The Workers’ Comp Research Institute, one of the three top research entities focused on WC, will be delivering a comparison of California’s workers comp to eleven other states at a seminar in San Francisco on March 23.
WCRI’s research typically lags eighteen to twenty-four months behind, for very good reasons. So, don’t expect to see any indication of the impact of recent changes in CA WC. With that caveat, I can assure you attendance at these seminars is well worth the time and travel.
Testifying before Congress, Fed Chair Alan Greenspan (free registration required) noted that while Social Security is indeed at risk, Congress must address “far larger shortfalls in Medicare”.
However, Greenspan also noted that we are not yet ready to take on the task. According to California Healthline;
“However, he emphasized that despite the larger problems in Medicare, lawmakers “probably ought not to address the medical issue quite yet, until we get much further down the road in the advance in information technology in the medical area,” which could help reduce costs. He added, “If we do it now or even next year, I’m fearful we would be restructuring an obsolete model and have to come back and undo it.”
Greenspan’s comments agree with a report just released by the Employee Benefit Research Institute, which stated that Medicare will soon account for a “greater and rapidly growing share of the nation’s gross domestic product, sending Medicare into insolvency 23 years before Social Security,”.
EBRI says that Medicare’s nearly $28 trillion in unfunded liability is more than seven times Social Security’s $3.7 trillion.
The news here is individuals whose pronouncements are widely followed are finally talking about the real issue facing the economy – health care costs.
GM’s health care costs just went up by over a billion dollars. The uninsured population is increasing every year, and is now over 45 million. Medical trend rates in Property and Casualty insurance are the most significant driver of premium inflation. Health care costs for municipalities are now over $7000 per employee, leading to higher property and other taxes.
David Lazarus in the San Francisco Chronicle puts it this way. It is a “big mistake” that “Americans are talking about problems facing the Social Security system” while paying “little attention” to Medicare, San Francisco Chronicle columnist David Lazarus writes in his “Lazarus at Large” column.
Lazarus adds that most experts “believe that Medicare’s issues can’t be adequately addressed without overhauling the nation’s entire health care system.” (thanks to California HealthLine)
Perhaps, just perhaps, we are nearing the tipping point when real health care reform is possible.
California HealthLine reports today that three studies indicate strong links between COX-2s and cardiovascular problems. In fact, the link is so strong that the studies, reported in the New England Journal of Medicine, may well lead to the complete withdrawal of COX-2s from the market.
The three studies investigated Vioxx, Celebrex, and Bextra; all had significant negative side effects, ranging from delayed wound healing to double the risk for heart attack and stroke to kidney damage.
The NEJM editorialized that, based on the results of the studies, “physicians are dismayed, pharmaceutical companies are embarrassed and financially threatened, and patients are injured.”
If the physicians had seen fit to prescribe COX-2s only for those patients who clearly could not take other drugs, the scope of this problem would have been drastically dimished. But one cannot point the finger only at physicians; Merck, Pfizer et al spent hundreds of millions promoting these drugs.
The recent changes in WC laws in California appear to be just the proverbial tip of the iceberg, as several additional states are seriously considering changing their regulations, rate-making process, managed care programs, or all of the above. Here is a summary of recent news.
According to Insurance Journal, legislation has been proposed that would have major implications for Texas Workers Compensation, including abolishing the Texas Workers’ Comp Commission.
“State Rep. Burt Solomons (Carrollton) recently filed a bill that would make major changes to the workers’ compensation system in Texas. According to an announcement released by the House of Representatives, House Bill 7 abolishes the Texas Workers’ Compensation Commission (TWCC) and focuses on four main system improvements: streamlining the regulatory process by moving regulatory functions to the Texas Department of Insurance (TDI), allowing workers’ compensation networks, applying group health laws and rules to the workers’ compensation system, and focusing the entire system back on the injured worker.”
