Insight, analysis & opinion from Joe Paduda

Apr
22

Florida’s dispensing legislation clarified

Posted by Joe Paduda on Friday, April 22nd, 2011 | Comments

There’s a good bit of confusion out there about the two physician dispensing bills on the table in Florida.
There are two separate issues here that are often conflated in the media.
First are the pill mills – those storefronts that dispense millions of doses of OxyContin and other narcotics to anyone and everyone who shows up. Florida’s got a well-deserved reputation as the OxyContin supplier to the nation – due almost exclusively to the pill mills.
pillmill2_754502c.jpg
Second is specific to workers comp – according to NCCI, physicians dispensing drugs to comp claimants added $62 million to employers’ costs last year – with no measurable benefit to claimants, employers, or anyone else but the dispensing physicians, drug repackagers, and dispensing companies.
The House version, which passed yesterday in a near unanimous vote, would ban physician dispensing of Scheduled drugs – mostly narcotics, anti-depressants, and muscle relaxants, but allow continued dispensing of non-Scheduled drugs. This bill now moves to the Senate, where a somewhat different ‘pill mill bill’ (SB 818) is under consideration.
Another Senate bill (attached to the budget resolution) is designed to close the loophole that enables physicians dispensing drugs to work comp claimants to charge prices far above retail pharmacies’. This issue has a far smaller constituency, isn’t really recognized as an issue by anyone but a few employers and comp payers, and many seem to think that the House bill would “fix” the work comp problem.
Both bills are desperately needed.
My bet is the politics are such that we’ll see the pill mills banned and no action to fix the work comp problem.

Apr
21

A hardening workers comp market?

Posted by Joe Paduda on Thursday, April 21st, 2011 | Comments

Conditions look ripe for a hardening of the workers comp market later this year. I’ve been known to get just a bit ahead of myself in my predictions about lots of things – and this time may be no different. That said, the stars look to be getting closer to alignment, with profits up, underwriting losses increasing, and medical costs heading north as well.
Yesterdays’ PropertyCasualty 360 brought news that P&C insurers’ “2010 net income rose to $34.7 billion from $28.7 billion the year before, the industry’s net losses on underwriting for the year grew $7.4 billion compared to 2009.”
So, you say, how could the market be hardening be income is going up? Doesn’t that lead to more entrants to the market, more capital chasing less business?
Well, perhaps. But there’s a couple other things going on that weigh against a soft market.
First, insurers’ results aren’t very good. Last year’s 6.5 percent margin compares poorly to 9.1 percent, the average for last fifty years or so. As investors like to see a nice steady improvement in margins and a rosy outlook, those numbers are likely going to discourage the big money folks from allocating billions to the P&C insurance business.
The news from California isn’t encouraging either. The state fund’s loss ratio is above 157%.
157%.
Nationally, NCCI reports the picture is getting increasingly gloomy. This from Joan Collier’s report:
– After very minor underwriting losses in 2007 and 2008, the combined ratio for workers’ compensation (private carriers) shot up nine points in 2009–the largest single year increase since the mid-1980s.
– Deteriorating underwriting results, combined with a record low interest rate environment, left the line in an only slightly better-than-break-even position after investment income is considered.
– Combining the underwriting loss with the investment gains, the result is a pre-tax operating gain of 1.6 percent, the worst result since the 0.9 percent gain of 2003.
When you add a strengthening economy, growth in employment, and a faster pace of work – and the likely outcome of all that, which is an increase in claim frequency, coupled with the increased severity we’ve been experiencing for some time now, and the near-term outlook for workers comp doesn’t look so bright.
What does this mean for you?
A tighter market by the end of 2011 and increasing prices.

Apr
20

Prescription drug abuse – are you complicit?

