Insight, analysis & opinion from Joe Paduda
There’s so much going on in healthcare these days, it would be impossible to keep up, stay informed, and actually understand what’s happening and what it means for you.
(sound trumpets of cavalry charge!)
The time, energy, and pure brain power she puts into her Health Wonk Reviews means you, dear reader, get what you need to know in one easy-to-digest serving.
There are going to be disruptions, incidents of lousy patient care, and fraud eruptions. And when those hit the news, remember – our current system is not sustainable, and change is never without disruption.
What does this mean for you?
ACOs are coming, and the shift in thinking, rather than the delivery system itself, bodes well for comp.
Monday we kicked off the discussion of the impact of PPACA/Obamacare/health reform on workers’ comp with a review of the (very limited) direct impact of reform on comp. Today it’s the the impact of increased group and Medicaid insurance coverage on workers’ comp.
Let’s leave aside yesterday’s announcement by HHS that the employer mandate will be delayed till 2015; we’re after the long-term impact, so the one year delay will not be material to our discussion. There will be somewhere around 30 million more folks covered by health insurance post implementation, with 32% covered under Medicaid, 45% from the individual exchanges, and 23% from employers. Here are the major effects of the increased coverage…
“even repeat injury-sufferers are more likely to file during episodes in which their employer offers health insurance, but not statistically more likely to file during episodes in which they themselves are insured. This suggests that the workplace environment and employer incentives may have a significant, or perhaps even the dominant, impact on workers’ compensation filing.”
Next week — more on the impact of PPACA – bet you can’t wait!
The closer we get to January, the more interest there is in how health reform, aka PPACA, aka Obamacare will affect workers’ comp. In a meeting with a dozen industry executives last week the issue garnered much attention – as well it should.
While there are no direct ways Obamacare will impact work comp, there are a host of indirect ways it will – some of which are obvious, many rather subtle. I’ll explore the 8 “indirect impacts” over the next couple of weeks, but we’ll begin with a bit of table-setting.
First, recall that worker’s comp is tiny. Compared to the total US health spend of $2.6 trillion, comp’s $30 billion is just over 1 percent. The implications are clear – we are the flea on the tail of the dog, and a mighty big dog at that.
Second, while there is no direct impact on workers’ comp, there are a couple things in PPACA that affect occupational disease – some changes to the feds’ Black Lung program, and “LibbyCare”. The Black Lung changes are rather obscure and relate to reinstating presumption of cause and widow’s benefits provisions. Libby Care is a bit more complicated.
Some background is helpful. In the Senate, PPACA fell under the jurisdiction of the Finance Committee. The chairman of the Senate Finance Committee, Max Baucus, hails from Montana. Libby is in Montana, and Libby is the site of massive asbestos mining and manufacturing operations, and an attendant public health disaster. Not only were workers affected by asbestos-related illness, but residents in and around the town have also been harmed.
Briefly, Libby Care is the assumption by Medicare of the responsibility of providing care to Libby residents affected by asbestos and related illnesses/conditions. Victims will also receive special home care, pharmacy, medical device, and other services. The details are in Section 10323, Medicare Coverage for Individuals Exposed to Environmental Health Hazards.
While some might argue that Libby Care is the first step in some sort of federalization of workers’ comp, that is far-fetched at best. In fact, this is a powerful politician’s use of that power to serve a specific constituency; a one-time fix to a specific ‘problem’. That’s not to say that the work comp industry has done a good, or even passable, job in addressing occupational disease, but the Libby Care Amendment isn’t an attempt to Federalize management and treatment of occupational disease.
Color me a cynic if you will, but my sense is the Manager’s Amendment (technical term for the Libby Care language) isn’t so much the ‘camel’s nose under the tent’ as a political move by Sen Baucus (D MT) to curry favor and win votes.
Here’s why.
1. The Amendment requires a site be designated a “Public Health Emergency” by the Secretary of HHS. To date, Libby is the only site so designated, and the requirements for designating any site as a Public Health Emergency are stringent indeed.
2. The provision covers care for all affected residents and employees, not just workers. This is clearly far beyond ‘occupational’ and is much more of a public health issue than a work comp one.
3. Care is to be delivered through the Medicare system. This will require allocation of additional funding for each new site, something a cash-strapped CMS is unlikely to encourage.