While the OHP regs in Ohio were touted as leading edge, innovative, and a model for the rest of the country, these claims were, at the very least, overblown. The OHP program was not terribly innovative and, if anything, represented a me-too approach. Now, James Conrad, Administrator of the Ohio Bureau of Workers’ Comp, has proposed new legislation that has rather broad, if somewhat minor, implications for WC in the state. Here is a summary from Business First:
“The bureau is proposing more than 30 changes to workers’ comp law. The changes range from allowing people with traumatic brain injuries to earn minimal income without jeopardizing their disability benefits, to prohibiting doctors and other medical providers who treat injured workers from paying or receiving kickbacks for referral of services.”
Twenty insurers licensed to sell Workers Comp in Rhode Island (free registration required) have notified the state that they will adopt NCCI’s revised rate guidelines, potentially lowering premiums on average by 20%. However, Beacon Mutual, with 75% of the state’s WC market, is not in favor or the move, claiming that it has already factored in the better performance of the WC market through “merit-based premium reductions”.
A bill has been introduced that would deny WC benefits to workers who failed to follow posted safety instructions and were injured on the job. Don’t look for this to succeed
HealthAdvocate is a relatively new company that is making a business (and by all accounts a fairly successful one) by helping consumers deal with the increasingly complex, frustrating, convoluted world of health care. I don’t have any personal experience with them, but their approach and business model makes sense.
They sell their services to employers, TPAs, insurers, unions, and other organizations as an add-on to employee benefit programs. The service, which is billed on a per employee per month basis of $1-$4, provides several benefits:
1. assists employees in locating health care providers with specific experience and expertise
2. negotiates with health plans for coverage and payment for specific procedures and treatment
3. facilitates claims handling by working with providers and health plans
As Tom Schell of Paradigm Health puts it, ” this type of service offering will be the norm in several years as companies look to get more bang out of their healthcare dollar — since it enables the users to maximize the coverage they currently have and increase the overall patient satisfaction level.”
I agree. “Consumerism”, patient-directed health care, and all the other “make the patient responsible for their own healthcare” efforts have one major obstacle – people are mystified, overwhelmed, and frustrated by healthcare processes and requirements. And it is not likely to get any better. The worse it gets, the more valuable HealthAdvocate and similar firms will become.
AIG thought it had successfully negotiated NY Attorney General Spitzer’s treacherous path, at least until yesterday. Evidently AIG is still under investigation for business practices that might be construed as unethical or illegal by the AG.
These business practices involve the sale of financial instruments that serve to “smooth” earnings for public companies, thereby making them appear to be more consistent, thereby pleasing analysts and investors.
To those of us in the managed care field, this is mildly interesting. What is more interesting is the spread of the investigations, from sham bids to contingent commissions to financial products to inappropriate business practices. Some industries, notably Workers’ Comp managed care, may be particularly vulnerable to this type of inquiry, as it is rife with special deals and considerations.
The Concentra subpoena is likely a reflection of the growing scope of Spitzer’s investigation. As other AGs, notably Blumenthal in Connecticut and Insurance Commissioners such as Garamendi in CA take note, they may well want to add their investigative prowess to the mix.
Concentra (CISI) announced today that it has received a subpoena from the New York State Attorney General requesting “documents and information regarding CISI’s relationships with third party administrators and health care providers in connection with the NYAG’s review of contractual relationships in the workers’ compensation industry.”
Any speculation regarding the specific reasons for the investigation would be just that. However, some general statements can be made about business practices in the WC managed care industry that may be influencing the AG’s investigation.
1. It is common for managed care firms to pay third party administrators (TPAs) a percentage of their revenues from business referred by the TPA. Typically this is in the 5% range.
2. While most TPAs “disclose” this arrangement, it is often contained within language that makes it fairly difficult to discern the actual meaning. For example, there may be wording similar to “the TPA reserves the right to assess an administrative fee on vendors used by the client”.
3. There is a long-established tradition of gifts from managed care vendors to claims adjusters, managers, and other staff, with either an overt or subtle link between the gifts and future business. These gifts can occasionally “cross the line” into expensive territory.
4. At the very least, the “percentage of savings” method of paying for network services does incent the TPA to utilize networks that over-utilize and over-charge for savings.
This is not meant to imply that any of the above activities were or are going on at Concentra. As the largest WC managed care firm, they may just be the most apparent target.
