Insight, analysis & opinion from Joe Paduda

Jul
3

Obamacare and workers’ comp – Part 2 of 9

Posted by Joe Paduda on Wednesday, July 3rd, 2013 | Comments

Monday we kicked off the discussion of the impact of PPACA/Obamacare/health reform on workers’ comp with a review of the (very limited) direct impact of reform on comp.  Today it’s the the impact of increased group and Medicaid insurance coverage on workers’ comp.

Let’s leave aside yesterday’s announcement by HHS that the employer mandate will be delayed till 2015; we’re after the long-term impact, so the one year delay will not be material to our discussion.  There will be somewhere around 30 million more folks covered by health insurance post implementation, with 32% covered under Medicaid, 45% from the individual exchanges, and 23% from employers.  Here are the major effects of the increased coverage…

  • Healthier workers heal faster – people without health insurance are not as healthy as those with coverage, and as healthier people heal more quickly when they are injured, the increased coverage means more work comp claimants will heal more quickly – reducing medical cost and indemnity expense.

  • The preventive benefits will help identify – and hopefully lead to early treatment for – health issues that can prolong/delay recovery.  Diabetes, asthma, depression, hypertension, and other conditions often go undetected until something really bad happens – an acute episode requiring a visit to the ER is typical.  Controlling these conditions and keeping them under control will speed recovery from injuries.
  • Many injured workers don’t have health insurance. If they have health conditions – say obesity – that are affecting recovery from an injury, the comp payer often ends up paying to treat that condition as well as the occupational injury.  If the diabetic injured worker does have health insurance, the comp payer doesn’t have to pay to treat the diabetes – a key consideration as the condition can dramatically affect recovery from surgery.
  • There appears to be a correlation between the availability of health insurance and claim filing, but it isn’t what many think.  A 2005 RAND paper notes “uninsured and more vulnerable workers are actually less likely to file claims than the insured.” Why?

“even repeat injury-sufferers are more likely to file during episodes in which their employer offers health insurance, but not statistically more likely to file during episodes in which they themselves are insured. This suggests that the workplace environment and employer incentives may have a significant, or perhaps even the dominant, impact on workers’ compensation filing.”

Next week — more on the impact of PPACA – bet you can’t wait!

 

Jul
1

Obamacare and workers’ comp; Part 1 of 9

Posted by Joe Paduda on Monday, July 1st, 2013 | Comments

The closer we get to January, the more interest there is in how health reform, aka PPACA, aka Obamacare will affect workers’ comp.  In a meeting with a dozen industry executives last week the issue garnered much attention – as well it should.

While there are no direct ways Obamacare will impact work comp, there are a host of indirect ways it will – some of which are obvious, many rather subtle.  I’ll explore the 8 “indirect impacts” over the next couple of weeks, but we’ll begin with a bit of table-setting.

First, recall that worker’s comp is tiny.  Compared to the total US health spend of $2.6 trillion, comp’s $30 billion is just over 1 percent.  The implications are clear – we are the flea on the tail of the dog, and a mighty big dog at that.

Second, while there is no direct impact on workers’ comp, there are a couple things in PPACA that affect occupational disease – some changes to the feds’ Black Lung program, and “LibbyCare”. The Black Lung changes are rather obscure and relate to reinstating presumption of cause and widow’s benefits provisions.  Libby Care is a bit more complicated.

Some background is helpful. In the Senate, PPACA fell under the jurisdiction of the Finance Committee.  The chairman of the Senate Finance Committee, Max Baucus, hails from Montana. Libby is in Montana, and Libby is the site of massive asbestos mining and manufacturing operations, and an attendant public health disaster.  Not only were workers affected by asbestos-related illness, but residents in and around the town have also been harmed.

Briefly, Libby Care is the assumption by Medicare of the responsibility of providing care to Libby residents affected by asbestos and related illnesses/conditions. Victims will also receive special home care, pharmacy, medical device, and other services.  The details are in Section 10323, Medicare Coverage for Individuals Exposed to Environmental Health Hazards.

