WCRI – deductibles and claims!

I showed up late to WCRI’s annual meeting, and thanks to American Airlines missed three great sessions – two dealt with opioids and one was a deep dive into coordinating medical and RTW services. Grrrrr…

Ok, whining is now over.

For those seeking intel on those early sessions – I’ll link to posts on those when I find them.

A session I’ve been looking forward to – nerd bomb alert – is a discussion of the relationship between group health deductibles/copays and coinsurance and claim classification.

This study follows two others that looked at capitated vs non capitated plans and provider reimbursement impacts on claim classification – aka shifting claims to work comp.

So, is there a correlation between higher deductibles and a greater propensity by patients to file work comp claims?

It appears high deductibles are correlated with higher rate of work comp claim filing for patients – especially for patients with soft tissue injuries, but the impact isn’t great. More specifically, the data indicates a 1.4% increase in filing associated with high deductibles – when WCRI looked at claims over an eleven-year period; this is much more likely in states where workers can pick their initial treating provider.

In fact there was little correlation between high deductibles and increased WC claiming in employer-choice states.

However, it appears that much of that increase has occurred more recently, as deductibles have grown significantly. with soft-tissue injuries

The entire research report is here – there’s a fee for non-WCRI members.

The finding is somewhat complicated by earlier research that found a significant percentage of workers that actually had occupational injuries didn’t file them under work comp

There’s no question deductibles have grown by leaps and bounds of late – the average is now over $1500 – and 4 out of 5 plans have deductibles. (deductibles are a lousy idea for lots of good reasons – mostly they don’t work).

So, what does this mean for you?

Two things – we all know WC claims frequency has been declining for decades, but the “increase” in WC filing offset about 20% of that decline.

And, we do NOT know if those claims were actually occupationally-related. It could be that claims are just getting filed more accurately of late.


Medicare for All – the three versions

There is no consensus about what MFA is – and that makes it really easy for supporters and opponents to convince the uninformed it is great or awful.

They do that by picking out whatever they think you’ll love/hate – even if it has nothing to do with MFA. Then, they yell about that at maximum volume in an effort to convince you that the whole thing is terrific/awful.

Before we decide if MFA is worse than the stomach flu or better than a teenager that actually listens to mom and dad, let’s spend two minutes understanding what MFA is.

There are three general “versions”, each coming in multiple variations and with different tweaks. The basic differences are:

  • who is covered
  • what types of healthcare are included
  • is there a role for private insurers
  • what mechanism/payer system is used.

Notably, many of the proposals aren’t exactly precise on where the dollars to pay for all this will come from.

There’s the Bernie Sanders version which is basically – every kind of healthcare service anyone could think of for free for everyone – provided only by the government, with no private insurance allowed. Another even richer version is to be announced today – which is even more generous – and hyper-expensive.

My take – completely unrealistic for several excellent reasons which I’ll get into in a future post.

Then there’s Medicare for some – which would allow older folks to “buy in” to current versions of Medicare, while leaving employer-based insurance alone. A similar proposal, known as the “Public Option” was part of the ACA until the Democrats took it out in an unsuccessful effort to get Republican support for ACA legislation

My take – this makes more sense for multiple reasons; again we’ll dive into this next week.

Some – including your author – have pitched Medicaid for some or all. To me this is more viable as it heavily involves states, wouldn’t affect federal taxes nearly as much as Medicare for All, and uses an already-existing program that is much simpler than Medicare.

What does this mean for you?

A gentle reminder – yes, there are issues with all of these. But what is the alternative? Our current system is a mess and is getting worse by the day. If you object, what’s a better solution?

What does this mean for you?

Change is coming – make darn sure you understand what it means for you.


What is “Medicare for All”?

MFA/M4A uses Medicare as the health insurance mechanism for people younger than 65. Some advocates are pitching “Medicare for Some” wherein folks older than 50 or 55 would be able to “buy-in” to Medicare (which covers everyone over 65 today).