Finally, PPACA funding includes about $20 billion from a medical device excise tax of 2.3%. This may add a few pennies to workers’ comp medical costs – but remember a) medical devices are just a few percent of WC medical costs, and b) markup on these items is already so high that another couple percent isn’t going to move the proverbial needle. While the device industry is lobbying its brains out to get this repealed, claiming it will cost jobs, hamper innovation, and bring asteroids crashing down on our heads (well, perhaps not that), a dispassionate analysis indicates this is a non-event.
Next up – the impact of increased group and Medicaid insurance coverage on workers’ comp…
Immigrants Contributed An Estimated $115.2 Billion More To The Medicare Trust Fund Than They Took Out In 2002–09 – that’s the headline from a piece in Health Affairs this month.
“immigrants may be disproportionately subsidizing the Medicare Trust Fund, which supports payments to hospitals and institutions…In 2009 immigrants made 14.7 percent of Trust Fund contributions but accounted for only 7.9 percent of its expenditures—a net surplus of $13.8 billion. In contrast, US-born people generated a $30.9 billion deficit…
Most of the surplus from immigrants was contributed by noncitizens [emphasis added] and was a result of the high proportion of working-age taxpayers in this group. Policies that restrict immigration may deplete Medicare’s financial resources.”
When one considers that birth rates among citizens are declining, and thus there will be fewer young working folks to support us aged people, the current anti-immigrant/nativist stance starts to look a little problematic.
Fact is, Medicare and Social Security depend on contributions from working age people; if we drastically restrict immigration and deport all undocumented aliens those two programs will be in dire financial straits much sooner than anticipated.
Conversely, a more “open” policy would go a long way toward reducing the strain on Medicare and SS.
Just saying.
Obamacare is going to raise rates by 88% in Ohio while California officials think health reform has “hit a home run for consumers.” As these are the only two large states with published rates (not that I don’t love and respect Vermont), we’ll focus on OH and CA.
(For the quick net-net, see the last paragraph)
As Jonathan Cohn points out, this is really an apples to grapefruit comparison. In order to accurately assess the cost differential, one has to do an actuarially accurate comparison.
Alas, I can’t find any that are credible; Ohio’s doesn’t factor in benefit design differences or the impact of no medical underwriting and fewer age bands; there are several other factors that affect what consumers will actually pay.
First – this only affects people who get coverage thru the exchanges. That’s about 14 percent in California. Most get insurance thru their employers, Medicaid, or Medicare, so they are unaffected.
Second, a LOT of people will get subsidized coverage, so what they pay will be less – sometimes a lot less – than the advertised price. In California, about half of those getting benefits from the Exchange will get coverage at a lower cost; a 40 year old who makes just under $24,000 a year will get very good insurance at $90 a month (Health Net Silver plan). (I know, taxpayers, hospitals, drug companies, and insurers will pay for those subsidies, but most of the press has been focused on what the insured’s cost will be, so we’ll focus on that)
Third, it’s NOT just the cost of the insurance, it’s the cost of care – premiums and out-of-pocket expenses. The benefits covered by the Exchange plans are much richer than the lowest-cost plans now offered in many states. For example, the individual Bronze plan in Ohio has an out-of-pocket cap of $6,350, compared to UnitedHealthcare’s Saver 80’s $13,000 max out of pocket. But the Saver 80 doesn’t cover maternity, vision, mental health care, drugs or office visits (except for very limited wellcare visits). So consumers who pay less in premiums for today’s Saver 80 than tomorrow’s Bronze plan will spend much more out of pocket, far outweighing any premium savings.
Fourth, costs for younger people will likely be higher under the Exchange, while costs for older folks may well come down. That’s a function of the reduced number of “age bands”; insurance-speak for charging us older folks more because we are worse risks than you young pups.
Fifth, because medical underwriting is banned under Obamacare, many individuals who can’t get coverage at any price today will get coverage tomorrow. Today, many folks with a history of heart disease or cancer or other serious conditions can’t get any coverage in some states, and only at incredibly high prices in others – due to pre-existing medical conditions. For those people, any conversation about higher costs is irrelevant, because no one will sell them insurance, or if they do it will be at rates unaffordable to anyone but the top 0.1%. So, if you have high blood pressure, a family history of heart disease or cancer, a BMI above an acceptable range, lupus or diabetes or high cholesterol or asthma or depression or any of dozens of other “conditions”, you will be able to get coverage next year – at the same price as anyone else your age.
