Insight, analysis & opinion from Joe Paduda

Apr
4

Hubbard’s simple solutions

White House Domestic Policy Advisor Allan Hubbard has been making waves of late, speaking out on behalf of consumerism in health care, advocating bigger tax breaks for health savings accounts, and demanding hospitals disclose their pricing information so consumers can make better decisions.
I’ve been blogging on consumerism in health care, the lack of useful data on prices and outcomes, and the complexities of health care buying decisions for well over a year, so no need to review those issues.
Except, one of his statements manages to simultaneously be both blatantly jingoistic and completely misleading. Here’s the quote from Sunday’s NYTimes “”no consumer is better than the American consumer at driving prices down and quality up.”
I’m not sure if Hubbard’s statement is a tortured call for patriotism as the solution to health care’s ills, or if he actually believes this drivel. Doesn’t really matter.
Every other country has some variation of nationalized health care, with some entirely nationalized (Canada), others mostly public (Britian), and others with a strict national requirement for care delivered by private providers (Switzerland). Yes, there are lots of variations and permutations, but every other country uses government to set prices for health care, not consumers.
And by the way, Allan, if you knew anything about health care you would know that the single most significant factor causing US health care to be more than 50% more expensive than other developed countries is price. And somehow you think that each individual citizen will be better equipped to demand and obtain lower prices for drugs than, say, the VA?
If that’s your position, Alan, than why are small businesses pushing so hard for Enzi’s AHP bill to allow them to capture the purchasing power of big companies?
My guess is Hubbard is another of the “every complex problem has a simple solution” guys.
What does this mean for you?
More wasted time as the Administration refuses to engage in meaningful efforts to address the health care crisis.


Apr
4

Workers Comp PPOs are dead

The workers comp PPO is dead. Well, dying. The era of large, national PPOs delivering a single generic discount-based model is coming to a close. Payers are finding that their medical costs are still going up; their managed care fees are climbing; and their customers are increasingly questioning their business models, fees, and outcomes.
Liberty Mutual, ESIS, the Hartford , Zenith and California’s State Insurance Fund are among the major workers compensation insurers and TPAs that are making significant changes to their provider networks, strategies, and partners. By the end of 2006, the comp PPO vendor landscape will have significantly shifted, with the dominant players (First Health, Focus, CorVel) losing share to regionals, specialty firms, and a couple of relatively new entrants including Aetna.
While that evolution will be good for the industry, it is neither far enough or fast enough for my liking. Here’s what the payers should be doing.
BTW, this subject is too big for a single post, so I’m breaking it down into a series…

Continue reading Workers Comp PPOs are dead


Mar
30

Workers comp pharmacy news roundup

The NCPDP meeting in Phoenix last week was more than just a few days sunning, golfing and dining. For those occupying the narrow-but-deep workers compensation niche, it was quite instructive. For example…
Kroger continues its anti-PBM stance; refusing to contract with any PBMs for workers compensation, instead choosing to send all their comp scripts to a third party biller. And as long as workers comp payers allow or enable their injured workers to get their scripts filled at Kroger stores, this problem will continue. Why? Because Kroger does not believe any comp payer can influence their comp script volume.
WorkingRx may be in trouble. The Albertson’s deal will likely result in WorkingRx losing its marquee customer (Albertson’s owns Sav-on and Osco’s, which are being sold to CVS), and therefore much of its clout with comp payers. This being the case, several PBMs and payers are scratching their heads over recent announcements that some comp PBMs are doing deals with WorkingRx…
Walgreen’s will not contract with any workers comp PBM or insurer for less than AWP-10%. That’s their public stance, and it appears to be consistent with their private contract negotiations as well.
Meanwhile, several payers have been in conversations with Third Party Solutions in a quest to find some way for payers, PBMs, and third party billers to work together. So far, TPS has been more “reasonable” than the other third party biller(s), but the inherent conflicts in business models and motivations are proving to be rather difficult to overcome.
A follow up from the ScripNet – WorkingRx court case – the transcript contains a potentially significant statement by WorkingRx’s attorney. When questioned by the judge abouit the surcharge placed on each script by WorkingRx, the lawyer admitted that WorkingRx’s right to reimbursement (and I’m paraphrasing here) was not any different from that of the retail pharmacies, and thus any surcharge was not reimburseable.
Finally, in a completely unrelated note, there is news out of California that legislative efforts to address the really significant issue of drug repackaging appear to be progressing.
And that’s today’s potpourri of drug talk.


