Nov

The Public Option in Workers Comp

Posted by Joe Paduda on Wednesday, November 4th, 2009 | Comments

Thanks to the good folks at Workers Comp Insider, I learned of an intriguing study conducted by Conning and Company that concludes (in part) that private work comp insurers don’t perform as well as public ones.
Here are a couple of excerpts from the article in Insurance Journal:
– 25 public and quasi-public workers’ compensation insurance plans perform better financially than the private market in a number of performance categories and at least as well when it comes to the bottom line.
– public workers’ compensation providers tend to have higher losses than the workers’ compensation insurance industry as a whole, they more than offset those losses with lower expenses, higher investment returns, bigger dividends to employers and better injury prevention efforts.
– through more stable reserves and superior investment income, state funds have managed to achieve operating income on a par with that of the workers’ compensation industry as a whole.
– Spurred by their mission that includes improving safety and their state’s economy, state funds blunt the impact of bigger losses through concerted loss prevention efforts. As Jablonowski put it, “They are able to convert the marginal and poor risk into something better.”
The public providers offer employers significantly higher dividends, which provide an incentive for businesses to adopt safety measures. These dividends can also create a competitive advantage and build customer loyalty, according to the study.
Congratulations to the good, hard-working, effective folks at SCIF in California, Texas Mutual, NYSIF in NY, the North Dakota state fund, Beacon Mutual in Rhode Island, and the rest of the state funds. While all is not perfect, and as Peter Rousmaniere has pointed out, often quite a distance from perfect, some of the findings of the Conning study are illuminating.
I’m also thinking the study should be carefully reviewed by Federal legislators, as the conclusions may help inform the discussion about the public option in health reform. I’d point to them to this quote:
“When you look at the entire insurance world, there are obviously insurance companies in the private world that do a great job of loss prevention control,”[the study’s author said] “But the unique thing about funds is that they all do it. Twenty-five of them and they all do it. So it’s not a random sample; it’s a sample that suggests that this group puts an emphasis on loss prevention control.”
That’s exactly, precisely what we need to do with health care – prevent preventable claims that lead to high costs and lousy outcomes.
What does this mean for you?
Once again, the health insurance world can certainly learn something from workers’ comp.

Oct

How horrible is Medicare?

Posted by Joe Paduda on Tuesday, October 27th, 2009 | Comments

Depends on who you ask. If you ask group practice administrators about how Medicare compares to the private insurance industry, it is pretty darn good – in several categories, Medicare Part B is rated higher than any other large payer.
That’s partly due to the lousy performance of some of the private insurers, but administrators actually rate Medicare’s responsiveness, transparency, prompt payment, and overall administrative functions highly.
Yes, you read that correctly.
On a five-point scale, with 5 the highest rating, the much-maligned and oft-decried public plan for the aged has an overall satisfaction rating of 3.6, with Aetna at 3.1 and UnitedHealthcare bringing up the rear at 2.5.
Medicare was considered the most timely responder to inquiries, with Aetna second and UHC at the back of the pack; the same standings hold for accuracy and consistency of the payer’s responses to questions, speed of payment (Medicare 4.1, Aetna 3.5, UHC 3.1), disclosure of payment policies, and claims appeal process (Aetna was excluded from the report).
Medicare doesn’t appear on the list of questions regarding satisfaction with the contracting process, except in the ‘willingness to disclose the fee schedule’ category, where it is again rated at the top. This isn’t surprising, as CMS is not engaged in ‘2-way good-faith negotiations’ nor do practices have ‘leverage during the negotiation process’. I don’t know if responders didn’t ask about Medicare or if Medicare was ranked at all; I’ll let you know when I hear back from the Medical Group Management Association (MGMA), the organization that conducted the study.
As with any study or survey, you can find data to support any perspective.
That said, the ratings of the health plans are generally consistent with those reported by the Verden Group, an independent firm focused on helping providers deal with managed care organizations.
Aetna received top marks for clarity of communications, and was rated the most ‘provider friendly network’ by respondents to the Verden Survey in 2008.
As the public option becomes possible once more, and opponents lament the inefficiency, lousy service, and incompetence of the faceless bureaucrats that run Medicare, it is helpful to know what the people on the other end of the transaction think.
If you listen to them, on a number of fronts, Medicare’s a darn sight better than most of the private insurers they have to deal with

Oct

A bit of sanity on Capitol Hill?

