Insight, analysis & opinion from Joe Paduda

Mar
7

Duke Cunningham’s Ohio protege

It looks like Duke Cunningham was not the only public official with a documented list used to apportion public dollars. The former CFO of Ohio’s workers comp Fund (known as the Bureau of Workers Comp) Terence Gasper, allegedly used a handwritten list to determine how much of the Bureau’s investment business was going to specific investment firms. The 25 to 30 firms that made the list received upwards of $100,000 each, with the most fortunate enriched by three-quarters of a million dollars.
The question now is, if this list existed (and it appears it did), why was it set up and did anyone at the BWC receive any kickbacks or payments for business steered to specific firms?
According to one colorful witness (probably a big Sopranos fan), interviewed after his/her testimony before the grand jury investigating the matter, “Somebody was getting greased‘Somebody’s gonna fry. Actually, a few somebodies are gonna fry
It looks like our old acquaintance Tommy Noe may be one of the “somebodies”; one witness identified Noe as someone who would not have received $50 million to invest on BWC’s behalf unless he was “pushed from above”.
Gasper’s alleged conduct was not limited to Cunningham-esque lists; he also authorized investments into a hedge fund (“MDL”) without informing his bosses. Hedge funds can deliver great results, as well as huge losses, and this is the only instance I am aware of where such a volatile vehicle has been used to invest workers compensation reserves. Unfortunately for policyholders in Ohio, MDL proved to be much more adept at losing money than making it, to the tune of some $215 million.
MDL was fortunate in that an employee was the daughter of a BWC Oversight Commission member, George Forbes. Forbes resigned his post when this information became public knowledge.
What does this mean for you?
If you are an employer in Ohio, higher WC premiums.


Mar
7

Copays, compliance, and costs

It will come as no surprise to most that a significant number of people do not take their medications as recommended. In fact, the number appears to be about 20%, at least according to a study funded by pharmaceutical company GlaxoSmithKline covering 429,000 Ohio health insurance claims for conditions such as diabetes, congestive heart failure and asthma. GSK’s study indicates that non-compliance adds over $700 million to the state’s health care costs.
Again not surprisingly, GSK has a plan to fix this problem. It involves eliminating copays for individuals if they agree to talk with a pharmacist at least once a month, and have the pharmacist check their blood sugar, pressure, and feet for sores. The extra payment to the pharmacist for their time, as well as the employees’ copays, will be funded by insurance companies or employers.
And last in this “dog bites man” story is the rather obvious note that although GSK et al will benefit by selling more drugs, they don’t appear to be contemplating any financial contribution to this noble cause.
What does this mean for you?
Two things.
One, another study that demonstrates the positive financial impact of reducing or removing copays for medications for chronic conditions. This has been documented previously, and calls into question what sems to be the main premise of the consumer-directed health plan – the theory that individuals will spend their money in such a way as to maximize their health.
Two, yet another example of big pharma shooting themselves in the foot. To look both smart and magnanimous, all GSK had to do was offer to partially fund the pharmacists’ extra time, provide the blood pressure monitors, reduce prices for insulin by $3 for those employers participating in the plan (either directly or through rebates) or otherwise do something altruistic. Instead, they fund a study (yay) that shows it makes sense for the rest of us to buy and use more drugs, thereby generating more revenue and profit for GSK et al.


Mar
7

UPDATE – Aetna’s WC contracting efforts

An alert reader from Aetna called me to correct what looks like a misinterpretation by several docs in Florida. According to this individual, Aetna’s requirement for med mal is $250,000 per occurence; the million dollar level (mentioned in the original post) is for general liability. This is not what I heard from some of the docs Aetna has been recruiting; looks like there’s a “failure to communicate…”
From sources in the Sunshine State comes news that Aetna is attempting to contract with docs as part of their effort to build a workers’ compensation provider network. The lack of affordable med mal insurance in Florida is well-documented; in some counties docs are “going bare”; working without any med mal coverage at all.


