Dec

Health care rationing – reality in Arizona

Posted by Joe Paduda on Monday, December 6th, 2010 | Comments

Friday’s NYTimes reports Arizona has decided to stop funding certain organ transplants under the state’s Medicaid program. According to the article, “lung transplants, liver transplants for hepatitis C patients and some bone marrow and pancreas transplants, which altogether would save the state about $4.5 million a year” were ended in October.
While it’s tempting to make political hay out of this, the reality is Arizona’s decision, as painful as it may be, reflects decisions we as a society have to make.
The $4.5 million saved could be spent on preventive medicine, diabetes screening, cholesterol medication, pre-natal care, and other high-value services, services that would likely reduce the need for future acute care while improving the health of many more Arizonans. And the decision process used by the state, while not perfect, is one that we as a society must come to terms with.
The reality here is the government – ‘faceless bureaucrats’ to some, compassionate and caring stewards of taxpayers’ funds to others – determined who will live – perhaps if only for a few more months – and who will not.
Before instituting the change, Arizona studied the outcomes of transplants funded by the program. The results were pretty bad – according to the state, 13 of 14 patients under the state’s health system who received bone marrow transplants from nonrelatives over a two-year period died within six months.
Other disagreed with the state’s assessment; outside specialists said the success rates were considerably higher, particularly for leukemia patients in their first remission.
I’m not qualified to determine which side is ‘more right’, and anyway, that’s beside the point.
Which is starkly simple. We as a nation cannot afford to provide every health care service that may help every patient.
As db said on his blog;
“We can ration health care rationally or irrationally. We can ration health care based upon emotionally appeals or based on data. We must remember that a decision to pay for one treatment or diagnostic test may deprive someone else of a different treatment or diagnostic test. Or even worse, one treatment may cost so much that many other patients will go without a vaccines or preventive visits.
Rationing exists, it will continue to exist, and we have an obligation to ration in a fair way. We should not value some diseases over other disease. We should avoid emotional appeals, but rather look at data to make the difficult decisions that must be made.”
I find it intriguing that a state governed by the GOP is in the forefront of this issue (along with Oregon, which has been addressing Medicaid rationing for years). I sincerely hope – but highly doubt – this will result in an honest, open, and non-politicized discussion of what we can and cannot afford, and why, and how we’re going to allocate scarce resources.
Because that’s exactly what we must do.
Currently, Medicare is legally prohibited from setting payment based on the efficacy of a specific procedure/medication/treatment. This has to change. It is fiscally irresponsible to pay the same amount for treatments that have a one percent and a one hundred percent effective rate.
Unless and until we address this issue head on, our efforts to reduce the deficit are pointless.

Dec

What’s the latest from North Dakota?

