Jan

The Obama Presidency started today

Posted by Joe Paduda on Thursday, January 8th, 2009 | Comments

President elect Obama’s speech this morning highlighted the critical state of the US economy. It also marked the beginning of the Obama Presidency.
Obama has made every effort to avoid interfering with Pres. Bush’s authority as the sitting President. But events have overtaken Obama, forcing him to inject himself into the legislative process before things get even worse.
One line dramaticaly makes this point. “For every day we wait or point fingers or drag our feet, more Americans will lose their jobs. More families will lose their savings.”
The speech was designed to increase pressure on legislators of both parties, to focuse them on passing the stimulus package without bogging it down with grandstanding and loading it with pork. Of course, one representative’s pork is another’s essential investment in infrastructure.
Simultaneously, Tom Daschle was in the midst if confirmation hearings just a few miles away. Daschle was introduced by none other than Bob Dole, former GOP Presidential candidate.
A couple thousand miles away, hospitals in California were reporting elective admissions were down almost a third while indigent cases have risen dramatically. This over the last few months, and if It continues we can expect hospitals to join the ever-lengthening line of supplicants coming to Washington with their hands out. .
The wheels have fallen off the economy faster than anyone anticipated, much faster than our leaders’ ability to react much less anticipate the next yawning pothole. There’s no question the imploding economy is directly related to hospitals’ travails, just as there is no question these travails will add their own weight to the burden on the economy.
I predicted a few weeks ago that the number of uninsured would hit 50 million in 2009. At this rate, that may come sooner than anyone expects. The only thing standing in the way is a huge stimulus; President Elect Obama’s speech this morning shows exactly how important fast action is.

Jan

Who benefits from universal coverage?

Posted by Joe Paduda on Thursday, January 8th, 2009 | Comments

As Bob Laszewski trenchantly notes, covering everyone will not reduce costs in and of itself – at least not on a system-wide basis. Absent major changes in reimbursement and demand management, covering more people will just increase total costs.
That said, universal coverage should significantly decrease costs for private payers and their members, as well as the employers who fund most group coverage. Most significantly, a substantial portion (about eight percent, or over $1000 per family) of health insurance premiums go to cover the cost of uncompensated care. Note that this includes costs for both the uninsured and underfunded care; Medicaid is the most often cited example of inadequate compensation.
Covering everyone would not eliminate the inadequate compensation and resulting cost-shifting, but it certainly would reduce providers’ need to recoup lost revenue from treating the uninsured.
Among the beneficiaries of universal coverage, workers comp payers might see the most benefit. Not only is comp a very soft target for cost-shifting, it is also likely claimants without other health insurance receive treatment for their non-occupational conditions in the course of treatment. This is not due to laziness or incompetence or fraud, but rather because the insurer understands that the injured worker cannot return to work unless the injury and any complicating medical conditions are resolved.
What does this mean for you?
The pluses of universal coverage are not often obvious.

Jan

Bill review companies – will they be the solution?

