Category: Medicare and Medicaid

Apr
16

Medicare is to Workers Comp as Yin is to Yang

Posted by Joe Paduda on Wednesday, April 16th, 2008 | Comments

Why do regulators base WC reimbursement on Medicare? It’s easy, simple, and already familiar to legislators and regulators alike. It is also a big mistake.
Medicare is a program for America’s elderly – over-65, mostly sedentary, and mostly not employed. Workers comp covers ‘working age’ folks; primarily 18-65. ) Many of the surgeries being performed on Medicare vs. workers’ compensation patients are fundamentally different.
The types of outpatient surgeries that can be performed on workers’ compensation patients, who are generally young and in overall good health, are different than the outpatient surgeries Medicare covers (pays) for. Medicare sharply restricts outpatient surgery for good reason as Medicare patients are frail and surgery followed by an inpatient stay is safer given their complicated medical conditions and health risks of prolonged general anesthesia. WC claimants are younger, in better physical condition, and much better suited for outpatient surgeries – yet basing WC reimbursement policies on Medicare would forbid, or at the least financially dis-incent, outpatient surgery in favor of inpatient.
Medicare fee schedules (like the one Florida’s Three-Member Panel is considering adopting) result in more specialist care and more procedures being performed. (opens pdf) National studies show this frequently leads to poorer outcomes and more suffering for patients, in addition to higher costs for payers.
Medicare recipients’ medical conditions are very different from comp claimants’. The top ten Medicare DRGs (Medicare’s coding for inpatient care) are:

  • Heart Failure & Shock
  • Simple Pneumonia & Pleurisy
  • Specific Cerebrovascular Disorders
  • Psychoses
  • Chronic Obstructive Pulmonary Disease
  • Major Joint & Limb Reattachment Procedures, Lower Extremity
  • Angina Pectoris
  • Esophagitis, Gastroent & Misc Digest Disorders
  • G.I. Hemorrhage
  • Nutritional & Misc Metabolic Disorders

No spine conditions, multiple trauma, burns, TBIs, crushing injuries, joint surgeries…
Inflation in Medicare billing is rampant – if you think it is bad in WC generally (and you would be right) it is an order of magnitude worse in Medicare. In Florida, the current annual inflation rate is north of 14% for Medicare outpatient services.
Medicare reimbursement disproportionately favors hospital-based care. With facilities reimbursed at levels much higher than free-standing doctors’ offices and clinics, basing reimbursement on Medicare encourages providers to affiliate with, provide care in, and bill thru facilities. In Florida, the impact is dramatic; basing reimbursement on hospital outpatient service charges will increase costs by an estimated $1,675 to $2,320 per claim (calculations courtesy of FairPay Solutions, an HSA client).
What provider would want to treat in their own, lower cost clinic or office, if they could more than double their fees by working through a hospital?
Finally, CMS itself has warned against using their payment methodologies for non-Medicare patients. “The cost-based relative weights were developed solely using Medicare data. We do not have non-Medicare data…For this reason we are concerned that non-Medicare payers may be using our payment systems and rates without making refinements to address the needs of their own population.” (page 272)
I could go on, but you get the picture. The populations are starkly different, claimants’ health status is different, their motivations are different, provider types are different, and reimbursement should reflect these differences.
Unfortunately, Medicare is the easy choice. Easy, but dead wrong.

