Insight, analysis & opinion from Joe Paduda
Is detailed in the biweekly Cavalcade of Risk, managed by good friend Hank Stern of InsureBlog fame, and this week authored by the incredibly talented Julie Ferguson.
While Health Wonk Review is focused on health policy stuff, CoR is more risk and insurance oriented – there’s some overlap, and a definitely different perspective.
Different perspective is often just what we need…
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)
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.
Of the many topics worthy of attention, I’ve been remiss in not learning more about swine flu, aka the H1N1 virus.
According to the CDC, to date there have been 9000 hospitalizations and over 600 deaths due to H1N1, and more are coming. There’s no doubt H1N1 will have a significant impact on employers – and also no doubt many have yet to plan adequately.
Here are a couple things to ponder…
1. If an employee gets sick after exposure at work (think teachers…) is that a work comp claim?
2. If a bunch of workers get sick, should you shut down operations for a while? If so, can employees work from home?
Broadspire, the big TPA, is hosting a webinar on H1N1 le\d by Jake Lazarovic, MD, the company’s medical director and in my experience a thoughtful and insightful clinician. The webinar is going to be held today (Monday) at 3 est, Wednesday at 1 est, and Friday at 9 est. Click on the links for more info.
Note – Broadspire is not a client.
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.
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.
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..
The health plans’ lobbying group is out with a new analysis of the Baucus bill, claiming it will dramatically increase costs.
It’s tempting to dismiss this as another industry-biased report produced by a firm bought-and-paid-for by the same industry the report helps. And while the characterization is true, there is some truth to PWC’s analysis.
The PWC report (pdf) claims health insurance costs will increase more if the Baucus bill is passed than if nothing happens – but according to PricewaterhouseCoopers, this claim is based on a review of only four components of the bill.
The components are
.
Sure, the PwC 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.
This has been proven in Massachusetts. Health plans have to take all applicants, but there is no real financial penalty for individuals who don’t sign up. Sure, there’s a fine for those who don’t have coverage (but can afford it), but it is so small as to be negligible. Not surprisingly, health plans have seen an explosion in the number of individuals who sign up for coverage, get their problems fixed, then drop out. One health plan has reported that their costs for these ‘drop-in’ insureds are six times higher than their premiums.
And now Senator Baucus et al want to foist this off on the rest of the country?
As much as I want national health reform, the Baucus bill – as currently conceived – makes no sense.
I’m hoping this is the last post on the state of Texas’ report on work comp networks.
Believe me.
As I’ve noted in two posts earlier this week my concerns with various aspects of the REG report, concerns which I – and other observers – believe are real and relevant.
There’s a larger concern and that is the effect of the report on decision makers at work comp payers. Several managed care execs I’ve spoken to since the report came out last week said they are scrambling to explain the results of their HCN and why it
makes sense to continue the program despite the negative implications of the report. Their bosses and some peers are asking why they are spending so much in the way of time and energy and legal resources on a program that doesn’t deliver any better results than their ‘old’ managed care program.
The primary reason HCNs may not deliver better results (although one shouldn’t make that assumption based on the REG report) is simple – the HCNs aren’t much different that those ‘old’ managed care programs. The underlying network, bill review, utilization review and ancillary programs employed in the HCN are all but indistinguishable from the non-HCN managed care programs.
Sure there are differences in denial rates and appeals processes and reporting requirements – but the basic nuts and bolts are identical.
What does this mean for you?
That may be – MAY BE – one reason it’s hard to see how HCNs are more effective than non-HCN managed care programs.
New news on yesterday’s post – turns out that ‘costs’ are not based on billed charges, but on payments. Unfortunately, the report doesn’t make that clear – nowhere in the report does it define ‘costs’ as payments, it does state costs are based on billing data, and in the data sources section it explicitly links cost to billing data.
Here’s where the confusion lies.
On page 2, the report reads “Utilization measures represent the services that were billed by health care providers, regardless of whether those services were ultimately paid by insurance carriers. Duplicate medical bills and bills that were denied due to extent of injury or compensability issues as well as other outlier medical bills were excluded from the analyses. Cost and utilization measures were examined separately by type of medical service…”
Note there is no differentiation between utilization and cost, and no specific definition of ‘cost’. So, perhaps that’s a bit misleading.
But wait, there is another statement that certainly seems to describe how ‘cost’ figures were derived:
In the data sources section (also on page 2), the report reads “Medical cost, utilization of care, and administrative access to care measures were calculated using the Division of Workers Compensation’s medical billing data [emphasis added]. Seemed pretty straightforward to me.
Unfortunately I wasn’t the only one confused; two large payer clients interpreted the statement the same way I did.
My post generated a good bit of excitement at the REG and among stakeholders. Bill Kidd reported on it at WorkCompCentral, where DC Campbell, director of the department’s Workers’ Compensation Research and Evaluation Group, was quoted as saying “”Paduda expresses concern about the results since Coventry covers ‘much’ of the non-network claim population. It’s not clear from his statements [emphasis added] whether this refers to Coventry’s market share in terms of utilization review activities, bill review activities, contractual discounts outside of certified networks, etc.”
I’m not sure where the confusion lies, as I clearly referred to ‘networks’ in the post yesterday…
For example, several of the networks are based on the Coventry work comp network – Liberty, Travelers, and Texas Star (the Star network was designed by Texas Mutual, and is much smaller than the overall Coventry network). There was significant variation among and between these three Coventry networks, variation that may well be due to the relatively small sample size and relative “newness” of the claims analyzed – the claims haven’t developed sufficiently to draw ‘conclusive conclusions’.
The net is the report uses payments for all cost calculations. Thanks to Amy Lee and DC Campbell for setting me straight. OK, now that that’s behind us, I’m still not sure what to make of the report’s findings. According to the report, claimant demographics were accounted for, I assume to enable fair comparisons among and between the various networks. Yet 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.
Consider that Liberty’s average medical costs were lower than non-networks in 4 categories, and Coventry’s in 3, yet the Coventry network was utilized by all three entities. And that’s just one of the findings. Claims in the Coventry network had higher overall medical costs than non-network claims, as well as higher hospital inpatient and outpatient costs. Both Coventry and Travelers network claims had higher inpatient utilization than non-network claims, but Liberty’s was lower. Coventry outperformed non-networks in release to return to work, but Liberty and Travelers underperformed non-networks.
So, what does this mean for you?
It sure doesn’t look like one can draw any meaningful conclusions from the report’s findings.
Kudos to the Texas REG and their supporters for funding and conducting the research. More time for the data to mature, more clarity on definitions, more disclosure about the similarities among the networks being studied, and more discussion about possible reasons for the disparate results from all-but-identical networks and their work will be much more useful.