Insight, analysis & opinion from Joe Paduda

Apr
11

Pipes’ smoking something

Sally Pipes is a think-tank leader out on the west coast who appears to be a “free-market-as-cure-for-healthcare’s-ills” advocate. Her latest effort appeared in USAToday earlier this week, wherein Ms Pipes reveals her belief that Massachusetts’ health plan legislation is a thinly-veiled attempt to force the state into a single-payor solution.
While the entire editorial is, well, interesting, one of the most bizarre statements in her editorial is this –
“Individual health insurance is not always a good deal in Massachusetts, thanks to state-imposed community rating regulations that require companies to charge the sick and healthy the same rates.”
Uh, that’s kind of the point of insurance – everyone pools their funds to pay for the claims of the few with high expenses. If you don’t do that, you have what is known as pay-as-you go. And that’s not insurance. But for some reason Ms. Pipes thinks that’s bad.
Wait, there’s more.
Ms. Pipes then says that the Mass plan will saddle the state with the “same health plan design (that is) threatening General Motors Corp.’s viability and bankrupted its suppliers.”
Oh jeez, that’s about eight errors in less than one sentence.
Health plan design is not the main problem at GM – lousy cars, poor union negotiation tactics, aging plants, high gas prices, and bad management are GM’s biggest problems. And health care. But GM’s health care plans are WAY different from the new plan in MA. And cost-shifting from the uninsured, an aging population, too many retirees, inadequate cost controls, and lack of effective disease management are the biggest problems with GM’s health care program.
Here’s the silver lining – Ms. Pipes went on to say “The legislation will not control the true costs of these plans.” That’s absolutely true, and she is right on point, and I agree.
It’s great to find common ground.


Apr
10

Enzi’s bill – the Risk Selection Act of 2006

Bob Laszewski is one of the most insightful observers of health policy matters inside the Beltway, and his recent comments on Enzi’s proposed AHP legislation continue that record. Bob has noted that the bill now before Congress is a far cry from the original AHP legislation, and has potentially far-reaching consequences for the health insurance industry.
AHPs were health insurance plans set up by trade associations who used them to generate fat commissions. Back in the eighties and early nineties, trade association members signed up for these programs in large numbers. While they did not have much in the way of managed care or “cost containment”, many AHP type programs thrived even after the initial entry of managed care programs into the market, on the basis of their ability to select the best risks and price accordingly.
As HMOs and health plans became more sophisticated, the AHPs’ advantages in these areas declined significantly, and their cost management capabilities were overmatched by those of the managed care experts in HMOs and larger health plans. Faced with very tough competition, AHPs all but died out in the late nineties.
For those that can afford them, small employers’ helath insurance costs are significantly higher than their larger competitors’. This additional cost is in large part due to higher administrative expenses; fewer premium dollars go to pay health care costs because it costs more on a per-person basis to bill premiums, issue cards, set up computer systems, track elgibility, etc. This differential has led Sen. Enzi, at the behest of the Chamber of Commerce, NFIB and others, to try to come up with a way to make insurance “affordable” for the small employer.
Enter the Enzi bill, titled, with much editorial license the “Health Insurance Marketplace Modernization and Affordability Act”. A product of the “sausage-making” that is our legislative process, the bill seeks to eliminate most state mandates, thereby allowing both insurance companies and associations to offer stripped-down plans.
While that sounds great, the likely effect of the bill, if it is passed, will be to allow insurers to do a much more effective job of risk selection, thereby avoiding the less healthy (i.e. more costly) people. I’m not blaming the insurance companies; insurance is about avoiding avoidable risk.
What Enzi’s bill will not do is make health care more affordable for small businesses. It will certainly make insurance more affordable for some businesses – those with healthier employees and lower risks. The rest will be even worse off than they are today.
What does this mean for you?
More health policy by folks without any health policy expertise equals no solutions to our health care cost problems.