Mar
9

Why Medicaid Rx reimbursement rates don’t make sense for Workers Comp

Posted by Joe Paduda on Sunday, March 9th, 2008 | Comments

Regulators are increasingly seeking politically low-cost ways to reduce workers comp costs. Some have decided to use the Medicaid reimbursement rate for drugs for Workers Comp, evidently figuring that if pharmacies accept it for Medicaid, they’ll do the same for WC. Same ‘logic’ evidently goes for PBMs.
The only problem is it is dead wrong.
1. Unlike Medicaid, there are no copays, restrictive formularies, or other cost- and utilization containment measures. Thus all cost containment efforts in WC for drugs involve resource-intensive Drug Utilization Review processes; pharmacists and clinicians reviewing scripts for appropriateness, medical necessity, potential conflicts and adverse outcomes, and relatedness to the WC medical condition.
2. PBMs pay pharmacies more for WC drugs than for Medicaid drugs; a lot more.
3. Unlike Medicaid, to the extent they exist at all, rebates are much lower in WC. Medicaid rebates are a minimum of 11% of the Average Manufacturer’s Price per unit (and even higher in many states). The rebate revenue significantly reduces states’ costs for drugs. As these rebates are much lower or nonexistent in WC, PBMs do not have rebate dollars to offset their drug costs.
Unlike Medicaid, most workers comp claimants have no idea how WC works, much less who their insurer is; the chances of the claimant presenting with a card is therefore quite low (less than 25% of all WC first fills go to the appropriate PBM). When a Medicaid recipient shows up at a pharmacy, they have been enrolled and thus have a card, and the transaction process is instantaneous and very low cost.
There is no positive enrollment in WC, unless the claimant presents a card, the pharmacy has no way to identify the appropriate PBM. This presents pharmacies with a high level of risk, a level that is not balanced by a reimbursement that makes that risk level tolerable. Specifically;
1. pharmacies are ‘at risk’ for initial fills where they cannot be sure the carrier/employer will accept the claim – this higher risk level requires a higher reimbursement. There is nothing preventing an individual from writing ‘WC’ on a paper script, thereby perpetrating fraud on the pharmacy.
2. the current regs pay pharmacies 25% more for scripts that are ‘controverted’; that is, where the carrier/employer has said they will not (yet) accept the claim
3. The ‘controverted’ situation is very similar to first fills – the carrier/employer has not indicated they will accept the claim, yet the pharmacy is required to fill it, without guarantee of reimbursement
4. the additional risk forced upon the pharmacies may lead them to:
• not fill scripts without a claim number/specific notice from the carrier/employer
• use the claimant’s existing profile (usually a group health PBM card) to fill the script, thereby increasing group health costs
• require the claimant to pay cash which they may, or may not, be able to do
We’re all for reducing work comp medical expense, but the blunt instrument of deep, and inappropriate, cuts in reimbursement for drugs is also counterproductive.
The key driver of prescription drug cost inflation is not the price per pill but utilization – the volume and type of drugs dispensed. The National Council on Compensation Insurance’s recent study on drug costs in workers comp stated “Utilization changes are the driving force in drug cost changes for WC…Utilization is the biggest reason for cost differences between states” (Workers Compensation Prescription Drug Study, 2007 Update; Barry Lipton et al; NCCI, p. 4, 6).
PBMs have adopted and are continuously improving programs designed to address inappropriate utilization. These programs include
• development of clinical evidence-based guidelines for the use of drugs for musculoskeletal injuries
• outreach by PBM physicians in specific cases where the drug treatment plan may be inappropriate
• data mining to identify potentially questionable prescribing patterns including off-label usage of drugs such as Actiq and Fentora
• Prior Authorization of specific drugs (e.g. narcotic opioids, cardiovascular medications).
What does this mean for you?
If PBMs don’t operate in a state or can’t generate any margin, they’ll eliminate any and all utilization control measures.
And drug costs will increase.

Feb
5

Why is workers comp paying for hospital errors?