Posted by Joe Paduda on Wednesday, October 21st, 2009 | Comments

The Senate rejected the Medicare Physician Fairness Act rather resoundingly today, preventing a ‘fix’ that would have added a quarter trillion dollars to the deficit.
Senate Dems were trying to pass the bill separately from any overall reform bill, as combining the two would have pushed the total cost well over a trillion dollars over ten years – a figure that would, in all likelihood, doom the bill.
But an interesting coalition of all 40 Senate Republicans, Evan Bayh of Indiana, Russ Feingold of Wisconsin, Claire McCaskill of Missouri and Ron Wyden of Oregon – a pretty broad spectrum – voted no, killing the bill in a procedural vote.
This is good news. Not because we’re still stuck with the dysfunctional Medicare Sustainable Growth Rate mechanism, but rather because fully a dozen Dems stepped up to the plate and rejected a huge increase in government spending on an entitlement program. Lest my Republican readers get too excited, their party has yet to participate in any meaningful, helpful way in the discussion, and Minority Leader McConnell’s snarky comments today were yet another example of his inability to set aside petty, stupid, childish politics for the good of the country.
Here’s hoping that the rejection means we will actually, finally, seriously start talking about cost. This is where the GOP should show some leadership, which will require McConnell et al get a sudden injection of statesmanship. None of the bills currently before Congress – with the exception of Wyden-Bennett – reduce costs.
We should throw them all out, pass Wyden-Bennett, and get on with other matters.
Yeah, right, that’s really going to happen…

Oct

From Harry and Louise to Thelma and Louise

Posted by Joe Paduda on Tuesday, October 20th, 2009 | Comments

AHIP – did they jump or were they pushed?
I’m not pointing any fingers, but if I were, all ten would be pointed right at Bob Laszewski.
Yesterday Bob pointed out that AHIP could not possibly have screwed up any more than it did when it released the PwC ‘analysis’ of the Senate Finance Committee reform bill. Here’s how Bob put it.

When you are going to issue a report of the kind AHIP and PwC did–in terms of its intended consequences on a national political debate–you better be sure you can back-up everything you say in simple and unambiguous terms.
The ineptitude on the part of AHIP and PwC is startling. That either organization was not able to clearly and decisively defend their conclusion in the midst of the health care reform finals is one thing. That they couldn’t defend a conclusion that is generally right and consistent with common sense [emphasis added] is even more startling if not aggravating.
But then AHIP starts from way behind anytime it has tried to do anything in this town… there was the Congressional hearing this summer where three of their members told a House committee that they planned to continue retroactively canceling individual health insurance contracts even when they found only inadvertent and immaterial errors on the original applications.
Then, of course, there was the silly $2 trillion cost savings offer they spearheaded at the White House this spring, which Republican Chuck Grassley dismissed as nothing more than “fairy dust.”
When you have that kind of track record and lack of credibility and you want to issue a game-changing report you better have every duck in line. I swear, if AHIP issued a press release on a crystal clear day telling DC the sun was shining no one would believe them [emphasis added].

But you can’t blame Karen Ignani alone – her board, which includes CEOs of pretty much all the big and most of the medium-sized health plans, obviously played a big role in developing AHIP’s ‘strategy’, such as it is. There are some really bright and capable folks on that board, many of whom are likely stunned at the blindingly inept way AHIP tried to make their point – a point that I absolutely agree is entirely valid, and for which there is ample historical support.
Alas, the correctness of their opinion has been overwhelmed by the way it was ‘presented’ – a bucket of cold slops dumped over the heads of the Democrats who were (at the time) warming to the idea of sending forty million more paying customers their way.
Unless…unless Karen Ignani is a secret single payer zealot, the only explanation is they just woefully miscalculated – or the accelerator got stuck…

(much as I’d like to take credit for the Harry and Louise to Thelma and Louise, I stole it from someone on the toob)

Oct

A Quarter Trillion Dollars – from where?

