Insight, analysis & opinion from Joe Paduda

Nov
7

Wal-Mart’s impact on Medicaid and local economies

Wal-Mart’s impact on health care costs, wages, employment and other indices will be the subject of a conference in Washington DC today. According to an article in Bloomberg, when the nation’s largest employer opens a store, it significantly impacts the local economy, with notable effects on Medicaid enrollment and expenses, the cost of staples (e.g. detergent, food), and wages. (Thanks to Peter Rousmaniere for the heads-up)
As one might expect, there is good and bad news to come. On the positive side, purchasers of goods from Wal-Mart get more for their money. On the negative side, wages drop both locally and in the areas that source the company’s goods; and governmental health care costs increase.
Here is an excerpt from the article.
” Another conference participant, Michael Hicks, an economist at the Air Force Institute of Technology at Wright-Patterson Air Force Base in Dayton, Ohio, studied Wal-Mart’s effect on government anti-poverty programs and found that Wal-Mart increased Medicaid costs an average of $898 per worker.
Medicaid Spending
Hicks found that a 1 percent increase in Wal-Mart’s market share in a state is accompanied by a 1.5 percent increase in Medicaid spending. Wal-Mart insures fewer than half its employees, many of whom cannot afford to pay for their own health insurance. Hicks found that government aid to needy families decreased by 3.3 percent with every 1 percent increase in Wal-Mart’s market share


Nov
7

Krugman on national health insurance

Paul Krugman, one of the Op-Ed writers appearing in the New York Times, has an interesting take on a solution to the national health insurance crisis (free subscription required). Those who follow Krugman will not be surprised that he is in favor of a national health insurance program. But put aside the ideological constraints and consider the rationale. Here are a few of his points.
1. Life expectancy and infant mortality in the US is lower than in Canada, Britain, Germany, and many other countries.
2. Health care expenditures in the US are 40% higher than the next most expensive country and twice what they are in the UK.
3. Access to elective procedures is better for some in the US compared to some other countries, and worse for others (e.g. the uninsured).
What Krugman misses is the impact of health care on productivity and functionality. He talks about outcomes in terms of life expectancy, and the impact on health maintenance of deductibles and copays, but has yet to make the connection between those issues and what matters to business; revenue and profit per employee.
He also does not opine on his preferred form of national health insurance; single payer as in the UK or multiple insurers as in Switzerland; or funding; tax-based v. employer v. individual v. combination. In my view, that’s smart. Once we figure out that we need a form of mandatory health insurance, then we can argue over the funding of same. But first we need to agree that health insurance should be mandatory.
My bet is within 3-5 years that will indeed be the consensus of American business, a goal of most in the middle class, and growing in popularity among elected officials. The myth is we can’t afford health care coverage for all; the reality is we are paying for health care for the uninsured every day in the form of higher premiums, higher taxes, and reduced productivity and higher Medicaid and Medicare costs.
What does this mean for you?
The sooner we can reach consensus that some form of national health care coverage is the goal, the better for US business, providers, and the middle class.


Nov
4

China’s workers compensation

Peter Barth presented an interesting overview of China’s occupational insurance situation at WCRI’s annual meeting yesterday. According to Dr. Barth, China passed a comprehensive workers comp law that took effect January 2004. WC is voluntary in the world’s most populous country, although employers that do not subscribe to the insurance program are required to pay the same indemnity benefits available through the program.
The employment situation in China is somewhat unique; a large percentage of the employed population works for government or military-owned firms; about half of the 800 million potential workers are in agriculture, and a large percentage of the remainder is employed by either small firms or foreign and domestic joint ventures. To date, 75 million are coverd by the state fund, which has a goal of 140 million by 2010.
Here are a few other highlights.
– the standard for an injury or illness is consistent with the US’; arising out of or in the course of employment
– premiums are in three bands, ranging from 0.5% of premium to 1.5%, with 2.0% for the worst case
– experience rating is in place, but a maximum of one point can be assessed for the worst risks
While the occupational health situation in China has been the subject of much negative attention, the inception of this state fund may well be the start of significant improvement. Much needed improvement.


Nov
3

WCRI UPDATE on Medical utilization in workers compensation back cases

Medical utilization trends were the subject of a presentation this morning. Here are some of the highlights which are based on research on back and neck injuries…
– use of MRI increased 11-14 points for non-specific back pain cases from 1998 – 2003.
– 40 pct of these cases had MRIs in 2003.
– the surgery rate for disc problems was stable over that period, although there was a shift in location with more performed in outpatient settings
– the typical back case received 4-7 more physical medicine visits over the 5 year period, driven almost entirely by trends in CA and TX


Nov
3

Report from the WCRI conference

Here are a few highlights from today’s WCRI conference
– medical cost growth from 01/02 to 03/04 was in the 8-12 pct. range, driven primarily by increased utilization
– there is a strong correlation between utilization and disability duration, with a 10 pct change in utilization associated with a 4 pct change in duration.
– early returns from CA indicate the recent reforms are having a significant impact on medical costs with a particularly large drop in physical medicine expenses (around 50 pct)
– a study by CWCI (www.cwci.org) indicates that relatively few physicians’ treatment of claimants are consistent with ACOEM treatment guidelines. This particularly interesting as the new regulations state ACOEM’S guidelines are viewed as presumptively correct: they take precedence over the treating physician when there is a disagreement. The full study is available on CWCI’s site.
– MA and FL, two states with historically low physician fee schedules have disproportionally more complex office visits than the median state. This is consistent with other studies which indicate low fee schedules are associated with billing practices featuring a higher proportion of higher value services.


