Posted by at 9:40 AM | Permalink | Comments (1)

I'm reluctant to post this. There have been so many false starts and so much confusion around the issue of PBMs' status in Texas that the latest 'news' sounds too good to be true.

I have heard from two credible sources that Texas' Department of Work Comp will file emergency regulations permitting PBMs to continue operating until legislation addressing the issue around their status is passed in the next legislative session.

Unless DWC - or another entity intervenes, as of now - 7 am in Phoenix - PBMs will be out of business in Texas after 1/1/11 - they are considered 'involuntary networks (well, at least they 'appear' to be considered involuntary networks, but some disagree...) which cannot operate after the first of the year.

While some are saying involuntary networks should continue as legislation will retroactively permit their operation, that's a very - very - high stakes gamble - loss of license plus a $25 grand per day fine for transgressors.

For more on the history click here.

Posted by at 8:26 AM | Permalink | Comments (0)

That depends on whether the rest of the reform bill survives without that clause. I've heard from a couple of sources that the Accountable Care Act doesn't include a severability clause. If that is true, than the entire bill may be thrown out if the mandate is ruled un-Constitutional.

That's for others steeped in the details of the ACA and law to figure out. As I'm sure they will.

(Lest we get all excited about the Virginia case, note that there have been about twenty suits filed so far re the ACA, 12 have been dismissed and in two other cases both judges ruled the mandate is Constitutional.)

If the rest of the ACA does survive the demise of the mandate, we'll have a very, very interesting situation. Health insurers will be required to take all comers, the rates they can charge will be highly regulated, benefit plans consistent across most insurers and employers, and there will be no upcharging or medical underwriting or discrimination based on age, pre-existing conditions, or sex.

It would be tough to design a better recipe for disaster for insurers.

Nonetheless, that's what we'll be faced with if the mandate is removed; the rest of the Act will become law, and individuals and employers would - at least theoretically - be able to buy insurance when they need health care, and drop it when they don't.

There's already a precedence for this - in the Massachusetts experiment, loss ratios in the individual market for at least one health plan were about 600%.

The White House recognizes the problem - in a response to the latest court challenge to the mandate that is notable for its focus on individual responsibility for the costs of their care:

"However, unless every American is required to have insurance, it would be cost prohibitive to cover people with preexisting conditions. Here's why: If insurance companies can no longer deny coverage to anyone who applies for insurance - especially those who have health problems and are potentially more expensive to cover - then there is nothing stopping someone from waiting until they're sick or injured to apply for coverage since insurance companies can't say no. That would lead to double digit premiums increases - up to 20% - for everyone with insurance, and would significantly increase the cost health care spending nationwide. We don't let people wait until after they've been in a car accident to apply for auto insurance and get reimbursed, and we don't want to do that with healthcare. If we're going to outlaw discrimination based on pre-existing conditions, the only way to keep people from gaming the system and raising costs on everyone else is to ensure that everyone takes responsibility for their own health insurance."

Whether the President and/or Congress would try to overturn the ACA, or remove the underwriting language is to be determined. While the White House's statements to date acknowledge the issue, AHIP et al have few friends left among Democrats, and those friends would be hard pressed to convince the Administration to be nice to an industry that has been anything but to the Democrats.

Posted by at 9:13 AM | Permalink | Comments (0)

According to AHIP, over the last ten years, private insurers' hospital costs in California are up 159%.

One hundred and fifty nine percent.

Instead of an intelligent and helpful discussion of the causes and impact, there's an all-too-familiary orgy of finger-pointing and 'oh yeah, sez you' as hospitals blame insurers and insurers wail about the unfairness of it all and everyone complains about Medicare.

Time to call Whine-one-one...

Here's what we should be focusing on.

1. Clearly (some) private insurers and health plans cannot - or more likely will not - do anything to control hospital costs. For all their bitching and complaining, this is yet more evidence that health plans have not fulfilled their primary mission - control costs and deliver quality care.