Posted by Joe Paduda on Tuesday, October 20th, 2009 | Comments

That’s what it is going to cost to ‘fix’ Medicare’s physician reimbursement problem. A bill introduced into the Senate, and now scheduled for a vote within days would eliminate the Medicare Sustainable Growth Rate (SGR) program (which determines, or is supposed to determine, what docs get paid by the Feds for procedures) while adding another quarter trillion dollars to the program’s deficit.
Really.
The Medicare SGR formula/process was set up six years ago to establish an annual budget for Medicare’s physician expenses. Each year, if the total amount spent on physician care by Medicare exceeded a cap, the reimbursement rate per procedure for hte following year would be adjusted downward.
And for the last six years, reimbursement – according to SGR – should have been cut, but each year it was actually raised, albeit marginally. The result is a deficit that is now almost 250 billion dollars, a deficit that we’\re carrying on our books, and, by the way, is not addressed in the Senate Finance Committee’s reform bill. In order to pass, the bill, S 1776, will have to get at least 60 Senators to agree to waive a budget point of order because the measure is not offset in the budget – that is, there isn’t a cut of a quarter trillion in spending elsewhere in the budget, so the bill, which goes by the feel-good title of Medicare Physician Fairness Act of 2009 (MPFA) will add a quarter-trillion bucks to the deficit.
Physicians are, not surprisingly, all in favor of the bill – even if there are no details on what the ‘new reimbursement’ methodology or levels will be. Certainly not in the bill itself, which takes less than a minute to read. If you’re looking for what replaces SGR, and how Medicare will control costs, don’t look in the bill – it isn’t there. It looks like the docs think anything is better than the SGR; at least that’s what their thinking appears to be today.
But what about the cost? Where are we going to come up with a quarter trillion dollars, while adding another eight hundred billion or so for the big health reform bill? Does the MPFA have some magic bullet, a money tree, a golden goose provision?

Sources on Capitol Hill tell me this isn’t just a Democratic measure, but one that will likely garner perhaps a half-dozen Republicans voting ‘aye’. Both Harry Reid (D NV) and Minority leader McConnell have agreed the Senate will proceed to vote on S. 1776 next week.
Well, what can you expect from a body that voted in favor of Medicare Part D, and as a result added $8 trillion to the Medicare unfunded liability? This is a measly quarter-trillion, less than 3% of the Part D boondoggle.
Jeezus H Flippin Christmas. This is nuts.

Oct

Anti-trust and the Health Insurance Industry – what’s this all about?

