Insight, analysis & opinion from Joe Paduda


Here’s what happened last week…

People who enroll in exchange programs in red states pay 3.2 percent more for their health insurance than folks in purple or blue states.  Research indicates it is because fewer folks in red states sign up for coverage – and these are likely the healthier people.

Families pay about a third of their healthcare costs, with employers picking up most of the rest.

In part that may be because healthcare now costs more than a new car…Yet one more straw on that poor camel’s back…

Yet another indicator that the healthcare market continues to rapidly consolidate came last week with news that Tufts and Harvard Pilgrim look to be merging.

A you-should-definitely-read-this piece from Harvard Business Review reminds us that variations in data should be considered thru the lens of statistics, not emotion or intuition. An excerpt:

Sorting out variation provides needed context, points to opportunity, and helps managers maintain their cool when something goes wrong. Managers should learn how to measure variation, understand what it tells them about their business, decompose it, and, when necessary, reduce it.

WCRI’s Vennela Thumula PharmD will be discussing Interstate variations in opioid dispensing in a webinar on September 12.  Dr Thumula is one of the nation’s leading experts on workers’ comp opioids and well worth your listen. Register here.

Great piece from HealthAffairs on evidence-based treatment guidelines.  There’s a lot of nonsense and BS out there – especially in workers’ comp guidelines – and this article provides a solid foundation to understand what’s real and what isn’t. Here’s the central message…

There are two core issues that lead to a host of problems. First, there is a lack of centralized authority to coordinate, vet, approve, and catalog guidelines. Second, there is an absence of a universal methodology to create guidelines—every professional organization promulgating guidelines today generally decides freely which, if any, framework they will use to construct guidelines.

Finally, if you want to understand how to incentivize physicians – and improve your ability to work with them, read this.

take time to develop relationships with physicians. I need to develop trust. I need to convey the why. And then, once we do that, you can begin to move into the how and the what. And then physicians are ready to look at the dashboards to help you move them forward.



Three reasons we’ll have major healthcare reform by 2025

Middle class voters can’t afford healthcare.

Total health insurance cost for the average family with employer-sponsored coverage is over $22,000 annually.

Even families that have coverage are being crushed by costs not covered by insurance.

lawsuits keep the “Debt and Collections” courtroom in Poplar Bluff busy. (Michael S. Williamson/The Washington Post)

Hospitals and health systems are going out of business, leaving towns and rural areas with reduced access healthcare.

Health systems and hospitals have a Hobbesian choice – force families into bankruptcy or go bankrupt themselves.

Tennessee and Texas lead the nation in hospital closures, with one-fifth of the Lone Star State’s rural hospitals already closed or close to it. Just north, a grassroots movement in Oklahoma driven by closure of a half-dozen rural hospitals, is gaining traction.

While Becker’s reports all but one of the hospitals going belly up are in states that didn’t expand Medicaid.   While there’s no question the problem is much worse in non-expansion states, facilities’ fiscal problems aren’t all solvable by Medicaid. Hospitals from Philadelphia to Chicago are facing bankruptcy, leaving behind massive unpaid bills and huge gaps in the provider landscape.

Improved access to care has big economic benefits.

Growing evidence indicates Medicaid expansion has been a big positive for expansion states:

Medicaid expansion was associated with improved hospital financial performance and significant reductions in the probability of hospital closure, especially in rural areas and areas with higher pre-ACA uninsured rates.

A study in Louisiana found that the injection of federal expansion funds created and supported 19,195 jobs (while creating and supporting personal earnings of $1.12 billion) in sectors throughout the economy and across the state as of SFY 2017. A study in Colorado found that the state supported 31,074 additional jobs due to Medicaid expansion as of FY 2015-2016

Another Louisiana study found that as a result of the federal infusion of Medicaid expansion dollars into the state’s economy, Louisiana derived an additional $103.2 million in overall state tax receipts (which exceeded the state dollars budgeted for the Medicaid expansion program by close to $50 million) and local governments derived an additional $74.6 million in local tax receipts. A study in Montana found positive financial effects for businesses due to infusion of federal dollars to fund health coverage for workers

The net is this – People want their kids to be covered, to be protected from medical cost bankruptcy, to have access to care.