Posted by Joe Paduda on Friday, December 3rd, 2010 | Comments

Gosh, since the judge in Sandy Blunt’s case rejected his request for a new trial, a lot has happened. As winter settles in on the plains, allow me, dear reader, to separate the wheat from the chaff (a bit of a NoDak metaphor, doncha know…).
First, Blunt’s attorney appealed his case to the US Supreme Court. It was highly unlikely those worthies will consider the case, but in a case as unfair as Sandy’s, one can always hope. Unfortunately, his case will not be heard.
Second, one of the prosecution’s chief witnesses against Blunt, James Long, lost in his effort to gain whistleblower status. Long had filed a civil suit against WSI (the ND State WC fund) seeking to get back pay, (Long was fired by the agency Blunt led) but lost; the jury found he did not qualify for whistleblower status and thus was not protected from dismissal
Even more telling, during the course of the discovery process for his trial, it became clear that Long and his attorney both communicated with Cynthia Feland, (the prosecutor in the Blunt case) yet not one of these statements/communications was ever acknowledged or provided to Blunt during discovery.
This withholding goes to the heart of the issue I (and others) have been pounding on for over a year; Long in his email was requesting some type of special assistance or consideration from Feland due to his part in presenting allegations against Blunt, yet Feland withheld exculpatory evidence from Blunt, evidence that would have proved the main charge against him was without merit.
Sources indicate Cynthia Feland’s ethics trial is on schedule and word is things are not looking good for her. The ethics trial relates to her purposely withholding evidence from Blunt.
Meanwhile, back over at WSI, things are progressing about as well as one would expect in an organization led by a person with absolutely no qualifications for the job. That’s not to say there aren’t a number of quite competent and highly effective people at WSI, but they are a bit…hamstrung by the current leadership.
To wit – the ongoing effort to implement a new IT platform at the ND state work comp fund continues to proceed – over time and over budget, despite Executive Director Bryan Klipfel’s strenuous efforts. (note Klipfel’s still listed as the Superintendent of the North Dakota State Police). In fairness, Klipfel had zero experience in workers comp, and less in managing complex IT projects before he was appointed ED at WSI.
Then again, Klipfel has been in the job for a couple years; the outside consultants working the project are, by all accounts, extremely capable; and there was a clear workplan and timeline in place – and in progress – when Klipfel walked into the executive suite.
It is interesting to note that in Klipfel’s recent report to the ND Legislature on WSI’s 2010 performance, many of the ‘positives’ listed by Klipfel were the result of efforts initiated, or significantly enhanced, by Blunt – Klipfel’s predecessor.
Some may think I’m being too harsh on Mr Klipfel. As I’ve said before, Klipfel may, or may not, be a highly motivated, diligent, and hard-working guy. He walked into a tough situation – but he did so of his own volition. No one forced him into the job – a job for which he was completely unqualified. Now, the taxpayer and employers of ND are suffering the consequences.
One has to wonder what Klipfel would have thought if roles were reversed, and the former Executive Director of the ND state WC fund had been installed as Superintendent of the ND State Police.

Dec

Fixing health reform – Part Three, reducing costs

Posted by Joe Paduda on Thursday, December 2nd, 2010 | Comments

So, you want to get serious about reducing the cost of entitlement programs? How does $25 billion a year, or a quarter-trillion over ten years sound?
Does it sound even better if there’s no increase in taxes? How about if there’s no reduction in services? And what if beneficiaries didn’t have to pay any higher fees, or suffer a reduction in benefits?
What’s the catch?
It would require one simple change in Federal law – allow the Secretary of HHS to negotiate prices with pharmaceutical manufacturers.
According to an analysis done three years ago, that’s exactly what would happen.
When Part D legislation was passed back in 2003, the Feds were expressly forbidden to negotiate drug prices for Part D. Despite a long and successful history of the Feds doing just that, Congress decided that the private market would do a better job of controlling cost than the gubmint. In actuality, “A report by Families USA, which looked at the top 20 drugs prescribed to seniors, found that VA prices were substantially lower than the cheapest Part D plans, with a median price difference of 58%.6”
That ‘VA’ is the Veteran’s Administration, a federal government entity.
The study indicated “An annual savings of over $20 billion could be realized if FSS [Federal Supply Schedule] prices could be achieved by the federal government for the majority of drugs used by seniors in 2003-2004…”
And that’s in 2003 dollars. Recall that brand drug prices increased over 9 percent last year alone; In 2010 dollars, we’re easily above the $25 billion per year number for savings.
In a 2006 House analysis, a report “released by Democratic staff on the House Government Reform Committee showed that under the new Medicare plan, prices for 10 commonly prescribed drugs were 80% higher than those negotiated by the Veterans Department [emphasis added], 60% above that paid by Canadian consumers and still 3% higher than volume pharmacies such as Costco and Drugstore.com.”
I don’t know why the Bowles-Simpson deficit commission didn’t consider this in their just-released deficit reduction strategy. After all, Part D alone is responsible for $15 trillion in ultimate deficit dollars. You would think this would be enough to get liberals, conservatives, Druids, Neanderthals, John Birchers, hippies, Greens and Flat-earthers all clamoring for action.
You would think…