The war between payers and pharmacies just got nastier. In a pre-emptive move, GM anounced that Walgreen’s would no longer be allowed to fill prescriptions for its insureds. It appears that GM made this move after Walgreens got into a dispute with Toyota over Toyota’s efforts to increase the use of a mail-order pharmacy by its employees. (Mail order pharmacies are generally significantly less expensive than retail. Retail pharmacies want people to come into their stores, buy drugs, and pick up other goods on the way to check out, thus they really do not like mail order) As a result of the Toyota-Walgreen’s dispute, Walgreen’s cut Toyota out.
Perhaps Walgreens hoped Toyota’s employees would rise up in arms and demand Toyota include the chain, or perhaps Walgreen’s just could not afford to participate on Toyota’s terms. Regardless, GM decided to pre-empt any similar move by Walgreen’s towards the GM employee benefit plan. As one of the largest private payers, GM represents significant dollars for many health care providers.
According to Reuters, “GM provides health care coverage for 1.1 million workers, retirees and their families in the United States. Last year, GM spent $5.2 billion on health care in the United States, including $1.5 billion on prescription drugs.”
GM’s move is a clear indication of how seriously large employers take this issue. And with prescription drug costs leading the inflationary charge, don’t expect them to back down.
The announcement last week that the Medicare Drug benefit will cost $724 billion over ten years, instead of the Administration’s original forecast of $400 billion, may be the long-awaited trigger for fundamental reform. Perhaps this is wishful thinking, perhaps not.
Three recent reports from prominent media outlets present rather compeling arguments that the sticker shock may well cause Congress to rethink its approach to prescription drugs.
In an article labeling the issue “sticker shock and awe, the Christian Science Monitor reports that the price tag is “focusing the minds of many lawmakers” on confronting the rising cost of drugs in Medicare.
The San Francisco Chronicle quotes a Heritage Foundation spokesman who claims the drug cost issue, along with the seemingly unstoppable rise in other entitlement programs will “cast a shadow over the entire conservative domestic agenda.”
National Public Radio on Thursday featured a segment with Dan Schorr commenting on Medicare costs and the potential fallout from same.
Among the suggested fixes to the problem are the reimportation of drugs from Canada (a non-answer, as discussed in previous postings here) and the negotiation of prices by the government with drug companies. The former is no answer at all, but the latter may well offer some hope. Almost every other country negotiates directly with pharma manufacturers, and receives much better pricing than does Medicare. In addition, the US Veteran’s Administration negotiates drug prices directly and has done a very effective job in containing prescription drug costs.
While this may offer scant hope for commercial payers, it is important to recall that many physician, hospital, and ancillary reimbursement arrangements are based on Medicare rates (Workers’ comp fee schedules, DRGs, RBRVS, etc.). Therefore, it is possible that any Federal pricing standard would replace the much-maligned Average Wholesale Price as the basis for pricing drugs.
And that would be great news.
Pres. Bush stated Wednesday that Medicare reform will be addressed after Social Security reform had been completed. According to the NYTimes, Bush’s statements were in response to the recent disclosure that the Medicare prescription drug program cost estimates are now in excess of $700 billion for the program’s first ten years, “with costs reaching $100 billion annually by 2015.”
By way of comparison, the Administration’s initial estimate of program costs for the first eight years was $400 billion, a number that was, according to reports, significantly less than that predicted by the Medicare Actuary. Readers may recall the mini-scandal that erupted when the Actuary disclosed that he had been threatened with dismissal if he went public with the discrepancy (the Actuary’s estimate was $534 over the same period.)
According to California HealthLine,
“lawmakers listed several possible changes to the present Medicare program. The potential measures include capping spending for the benefit; cutting payments for wealthy beneficiaries; allowing the government to negotiate bulk drug prices with pharmaceutical firms; banning Medicare coverage of “lifestyle drugs,” such as Viagra; and legalizing the importation of prescription drugs from Canada and other countries. ”
It is encouraging that our elected officials are becoming more realistic about the costs of this program, and may consider allowing the Federal government to negotiate with drug manufacturers. However, if the Feds are succesful in their efforts, there could be a massive cost-shift to private payers as drug companies seek to recoup lost income.
We’ll be watching this very closely.