Author: Joe Paduda

May
17

NCCI – Gergen’s observations

Posted by Joe Paduda on Friday, May 17th, 2013 | Comments

A few random observations and perhaps an insight or two.

Keynote speaker David Gergen noted this morning that the recent favorable news about the deficit and its impact on debt may well be counter-productive as it takes the pressure off Congress and the President to deal with the debt while investing in education and infrastructure.  Soundbite – Mexico is investing more than we are in infrastructure.

Mexico.  

Gergen also does not believe there’s going to be much progress in Washington over the next few years; Obama’s over-reaching post-election has come up against the newly-energized GOP’s belief they can wait him out and win the mid-terms.  That reality, combined with the current crop of controversies, makes for a DC not focused on strategic issues such as long term deficit reduction, infrastructure, education – and therefore little of the important work will get done.

Long term, Gergen is much more optimistic, primarily due to American energy independence – lower energy costs and energy security will bring manufacturing back to our shores – and already is (Gergen didn’t have anything to say about the potential implications for climate change, a notable miss).

He is also a big fan of the millennial generation, citing their enthusiasm for helping others (a quarter of Spellman College graduates and a fifth of Harvard’s applied to Teach for America) and willingness to serve both in the military and other volunteer/low-paid-but-critically-important jobs).

May
16

NCCI’s regulatory and legislative update

Posted by Joe Paduda on Thursday, May 16th, 2013 | Comments

Day One is concluding with a discussion of legislative and regulatory trends, a panel of legislators and then your devoted author discussing “Thieves, Profiteers, and Enablers”; the bad actors infesting workers comp.

Peter Burton led off with his discussion of what’s happening nationally on workers comp reform/evolution/changes.  He led with medical cost containment initiatives; Peter sees this as the dominant theme in the regulatory world.  The Sandy Hook shootings are leading to legislative initiatives around expanding compensability of medical injuries (SB 823); there’s some concern that Connecticut’s workers’ comp costs, already ranked second highest in the nation in the Oregon premium rate ranking study, will increase if SB 823 becomes law.

Maryland’s privatization of IWIF (to be called Chesapeake Employers) which will likely happen in a few years did not make much progress this year; an effort to control pricing for physician dispensing of repackaged drugs was not successful.  Alas.

Much discussion of Florida; the resolution of the four-year-long repackaged drug problem; rate increases (6.9% this year, third straight year of increases), and the final resolution of a key court battle will have an impact on work comp in the Sunshine State.

Tennessee is looking or comprehensive reform, moving to an administrative from a court-based system (SB 200) which will be effective 7/1/2014; there will be benefit adjustments as well.

Some parties in Illinois are looking to potentially create a competitive state fund, while employes want to strengthen the industry causation standard.  No word on when – or more likely if – these or other possible changes will come co fruition.

Oklahoma’s the biggest mover, with opt-out passed and the state fund moving to a mutual model as the most visible changes; however other moves will result in a 14 percent reduction in work comp costs.

May
16

Bob Hartwig on macro factors – drinking from the firehose

Posted by Joe Paduda on Thursday, May 16th, 2013 | Comments

More discussion over macro factors driving workers comp – the always energetic Bob Hartwig Ph.D. followed Dennis Mealy.  Hartwig was his typically rapid-fire self, dispensing insights, quick takes on economic data, the impact of catastrophes and myriad other topics faster than I could record them.

You can get his presentation slides here shortly.

Overall, Hartwig was pretty optimistic, especially about the recovering economy; private sector employment was up 6.74 million jobs since 2009, while governmental employment declined more than 600,000 jobs.  Hartwig forecast unemployment to dip below 7 percent in the last quarter of 2014 – or perhaps earlier.  As payroll is a main driver of workers’ comp premiums, this is good news indeed.

Overall, the larger employment picture has returned to a level we haven’t seen since just before the recession; mass layoffs are way down, hours worked has moved back up, and hourly wages, while not all the way back, are up significantly.   The overall economy has been – and continues to be – dragged down by the sequestration to the tune of about a half-point of GDP growth.  Fortunately private housing starts are accelerating, driving up construction employment which has partially offset the impact of the political impasse. Manufacturing employment is also up by more than a half million jobs. 