While some might argue that Libby Care is the first step in some sort of federalization of workers’ comp, that is far-fetched at best.  In fact, this is a powerful politician’s use of that power to serve a specific constituency; a one-time fix to a specific ‘problem’. That’s not to say that the work comp industry has done a good, or even passable, job in addressing occupational disease, but the Libby Care Amendment isn’t an attempt to Federalize management and treatment of occupational disease.

Color me a cynic if you will, but my sense is the Manager’s Amendment (technical term for the Libby Care language) isn’t so much the ‘camel’s nose under the tent’ as a political move by Sen Baucus (D MT) to curry favor and win votes.

Here’s why.
1. The Amendment requires a site be designated a “Public Health Emergency” by the Secretary of HHS. To date, Libby is the only site so designated, and the requirements for designating any site as a Public Health Emergency are stringent indeed.
2. The provision covers care for all affected residents and employees, not just workers. This is clearly far beyond ‘occupational’ and is much more of a public health issue than a work comp one.
3. Care is to be delivered through the Medicare system. This will require allocation of additional funding for each new site, something a cash-strapped CMS is unlikely to encourage.

Finally, PPACA funding includes about $20 billion from a medical device excise tax of 2.3%. This may add a few pennies to workers’ comp medical costs – but remember a) medical devices are just a few percent of WC medical costs, and b) markup on these items is already so high that another couple percent isn’t going to move the proverbial needle. While the device industry is lobbying its brains out to get this repealed, claiming it will cost jobs, hamper innovation, and bring asteroids crashing down on our heads (well, perhaps not that), a dispassionate analysis indicates this is a non-event.

Next up – the impact of increased group and Medicaid insurance coverage on workers’ comp…

Jun
28

OneCall acquiring TechHealth

Posted by Joe Paduda on Friday, June 28th, 2013 | Comments

Giant workers’ comp managed care firm OneCallCare Management will announce today it is acquiring Tampa-based TechHealth.

TechHealth, which has been on and off the block several times, provides a range of services  – transportation, home health, DME, PT, pharmacy and imaging to the comp industry.  As OCS already has a robust offering in all but two of the product lines, it may well be OCS’ owners were seeking a toehold in pharmacy and PT, while adding a bit more capability in transportation and home health/DME (I don’t see TH’s imaging as material to the deal).

With revenues well above $100 million and a solid technology platform, TechHealth will also add top line revenue and a different customer mix (heavier on the smaller-payer end) to OCM.

TechHealth got its big start serving AIG’s regional claims office in Florida around the turn of the century, the value proposition defined as relieving the adjuster of the hassle of handling the multiple services needed for complex claims.

TH grew in fits and starts, primarily by selling into claims offices with a few regional carriers and TPAs using their services on a broader scale. The one-stop-shop value prop, while appealing on its face, has yet to gain appreciable traction amongst the larger (top 20) payers.  While there are several competitors with similar strategies, none has managed to become a major supplier across all (or even most) of the service lines with any of the big payers.

The OCM model is markedly different.

As the largest imaging, DME/HHC, dental, and transportation/translation supplier, it can make the argument that the promise of the one-stop shop is now reality. The addition of Harbor Health gives OCM insights into physician-ancillary service provider relationships, which it will undoubtedly use to increase the volume of services delivered thru OCM.

OCM’s model is anchored in the “original” OneCall Imaging’s expertise and deep experience in scheduling imaging; the new owners leveraged that expertise and combined it with similar services (if you’re getting an MRI, you may need transportation). The growth – primarily via acquisition – has been impressive, as OCM is now the largest single supplier of services to the WC market, eclipsing Coventry Workers’ Comp last year.

This isn’t the only deal you’ll hear about this summer; word is one – or more – of the big bill review firms are looking at a transaction, and there are at least two others expected to be announced before the kids head back to school.

What does this mean for you?

For payers, fewer choices. For entrepreneurs, an opportunity to launch something new and different, albeit a high-risk one. 

 

 

Jun
27

Should workers’ comp pay more for medical care than group health?