Posted by Joe Paduda on Wednesday, April 20th, 2011 | Comments

This morning’s NYTimes has a heart-crushing story about a town in Ohio devastated by abuse of OxyContin and other prescription narcotics.
Here’s what prescription drug abuse has done to Ohio.
– in 2007, deaths from prescription drug abuse (PDA) in Ohio surpassed deaths from motor vehicle accidents.
– more people died from PDA in Ohio in two years than died in the World Trade Center in 2001.
– almost one in ten babies born in Scioto County tested positive for prescription drugs.
Around the nation, the numbers are equally terrifying.
– Prescriptions for opiates (hydrocodone and oxycodone products) went from 40 million in 1991 to nearly 180 million in 2007
– The U.S. consumes 99 percent of the world total for hydrocodone (e.g., Vicodin) and 71 percent of oxycodone (e.g., OxyContin).
– PDA grew by 400% from 1998 to 2008. Four hundred percent.
And that’s just the statistics.
There’s no figure, no number or percentage, that can describe the pain felt by parents, spouses, siblings who lost someone to PDA.
These abusers are getting the drugs from somewhere, and some portion of the drugs that are killing these people are paid for by insurers. At some point, some enterprising attorney is going to ask the question; “What did you know about this person’s drug profile, when did you know it, and what action did you take?”
Play that conversation thru in your mind.
Which leads to the question, what are we going to do about it?
And more precisely, what are YOU going to do about it?
If you work for an insurer or TPA, are you monitoring potential PDA? Looking for possible abuse or diversion? Tracking provider prescribing patterns? Identifying claimants at risk for doctor shopping or use of multiple pharmacies?
Or are you thinking about it, debating, discussing, having meetings and writing memos? Getting ready to get ready?
Not only is there a societal cost of PDA, there’s also a fiduciary obligation. Payers have the technology, data, and analytical abilities to identify potential PDA. It’s time to stop ignoring the problem, get off our collective butts, and take action.

Apr
18

Controlling Medicare costs – Obama v Ryan

Posted by Joe Paduda on Monday, April 18th, 2011 | Comments

Last week we saw two starkly different views of how to control future costs of Medicare. President Obama is seeking to use the negotiating and regulatory power of government, while Rep Ryan wants to abandon any pretense that government can control costs and cede responsibility to individuals and private industry.
The contrast strikes at the heart of the current political divide; what is the role of government in our society.
Rep Ryan’s approach is to get government out of the health insurance business entirely, passing responsibility along to private insurers. In 2022, Medicare recipients would get a check/voucher for $8,000, (based on CBO estimates of Medicare’s average per-beneficiary funding). They’d then have to buy insurance with the eight grand, probably from private or not-for-profit health plans. There’s no way that would cover the entire cost; the CBO estimates that under the GOP privatization plan, the average health insurance policy would be more than $20,000 per year, so the average senior would have to pony up the additional twelve grand.
There are a few other complicating factors not discussed in Rep Ryan’s proposal. Here are the most ‘complicating’ ones.
– What about seniors with pre-existing conditions? What insurance company would want to cover them? Sure, there’s a mild risk-share arrangement in Ryan’s plan, but I seriously doubt don’t know that any insurer would willingly enroll a senior with hypertension, history of melanoma, signs of memory loss, and osteoarthritis.
– Who’s going to help seniors understand their options and ensure they are treated fairly by their insurers? If there isn’t a government regulatory and watchdog function, are we to rely on private insurers to police themselves? Really?
– When costs go up faster than the overall rate of inflation, what’s to be done? Ryan’s plan caps annual increases at the overall inflation rate; medical inflation is usually two to several points higher. We’ve already seen private insurers can’t control costs (or at least haven’t been able to so far), so if anything costs may go up even faster.
To Ryan et al, these are beside the point. His plan is designed to get government out of the health insurance business, and let the chips fall where they may. His plan doesn’t address these issues, and I seriously doubt he or his fellow Republicans have any intention to address them.
President Obama’s strategy is markedly different. His vision is of a more energized and focused Federal approach using the government’s leverage and regulatory power to control cost and improve outcomes.
As a start, last week the President appeared to call for the Feds to negotiate drug prices with big pharma; strengthen, greatly increase the power, and enlarge the role of the Independent Payment Advisory Board; and speed up adoption of new models to deliver care.
Notably, the President’s IPAB would make significant cuts whenever Medicare spending rose more than the increase in gross domestic product plus one percent. And, if Congress failed to act to control costs, the Secretary of HHS could act independently to initiate changes in Medicare. Finally, the IPAB could sequester Medicare funds if neither Congress or the Secretary acted.
What does this mean?

Well, at the most simplistic level, both plans would control costs by limiting future cost increases by capping future spending.
But there are two markedly different ways to do that. Ryan gets government out of the insurance function, while Obama calls for a more activist, engaged, and assertive role for the Feds.
This will be interesting.

Apr
15

What to do about Managed Care Matters?