Mar
6

Labor unrest and health care costs

What do GM, Ford, hotels in LA, grocery stores and public transit in Sacramento, public transit in Philly, and Boeing have in common?
All were faced with strikes and/or labor strife due primarily to conflicts about health care insurance, costs, and access. The strike by Sikorsky workers in Connecticut (registration required) is yet another example of health care’s growing pressure on US employers.
There’s a great quote in the NYTimes article on Sikorsky from one of Sikorsky’s flight technicians that crystallizes this issue – ” “This isn’t only about us,” said Bruce Peters, a flight technician … This is a nationwide problem with medical care.” Peters notes that any wage increases the workers have been offered will be consumed by insurance costs – the additional copays, co-insurance, and employee premium contributions contained in the company’s latest contract offer.
Peters personalizes the national disparity between wage growth and employees’ personal health care costs. Premiums for employer-sponsored health care have grown five times faster than wages since 2000.
In 2004, the average family’s insurance premiums came within an x-ray charge of $10,000. In contrast, median family income in 2004 was slightly over $43,000. Yes, you read that right – health insurance costs came to 23% of family earnings.
And yes, things have gotten worse since the sunny days of 2004; predictions are that 2006 will see the average family’s insurance costs hitting $14,500 per year.
A survey of smaller employers in California indicates that more than half will not be offering health insurance to their workers this year. This despite their optimism about growth and increased revenues in 2006.
The sky is falling, and it is crashing down around the heads of US employers, employees, taxpayers, and governments.
What to do?
Of all the groups out there, the National Coalition for Health Care Reform is making the most sense. NCHC’s goals are universal coverage; health care quality improvement; cost management; equitable financing and simplified administration.
What is notable about their work is nowhere does the coalition advocate single-payer, private insurance, or any other system. Yes, they research, study, and report on the potential impacts, positive and negative, of the several types and sources of funding. No, NCHC doesn’t take a political stance.


Mar
5

Health Wonk Review website

Julie Ferguson and Chris Miller are working on getting the “official” HWR website (check this on Friday 3/10/06) up and running. Plans are to have it done by the end of next week so the second edition can be posted there after Matthew Holt gets it up and running on Wednesday (no pressure Matt).
In the interest of speed and fiscal prudence it will, well, look fast and inexpensive.
Chris Miller’s firm, Artefact Design, will do the actual design stuff and hosting, and Julie will be responsible for making sure the content and structure work.
Helen Knight of KingKnight Communications is handling the “old media” exposure stuff. All are great to work with, incredibly focused on doing things right, and fun (I love to plug good people).


Mar
4

Medical malpractice – fixed or broken?

The medical malpractice insurance business is either back under control and meeting the needs of the market without the benefit of major and widespread tort reform, or is in crisis, near death, and likely to expire without major tort reform.
Where you sit determines what you see.
From consumer watchdog group Americans for Insurance Reform comes the following excerpt from their press release:
“Americans for Insurance Reform (AIR) released a new study today confirming the wholesale decline of medical malpractice insurance rates nationwide. The AIR study also shows that this phenomenon is occurring whether or not states enacted restrictions on patients’ legal rights, such as “caps” on compensation. The medical malpractice insurance “crisis” is over, according to the study.
AIR’s study is based on the most recent Council of Insurance Agents and Brokers survey of market conditions, showing that the average rate hike for doctors over the past six months has been 0 percent. This is following similar results for the last quarter of 2004, which saw rates rising only 3 percent at the end of that year. By comparison, rates jumped 63 percent during the same quarter of 2002. ”
In contrast, the Council of Insurance Agents and Brokers released their own interpretation of the numbers, noting:
“‘ to interpret that data to mean that the ‘crisis’ is over is a gross misrepresentation of the situation,” Crerar said. “First of all, having rates stabilize for one or two quarters doesn’t mean those rates have gone down. It only means that they have not gone up any farther. It is like saying that just because gasoline costs $2.50 a gallon today, down from $3 a gallon last year, we don’t have an energy crisis, and gas is cheap.”
CIAB also finds fault with AIR’s math, and reading CIAB’s interpretation it does appear the Americans for Insurance Reform could do with a little more practice with the calculator.
So, what’s the real deal?
Well, the malpractice “crisis” is partially related to insurance cycles (we’re in a transition from a hard market to a confused one right now), and as I’ve noted before, has a relatively small impact on overall health care costs. While the med mal debate is interesting, it is a sideshow – med mal is not a major force in US health care.
That said, the interesting point is that the drop in rates is occuring in states that implemented tort reform and those that did not. Makes one wonder what influence tort reform has on costs…


Mar
2

Medicare development timeline

Jason Shafrin at Healthcare-Economist.com has provided a brief timeline of the development of Medicare in the US.
Jason’s blog is quite good; heavy on the policy side (no surprise there) with several excellent summaries of data-rich topics such as price elasticity of employer-based health insurance.
I recommend it to fellow policy wonks.