Dec

Fixing health reform – Part Two, Medical Loss Ratios

Posted by Joe Paduda on Wednesday, December 1st, 2010 | Comments

A couple weeks ago I started what was going to be a discussion of how we should ‘fix’ health reform that was intended to run on consecutive days – only to have that sidetracked by goings-on in the health, political, and financial worlds that pushed reform to my back burner.
Let’s get back to reform.
First, the easy part. There’s no question Congress has to address the 1099 issue – the requirement that all businesses have to inform the IRS when they pay anyone more than $600 over a year. As a small business person myself, I have zero time to send out 1099s to my cell phone, internet access, web hosting, legal, accounting, admin support and other suppliers. No brainer.
Here’s a much harder one. Medical loss ratios (MLR).
For politically-obvious reasons, the Senate included requirements that health insurers spend a set percentage of their premiums on actual medical costs and quality improvement activities; at least 80% for individual/small group policies and 85% for larger group coverage. If an insurer’s admin expense (all costs EXCEPT medical costs are higher than 20%/15%, policyholders get a refund/rebate of the ‘extra’.
The rebate requirement kicks in on January 1, 2011; insurers are already scrambling to figure out how to identify, aggregate, and report costs; lobbying HHS and the National Association of Insurance Commissioners to consider medical management and prevention expenses part of the medical cost category; and crunching numbers to figure out what their medical costs will be in 2011, and based on that, what premiums they can charge.
The MLR requirement is going to require health plan execs to spend an inordinate amount of time and energy figuring out what costs go where and how they need to report those costs to HHS. If they screw up and their medical costs and quality improvement expenses are below the threshold, they have to pay a penalty.
While one can make a rather superficial argument that this is all to the good as it improves transparency, I’m hard pressed to understand how this ultimately benefits anyone.
Health plans that do a great job managing chronic conditions may well be ‘penalized’ for that success. Plans that contract with providers who deliver excellent preventive care, ensure expectant moms take their vitamins and don’t smoke, and get their tubby patients to drop a few pounds may find they are cutting checks come MLR audit time. Payers channeling patients to hospitals with low infection rates and few re-admissions will be in the same situation, as would those that carefully monitored potential diabetics’ health status and clinical signs.
These programs are costly, many have unproven benefits and/or won’t pay off for some years, and therefore the cost of the programs today (if they don’t qualify as ‘quality improvement’) will add to expenses, driving down the MLR.
While I‘m not a believer in the infinite wisdom of the free market, I do know that the health plans that deliver lower costs – over time – will have a major competitive advantage over their less-capable competitors. While insurers and providers need very, very close watching when it comes to risk selection, rescission, underwriting, and care authorization, we don’t need to waste their time – and ours – worrying about their MLR.

