Dec

What happens without a mandate?

Posted by Joe Paduda on Wednesday, December 15th, 2010 | Comments

That depends on whether the rest of the reform bill survives without that clause. I’ve heard from a couple of sources that the Accountable Care Act doesn’t include a severability clause. If that is true, than the entire bill may be thrown out if the mandate is ruled un-Constitutional.
That’s for others steeped in the details of the ACA and law to figure out. As I’m sure they will.
(Lest we get all excited about the Virginia case, note that there have been about twenty suits filed so far re the ACA, 12 have been dismissed and in two other cases both judges ruled the mandate is Constitutional.)
If the rest of the ACA does survive the demise of the mandate, we’ll have a very, very interesting situation. Health insurers will be required to take all comers, the rates they can charge will be highly regulated, benefit plans consistent across most insurers and employers, and there will be no upcharging or medical underwriting or discrimination based on age, pre-existing conditions, or sex.
It would be tough to design a better recipe for disaster for insurers.
Nonetheless, that’s what we’ll be faced with if the mandate is removed; the rest of the Act will become law, and individuals and employers would – at least theoretically – be able to buy insurance when they need health care, and drop it when they don’t.
There’s already a precedence for this – in the Massachusetts experiment, loss ratios in the individual market for at least one health plan were about 600%.
The White House recognizes the problem – in a response to the latest court challenge to the mandate that is notable for its focus on individual responsibility for the costs of their care:
“However, unless every American is required to have insurance, it would be cost prohibitive to cover people with preexisting conditions. Here’s why: If insurance companies can no longer deny coverage to anyone who applies for insurance – especially those who have health problems and are potentially more expensive to cover – then there is nothing stopping someone from waiting until they’re sick or injured to apply for coverage since insurance companies can’t say no. That would lead to double digit premiums increases – up to 20% – for everyone with insurance, and would significantly increase the cost health care spending nationwide. We don’t let people wait until after they’ve been in a car accident to apply for auto insurance and get reimbursed, and we don’t want to do that with healthcare. If we’re going to outlaw discrimination based on pre-existing conditions, the only way to keep people from gaming the system and raising costs on everyone else is to ensure that everyone takes responsibility for their own health insurance.”
Whether the President and/or Congress would try to overturn the ACA, or remove the underwriting language is to be determined. While the White House’s statements to date acknowledge the issue, AHIP et al have few friends left among Democrats, and those friends would be hard pressed to convince the Administration to be nice to an industry that has been anything but to the Democrats.

Dec

Health plans’ two-faced approach

Posted by Joe Paduda on Tuesday, December 14th, 2010 | Comments

According to AHIP, over the last ten years, private insurers’ hospital costs in California are up 159%.
One hundred and fifty nine percent.
Instead of an intelligent and helpful discussion of the causes and impact, there’s an all-too-familiary orgy of finger-pointing and ‘oh yeah, sez you’ as hospitals blame insurers and insurers wail about the unfairness of it all and everyone complains about Medicare.
Time to call Whine-one-one…

Here’s what we should be focusing on.
1. Clearly (some) private insurers and health plans cannot – or more likely will not – do anything to control hospital costs. For all their bitching and complaining, this is yet more evidence that health plans have not fulfilled their primary mission – control costs and deliver quality care.
Here’s how a healthplan exec put it: “The report’s focus on California hospital costs just reinforces what we have been saying the past couple of years. Steep increases in medical costs must be addressed. Our country and state cannot sustain this kind of growth,” said Patrick Johnston, president of California Association of Health Plans.
No kidding. I don’t get the AHIP strategy – bitch about government intervention then complain that outrageous health care cost inflation isn’t your fault.
2. Private insurers are clearly asking for help from government – the same government they pillory in their multi-gazillion dollar PR and lobbying campaign as too incompetent to run a health plan.
3. Controlling costs will require health plans to build small, tight, highly-managed networks of excellent providers, an approach most seem quite unwilling to pursue, citing the ‘managed care backlash’ from the late nineties. (there are a few notable exceptions)
Execs, that was then, and this is now.
4. If health plan execs think their life is tough, they should sit behind the desk of a work comp claims exec. Work comp is getting murdered by facility costs; many payers would kill for a 159% increase over a decade.
Last week Kaiser Health News reported several large health plans appear to be frustrated with AHIP and are looking to set up their own DC lobbying entity – albeit one that is a ‘subcommittee’ within AHIP. Evidently they feel the smaller health plans and not-for-profits have hijacked AHIP and aren’t representing their interests.
Bob Laszewski sees a historical parallel: “This reminds me of the early 1990s. In the wake of the insurance industry being made to be the bad guys during the Clinton Health Plan debate, many of the largest members exited the historically dominant Health Insurance Association of America (HIAA) for the competing HMO dominated trade association.
At the time, many observers saw a cynical irony in the move; it was those dominant members that drove much of the policy that got the industry in trouble.”
What does this mean for you?
At this rate we’ll all be covered by the VA health plan in a decade – which is just fine with me. They are the only ones that consistently control costs and deliver quality care.

