Insight, analysis & opinion from Joe Paduda
Managed Care Matters will be celebrating the nation’s independence this weekend; a new flag graces the flagpole out front, friends and family will be with us to watch the fireworks show off the Town beach; and I’m going to try to finish reading a biography of James Madison I’ve been working on for about a year.
Have a great holiday – and see you next week. If you’re working, that is
The former head of North Dakota’s state workers comp fund has been – and continues to be – vilified by a few people who obviously don’t know the guy. (more on the appeal in a future post).
Prosecuted for ‘misuse of funds’, Sandy’s life has been ruined because he approved payments for balloons, small ($50) gift cards, sweets, and cakes for employee recognition events, along with refusing to seek repayment for relocation expenses for an employee terminated for performance (which was legal and appropriate).
Well, I do know the guy, and there’s plenty wrong with him. Here’s the real scoop on this horrible guy/abuser of the public trust/scofflaw…
Well, he worked for George HW Bush in the White House (our politics are pretty different, but I keep hoping he’ll come over to the bright side).
He’s an avid, very well informed – and extremely loyal – Cleveland sports fan. (Gotta respect that, even if you don’t understand it)
He isn’t a golfer. (Me neither, so that’s actually a big plus)
I don’t think he can dance.
He went to one of those fancy Eastern big-name business schools (Wharton, I think).
He is such an Eagle Scout (which he actually is) that he won’t let his kids download music from file-sharing services because it is unethical. I’m sure the young Blunts think he’s horribly unfair.
For a non-IT guy, he’s pretty good at tech stuff, making me think he was an AV club guy in his high school days (and not, that’s not meant pejoratively).
Sandy was COO of Ohio’s Bureau of Workers Comp before he was recruited to professionalize the NoDak state fund (so much for that honest effort). By all accounts he was well-liked, and more importantly, very well respected in that role. But still, he was a workers comp exec, and you KNOW what those people are like…
He’s unremittingly positive, unerringly cheerful, and undeniably an upbeat person. Despite what the ‘criminal justice’ system has done to ruin his life, Sandy’s always positive. I don’t get it.
He’s a very, very good analyst. Sandy’s helped me on several consulting projects involving analyses of big databases of medical and claims data and interpreting the results, and the guy knows his stuff. This ticks me off, because he sees stuff I don’t.
He knows his college sports, and probably did pretty well in the NCAA pool. Those guys who a) know their sports and b) are analytical usually do. Again, pretty darn annoying.
There’s more, but if I say anything else I’ll embarrass the guy even more. Still, glad I’ve finally come clean on just what kind of bad actor this Blunt guy really is.
I feel so much better now!
I’m in DC for a couple of meetings focused on the use, abuse, and impact of narcotics in workers comp. To say this is starting to get major traction would be an understatement; payers, policymakers, employers, and pharma are all recognizing the issue for what it is – one of the biggest problems in comp today.
For now, here’s a few numbers to help put things in perspective.
– workers comp payers spent about $1.4 billion last year on narcotics. That’s ‘billion’ with a ‘B’.
– A study in Washington state determined that there between eight and twelve deaths were associated with workers comp claimants’ use of opioids each year from 1999 – 2002.
– over a third of claimants who start using narcotics are on them for more than a year.
– a fifth are on for more than two years.
– a seventh are on for more than three years.
– this despite well-recognized treatment guidelines that suggest narcotics should be used for a limited dime during the acute phase of an injury.
– in a Washington study, only 16% of the low back claimants taking opiates saw an improvement in functionality; only 30% saw a reduction in pain.
– the extended use of opiates doubles the risk of duration exceeding one year.
The elephant in the room is the issue of addiction. Many payers don’t want to hear about the likelihood that many of their long-term claimants are – in fact – addicted to or dependent on narcotics. For some reason, they appear content to ignore the issue; a couple claims people I’ve spoken with have said “we don’t want to ‘buy’ the addiction.”
Well, here’s a news flash; You already have.