Nov

A few more dollars for docs, a lot fewer dollars for PT

Posted by Joe Paduda on Tuesday, November 30th, 2010 | Comments

The one-month Medicare physician payment fix passed the House yesterday and will be signed by President Obama. As Congress is operating under ‘Pay as You Go’ rules, the additional cost of the increased 2.2% for physicians had to be offset – and physical therapy was picked as the victim. PT will take a big hit – a 20% reduction in Medicare reimbursement.
This umpteen-gazillionth short-term Medicare physician payment fix will expire at the end of 2010, and when it does, Congress will have to either:
a) pass a long term fix, or
b) pass another extension/short term fix.
As loyal readers know all too well, I don’t see this ridiculously ludicrous situation getting resolved anytime soon, because a permanent fix will require the fixers to acknowledge a $300 billion (and growing) addition to the deficit. While no one likes the Sustainable Growth Rate methodology, it’s a heckuva lot more likeable than having your name associated with yet another addition to the deficit – especially these days.
The Medicare SGR formula/process was set up seven years ago to establish an annual budget for Medicare’s physician expenses. Each year, if the total amount spent on physician care by Medicare exceeded a cap, the reimbursement rate per procedure for the following year would be adjusted downward.
And for the last seven plus years, reimbursement – according to SGR – should have been cut, but each year it was actually raised, albeit marginally. The result is a deficit that is now almost 300 billion dollars.
Way back in the early days of this blog, I wrote about what was then a 4% cut and the attendant furor surrounding the issue: “Complicating the matter is the pending 4.3% decrease in the fee schedule slated to go into effect on 1/1/06. If Congress reverses the cut, then 2007 premium and deductible increases will be even higher than projected.”
Congress couldn’t muster the votes/guts/brains to deal with a 4% cut five years ago, so now we’re facing a 25% reduction on 1/1/2011...
So, what’s going to happen>
Well, a couple of folks in Congress are pushing for a twelve month extension so they have time to work on a permanent solution. While I admire the intent, I just don’t see the Dems and Reps coming together on a solution to such a politically-charged issue.
As I said a couple weeks back, the new Congress is all excited to change the way business is done in Washington.
How they deal with SGR, the $300 billion deficit recognition problem, furious seniors and really cranky physicians will tell us a lot about whether they’re serious about making hard decisions, or just naive.
My money’s on the latter.

Nov

The Humana – Concentra deal: this isn’t that hard to figure out, people

Posted by Joe Paduda on Monday, November 29th, 2010 | Comments

We’ve all had a few days to digest the recently announced Humana – Concentra deal, and perhaps think thru what this means for Humana, why they did the deal, and if this gives any insight into what other health plans may do.
Perhaps the best one-sentence synopsis of the deal was provided by a Humana spokesperson: “This acquisition is consistent with the goals of health reform”.
Here’s the slightly longer version.
1. Three million Humana members are located in close proximity to Concentra facilities.
2. Concentra knows how to deliver primary care efficiently. They are also working hard at wellness and health promotion.
3. Health plans are going to be desperate for primary care providers come 1/1/2014, when their membership will explode.
4. Health plans that can keep patients away from specialists, expensive diagnostics, and facilities are going to do very, very well. That can only be accomplished with good primary care.
5. Concentra has very strong relationships with local employers, and solid experience selling to those employers.
I was a little surprised to read some of the financial community’s statements about the deal.
For example, AM Best said “This transaction is expected to be a source of business diversification for Humana as well as unregulated cash flows.”
This was the lead sentence in their comment on the deal, and while it mentions a couple benefits, I doubt they were the primary reasons Humana decided to shell out almost $800 million. Sure, the cash flow is unregulated, and business is different, but workers comp also faces a structural issue with declining claims frequency and is highly vulnerable to regulatory risk, two factors that would militate against a ‘diversification and cash flow’ rationale.
Then there was this gem from Marketwatch: “Plus, the company said it was buying privately held insurer [emphasis added] Concentra Inc. in Addison, Texas, for $790 million in cash.”
There has also been some speculation that the deal was – at least partially – due to a desire on the part of Humana to buy a provider and thus get around, avoid, or mitigate Florida MLR rules. While this may have been a contributing factor, it is highly unlikely it was one of the top reasons Humana did the deal. Humana already has primary care centers in Florida as a result of the CarePlus deal in 2005 and Concentra doesn’t have a lot of facilities in the Sunshine State.

Perhaps Humana is going to add occ med services to the ten or so CarePlus facilities; this would help it’s soon-to-be subsidiary and give analysts evidence of that oft-cited ‘synergy’ thing.
The net is this. Reform is coming, healthplans must drastically change their operating models, and winners will be the ones that figure out how to market to and manage previously-uninsured, and solve primary care.
Humana’s got a good start.