Amongst all that good news is the number of discouraged workers – those who have stopped looking for work – has declined by some 14 percent, but is still quite high relative to historical levels.  More troubling yet is the growth in Social Security disability rolls, which has gone up dramatically over the last two decades.  SSDI claim frequency is up nearly 30% since 1996 – while WC lost time frequency has dropped by almost 50 percent.  (more on this here)

Hartwig made a major point of the P&C industry’s continued ability to pay claims, contrasting that ability with other financial institutions’ less-than-robust stability – evidenced by the 500 banks that failed post-recession.  However, the continued lower-than-low interest rates available in the bond market will require better underwriting results – a lot better – if workers comp payers are going to stay even, much less generate a bit more margin.

 

 

May
16

Work comp frequency and severity – Mealy reports on 2012

Posted by Joe Paduda on Thursday, May 16th, 2013 | Comments

Part 2 of The NCCI State o’ the Line; aka the Dennis Mealy farewell tour.

There was a good bit of discussion re frequency in his SoL report, with Mealy noting there was a sharp decline in relatively low-cost claims early in 2008/9, but little change in the number of high cost claims. This is consistent with other research indicating employees are reluctant to file claims in a recession for fear of losing their jobs; however those with major injuries really have to file.

Indemnity severity (cost for wage replacement) was up just a point over 2011; not surprising given the continued tough employment situation – wages weren’t up, so wage replacement costs weren’t either.

Medical severity was up 3 percent, overall “not bad” according to Mr Mealy.  Recall workers’ comp is just 2 percent of total national health spend, thus we are more affected by external factors than in control of our own destiny.  There are structural changes working their way thru the medical community, driven in large part by efforts to prepare for PPACA implementation in 2014 that are likely having a significant impact.

Somewhat surprisingly, the medical CPI is actually running a full point higher than lost time medical severity – only the second time in memory this has happened.

There was a bit of discussion about the impact of health reform on workers’ comp; I remain convinced the overall impact will be quite positive; I was puzzled by some comments that ACA might increase cost shifting.  As ACA will ensure somewhere around 20 – 30 million more Americans have health insurance, there’s no question there will be LESS need for providers to cost shift post-ACA than there is today.  

Those uninsured are getting free care today, and that care will be reimbursed tomorrow. Even if that reimbursement is at Medicaid levels, that’s a heckuva lot better than zero reimbursement.

That said, I’d also note access to key specialties – think orthopedics – is going to be very tight this time next year as pent-up demand meets insurance coverage.

May
16

Workers’ comp – the state of the line, aka Dennis Mealy’s farewell tour

Posted by Joe Paduda on Thursday, May 16th, 2013 | Comments

Dennis Mealy – NCCI’s chief actuary (and soon to be retired chief actuary) got further into the details of the data.  Lots to get into; here are my takeaways.

Work comp premiums written by private carriers jumped significantly, up 9 percent over 2011 to $35.2 billion, by far the greatest increase in the P&C industry.  State funds accounted for another $4.4 billion in premiums; recall there’s been a trend towards more self-insurance so growth would have been even larger if more companies hadn’t decided to self-insure their WC. 

The increase was largely driven by higher payroll – to be expected as we continue to (haltingly) recover from the recession.  However, there was also less discounting by carriers who’ve generally decided to get tougher on pricing and avoid cutting rates to win business – a clear sign of a hardening market.  

Mealy referenced firming/increasing pricing and other hardening-market-leading-indicators several times …

This pricing discipline – and a host of other contributors – led to a 5 point improvement in WC operating results for private carriers – from essentially flat to a 5% pre-tax operating gain.  Interestingly, state funds showed an ever larger improvement –  upwards of 7 percent (however their combined ratios remained much higher than private carriers at 124, balanced by a better return on investment than the private carriers).

One not-too-dark cloud on the horizon is reserve deficiency; NCCI estimates the workers’ comp industry needs to add $13 billion to reserves, up from $11 billion in 2011; as a percentage of total reserves it isn’t that much of an increase..

Another definitely-dark cloud is the continued lethargic growth in employment; this is particularly problematic in manufacturing and construction, industries that drive over a third of workers’ comp premium.