Whether you choose to acknowledge this or not, claimants who have been getting opiates (and/or opioids, the synthetic version) for more than 90 days at a dosage exceeding 120 morphine equivalents per day are are at high risk for dependency/addiction.
And the ones who are addicted are ‘treating’ their addiction by consuming drugs which:
a) employers are paying for – directly or indirectly
b) are preventing return to work
c) increase total medical costs and require claimants to take other drugs to address the side effects of narcotics
d) may be sold, given away, or taken by family, friends, or other users.
What does this mean for you?
It’s time to get real, folks. Here are a few ways to get started.
Begin identifying the claimants at risk for addiction; develop a scientifically – and jurisdictionally – sound approach to addressing the risk; partner with your PBM on a comprehensive strategy; work with regulators to change rules where necessary and possible; task your medical director with developing – and implementing – a solution.
Washington State has what looks to be an excellent, well-researched approach.
Remember the woman who sued McDonald’s and won millions ($2.9 million to be precise) after spilling hot coffee on herself? Like millions of others, you may have been outraged at the award for something so trivial.
There’s a film on HBO tonight that you should watch.
Hot Coffee is a documentary about Stella Liebeck, the elderly woman who spilled coffee on herself and sued McDonald’s, “while exploring how and why the case garnered so much media attention, who funded the effort and to what end.”
Like most, I read the headlines abut the suit back in 1992 and thought “jeez, this is ridiculous”.
Maybe not.
This from wikipedia:
“Stella Liebeck, a 79-year-old woman from Albuquerque, New Mexico, ordered a 49 cent cup of coffee from the drive-through window of a local McDonald’s restaurant. Liebeck was in the passenger’s seat of her Ford Probe, and her nephew Chris parked the car so that Liebeck could add cream and sugar to her coffee. Stella placed the coffee cup between her knees and pulled the far side of the lid toward her to remove it. In the process, she spilled the entire cup of coffee on her lap
Liebeck was wearing cotton sweatpants; they absorbed the [180 degree] coffee and held it against her skin, scalding her thighs, buttocks, and groin. Liebeck was taken to the hospital, where it was determined that she had suffered third-degree burns on six percent of her skin and lesser burns over sixteen percent. She remained in the hospital for eight days while she underwent skin grafting. During this period, Liebeck lost 20 pounds (9 kg, nearly 20% of her body weight), reducing her down to 83 pounds (38 kg). Two years of medical treatment followed.”
Without being too graphic, think about that. An entire cup of 180 degree coffee dumped in your crotch, causing third degree burns on an extremely sensitive area with millions of nerve endings. An anatomical region involved in rather essential physiological functions.
Disclosure – my wife’s family was involved in McDonald’s for decades, we still own stock in the company, and know many fine people at McDonald’s.
This week Tinker Ready is hosting HWR; the proud Bruins and Springsteen fan adds her usually distinctive touch to this biweek’s edition.
I add my congratulations to the Bs and sadness at the departure of Clarence Clemons – play a bit of Jungleland and you’ll know why.
There’s been much publicity around a McKinsey survey that purported to indicate many employers would drop their employee health insurance plans, a finding markedly different from that predicted by several other studies.
Were the other surveys wrong, and is McKinsey right?
Give me a minute…
First, lets examine the McKinsey study. It was conducted by Ipsos, a firm contracted to McKinsey; the survey was done on line
Here are the key findings, as reported by McKinsey:
– Overall, 30 percent of employers will definitely or probably stop offering ESI [employer-sponsored insurance] in the years after 2014.
– Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.
– At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.
Notably, the folks from the highly-regarded consulting firm initially refused to release the details of the survey, the methodology, and information on exactly who was surveyed. That’s weird. After significant pressure from Congress and others, they did provide additional information about the process and methodology, but details on who responded (other than broad characterizations) were not revealed. I read the Survey instrument itself; you can download the pdf http://www.mckinsey.com/en/US_employer_healthcare_survey.aspx.
