Today starts off with a discussion of the impact of health care reform on the health care system – there’s another talk tomorrow morning on the impact of ACA; here’s the first of a nine part series I penned last summer…will be interesting to see the panelists’ views.

The first presentation was by MIT’s Dr Jonathan Gruber on health care reform.  Gruber noted that a government-run program is never going to happen, but each time we tried to do this in the past and failed, a chunk of the underserved got some form of relief – Medicaid, Medicare, Part D, S-CHIP, etc.

RomneyCare, seen by many as the basis of PPACA, is a combination of left- and right-favored ideas, including community rating reforms, an individual mandate, and subsidies for those who couldn’t afford insurance on their own.  This went into place in 2006.

The uninisurance rate in Mass. is now 3% (compared to the national rate of about 16%), premiums in the individual market fell by about 50%, and premium trend rates for small employers have been flat for the last couple of years.  However, Mass’ reform was subsidized to the tune of a half-billion dollars.  This too has become part of the basis for PPACA, along with the individual mandate, subsidies for low-income families and expanded Medicaid, and rating reforms.

Lots of nonsense has been dumped on the ACA – the death panels being only one of the most blatantly false.  Gruber highlighted the impossibility due to political issues  – there were just too many forces – political, industry, lobbyists – blocking meaningful cost reduction.  There are, however, five cost control mechanisms.

1. Cap the taxable benefit of employee health benefits – currently the tax-free status of benefits reduces taxes by $250 billion. The “Cadillac plan” tax cap is intended to address this, albeit in a bass-ackwards way; this will reduce costs by not by much.
2. Health insurance exchanges – introduced more competition and lowered cost of sale. (in my view the leveling of the playing field coupled with universal coverage will force health plans to compete on the basis of outcomes and cost – and this is going to have a very large, and very positive, effect on long-term cost inflation)
3. IPAB – independent payment advisory board – which can affect Medicare health reimbursement by forcing Congress to save money or agree to use IPAB’s recommendations.
4. Research on Comparative Effectiveness
5. ACO and other experiments; medical homes, bundled payments, and other mechanisms aimed at coordinating care and reducing cost especially for chronic conditions.

In response to a question about freedom, Gruber noted that there are more health plans available now thru the exchanges than there were prior to reform.

Insurance prices for exchange plans for 2014 were about 15% below predictions, however this pricing was more of a guess than an actuarial projection based on past data.  We will know much more at this time next year when the 2015 rates are in place.

I loved Gruber’s characterization of states’ failure to expand Medicaid as political malpractice…

That’s the conclusion I’ve reached partway thru a quick-and-dirty survey of a handful of savvy, connected brokers.

The people who buy workers’ comp insurance and or claims and/or medical management are, mostly, clueless.  

They succumb to spreadsheets when comparing TPAs.  Because they have no idea how to separate out the good ones, they go for the cheapest per-claim fee, then are surprised when their ALAE costs are thru the roof.  But hey, that’s “claim-related” so they’re safe.

They bitch at their insurer when their claims costs go up, but won’t direct to good docs, or educate their employees before injuries, or hold management accountable.

They think bigger networks are better networks, that deeper discounts deliver big savings, that case management is the “state of the art.”  Many are quite ignorant of evidence-based medicine – which to my mind is the ONLY way we’re ever going to deliver quality care at reasonable prices.

Providers who pitch outcomes and return to work get some traction with a few of the bigger employers, but nowhere near enough to change the managed care business model.

To be fair, some large employers – think Lowe’s, Costco, Safeway – are doing really great stuff, and I’m sure there are lots of others who are innovating and improving and demanding performance.

The only thing that’s protecting these “buyers” is the up-and-down insurance cycle, a driver that has a disproportionate effect on the price and availability of work comp insurance and claims services.  Those that think they are safe may want to consider what’s coming.  PPACA has and will dramatically affect provider behavior, provider access, and the type and quantity of care delivered.

What does this mean for you?

To paraphrase HL Mencken, you get the work comp results you deserve, and you deserve to get them good and hard.

Are all described in detail in Greg Jones’ terrific piece in this am’s WorkCompCentral.  The 1,000 + word piece lays out the fraud perpetrated on California’s employers by the owner of Pacific Hospital, the complicity of two California legislators, and the cost – a whopping $500 million.

Michael Drobot has pled guilty, and is looking at up to 10 years in prison for allegedly paying kickbacks to get docs to use his hospital for spinal fusions, while also allegedly bribing a state Senator, Ron Calderon.

Calderon is also facing charges; a 24-count indictment was filed last week charging bribery, money laundering, and conspiracy.  He and his brother are each looking at possible sentences of over 100 years.

Drobot paid “a kickback of $15,000 for each lumbar fusion procedure that was referred to his hospital and $10,000 for each cervical fusion procedure.”