Posted by Joe Paduda on Wednesday, January 7th, 2009 | Comments

Think about what bill review and generalist network and specialty bill review and negotiation firms do. All have the same value proposition – discounted medical bills. (most networks don’t deliver value in the form of better docs or outcomes, their business model is reduce cost by slashing bills retrospectively.)
All are in the cost reduction business although each take a different approach. A useful analogy is transportation; trains, trucks and ships all transport goods; each has its strengths and weaknesses, and at different times one model is more successful than the others. Right now, trucks transport most goods, even though they cost more because they can deliver convenience by moving goods to the precise location on time. This model has gained in large part due to low fuel costs, heavy investment in roads, and customers’ adoption of just-in-time inventory management. As the economics of transportation evolve, we may see a resurgence of rail and/or shipping; the cost per ton/mile for rail and shipping is significantly lower than trucking.
For several years bill review has been a commodity. Despite vendors’ best efforts to differentiate, most buyers place great emphasis on price. As a result, bill review vendors have worked hard to squeeze out cost through automation, auto-adjudication, streamlining and offshoring. None of these technologies are ‘bad’, rather the rationale behind employing them may well be misguided.
In an effort to compete bill review vendors have lost sight of their reason for existence – to ensure their customers pay only what they legally are required to. Instead they compete on the basis of how cheaply they can write checks out of their customers’ checkbooks.
This is not entirely the bill review vendors’ fault. Their customers bear much of the responsibility for the situation, playing vendors off against each other in an effort to reduce the payer’s admin expense. And the payers have succeeded. That success has come at a cost which some payers are only recently beginning to grasp. Here are a few examples.
For some procedures, the amount reimbursed is dependent on modifier codes. At least one large payer has instructed its bill review staff to ignore the modifiers as their entry slows down the bill review process.
A vendor known for its very competitive pricing often charges extra for ‘nurse review’ of items that are commonly audited and repriced within the bill review process. This allows the vendor to recoup the margin it gives away with its low per-bill pricing.
Another large payer’s bill review process actually requires claims personnel to authorize payment of each and every bill, no matter how routine, no matter how many times that provider has been paid for the same procedure in the past. This step has been put in place because the bill review process can’t be trusted; instead of fixing the process the company uses its expensive staff to do something the system should.
Payers want national solutions yet don’t want to take the time to understand some of the state-specific intricacies that can dramatically influence costs. For example, hospital reimbursement in PA is based on each hospital’s chargemaster, requiring repricers to have access to current data. In CT, payers are required to reimburse hospitals at cost, yet very few payer or bill review vendors have invested the energy required to determine each hospital’s costs.
Sure, payers have been able to cut their bill review costs, but the price they are paying is, in many instances, much higher than the reduction in administrative expense.
More and more, payers have come to rely on their networks for cost reduction; bill review is a necessary part of the bill flow and a way to get bills repriced to network rates, and a source of data for state reporting. In large part this reflects the change in pricing methodologies for bill review from a percentage of ‘savings’ below billed charges to a flat fee per bill or per line. In the transition, the purpose of bill review has been lost.
As payers look for better solutions to address rising medical costs, they should go back to the basics. There’s nothing more basic than making darn sure you are only paying what you are legally and contractually obligated to. Simple, yet this will require significant investment on the part of vendors, investment that will have to be recouped from their payer customers.
What does this mean for you?
Bill review vendors should not be competing on the basis of price per line or bill. Payers should buy smarter, but won’t until and unless they realize what they’re buying; technology, people, and processes all focused on writing checks out of the payer’s checkbook. Only then will bill review vendors be able to do their job effectively.
Note: my firm, Health Strategy Associates LLC will be surveying payers on bill review this spring. If you would like a copy of the public report send an email to infoAthealthstrategyassocDOTcom. Substitute symbols for AT and DOT.

