Year: 2016

Jun
6

Monday catch-up

Posted by Joe Paduda on Monday, June 6th, 2016 | Comments

Summer’s arrived in upstate New York – and boy do we appreciate it. While I was watching all the trees turn green, I missed reporting on a bunch of stuff last week.

So better late than never, here it is.

P&C industry outlook

Let’s start with the macro stuff.  A couple weeks back, Fitch published a piece wherein they opined the P&C industry is in for a tough time this year. After several years of stellar performance, Fitch expects prices to decrease as competitors battle for market share. Here’s how they put it:

Renewal rates are flat or declining for most commercial market segments following a hardened market from 2011-2014. The price competition comes from underwriting success and market capacity expansion from earnings accumulation. As price competition intensifies however, this will likely be a drag on premium growth, according to Fitch. Commercial lines written premium volume grew by only 1.8 percent in 2015.

For work comp, Fitch identified prescription drug costs and continued low interest rates as problematic; the first increases costs while the second reduces investment income.

Opioids

The number of opioid scripts in the US actually declined last year. And that was the third year in a row. That’s the best news we’ve heard in quite a while. Since 2012 – the peak year for opioid script volume – the number of scripts has dropped by 12% – 18% (depending on the data source).  

In case you’re interested, prescription opioids accounted for about $10 billion in total spend in 2015. Workers comp accounted for around 14% of that, a rather striking figure when you consider total work comp medical spend accounts for 1.4% of overall US medical spend.

Yup, work comp uses about ten times more opioids than other payers.

And how the bad news; the drop in scripts hasn’t been accompanied by a decrease in the death count, which stands at 28,000 for 2014.

California Workers’ Comp

Well, at least it hasn’t gotten any worse.  That’s my take on the just-released CWCI study on the UR/IMR process for Q1 2016.

  • IMR volume is about the same as last year at 160,000 determination letters per year;
  • the overall IMR uphold rate is the same as last year at 89%;
  • Rx drug requests still account for nearly half of all disputed medical service requests submitted for IMR (and 40% of the Rx drug IMRs are requests for opioids or compound meds);
  • and a small number of docs still account for the majority of the disputed  service request that undergo IMR (the top 10% of medical providers accounted for more than ¾ of the IMR service requests).  

My take – the IMR process is preventing people who don’t need opioids from getting scripts for opioids.  That’s a very, very good thing.  Yet the same docs keep prescribing this crap to patients knowing full well these requests will be rejected.

I’m very much looking forward to hearing all those “injured worker advocates” heaping praise upon the system for protecting their clients’ health and wellbeing, and that of their kids as well.

I’ll personally nominate each of them for a Comp Laude Award.

Jun
3

What’s with the gloom and doom?

Posted by Joe Paduda on Friday, June 3rd, 2016 | Comments

“The economy seems to pulse — surges a little bit, pauses, surges a little bit, pauses,” said Kevin Logan, chief U.S. economist at HSBC. “And in the end it’s nothing.”

That’s the money quote from a very readable piece in today’s Washington Post, one that seems at odds with the doom and gloom emanating from some politicians and pundits.

Before my inbox overflows with tales of woe, I fully understand there are places where the recovery is halting at best.  And there are still too many who have decided to exit the workforce – although the number isn’t nearly as high as many think.

And, the percentage of the population that is without health insurance continues to decline – down to 11.0% in Q1, 2016. Deductibles are increasing for many – as they have for the last two decades – but it’s still far better to be insured than not.

Wage growth has increased, the unemployment rate is half what it was at the peak of the recession (and likely headed lower), manufacturing is growing, consumer spending is high, and most stock market indices remain relatively high.  Consumer confidence is in a six-month slump, but one wonders if that’s partially driven by the incessant drumbeat of negativity from Trump et al.

All that said, it’s abundantly clear the employment world is going to change dramatically over the next decade, and it is possible if not likely some of the unease is due to fears that automation and offshoring will continue to eliminate stable, good-paying jobs.

I bring this to your attention, dear reader, to add a bit of perspective and data to the discussion.

Enjoy the first weekend in June

 

 

Jun
2

Opioids and Workers’ Comp – a quick update

Posted by Joe Paduda on Thursday, June 2nd, 2016 | Comments

The rest of the world is beginning to catch up to the progress workers’ comp has made fighting the opioid scourge.  Kudos to PBMs, payers, regulators, researchers and some physicians for recognizing the incredibly negative effects of opioids years ago, and taking action to mitigate some of these effects.

That is NOT to say we’re anywhere close to getting this solved – far from it.

