Spent most of this week doing a long bike ride with two great friends – riding thru a 90 minute downpour, falling into a mud puddle, and marveling at two century-old engineering feats.

Glad I missed the poison ivy and horse poop…

Work comp premium rates keep tumbling

This is one of those very big stories that isn’t getting near enough attention. This morning’s WorkCompCentral had two stories that highlight just how much the world is changing.

WCC’s Greg Jones (one of the more diligent reporters I’ve read) noted that California may lose it’s place as the state with the highest work comp rates. 

Ohio’s public employers are looking at a 12 percent drop, capping off a seven-year run of decreases that have slashed premiums by almost 42%.

Meanwhile, despite high medical costs and lots of litigation, Louisiana’s rates have also declined some 30 percent over the last decade.  (thanks to LCTA’s Troy Prevot for the head’s up). While the reduction in employers’ and taxpayers’ costs is a very good thing, too-high medical costs and too-long disability duration are problematic indeed. But the story here is rates are dropping despite these significant cost drivers.

The biggest driver appears to be claims volumes – frequency declined 6 percent last year alone. While some argue that frequency is not a number, and therefore isn’t relevant, as we get very close to full employment, the “gap” between frequency (claims per 100 FTEs) and the actual volume of claims becomes pretty meaningless. (cue disagreement, which is welcomed)

What does this mean for you?

Lower rates will force insurers to reduce administrative expenses, overhead, staff, investments in technology.

Lower rates reduce premium taxes, a funding source for regulatory entities.

Historically low injury rates are continuing to drop, reducing the number of claims – which reduces the need for case management, claims adjusting, bill review, UM, peer review, IMEs…pretty much all claims services.

Insurers seeking to cut fixed costs to reduce Unallocated Loss Adjustment Expenses are moving claims to TPAs, a trickle that may become a flood.

July’s Health Wonk Review has:

• intel on how Purdue deceptively marketed OxyContin;
• the ACA’s role in tackling the opioid crisis via expanded coverage for mental health
• a great review of so-called “faith-based” alternatives to health insurance

Just in time for your lunch break too.

Happy last June Friday – going to be a blistering weekend here in upstate New York with temps likely to blast thru records.  Hope you’re cooler than we are…

Here’s a few newsworthy items that crossed my virtual desk this week.

First up – WCRI’s got the latest on perhaps the biggest cost driver in work comp medical – outpatient facility costs.

Couple quick takeaways:

• States without fee schedules had significantly higher prices
• States with percentage of charges fee schedules were way more costly than those with fixed fee schedules
• Medicare’s reimbursement scheme is becoming more pervasive – my view is this is a very good thing.

Speaking of cost drivers…Health systems are buying up physician practices at a record pace. But does this make good business sense? “…some larger health systems’ physician operations are generating nine-figure operating losses, which are major contributors to the deterioration in hospital earnings. ”

Best line in a news article this week goes to the Economist; in a great article about why meetings suck.

MOST workers view the prospect of a two-hour meeting with the same enthusiasm as Prometheus awaited the daily arrival of the eagle, sent by the gods to peck at his liver.

The solution? “the best solution to tedious gatherings is to have far fewer of them.”

Excellent discussion of the Infrastructure issue – how it affects local business, why tolls should only cover operating and not capital expenses, and why Dodge City didn’t become Dallas – Forth Worth – and DFW did.

Health status is driven by many things – but perhaps the most important is food. One out of six Medicaid recipients surveyed who are working didn’t eat anything for the entire day. Details here.

In the Road-To-Hell-Is-Paved-With-Good-Intentions department, we bring you Medicaid work requirements; they make sense, right? Well, most of the recipients who would lose coverage are actually working today – but they’d be kicked out due to the administrative hassles of complying with reporting requirements.

Prescription Drug Monitoring Programs  – when effectively and intelligently implemented – are associated with reduced opioid prescribing. The best results appear to come from Kentucky…

Ok, time to get to work.

Don’t forget the sunscreen, eh?

Thanks to the estimable Hank Stern, we bring you the June edition of Health Wonk Review, a fast read of the latest intel on health policy and related matters.

Hank’s summary includes notes on the CVS’ donation kerfuffle; a very readable review of the Trump Administration’s Association Health Plans plans; what may happen if the Trump folks kill off ACA; and how Medicare might be expanded.

Read on!

After a spate of mega-deals and “tuck-in” acquisitions, things seemed to have calmed down in work comp services M&A.

In reality, there’s a lot going on – for reasons I’m not sure make sense.

There’s been consolidation throughout work comp services; every niche from pharmacy management to MSA vendors to networks to IME firms to case management to TPAs has gone thru this. There’s been both vertical (companies in the same business merging (e.g. EXAM buying IME companies) and horizontal deals (companies in dissimilar areas joining forces (e.g. Mitchell buying MCN).