Folks who have followed California work comp long puzzled over why the state allowed providers to double bill for the cost of implants (see research report dated 6/6/12); this was finally addressed a couple years back, but only after Drobot and his cronies sucked $500 million out of employers’ and taxpayers’ pockets.

There are two things to take away from Jones’ piece –

• Investigative journalism lives on – although only at niche pubs, the very largest mass media outlets (NPR, Rolling Stone, NYTimes), and independents (ProPublica).

• Employers and taxpayers are losing hundreds of millions of dollars to sleazeballs who’ve figured out work comp is a very soft target. And this continues with physician dispensing…

Doc-dispensing firms have their minions out and about in multiple state capitols, using their dollars to buy lobbying prowess and support pliable politicians (talking about you, Clayton Hee in Hawai’i).

What’s different these days is they are supporting fee schedules in many jurisdictions – Hawai’i and Maryland being two.

Why?  Well, you could ask drug dispensing “technology” firm AHCS’ Board Member Hilary Grove. She’s with ABRY, the private equity firm that owns AHCS; shoot her an email at hgrove@abry.com.  Please.

Or you could track their recent activities.  Such as:

• they’re getting in to the drug compounding business – actually they’ve been doing that for a while. There are at least two compounding pharmacies affiliated with AHCS or AHCS personnel – Compound Care Pharmacy Rx (which appears to be owned by AHCS) and ezCompound Rx, which has the same attorney as AHCS listed as their “correspondent”.

  No surprise there, as compounded drugs are becoming much more common in work comp, despite no credible research suggesting it is appropriate for the vast majority of patients. Compounds are very, very, profitable… 

• they’re working with very small drug “manufacturers” who can “manufacture” drugs, file their own drug code (NDC) and price (AWP). Remember, in many states, WC fee schedules for repackaged drugs are based on the original manufacturer’s AWP – which is nothing more than whatever number the “manufacturer” wants to use, and bears NO relation to the ACTUAL price dispensing docs pay for the drugs.This is pretty clever as it essentially eliminates the price controls put in place by many states and allows dispensers and their enablers to continue making huge profits for their owners.

Alas, many payers are still focused on controlling the price of the pill or compound, a strategy that is obviously fundamentally flawed as it’s really easy to circumvent.  And ignores the research that demonstrates dispensing actually increases indemnity expense, keeps patients out of work longer, and increases other medical costs, thereby increasing employers’ and taxpayers’ costs.

Doc dispensing is a billion-dollar business.  It is maturing, getting smarter, and figuring out ways to sustain and grow its revenue. And work comp payers are not even close to keeping up.

What does this mean for you?

Doc dispensing increases loss costs about 3 percent.

How much premium do you have to sell to earn profits equal to 3 percent of loss costs?

That’s what this is costing you.

In Maryland and Hawai’i, docs are claiming that they pay much more for drugs than retail pharmacies, therefore they are justified in getting paid a lot more than retail pharmacies.

Bullshit.

Now that I’ve got your attention, here’s the truth.

This is just one page from a document was included in All State v Prescription Partners, a lawsuit filed by the big insurer in Federal court last summer.  It is described as “the drug list included in the “sales pitch” of AHCS…”

It is pretty much self-explanatory. 

 What does this mean for you?

Two things.

1.  Legislators should demand proof from dispensing advocates that their costs are higher and justify their outrageous prices.

Clearly they are not, and dispensing advocates testifying that their costs justify their prices are misleading/uninformed/duplicitous.

2.  More evidence of the ongoing effort by profiteers looking to suck money out of employers and taxpayers.  

On the off chance that an entity that owns a workers’ comp PPO ever thinks about selling it, here are a few things one may want to consider.

1. Who owns the provider contracts?
   If the provider contracts are tied to a group health insurer/health plan, then that’s how they get leverage with providers to get discounts for work comp care.
2. What happens to the provider contracts if the group health plan sells the network?
   Over time, the contracts’ value will deteriorate, and that “time” may not be very long.  As contracts come up for renewal, the discounts offered by providers will decrease if not disappear.
3. But what if the group health insurer/plan agrees to continue to manage the contracts?
   Sounds good in a contract, but won’t work out in practice.  The health plan’s provider relations staff will be evaluated on their ability to get contracts at acceptable rates for the health plan’s core products – group health, individual health, Medicare and perhaps Medicaid.  About 98% of medical dollars are spent by those payers, leaving about 2% for work comp.
   Where would you spend your time?

There’s obviously a lot more to this, but I’m swamped and you are too.

This isn’t idle speculation.  I was directly involved in a deal wherein a large national group health plan sold a work comp network, contractually agreeing to maintain the contracts for a time certain.  Things were fine for a year and in some states a bit longer, but the deterioration of both effective discounts and network size then accelerated rapidly.

What does this mean for you?

If you’re selling, don’t commit to things you can’t deliver.

If you’re buying, caveat emptor.