But we have seen some evidence of decreases in the number of new claims getting opioids in some areas and an overall decline in opioid scripts and morphine equivalents (MEDs).  We’ll have more information in a couple of months when CompPharma (a consortium of work comp pharmacy benefit managers) releases its 13th Annual Survey of Prescription Drug Management in Workers’ Compensation. (note I’m president of the organization and am conducting the research, past reports are available free for download here.)

A few factoids to give some perspective:

From CWCI’s most recent research:

  • Opioids declined to 27.2% of all scripts dispensed to California work comp patients in 2014, down from a peak of 31.8% in 2008.
  • Average number of morphine equivalents per script declined from 550 in accident year (AY) 2007 to 422 in 2012.
  • The % of work comp patients receiving opioids within 24 months of injury increased from 22.4% in 2005 to 27.9% in AY 2012
  • Express Scripts reported overall spend for opioids declined 4.9% in 2015, the fifth consecutive decrease.
  • Helios reported:
    • the percentage of work comp patients getting opioids declined by 1.6% from 2013 to 2014.
    • opioid utilization dropped 2.9% over the same period

What we have NOT seen is any significant progress dealing with the knottiest and most important problem – long term opioid users.

I can’t count the number of erstwhile start-ups, business ventures, and eager entrepreneurs I’ve spoken with who contend they’ve figured it out.

By definition, anyone who claims to have a universal solution most certainly doesn’t understand the problem.  Unlike reducing initial and secondary scripts, addressing patients who’ve been taking opioids for months is very much an

  • individual,
  • patient-by-patient approach
  • requiring flexibility,
  • a deep understanding of the disease state and chronic pain and addiction,
  • a willingness to experiment and fail, and
  • a very long term commitment to a business model that almost certainly will not be hugely profitable.

That’s not to say there isn’t opportunity – there most certainly is.

What does this mean for you?

We’re at the end of the beginning of the work to address opioids.  This will take focus, years, diligence, and unrelenting focus.

May
31

No thanks, I don’t want to be impotent.

Posted by Joe Paduda on Tuesday, May 31st, 2016 | Comments

At long last men are pushing back against the prostate cancer treatment industry’s decades-long scare tactics.  A really good NYT story documented a rapidly-growing trend among men to practice “watchful waiting” when diagnosed with some forms of prostate cancer. The money quote: “Five years ago, nearly all opted for surgery or radiation; now, nearly half are choosing no treatment at all.”

HealthNewsReview posted a thoughtful piece about the facts, research, and trends – well worth a read.

I’d note that this has long been known, but docs – especially those in private practice – were loathe to discuss non-aggressive treatment with patients.  Couple of points to ponder – is this because remuneration for watchful waiting is paltry compared to aggressive techniques, and/or a fear of litigation?

Key to the trend towards watchful waiting is an understanding that not all cancers are the same.  Especially with prostate cancer.  This is a relatively common condition among older men, with a very high survival rate regardless of whether the patient got aggressive treatment or not.

And, that “aggressive treatment” may result in impotence and/or incontinence.

Another key to this is understanding that the diagnostic and treatment industry is very big, very lucrative, and very willing to use its money to preserve its profits.

After research assessing the effectiveness and outcomes of patients treated with watchful waiting vs aggressive surgery documented no significant difference, it still took years for docs in private practice to get with the program and start discussing the watchful waiting option with patients.

So, what does this mean?

  1. Medicine in this country is a for-profit industry.
  2. That industry is heavily vested in aggressive diagnosis and treatment options.
  3. It is very powerful and very persuasive, and quite willing to advocate potentially harmful treatments.
  4. It takes years to get patients and providers to change, especially when confronted by the lobbying efforts of the medical-industrial industry.
  5. Like anything else, there’s much benefit from the capitalist approach, and much to be worried about.

But we don’t need to be impotent.

 

 

May
24

Workers’ comp – for hospitals, it’s where the money is

Posted by Joe Paduda on Tuesday, May 24th, 2016 | Comments

Two recent articles in Health Affairs highlight a growing issue for employers and taxpayers; some hospitals are increasingly looking to work comp as a profit maker.

Depending on the state, facility costs can account for anywhere from around 32 – 40% of total work comp medical expenses (different states classify locations-of-service differently).

Ge Bai and Gerard Anderson examined the fifty US hospitals with the highest charge-to-cost ratios and found their markups over Medicare-allowable costs were three times higher than the average hospital.

This is critical in work comp because state work comp regulations often base facility reimbursement on charges – despite NO evidence or requirement that those charges have any basis in reality.

Fully 20 of the fifty hospitals are in one state – Florida – that uses a percent-of-charges reimbursement methodology for hospital outpatient services (manual is here).