What’s weird is why McKinsey delayed publishing the details. The instrument and methodology look to be pretty sound; results were weighted to account for differences in the actual employer population; and the survey firm itself is well-regarded. But, here’s the kicker. When asked how much their company paid for health benefits, almost three in five didn’t know. If these respondents were truly decision makers or influencers, you’d think they’d know this rather basic information.
WIth that rather major concern, it is clear this was not some cheap-shot Tea Party-funded hack job.
That said, there are two sets of questions that appear to deliver very different takes on the over-arching question – will employers drop coverage after 1/1/2014. In the initial question re would they maintain or drip coverage, 9.2% said they ‘definitely would’ drop coverage, and another 20.5% said probably. This question was preceded by a detailed description of individual subsidies and employer penalties, however, while the questionnaire (specifically around question 8) did include some details of the employer subsidies/premium support provided under ACA, it appears these were presented in a sidebar on the internet-based survey and may not have been shown to all respondents. Whether folks read this in detail, or understood what they read, is an open question.
The other question (hat tip to Kate Pickert of TIME’s Swampland) asks if the respondents knew what their competitors would do in response to reform. Not surprisingly, 31.4% said they didn’t know, but 27% said continue as is or with minor changes and 24.3% said continue offering coverage but with significant changes.
The folks at the Urban Institute published a response (based on their Health Insurance Policy Simulation Model (HIPSM)) to the McKinsey work in which they refute McKinsey’s central finding. From the report:
• Employers with fewer than 50 employees are expected to experience substantial savings on health care costs due to the benefits of the health insurance exchanges and subsidies for the smallest firms. These employers face no requirements to contribute to the health care costs of their workers under the ACA;
• Savings on premium contributions are offset by employer responsibility assessments for those employers with 50 to 100 workers, which is expected to result in a very small increase in total costs for this group;
• The smallest firms are expected to experience a significant increase in offer rates under the ACA, while offer rates for those with 25 or more employees are expected to remain stable;
Notably, the methodologies were markedly different, but, the conclusions were supported by the underlying data.
Which leads to this conclusion.
We don’t know what employers will do.
That said, here’s what I think. More smaller employers will offer coverage after reform than do today.
Some mid-size (50-100) employers will drop coverage and pay the penalty.
Remember, once people start seeing the benefits of an entitlement program, they are loathe to give it up. Just think about Part D, Medicare, and Social Security, and the unwillingness of (most) politicians to do anything material about these programs.
is that of claims adjuster.
Whether you know them as adjusters, examiners, file handlers, or claims case owners, these women and men are the ones who write the checks out of the checkbook – both literally and figuratively. What they do, and how they do it, has more impact on the success or failure of an insurer or employer’s work comp program than any other position (although some underwriters would argue they’re just as important).
Adjusters determine compensability; keep an eye out for fraud; authorize indemnity payments; encourage/direct/cajole claimants to go to preferred providers; interface (or, as one seasoned adjuster referred to his approach, ‘in-your-face’) with claimant attorneys; meet with employers’ risk managers to review claims, discuss reserves, and encourage RTW planning; set, change, and justify reserves; encourage, and in many cases educate treating docs to think about RTW; try to figure out if this or that unpronounceable drug is appropriate for the claimant’s condition; authorize, or deny, medical treatment; prepare and present cases to hearing judges; explain to their managers why they can’t get a case closed or IME scheduled.
All this while looking every day at a case load that, a decade ago, would have seemed far too large. With claims case loads at many payers in the 150 range (lost time), adjusters have about twenty minutes a week to focus on each claim.
Twenty minutes.
Of course, this is before we factor in the other stuff; ongoing CEUs required in many jurisdictions and the training requirements for new products, vendors, programs, and technology innovations.
And recall that we’ve been hammered by a work comp market that’s been soft as fresh WonderBread for several years, leading payers of all types to consolidate, cut staff, hold off on investments in technology and workflow improvements, and require everyone to ‘do more with less’.
I’m often asked by those in- and outside the comp business what the secret to success is. In most cases, the answer is the same:
Take work off the adjuster’s desk and put it on your’s.