Here's how a healthplan exec put it: "The report's focus on California hospital costs just reinforces what we have been saying the past couple of years. Steep increases in medical costs must be addressed. Our country and state cannot sustain this kind of growth," said Patrick Johnston, president of California Association of Health Plans.

No kidding. I don't get the AHIP strategy - bitch about government intervention then complain that outrageous health care cost inflation isn't your fault.

2. Private insurers are clearly asking for help from government - the same government they pillory in their multi-gazillion dollar PR and lobbying campaign as too incompetent to run a health plan.

3. Controlling costs will require health plans to build small, tight, highly-managed networks of excellent providers, an approach most seem quite unwilling to pursue, citing the 'managed care backlash' from the late nineties. (there are a few notable exceptions)

Execs, that was then, and this is now.

4. If health plan execs think their life is tough, they should sit behind the desk of a work comp claims exec. Work comp is getting murdered by facility costs; many payers would kill for a 159% increase over a decade.

Last week Kaiser Health News reported several large health plans appear to be frustrated with AHIP and are looking to set up their own DC lobbying entity - albeit one that is a 'subcommittee' within AHIP. Evidently they feel the smaller health plans and not-for-profits have hijacked AHIP and aren't representing their interests.

Bob Laszewski sees a historical parallel: "This reminds me of the early 1990s. In the wake of the insurance industry being made to be the bad guys during the Clinton Health Plan debate, many of the largest members exited the historically dominant Health Insurance Association of America (HIAA) for the competing HMO dominated trade association.

At the time, many observers saw a cynical irony in the move; it was those dominant members that drove much of the policy that got the industry in trouble."

What does this mean for you?

At this rate we'll all be covered by the VA health plan in a decade - which is just fine with me. They are the only ones that consistently control costs and deliver quality care.

Posted by at 7:50 AM | Permalink | Comments (1)

After mulling over Texas Attorney General Greg Scott's just-released opinion [opens pdf] on the use of PBMs in workers comp, I'm still confused.

That wouldn't be so bad, except so is everyone else.

The opinion appears to contradict itself, with declarative statements about the legality of paying less than fee schedule for drugs in one place, and apparently contrary statements a few sentences later.

Then, the opinion concludes ""...although a WCHCN [work comp Health Care Network] must not provide prescription medication or services, an insurance carrier may enter into a contract with a WCHCN to obtain a contract with a health care provider to pay for prescriptions at a negotiated rate after January 1, 2011".

Sounds great, right?

Except experts opine that PBMs don't meet the definition of 'providers' under Texas law.

So, does this mean an HCN will have to contract with pharmacies directly? In the next two weeks? Because that's when PBMs turn into pumpkins under the involuntary network 'sunset' provisions.

Or does it mean that HCNs can actually subcontract with PBMs? In which case the dominant HCN - Coventry - may well require its customers use FirstScript - Coventry's inhouse PBM.

The DWC has prepared two different regulations in anticipation of the AG's opinion - one in case the opinion killed PBMs, which reduces the fee schedule to a rate that, according to Bill Kidd of WorkCompCentral, "to adjust fees in an attempt to maintain overall costs in the workers' compensation system."

I'd emphasize Bill's use of the word "attempt".

Drug prices are NOT the same as costs.

Drug COSTS are driven more by the type and quantity of drugs than the the price of the pill. If low fee schedules controlled costs, we wouldn't have seen pharmacy costs in California explode after adoption of the lowest fee schedule in the country.

In fact, CA's drug costs increased significantly, driven by significant increases in both the average number of prescriptions per claim and the average payments per claim for prescriptions. In addition, payments for Schedule II narcotics, categorized as having a high potential for abuse and addiction, increased nine-fold after reform. Schedule II drugs are also strongly associated with extended disability duration, driving up both medical and indemnity costs.