Jan

Misleading managed care headlines

Posted by Joe Paduda on Tuesday, January 6th, 2009 | Comments

Last week a study hit the wires indicating that managed care plans did not have better outcomes for carotid endarterectomies (CEs), a surgical procedure ostensibly intended to reduce the risk of stroke.
Here’s the headline from UPI – “No managed care link for stroke-prevention”.
A quick read of the headline and abstract leads the reader to the conclusion that managed care is ineffective. But there’s much more to it than the headline and brief synopsis. For starters, the data was ten years old. It was from one state (NY), that is not exactly known as a hotbed of managed care. And it lumps all kinds of ‘managed care’ – from group model HMOs to PPOs under the same category.
And the study’s conclusions are muddy. In fact, there had been a good bit of research into the procedure itself (it involves cleaning out the carotid artery (the big one in the neck that bad guys are forever threatening to cut in movies), and the data used indicated “the rate of inappropriate surgery dropped substantially from 32 percent in 1981 prior to the RCTs [randomized controlled trials] to 8.6 percent in 1998/1999 after publication of the clinical trials [by AHRQ].” Clearly, medical practice had changed dramatically over that period, due primarily to publication of data indicating the procedure “reduced the risk of stroke and death compared to medication alone among carefully selected patients and surgeons.”; the research also showed many patients did not benefit from the surgery.
It wasn’t that simple. In fact, the surgery rate had dropped in the mid-eighties after publication of research indicating the procedure had high complication risks. A decade later, additional research seemed to show that CEs did benefit some patients, and the rate shot up again, only to start a gradual decline.
What happened? Generally accepted medical practice changed. Was the rate different within “managed care’ plans? No. But why would it have been?
I worked for large managed care/health plan companies during the late eighties and early nineties, with responsibilities in customer reporting and managed care product development. We all knew there were probably too many carotid endarterectomies performed, but we didn’t really know which ones were inappropriate. The indications were rather uncertain, and it did appear the procedure helped some patients. What was not clear was which patients would benefit and which would likely not. The ‘choice’ we made was to encourage/mandate/require second surgical opinions (at that time the state of the art in managed care) to ensure the patient got at least one other physician’s views on the potential risks and benefits. There wasn’t much in the way of clinical guidelines that we could use to deny the procedure outright, and the legal risks of a denial were so high that this option was never seriously considered.
Truth be told, the managed care firms I worked for had little ‘control’ over medical practice. Sure, we had contracts with physicians, but our influence was minimal – we were ‘two inches deep and a hundred miles wide’. With little ‘market share’ in any one physician’s office, it was unlikely most of ‘our’ docs would pay much attention to directives from one of our Medical Directors. We did notice that our rate of surgeries was dropping, but did not have the data to know if this was occurring across the board and thereby due to our efforts (I’m pretty sure we took credit for the decrease…) or was driven by external factors.
Contrast our very loose ‘managed care’ with the much different model exemplified by group and staff HMOs – Kaiser Permanente, Group Health of Puget Sound, HIP, etc. I don’t know what the group/staff model HMO rates were, but I’d bet they were lower than my employers’.
In retrospect, it is obvious that external factors were the reason for the decline in my employer’s number and rate of carotid endarterectomies. In retrospect.
What does this mean for you?
There’s far too much superficiality in the press, superficiality that can distort public views of managed care and the effectiveness thereof. In this case, the headline, although nominally accurate, is highly misleading.

Jan

Why big comp networks won’t do the smart thing

Posted by Joe Paduda on Monday, January 5th, 2009 | Comments

Because they are more interested in their profits than their customer’s needs.