Posted by Joe Paduda on Monday, October 19th, 2009 | Comments

Last week the Senate Judiciary Committee held an initial hearing aimed at removing some of the health insurance industry’s anti-trust exemptions. The hearing, entitled “Prohibiting Price Fixing and Other Anticompetitive Conduct in the Health Insurance Industry”, may be a reaction – at least in part – to the health insurance industry’s public (and private) assault on health reform legislation.
And over the weekend, President Obama added his considerable weight to the call for a review of the industry’s anti-trust exemptions.
To be sure, AHIP’s public slam of the Senate Finance Committee did nothing to strengthen relations with Democrats, and the hearing, (although put on the Committee’s schedule on October 2, well before the AHIP report was released), was a fine opportunity for Senators outraged by AHIP’s action to up the ante.
Like pretty much everything having to do with health insurance and reform and Washington, this isn’t simple, and I certainly don’t pretend to understand the details. But as near as I can make it out, here’s what is causing heartburn among some.
Here’s Julie Barnes’ synopsis: “There are three sets of laws involved here; 1) the federal antitrust laws; 2) the state laws that regulate the insurance industry; and 3) the federal law passed in 1945 called the McCarran-Ferguson Act. The antitrust laws promote competition, and states have a long tradition of regulating insurance practices for their citizenry. The McCarran-Ferguson Act doesn’t regulate insurance or prohibit certain anticompetitive behavior, but it does allow federal and state governments to regulate insurance and makes clear when antitrust laws do and do not apply to the insurance industry.”
The issue is the industry’s exemption from the McCarran-Ferguson antitrust laws (which is under the Judiciary Committee’s purview). Providers have long contended that it is unfair for the payers to be exempt from these laws when providers are not; this, providers contend, is unfair. I’m not sure I buy that argument, as provider consolidation has been continuing regardless of the regulatory environment, and the negative effects of that consolidation were clearly illustrated in the Boston Mass market.
McCarran-Ferguson exempts insurance industry activities that: (a) constitute the business of insurance; (b) are regulated by State law; and (c) don’t constitute an act of boycott, coercion, or intimidation. According to Barnes, the crux is the ‘business of insurance’ standard – and the Supreme Court has set up a test to determine if an activity is the business of insurance – (1) whether the activity has the effect of transferring or spreading a policyholder’s risk; (2) whether the activity is an integral part of the policy relationship between insurer and insured; and (3) whether the activity is limited to entities within the insurance industry.
Over the years, the exemption has been tightened considerably – in particular mergers and acquisitions and provider contracting activities are generally not exempt, so anti-trust laws and regulation apply.
So what happens if Congress repeals the exemption? Way too early to tell, but undoubtedly even the whisper of this possibility is most unwelcome in health plan executive suites.
If you look at market concentration, there’s no question the health insurance industry is not exactly competitive; 94% of insurance markets are ‘highly concentrated’. Here are a few factoids using 2005 data; if anything there has been more market consolidation, so these percentages are even higher today…
– in 96% of markets, at least one insurer has share higher than 30%
– in almost two-thirds of the markets, one insurer has share greater than 50%
– in a quarter of the markets, one insurer has share at or above 70%
But repealing the industry’s exemption is not likely to significantly increase market competition.
Which leads us back to the original question – Why?
My sense is this is a ‘OK, you want to mess with us?’ statement by the Senate Democrats. It is a very loud, and very close, shot across the bow of the industry intended to let them know in no uncertain terms that intransigence will be very, very costly.
What does this mean for you?
Watch to see how AHIP et al react. If they appear somewhat chastened, don’t be surprised.

Oct

The Baucus bill is out of committee…and that means exactly what?