Here are some of the reasons supporters like MFA:

  • Overall healthcare costs would be lower, reducing expenses for employers, individuals, and taxpayers over time.
  • Current beneficiaries really like Medicare – more than insureds like private insurance
  • It relies on an existing system and infrastructure that exist today and are familiar to all stakeholders
  • Administrative expenses are much lower than employer-sponsored and individual insurance
  • Price controls are universal and apply to almost all types of providers
  • Cost increases – on a per-capita basis – are lower than in commercial health insurance
  • Pretty much all doctors and hospitals accept Medicare
  • Commercial insurers are very active in Medicare, offering plans that provide added benefits for little to no additional cost (however there are usually limits on providers patients can use (known as Medicare Advantage plans)
  • Those who like “traditional” Medicare can buy supplemental benefits from private insurers to cover services, deductibles, copays and other costs not covered by Medicare (Medicare Supplement plans)

Opponents cite:

  • It would be wildly expensive and require massive new taxes, with annual cost estimates ranging from $1.4 to $2.8 trillion (although one major opponent concedes total US healthcare costs would be $2 trillion less a decade into MFA)
  • Medicare reimbursement is too low, forcing providers to upcharge other payers to make up for lost revenue. If Medicare is the only insurance carrier, then providers will be in dire financial straits.
  • People covered by employer-funded health insurance are leery of losing those plans.
  • MFA would severely limit or restrict “choice” of health plans and coverage options
  • The notion of “government-run” healthcare scares some, but most don’t even know Medicare IS a “government-run” program.

My take

There’s no question Medicare is less expensive than group/individual health insurance – and costs will increase more slowly. Private insurers are heavily invested in the business, so they can handle the admin piece. Yes, taxes would go up, but employers’ costs would likely drop considerably. Patient hassles would greatly diminish.

Oh, and given what a pain in the butt commercial insurers can be when it comes to out of area coverage, deductibles, annual premium increases, covered v non-covered services and everything else they do to make our lives miserable, I’d be way happier with Medicare for me and my wonderful bride.


What is “Single Payer” healthcare?

You’re going to hear a lot about Single Payer over the next 20 months – mostly from people who a) have an opinion about it and b) don’t even know what “Single Payer” is.

Before you get sucked into that discussion/argument, here’s a primer.

“Single Payer” – by definition – is government-financed and government-managed health insurance.

Beyond that, pretty much every country with Single Payer is unique, each with its own nuances. For example,

  • most don’t have government-employed healthcare providers; in many single payer systems, physicians, therapists, hospitals and other providers are private.
    • The UK is an exception; providers are (mostly) employed by the government
  • many are not government-operated; in many systems private insurers contract with the government to handle administration of health insurance – similar to our Medicare
    • Again the UK is an exception


  • the government sets pricing/reimbursement policy and actual prices – similar to our Medicare
  • funding comes from some combination of employee, employer, and other taxes; in some countries, insureds pay some form of premiums – similar to our Medicare
  • it covers everyone
  • there is little to no paperwork for patients/consumers; all that is handled by the administrative agency
  • there are minimal or no deductibles, copays, or co-insurance requirements
  • people can buy into supplemental insurance through private insurers

What does this mean for you?

You are now more knowledgeable than most everyone else about Single Payer.


One Call – the latest.

Workers comp managed care company One Call reportedly “clinched a deal” to rework its debt late Wednesday, a quick recovery from a previous debt offering that was cancelled (thanks to Bloomberg’s Katherine Doherty for her reporting on this.)

While the company has made good progress in completing the transaction, rating agency Standard and Poor’s has opined that the exchanges are “distressed”, and has downgraded One Call to “SD” as a result. If One Call completes the exchanges, S&P has said it will likely raise the company’s rating.

Readers may recall One Call’s interest expense and cash flow challenges were noted in an earlier post which also discussed the core issues faced by the company.

Here’s what One Call is doing to, at least partially, address the debt situation. First, recall that OneCall has about $2 billion in debt outstanding. The company appears to be working to reduce its debt expense – the interest payments that amount to somewhere around $150 million annually.

There are two parts to this debt restructuring. Simply put, One Call is doing two things – in both cases asking current debt holders to swap their existing notes for new ones. In both cases One Call has structured the new debt to allow the company to not pay interest if it chooses.

The mechanism One Call is using isn’t that unusual, it’s known as “PIK toggle” loans; “Payment In Kind toggle” notes allow the issuer to forgo interest payments by giving debt holders more first-lien notes instead of paying the interest due in cash.

Got that?  I know, complicated stuff.

Here are the details.

Part one

According to Bloomberg, after dropping its previous debt exchange effort One Call offered debt holders “sweeter terms” on a revised deal allowing “certain first and second-lien creditors” to exchange their current notes for ones that are all first-lien. This is good for the current second-lien holders involved as they move up in line in case One Call gets into financial difficulty in the future.