The big comp network companies (with “big” referring to the size of the network, not the company, as there’s only one BIG NETWORK COMPANY – Coventry) have a problem.
They’ve been selling their network based on the “thump” the directory makes when it hits the managed care execs desk (“wow, now THAT’s a big network”) followed closely by the price (“And if you act now, I’ll get my boss to commit to a rate below 20% of savings!!”). While this has made them lots of money, it hasn’t saved their payer clients much, if anything, in the way of medical costs. Now, some payers are wiping the sleep from their eyes and noticing that those whopping network-access fees have gone up just about as fast as their medical costs.
And that ain’t no small thing.
Payers have been hearing for years about the small network solutions the big boys are just about ready to launch. They’ve been a few months away for about four years now; four years and counting. So, why so late? Why aren’t the big networks innovating? Coventry et al have been selling essentially the same network model the same way to the same markets for fifteen years. The market has moved on, with the early risers amongst the payer community looking for very small networks of physicians who can not only spell w-o-r-k-e-r-s c-o-m-p-e-n-s-a-t-i-o-n but pronounce it as well.
That’s no small challenge, as the payers’ network “partners” haven’t exactly made their business thrive by identifying the docs who treat less, write fewer PT scripts, don’t admit claimants for lengthy hospital stays or order multiple epidural steroid injections. In fact, those are the docs the big networks want to stay far, far away from. Because the more bills there are, the more “savings’ are generated, and the more network access fees are collected.
Ka-Ching!
Therein lies the core reason the big networks haven’t done the right thing – it won’t make them near as much money as their current high-cost, low-benefit big-directory network.
The technical term for the problem faced by these companies is the “Innovator’s Dilemma”. This more-than-a-theory holds that companies that are very successful in their fields keep improving their products, believing that what their customers want is more and better versions of the same. What these companies don’t do is think up new ways of meeting their customers’ needs; ways that are cheaper/faster/easier. Instead, they work diligently on making their existing product a tiny bit better every year. And in the process, they don’t pay attention to what their customers actually need – the problem they are trying to solve.
The leading proponent of the theory, as well as the one who coined the term, is Clayton Christensen. Christensen’s research shows it is often entirely rational for existing companies to ignore new and disruptive innovations, because those new innovations don’t compare well with existing technologies or products. Even if a disruptive innovation is recognized, existing businesses are often reluctant to take advantage of it, since it would involve competing with their existing (and more profitable) technological approach. (in this instance, several large Coventry clients have asked them repeatedly when they are going to develop a physician-centric model. As of late last year, Coventry had nothing to show, or talk about, or demo…)
Here’s an example from Christensen’s book, the Innovator’s Dilemma. Back in the early- and mid-nineteen hundreds, the only way to dig big holes efficiently was to use a cable-actuated shovel driven by coal (initially) and later diesel. The cable shovel manufacturers got really good at making larger and larger shovels that could move yards and yards of dirt. Meanwhile, other companies began developing hydraulically-driven shovels. At the start, these were small, puny affairs, barely able to move a third of a yard of dirt. Not surprisingly, the big cable shovel companies (e.g. Bucyrus Erie) laughed at the upstarts, knowing their customers were not interested in the toy version of their behemoth shovels. But lots of residential contractors and utilities could use the smaller shovels; their only alternative was hand-powered shovels. The new market entrants gradually improved their hydraulic shovels, until they could effectively move as much dirt as the biggest of the big boys. And do it more efficiently, with far fewer breakdowns, and much more safely.