Posted by Joe Paduda on Thursday, October 15th, 2009 | Comments

Over the last few weeks, all the media focus (as well as here at MCM) has been on the Senate Finance Committee’s health reform legislation, aka the Baucus bill. Now that the eponymous bill has been voted out of committee, it is no longer the only game in town, but rather one of six.
As the most ‘conservative’ of the six bills, it is highly likely the final version’s details will reflect a less ‘conservative’ approach, perhaps with some version of the public option, which the other Senate and all House versions contain.
First, the Senate is going to compare, contrast, and possibly combine it with the bill voted out of the Senate Health Education Labor and Pensions (HELP) committee – the one formerly chaired by the late Senator Kennedy. Among the major differences between the two; the HELP bill includes a public option; phases in the mandate penalty of $750 immediately (Finance doesn’t get to $750 till 2017); has a tougher employer mandate with higher penalties; expands Medicaid to individuals earning up to 150% of the Federal Poverty Level (Finance is 133% and is delayed till 2014); and the HELP bill does not contain the excise taxes that are included in Finance’s effort.
The differences with the House Tri-Committee bill (HB 3200) are even more stark (no pun intended).
HB 3200 has a much stiffer individual (2.5% of adjusted gross income up to the cost fo the average plan premium thru the Exchange) and employer mandate (almost all employers would have to contribute at least 75% of the cost of individual/65% family coverage or pay 8% of payroll into the Exchange; and offers up to 50% premium credit for smaller employers to help pay for insurance; increases Medicaid reimbursement to 100% of Medicare (Medicaid is usually significantly lower). HB 3200 also sets up an Insurance Exchange, is funded thru a higher tax on families making over $350,000 annually, increases rebates from drug companies, and significantly reduces Medicare Advantage subsidies. (there are several version of this bill, see the Kaiser site for additional detail).
CBO estimates HB 3200 will cost slightly over a trillion dollars over ten years, significantly more than Finance’s $850 billion.
These are by no means the only differences; they do serve to illustrate the yawning gap between the Finance bill and the other major bills before Congress.
So, what’s going to happen?
Can it get thru the Senate is the standard by which all revisions and edits will be judged. Just a week ago, that made it highly likely the final bill would look much like the Finance version, but the release of the PwC report by AHIP may have given potentially-wavering Senate Democrats the push they need to adopt some of the provisions from HELP and HB 3200. Democrats are outraged by what they (I think somewhat unfairly) view as a last-minute stab in the back by the health insurance industry, which heretofore had been publicly in favor of reform.
Democrats are also keenly aware that a failure to pass health reform will be a political disaster.
I’ve long doubted the votes are there to pass reform, but of late the odds are moving – slightly – in favor of reform.
The Kaiser Foundation has an excellent tool that enables side-by-side comparison of all of the bills, proposals, and suggestions; the NYTimes has a comparison of the several bills before Congress here.

Oct

What you missed on MCM

Posted by Joe Paduda on Wednesday, October 14th, 2009 | Comments

For at least a couple weeks, many of the 1642 people who subscribe to MCM didn’t receive notices when new posts went up. It looks like we’ve figured out the problem (electronic fingers crossed), so here’s what’s been on the blog while we were in a technical hiatus.
Yesterday I opined that the recent AHIP/PwC report is more right than wrong; the report misses a lot – and much of what it misses is less than favorable to the report’s funders – health insurance companies. But the central point is indeed accurate; without a tough, enforceable universal mandate, you can’t force insurers to take all comers without charging more for higher risks or excluding them altogether.
Last week was devoted to the recent report by the state of Texas’ Research and Evaluation Group’s report on workers comp networks. The initial post generated a good bit of dialogue with the report’s authors wherein they clarified a confusing (at least to me and several large payer clients) statement; the follow up post detailed the issue, adn explored another concern; “the report didn’t note that three of the networks are provided by one company – Coventry, which also administers a network that is likely underpinning much of the ‘non-network’ category.”
The ‘Texas Week’ concluded with a post on the larger issue with the report – the fallout in workers comp “C” suites, and the potential damage to managed care.
Two posts the week before covered the AmComp meeting in NYC, with one lamenting the lack of concern about medical costs among work comp execs and another summarizing a talk by industry veteran John Burton.
Before I got all wrapped up in workers comp, i handicapped the health reform odds, saying “If the Baucus bill comes out of committee with unified Democratic support, that tells a lot. And if Snowe signs on, that’s even more telling…The Democrats are almost all-in on health reform; at the end it will come down to some Dems deciding if they’re better off holding their nose and voting in favor or handing the victory to the GOP.”

So far, looks like those Dems are indeed holding their collective nose.
This was preceded by a confession – I’m one of those nerds that actually reads Health Affairs – the latest issue has a great piece on the primacy of price in health care inflation. I don’t necessarily agree, but the authors make a compelling case.
It appears that the problem started just before the end of September; readers can always check the main page, sort by category, or type in key words to find specific posts.
Thanks for the forbearance, and here’s hoping the gremlins are back in wherever gremlins live..