Finally we aren’t going to see investment returns anywhere close to the mid-teens we’re enjoying now (from long-ago bond purchases among other vehicles).  Thus there will be even more pressure on workers’ comp insurers to at least break even on an underwriting basis in the next few years.  Can’t make up for an underwriting loss if your bond portfolio is returning 2-3 percent…

What does this mean for you?

We’ve got to keep focused on underwriting discipline – and claims cost management – as our buddies in the investment dept. aren’t going to bail us out much longer…

May
16

NCCI – happy days are….

Posted by Joe Paduda on Thursday, May 16th, 2013 | Comments

Perhaps the best-produced workers’ comp conference is the annual issues symposium (AIS), held in Orlando each May.  The 800+ attendees got together last night for a pre-conference cocktail party in blessedly comfortable weather; the mood was upbeat, positive, and optimistic, terms not used to describe workers comp for several years. (presentations will be up here later today)

The reason for the optimism – a combined ratio of 109; waaay down from 2011’s 115.  Along with an investment gain of 14 percent, this makes for a profitable industry.

That said, those high return rates are things of the past, and investment officers aren’t going to replace expiring bonds with new ones returning anything close to double digits.

Lost time claims frequency dropped five points – a return to the twenty-year trend that was interrupted by an increase just after the deep recession.

Medical trend in comp remains in the low single digits, roughly paralleling the overall decline in medical trend we’re seeing (and I’ve posted on) recently.  This is very good news – but doesn’t parallel what several large payer clients are seeing.

NCCI CEO Steven Klingel explored the factors contributing to the lower medical trend – noting pricing increases are moderating somewhat(more fee schedules for hospitals); better control of drug costs and indications from two PBMs that they’ve been able to reduce the use of narcotics.

Klingel attributed some of the improvement to the growth in the use of networks; I don’t see networks as doing much of anything as the incentives aren’t there to control total claims expense.  They do control price, but the percentage-of-savings methodology provides the wrong incentives for all parties.

Kudos to Klingel for focusing attendees’ attention on the dramatic impact of medical expense on profitability.  He displayed a chart showing the difference in profitability attributable to a mere 3 percent increase in trend – that increased trend leads to an operating loss of around 8 percent compared to just about breakeven at the current 3 percent trend.  Here’s hoping the execs in attendance got it; in my view this was the key takeaway.

Klingel also focused on opioids, opining that this is the top issue on state workers’ comp agendas.  Here’s hoping IAIABC gets back to their model language; unfortunately sources indicate a recent meeting that was to focus on this was notable for the lack of progress.  Sigh.

Finally, Klingel opined that he’s encouraged by the current state of the WC market.  Which returns us to the lede; happy days – if not here again – are on the way.

May
15

What happened to the work comp Medical Director?

Posted by Joe Paduda on Wednesday, May 15th, 2013 | Comments

Late in 2011 I predicted medical directors would begin to assume more authority and responsibility as workers’ comp insurers/TPAs realized the significance of medical management.

Boy was I wrong.

My thinking was logical (I know, that was my first mistake); with medical expense totaling three-fifths of claims expense, the powers-that-be would realize that managing that medical expense required medical expertise.  Ergo, doctors (well, some doctors) should be heavily involved – in leadership roles – in managing that expense, setting policy, allocating resources, leading that effort.

Alas, with a few notable exceptions (Hartford, Broadspire), docs aren’t sitting in the big offices. Most are in high-level-but-primarily-supporting roles – advisers, conference speakers/representatives, in-house consultants, client and prospect presenters – while filling the traditional function of in-house medical expert addressing UR determinations and responding to claims queries.

That’s no knock – none at all – against the folks in the medical director role.  I know a few pretty well and others a bit; they are very knowledgeable, thoughtful, extremely capable, and way under-utilized.  That’s not to say they aren’t incredibly busy, but all too often they are busy doing things that, while necessary and important, aren’t the highest and best use of their expertise. More importantly, they aren’t setting policy and strategic direction for medical management – that remains the purview of business/claims folks.

Again, that’s not to say many claims folks are incompetent or unskilled or not capable.  That’s not my point.

My point is simply this – medical management is increasingly important, yet most workers’ comp payers’ claims operations are run by folks who grew up in an industry where indemnity was deemed (appropriately) more important. They know and understand that world very well, and are well-equipped to deal with claims in that environment.  Payer CEOs appear to view medical expertise as a supporting function.

