ‘certify’ work comp PBMs met with mixed reviews; twice as many respondents considered URAC certification ‘not important at all’ as viewed it as ‘extremely important’.
To combat cost inflation, savvy payers are increasing their investment in data mining and analytics, adopting step therapy programs, enforcing mandatory generics, and calling on their PBMs to provide clinical support for drug management. Payers are more knowledgeable about and ‘on top of’ their drug cost and utilization data, with most having ready access to generic fill rates, generic efficiency, network penetration, price changes, and other summary information. First fill capture statistics are also more widely captured, as payers seek to gain control over drug usage as early in the claim cycle as possible.
Continuing a five year trend, no one PBM has established a dominant position in the market as the leading PBM. However, PBMs are all rated much higher than Third Party Billers.
In partnership with the good people at WorkCompCentral, I’ll be providing an overview of the most recent findings from the in a webinar scheduled for Tuesday, January 12 from 1:00 – 2:00 pm eastern. The cost for the webinar is $149.
Webinar registrants will receive a copy of the Survey results, to register click here and enter the code ‘Hsarx’.
The public version of the Survey will be released on Monday, January 18. If you would like a copy, email info AT healthstrategyassoc DOT com. Seminar participants will receive a separate, detailed version of the Survey.

Year: 2010