Sep

Handicapping health reform

Posted by Joe Paduda on Monday, September 28th, 2009 | Comments

The odds that comprehensive health reform will pass are up – a bit. Word from Washington is the Democrats in the Senate Finance Committee are ‘coalescing’ around Baucus’ original bill’s provisions. While there’s been much discussion, few of the 564 amendments have passed.
While the public option will be offered up as an amendment, odds are it won’t become part of the Finance Committee’s bill – but may be added when that bill is combined with the Senate HELP Committee’s version later on.
The Democratic strategy appears to be focused on maintaining unity, while peeling away the one Republican Senator (Snowe, ME) that has voiced some support for Baucus’ bill. The White House is working every angle, including schmoozing Snowe’s fellow Maine Republican Senator, Susan Collins. Whether they can keep the Dems together is anyone’s guess, but with White House Chief of Staff Rahm Emanuel focused on this issue, it would be difficult indeed for the Democrat who wavers.
Meanwhile, the for-the-moment-still-unified GOP is facing dissension among the ranks of traditional supporters. Big business, and small business as well, appear to be rallying behind the Baucus bill, due in large part to the lack of an employer mandate. What’s pushing the usually-reliable GOP base to back reform is a recognition that health care costs are out of control – one statistic released by the Business Roundtable has focused attention on the issue: “the cost to insure a single employee, including the person’s own out-of-pocket expenses, would jump to more than $28,000 a year by 2019, from around $11,000 a year now.”
Even the US Chamber of Commerce said nice things about Baucus’ effort, notably that the bill: “will actually…get health-care costs under control.”
“The reality with the business community is that we want reform, while some Republicans want to stop this train and start over,” said Bruce Josten, the chamber’s chief lobbyist. “That is just not going to happen.” [emphasis added] (WSJ)
THIS IS BIG NEWS.
The traditionally fractious Dems are banding together, while a critical GOP constituency is breaking with the Party.
What to watch for
If the Baucus bill comes out of committee with unifed Democratic support, that tells a lot. And if Snowe signs on, that’s even more telling.
But remember, nothing gets passed without sixty Senators voting ‘aye’. And right now there are exactly 60 Democrats in the Senate. The two Senators from Maine are possible supporters, but there may be defections among the Dems.
What’s going to be the most important single factor? Likely the political calculation on the part of the Democrats, many who clearly remember the disastrous fallout after the failure of the Clinton plan, when the GOP won control of both Houses for the first time in forty years. The Democrats are almost all-in on health reform; at the end it will come down to some Dems deciding if they’re better off holding their nose and voting in favor or handing the victory to the GOP.

Sep

The role of price in health care cost inflation

Posted by Joe Paduda on Friday, September 25th, 2009 | Comments

I’ve been accused of being one of the few that actually reads the bimonthly journal Health Affairs. Well, guilty as charged, although the pub has a lot more than a ‘few’ devotees. What it does particularly well is challenge core beliefs.
The latest edition focuses on bending the cost curve – a phrase likely to inspire William Safire to dissect it in detail in one of his discourses on language. The idea is to find ways to reduce the rate of growth in health care costs, and this edition has plenty of ideas.
One of the most thought provoking articles contends that price controls are “central to curbing cost growth”. I’m going to comment on the article next week in detail, but here are a couple of points made by the authors.

“out of pocket spending in the United States is roughly twice the OECD median. If some Americans have “Cadillac coverage,” than most workers in Germany or France must have “Mercedes coverage” – and they would likely view many American insurance policies as “Yugo coverage.”
patients in OECD countries average more hospitaldays, more physician visits, and greater consumption of prescription drugs than American patients do. Higher US spending is not primarily explained by greater volume of services.
analyzing data from Massachusetts, David Cutler and colleagues found<, for example, that virtually all of the savings that managed care plans achieved for heart disease treatment, relative to indemnity insurance, came from price reductions./li>

I’ve long believed, and still do, that utilization is a more significant cost driver than price. I’ve seen this time and time again – in data on physician in-office utilization from CMS (up 11% in 2006), in NCCI’s analysis of workers comp prescription drug costs, in analyzing client physical medicine experience, in the correlation between workers comp medical expenses and state fee schedules – or rather lack thereof, and a host of other examples.
What doe this mean for you?
The authors make a compelling case – not just for price as a cost driver, but to always question your assumptions.

Category: Health Policy