Of all the big steam shovel companies in the business mid-century, only a small handful survived the onslaught of hydraulics, and the survivors did so by adopting the new technology. They found that the smaller end of their market was gradually taken over by the “toy” manufacturers, which then moved relentlessly up-market, until the only market left for Bucyrus et al was the hundred-yard plus strip mining shovel. Most of Bycyrus’ competitors went out of business, including the Marion Power Shovel Company. Marion employed over 2500 workers at its peak, when it made the largest steam shovels in the world to build the Panama Canal. When it was finally sold off in 2003, Marion had fewer than 300 employees.
Back to our little world. The small, physician-only network doesn’t deliver big “savings” (in the form of discounts) and “penetration” (in the form of a really thick provider directory with most live and some dead docs listed therein) and therefore is not, in the view of the big network companies, something worth developing. Moreover, these big network companies believe the market for the small networks is quite small compared to the market for their established network offering. And they are right – today.
What the big network companies are missing is what their customers want to buy – not “savings” defined as discounts below fee schedule, but lower medical expenses. After a decade-and-a-half of more and more networks delivering higher and higher medical expenses, big payers need, and want, a different answer.
But the big network companies have an even bigger problem, one that did not affect the cable shovel manufacturers. At the height of their business, there were no fewer than twenty companies making shovels, all working as hard as humanly possible to develop better and better cable shovels. They were innovating, all right, but their innovations were designed to make their core product better at moving more and more dirt.
What’s different in the comp network business is the almost complete lack of competition. Coventry controls upwards of 60% of the generalist network business, with the rest spread thinly between CorVel, Wellpoint, Horizon, Prime, and a few others. By all accounts, Coventry is not even bothering to improve their current product offering. Instead, they are raising prices and ignoring customer complaints about data quality.
What does this mean for you?
It took the hydraulic shovel companies a good three decades to all but destroy the cable shovel business. I don’t expect Coventry’s work comp offering, nor those of its competitors, will have that long a horizon. Not by a long shot.