Nov

When the Chinese stop buying our bonds

Posted by Joe Paduda on Wednesday, November 24th, 2010 | Comments

That’s the answer to the question posed by Bob Laszewski in a post this morning; to paraphrase:
When will the US get serious about controlling health care costs?
Right after the bond market collapse…
Health care is the single largest contributor to our deficit, as well as being a huge drag on our international industrial competitiveness. For now, foreign countries and investors are seemingly fine with the historically-low rates of return they get from governmental bonds.
For now.
But not forever.
When the Chinese – or the Germans – or the Scandinavians – decide they want a better return, we may well see the collapse of the bond market. Ivestors will demand much higher returns, which will lead to intolerable budgetary pressure as debt service costs skyrocket.
In turn, this will force us to adopt draconian measures to rein in spending.
Which will – inevitably – lead to big cuts in Medicare, Medicaid, Part D, and other entitlement programs.
What does this mean for you?
It’s not a question of ‘If?’ but ‘When?’

Nov

Rick Scott to cut Florida work comp costs by 35%!

Posted by Joe Paduda on Tuesday, November 23rd, 2010 | Comments

WorkCompCentral’s Mike Whiteley has the scoop [subscription required] of the month; he reported this morning Governor-Elect Rick Scott of Florida has renewed his promise to cut employers’ work comp costs by 35% .
(That was one of the lead lines I considered – the other was “Is it April Fools?”)
No, it’s true. According to the article, in a speech last week, the new governor said “We also need serious tort reform, and a 35% reduction in workman’s [sic] compensation costs.”
Wow.
That’s one ambitious guy! Another 35 percent on top of the 40 percent reduction most employers have seen since reform passed in 2003?
How’s he going to do that? Let’s see…
1.) Scott could immediately reduce the maximum maximum weekly wage basis to $0.00; or
2.) require all medical providers to treat work comp claimants for free, or maybe
3.) make workers comp optional for employers while prohibiting suits against employers for occupational illnesses or injuries (that’d be part of his ‘tort reform’ plank…)
Short of those rather draconian measures, all of which would require a compliant Legislature and Senate, I’m not seeing where he’s going to get another 35%.
I’m not the only one wondering, as Mike Whiteley reported on WCC; one local expert (Christopher Smith of Florida Workers’ Advocates) said “It’s our belief he’s relying on information that’s 10 years out of date. [emphasis added]…It appears to be based on some statistics that were advanced during the time running up to the 2003 changes.”
Well, perhaps the soon-to-be Gov is going to ask the Senate to overturn his predecessor’s veto of a bill reducing costs for physician dispensed drugs; perhaps but highly unlikely, as Scott reportedly convinced the new Florida Senate leader to not seek an override.
Here’s how the Palm Beach Post described the…episode.
“Concerning the workers comp prescriptions bill, Cannon first said the reason for his reversal was because Democrats had objected to the override and that he and Haridopolos had targeted measures that were non-controversial and had received unanimous or near-unanimous support during the regular session.
But he later conceded that a dispute among major Republican Party donors had foiled the override attempt planned for Tuesday.
“In the lobby corps there has emerged this debate and discussion and controversy. . . . If there’s that much debate and disagreement, that’s the type of thing that should be run through the entire committee process and should come back in regular session,” Cannon said.
Associated Industries of Florida supported the bill, saying it could have saved private companies $34 million in workers’ compensation costs, whereas the Florida Medical Association and the Florida Orthopedic Society supported the veto.
Also supporting the veto was Automated Healthcare Solutions, a Miramar-based company headed by a pair of doctors, Paul Zimmerman and Gerald Glass, who later gave more than $1 million to political spending committees headed by Haridopolos and Cannon.
The company provides software that helps doctors dispense and manage patient prescriptions, a profitable sidelight for many doctors.
After Scott’s primary election victory, Zimmerman and Glass also contributed $735,000 to the Republican Party of Florida and $175,000 to Scott’s political committee, according to The Miami Herald.”