Here’s the net.
For older folks, benefits will likely be richer, out-of-pocket expenses and premiums lower. Younger people will likely pay more for better coverage than they have today.
There’s much confusion about the “costs” of Obamacare, with some opining that health insurance costs will explode and others citing recent data indicating the opposite.
This is a blog post, and therefore I won’t write, and you don’t have time to read, a comprehensive overview. So, here are the highlights.
1. The law requires insurers to sell only standardized benefit plans; one reason for this is to prevent plan-design-based “underwriting”; today, health plans can use benefit design as a way to encourage sick people to go elsewhere and healthy people to sign up.
2. In some instances, the plans some people have today are much less generous than even the lowest plan offered thru the Exchanges. Thus, those people with very high deductible/low benefit plans will see a big increase in cost. However, their benefits will be much better.
3. The new law significantly restricts underwriting practices; charging higher prices based on age, pre-existing conditions, sex, and other factors is limited or banned. Thus folks who are very young and healthy today are likely to pay more – in some cases a lot more – while older and sicker people will likely pay less under ACA.
4. Employers that have health plans today are not going to see much change as their plans are grandfathered in as long as they don’t significantly reduce benefits.
So, what about costs?
“Rate shock” is the term used by some to describe the big increase in insurance prices due to the mandated benefits under ACA and elimination of pricing differentials based on age etc. There’s been a lot of speculation about pricing, but so far this has been mostly speculation – except for those states which have set up their own exchanges and negotiated pricing with insurers that will offer plans on those exchanges.
BTW, only about 2.5 percent of Americans will get coverage thru the exchanges next year, so all this babble about rate shock and the efficiency of exchanges is somewhat overblown
California published rates that were significantly lower than projected; the blog-o-sphere immediately responded with yelling headlines based on carefully-selected facts that supported their ideological positions.
Here’s the net. Comparing costs via the exchanges to current published prices is an-almost pointless exercise; the benefits are different and there is underwriting today that will be illegal next year. I say “almost” because the rates for a “bronze level” plan in CA under the exchange are almost identical to those offered today for a similar plan. However, a quarter of those applying for plans today can’t buy at the published rate because they have health risks that result in higher costs.
That said, I’m a big believer in well-regulated competition. Insurers will figure out how to deliver lower-cost, higher-quality health plans – or they will go out of business. Many will offer plans with small provider networks – which is good. The prices published in California and Vermont are early proof of the power of the market. Some insurers will not adapt and will fail, others will flourish.
Lastly. ponder this. Where would we be without Obamacare? What would happen as health care costs continued to escalate and private insurers continued to risk-select? More uninsureds and ever-increasing costs as providers charge insureds more to cover the costs of treating those without insurance – or with insurance that doesn’t cover much.
What does this mean for you?
Obamacare has more than its share of warts. But the alternative – the continued health insurance death spiral – is much uglier.
Kudos to NCCI for devoting an hour at their annual issues symposium to a discussion of medical care and cost drivers provided by the Mayo Clinic’s Douglas Wood MD.
Woods noted – “If the entire country could achieve [quality improvement and cost reduction] results like the top ten states we could reduce spending by a third without reducing – and likely improving – quality.”
And that’s pretty much what ACA seeks to do, in its convoluted, politically-driven, sausage-making way.
Wood noted that we have to not “ration” but be “rational”. He reviewed the SGR (something that has been covered in detail in this blog) as a way to show that price controls do not equal cost (or quality) management.
As the “Choosing Wisely” campaign demonstrates, many common procedures don’t add any value. (about 5 of the 800 attendees have heard of this campaign…) This isn’t value defined as improved patient safety/better clinical outcomes/patient satisfaction, but rather functional health (sound familiar, workers’ comp folks?).
Which leads to ACA’s components intended to improve value delivered for dollars spent, focusing on reimbursement based not on per-procedure but episode-based payment – with a warranty for complications. Wood reviewed the basics of ACA (presentation here). About 19 states will have their own exchange, 25 will use the federal exchange, and the remainder will have a hybrid, or partnership arrangement. Some of the larger national insurers don’t want to participate, but may change their minds if lots of employers and individuals buy policies thru the exchanges.
