Over the last two + weeks I’ve had a dozen or so calls with investors asking about the workers’ comp space.  Mostly this seems driven by the OneCall debt issuance and financial situation, but the conversations all started with a high-level view of what’s happening in work comp.

To save you investors money and me time, here’s my view from 30,000 feet.

Work comp is shrinking

Fewer workers are getting injured. Premiums continue to decline. The injury rate is declining.  Folks, we are in a shrinking business, and that isn’t going to change. If anything, when the next economic downturn hits, comp is going to get hit harder.

That means fewer medical services, fewer scripts, fewer first notices of injury, fewer claims.

Pharmacy is leading the shrinkage

Several new “work comp” PBM start-ups have emerged over the last couple of years, most of them talking “transparency” and better customer service for smaller payers.  Over the last 7 years, PBMs have done a pretty good job shrinking their top lines as they work with payers to reduce unnecessary opioid use and compete on price. Yes, there is money to be made here, but size and service matter – a lot. (more on this in a month or so when we do the next Survey of PBM in WC).

Why these folks are investing start-up funds in a business that has been declining by near-double-digits for several years is a puzzle indeed.

Big caveat – Coventry First Script won the Department of Labor PBM contract, which may well be the largest WC PBM deal awarded to date. Hats off to the Coventry folks who made that happen.

The big keep getting bigger

And that’s going to continue.  In a mature/declining business, the only way most companies can grow is to acquire other businesses, then reduce expenses.  This works even better when the businesses you acquire can replace external vendors you were using before – so you can count their revenue as top line and margin as profit. This is what Mitchell/Genex is doing with Priority Care Solutions.

Big caveat #2 – MedRisk continues to do quite well – proving that doing one thing really really well is the strategy that always works, everywhere. Of course, it’s also the hardest to get right and sustain. (MedRisk is a consulting client)

TPAs are one of the few niches that are “structurally growing”

Sorry about that terminology – but I couldn’t think of any other way to characterize the growth that TPAs are enjoying as insurers continue to outsource claims services to the industry. As premiums decline, insurers have fewer dollars to invest in people, technology, buildings, etc – so buying claims services on a variable cost basis looks a lot less risky than building/fixing/developing your own stuff internally.

And this will continue.

Yet, every work comp insurer I have spoken with is going to grow.

Which is NOT going to happen. The question is, will this quest for growth turn into a “how far over the stupid line will we jump before we figure out we’re screwed” contest.

Some will win, some will lose – and some are born to sing the blues (kudos to you if you know the band that sang these lines...) Those that are embarking on a quest up to the edge of the line may want to research Reliance Standard, Golden Eagle, Atlantic Mutual, and Kemper.

Jeez I’m getting old.

What does this mean for you?

If you’re an investor you’ve just saved a lot of money and time.

Healthcare was the top issue for Independents (and Democrats) before the 2018 midterms.

Notice the emphasis on “Independents”. Dems are going to vote blue, Republicans will vote red, so the 2020 election is going to be decided – like most elections – by independent voters.  You can expect every Democratic candidate to hammer away on healthcare in language that worked well last fall.

And they will be focusing on costs and access, issues top-of-mind for voters concerned about healthcare.

There’s a busload of Democrats who’ve announced they’re going to run for President in 2020, and it looks like the bus is going to be standing room only when Biden and perhaps others announce.

Pretty much every of the 354 announced Democratic presidential candidates have signed on to some form of Medicare for All; while I’d argue most haven’t demonstrated any real grasp of the details, the issue is clearly a winning one.

Meanwhile, the President has released a budget calling for a $2.3 trillion cut to Medicaid and Medicare. You may recall that then-President Obama called for many of the same changes to Medicare that Trump is hawking now – primarily reducing reimbursement for hospital-based providers.

Kudos to whoever put this language into the latest budget – it made sense then, and it makes sense now.

BUT – while Dems will be talking about protecting Medicare and Medicaid (which pays for most nursing home care than any other payer), Republicans will be trying to convince healthcare voters  that slashing $2.3 trillion from their Medicare and Medicaid is the right answer.

The GOP may figure out how to get seniors and others to support slashing their healthcare – a feat that is possible as Republicans are way better at messaging that Democrats.

Democrats may be able to stick to their message – as they did to telling effect in the 2018 mid-terms. If they do, and if they win the White House and Senate, the first thing they will do is pass Medicare for Some legislation. The major candidates are all talking about doing big things, they need to deliver big results early, and healthcare was – and is – a winning issue.