The world has changed, dramatically. It is now 2013, yet medical management in workers’ comp is dominated by huge networks of deeply-discounted providers; results are measured by how much payers can squeeze out of providers on every bill (ignoring the services on that bill or how many bills come in) and how much margin their in-house “medical management” unit generates for the enterprise.  Moreover;

Outcomes are a sound bite with little meaning beyond RFP responses and conference Powerpoints.

Medical management directors are evaluated based on the totally-wrong-headed percentage of savings model.

Non-medically expert claims personnel are tasked with making critical decisions about medical services, decisions for which they are woefully unprepared and unqualified.

So, any surprise that medical costs are escalating, opioid use has reached epidemic proportions, back surgeries are far more prevalent in comp than other lines, utilization continues to increase, and loss ratios are way above 100%?

There’s another contributor to this situation – the hoary meme that doctors can’t manage or lead.  That is sooooo nineteen-nineties.

Fact is doctors are leading many organizations and business units within those organizations – and doing a damn good job.  Think Mayo, Lahey Clinic, Oregon (Governor is a physician), CDC, Wellpoint, Partners (Boston), United HealthGroup, McKesson Health Solutions, CVS/Caremark – and many others.  I know several workers’ comp medical directors that are more than capable of sitting in bigger chairs behind bigger desks, yet they aren’t.

Once again, we in the work comp world are stuck in the past.

What does this mean for you?

Those payers that recognize the critical importance of medical will be more successful than those that do not.  And that means putting medical directors in positions of authority and responsibility. 

May
13

Austerity’s impact on public health

Posted by Joe Paduda on Monday, May 13th, 2013 | Comments

A new book reports on the impact of financial austerity measures on public health, suicide rates, hospital admissions, and other measures of morbidity and mortality.  The news is striking – countries that adopted severe austerity measures have seen rapid deterioration of citizens’ health status, while those that dealt with financial trauma in a more measured way avoided those consequences.  In a piece in today’s NYTimes, they  contrast two recent financial disasters – Greece and Iceland – and the impact of their austerity programs on public health.

Lest you think this has nothing to do with we Americans, think “sequester”.  More on that in a minute.

Severe austerity measures in Greece have produced similar consequences for public health –

“Greece[‘s] national health budget has been cut by 40 percent since 2008, partly to meet deficit-reduction targets set by the so-called troika —  the International Monetary Fund, the European Commission and the European Central Bank — as part of a 2010 austerity package. Some 35,000 doctors, nurses and other health workers have lost their jobs. Hospital admissions have soared after Greeks avoided getting routine and preventive treatment because of long wait times and rising drug costs. Infant mortality rose by 40 percent. New H.I.V. infections more than doubled, a result of rising intravenous drug use — as the budget for needle-exchange programs was cut. After mosquito-spraying programs were slashed in southern Greece, malaria cases were reported in significant numbers for the first time since the early 1970s.”

While Iceland’s more measured approach has had little impact on their citizens’ health status –

“Iceland avoided a public health disaster even though it experienced, in 2008, the largest banking crisis in history, relative to the size of its economy. After three main commercial banks failed, total debt soared, unemployment increased ninefold, and the value of its currency, the krona, collapsed. Iceland became the first European country to seek an I.M.F. bailout since 1976. But instead of bailing out the banks and slashing budgets, as the I.M.F. demanded, Iceland’s politicians took a radical step: they put austerity to a vote. In two referendums, in 2010 and 2011, Icelanders voted overwhelmingly to pay off foreign creditors gradually, rather than all at once through austerity. Iceland’s economy has largely recovered, while Greece’s teeters on collapse. No one lost health care coverage or access to medication, even as the price of imported drugs rose. There was no significant increase in suicide. Last year, the first U.N. World Happiness Report ranked Iceland as one of the world’s happiest nations.”

Which brings us home to the US.

Sequestration’s impact on public health has been well-documented.  What I find really troubling is how fast Congress and the President reacted to air traffic delays – it took them less than a week – compared to their total inactivity on Head Start, addiction treatment, inoculations, and staffing cuts.

Good to know we abide by the Golden Rule:

He who was the Gold, rules.