Wood delved into several related topics, many of which are old news to the better-informed medical folks out there, but new news to most in the workers’ comp business. This included shared decision making, appropriate use criteria, and creating healthy communities.
Now, what’s all that got to do with work comp? ACA will help “make healthcare more affordable” was Wood’s initial statement, but beyond that he didn’t connect the dots; there are several potential impacts on workers comp (tight access to specialty providers, better health status of claimants, no need for WC payers to pay for non-WC conditions when caring for injured workers, etc.), none of which he noted.
On balance, an excellent presentation on PPACA, but no understanding of workers’ comp or how it will impact WC.
A few random observations and perhaps an insight or two.
Keynote speaker David Gergen noted this morning that the recent favorable news about the deficit and its impact on debt may well be counter-productive as it takes the pressure off Congress and the President to deal with the debt while investing in education and infrastructure. Soundbite – Mexico is investing more than we are in infrastructure.
Mexico.
Gergen also does not believe there’s going to be much progress in Washington over the next few years; Obama’s over-reaching post-election has come up against the newly-energized GOP’s belief they can wait him out and win the mid-terms. That reality, combined with the current crop of controversies, makes for a DC not focused on strategic issues such as long term deficit reduction, infrastructure, education – and therefore little of the important work will get done.
Long term, Gergen is much more optimistic, primarily due to American energy independence – lower energy costs and energy security will bring manufacturing back to our shores – and already is (Gergen didn’t have anything to say about the potential implications for climate change, a notable miss).
He is also a big fan of the millennial generation, citing their enthusiasm for helping others (a quarter of Spellman College graduates and a fifth of Harvard’s applied to Teach for America) and willingness to serve both in the military and other volunteer/low-paid-but-critically-important jobs).
A new book reports on the impact of financial austerity measures on public health, suicide rates, hospital admissions, and other measures of morbidity and mortality. The news is striking – countries that adopted severe austerity measures have seen rapid deterioration of citizens’ health status, while those that dealt with financial trauma in a more measured way avoided those consequences. In a piece in today’s NYTimes, they contrast two recent financial disasters – Greece and Iceland – and the impact of their austerity programs on public health.
Lest you think this has nothing to do with we Americans, think “sequester”. More on that in a minute.
Severe austerity measures in Greece have produced similar consequences for public health –
“Greece[‘s] national health budget has been cut by 40 percent since 2008, partly to meet deficit-reduction targets set by the so-called troika — the International Monetary Fund, the European Commission and the European Central Bank — as part of a 2010 austerity package. Some 35,000 doctors, nurses and other health workers have lost their jobs. Hospital admissions have soared after Greeks avoided getting routine and preventive treatment because of long wait times and rising drug costs. Infant mortality rose by 40 percent. New H.I.V. infections more than doubled, a result of rising intravenous drug use — as the budget for needle-exchange programs was cut. After mosquito-spraying programs were slashed in southern Greece, malaria cases were reported in significant numbers for the first time since the early 1970s.”
While Iceland’s more measured approach has had little impact on their citizens’ health status –
“Iceland avoided a public health disaster even though it experienced, in 2008, the largest banking crisis in history, relative to the size of its economy. After three main commercial banks failed, total debt soared, unemployment increased ninefold, and the value of its currency, the krona, collapsed. Iceland became the first European country to seek an I.M.F. bailout since 1976. But instead of bailing out the banks and slashing budgets, as the I.M.F. demanded, Iceland’s politicians took a radical step: they put austerity to a vote. In two referendums, in 2010 and 2011, Icelanders voted overwhelmingly to pay off foreign creditors gradually, rather than all at once through austerity. Iceland’s economy has largely recovered, while Greece’s teeters on collapse. No one lost health care coverage or access to medication, even as the price of imported drugs rose. There was no significant increase in suicide. Last year, the first U.N. World Happiness Report ranked Iceland as one of the world’s happiest nations.”
Which brings us home to the US.
Sequestration’s impact on public health has been well-documented. What I find really troubling is how fast Congress and the President reacted to air traffic delays – it took them less than a week – compared to their total inactivity on Head Start, addiction treatment, inoculations, and staffing cuts.
Good to know we abide by the Golden Rule:
He who was the Gold, rules.