Mar
30

Most ER patients have insurance

Contrary to popular belief, most of the patients in emergency rooms have insurance, but are there because they can’t get in to see their regular physician or are waiting for an inpatient bed. A new study released today by the American College of Emergency Physicians (and reported in the LA Times) indicates that about 15% of patients in ERs were people without health insurance.
The statistics hold true across the board, even for high utilizers of ERs (those who visited 4 or more times per year).
The report refutes a common misconception that the uninsured make up a substantial percentage of ER admissions.
What does this mean for you?
The lesson I take from this is to always question your assumptions (to quote one of Ayn Rand’s heroes), and question your most basic assumptions about health care most aggressively.


Mar
29

Part D’s failure is good news for pharmacies

I noted a couple weeks ago the problems pharmacies in Texas have been encountering with Part D – slow pays, no pays, missing information, higher staffing costs, and the like. Now word comes that California pharmacies seem to be suffering the same side effects of Part D.
The news comes from the Sacramento Bee (free registration required), and was triggered by reports of a home-delivery pharmacy shutting its doors, at least in part due to payment problems associated with Part D. According to the Bee;
“In a CPA (California Pharmacy Association) survey about Medicare Part D, 55.8 percent of independent pharmacies said the drug program’s timing of payments has created a “significant negative financial impact” on their business.”
Ohio pharmacies, especially the independents, are also experiencing financial troubles they attribute largely to Part D. While many of these issues were recognized early this year, the financial impacts are only now really starting to be felt.
The independents don’t have large chains’ financial backing nor buying power; this will make it very difficult for those in anything less than excellent financial shape to survive while Part D is sorted out. As independents account for 43% of all pharmacies, this is no small issue.
The good news is few eligible seniors have signed up for Part D. This presents us with an interesting picture – the success of a program designed to get more drugs to more people may well have killed off many independent pharmacies.
Only in Washington could they have come up with something so creatively destructive.


Mar
29

Bird Flu Primer

Yesterday’s New York TImes includes an excellent primer on avian flu (A(H5N1)), one that executives at managed care firms would be well-advised to read and file away. For those without the time or inclination to do so, here’s a couple interesting take-aways.
To get your attention, the World Health Organization estimates that if the bird flu becomes contagious among humans, an infection rate of 25% is possible. Estimates are that this would lead to deaths totaling 400,000 in Europe and 200,000+ in the US.
1. To date, bird flu has infected about 200 humans and killed approximately 100 that we are aware of. This last qualifier is key; as most of the infections have occured in underdeveloped countries, reporting may well be suspect. However, for a disease that has been in existence for over ten years, the death toll has been very low indeed. This leads some experts to surmise that avian flu is not likely to “jump” to human-human transmissability – if it hasn’t in ten years, it likely never will.
2. The death rate may not be nearly as high as indicated above, as some infected people may have relatively mild cases for unknown reasons. Again, under-reporting would skew the numbers.
3. BUT. The disease also did not move out of southeast Asia for ten years, then exploded across the entire continent in the space of a few months. This somewhat refutes the argument that since the disease has yet to become transmissable between humans it won’t over the long term.
4. Flu pandemics are unpredictable, vary widely in their lethality and the profile of victims, can occur any time of year, and are very difficult to prevent via vaccine and treat via drugs, as the virus is highly adaptable.
Fitch Ratings has doen their usual excellent work preparing a review of the potential impact of bird flu on the insurance industry. While Fitch notes that most of the financial impact of a pandemic woudl hit life insurers and reinsurers, it also provides its perspective on the effect on other lines of insurance, notably health.
What does this mean for you?
Better to be aware and prepared for something that never happens than unprepared for a crisis.


Mar
27

A survey by a small business trade association in California found that 91% of respondents rated health care cost and availability as their chief concern, outweighing workers comp, energy costs, and governmental regulations. Only 2% of the 430 respondents said health care was a low priority.
Amazingly, 44% don’t require any employee contribution for insurance. It could be that this 44% primarily includes businesses where all employees are family members.
Equally amazing, fully 52% supported a Canadian-style single payer system; 90% also support purchasing pools for smaller employers.
11% of the respondents offer HSA-based health insurance.
What does this mean for you?
Even more evidence that likely voters want the health insurance mess solved.


Mar
27

Whither part D? or Wither Part D?