Mark Wall’s LinkedIN group always has great insights; for more detail on what these folks go thru, and how those struggles affect their ability to handle claims effectively, check out this conversation .
Austin Frakt’s piece discussing the latest research findings tells us what we’ve long suspected – high deductible plans don’t seem to reduce cost trends.
Frakt highlights an analysis by Katherine Swartz of the Robert Wood Johnson Foundation, an analysis that reads in part:
the CDHP [consumer directed health plan, which uses a very high deductible] was not able to controlmedical expenditures over time and it appears that the enrollees in the CDHP spent more on hospital care than enrollees in the traditional plans…The findings from these three studies are consistent with expectations about deductibles — once the deductible has been met, there are no longer strong incentives for an enrollee to be concerned about further health care expenditures. […]
Health plans with high deductibles and uniformly applied co-payments or coinsurance rates are oftenreferred to as “blunt instruments” for reducing unnecessary health care expenditures because evidenceis mounting that people reduce both essential and nonessential care…uniformly applied cost-sharing particularly causes people to reduce their use of prescription drugs, which in turn seems to lead to use of more expensive types of care that are indicative of adverse events and poor health outcomes. [emphasis added]
Those who’ve been watching the evolution of CDHPs for some time are not surprised. In fact, we knew as long as five years ago that CDHPs = lower drug costs = more hospitalization
. There are several other problems w CDHPs – chief among them the fact that the people who spend the most dollars on health care will not alter their spending habits on iota due to a CDHP.
Here’s a discussion from a previous post.
The underpinnings of CDHPs lie in the economic theory of “Moral Hazard.” Journalist-author Malcolm Gladwell describes this as the belief that “insurance can change the behavior of the person being insured” and notes that it is popular among many economists and think-tank types and, consequently, has been influential in shaping health care delivery systems. The idea is that if insurance covers the bills, people are more likely to seek care and run up unnecessary costs.
The Moral Hazard theory falls short when confronted by the rather uncomfortable reality of actually having health care services rendered to one’s own person. Why would anyone want to subject themselves to surgery or hospitalization if there were an option to avoid it and just go fishing instead?
But on the surface, the concept makes some sense. Most people would be careful about getting an MRI if they knew they had to foot the bill, but perhaps too careful. People will not simply avoid discretionary care; they will avoid necessary care, as several studies indicate. One Rand Corporation study concludes that when individuals are required to pay more for prescription drugs, they don’t take them as they should. This leads to nasty physical and financial problems, such as more strokes, which cause lots of pain and cost lots of money to fix when a few blood-pressure pills might have sufficed. As far as drug copays go, increasing consumers’ costs actually drives up total medical expenses. It’s not a great leap to think individuals with high deductibles will likely wait before scheduling an appointment with their physician to see if a problem just goes away on its own. In a time when the Centers for Disease Control describe diabetes as “a runaway train,” is it economically wise to foster measures that discourage preventive care?
The coup de gras for CDHP is its old nemesis, the real world. CDHP’s fatal flaw is that the “consumer” part is directed at the wrong people. Half of U.S. health care costs are spent on five percent of the population. A deductible has little impact on the purchasing behavior of these folks; they’ll blow through a few thousand bucks in a couple of months
Conversely, over two-thirds of Americans spend less than a thousand dollars a year on health care. The only effect a high deductible will have on these folks is to discourage the use of preventive care.
Consumerism is not all bad – health care shouldn’t be “free” for anyone. Requiring people to share in the cost of their care should be a part of any serious reform effort. The fix for CDHP is relatively simple – get rid of high deductibles, which are unaffordable for many and may well discourage preventive care, and replace them with coinsurance per service to ensure patients have some financial skin in the game. Insurance companies should keep an income-indexed out-of pocket-maximum, while covering preventive services and maintenance medications at very low copays to encourage their use.
I”d add that employers really interested in reducing costs over the long term do have another alternative – buy a CDHP plan, and then fund the deductibles. One company has saved their clients significant dollars with this hybrid approach.