What does this mean for you?

For healthcare, 2020 will be the most consequential election ever.

 

Because a) voters want it and b) no one cares about the federal budget deficit or national debt.

Seriously, that’s all there is to it. If you want more details, read on!

I’ve had numerous email and phone conversations about my series of posts on Single Payer and Medicare for All. Unlike past dialogue, it’s been generally apolitical and more fact- and less emotion based.

What’s striking is the conversations haven’t been about how awful “socialized medicine” is, rather what’s preventing Single Payer from happening. There’s been a bit of nonsense – the typical apocalyptic scare stories about pharma not developing new drugs because we don’t keep overpaying for the ones we take today, visions of patients dying while waiting to see a doctor, uninformed comparisons to Canada and the UK – but overall most people want to talk about why Single Payer can’t or won’t happen.

Deficit? No one cares.

Republicans have long branded themselves as the part of fiscal responsibility; that went out the window when they passed into law the Trump Tax bill. Screw the deficit, just cut taxes and growth will explode so all will be fine – a theory that been totally discredited in theory and has never worked in practice.

Plus, the average voter is profoundly ignorant – including about deficits. So, deficits don’t matter.

What voters want

Voters do. And polls clearly show voters are warming to Single Payer.

And, they have opinions on different versions, with big majorities wanting a public option.

Yes, I know when you tell people that it will cost more in taxes, or possibly eliminate their employer plan, they like Single Payer less.

So, what does this mean for you?

Some form of Single Payer – likely a public option allowing folks over 50, those who don’t get health insurance thru work, to buy into Medicare or Medicaid. – is going to happen.

When did you last:

• buy a newspaper or book
• use a real camera
• plug in your Garmin and stick it on the windshield
• shop in a mall, or
• use your home phone?

That cellphone you are reading this on? It’s replaced entire industries – landline phones, books, newspapers, white noise machines, handheld recorders, calculators, radios, bank visits, cameras, video cameras, stereos, maps and satellite navigation devices, paper tickets, even desktop computers.

Your Lyft/Uber account? For many, it’s replaced a personal vehicle.

That box on your front step? It’s taken out thousands of local retail establishments and hundreds of malls.

These are just three of the all-but-invisible ways technology has radically changed our world – and your business – over the last decade.

It is well worth stopping to consider this when planning for the future. Here are a few takeaways.

Construction is affected by much lower retail construction coupled with a very recent spike in home ownership. After years when millennials chose to live in small apartments, group homes, or with relatives, it looks like getting your own place is back.

Maybe they can convert malls to apartment complexes?

The net – lower commercial construction will be balanced out by more residential building.

Manufacturing employment is growing much more slowly than manufacturing output, driven by the Administration’s tariffs, the “cellphone effect”, and accelerating use of robotics and sister technologies.

We may have reached peak auto manufacturing, with significant structural implications for the auto industry and its entire supply chain and service infrastructure.

What does this mean for you?

Is your business model prepared for the future? 

I don’t see how BernieCare makes it to the serious consideration stage – much less becomes reality. Not because it isn’t a way better healthcare answer than the mess we have today. It just isn’t do-able.

When we do finally ditch the completely unsustainable, inefficient, and idiotic “healthcare system” we have today, I’m convinced it will have most of these components.

1. This won’t be “Single Payer” as commonly defined, rather it will be a tightly managed, measured, and defined health insurance product administered by various governmental and non-governmental entities.
2. Everyone will be enrolled.
3. These will be both not-for-profit and for-profit entities competing in defined markets. Similar to Medicare Advantage, ACA Individual Exchange, Managed Medicaid and other current programs, these entities will bid for programs on a multi-year basis.
4. Certain populations will be defined separately and bidders will have to demonstrate expertise and capabilities unique to each population. Medicare/Medicaid dual-eligibles will be the most significant of these defined populations.
5. Winning bidders will have to comply with most of the current ACA requirements such as no medical underwriting, a standardized benefit plan, significantly reduced member cost-sharing, open access to providers.
6. There will be one universal reimbursement mechanism – likely based on Medicare’s MS-DRGs for facilities and Physician Fee Schedule for other providers. This will be an “all payer, all product” fee schedule, meaning it covers all types of care – including auto, workers’ comp, liability, etc.

