Author: Joe Paduda

Dec
29

PC Industry Profits in 2004

Posted by Joe Paduda on Wednesday, December 29th, 2004 | Comments

Best’s has released their latest report on the profitability of the Property and Casualty insurance industry. The net is 2004 has been a very good year, despite the large number of catastrophic events most notable of which were the four hurricanes that devastated the southeastern US.
The industry appears to have been profitable on an underwriting basis to the tune of over $4 billion for the nine months ended 9/30/04. This is a very strong performance, as the industry typically loses money on an underwriting basis, relying on investment income (from investing premiums in debt and equity instruments) to deliver profits.
If not for the estimated $20.5 billion in covered losses from the hurricanes (most of which was incurred by US insurers), 2004 would have been a stupendously profitable year. But, as one wag put it, that’s why they call it insurance.
This silver cloud has a grey lining. Historically, senior management in the P&C industry has a pathologic aversion to profits, which they demonstrate by cutting premiums and writing lots of bad business whenever they start to make lots of money. Expect this condition to perpetuate itself in the new year. In fact, Best points out that it may already have started…
“(the) industry’s operating performance measured by return on revenue improved to a healthy 10.3 percent as of nine-month 2004 results, up from 8 percent in the comparable 2003 period. However, operating results moderated from the 13.8 percent return on revenue reported for the first six months of 2004 due to reduced underwriting income…”

Dec
29

WC pharma costs

Posted by Joe Paduda on Wednesday, December 29th, 2004 | Comments

HSA will be conducting the second Annual Survey of Prescription Drug Management in Workers’ Comp.
For those unfamiliar with this issue, here are a few factoids.
— Pharma costs are the fastest growing component of WC medical expense
— Pharma costs are now 12% of total WC medical dollars, up from less than 4% ten years ago.
— Last year’s survey indicated most payers were searching for answers, and most vendors were not supplying the answers payers wanted.
HSA conducted the first survey on drug costs in workers’ comp last year.

Dec
22

The myth of drug reimportation

Posted by Joe Paduda on Wednesday, December 22nd, 2004 | Comments

The panacea that is drug reimportation is finally getting its due. I’ve been wondering what the big hoopla is regarding “cheap” drugs from Canada and other foriegn nations. Sure, the Canadians and other countries use their monopolistic buying power to negotiate cheap prices from drug manufacturers, and some American consumers may be able to save significant dollars (barring a more significant decline of the US$) by piggybacking on those nations’ smart buying.
But on the whole, buying drugs from Canada is NOT an answer to the US drug cost inflation problem.
A just-published HHS study on the reimportation of drugs demonstrates that this “strategy” provides negligible savings.
Leaving aside the question of how a country that consumes 2% of the world’s pharmaceuticals can supply a nation that consumes over 50%, the real implication is clear – reimporting drugs is no solution. While it may be politically expedient, it is merely allowing US consumers to use the leverage of the Canadian government to buy drugs at a marginally lower cost.
Interestingly, the same US politicians that bought into the (at the time politically attractive) Medicare Drug bill also included provisions prohibiting the US government from negotiating with drug manufacturers. Thus, the politicians refused to allow the US government to employ the same “price lowering” tactics used by the Canadians, tactics that were delivering prices so attractive to voters that these politicians were in favor of allowing drug reimportation.
Have your cake, eat it too, and don’t get fat. Or in this case, please the big pharmas, protect the little guy, and thus preserve both campaign donations and votes. What a great country.
An excellent summary of the issues surrounding drug reimportation is provided by California HealthLine.

Dec
22

Prescription drug safety concerns

Posted by Joe Paduda on Wednesday, December 22nd, 2004 | Comments

A recent post on the HealthBeat blog concerns a 2002 survey of employees of the US FDA. The survey indicates many FDA scientists are concerned about drug safety after approved drugs were on the market.
The study found that fully 2/3 of FDA scientists “lack confidence in the agency’s process for ensuring drug safety…(and) Nearly one in five said they had been pressured to approve or recommend approval for a drug despite safety and quality reservations.”
Other findings addressed drug labeling concerns:
“Only 12% of scientists were completely confident that FDA “labeling decisions adequately address key safety concerns” while 30% were not at all or only somewhat confident”
and perhaps most troubling, internal political pressure to approve new medications:
“Nearly one in five scientists (18%) said that they “have been pressured to approve or recommend approval” for a drug “despite reservations about the safety, efficacy or quality of the drug.”
The full study, conducted by the Office of the Inspector General of DHHS, reports on potentially dangerous gaps in the approval and marketing of prescription drugs.
As pressure grows on the FDA in the wake of the Cox-2 fiasco (Vioxx and Celebrex to the layperson), it is likely this survey will get increased attention.
Of note, the present head of CMS (Center for Medicare and Medicaid Services, Dr. Mark McClellan, was formerly the Commissioner of the FDA.
McClellan was Commissioner from 11/2002 to 3/2004, so his tenure post-dated the survey.