Dec

The Texas AG opinion on work comp pharmacy

Posted by Joe Paduda on Monday, December 13th, 2010 | Comments

After mulling over Texas Attorney General Greg Scott’s just-released opinion [opens pdf] on the use of PBMs in workers comp, I’m still confused.
That wouldn’t be so bad, except so is everyone else.
The opinion appears to contradict itself, with declarative statements about the legality of paying less than fee schedule for drugs in one place, and apparently contrary statements a few sentences later.
Then, the opinion concludes “”…although a WCHCN [work comp Health Care Network] must not provide prescription medication or services, an insurance carrier may enter into a contract with a WCHCN to obtain a contract with a health care provider to pay for prescriptions at a negotiated rate after January 1, 2011”.
Sounds great, right?
Except experts opine that PBMs don’t meet the definition of ‘providers’ under Texas law.
So, does this mean an HCN will have to contract with pharmacies directly? In the next two weeks? Because that’s when PBMs turn into pumpkins under the involuntary network ‘sunset’ provisions.
Or does it mean that HCNs can actually subcontract with PBMs? In which case the dominant HCN – Coventry – may well require its customers use FirstScript – Coventry’s inhouse PBM.
The DWC has prepared two different regulations in anticipation of the AG’s opinion – one in case the opinion killed PBMs, which reduces the fee schedule to a rate that, according to Bill Kidd of WorkCompCentral, “to adjust fees in an attempt to maintain overall costs in the workers’ compensation system.”
I’d emphasize Bill’s use of the word “attempt”.
Drug prices are NOT the same as costs.
Drug COSTS are driven more by the type and quantity of drugs than the the price of the pill. If low fee schedules controlled costs, we wouldn’t have seen pharmacy costs in California explode after adoption of the lowest fee schedule in the country.
In fact, CA’s drug costs increased significantly, driven by significant increases in both the average number of prescriptions per claim and the average payments per claim for prescriptions. In addition, payments for Schedule II narcotics, categorized as having a high potential for abuse and addiction, increased nine-fold after reform. Schedule II drugs are also strongly associated with extended disability duration, driving up both medical and indemnity costs.
According to the California Workers Compensation Institute, the average number of first-year prescriptions per claim increased 25 percent after the implementation of the Medi-Cal link, while the average drug cost per claim went up 37 percent. (Changes in Pharmaceutical Utilization and Reimbursement in the California Workers’ Compensation System, September 2009)
So, where does this leave us?
1. The opinion doesn’t provide enough clarity to ensure PBMs can legally operate after January 1 2011.
2. The penalty for operating an involuntary network in Texas is huge – $25,000 per day plus loss of license to operate.
3. Pharmacy costs in Texas account for around 15% of loss costs – with PBMs operating. I don’t see how PBMs can continue to operate in Texas, which means they won’t be able to address either the price of the pill, the types of pills, or the quantity of pills, dispensed to injured workers.
4. Realistically, legislation to ‘fix’ the problem won’t be completed until sometime this spring. Which means employers, insurers, governmental entities, and taxpayers are going to have to foot the bill for higher drug costs – for at least several months – until this gets fixed.