Nov
2

I’m posting this from the WCRI Annual conference in Boston. For those who have yet to attend, this is perhaps the best short conference on WC on the calendar.
Topics this year include workers’ satisfaction survey results and the correlation with costs and outcomes: pharmacy in WC (driven by the 3 new WCRI members who are PBMs): a session on medical guidelines with an excellent presentation by CWCI’s Alex Swedlow on early results of CA’s reform measures (and other topics) and more to come tomorrow.


Nov
2

Hurricanes hit insurer’s financials

The first indication of the financial impact of Rita and Katrina is St Paul/Travelers’ announcement that they took a $1 billion charge (after tax) to account for the costs of the two storms in the most recent quarter.
Interestingly, gross premium income was only up 2% from the prior year’s quarter. This is yet more evidence of the current soft market in property and casualty insurance. As noted here previously, rates are already heading back up as insurers seek to rebuild reserves after taking hits for the current storm season. Which is not yet over…
Return on equity was a strong 11.9% for the first nine months on an operating basis, even after including the hurricane impact. Without those storms, RoE would have been a very healthy 18.4%.
What does this mean for you?
As indicated here before, strong financial results usually mean prices will be coming down for insurance. However, the recent weather has likely hit confidence levels as well as financials. Thus, I would expect pricing to firm up rather than continue to soften.


Nov
1

Wal-Mart, memos, ADA, and health benefits

Wal-Mart is back in the news, and it looks like it will be making headlines for some time to come. The fallout from the release of an internal Wal-Mart memo focusing on employee benefits expenses, health care costs and plans appears to be spreading, with potential problems for the firm pertaining to ADA issues. (thanks to a good friend in the insurance industry for the reference) In response, Wal-Mart has set up a “war room” (free subscription required) staffed by veterans of heated political campaigns to respond instantly to bad news and provide the company’s perspective on issues.
According to the LA Times, the internal memo authored by Susan Chambers, EVP Benefits will raise thorny issues for the company:
“The memo


Nov
1

Managed Care Matters is a year old

Managed Care Matters is a year old. Starting with the first day’s posts on the use of oxycontin in workers comp and Coventry’s acquisition of First Health, the blog has covered topics ranging from international pharmaceutical pricing to the investment strategies of Ohio workers comp officials. We are up to just under 200 individuals signed up to receive posting notifications. Almost 5000 unique users visited last month, perusing the 320 entries posted to date. Over 120 comments have been posted to date, enriching the debate, educating me, and providing perspective sorely needed in today’s health care debate.
These are busy days for managed care bloggers. Proposals to cut Medicare and Medicaid by Congressional Republicans hit the nightly news shows, interrupted by ads for the $800 billion dollar Medicare prescription drug program passed by these same elected officials.
Mergers and acquisitions still happen, although the decline in frequency is balanced against the increase in the size of the deals.
Workers comp executives are indicted for illegal campaign contributions, bribery, and outright theft.
Managed care firms find themselves the subject of scathing audits alleging overbilling and lousy services.
Consumer directed health plans grow in popularity, while costs keep rising.
Health plan profits zoom, as medical inflation moderates and premiums climb.
Hurricanes affect the entire industry, forcing drivers in Alaska to help pay for wind damage in Alabama.
Huge companies, beneficiaries of state tax subsidies, are forced to offer health plans to low paid workers after news reports indicating 65,000 of their employees are covered by Medicaid.
I have enraged a few along the way (one executive at a workers comp managed care firm was heard to say he would rip my head off the next time he saw me) and look forward to continuing to perform that needed chore when appropriate. Hosting Managed Care Matters has made me more thoughtful, better read, and busier than ever.
Thanks for the insights, challenges, and news items, and please, keep it up.


Oct
27

More on Wal-Mart’s health benefits issues

More details are emerging about Wal-Mart’s internal debate on health care and benefits for employees (free subscription required). An internal memo from Wal-mart’s head of benefits notes that costs can be reduced by hiring younger workers, ensuring all workers get some physical exercise, and hiring more part time workers.
The memo was in response to the company’s soaring benefits expense, which has jumped 15% annually since 2002, driven in large part by a $1.4 billion increase in health care costs over that period. Wal-Mart, which employs 1.33 million people, provides insurance for less than 45% of employees, and 46% of their children are either uninsured or on Medicaid. Medicaid insures 5% of the company’s employees, or about 65,000 people (and probably more of their dependents).
Here are some interesting excerpts


Joe Paduda is the principal of Health Strategy Associates

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