Jan

Predictions for Comp managed care in 2009

Posted by Joe Paduda on Thursday, January 1st, 2009 | Comments

Much against my better judgment, here are my predictions – in no particular order – for the work comp managed care world in 2009.
1. Coventry will be acquired.
Currently trading just under $15 per share, Coventry Health looks to be an attractive target for another second-tier health plan company. They have solid operations in many secondary and tertiary markets, some decent business in Medicare and other governmental programs, and their work comp sub is wondrously profitable. Expect it to get bought some time this year – likely after the credit markets loosen enough for potential acquirers to feel a little more comfortable. As to what happens with Coventry’s comp business, more on that when the time comes.
2. Aetna’s work comp network business will slowly dissipate.
Now that the provider relations, sales, compliance, and other support services are not all reporting up to one leader, it is inevitable that the focus on work comp will diminish. For customers hoping for improvements in the quality of provider data, this isn’t good news; nor is it for payers looking for solid networks in key states.
3. Corvel’s transition to a TPA with managed care services will accelerate.
As the company’s TPA customers continue to depart, pressure will mount on Corvel to demonstrate the viability of the TPA strategy. For a company that has seen sales increase slightly more than 3% over the last three years and profits decline over the last four quarters, 2009 will be a key year. Either the company is able to make a go of it as a TPA, or investors will weary of the “its coming soon” meme and cash out. The timing is a little better, as the hardening market may make the TPA business more viable in 2009 than it has been the last two years. Then again, there’s lots of other TPAs that are going to be fighting for that business too.
4. Several of the larger payers will announce their own, small physician-centric network products.
Beyond frustrated, large payers have given up hope that the Coventrys will ever do anything meaningful in the small, EPO-type physician-based network product line. Several large payers have been working diligently to do things on their own or in partnership with vendors; expect these to hit the market in Florida and several other states by Q3 2009.
5. – Correction- Oregon will do a do-over.
The state’s misguided, ill-informed, and illogical stance on workers comp network reimbursement is going to blow up, big time. Many carriers are carefully considering their options, as Oregon’s new regs require comp payers to reimburse at fee schedule for those services subject to the FS. Non FS services are to be reimbursed at billed charges. When I asked when a top carrier’s managed care exec what they would do if a bill for a non-FS service came in at a billion dollars, he said, after a pregnant pause, “according to the State, we’d have to pay it.”
6. Innovation
Uh, wrong industry…there will be precious little in the way of innovation, unless you count a few “aggregators” trying to become the “pipe” for payers to connect with various managed care vendors.
7. Specialty managed care
There will be new entrants into the various specialty managed care areas, as private-equity funded companies seek to take advantage of the ground-breaking work done by the innovators. These follow-on firms will do fine for a couple years, after which their customers will figure things out.
8. Medical costs
Will continue to increase far faster than they should, driven by lousy managed care models poorly implemented by payers more concerned with “savings” than claims costs.
If that isn’t a safe prediction, I don’t know what is.

Dec

What are health insurers afraid of?

Posted by Joe Paduda on Wednesday, December 31st, 2008 | Comments

As the options on the table become somewhat more clear, it appears all but inevitable that any national health reform program will include a public insurance option, sometimes labled as “Medicare for All”. The plans offered by Pres. Elect Obama plan, Sen Baucus, Sen Kennedy and others all include a governmental option. The Medicare for All is also consistent with the views of key House and Senate leaders, including Pete Stark (D CA).
The wailing and whining has already started. Private insurers are aghast at the prospect of competing for members with a government health program. You know, the much-derided Medicare program, the one that private insurers volunteered to fix with their Medicare Advantage programs (yep, the Medicare that was so lousy that private insurers only needed a small subsidy to compete effectively with, and perhaps a little creative marketing as well).
What exactly do they fear? Specifically, three things.
1. A governmental program will get so large that it will crush private insurers.
2. Government plans have unfair advantages over private plans: they don’t need to maintain reserves, earn profits to attract capital, or pay premium taxes.
3. Governments, through their use of monopsony power, can aribitrarily set prices, reimbursement policy, and make coverage determinations
Fear one – if private industry is successful, governmental programs won’t compete effectively, and private options will come to dominate the market at the expense of the public offering. So unless private industry fails, issue one is moot.
Fear two -fair point. Then again, many healthplans are not for profit (e.g. Blues plans and Kaiser Permanente) and therefore don’t need to earn profits either. Premium taxes are rather minimal in most states, amounting to a couple of points. The reserve issue is a significant one, especially as the rating agencies are starting to toughen up their reserve adequacy standards.
Fear three – there has been so much market consolidation among health plans that most markets have two or at most three major health plans ‘competing’ for share. These plans, such as Independence and Aetna in Philly; the Blues in Boston, Blue Cross, Wellpoint and Kaiser in parts of California; the Blues and United Health in several Florida cities; Empire, GHI, and UHC/Oxford in NYC, all have significant market power over providers and employers today, power that would not likely diminish if a Medicare option came on the scene. These health plans set reimbursement policy and rates, have their own P&T committees and appeals processes, and enforce their market power whenever and wherever they can. They already have monopsony power themselves.
I have been and continue to be a supporter of private insurers and health plans. After working in this industry for twenty-five years, I know there are very smart, capable, and talented people in the business. We have our share of knuckleheads, but that’s no different from any other business. The problem we have is most of those smart folks are not working on care management and outcomes assessment, they are in underwriting. Once the industry stops trying to compete on the basis of risk selection and focuses its brains on care management, I’m confident some of the nation’s largest insurers will find themselves able to compete with Medicare quite comfortably.