Posted by Joe Paduda on Friday, April 15th, 2011 | Comments

Hard to believe, but it’s been six-and-a-half years that I’ve been writing, and some of you have been reading, Managed Care Matters. In that time, I’ve done over two thousand posts, accumulated 2539 subscribers, 3920 (legitimate) comments, and now average about sixteen hundred visitors a weekday.
So, where to next?
Content
No plans to change what we talk about here – heavy on the workers comp area, good coverage of national health policy and doings in the group health and Medicare markets, and I’ll keep working to explain why national, global, economic, cultural, societal, and business ‘macrofactors’ influence and affect work comp.
With the coming battle over entitlement reform, there will be much to discuss and dissect, as pro- and op-ponents of various proposals engage in hyperbolic predictions of catastrophe, rodents falling from the sky, and other signs of doom if their particular version of reform isn’t made into law. Rest assured I’ll keep this fact-based and use lots of references to support my views.
Occasionally I take some nasty shots from anonymous individuals complaining that this blog is just a way to schmooze my consulting clients, that I slant stories or pick fights solely to benefit clients.
My response is two-fold; transparency and stature. Re transparency, I ALWAYS disclose when a company or individual is a client or partner.
Re stature, I’m fortunate in that I’ve got as much work as I can handle and don’t need to work for clients I don’t like, respect, and believe in. Of course I write positively about my clients; they are all good companies doing business the right way, looking to get better.
Presentation
It’s important to refresh the look every so often, and we’ll be doing that this summer. Don’t expect laser light shows and pop-ups, but do expect a new and bolder look.
Along with that, we’re going to be starting video blogging; every week or so I plan on doing a ‘live video’ comment/report on something of interest. We’ll work to keep bandwidth requirements low so those using smartphones aren’t frustrated. Don’t know how this will turn out, but looking forward to blog-casting from the Intergalactic Headquarters of Health Strategy Associates, LLC.
Ads
My several month experiment with ads is over, mostly due to my unwillingness to change the blog’s layout to drive more click-thrus. Turns out that putting the ads in the posts themselves, or just below or to your left increases click thrus dramatically. I didn’t like the way that looked as it chopped things up and put emphasis on the ads and not the content (which I suppose is why it works better). So, they’re gone.
Comment policy
You would not believe the spam comments I get – over a hundred a day, and sometimes two hundred. We’ve tried everything to ensure your comments get thru (even ones I take issue with) while blocking spam; for now I have to review all comments before they go thru. We’ve got to change that, so look for something new soon.
As always, rants and comments disagreeing with me will not be posted unless they are backed by sources. That’s not to say I won’t post different opinions; always have and always will.
MCM ‘attitude’
Every now and then I get myself into a bit of hot water (or more) over a post, a characterization within a post, or an honest mistake. I’ll continue to retract and apologize for errors. I will also continue to opine assertively when I think the issue merits assertive opining. When I hear something that’s newsworthy, I’ll post it (after verifying thru at least two sources). And of course you can always rely on MCM to debunk stories, press releases, and flat out BS, with the tone and histrionics directly in proportion to my level of outrage.
Finally, through the blog I’ve been introduced to many great people and terrific companies. Sandy Blunt is a man I truly admire and respect; he’s now working with me on several projects and his work is exemplary. The work done by Alex Swedlow and CWCI is just outstanding, as is their commitment to shining a very bright light on issues sorely needing that attention. Similarly, NCCI publishes studies and research that add perspective and depth to our understanding of the work comp world. Maggie Mahar is a great writer and strong advocate for her positions on health policy. Jason Shafrin remains one of the best health care economists I’ve come across. Roberto Ceniceros, Peter Rousmaniere, and Julie Ferguson have much to say and manage to say it economically and in ways that often makes one stop and think.
And then there’s you, dear reader! Thanks for reading, keeping me on the straight and narrow, and letting me know when there’s something worth writing about.
Thanks for reading, and keep those comments coming.