Politicians who offer solutions to these problems are finding receptive audiences, even in red states and states where Medicaid expansion was turned down. Louisiana, Kansas and Maine are three states where healthcare was a significant factor in gubernatorial elections – all have expanded, or working to expand Medicaid.

Voters will drive healthcare reform, and politicians will follow. More coverage = a healthier economy.

What does this mean for you?

It’s going to happen.


High hospital costs? This may be why.

Work comp and auto payers in many southeastern states have seen a sharp rise in facility costs over the last five years.

While ineffective fee schedules are partially to blame, the real driver may well be politicians’ refusal to expand Medicaid.

When Medicaid expansion was offered in 2014 as part of the ACA, most states took advantage of the option, resulting in a massive decline in uncompensated care. However, the ACA also reduced federal payments to hospitals in tough financial shape, the rationale being Medicaid’s expansion would reduce the need for additional funding.

Not surprisingly, the cost of uncompensated care dropped dramatically in states that expanded Medicaid.

Equally unsurprising was the increase in the cost of uncompensated care for those states that didn’t expand Medicaid.

In the chart below, the gold bubbles in the top right show how much the uninsured rate increased, correlated with uncompensated care’s share of hospital costs.

So, we have a massive revenue shortfall in non-expansion states; Florida, Texas, Georgia, South Carolina, and others, setting up pretty dire financial situation for hospitals.

What does this have to do with workers’ comp, you ask?


The chart – courtesy WCRI – shows a remarkable correlation between non-Medicaid expansion and higher prices paid for workers’ comp.

The reason is simple. Hospitals, especially those in southeastern states, rural and small ones, are desperate for revenue, and workers’ comp is a very soft target.

What does this mean for you?

If you think you’ve got the right answer for facility costs, you’re probably wrong.


Are health insurers’ profits and costs the problem?

There’s a lot of bleating about the huge profits made by health insurers, with some – including too many who should know better – complaining loud and long. [Insurers and pharma netted about $97 billion last year.]

While some would argue the billions raked in by insurers is far too much, let’s take a step back and look at the big picture.

First, insurers’ profits are a tiny fraction of our $3.6 trillion healthcare spend – as in >1 percent.

Second, healthplan, insurers, and other payers’ total administrative expenses amount to 8.3% of that $3.6 trillion – roughly $300 billion.

Oh, and a big chunk of most health insurers’ business comes from servicing governmental programs.  Example – 58% of United Healthcare’s revenue is from Medicare, Medicaid, and other governmental programs.

Frankly, given commercial insurers’ demonstrated inability to control costs and improve quality, that $30 billion may be too generous by far. But it’s clear the big problem with healthcare costs is not insurer profits or administrative expense.

It’s the underlying prices of healthcare.

What does this mean for you?

It’s not insurer profits.


Conference overload

For a relatively small industry, there sure are a ton of conferences.

From WCRI to NCCI to AASCIF to CSIA to CLM to PRIMA to NWCDC to SIIA to WCI360 to RIMS to AFERM to the ExecuSummit and dozens of other national events, to state WC events in Montana, California, Georgia and every other state, to payer-sponsored confabs, to provider-centric events you could spend most of the year scheduling, traveling to, preparing for, and attending conferences.

While there’s no doubt a lot can be learned – at some events from some speakers – it’s also pretty clear we’ve got so many conferences it has become impossible to figure out which ones are the most useful, provide the most insight, and are the most efficient use of your time.

On top of the sheer number of events, there are three additional issues; many have become pay-to-present, and the emphasis on drawing specific types of attendees has affected – I would argue negatively – actual learning opportunities.