Dec

The political case for national health reform

Posted by Joe Paduda on Sunday, December 28th, 2008 | Comments

A positive brand image. That’s what every successful company seeks, and what unsuccessful companies don’t have – and which the Democratic party, despite its recent successes, is sorely lacking. Yes, the 2008 elections were a rousing success for the Democrats, but that success was driven more by the astonishing incompetence and jaw-dropping corruption of the opposition than by a noticeably smarter/better/more accomplished Democratic party.
The Democrats now have eighteen months to become a real political party again, something that is not merely an alternative to the GOP. Sure, there will be new regulatory bodies and enhanced oversight, better personnel selection procedures and more open government, fewer signing statements and more regulations that will affect workers and protect savings and the environment, but how do you put that on a bumper sticker? How does that translate to a message for the masses?
For the past sixteen years, Democrats have attempted to claim the mantle of the advocate for the working man, all the while passing NAFTA, cutting taxes for the wealthy and big business while enabling offshoring. rolling over and being rolled by their more aggressive political opponents. No wonder blue collar voters ditched the Dems; instead of opposing the Republicans’ business-friendly agenda, to a large extent Dems went right along, even if it cost their old core constituency big-time. For the newly-ascendant Democratic Party, significant health reform may be the key to re-establishing the Party’s brand among middle-class and blue-collar voters. Guaranteeing every American access to affordable health care would, in one stroke, regain the party’s tattered reputation as the supporter of the working man, the party of the middle class.
As Thomas Frank notes, “Any kind of national medical program would be so powerfully attractive to working-class voters that it would shift the tectonic plates of the nation’s politics.” Mr Frank, a deep student of the phenomena wherein so many Americans vote against their economic betterment, is referring to the Republicans’ power within middle America, the so-called Red States, where the middle and lower socio-economic class voter consistently supports the GOP’s candidates, driven primarily by social issues. The candidates elected by these voters push positions that end up benefiting big business while reducing wages and the power of labor. Yet the Republican candidates are able to win and stay in office largely on the strength of positions on abortion, guns, school prayer and choice, homosexual rights; issues that appear to be far more important to many Red State voters than economic concerns.
Not only have most Democratic candidates consistently been on the wrong side of many of these social issues (from the perspective of most Red State voters). The Dems have failed to make political hay out of issues as compelling and obvious as declining wages, job losses, and economic blackmail on the part of big business (tax breaks or we’re out of here). These bread-and-butter issues, the ones that land on the kitchen tables of working people, are precisely where the Democrats used to earn their keep.
Right now, those workers with health care know their health care is subject to the whim of their employer, and while they may feel ‘safe’, they know more than a couple people who have lost their insurance and suffered mightily as a result. Bob Laszewski notes that most workers with coverage are pretty satisfied with their health insurance. But my sense is there is something deeper here too; as middle class, white blue and pink collar workers watch the economy slide out from beneath their feet like sand on a beach, there is a just-under-the-surface-anxiety, a nibbling fear that their coverage may not be as rock-solid as they thought.
The Democratic Party would put itself in a very strong position entering the mid-term elections in 2010 if it passes national health reform (or something close enough for political advertising). By actually delivering something of obvious and significant value to the vast majority of voters – for those with coverage today a sense of security, of protection, of solidity; for those without affordable, comprehensive insurance; the party would plant its flag deep in the heart of Red State Republican country.
Passing some form of national health reform, one that includes a guarantee of access to care and protection from financial devastation would blow this gloomy cloud right off the shoulder of the middle class. It will take a masterful job of cat-herding, as the Democrats in Congress are a remarkably diverse lot. This diversity, from southern Blue Dog to Bay Area liberal, is both the strength and weakness of the Dems. While it enables the party to compete and win in diverse areas, now that the party has solid majorities in both houses of Congress, that diversity is a problem. The Democrats task is to find a major “win” to coalesce around, a goal that will clearly and loudly resonate among voters wondering who exactly these Democrats are and what they stand for.
A compelling case can be made that universal health care addresses the issues of concern to each member in the Democratic caucus: a universal plan
– is good for business, as it alleviates employers’ burden of health care selection (possibly) and financing (possibly at least in part) while improving the health of the workforce.
– is good for providers as it eliminates the risk of uncompensated care, allowing providers to concentrate on treatment while (potentially) addressing the problem of under-compensated care
– is good for patients because they will have access to good care regardless of their employment or marital situation
– is good for society as it will lead to an overall improvement in the nation’s health status.
A universal health plan also addresses the single biggest issue in the Party today – solid evidence that it can actually deliver on its promise to fight for the middle class.
Most importantly, passing universal health care would give the Democratic Party a hugely valuable head start on the 2010 election battle, one that may actually give Red State voters reason to consider voting “D”.
No doubt, Republicans will dust off the “socialized medicine” meme and play those old “Harry and Louise” recordings yet again. But I’m not so sure those messages will scare voters, at least not enough to overcome the pervasive anxiety felt by many families throughout middle America. And if the Republicans are able to block health reform, my sense is voters will see them as on the wrong side of the issue. Recall last summer’s battle over raising physician reimbursement; GOP Senators were crucified by voters after the Senators blocked a physician payment increase, a move that may well have helped their Democratic opponents in the fall.
What does this mean for you?
I don’t think Congress is ready for national health reform in 2009. There’s just too much to do and not enough time to do it all.
But politics trumps all.
Now that adults appear to be once again heading up the Democratic Party, they may well seize this political opportunity and press for reform in 2010. Win or lose, it’s a winning move.