Potential variables

1. This may take the form of Medicaid for All – albeit using a different name (the point made by Dr Jake Lazarovic in a previous post.) I don’t see using Medicare as the basis. Medicaid involves partial state funding – key to get states involved in funding the program. Medicaid also provides a relatively seamless program across all services including long term care, unlike Medicare which separates facility, physician, supplemental, and prescription services into distinct service lines – and doesn’t include long term care beyond relative brief rehab stays. To say these separate programs are confusing and irrational is to be kind indeed.
2. Employers may be able to provide financial support for their workers, or decide to give their workers higher wages in lieu of a healthcare benefit plan.

However, it’s either this, or BernieCare. And BernieCare is death to insurers and many other stakeholders, while Single Payer 2.0 will be the best of the alternatives.

Next week – yes, this is affordable, and YES, the healthcare industry is going to go berserk.

What does this mean for you?

Massive changes are coming. Survival favors the prepared; extinction is the fate of the willfully ignorant and ideologically blind.

Sure, there’s lots to like about it – no paperwork, see any doctor you want, no cost for any services, covers nursing home and long term care, dental, vision, you name it.

It will cost a good bit more – at least initially, but over a decade we’d actually spend a couple trillion dollars less than if we stick with the current clustermess. Despite the initial sticker shock, as voters get increasingly scared and frustrated by the crappy “health system” we have today, the balance may well tip towards BernieCare.

Except it won’t, and here’s why.

Infrastructure – There is no current wholly-government infrastructure in place that would be a platform to handle BernieCare. Much of Medicare and Medicaid is administered by private or not-for-profit organizations. It would take years and tens of billions to build that infrastructure. Sure it may well be more cost-effective than using private entities, but I just don’t see us collectively agreeing to spend the sums needed to make it happen.

Impact on employment – BernieCare would essentially eliminate 99% of private insurance. The 540,000 people employed in that business would no longer have a business to employ them. I don’t see Congress voting to vaporize over a half million jobs; and that’s only to start. As things got more automated, many more admin roles would be eliminated.

Big money’s control over politicians – Citizen’s United killed the last faint hopes we could keep dirty dark money out of politics. Fact is, healthcare is by far the biggest political contributor, led by big pharma. Add in device manufacturers, healthplans, physician groups and health systems – all in healthcare collectively pumped about $650 million in cash into political coffers last year alone.

Recall what makes our healthcare so damn expensive is that for-profit entities are heavily involved in healthcare services, devices, drugs, and everything else – BernieCare would crush their profits if not eliminate them altogether.

If you think the healthcare industry contributes a lot now, wait to see what happens if BernieCare gets just a bit of traction.

What does this mean for you?

If we were starting from scratch, BernieCare is by far the best model. We aren’t, so it won’t get off the ground.

That’s not to say some form of MFA/Single Payer isn’t viable. More on that in a future post.

So, what would the most expensive version of Single Payer cost? Eliminating all deductibles, copays, coinsurance, premiums for Bernie Sanders’ super-duper Rolls Royce plan would run about $32,000 for a family (a gross simplification to be sure).

There are 22 million jobs in the US healthcare and related industries (that includes mine, one of our daughters, and her husband – they are nurses.) Let’s add all the college and grad school institutions that employ tens of thousands to educate people on healthcare administration, and the support infrastructure  – IT companies, paper form printers, App developers, pundits and commentators, real estate occupied by insurers…you get the idea. The health care industry is at least a fifth of our economy.

The private health insurance industry alone employs 540,000 workers.

If we switched to a true single payer system, millions of administrative jobs would disappear.  Remember what happened to manufacturing in the rust belt? That happened over 30 years; this would affect a much bigger share of the economy over a much shorter time.

The result would be an economic collapse that would surpass the Great Depression and devastate the economy.

Lest you think this is hyperbole, Taiwan employs a grand total of 300 people to administer a single payer healthcare system for a population of 24 million.

Using Taiwan as a basis, we’d only need 4,125 people to administer a universal single payer system.

Recent posts have focused on defining Medicare for All/Single Payer and the problem both are intended to solve – healthcare prices in the US are the problem.

Today, we’ll figure out what you really pay for healthcare.

That’s pretty darn important because we’ll need to compare what we pay now to what we’d pay for any MFA or other model.

First, it’s insurance costs, deductibles, and copays. For a family of 4 with one person in poor health, the total is about $7850 this year.

Then there’s the $1400 in state and federal tax payments that go to fund healthcare – you know, that FICA thing, plus state and federal taxes that pay for Medicaid, plus VA funding, Tricare, Indian Health Services, and lots of other programs I don’t know about.

