Medical costs are rising much faster in workers comp than in group health. Over the last ten years, WC medical trend has been going up more than twice as fast as overall medical inflation. Medical is now almost 60% of claims costs and is projected to hit 70% within ten years.
Why?
Simple, really. Workers comp payers just don’t get it. They don’t understand that medical drives everything. Sure, they may pay it lip service, may ‘think’ they are controlling medical by implementing discount-based PPO networks, bill review, and case management/UR, but these programs have been in place for years – and medical trend has increased during those same years.
If the industry doesn’t figure it out, they will go the way of the group health indemnity payers – the Home Life’s, Phoenix’, Mutual of Omaha’s, Travelers’, and Met Life’s. These insurance companies and their competitors dominated the group health industry in the eighties. To these insurance companies, ‘medical’ was a line item on a loss run, a cost of doing business, a black box to be addressed with ‘cost containment’ programs.
Now, almost without exception, these big insurers are out of the health business, killed off by HMOs who understood that their business was not insurance, but health care.
We are now at that point in workers comp. Most of the senior people in workers comp payers don’t understand that they are in the medical business. They think they are insurance companies that prosper by risk selection and financial wizardry. They evaluate their managed care programs by network penetration and savings below billed charges, by denied procedures and slashed bills.
They are saving themselves to death. Instead of bill reductions, payers should be looking at cost per claim. Replace network penetration with physician performance evaluation, based on total outcomes. Stop looking at denied procedures and start identifying the providers who do a great job, send claimants to them, and leave them alone.
What is scary is that many in the industry think they are making progress. They are plodding deliberately along, studying, evaluating, debating, discussing, re-organizing, considering, meeting, presenting, recommending.
Just like the indemnity insurance companies did right up until United HealthCare ate their lunch.
What does this mean for you?
In ten years, many of today’s largest workers comp payers will be out of the business.
How about you?
Feb
12
I couldn’t agree more. The issue is that most of the large payors are
run by old claims folks, and the future is even worse as more are being
replaced by those who grew up in claims other than WC.
Joe, for once I could not agree more with your analysis. You are dead on! The other fundamental problem here is not just in how to analyze those providers that outperform others in their specialty, but in how to FORCE the case managers and adjustors to refer to those providers. Until we figure out the referral piece of the pie, there will be no true change.
Joe, this is one of your most prophetic, incandescent postings. I will struggle to move it further down the path. Let’s look at pain management.
There are four components of a successful pain intervention. when the four components are in sync, the treatment of pain becomes more effective, a lot more transparent, and a lot more credible.
The WC industry focuses on only one component — the only one that has a “savings” play — and it effectively fights the others. It is saving itself to death.
The one insurers focus on is medication pricing, through PBMs. Now PBMs can do more than manage pricing, but the insurers don’t ask for more and in any event the business model of the PBMs don’t incent the PBMs to deliver more.
A second component is patient behavioral management. This ranges from controlling behaviors that clearly signal and reinforce addictive lifestyles, such as smoking, to coping problems that can be addressed through counseling. Insurers have shown little taste for supporting programs to address these behaviors. Many adjusters actively disallow treatment for behavioral issues.
A third component is matching patients with the right interventions. Pain related interventions vary enormously, and patient matching is critically important. Insurers have shown little taste for ensuring good matches. This is a role that the case management community has largely ignored, amazingly.
A fourth component is medication management — applying quality controls to the hugely influential and expensive drug side of pain treatment. PBMs do not improve quality controls. They process bad medication just as sublimely as they do good medication. Medication management for insurers means making sure that the medication program for a patient is always on target, not allowed to drift, as many doctors allow to happen. Half of medication programs are significantly askew in some manner.
Thank you for this for this enlightened and succinct statement. It is exactly aligned with our position and the reason we use medical analytics to identify and monitor best practice providers in workers compensation.
I agree with the first paragraph and following single sentence. What “payers” don’t seem to get is that their relationship with their workers drives everything, inlcuding W/C costs. Pre-injury management, including job training has more to do with total costs than any post-injury expenses. Until employers learn to increase profits through better training, and delightfully accept lower accidents and W/C costs as a bonus, I fear the trend will continue.
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