Apr
14

The future of health reform – lessons from workers comp

Posted by Joe Paduda on Thursday, April 14th, 2011 | Comments

The current political and cultural divide over health reform is not new – in fact, a century ago a very similar debate took place, and the result may be instructive.
At the turn of the century courts were stuffed full of tort cases brought against employers by workers injured in industrial accidents. Workers had no other recourse besides the court system, and for the years leading up to 1911, the courts offered little hope. That began to change in 1911, when New York passed legislation requiring employers to pay for industrial accidents. The day after the bill passed, a Earl Ives, a railroad worker, sprained his ankle while signaling to an engineer. His employer took the case to court, saying it was Ives’ responsibility to be more careful.
Ultimately, the court found in favor of the railroad. This from Peter Rousmaniere’s recent piece in Risk and Insurance:
“…what drove Werner’s (judge in the Ives case) reasoning were cultural values. He magnified the responsibility of the self-reliant worker within his or her immediate sphere of influence. He chose, in effect, a narrative that made sense a generation before Ives’ accident.
New York voters overrode Ives with a constitutional amendment in 1913. Other states responded by crafting legislative proposals meant to be challenge-proof.
The rapid and broad acceptance of the new system was mainly due to a new angle of vision on the individual at work. The cause of work accidents now was neither the worker nor the employer but industrial employment itself. The new mantra of a work accident “arising out of and in the course of employment” skirted the question of causality.”
Workers comp took hold across the country, and within a decade most states had passed some form of comprehensive workers comp legislation.
There are a couple reasons why employers’ efforts to battle workers comp legislation stopped. First, on a national scale, the cultural issues noted by Peter overtook the laissez faire theology of early industrial America.
Second, employers were starting to lose more and more court cases, an occurrence that struck fear into management and owners. Work comp was seen as a ‘less worse’ alternative to the increasing number of increasing verdicts.
Third, the growing influence of organized labor was being felt in corporate boardrooms around the country, and management wanted to eliminate industrial accidents as an issue.
So what does this have to do with health reform?
Health care is reaching a crisis point. Within six years, family premiums will exceed $30,000, plus out of pocket costs In an increasingly global economy, American employers are going to abandon ideology when confronted by the stark reality that they cannot and will not ever be able to compete if they aren’t relieved of the burden of health care costs.
Similarly, taxpayers (as we’re seeing every day) cannot and will not pay for ever-increasing health care benefit costs for Medicare, Medicaid, and public employees. But those programs, especially Medicare, control a LOT of votes. Thus politicians will be forced to come up with cost-reducing solutions that are dramatically different from the feeble attempts from Washington to date (and I include both parties in that).
Ryan’s solution is no solution at all – in actuality it is nothing more than a ‘throwing up of the hands and abandoning any pretense of cost control.’. And, it’s from one of the guys who voted for the single largest increase in entitlement programs since Medicare – Part D.
The Accountable Care Act isn’t a solution either, but it contains the seeds of real change, specifically with the IPAC.
What does this mean for you?
When things no longer can continue, they won’t. We saw that with workers comp exactly a century ago, and we will see that with health care within five years.

Apr
13

The narcotic abuse problem hits home

Posted by Joe Paduda on Wednesday, April 13th, 2011 | Comments

Today’s local news reported the arrest of a doctor from our small town for allegedly illegal prescribing controlled substances. The physician, by all accounts a well-liked and generally respected member of the community, was charged with illegally prescribing “Demerol, Percocet, Valium and Fentanyl for a patient in a frequency that exceeds his own directions for use.”
I don’t know the person in question, although several neighbors do. I do know this is an all-too-common news story; a cursory search finds similar reports from Ohio, Los Angeles, Pennsylvania, Georgia, and upstate New York where a thirteen year old boy recently died of a prescription drug overdose.
The problem has attracted the attention of Congress, where Senator Chuck Schumer (D NY) recently introduced legislation to monitor, track, and attack illegal trafficking in prescription drugs.
What can be done?
First, a national Prescription Drug Monitoring Program, like the one advanced by Sen Schumer, would be a big step in the right direction. While there are about 33 state-based PDMPs in place today, they are pretty ineffectual. Many are voluntary; they don’t track interstate transactions; many don’t cover all controlled substances, and most are underfunded.
Second, states need to get serious about their PDMPs. The poster child for irresponsible behavior is that model of personal rectitude, Gov Rick Scott of Florida, who’s been trying to shut down Florida’s PDMP before it even gets started. (word is the pressure on Scott may finally be having an affect, as Scott may be changing his position, although one can never tell what he actually will do.)
Third, payers must use their data mining capabilities to ensure they aren’t victimized by this practice; identify high prescribers, determine if that activity is legitimate or not, and engage with law enforcement when red flags appear.