Bai and Anderson’s latest work provides a deeper dive into hospital profitability.  A few key quotes:

  • Hospitals with for-profit status, higher markups, system affiliation, or regional power, as well as those located in states with price regulation, tended to be more profitable than other hospitals.
  • Hospitals that treated a higher proportion of Medicare patients, had higher expenditures per adjusted discharge, were located in counties with a high proportion of uninsured patients, or were located in states with a dominant insurer or greater health maintenance organization (HMO) penetration had lower profitability than hospitals that did not have these characteristics.

The methodology used by Bai and Anderson is somewhat different from that used by other researchers in that it excluded income from non-patient care services. I infer that they did this to focus specifically on the actual care delivery cost and not factor in other revenues from services such as parking, gift shops, investment income, etc.

So, what are the implications?

  • Work comp is a soft target for facilities in many states
  • The percentage-of-charges methodology is a license to…profit
  • More profitable facilities have likely already figured out how to make the most revenue possible from every source – including workers comp
  • Less profitable hospitals are going to learn from their more profitable competitors
May
20

Who’s running your company.

Posted by Joe Paduda on Friday, May 20th, 2016 | Comments

Is it the execs or the IT department?

The workers’ comp, and, for that matter, the entire property and casualty insurance industry, is chronically systems-poor.  While other industries view IT as a strategic asset, continually investing billions in IT, WC/P&C considers IT an expense category to be mined for pennies to add to earnings per share.

We all know how much execs HATE unallocated loss adjustment expenses…

Execs at payers are hamstrung by IT departments that can’t/won’t/aren’t able to implement systems changes. In fairness, IT departments are hamstrung by a lack of strategic vision in many C-suites, which in turn is motivated by financial markets or executive comp plans at mutuals.  Suffice it to say there is plenty of blame to go around – but the result is insurers’ strategy is often greatly limited by IT.

For example, underwriting and distribution. Yes, Google’s initial foray into insurance was short-lived, but that wasn’t because they weren’t selling insurance. In fact profits were good – but “good” by insurance standards, not by tech standards.  Google just couldn’t make the profit levels they are used to.

At some point another tech innovator will figure this out and/or decide a lower profit level is just fine, and then woe betide insurers.

Another example – the medical management world is changing dramatically, and work comp insurers are very hard pressed to adapt. Bundled payments, narrow networks, electronic medical records and vertically integrated delivery systems are here today, and will grow dramatically in importance tomorrow. Flexibility, adaptability, and the ability to move quickly are essential – and equally impossible.  Changing vendors requires IT to design, implement, test and monitor new data feeds to multiple systems and stakeholders.

Conversely, some payers have tied themselves to external vendors who act as consolidators or pipes, thereby greatly reducing the carrier’s IT burden.  In exchange, a LOT of power is transferred to the pipe vendor.  That’s fine if:

  1. incentives are aligned over the long term, and
  2. the vendor is able and willing to make changes to providers, processes, and feeds as necessary, and
  3. there’s transparency.

However, expediency and underinvestment comes at a cost.

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CEO T Rex: “Hey, when is that B2B platform scheduled for testing?”

CIO Triceratops: “18 months after I get the money to hire the staff you cut to reduce ULAE…”

The B2B and healthcare delivery market is evolving at a pace akin to that the dinosaurs saw after the meteor hit.  So, here’s a couple of questions you may want to ask yourself.

  1. Does your strategy drive your IT, or does your IT drive your strategy?
  2. What’s your plan to adapt to the revolutionary changes hitting distribution and medical management?
  3. Does your IT department, management, vendors, and infrastructure support that plan?
  4. What happens when – not if, but when – a carrier or new entrant builds the infrastructure and capability you can’t or won’t?
May
18

Clinton health 2.0

Posted by Joe Paduda on Wednesday, May 18th, 2016 | Comments

Medicare for more, caps on premiums and out-of-pocket spending,

Presumptive Democratic nominee Hillary Clinton’s health plan builds on ACA in several key ways, with an over-arching goals of providing more consumer choice and reduce the financial burden on consumers.

  • a tax credit of up to $5,000 per family to offset a portion of excessive out-of-pocket and premium costs above 5% of their income.
  • incease financial incentives for states to expand Medicaid
  • allow younger seniors to “buy-in” to Medicare

Let’s take these in order.

Tax credit

The Clinton plan’s tax credit is intended to address a growing concern; while premium costs aren’t zooming up (altho 2017 premiums look to be increasing at near-double-digit rates) deductibles, co-pays and coinsurance are becoming increasingly problematic.  The $5,000 tax credit is intended to offset some of these increases, and is coupled with a limit on total insurance and related expenses of 8.5% of family income and a mechanism intended to reduce costs for those earning more than 400% of the federal poverty level. (this last can make a huge difference, as costs for those just under 400% can be a fraction of what those earning just above 400% pay).