Mar
1

Noe owes $13 million to Ohio

An audit by Ohio’s Bureau of Workers Compensation has revealed that Tom Noe and an associate owe the Bureau over $13 million. And, one of Tom Noe’s partners in the rare coin business has pleaded not guilty to seven felony counts related to alleged thefts from Ohio’s state workers compensation fund. The miscreant, Timothy LaPointe, was escorted from the courtroom in handcuffs before being fingerprinted and released on bond. LaPointe is accused of corrupt activity and six counts of tampering records, proving yet again that cover-ups are always a bad idea.
Meanwhile, more details on Noe’s transgressions are coming out every day. The latest scoop is Noe spent the State’s funds lavishly on house improvements, entertainment, golf outings, and collectibles such as political pins.
The Toledo Blade has an in-depth review of the Noe case, including a follow-the-money section that is quite interesting. Notably (no pun intended), Noe was appointed to his post as a fund manager for Ohio’s BWC despite the fact that he was not qualified; he did not file adequate financial records; and the Bureau allowed Noe’s lawyers to write the agreement between Noe and BWC.


Mar
1

Health Wonk Review plans

Several folks have expressed an interest in submitting posts to and being kept abreast of our latest venture, Health Wonk Review. Some have asked for copies of the “rules”, a word that makes me break out in hives. So, here are the guidelines we’re working with today.
1. HWR is going to be published every other week. This may change to weekly based on interest.
2. The host will rotate with each publication.
3. The host determines which submissions are included in their edition of HWR.
4. Submissions will include the poster’s name or nom de chroniquer (the nickname under which they post), the url of the blog, the url of the submitted post, and a synopsis of the post.
5. Submissions are due by 9 am EST every other Wednesday – that means March 8, March 22, etc.
6. The host will include the name and email of the next host in their edition of HWR.
7. A separate website for HWR is in development and will be out sometime next week. Details to follow.
8. The host for next week is Matthew Holt – ‘matthew@matthewholt.net’; March 22 host is Kate Steadman – ksteadman@gmail.com; April 5 is David Williams [dwilliams@mppllc.com].
9. We are going to see how this goes and take it from there. As of yesterday, there were 577 hits on “health wonk review” on google – so we are getting a bit of traction.
Finally, thanks to all for their contributions, support, and cross posting.
Joe


Feb
28

Wal-Mart’s difficult position

The “Wal-Mart” legislation on the docket in over 20 states is pushing some pro-business advocates into a Hobbesian choice – support Wal-Mart and other opponents of mandatory benefits legislation, thereby adding thousands to Medicaid rolls, or support the legislation and place a heavier financial burden on the world’s largest retailer.
Wal-Mart and several other large employers have thousands of employees covered under state Medicaid programs. The modestly paid employees qualify for the taxpayer-funded coverage due to their relatively low income. And, Wal-Mart’s health insurance plans are too expensive for these employees; different souces indicate different participation levels for employees, but none report participation above 46%. (The Wall Street Journal claims 46% of employees are enrolled in the company’s plans, other sources indicate 43% of the company’s 1.3 million workers are covered under their plans in 2005, a drop of five points from last year’s 47%.)
The average income for a Wal-Mart employee is less than $20,000 per year, making it difficult for them to afford even the least-expensive plans offered by the company. The company has developed a low-cost alternative plan (the “Value Plan”) that provides minimal coverage for an employee contributing $11 per month; while there are tight limits on benefits in the first year, these restrictions make sense; they will help mitigate adverse selection risks.
Improvements to the health benefits annonced by CEO Lee Scott include a reduction in the eligibility waiting period from two years to six months for full time workers; allowing children of part-time workers access to the plans; and reducing the waiting period for part time workers.
There are more than enough Wal-Mart bashers and advocates throwing stones over these and other issues. And the company is (somewhat unfairly) being made into a whipping-boy for a national problem. Remember, the number of employers offering health insurance has dropped by 15% over the past five years…
Simply put, labor expenses are a very significant part of Wal-Mart’s overall cost structure, and health benefit costs are hitting the company both directly (via employees on insurance) and indirectly (via the tax burden from uncompensated care, Medicare and Medicaid). This increases the company’s cost of doing business, and thereby their prices to consumers.
This is not a value statement, but reality.
What does this mean for you?
The US health care system is a burdeon on employers and our industrial competitiveness.


Joe Paduda is the principal of Health Strategy Associates

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