So, Scott may cut 35% from employers’ workers comp costs, but he’s going to make them pay political contributors $34 million more than they would have.
Good luck with that…

Nov

Humana to acquire Concentra for $790 million

Posted by Joe Paduda on Monday, November 22nd, 2010 | Comments

In an announcement a few minutes ago, healthplan company Humana announced it intends to buy occ clinic firm Concentra for $790 million.
Currently Concentra has about 300 facilities and 240 on-site clinics and revenues of $800 million.
The deal does two things for Humana.
First, it diversifies the health plan’s revenue sources; Concentra handles over 10 percent of all work comp primary care, a very different business form Humana’s group/medicare business.
More importantly, Concentra’s three hundred plus clinics are located near many of Humana’s current – and hopefully future – members. This solves a very big problem for Humana – and every other health plan – the dearth of primary care.
Concentra also has very strong relationships with local employers, relationships that Humana is certain to leverage as it rolls out its new offerings in the near future.
Concentra’s facilities will be able to provide Humana with a significant advantage in many markets – tight control over primary care costs, integrated electronic medical records, access to wellness and health promotion activities and resources (currently a top priority for Concentra).
This is a smart move for both organizations, and will likely get other big health plans thinking harder about creative ways to address primary care access.

Nov

Body scans and reforming health care – good luck with that

Posted by Joe Paduda on Monday, November 22nd, 2010 | Comments

To understand how hard it is going to be to control health care costs, one merely has to consider the outrage surrounding TSA’s recent roll-out of ‘enhanced security’ measures – measures which include ‘enhanced pat downs’ and full body scans.
Videos of boys getting patted down personified the problem. But the upset and outrage and anger visible today will be nothing if another airplane gets blown out of the sky; then we’ll see – and hear – about the gross negligence that allowed the terrorists access to a plane full of people.
We want to have our cake, eat it too, and not get fat.
Folks, we need to get the deficit under control. We can’t afford the future bills for health care entitlements. Yet many of the same deficit hawks outraged by government spending are also the loudest voices protesting cuts to Medicare and angry about reducing physician reimbursement.
This is going to hurt everyone – you, me, my ninety-year old mom, doctors, the poor, the wealthy, hospitals, supply companies, pharma – you name it. We can either whine about how unfair and awful this is, or get serious.
A good place to start is the President’s deficit commission’s approach.
Here are a few things to consider
– Speed up cuts to Medicare Advantage and charity care payments to hospitals, both provisions in the ACA.
– Beef up and empower the Independent Payment Advisory Board, the newly created commission charged with slowing the growth in Medicare spending.
– Means-test seniors’ contributions towards their health care
– Quickly implement a strict cap on the amount of employer-provided health insurance expenses that are tax deductible – a much lower cap than called for under the ACA (that kick in until 2018).
And here are a few ideas from your author:
– Raise Medicare-specific taxes. Much as I dislike paying taxes, I dislike dumping the costs on my – and your – kids even more.
– Allow the federal government to negotiate prices with pharma for Part D; either that or cancel the program altogether. That’s $15 trillion right there.
– Require Medicare to alter payment based on the effectiveness and efficacy of various treatments – a rather obvious step that – believe it or not – is illegal today.
– Require individuals with modifiable risk factors to pay more – or get less – if they refuse to work to get healthier.
What does this mean for you?
This is about shared sacrifice. While the ‘enemy’ isn’t as easily personified as a terrorist or nuclear power, it is every bit as dangerous and threatening. Real, verifiable, tough steps are necessary. We’ve handled this before, and we can do so again, but only if we get serious.
Alas, the cynic in me doesn’t think we will get serious. The deficit crisis isn’t going to manifest itself in a highly-visible televised explosion or plane falling out of the sky; no pictures of bloody victims staggering away from a dust-filled street, no shattered buildings with blown-out windows and screaming sirens.
Just a deeper and deeper hole sinkhole that will slowly – but surely – swallow our future.

Year: 2010