Lastly, there’s far too much navel-gazing and far too little emphasis on external factors that directly affect workers’ comp.

Allow me to explain.

It is damn near impossible to get a speaking slot at many events unless your employer is a conference sponsor or a very large employer.  That’s not to say some presentations aren’t useful and worthy of your time, and some listeners can’t come away with something useful. Rather it is to call attention to the lack of diversity among presenters, the seemingly repetitive topics, the lack of much of anything new or insightful.

Do we really need another session on return to work or managing cat injuries or heaven forbid, predictive analytics?

Yeah, I get there are always folks new to work comp that find value in learning the basics, but there’s far too much time spent rehashing things that have been hashed to death.

There are innovative, smart, insightful entities and people out there who are pushing the industry to be better, innovate, do stuff smarter. It’s often tough for them to get a slot because they aren’t able to sponsor internet cafes, refreshment breaks, newsletters or buy big exhibit space.

Second, some conferences push to include speakers from types of organizations that potential attendees want to meet, get to know and hopefully do business with. One example is the emphasis on employers, which appears to be based at least in part on the idea that more brokers and consultants will attend.

Ostensibly the point in having an employer talk about an issue, solution, approach or program is so other employers can learn from that. While there’s a kernel of value there, I’d argue that what is relevant for a big airline, a major big-box retailer, a multi-state manufacturer or large healthcare system is not going to be terribly relevant to the other employer types on the list.

I can’t count the number of times I’ve heard “well, if I had a thousand workers in XYZ city I could negotiate with an occ clinic too”, or “how do I apply that to my interstate trucking company” or “yeah that’s not going to fly with my unionized workforce”.

Finally, when was the last time a presentation dove into:

  • the impact of provider consolidation on healthcare delivery and cost;
  • why and how healthcare systems and hospitals are driving up expenses;
  • how recessions impact workers’ comp;
  • the second-order effects of opioids and the dramatic reduction of same on claim reserves, future premiums, and actuarial models; or
  • the changing nature of our economy and how that will affect workers’ comp

I know these topics have seen some daylight, but nowhere near enough, for they are MUCH more important and will have MUCH greater impact than tweaks to RTW or cat injury management ever could.

What does this mean for you?

For conference planners, there’s an opportunity to break out from the usual and differentiate.

For conference attendees, reward those planners – and learn a lot more useful stuff.



The next recession – when will it get here and how bad will it be

When recessions hit, workers’ comp, healthcare, and healthcare delivery systems are deeply affected. Jobs are lost and so are benefits, claims decrease than increase, injured workers don’t have jobs to return to.

There are some indications that we may be on the cusp of a recession today.

  • The inverted yield curve (short term interest rates are lower than long term rates) is one clear sign, 
  • ” weakness in auto sales, industrial production and aggregate hours worked” are also factors, as is
  • the weakening economy (growth fell from 3.1% in the first quarter to 2.1% in the April to June quarter).
  • Job growth has fallen to 140,000 a month, down from 220,000 just a few months ago, signaling employers are being more cautious about expanding
  • The trade war is hammering agriculture and manufacturing, with Goldman Sachs estimating it has cut GDP 0.6% so far. That’s going to get worse when the latest round of tariffs kick in, with some slated to start in 2 weeks.

One of the few positive signs, initial jobless claims, remain stable which argues against a recession.

And this from Forbes:

The New York Fed’s recession probability model is currently warning that there is a 30% probability of a recession in the next 12 months. The last time that recession odds were the same … was just five months before the Great Recession officially started in December 2007.

When the model is updated to use current data, the odds increase to 64%.

How long will it last?