Employers and insurers decry the recent reform instituting PPOs in Illinois as ‘California Lite’. Plaintiff attorneys claim it will lead to undertreatment and negative consequences for claimants.
What’s the real impact?
The right answer is it’s a bit early to say. The PPOs go into effect September 1; at least they CAN go into effect then; there’s a lot to be done by employers, network developers, and regulators before an employer can activate a PPO, so it may well be several more months before we start seeing widespread adoption.
First, the State Department of Insurance has to certify Preferred Provider Programs – there’s too much text to quote here – search for “Sec. 8.1a. Preferred provider programs” – relevant section starts on page 88 line 23.
When an employer does get a PPO certified and implemented, there’s a couple key points to remember.
First, when an employee reports an injury the employer has to tell him/her of the PPP and the employee’s need to choose a physician from the PPP.
Second, employees can opt out of the PPP – here’s the relevant text:
“Subsequent to the report of an injury by an employee, the employee may choose in writing at any time to decline the preferred provider program, [emphasis added] in which case that would constitute one of the two choices of medical providers to which the employee is entitled under subsection (a)(2) or (a)(3)”
Essentially this allows the injured worker to choose their initial treating doc, who controls their referrals to specialists, ancillary providers, and facilities. My take on the network direction provision is it is pretty weak, and – realistically – will help with those claimants engaged in doctor shopping. However, payers’ ability to control which physicians and other providers treat their injured worker, while certainly strengthened, is not greatly enhanced.
While some seem to have concluded that the initial opt-out decision is one choice, and the subsequent selection of a provider is the second, I’m not sure that’s the case. The regulatory process will certainly clarify the issue, and if the other analyses are correct, the single opt-out choice will help employers – and in most cases, facilitate return to work and reduce unnecessary medical expense.
That said, note that an injured worker’s initial opt out includes the treating doc, and anyone that treating doc refers the worker to. Physical therapy, imaging, surgery, hospitals, you name it. That’s a lot of ‘opt-out’. My sense is Illinois providers who want to maintain their current lucrative flow of work comp patients will get very good at complying with the (future) regulations to keep referrals within that initial treatment stream.
What does this mean for you?
The net is this – the regulatory process will greatly affect the actual impact of the reform law. We don’t yet know what the specifics will be, but any employer would be well-served to identify PPPs that:
– a) contract with a relatively few physicians with demonstrated expertise in workers comp and focus on return to work;
– b) don’t include every doc in the yellow pages (I’d run from any PPP that markets itself based on how many physicians it has); and
– c) include ancillary providers to keep care in the PPP.
Of course, discounts are important, but make sure the treating docs – the ones who order the scripts, arrange for surgery, prescribe PT, and facilitate RTW – are treated well. Look for deeper discounts on the ancillary/secondary providers – the ones that do what the original doc tells them to.
There’s a detailed discussion of the issue at WorkCompCentral – subscription required.
Today’s Insurance Journal arrives with this bit of positive news: while rates for most lines of property and casualty insurance are still soft, work comp premiums are firming, driven in part by increasing rates in California, and for the first time in several years, higher rates in other states as well.
The data come from Towers Perrin’s Commercial Lines Insurance Pricing Survey (CLIPS), which is derived from figures submitted by insurers. That said, the database is rather small as the contributors account for about a fifth of the market. Given the highly competitive nature of the business, I’d be pretty confident these data are indicative of the larger market, as there’s no way a subset of commercial carriers could sustain price increases if other insurers were not increasing rates as well.
Another note of interest from CLIPS; accident year loss ratios continue to deteriorate, with the latest information indicating about a 5% deterioration from 2009 to 2010.
The report follows on the heels of another report indicating the P&C industry’s reserve cushion is getting slightly thinner. Fitch Ratings indicates industry reserves are likely just about ‘adequate’, but this is still reflects a deterioration from previous years.
What does this mean for you?
Work comp rates are firming.