Posted by Joe Paduda on Thursday, June 27th, 2013 | Comments

That is the question I’m left with after reading WCRI’s latest reports.

One compares group health’s payments for outpatient hospital services to work comp’s; the other discusses the use of group health payments as the basis for a work comp provider fee schedule.  There is a wealth of insight in both studies; generally, states with fee schedules had lower work comp medical costs than those without

The latter is the subject of today’s post; it “focuses on the median nonhospital price paid for five common surgeries and four common established patient office visits in 22 large states for services delivered in 2009.”; it compares group payments to comp.  By focusing on actual prices paid, the analysis factors in network and other discounts taken, increasing the “validity” of the data.

I’ve long thought providers should get paid more for care delivered to workers comp patients than for group, medicare, or medicaid.  Comp involves disability management and all the communications, reporting, and complications inherent in considering disability in delivering care, and as we expect physicians and other care givers to take an active role in that process, by rights we should expect to pay them for that additional work.

That said, the dichotomy between pricing differentials for office visits vs. surgeries reported by WCRI strikes me as precisely the opposite of what should be.  Specifically, the prices paid for office visits under group and comp were typically within 30 percent, with a range of 15 percent in about half of the states studied; in several states comp paid significantly less than group for office visits. Office visits are where and when the “disability management’ stuff occurs as the physician discusses the return to work plan, engages with the field case manager (if one is involved), talks with the claimant about the claimant’s job functions, physical capabilities and limitations, and other factors affecting disability.  This takes time, thought, documentation, expertise.

Conversely, reimbursement for surgeries was generally much higher when the payer was workers’ comp than when a health plan was on the hook. Remember, the payment is specific to the surgical procedure; it does not include visits pre- and post-surgery. A knee arthroscopy is a knee arthroscopy; yes, there may be a little different documentation for WC surgeries, but the surgical notes should consider functionality, rehab plans, and prognosis regardless of who the payer is. Yet in only one state – Michigan – was the reimbursement essentially identical, while in the other 21 states, the reimbursement was higher for comp – in seven states comp reimbursed at least twice as much as group health. 

Surgeons may argue that the higher reimbursement is necessary to ensure access; that argument, should it be made, is easily addressed by noting physicians are willing to accept much lower reimbursement for the identical procedure for most of their patients; there’s no access problem for group health patients despite the lower reimbursement.

In contrast, reimbursement for office visits should be higher for workers’ comp, for the reasons noted above.  If not for the office visit code itself, than perhaps states should institute a different code for disability management (some payers already do this).

What does this mean for you?

From here, this looks like another example of under-valuing primary care and patient – physician interaction, while over-valuing procedures; doing stuff TO patients.  

Jun
26

Immigrants and health care – who’s paying, who’s getting

Posted by Joe Paduda on Wednesday, June 26th, 2013 | Comments

Immigrants Contributed An Estimated $115.2 Billion More To The Medicare Trust Fund Than They Took Out In 2002–09 – that’s the headline from a piece in Health Affairs this month.

“immigrants may be disproportionately subsidizing the Medicare Trust Fund, which supports payments to hospitals and institutions…In 2009 immigrants made 14.7 percent of Trust Fund contributions but accounted for only 7.9 percent of its expenditures—a net surplus of $13.8 billion. In contrast, US-born people generated a $30.9 billion deficit…

Most of the surplus from immigrants was contributed by noncitizens [emphasis added] and was a result of the high proportion of working-age taxpayers in this group. Policies that restrict immigration may deplete Medicare’s financial resources.”

When one considers that birth rates among citizens are declining, and thus there will be fewer young working folks to support us aged people, the current anti-immigrant/nativist stance starts to look a little problematic.

Fact is, Medicare and Social Security depend on contributions from working age people; if we drastically restrict immigration and deport all undocumented aliens those two programs will be in dire financial straits much sooner than anticipated.

Conversely, a more “open” policy would go a long way toward reducing the strain on Medicare and SS.

Just saying.

Jun
25

Workers’ comp rates are up, but still no profit.