It’s not often the President of the United States does health benefit plan enrollment meetings, so Bush’s recent national tour touting Part D stands out as one of the more unique moments in health benefits history. But this is more than an interesting factoid, because Bush’s speaking tour came about because of the dismal enrollment rates seen to date. And with the enrollment period ending in less than two months, it does not look like things will get much better.
While the President touts the enrollment of 25 million seniors into the program so far, 20 million of those had coverage before the program started. That leaves a total of 23 million seniors eligible for enrollment – out of which 5 million, or less than 22% have taken the plunge.
As I’ve been saying all along, any voluntary benefits plan with participation under 70% is in trouble – so Part D looks to be in big trouble.
If enrollment stays slow and low, Congress may well have to extend the enrollment period. While Bush has said that is a non-starter, he also threatened to veto any Congressional action on the Dubai Ports deal. This turned out to be a hollow threat, and with Congress increasingly independent of the White House, and Republicans seeking to salvage anything from the ashes of Part D, an extension could well be in the works.
(Bob Laszewski was the first to characterize Bush’s role in enrollment meetings)


Mar
23

What does Baumol’s cost disease have to do with medical inflation?

I am no economist. Some will likely howl in agreement, others knowingly nod their heads while tapping out their pipes so as to not get ash on their tweeds (them are the economists). I do know a good bit about health insurance, health care, and the rather messy intersection of the two. With that disclaimer/caveat, here goes my take on an esoteric economic theory.
Jason Shafrin’s post on Baumol’s cost disease was picked up by Kate Steadman for the latest Health Wonk Review – as a few other bloggers and commentors on Managed Care Matters had been bludgeoning me with this economic term, I figured I better find out what it is. So, here’s the definition.
Basically, it holds that when there is little or no growth in productivity the result is that unit costs tend to inflate. As docs and nurses can’t increase productivity as fast as it increases in other industries, prices have to go up faster to make up for that differential.
OK – I’m not sure I agree w Jason’s underlying premise – which seems to be predicated on clinician time as the key determiner of health care cost. What about technology adoption rates, the rise in pharmaceutical utilization and pricing, the aging population’s increased demand for services, etc. While I will grant that labor costs are a major driver of hospital expenses (see California’s minimum nurse staffing headaches), and hospital costs are one of the biggest influences on total medical expense, there are so many other factors that one cannot attribute the sickness of our system to one single factor.
I’d also point out that physician cost inflation has held relatively steady at about 7.7% for several years (although costs jumped last year due to higher Medicare utilization by docs) , while Rx and hospital costs have varied widely. And, as physician expense is s relatively small part of the overall health care cost equation, I don’t see how Baumol’s cost disease is the over-riding factor here.
That said, I certainly agree with Jason’s conclusion that health care costs will continue to grow as a percentage of individuals’ expenditures.


Mar
23

Why is California’s workers comp injury rate dropping?

California’s workers comp rate roller-coaster looks to be poised to make another steep drop. The combination of the national decrease in claims frequency and the impact of reforms have led to drastic decreases in comp rates, with more likely on the way.
While some of the changes in frequency, or the number of claims per 100 FTEs are due to increased emphasis on safety, a change in the mix of occupations, drug testing programs, safer autos, and a decline in injury-heavy industries such as manufacturing, there are two other external factors that are likely major influences.
According to Workers Comp Executive, “because of the reforms there are fewer incentives to move claims into the workers’ comp system.” Interpretation – it is more difficult to get an injury classified as a workers comp claim, thereby reducing the number of claims. For those not intimately familiar with CA comp history, for a while there it was pretty easy to get almost anything classifed as an occupational injury, including a stress claim and/or psych issue if it could be related to employment. The new laws have made this much more difficult.
A hidden issue has been brought to our attention by Peter Rousmaniere, who notes that “many (undocumented workers) in this study do not file, even for disabling injury” under workers comp. (Peter also points us to a really interesting study done by RAND on the influence of group health insurance coverage on workers comp injury filing behavior – but that’s for another post).
So, how many undocumented workers are there, and what jobs do they hold? Again, kudos to Peter for his research and analysis – his assessment is that 19.5% of workers in laboror and unskilled jobs are “illegals” (my quotes). This is one of the highest rates in the country.
Will their propensity to not file WC claims change? Certainly one of the biggest obstacles to filing will be removed if the undocumented worker legislation pending in Washington becomes law. If this does happen, there may be a sudden surge of claims.
What does this mean for you?
For WC insurers and employers – good news. But remember the glory days of the mid-nineties, when open rating led to a crash in comp costs, followed by a very painful shakeout that left the largest carrier (Golden Eagle) insolvent, created huge stresses on the State Fund, and drove many carriers either out of business or to the brink.
This can’t, and won’t, last.


Joe Paduda is the principal of Health Strategy Associates

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