Dec

Here’s a place I hope you never see MCM featured…

Posted by Joe Paduda on Saturday, December 11th, 2010 | Comments

One of the better journalistic oversite ‘sites’ is the one run by the Columbia School of Journalism.
Each year they feature a column on ‘errors of the year’. It is usually hilarious, and this year’s no exception.
While some think there’s no such thing as bad PR, I sincerely hope never to have this blog featured on the EOTY…
That said, I don’t think there’s much chance managed care can compete with copulating bats and expletive-spewing politicians. Sigh.

Dec

Texas’ Attorney General’s opinion is out

Posted by Joe Paduda on Friday, December 10th, 2010 | Comments

Greg Abbott, Texas’ Attorney General, has released his opinion re “Whether a workers’ compensation carrier may pay for a prescription drug at a rate lower than the fee rate allowed under the guidelines of the DWC…”
I’m no attorney. And being an attorney would be very helpful in this instance.
The key part of the four-page pronouncement is on page 3 and reads, in part:
“…although a WCHCN (work comp Health Care Network) must not provide prescription medication or services, an insurance carrier may enter into a contract with a WCHCN to obtain a contract with a health care provider to pay for prescriptions at a negotiated rate after January 1, 2011”
I’m not sure what this says. One interpretation I’ve heard is that payers must contract with an HCN, which then contracts with a PBM to provide pharmacy management services. However, a PBM may not qualify as a “provider”.
Another part of Mr Abbott’s opinion holds that there is no statutory minimum requirement for reimbursement under workers comp – and he’s pretty definitive about that. Then again, a later section appears to directly contradict this statement…
More to come – much more.

Dec

A random walk down work comp lane

Posted by Joe Paduda on Friday, December 10th, 2010 | Comments

Here, in no particular order, are a few of the more interesting goings-on in the work comp space these days.
Eileen Auen, CEO of PMSI, was named one of Business Insurance’s Women to Watch for 2010. I first met Eileen when she called me the day before she took the helm of PMSI to discuss a PMSI client situation. I was impressed then with her demeanor and openness, and over the last two years my respect has increased as I’ve watched PMSI regain much of the luster it lost before the arrival of Eileen and her team. They are once again a formidable competitor, due in large part to her leadership, and the desire and hard work of many long-time PMSI veterans.
Texas
The Texas ‘situation’ may be changed dramatically later today, as rumor has it the Attorney General is set to release his opinion on ‘involuntary networks’. The opinion has allegedly been sitting on the AG’s desk since before the Thanksgiving holiday.
The complexity of this situation is matched only by its importance to employers, insurers, PBMs, imaging networks and other ‘specialty managed care’ vendors – as of now, after 1/1/11, it will be illegal for a ‘network’ to take a discount unless it is part of an HCN.
To say this is critically important is bland understatement – about forty percent of the work comp medical dollar is for services managed by these entities, and their demise will raise workers comp costs – immediately and significantly.
California
Pat Sullivan’s WorkCompWire has the news that SCIF (California State Fund) is going thru some drastic changes – all intended to save $200 million. The moves include moving staff to other locations, reducing staff, and selling real estate.
It must be brutally difficult to manage a ‘carrier of last resort’. When the market hardens, business booms, requiring more staff, more computers, more everything. Then when the commercial carriers decide to get back in the market, premium volume declines, along with the need for those new employees, computers, offices, telephones. In the meantime, any politician can excoriate Fund management for understaffing and the associated service issues in a hard market, then turn around and lambast management for bloated payrolls and inefficiency when demand drops.
Reform
Finally, there’s been a bit more discussion about the impact of reform on workers comp. Friend and colleague Greg Krohm, Executive Director if IAIABC, has written an insightful piece about this, and SwissRe’s also provided their insights. Mark Walls’ Work Comp Analysis Group is also engaged.
It is good to see lots of discussion about this, as the more smart people we have focused on reform’s impact, the better prepared we’ll all be.

Dec

Brad Wright’s HWR – read on!

Posted by Joe Paduda on Thursday, December 9th, 2010 | Comments

Brad Wright’s edition of Health Wonk Review contains brief summaries of the best of the health policy blogosphere – lots of good information and insights that go waaaay beyond what you’ll see anywhere else!