May
9

HWR on health care cost trends, reform implementation, and motivations

Posted by Joe Paduda on Thursday, May 9th, 2013 | Comments

This biweekly edition of health Wonk Review covers the recent news that health care cost inflation has moderated, digs into various aspects of ACA implementation, and provides insights on a couple other timely topics.  Read on!

Health care cost trends are slowing…

First up, Health Affairs’ just-released research indicates the decline in inflation could result in a reduction of $770 billion (yup, that’s “billion” with a B) in public program health care costs over ten years.  

I can hear the cheering…

For those looking for a thoughtful and comprehensive consideration of the sustainability of this trend, consider this post from John Holahan and Stacy McMorrow of the Urban Institute; “All of these factors taken together suggest that a return to a high historic growth rates in health care spending may not materialize….we…are cautiously optimistic.”

John Roehrig is less optimistic, using research into economic cycles and related factors to come to a conclusion that “I don’t think either of these studies suggests that spending growth is likely to remain at the 4 percent levels seen over the past four years. [emphasis added] Some portion of the slowdown is permanent but some will be given back during a recovery.

I’ve reviewed these and several other reports, and my takeaway is guarded optimism.  Sure, the economy reduced demand, but there’s no question there are fundamental changes occurring that are affecting care delivery, pricing, and reimbursement.  

While drug costs are not top-of-mind these days, a group of oncologists is plenty cranky about the cost of specialty meds intended for cancer patients.  David Williams gives us his take, quoting one section of the doctors’ opinion piece: ““In the US, prices represent the extreme end of high prices, a reflection of a “free market economy”.

One cannot talk drugs without talking marketing to docs; Gary Schwitzer has highlighted an innovative marketing approach involving Hooters… If you don’t follow Gary, you should.

One area that researchers are paying close attention to is facility costs; Brad Flansbaum’s entry; Brad discusses the problems inherent in reducing costs in the hospital environment – “Most providers employed by hospitals know the drill: increase throughput, implement regulatory changes, monitor hospital measurement and report cards, and of course, reduce costs.  However, despite the growth of “hospital as laboratory” and rise of the inpatient practitioner, we must face facts.  We receive our salary from the beast we wish to slay.” [emphasis added]

Sticking with hospitals, a recent WSJ opinion piece assaulted Medicare’s new hospital re-admissions reimbursement policy; the John Hartford Foundations’ Chris Langston presents a clear-eyed, point-by-point rebuttal that shows why the program is a necessary and important step to improving health care for older adults. The net? The reduction in reimbursement for re-admitted patients appears to be good policy and will likely drive improvements in patient care and quality. 

Implementing reform

A big part of reform’s implementation involves exchanges; Louise Norris ofColorado health Insurance provides a brief overview of the progress his state has made: “Less than a year after the ACA was signed into law, Colorado began the – often contentious – process of creating the state’s exchange.  They’ve been working on it pretty much constantly ever since.  And the result is Colorado’s health insurance exchange is on track to open on time and provide all of the promised services:  small business and individual sales platforms, with an option for employees to select from multiple plan options in the small business exchange.  Jay hasn’t seen data from DC and the other 16 states that opted to run their own exchanges, but guesses they’re also faring relatively well,

Interestingly, the move to electronic health records (EHR) may well lead to higher costs, as providers get better at coding, payers end up paying for more stuff.  That’s one  takeaway from Jonena Relth’s submission on EHR and a recent teleconference on same.

The changes in delivery models may well lead to long-term cost reductions, however patient involvement will be key.  Jason Shafrin’s contribution contemplates the issues inherent in informing Medicare patients they’ve been assigned to an ACO; many may not know…

Neil Versel has also contributed a piece on consumer awareness – or more accurately the lack thereof.  His piece refers specifically to ignorance about telemedicine, and what the industry must do to reduce that ignorance

For those seeking more info on Medicare and the often-mind-numbingly-confusing array of programs, acronyms, and payment schemes, Joanne Conroy MD’s post offers a simple overview of the program.

Writing at healthinsurance.org, Wendell Potter doesn’t see the possible decision of some large insurers to avoid the exchanges as much of an issue; “The number of insurers that participate in the exchanges will vary from state to state, but there should be no shortage of affordable options available, especially when the subsidies – which will be available only for coverage purchased through the exchanges – are factored in.”  Wendell cites Vermont as an example; there are only two likely participants but both have submitted rates that are quite competitive with current products.