Apr
10

Troubles at IntraCorp

Industry sources indicate that managed care company IntraCorp is having its problems of late. It’s bill review business has declined rather drastically, with Sedgwick and ESIS both moving their work to other vendors. These two payers likely represent over 2 million bills annually, which may amount to 40% of IntraCorp’s business.
Organizationally, IntraCorp has been required to move into shared space, and is also using CIGNA corporate counsel and other G&A resources. This is a departure from the previously jealously-guarded independence enjoyed by IntraCorp.
IntraCorp’s new disability management chief, Archie Anderson, is a well-respected sales executive with a long history in the industry. It is most likely that these losses were well in the works before his arrival from Genex. It is likely that one of Archie’s challenges will be to generate enough case volume for Intracorp’s 2400 nurses. While the company continues to lead the industry in terms of sheer volume of cases managed, given the recent trend to reduce the role of field case management Intracorp may find itself with more nurses than it needs.
Unlike Concentra and First Health, Intracorp does not have a large cash-generating PPO network to drive profits. However, with the recent decline in popularity of these big discount-driven networks, this may not be too problematic. If Intracorp can develop or acquire technology that enables it to truly integrate and manage specialty managed care services on a custom basis, it may be able to leapfrog the competition.
That’s a big “if”.


Apr
7

Is flu a workers comp illness?

California HealthLine picked up a story from the journal Science on transmission of the flu. Turns out that business travelers are a key vector in the spread of the disease around the US.
As one who spends way too much time on planes trains and waiting around for same, I guess I’m an occasional carrier as well. Sorry.
So here’s the interesting question – aren’t those traveling on business who return home with the aches pains and other nasty effects of the flu covered under workers comp? Their travel is business-related, and if they are in an accident that’s a comp claim, so…?


Apr
6

Survey of Prescription Drug Management in Workers Comp

My firm, Health Strategy Associates, is conducting the Third Annual Survey of Prescription Drug Management in Workers Comp, and I’m hoping to have the final report completed before the end of April. Here are a couple of interesting bits that have come up in the 20+ interviews conducted to date.
1. There is a rather striking difference in the pharmacy inflation rate between what I would characterize as less- and more-sophisticated payers. Some payers have held their inflation rates down in the lower single digits, others are seeing trend rates above 15%.
2. Claim frequency decreases get part of the credit for low pharmacy inflation, but not all of it.
3. The number of PBMs is growing, but no PBM has a dominant market position. In fact, many senior execs don’t know much about the PBMs beyond their names.
4. Cost inflation tends to be attributed to more “designer” drugs, e.g. more expensive branded drugs being prescribed when a cheaper generic would likely work; direct to consumer advertising’s impact on consumers, and more claimants getting more drugs for longer periods.
5. This last is probably the most consistent thread running throughout the interviews – a heightened awareness of and concern about the sheer volume of drugs prescribed.
I’ll post additional highlights when they make themselves apparent. If you want a copy of the survey report, email me at jpaduda@healthstrategyassoc.com.


Apr
6

Why Massachusetts’ “universal health care” program will not work

OK, congratulations to Massachusetts’ legislators and governor for creating the nation’s first potentially viable universal coverage program. While everyone is busy congratulating each other, (free registration required) I hate to be the one to harsh their mellow. But so I shall.
I’ve read numerous reports of the new program, but nowhere have I seen any reference to any aspect of the program that convinces me it will work over the long haul. Why not?
There don’t appear to be any cost-control mechanisms, price or fee or utilization or frequency controls, nor any constraints on supply.
Yes, the program should eliminate excessive costs in the system due to cost-shifting, as long as the fees paid by all payers are high enough to cover associated costs. And, with cost-shifting accounting for about $1000 of the average family’s annual health insurance premium, the savings should be significant.
But that’s it. I’m afraid Massachusetts’ noble efforts have built a giant new demand mechanism, one that will produce healthier people, a one-time drop in premiums due to elimination of cost shifting (fingers crossed on that one), and ever-higher costs for the state’s citizens.
If we are relying on private industry’s innovators to come up with a solution, one that will effectively hold down costs over the long term for the entire population, we may have a long wait. For there are few incentives and lots of risks for any insurer to develop bold new programs when all they have to do is out-market their competition to capture their slice of the Mass pie. And there certainly has been ample opportunity for private companies to develop and deliver new programs over the past two decades, programs that could successfully constrain costs. That just hasn’t happened.
I hope I’m wrong, I hope I’m wrong, I hope I’m wrong.
But if I’m not, naysayers will have another example of an “experiment” that did not work out, an example they can, and will, point to as an image of another failed attempt by government to solve a huge problem.
The reality is government did not do too much, but rather did not go far enough.