Posted by Joe Paduda on Tuesday, February 5th, 2008 | Comments

Surgical devices left inside a patient. Dispensing the wrong medication or the wrong dosage. Giving a patient the wrong blood type in a transfusion. Serious pressure ulcers incurred while hospitalized. Infections from catheterization in the ICU.
These are among the ‘never-ever’ events – incidents that should never, ever happen during an inpatient stay. CMS recently decided to stop paying hospitals for care required due to certain“preventable complications” — “conditions that result from medical errors or improper care and that can reasonably be expected to be averted” (NEJM, 10/18/07). The list includes air embolisms, certain infections, patient falls, pressure ulcers and the like.
HealthPartners in Minnesota was one of the first payers to identify the problem and take action, way back in 2002. Now, other commercial health insurers, notably Wellpoint and Aetna, are planning to move beyond CMS’ list and eventually refuse payment for 28 events. These events, identified by the National Quality Forum are also under review by the Blue Cross/Blue Shield Association, United Healthcare, and CIGNA who may decide to stop paying for them.
And the Leapfrog Group’s membership, which includes many of the country’s largest employers, is also asking providers to not bill for these events.
It is not just the payers; hospitals themselves are starting to see the light. Hospital associations in Massachusetts and Minnesota have agreed to not charge payers or patients for these events, which include “wrong-site and wrong-patient surgery, patient death or disability due to wrong use of blood or blood products and medication errors, and follow-up care needed to bring the patient back from such errors.”
The largest payer in the nation, CMS, has decided that paying for certain medical errors is bad policy. So has two of the largest health plans, along with one of the best-run health plans in the country. Our biggest companies have joined the “no pay for mistakes” movement. Hospitals themselves have decided it is inappropriate to charge for their screw-ups.
So why are workers comp payers reimbursing hospitals for ‘never-evers’? I don’t have any empirical evidence that WC payers are not paying for these events. In fact, given the lax payment policies of most payers, I’d be very surprised if more than a very few (if any) payers have the ability to deny payment, much less a policy to do so.
What does this mean for you?
There is clear precedent for non-payment for medical errors. Moreover, workers comp payers may find themselves in the rather awkward position of trying to justify their payments for conditions that their clients have publicly stated are not reimbursable.

Jan
23

Warning on Fentora

Posted by Joe Paduda on Wednesday, January 23rd, 2008 | Comments

The FDA has issued a warning notice for off-label use of Fentora after three deaths were linked to off-label usage of the fentanyl tablet.
One issue may be related to the substitution of Fentora for another powerful pain medication, Actiq. Both are manufactured by Cephalon, but Fentora is absorbed more quickly than is Actiq. Therefore, the same dosage of Fentora may result in more of the drug being absorbed into the bloodstream.
Cephalon has been plagued by accusations of aggressive detailing, including encouraging physicians to prescribe the drug off-label. Another recent article indicates the pharma industry has been aggressively lobbying the FDA to allow this type of detailing, which evidently has been going on for two years despite restrictions against the practice.
Of note to workers compensation insurers, Fentora appears to be becoming increasingly popular for treatment of back pain in some areas.
What does this mean to you?
If you are a WC payer, find out which claimants are taking Fentora and figure out why and if it is appropriate. Not only is the drug dangerous, it is also very expensive.

Nov
27

Medicare dollars are paying for the uninsured

Posted by Joe Paduda on Tuesday, November 27th, 2007 | Comments

Adding to the seemingly-endless list of compelling arguments in favor of universal coverage is the rather obvious “if we insure them now, we won’t have to pay for more expensive care tomorrow.”
Specifically, I’m referring to a recent Commonwealth Fund/AHRQ study on health care costs for new medicare enrollees; the study found that new Medicare enrollees with chronic conditions that previously lacked health insurance incurred substantially higher treatment costs than those that had health insurance before enrolling.
While all previously-uninsured Medicare recipients had higher utilization, this was particularly noticeable for those with hypertension, diabetes, heart disease, or stroke, where prevention and routine care can prevent costly and calamitous acute episodes. The uninsured with these conditions reported more doctor visits (13% relative difference), more hospitalizations (20% relative difference), and higher total medical expenditures (51% relative difference) from ages 65 to 72 years than previously insured adults.
Each year, approximately 2.3 million seniors qualify for Medicare. Of this population, 57% had chronic conditions. The average medical cost (2003 numbers) per Medicare enrollee in the 65-74 age group was $9473. While the information available doesn’t allow a precise calculation of the additional cost involved in treating this group, the amount is certainly well up in the billions.
According to the original article in the NEJM, “The costs of expanding health insurance coverage for uninsured adults before they reach the age of 65 years may be partially offset by subsequent reductions in health care use and spending for these adults after the age of 65, particularly if they have cardiovascular disease or diabetes before the age of 65 years.”
What does this mean for you?
Covering the uninsured would reduce Medicare’s expenses.

Aug
7

Medicare sneezes

Posted by Joe Paduda on Tuesday, August 7th, 2007 | Comments

The adage goes something like – when the US sneezes, the world catches a cold, signifying just how much influence this country has on the rest of the world.
That’s analogous to Medicare’s impact on the health care sector. And Medicare is about to change the way it pays hospitals, a change that will have a dramatic effect on every private payer from HMO to individual carrier to workers comp insurer to self-insured employer.

Continue reading Medicare sneezes