Posted by Joe Paduda on Tuesday, June 25th, 2013 | Comments

While workers’ comp premiums have been increasing steadily for two years, the industry is still not profitable.

Why not?

There are a bunch of pluses and minuses influencing profitability; premiums were up 7 percent in 2012, driven by higher rates and growing payrolls.  Rates have been trending up for eight consecutive quarters and increases are now in the double-digits. That helped improve 2012’s combined to 110.

On the negative side, today’s historically-low interest rates get part of the blame, but their impact is somewhat offset by declining frequency (down 5 percent last year).  Fitch’s latest report noted the industry still suffers from reserve deficiencies, making the current combined ratio a bit optimistic.

The industry’s performance is simply a composite of all insurers, and here’s where it gets really interesting.  Couple things stand out from Fitch’s analysis (access is free to registrants).

  • Companies with weaker underwriting performance shrank their books; specifically, all insurers with combineds over 100 reduced their premiums over the last five years.
  • Liberty Mutual is once again at the top of the market-share list, despite dropping from 11.1% share to 9.9%.  AIG has reduced its exposure by over $3.5 billion over the last half-decade.
  • Fitch notes that the implementation of health reform under PPACA will likely affect “volatility in workers’ compensation claims costs”; that’s certainly true, but I’d suggest the impact of long-term opioid usage will be rather more significant.
  • The report authors also note “the industry will continue to report unfavorable reserve development” in work comp over the next several years.  In English, they are saying insurers haven’t set aside enough money to pay for the future medical and indemnity expenses of claims that have already occurred.  

I remain convinced most insurers don’t have a firm grasp on medical costs and drivers thereof.  Fitch’s comments about reserve inadequacy support that belief, as do anecdotal discussions with executives.  I detect a distinct uneasiness when discussing medical costs, a sense that things are not as under-control as one would think from reading industry reports and company press releases.

What does this mean for you?

Rates will continue to go up; more employers will go self-insured; and the carriers we expect to be the biggest will likely not be in a few years.

Jun
24

The true cost of opioids

Posted by Joe Paduda on Monday, June 24th, 2013 | Comments

A workers’ comp claim with no opioid scripts costs about $13,000.  Those with long-acting opioids like Oxycontin?  $117,000.

This and other factoids were reported in yesterday’s NYTimes in a revealing piece by Barry Meier; you may recall Meier was responsible for two articles last year in the Times on opioids and workers’ comp physician dispensing.

  • There were 16,651 deaths associated with opioids in 2010. My best guess is several hundred of those were workers’ comp claimants.
  • The price-per-pill for Vicodin dispensed by docs was roughly three times that of Vicodin purchased at a retail pharmacy.
  • Opioid sales more than doubled to $8.34 billion in 2012; workers’ comp accounts for about 18% – 20% of total opioid costs
    (remember workers’ comp medical is less than 2 percent of total US medical expense…)
  • The number of patients in drug treatment – inpatient, outpatient, or using drugs intended to address addiction – has increased dramatically over the last ten years.

What does this mean for you?

Do you have any idea what opioids do to your claim costs?  Not just the cost of the drugs; the other medical expenses, extended disability duration, legal expense, and settlement costs?

 

 

Jun
21

PPACA/Obamacare and Medicare fraud

Posted by Joe Paduda on Friday, June 21st, 2013 | Comments

Among the hundreds of pages of the PPACA are passages addressing provider fraud, a far-too-common and far-too-costly issue that has long plagued the program.

The good news is, things seem to be getting better.

CMS just reported they recovered a record $14.9 billion in 2011 and 2012 from anti-fraud prosecutions and judgments.  The number of providers kicked out of Medicare more than doubled in the two years after PPACA was passed. And the most recent large action saw 89 individuals charged with $223 million in false billing.