Motivations and motivators

Then there’s the motivation of big health plans and their leaders – can you spell M-O-N-E-Y?  I thought you could…The always-engaged Roy Poses MD has two posts; one discussing UnitedHealth’s CEO, his compensation, and UHG’s rather checkered recent past and issues of quality, physician oversight, and patient safety.  Ouch.  Similar concerns exist regarding Amgen’s executive compensation and their recent legal troubles.  

An interesting perspective on the same issue comes from Jaan Sidorov MD MHSA; Jaan wonders if the policy of “no pay for readmissions” could translate into shoddy care for patients who, despite the best of care, still have to be readmitted; If you had to be readmitted through no fault of anyone, wouldn’t YOU want your doctors to be compensated for taking care of you?

Thanks to Maggie Mahar for her post on breast cancer awareness – an effort that I (and others) think has had some significant negative consequences.  Maggie says: “Could it be that breast cancer arareness has become over-awareness? This isn’t happening in other countries. Then again, we are better at marketing fear than any other country in the world. And the pink ribbon campaign is all about marketing.”[emphasis added]

Side-bar note – I’ve long been a critic of the male version of breast cancer awareness; the prostate cancer scare, those who profit from it, and their well-intentioned but harm-causing supporters.

Research says…

John Goodman thinks a recent analysis of Oregon’s Medicaid program is a damning indictment of Obamacare; “a new study finds that (as far as physical health is concerned) there is no difference between being in Medicaid and being uninsured.”

Ezra Klein has a different take on that study; while there’s no question many health status measures did not differ between the Medicaid insureds and uninsured’s, depression was 30% lower among the insured group.  More significantly Ezra notes a wealth of other research has found Medicaid coverage does tend to improve health status.

Thanks to Vince Kuraitis and Leslie Kelly Hall for their editorial on the “duty to share” patient information with the patient.  In the US and the UK, providers have excessive incentives to “hoard” patient data and insufficient incentives to “share” it.  Consistent with a recently released report in the UK, they authors recommend development of an explicit duty to share patient information and discuss barriers and implications.

from the Work Comp World

WorkCompInsider’s Jon Coppelman thinks Massachusetts’ Governor Deval Patrick’s idea to tax workers’ comp indemnity (wage replacement) benefits.  This in a state where those benefits are already inadequate – at best. 

Bad idea, Your Honor.

Mike Allen alerts workers’ compensation payers to the need to prepare for reform; while PPACA doesn’t specifically address workers’ comp, there are a host of implications – especially for tech platforms.

Today’s tech topic

David Harlow’s piece focuses on Massively Open Online Medicine, showing just how diverse – and informed – HWR contributors are. If health sensors and wearable devices do become prevalent, it will likely take a lot of time – and a lot of change by a lot of people and institutions.

May
8

Health inflation is down – and may stay down

Posted by Joe Paduda on Wednesday, May 8th, 2013 | Comments

There appear to be several reasons for the decline in the health care cost inflation rate with a poor economy and resulting job loss and changes in benefit design often cited – rightly – as chief contributors.  There’s some fear that an improving economy and higher employment will return us to the ugly days of 7+ percent health inflation rates.

Possibly. However there are indicators that changes to provider-payer contracts, a reduction in unused facility capacity, growth in medical homes and ACOs, changes in reimbursement methodologies, and less reliance on new technology are having an impact. These factors, and others unknown, look to be responsible for more than half of the decrease in inflation.

Here’s how the authors of a recent article in Health Affairs put it:

“we believe that current trends support cautious optimism that the spending slowdown may persist—a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country, among other factors.”

The implications are vast.  At the highest level, lower medical trend allows employers and their employees to use cash for other purposes, alleviates some of the pressure for Medicare reform and reduces deficit and debt projections.

This last may be the most significant implication – an analysis indicates public-sector health spending over the next ten years may be $770 billion lower than projections.  

What does this mean for you?

Those of us with grey hair and fading eyesight have seen too many of our hopes for cost control crushed to get overly excited.  Nevertheless, this is far better than the proverbial stick in the eye…