The subsidy isn’t limited to lower-income folks, and will certainly increase costs and concerns about affordability. However, indications are that take-up among the more affluent would likely be fairly low – and the subsidy pales in comparison to the favorable tax treatment currently enjoyed by those with employer-based insurance. Notably, there’s effectively a “fade-out” of the impact of the 8.5% cap for the truly affluent just because that 8.5% represents a pretty high figure for those with a lot of income.

Medicaid

Clinton proposes federal payment of 100% of the cost for any state that expands Medicaid for three years (declining to 90% thereafter).  Her plan also includes increased funding for education and enrollment activities for Medicaid-eligibles.

Medicare buy-in

The yet-to-be-finalized plan would allow seniors as young as 50 to buy in to Medicare. If enough seniors chose Medicare, rates for “regular” insurance on the Exchanges would likely decrease as the average age of members would decrease, thereby decreasing expected costs. And, insurance premiums for those seniors buying in would almost certainly be several thousand dollars lower than they can currently get via the Exchange. Clinton contends, with some justification, that adding more consumers to Medicare would reduce overall health care costs.

Medicare’s buying power and regulatory authority gives it much more control over health care price and utilization.  That, plus the sheer number of Medicare recipients, makes it the dominant force in the marketplace.  While providers may balk, many will find it necessary to go along – or lose a substantial chunk of their patient base.

However…Medicare is a mash-up of four separate and distinct parts, with different deductibles, treatment requirements, cost sharing, and treatment limits.  While it is well understood by practitioners, that’s only because it is THE dominant health insurer in every market.  Streamlining and rationalizing the benefit plan would make it much more palatable to under-65s.

Clinton has yet to dive into the details, but given the attention span and appetite for same among the eligible-voter population, those details are going to get attention from a very limited group of health care geeks (your faithful author included).

What does this mean for you?

Depends on whether a) Sec. Clinton is elected; b) the Dems take over the Senate; and c) the Dems make significant inroads in the House.

 

May
13

Friday catch-up

Posted by Joe Paduda on Friday, May 13th, 2016 | Comments

Got to love May!  Everything is greening up, baseball season is in full swing, college graduations, flowers are blooming.

While I was out smelling the new blossoms, a bunch of stuff happened.

Implementing health reform

There’s been a lot of press about UnitedHealthcare’s decision to leave the Exchanges, with opponents citing the move as more proof of the impending demise of wrongly-named “Obamacare” and others noting it’s much ado about not much.

A brief and compelling post by David Williams is in the latter camp; David notes:

[United] specializes in selling high-priced plans to corporate accounts. In the price-sensitive world of the exchanges that’s a losing proposition. No surprise — United wasn’t getting traction.

As a former UHC employee (albeit from two decades ago), I have to agree.  UHC never focused on the individuals or employers or demographic groups that seem to be signing up for insurance via the Exchanges.  There are several distinct attributes of health plans winning in the Exchanges; Health plans that have expertise in Medicaid, understand local markets and have very strong local brands, and/or are vertically integrated delivery systems are succeeding.

Bernie Sanders’ campaign appears to have “inspired” Hillary Clinton to talk more about offering a public option in the Exchanges, namely allowing a to-be-defined group to buy-in to Medicare. Notably, Sec. Clinton first broached the public option back in February, so this isn’t really new news. However, it does mark the first time she’s mentioned the Medicare buy-in. (a more detailed review of Clinton’s health policy platform is coming up next week)

From JAMA, the news that employer coverage of health insurance has not changed over the last few years.  This is a key reason the Exchanges have not enrolled more higher-income folks; they are getting their insurance thru their workplace.

Finally, before you get too wrapped up in the media nonsense about prices, enrollment, and the failure/success of ACA, read Larry Levitt’s piece in Vox on Obamacare 2017.

Workers’ comp

WCRI in partnership with the good folks at IAIABC published a must-have guide to State Workers’ Compensation Laws.  Order your copy at the link; investors, analysts, compliance departments and regulators all need this on the virtual bookshelf.

Friend and colleague Peter Rousmaniere’s Working Immigrants blog has been especially active of late; Peter’s been documenting the reality behind immigration trends, and his charts and graphs will speed your understanding of what’s ACTUALLY happening.

(spoiler alert – there is no big influx of Mexicans these days…)

Finally, a terrific post by a woman – a neuroscientist – who finally decided to treat her anxiety with medication.  It is an excellent piece addressing the balance between over-medication and the positive impact drugs can have – when they are the right choice.