While your take on this depends on where you sit, (e.g. fewer vendors bidding on a payer’s business), there’s another, arguably more important issue here.

I’m going to caution buyers to not conflate scarcity with value.

I’m seeing renewed enthusiasm among both strategic and financial buyers in companies that weren’t that exciting just a couple of years ago. Those heretofore-not-exciting companies seem to have gotten much more attractive now that there are far fewer potential acquisition targets available.

This is just human nature; we tend to value things more when there are few of them.

For example, I give you the Ford Pinto…

A horrifically crappy car rushed into production during the gas crises of the early seventies, thankfully there are few left in circulation.

Even worse, the AMC Gremlin (why a company would name a product after a manufacturing defect is one of the great mysteries of the Universe).

Yet people still spend stupid money on Pintos and Gremlins…

Why? because there are few of them left. That doesn’t make these awful examples of design and engineering incompetence any better, it doesn’t make the build quality less than horrific, and it sure doesn’t make them any more visually attractive.

What does this mean for you?

Before you plunk down your (or your investors’) hard earned cash on some company you passed on or wouldn’t have given a second look at a few years ago, you may want to ask if it passes the Gremlin Test.

The headlines were comforting – not much change in the number of Americans without health insurance.

Before you breathe that sigh of relief, you’d be well-advised to dig a bit deeper, because there’s plenty of bad news just under the headline.

While the national number of uninsured stayed about the same, that’s irrelevant to you – because healthcare is local. Here’s what I’d be worried about.

• Young adults are almost twice as likely as older adults to be uninsured – about one in six younger adults don’t have coverage.
  Takeaway – no health insurance = more incentive to file work comp claims 
• Over a quarter of working-age Texans don’t have coverage. Georgia, Florida, and North Carolina are not far behind
  
  Takeaway – no health insurance = poorer health status, more comorbidities, more charity care for providers thus more incentive to cost- and claim-shift.

• 44% of working-age adults were covered by high-deductible plans – but more than half of them don’t have health savings accounts needed to fund those high deductibles

Takeaway – “High” deductible healthplans aren’t much different than no insurance at all if the patient can’t afford the deductible – and over half can’t. So, more incentive to cost- and claim-shift.

What does this mean for you?

Workers’ comp will be affected by the Administration’s ongoing behind-the-scene effort to hollow out the ACA and cut funding for Medicare and Medicaid.

Jason Shafrin, the best economist in health policy, is hosting this month’s Health Wonk Review.

Young guy that he he, Dr Shafrin is doing this Instagram-syle.

A quick read with lots of pictures…

A few weeks back I posted on the incomprehensible decision by the Veteran’s Administration to award almost all of a $6.8 billion contract to two “different” companies that are actually very closely related.

Last week came the news that the Government Accountability Office delivered an official head slap – with a 2×4 – to the VA.

Politico reported [subscription required]

the GAO “citing “prejudicial errors” has directed the Department of Veteran Affairs to go back to the drawing board…the office “recommended that the VA reopen negotiations with the offerers, solicit, obtain, and evaluate revised proposals; and make new source selection decisions” [emphasis added]

Oh, and the VA “misled two of the protestors during the conduct of discussions or negotiations.  These errors led the VA to make source selection decisions…that were unreasonable…” [emphasis added]

Here’s my take.

First, there’s obviously some backroom dealing going on here.  When a giant defense contractor – Lockheed Martin – that has a documented record of failing to deliver a service and its “partner” are awarded most of a “competitive” $7 billion contract, while a much smaller competitor that happens to have a far better record of delivering that service on time and to specifications is awarded a tiny piece of the contract, something stinks.

Kudos to the GAO for the investigation.  HOWEVER, it’s unknown if this investigation would have happened at all if the three competitors who were screwed on the initial deal hadn’t spent hundreds of thousands of dollars preparing a protest within a really short time frame – a time frame that, to this observer, looks like it was designed to make it damn near impossible for the losers to react to the initial contract award to Lockheed Martin.

Second, and more important, this is outrageous, and demands further investigation.

There are thousands of veterans waiting on disability evaluations, a wait needlessly prolonged by what smells like corrupt contracting by someone or someones in the VA.

One just has to listen to calls from vets whose disability evaluations are delayed for months, vets in limbo because they have no idea if they will ever get any benefits, help, or the right treatment. These are men and women suffering from PTSD, missing limbs, burned, scarred, traumatized, now subjected to the mental anguish of not knowing when or if they will ever be taken care of by the country they fought for.

I would encourage you to email the GAO and ask it to continue the investigation to determine if this should be turned over to the Department of Justice.  Here’s the email address – youngc1@gao.gov 

Because the individual or individuals responsible for this unconscionable delay deserve more than a head smack.

[disclosure – I’ve consulted in the past for one of the protestors – Veterans Evaluation Services]