Dec

The CBO health policy study misses the mark

Posted by Joe Paduda on Monday, December 22nd, 2008 | Comments

The release of a long-awaited study by the Congressional Budget Office today “Key Issues in Analyzing Major Health Insurance Proposals” has stirred up a lot of comment and observation, most of it noting that the current proposals aren’t going to solve the coverage/cost problem.
There’s a lot in the study that’s very good, but much of the discussion has missed a central point. There is enough money in the system today to pay for excellent care for every American – probably more than enough. While we can save $110 billion over ten years by negotiating a 15% rebate on drugs covered by Medicare Part D and another $34 billion from efficiencies resulting from improved health care IT, these totals are chump change next to the amount of money we waste by delivering too much care to people who don’t need it.
As an excellent companion piece, I give you Dartmouth’s latest work, Expanding Coverage without Increasing Health Care Spending. As the Hanoverians put it:
“Most analyses of coverage reform predict that we will spend more as a nation on health care once the uninsured gain coverage and begin consuming more care,” write lead authors John E. Wennberg and Shannon Brownlee. “But we predict that covering everyone will have a much smaller impact on the trend in health care costs, provided that capacity is not increased.”… Not increasing capacity while improving quality and increasing coverage, say the authors, can be achieved in a number of ways, including reducing oversupply of health care services in high spending regions of the country. As documented repeatedly over 20 years of research by the Dartmouth Atlas Project, more spending on health care, more procedures and more hospitalizations, do not result in better health outcomes for patients.” [emphasis added]
The CBO report suffers from a troubling omission – an explicit acknowledgment of the impact of over-utilization on US health care costs. While the authors provide an excellent analysis of a hundred-plus health reform initiatives, they do not address the elephant in the room – too many doctors prescribing too many treatments that have no basis in science, no demonstrated efficacy, deliver no benefit to the patient.
That’s where the money is. Yet the CBO study claims that savings from comparative effectiveness research would be tiny – and most of the benefit would take place more than ten years in the future. Where the study misses the mark is in assuming that the health care funding, regulatory, and delivery systems remain static. Without fundamental change, their numbers are likely correct, and may well be optimistic. That, I would suggest, is the point.
There must be fundamental change – as described by Wennberg and Brownlee – in the health care system. Health care has to move from a cottage industry, overseen by a guild of white-coated demigods, to one blending diagnosticians with care delivery systems. Vertically integrated health systems could, and should, be able to survive and flourish in this new world, while insurers and big health plans will only make it if they buy up delivery systems and utilize their analytical capabilities to drive better outcomes on a population basis.
What does this mean for you?
Buyers – be they employers, governments, or individuals – must start evaluating health care offerings not on the basis of premium cost and size of the network directory but using the metric of functionality – how effectively does the health plan maintain and improve the health of its members.

Dec

What work comp has done right

Posted by Joe Paduda on Friday, December 19th, 2008 | Comments

The workers comp world has certainly had its problems over 2008, and often these problems have overshadowed the successes, and victories both big and small that were achieved this year. Here without further preamble are a few of the more significant ‘wins’ for work comp in 2008.
1. Frequency declines continued this year, building on a fifteen-year downward trend that has cut the US comp injury rate in half. By any measure, that’s great news. I’d also note that somehow the rate keeps declining, despite various experts (myself included) opining that it has to stop somehow.
2. Pharmacy costs have leveled off, due in no small part to efforts on the part of payers to mine their data, identify trends, and put in place programs to attack over-utilization. Good work to all; your efforts led to the fifth straight year of a decrease in the rate of pharmacy inflation in comp.
3. Predictive modeling continues to progress, albeit in fits and starts. Mistakes are being made, false leads chased, and assumptions proven wrong, but that’s actually good news. This is a new, complex, and weird business tool that will require a lot of trial and error. Mistakes are necessary and vital as the industry learns.
4. More and more payers are actually building new networks and adopting new strategies, either on their own or with new market entrants. These strategies are based on smaller, highly select networks of work comp expert docs, the kind of physician who can drive better outcomes at lower costs. After too many years of relying on the promises of the big networks, these payers are taking matters into their own hands, driving innovation and progress. it may not be as fast or as extensive as some would like to see (me being one of the some), but progress it is.
5. Disclosure of financial relationships among and between managed care firms and TPAs has significantly expanded, with companies including Gallagher Bassett, SRS, and Broadspire leading the charge (in fairness these firms were doing this long before 2008).
6. Specialty managed care has exploded, with carve-out vendors doing an exemplary job managing costs and delivering results in physical medicine, DME/home health, facility bill review, and cat claims. The more they do, the better they get.
7. Regulators in several states are working hard to do the right thing. New York’s willingness to change the pharma fee schedule and increase in benefits, California’s pursuit of lower costs, better medical care, and better benefits, and Texas’ (somewhat clumsy) attempts to fix their system all have been welcome signs of progress. We aren’t there yet, and all have their warts, but the needle is pointing in the right direction.
8. Solvency – unlike other insurance lines, the core solvency of the work comp insurance industry has not been in doubt this year. While parent companies, other insurers, and blue-chip, white-shoe Wall Street firms were imploding on a weekly basis, we in the work comp world have chugged along, hitting a few bumps on the way, but nothing like the rest of the financial world.
We have a long way to go, but in many areas, we’re heading in the right direction.
Good work.

Author: Joe Paduda