Debt holders were asked to trade $258 million in current notes for $235 million in new notes, which implies the current notes are discounted by 9 percent. (We don’t know if the original debt offering had a similar discount.)

This closed, so this part of the effort is complete.

Part Two  

One Call is offering to exchange up to $400 million in current term loans – some of which come due next year, others in 2022 – for new notes that mature in 2024. As of yesterday, about $103 million of debt has been committed to the swap.

Allow me to explain some terms.

    • ·     “first lien” debt is primary; that is, the entities that hold this debt get first dibs on assets in the event the debt issuer gets into financial trouble.
    • ·     “second lien” debt is next in line – a riskier position. If a company defaults, there may not be assets left so this type of debt usually pays a higher interest rate to compensate the debt holder for the greater risk.
    • ·     “notes”, “loans” or “debt” are all terms referring to a transaction where the creditor lends money to a debtor, and gets paid interest by the debtor. Mortgages and car loans are examples.
  • ·     “Payment In Kind toggle” notes allow the issuer to forgo interest payments by giving debt holders more first-lien notes instead of paying the interest due in cash.

In other One Call news, Chief Strategy Officer Pat Rowland departed a couple weeks ago, and a few other folks have left as well. I continue to ping One Call to get their comments; just got a response from One Call that didn’t even bother to answer the key question; why was the initial debt swap cancelled.

If One Call decides to respond meaningfully I’ll update the post. Don’t  hold your breath…

Kudos to One Call and its bankers for moving to enhance its future cash position. This will allow the company to reduce cash payments to debtholders by something north of $20 million. Given the company’s most recent financials this is important indeed.


Could Medicare for All Solve the healthcare cost problem?

This week we are unpacking Single Payer/Medicare for All to better understand the many variations of SP/MFA and now they are different, how those variations might work, and whether some version is a) politically viable and b) would solve the cost/access/quality conundrum.

Yesterday I made the case that voters want healthcare solved, and they don’t much care about the details and nuance. We also showed that employer-sponsored health insurance is a mess.

Can private insurers solve the healthcare cost problem? Well, on one level they get dinged if they control costs. A key point about for-profit insurers – the stock market loves and rewards revenue growth. In health insurance, revenue growth is overwhelmingly driven by higher medical costs. So, medical cost inflation = higher revenues = higher stock prices (yes, this is simplistic, but also mostly true).

Over the last two years insurers have kept premium increases low, but that’s due in large part to cost-shifting to members. In contrast, Medicare can’t cut costs by shifting them to you – benefits are set by law and rarely change significantly.

the big increase in Medicare 2000s was largely drive by the new Part D drug program; focus on per capita costs to account for changes in membership

As we’ve noted previously, facility prices are the biggest driver of cost inflation – and that’s where Medicare outperforms commercial payers. Of course commercial payers will say that’s because Medicare can force payers to agree to its prices – which, although true, begs the question – why can’t commercial payers do the same?

One main reason – in many areas, provider consolidation has given health systems market power – health providers have more leverage so they have an advantage in negotiations.

In 43% of markets, providers are super-concentrated, vs only 5% of markets for health insurers

That said, reality is health insurers have failed to control members’ healthcare costs. There are lots of reasons – including provider market consolidation, but as one of my rowing coaches once said to me; “I don’t want to hear why you can’t, I want to hear how you will”.

What does this mean for you?

If for-profit health insurers had done their job – controlling costs and delivering better outcomes and patient satisfaction – you wouldn’t be reading this.

Medicare has a better track record controlling cost – which is by far the most important issue in healthcare.

Tomorrow – can SP/MFA solve the cost problem going forward?

Note – Here are a couple approaches health insurers are working on, in process, have been tried, or may try in the future. In my view much of this is too little, too late.

Reference pricing has been implemented by some large employers and a handful of insurance plans. In a nutshell, it forces members to ask about prices, because their health insurance will only reimburse up to a “reference” price. One experiment is underway in North Carolina.

Narrow networkshealthplans with very limited provider panels – are gaining traction as healthplans force providers to agree to lower prices and outcome standards in return for patient volume.


One Call withdraws it’s debt exchange offer

Word just in that One Call Care Management has “cancelled a bond exchange intended to rework its $2 billion debt load”. According to Bloomberg, OCCM won’t pursue the debt swap.

The swap would have allowed holders of the current second-lien notes to exchange some for first-lien notes. This would have moved the holders of first-lien notes up in the event there is a restructuring.