Next, your employer’s insurance and tax costs – which total $13,050 in health insurance premiums and $750 in Medicare payroll taxes.

The total? $23,500 for a family of four.

You may be…surprised to learn $5,700 goes to administrative expenses. All that paperwork, utilization review, billing and reimbursement stuff costs serious money.

What does this mean for you?

US health costs twice as much as in many other countries – that have the same or better outcomes.

What would you do with another $11,750 in cash?

Reports from multiple sources indicate OCCM has just announced a significant “reduction in force” – i.e. a staff layoff. While this is by no means OCCM’s first staff reduction, initial indications are it is not a small one.

Internal sources indicate the Parsippany NJ office is the one most affected. Staff there do scheduling and care management functions, interact with adjusters, case managers, claimants and providers. Unconfirmed reports indicate work is being off-shored to the Philippines; One Call has previously offshored other functions.

I have reached out to OCCM multiple times and once again they are unresponsive.

Sigh. Free consulting advice – Management should stop obsessing on how I know this stuff before it is public and focus on running their business instead. Oh, and get a lot smarter about damage control.

I would hazard a guess that this is the next step in a series of cost saving measures, underway in an apparent effort to reduce expenses and cash outlays. While the offshoring will almost certainly have a positive effect on operating costs, it remains to be seen whether customers, used to talking with domestic service staff, will accept the change.

And therein lies the rub.

In work comp services it is all about customer service. Adjusters and case managers can be demanding – as they have every right to be. They want to talk with people who thoroughly understand their business, know the rules and regulations in their states, are highly trained, have all the necessary information at their fingertips, and have local knowledge.

They don’t want to call one person for billing and another for network details, a third for an update on the patient’s condition, and yet another for prior auth. And they want that person to communicate crisply.

This may all be solved when OCCM’s new Polaris IT application is fully developed and rolled out. Talking to a very large customer earlier this week, I heard the latest news is it will go live for them “this summer.”

Perhaps.

It is possible that adjusters and case managers will find their needs met by the new IT system and a staff half a world away. It is also highly likely those front-end clients will miss the people who worked with them over the years on multiple cases, understood their needs and requirements, and worked to meet them.

I’m reminded of the time I called a hotel chain for a room in Austin TX. The customer service rep, a gentlemen located on another continent, apologized as no rooms were available in their Austin hotel, but proceeded to book me in their Dallas property. He could not seem to grasp that this was not a viable option.

These are tough times for the folks losing their jobs, and I hope they can find good, stable, rewarding and fulfilling jobs soon.

At yesterday’s final session, Publix, Home Depot, and Starbucks work comp leaders had some pretty interesting recommendations around workers comp.

• Starbucks understands their partners (what they call their workers) don’t do much snail mail, and are much more likely to communicate via smartphones. They’ve done a lot to deliver as many communications and payments to electronic means as possible.
• Partners tend to trust nurses, so Starbucks uses nurse case managers to help partners deal with the emotional issues as much as the actual medical management (my words, not Ms Olson’s)
• Publix is working hard to identify the best physicians; as a Florida-centric company, the big grocery chain is often able to direct care – and it does so assiduously. Home Depot also assesses providers.
• Publix, Starbucks and Home Depot alike have a broad demographic of workers – from kids under 18 to octogenarians. This requires flexible approaches to return to work and a willingness to be creative and thoughtful about accommodations. Sounds obvious – this is a ton of work and very effective.
• Publix’ Marc Salm is quite concerned about increasing costs due to litigation, which appear to be driven at least in part by “jumper claims” that hit well above six figures within 24 months. To say Marc is passionate about this doesn’t adequately convey how strongly he obviously feels.
• Noreen Olson of Starbucks noted that she approaches this from a “how do we want this partner to be when this is over” – this is a paraphrase, but the essence is there. She focuses on the ultimate outcome from that individual’s perspective – a view that should be considered at all points of the “claim process.”
• Home Depot’s Dawn Goree has a similar philosophy – when you pick up the phone, think about how you are going to come across to the person on the other end of the line…trust is critical and it can’t be about dollars and cents.
• Starbucks does not do “post offer testing” as it has a young workforce and wouldn’t have any employees if it did (Love Ms Olson’s honesty)

What does this mean for you?

A fun, entertaining, and very worthwhile session that reminds us our job is about helping people who’ve been hurt.