Dec
21

FDA improvements

Posted by Joe Paduda on Tuesday, December 21st, 2004 | Comments

The HealthLawProf blog has an interesting post about the need for the FDA to set up an independent testing arm. The post opines positively about this idea and makes a solid case.
The blog cites a NYT article, and provides a good synopsis (brief and to the point).

Dec
21

Coventry – First Health deal passes key test

Posted by Joe Paduda on Tuesday, December 21st, 2004 | Comments

Coventry’s pending acquisition of First Health passed a key milestone with the Feds’ approval of the merger. This is now a “done deal”, not that there was much doubt it was going to happen.
News from sources familiar with First Health indicate that Pat Dills, Lee Dickerson, and Ed Wristen (FH senior leadership) will be departing the organization in the (very) near future. Art Lynch, present head of sales for FH, will remain on board, and will likely assume additional responsibilities.
One interesting tidbit related to this is the pending issues resulting from Coventry’s ability to access HealthNet contracts. Huh? Read on…
FH acquired the WC assets of HealthNet earlier this year. As part of the deal, FH received access to HealthNet’s WC contracts with their providers – this was perhaps the most attractive piece of the deal to FH, which had long been under pressure to improve California network results. Well, sources indicate that the FH-HealthNet contract does NOT include any change in control language, leaving HealthNet contracts (at least in theory) accessible by Coventry.
If these sources are correct, one has to wonder what HealthNet was thinking…rumors had abounded earlier this year about FH’s shaky future.

Dec
20

Avoidable hospital admissions

Posted by Joe Paduda on Monday, December 20th, 2004 | Comments

The Agency for Healthcare Reseach and Quality (AHRQ), recently published a study examining hospital admission patterns. The study indicates that a significant percentage of admits could have been eliminated if the patient had received appropriate care earlier.
It will be no surprise to faithful readers that there is significant variation across geography, with rates highest in the west. AHRQ theorizes that this is due at least in part to the greater distances people in rural areas have to travel to seek care; thus preventing them from receiving care earlier in the disease process.
Poverty, rural locations, and diagnosis are also key variables influencing the “avoidable admit” rate. There was much more variation for chronic than for acute conditions:
“Among the 10 chronic conditions, differences in admission rates between the lowest and highest income communities range from 76 to 278 percent.”
The report notes significant cost implications –
“Potentially preventable hospitalizations are a significant issue with regard to both quality and cost. During the year 2000, nearly 5 million admissions to U.S. hospitals involved treatment for 1 or more of these conditions; the resulting cost was more than $26.5 billion.1 While some hospitalizations were likely inevitable, many might have been prevented if individuals had received high quality primary and preventive care. Identifying and reducing such avoidable hospitalizations could help alleviate the economic burden placed on the U.S. health care system. Assuming an average cost of $5,300 per admission, even a 5 percent decrease in the rate of potentially avoidable hospitalizations could result in a cost savings of more than $1.3 billion.”

Dec
19

Source for PA WC info

Posted by Joe Paduda on Sunday, December 19th, 2004 | Comments

Robert Vonada, a judge in the Pennsylvania WC Office of Adjudication, publishes a blog on all things PA WC related. The topics tend to focus on legal and statute interpretation matters, as one would expect from a judge dealing with these issues on a daily basis.
Judge Vonada also notes developments in areas as diverse as back pain, WCRI reports on PA. If your job includes any responsibility for PA WC, put this blog on your favorites list.

Dec
19

Employer health premium increases

Posted by Joe Paduda on Sunday, December 19th, 2004 | Comments

As goes California, so goes the nation. Particularly bad news if the trend one is watching is health care. California’s health care premiums have just passed the $10,000 per family threshold, a level some experts think will finally lead to calls for significant change.
Don’t bet on it.
The frightening thing about this increase is it reflects a lower than expected trend rate of 11.4%…2003 costs were up a whopping 15.8%. When 11.4% is good news, you know we’re in trouble.
The study, sponsored by the California HealthCare Foundation and Kaiser Family Foundation, also covers national health care premium trends. And those numbers aren’t a beam of sunshine either.
The national health care trend rate is 11.2%. Since 2000, health care premiums are up 61%.
Sixty-one percent.
For those who are interested, a summary of the report presents the highlights, including employer contribution rates and trends, specific plan trend rates, and future cost projections. Make sure you are sitting down when you read this.