Apr
12

News you might hear at RIMS

Posted by Joe Paduda on Tuesday, April 12th, 2011 | Comments

The annual property and casualty conference/gathering of the tribes known as RIMS is slated for Vancouver BC the first week in May. A great city, terrific restaurants, and lots to do around town.
I’ll miss it this year – too much client work and I’ll be at NCCI’s Annual Meeting later that week. While it’s a (much) smaller affair, it is also highly focused on work comp, content-rich, and well-attended by industry pros. Can’t do both, so NCCI it is.
While I won’t be liveblogging from RIMS, I daresay there will be more than a couple newsworthy items that will generate a lot of buzz. Here’s what I’m hearing, and what may be ‘ready for prime time’ by May 1.
Word is giant work comp insurer Chartis (formerly AIG) is going to dump Coventry’s bill repricing system in favor of Medata. While Medata CEO Cy King won’t comment, I’ve heard this from two separate sources, both very knowledgeable about the process. Reportedly, Medata beat out StrataCare and Mitchell.
This would be a big win for Medata; a very big win.
UPDATE – Got a call from an AIG exec this afternoon who assured me no final decision has been made.
PT firm Align Network is on the block. Multiple potential buyers are looking at the company, and I’d guess (yes, that’s a guess) a deal will be consummated this year. Align has grown rapidly, based in large part on management’s strong industry contacts and relationships. The company has a customer-service-heavy operational model that some adjusters and nurse case managers like a lot; the scalability of that model will have a big impact on the multiple.
There’s a good bit of activity in the work comp PBM world, with several large payers looking to improve their results this year. With WC pharmacy costs spiking up near double digits last year (my estimate), drugs are once again in the spotlight. Expect there to be a lot of activity around PBMs’ booths, and even more in their hospitality suites and more discreet locations.
A couple other deal-related items are brewing; if they get closer to completion before RIMS I expect we’ll hear about it/them.

Apr
11

Is justice on the horizon in North Dakota?

Posted by Joe Paduda on Monday, April 11th, 2011 | Comments

For over two years I’ve been following – with a strong sense of outrage and disgust – the travails of Sandy Blunt as he’s been pilloried by the prosecuting and investigatory authorities in North Dakota. At long last it appears there’s hope justice will be done.
The prosecutor who’s vindictive and unethical practices have made a travesty of justice is about to face her own fate. At the end of June, Cynthia Feland will be tried by a Disciplinary Board under the authority of the North Dakota Supreme Court for prosecutorial misconduct.
While Ms Feland tries to make light of the charges, the facts (something she’s quite unused to dealing with) are most definitely not in her favor.
In 2009, there were 17 cases that went thru the Disciplinary Board Panel Hearing; that’s where Feland is headed. And the odds aren’t good.
Only 2 cases were dismissed. Of the remaining cases, the Panel reprimanded the attorney in 6, the Supreme Court suspended the attorney in seven, and disbarred the offender in 2.
Let’s do the numbers.
– Feland has a twelve percent chance of acquittal – or about one in eight. She’s got equal chance of being disbarred outright.
– She’s got a thirty-six percent chance of reprimand, the next ‘most favorable’ outcome.
– It’s more likely (forty-two percent chance) she’ll be suspended (which would likely mean she loses her judgeship, which she won in an election last year).
So Feland has an 88% chance of being disciplined, disbarred, or having her license to practice suspended.
This has been going on far too long, and at a personal and professional cost to Sandy that’s just appalling. But it’s not just Sandy who’s suffered. All of us who work in this industry, who push hard to do the right thing, to deliver better results for injured workers, their families, and employers, are being penalized by this injustice.
Sandy Blunt was persecuted because he didn’t accept the status quo. He wasn’t willing to go along to get along. He required more of his employees at the North Dakota state work comp fund, more than just punching a clock and doing their time. Sandy set standards for performance and responsiveness that some couldn’t meet, and rather than acknowledging their own shortcomings, they turned on the person the State tasked with turning around their poor performance.
And the justice system, and many – but assuredly not all – of the people of North Dakota were complicit.
Feland’s hearing will take about two days. It’s to be held in the largest hearing room in the court building. It’s going to be gratifying to see the person who’s tried to ruin one of the finest people I know get her comeuppance.

Joe Paduda is the principal of Health Strategy Associates

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