Dec

The fix is in – for Medicare physician reimbursement…for now

Posted by Joe Paduda on Thursday, December 9th, 2010 | Comments

Last night the Senate passed a bill postponing the cut for Medicare physician reimbursement that was scheduled to take effect at the end of this year. When signed by President Obama, the 13 month fix will freeze Medicare physician fees at their current level until the end of 2011, ostensibly giving Congress time to come up with a more permanent fix.
If history is any guide – and it almost always is – there won’t be a permanent fix; instead Congress will punt once again, primarily because almost any revamp of the fee schedule will require ‘officially’; adding over $300 billion to the deficit.
Still, for at least the next 13 months, Medicare and Tricare (military family health insurance) beneficiaries will not be threatened by the possibility of their physicians refusing to accept the fee schedule.
According to Dow Jones, “in order to pay for the extension, the bill contains a change to the recently passed health care overhaul, requiring that individuals repay excess federal subsidies for health insurance if their income rises.
Under the law, the subsidies for people earning up to 400% of the federal poverty level are calculated based on a person’s expected earnings. Repayment of those subsidies had been capped at $250 per individual or $400 per family, in the event that income exceeded expected levels. The law passed by the Senate Wednesday removes those caps and replaces them with a sliding repayment scale.”
What does this mean for you?
For workers comp, no change is good news, as it ensures there will be little need for states to rejigger their fee schedules to address Congress’ whim.
For more discussion of this issue click here.

Dec

What health reform will do to workers comp…not what you think

Posted by Joe Paduda on Wednesday, December 8th, 2010 | Comments

Yesterday SwissRe published their analysis of the impact of health reform on workers comp. The full report is available here [opens pdf]
It’s good to see an international player in the workers comp market consider the potential direct and indirect impact of reform on workers comp. That said, my sense is SwissRe’s perspective is narrow and flawed in several respects.
For example, in one section the report states: “Major reductions in the uninsured population could have a positive effect on Workers’ Compensation costs. Those newly insured may be less likely to attempt to bring a non-work injury into the Workers’ Compensation system.”
That’s not correct. Studies indicate those with insurance are less likely to file a comp claim, although the correlation appears to be statistical and not causal. For a more in-depth discussion, click here. [opens pdf]
SwissRe missed a much more significant issue – the increase in the number of people with insurance will have a significant – and positive – impact on comp.
Healthier claimants
What may well be the most significant long-term impact of reform is the likelihood that workers will be healthier, their underlying conditions and comorbidities will be addressed by their health plan, and therefore comp payers won’t have to pay for treatment of those conditions in order to resolve the work injury. Think diabetes and surgery, spinal stenosis, and hypertension.
Degenerative conditions
For some diagnoses, identifying the cause of the injury is becoming increasingly problematic. It is often difficult for a physician to determine the ’cause’ of back pain or dysfunction; it may, or may not be wholly or partially related to a work injury and different physicians often reach different conclusions about the cause of injury. While reform won’t clear up those medical mysteries overnight, it will reduce the need for comp payers to pay for what are clearly non-work-related conditions.
Less need to cost shift
Workers comp is the most profitable payer for many facilities; margins are much higher for comp than for medicaid (which pays below cost) and Medicare (which pays right around cost). When more people have health insurance, there will be less need to shift cost to workers comp to cover the expense of providing care to the uninsured. Sure, the ACA will not cover everyone, but it will cover about two-thirds of those currently without health insurance. And most of those newly-covered folks will be the employed (and dependents thereof).
This isn’t to take shots at SwissRe, merely to point out that their perspective reflects a lack of understanding of the broader problems with the current environment, and the potential positives of reform – at least for workers comp.

Dec

New entrant to the blog carnival – the Benefits Package

Posted by Joe Paduda on Tuesday, December 7th, 2010 | Comments

Evan Falchuk of Best Doctors has launched a new blog carnival focused on employee benefits – primarily health benefits. His first edition is here.
While there are a plethora of carnivals out there, this is the first one I’ve come across that focuses specifically on health benefits. Good quick read too.

Author: Joe Paduda