Apr
6

Hilarity Break 3

Further proof that health wonks with too much time on their hands can create havoc comes in Fard Johnmar’s recent post about fellow wonks Matt Holt, Trapper Michael, Kate Steadman, Nick Genes et al.
Accolades and cheers for Fard, who gets the “most creative” award, and to Kate for passing it on to those of us too lazy to find it on our own.
If you don’t get it, time to put aside that work and dive deeply into the wonk world…


Apr
5

Docs, defensive medicine, and disingenuousness

I’m in my hotel in Salt Lake City (a beautiful place) checking out what fellow bloggers are talking about, and hop over to Over My Med Body to see what Graham is up to. One of his recent posts is about the difference in health care costs in the US and Canada, wherein Graham notes the Canadians are spending about $900 less per person than we are, funds which could go to higher wages, etc.
In the comments section, a physician moans about the problems with rationing inherent up North, and states that no red-blooded American would put up with that, while placing most of the blame for our exorbitant health care costs squarely upon defensiivce medicine.
Which inspired the following rant.
If I hear one more doc complaining about defensive medicine and tort costs I’ll throw them under the wheels of their golf cart. Care is rationed in the US – for the 45 million uninsured, for Medicaid recipients, and for those in staff and group model HMOs as well as anyne who has to comply with precert rules.
This rationing argument is nonsense, not only because have de facto rationing but also because it is a red herring. Canadians, Swiss, Norwegians, and citizens of 33 other countries are healthier than Americans, yet we pay about 50% more than they do.
So the good Dr. Thompson et al are delivering an inferior product and charging much more for it.
Finally, what is wrong with rationing of care? The question is NOT how many MRI machines does Canada have compared to Portland, it is what is the right number of MRI machines? And my bet is many of Portland’s MRI machines are owned by docs, who make money by sending patients there, all the while hiding behind the covers of “defensive medicine”.
And this before the morning caffiene…


Apr
5

Work comp drug talk round 2

For the dozen folks who find this remotely interesting – A few factoids and interesting tidbits from around the WC PBM world.
The legislative efforts in California to address repackagers and dispensing of drugs by physicians appears to be stalled, and may not progress this year. This is bad news for payers and policyholders, as repackaged drugs account for over 50% of drug costs in California and that number is heading up.
Third party billers pay pharmacies about what most PBMs do, thus the reason pharmacies send their scripts to TPBs is because it is less work.
Sources indicate about 2% of all workers comp scripts are never picked up. If the pharmacy billed the script through a PBM, it will be reversed and the PBM and payer credited. This does not appear to be happening with third party billers. Anyone out there ever had a third party biller come back to them and reverse a charge? Anyone???
One third party biller strategy being discussed by a major comp payer is to require the biller to verify that each script was picked up. This could be in the form of a photocopy of the signature log or attestation by an officer of the TPB.
A source’s billing and payment data indicate that many payers, including at least two of the top five national WC insurers, pay third party billers at or close to billed charges in states without fee schedules. Meanwhile, other payers are cutting those bills to AWP-10% +$3.00 and not getting much pushback.
Word has it that Kroger’s is getting paid at straight AWP by their third party biller…no wonder they are not contracting with any workers comp PBMs.
Meanwhile, Medco is forcing pharmacies to accept group health reimbursement for their (very few) workers comp clients. Workers comp does not appear to be anything more than an accomodation for a very few of Medco’s largest customers, as Medco does not actively sell into the comp sector. My sense is if Medco did have more WC business, they very likely would have a lot more pushback from the pharmacy chains.


Joe Paduda is the principal of Health Strategy Associates

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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.

 

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