Don’t know if this will have any impact on the company’s ratings by Moody’s or Standard and Poor’s; will monitor and let you know.

For now, all we know is One Call attempted to restructure some of it’s debt, then withdrew the offer.


What’s all this about Single Payer and Medicare For All?

It’s the worst kind of government over-reach.

It’s an easy solution to a huge problem that will cost nothing.

And everything in between. Between now and Election Day you are going to hear a lot about Medicare for All and Single Payer, and most of it will be utter nonsense.

So, this week is Single Payer/Medicare For All explanation week.

Proponents of Single Payer/Medicare for All say it will reduce overall costs and ensure everyone in America has great healthcare; At the other end of the spectrum, it’s fiercest opponents say it will bankrupt the country while giving bureaucrats control over your family’s healthcare.

Reality is, since there is no actual agreed-upon “Medicare for All” or Single Payer legislation, each of us sees what we want to see – MFA as the Holy Grail or a Total Disaster.

Let’s take a step back and think about how voters are affected by the core problem – or rather problems, with healthcare and health insurance.

The focus on voters is critical here – most are covered by employer-based health insurance, and most of the rest are covered by Medicare. For the non-elderly:

  • Health insurance is stupid expensive.
  • For many of us, deductibles are so high “insurance” just protects you from catastrophic injuries or illnesses.
  • Insurance companies control the doctors and hospitals you can use and the care you get.
  • The paperwork is mindboggling, confusing, and adds billions in unnecessary cost.

For workers, healthcare “costs” are a combination of insurance premiums and cost-sharing payments – mostly deductibles and copayments. (While about 75% of premiums are paid by employers, economists argue that most of those premium dollars would be paid in cash wages if health insurance wasn’t provided.)

Today family health insurance premiums are almost certainly more than $20,000 a year.

Over the last two decades, healthcare costs have eaten up wage increases – one of the main reasons families aren’t getting ahead.

For those who actually have to use their health insurance, it’s worse. Deductibles are so high that many families can’t afford them.

Add this all up, and you understand why healthcare was the top issue for most voters in the mid-terms.

Voters like simple answers to complex questions – and for many, some form of Single Payer sounds great.

The takeaway – voters want healthcare solved and they don’t care much about the details.


The week that was…

Couple quick items from the week that was.

Heard from WCRI that they are close to capacity for the annual confab. If you haven’t registered, you’d best do so now here.

Rating firm Moody’s released an announcement regarding OneCall Corp.’s recent debt offering.[link accessible for registered users; registration is free]. This follows OneCall’s announcement last week that it would be offering to exchange new debt for existing debt.

Moody’s announcement indicates it is “likely” the debt exchange will be viewed as a “distressed exchange”; there is no change to ratings at this time.

S&P released a note indicating it lowered it’s long-term issuer credit rating for One Call Corp to ‘CC’ from ‘CCC+'[free registration required].

From S&P – “An obligor rated ‘CC’ is currently highly vulnerable. The ‘CC’ rating is used when a default has not yet occurred but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.”

New CEO Rone Baldwin released a letter to all earlier this week.


Research Roundup – or, stuff you don’t have to read because I did.

There’s so much great research published every day – and a lot of crap too – that it is impossible to figure out A) what should I read and B) what does it mean.

So, here’s what I found worth reading of late.

A Dutch study on the impact of automation on the workforce found:

  • annually. 0.7% of workers left their employer due to automation
  • higher-educated and higher-paid workers are MORE likely to be affected than their lower-wage colleagues
  • overall the impact of automation is a lot less than from mass layoffs.

Employer sponsored health insurance:

  • covers more Americans than any other type of insurance
  • 156 million of us get insurance from our employers – Medicare is second, at less than half that number

BUT – the percentage of Americans covered by employer-sponsored health insurance actually DROPPED over the last 20 years.

Of course, it’s not so much if you have insurance – it’s how much you have to pay out of pocket. Which, to coin a phrase, is becoming a ship-load as deductibles have exploded. Total worker cost sharing has increased about 50% over the last decade.

Meanwhile, employer-sponsored health insurance costs per member have gone up a lot faster than Medicare and Medicaid.

Finally, the good folks at WCRI have published a new compendium sure to be of interest – State Policies on Treatment Guidelines and Utilization Management: A National Inventory. Get it here. Kudos to  Dongchun Wang, Kathryn Mueller, and Randy Lea for what was undoubtedly a LOT of work.