Likely longer than the Great Recession of a decade ago, for a number of reasons:

  • to get the economy moving during a recession, officials lower the Fed funds interest rate, making it cheaper for companies and consumers to borrow money and buy stuff.  This jump-starts the economy. But the Fed funds rate is very low already, so there isn’t much room to lower rates and increase demand.
  • if the Fed can’t lower rates, it can try “quantitative easing”, which is a fancy term for the government buying its own debt. This dumps more dollars into the economy, dollars that – hopefully – are spent on new plants, equipment, houses, and washing machines. The problem with “QE” is that its impact is uncertain at best; it’s unclear if it made much of a difference last time around.
  • Consumer debt is really high right now, at 19% of income. When people lose their jobs, they default on their loans and credit card debt, cut back on purchases, and that will further harm retail, construction, durable goods (think washing machines and cars). It can take a long time for people to dig out of these holes, and when they finally do, they are very wary of spending – and absolutely hate debt.

There’s another factor that’s both difficult to measure and, I’d argue, much more troubling.

The trade war, Trump’s on-again-off-again tariffs, the elimination of area-wide trade agreements all make business extremely nervous. Businesses thrive in stability, and don’t when they can’t predict what’s coming.

Columbia, Neato Robotics, Wolverine, John Deere, and Caterpillar are all hamstrung, unable to predict what their supply chain costs will be, how tariffs will affect the price of their products, and what sales will amount to. As a result, they’re hunkering down; Moody’s estimated 300,000 jobs have already been lost due to Trump’s trade war.

We’ve already seen the Chinese shift agricultural purchases from the US to Brazil. This has hammered Deere and Caterpillar, as well as their local dealers, and the manufacturers that make up their supply chains.

What does this mean for you?

Watch indicators very carefully, be objective and rational, and remember that fortune favors the prepared. 

The good news is those who are clear-eyed and thoughtful can do well; for work comp businesses, remember:

  • claims drop, then increase;
  • duration increases;
  • premiums decline as payroll does.



The coming recession’s impact on workers’ comp

It’s not “if”, it’s when the next will recession hit.  Things were looking iffy a couple months ago, and – if anything – the outlook has worsened since then

And when it does, workers’ comp will be affected – like everything else.

Here’s how recessions affect workers’ comp; tomorrow we’ll discuss why the next recession may well be long, deep, and painful. 

At the early stage of a recession, employees who get hurt are less likely to file a workers’ comp claim. While we don’t know why that happens, research suggests it’s because workers are concerned their bosses will eliminate their job while they are out on disability, and they’ll have no job to return to.

As the recession deepens, frequency tends to bump up as employees realize their jobs are in real jeopardy.  Claims increase as a result, and it is tougher to find re-employment opportunities for workers ready to resume some level of work. This extends to part-time or other limited duty work that is essential to recovery and return to full duty. So, duration increases too.

In the final stages, as the economy recovers frequency appears to accelerate. Employers put older, less-safe equipment back on line, require workers to put in big overtime hours, hire temps who have minimal training on safety, and the pace of work picks up speed. The result – more injuries.

So, that’s what we can expect. The question is, when will the recession arrive, how long will it last and how bad will it be?

That’s for tomorrow.

What does this mean for you?

Fortune favors the prepared.


Quick takes on the week that was

Hope your week was excellent, and the weekend is full of family and fun.

Here’s a few takeaways from this week…

Congratulations to Ken Martino; he’s been named president of MedRisk, a post formerly held by Mike Ryan. Mike remains CEO. Ken’s been an instrumental part of MedRisk’s recent growth, and the promotion is well-deserved. I’ve known Ken for thirty years or so; he’s a consummate professional. (MedRisk is a n HSA consulting client)

Word is CorVel’s recovery from the Ryuk ransomware attack is not yet complete. Reports indicate as of yesterday some handwritten UR reports were still being faxed. Heard confirmation that at least one customer has switched from CorVel to another service provider.’s Jorge Alexandria summarized the attack in a post last week.

BTW is a pretty interesting site; if you are looking to better understand what makes the front-line folks tick, put it on your reading list.