One occurred in Miami (shocking, I know), where a local TV celeb was busted for allegedly falsely billing Medicare some $20 million for home health care services for diabetics…(you gotta see this picture of the alleged perp…)

There are a bunch of reasons for the increased success;

  • PPACA allocated an additional $350 million over ten years to anti-fraud efforts;
  • the FBI has dedicated more resources to the effort,
  • CMS investigations staff and resources have been increased and given more authority and a more prominent position in the Department;
  • computer programs designed to identify potential fraud have been developed and improved, and
  • rewards for tips may be drastically increased – up to a maximum of $9.9 million.

That’s all good – but every time I see a TV ad for that hoverround chair I think there’s still  some rather significant “opportunities” to reduce taxpayers’ burden.

If those companies can afford to stuff my cable box full of adverts, they are making too much profit.

Jun
20

HWR welcomes summer

Posted by Joe Paduda on Thursday, June 20th, 2013 | Comments

Wing of Zock (a great blog name and one you’ll have to click on to understand) has the last edition of the spring – or as I like to think of it, the first of the SUMMER!!

Jun
20

Pharmacies’ self interest v silos v ignorance

Posted by Joe Paduda on Thursday, June 20th, 2013 | Comments

$1.7 billion in workers’ comp drug costs are for drugs dispensed by physicians.  

Why don’t the big retail pharmacies care about physician dispensing in workers’ comp?

Why isn’t Walgreens, and CVS, and Rite-Aid, and Medicine Shoppe up in arms about this?

After all, claimants who get their drugs from their docs don’t visit a drug store, don’t pick up those other essentials, don’t establish a relationship with a pharmacist and possibly a store.

I’ve been stumped by this for years.  Here’s why.  About 65 percent of a chain drug store’s sales are for drugs; for independents its 93 percent.  The margin on most of those medications is pretty thin, and almost non-existent for Medicaid drugs in some states.  Chain drug stores sell drugs to get people to come in and buy toothpaste and magazines and convenience foods and cosmetics, where they do make a decent profit. And independents live and die on drug sales; and these days, most are dying. 

Yet anyone who’s tracked anti-physician dispensing efforts in Florida, Maryland, Hawai’i, Michigan, Illinois – anywhere, has not seen hide nor hair of anyone remotely associated with a drug store.

Is this a case of silos, where the department/person responsible for workers’ comp drug sales has no power or influence or is measured on percentage margin and not total sales or profits (because WC drugs are VERY profitable for pharmacies; the margins are many times those of drugs dispensed for group health plans).

Or is it ignorance, where the powers-that-be don’t care about WC drugs because they only represent a couple percentage points of scripts?  Of course, the total would be a lot higher if physicians weren’t dispensing, and this ignores the much higher profits on those drugs, but hey, ignorance is bliss, right?

Whatever the reason, it is abundantly clear that insurers, employers, PBMs, and others (me, for instance) have been fighting chain and independent pharmacies’ battles for them.

If independents don’t sell drugs, they’re dead.  And more are dying every day, as overall drug sales level off, and they are increasingly unable to compete with the chains and huge food-and-drugs.  Yet I’ve never seen anyone from an independent pharmacy, or their national trade group, engaged in the issue.

Folks on workers’ comp are either employed or getting a check to cover lost wages; they need toiletries and food and other medications and batteries, stuff they’ll likely get from the Big Box store if they don’t come in to the corner drug store to get their workers’ comp meds.  Yet NACDS and the other “advocacy” groups are nowhere on this issue.

It isn’t like I – and others – haven’t tried, multiple times, to get drug stores engaged.  For whatever reason, there’s been no response.

Meanwhile, the investment and provider communities have figured out that workers’ comp is a great business – profitable, with relatively low regulatory risk.  Comp is an “insulator”, a payer type that is removed from PPACA, Medicaid, Medicare, and all the changes coming down from Washington; a service line not affected by budget cuts or Obamacare.

At some point, perhaps when the last independent drug store is about to close up shop, someone may say “gosh, those dispensing docs sure killed our comp business; we could have used those dollars to stay open and profitable.”

Or a chain store exec may wonder “gee, why is my average profit per script lower than ever?’

Or, more likely, Not.

 

Joe Paduda is the principal of Health Strategy Associates

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