Congratulations to One Call; reports indicate the company made it thru the second quarter without breaching a key financial covenant. However, customer losses including Great American, Broadspire, and Nationwide didn’t hit the financials in Q2. Unless One Call wins a big piece of the Liberty Mutual ancillary services RFP it will be nigh on impossible to make up the lost revenue.

Will keep you posted.

MSA Administrator Ametros has released an app its customers can use to access their settlement funds and track expenditures.  The Massachusetts-based company pretty much owns the MSA Administration business; this is one sector I’m quite surprised there isn’t a lot more activity.

Family is coming in from California and Jackson Hole today – it’s going to be a terrific weekend!



Work comp vs. opioids – how we’re doing

It’s been a decade since work comp payers and PBMs got the big wakeup call, the one that changed the industry.

From looking at drugs just as an expense, the industry began to see how devastating these drugs were to patients, families, employers, and taxpayers. Instead of fighting over the price of each pill, payers started to push PBMs to figure out ways to slow down the spread of these incredibly dangerous drugs.

Today, we’re on a roll. While anyone with any sense of the issue knows opioids will remain a top 3 issue for years to come, we’ve made a lot of progress.

After surveying 30 workers’ comp payers, we’ve learned this:

  • Opioid spend dropped 19.7 percent from 2017 to 2018.
  • For the first time on record, opioid spend represents less than a fifth of total drug spend
  • By a long shot, opioids are not the biggest problem in workers’ comp pharmacy. (3 respondents out of 30 said they are)
  • Payers believe the’ve made more progress dealing with initial opioid scripts vs chronic
  • By far the most important tools have been more internal resources and focus on the opioid issue, followed by new regulations and legislation and payers adopting a comprehensive approach to the issue.

We’ve got work to do, to be sure.

But we should take a minute – or a day – to stand back and revel in what we’ve accomplished. 

The industry has cut opioid usage probably in half, and it’s headed further down. People haven’t died, families haven’t been destroyed, pills haven’t found their way into kids’ hands.

What does this mean for you?

A welcome opportunity to reflect on a very hard job done well.



You can’t handle the truth about healthcare

Which is this:

We want access to the best doctors and hospitals, low insurance premiums that cover every treatment and drug, doctors making shipload of money, we don’t want any rural hospitals shutting their doors, and we don’t want anyone to pay higher taxes.

Oh, and we want to stuff our faces, ignore doctors’ orders to exercise, smoke, not take care of ourselves and then expect someone else to pay the bills for our diabetes, hypertension, cardiovascular disease and cancer.

There’s a reason politicians aren’t being honest with us – we want to have our cake, eat it too, and not get fat.

But there’s plenty of blame to go around; a huge barrier is the power of the healthcare industry – real healthcare reform means doctors, pharma, device manufacturers, most healthcare investors and the rest of us will make a LOT less money.

Did I mention doctors will make a lot less money?

Yes, Medicare for All would allow all of us to see whatever doctor or we want, and deductibles and copays will be a LOT lower.

But the money has to come from somewhere – which means a tax increase, and lower payments to healthcare providers.

Pretty much everyone in the healthcare industry will earn less, likely a good deal less.

How much less depends on how much we raise from taxes.

Please don’t tell me private insurers have the solution – they don’t.  If they did, we wouldn’t be in the mess we are.

As I’ve reported here, the average family with one member in poor health “pays” about $23,500 for healthcare thru direct payments, insurance premiums, what their employer pays for insurance, and taxes for Medicare, Medicaid, and other government healthcare programs.

The good news is about $5,000 of that would be stripped out; that’s my best guess at how much administrative expense would be eliminated if healthcare providers and payers didn’t have tens of thousands of people on payroll fighting each other.

Oh, those tens of thousands of people will lose their jobs.

What does this mean for you?

Fixing healthcare is going to hurt you and me. A lot. There are NO solutions that get around this.

Anyone who tells you different is lying.


Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



© Joe Paduda 2019. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.