According to the California Workers Compensation Institute, the average number of first-year prescriptions per claim increased 25 percent after the implementation of the Medi-Cal link, while the average drug cost per claim went up 37 percent. (Changes in Pharmaceutical Utilization and Reimbursement in the California Workers' Compensation System, September 2009)

So, where does this leave us?

1. The opinion doesn't provide enough clarity to ensure PBMs can legally operate after January 1 2011.

2. The penalty for operating an involuntary network in Texas is huge - $25,000 per day plus loss of license to operate.

3. Pharmacy costs in Texas account for around 15% of loss costs - with PBMs operating. I don't see how PBMs can continue to operate in Texas, which means they won't be able to address either the price of the pill, the types of pills, or the quantity of pills, dispensed to injured workers.

4. Realistically, legislation to 'fix' the problem won't be completed until sometime this spring. Which means employers, insurers, governmental entities, and taxpayers are going to have to foot the bill for higher drug costs - for at least several months - until this gets fixed.

Posted by at 5:59 AM | Permalink | Comments (1)

One of the better journalistic oversite 'sites' is the one run by the Columbia School of Journalism.

Each year they feature a column on 'errors of the year'. It is usually hilarious, and this year's no exception.

While some think there's no such thing as bad PR, I sincerely hope never to have this blog featured on the EOTY...

That said, I don't think there's much chance managed care can compete with copulating bats and expletive-spewing politicians. Sigh.

Posted by at 5:46 PM | Permalink | Comments (1)

Greg Abbott, Texas' Attorney General, has released his opinion re "Whether a workers' compensation carrier may pay for a prescription drug at a rate lower than the fee rate allowed under the guidelines of the DWC..."

I'm no attorney. And being an attorney would be very helpful in this instance.

The key part of the four-page pronouncement is on page 3 and reads, in part:

"...although a WCHCN (work comp Health Care Network) must not provide prescription medication or services, an insurance carrier may enter into a contract with a WCHCN to obtain a contract with a health care provider to pay for prescriptions at a negotiated rate after January 1, 2011"

I'm not sure what this says. One interpretation I've heard is that payers must contract with an HCN, which then contracts with a PBM to provide pharmacy management services. However, a PBM may not qualify as a "provider".

Another part of Mr Abbott's opinion holds that there is no statutory minimum requirement for reimbursement under workers comp - and he's pretty definitive about that. Then again, a later section appears to directly contradict this statement...

More to come - much more.

Posted by at 1:58 PM | Permalink | Comments (0)

Here, in no particular order, are a few of the more interesting goings-on in the work comp space these days.

Eileen Auen, CEO of PMSI, was named one of Business Insurance's Women to Watch for 2010. I first met Eileen when she called me the day before she took the helm of PMSI to discuss a PMSI client situation. I was impressed then with her demeanor and openness, and over the last two years my respect has increased as I've watched PMSI regain much of the luster it lost before the arrival of Eileen and her team. They are once again a formidable competitor, due in large part to her leadership, and the desire and hard work of many long-time PMSI veterans.

Texas

The Texas 'situation' may be changed dramatically later today, as rumor has it the Attorney General is set to release his opinion on 'involuntary networks'. The opinion has allegedly been sitting on the AG's desk since before the Thanksgiving holiday.

The complexity of this situation is matched only by its importance to employers, insurers, PBMs, imaging networks and other 'specialty managed care' vendors - as of now, after 1/1/11, it will be illegal for a 'network' to take a discount unless it is part of an HCN.
To say this is critically important is bland understatement - about forty percent of the work comp medical dollar is for services managed by these entities, and their demise will raise workers comp costs - immediately and significantly.

California

Pat Sullivan's WorkCompWire has the news that SCIF (California State Fund) is going thru some drastic changes - all intended to save $200 million. The moves include moving staff to other locations, reducing staff, and selling real estate.

It must be brutally difficult to manage a 'carrier of last resort'. When the market hardens, business booms, requiring more staff, more computers, more everything. Then when the commercial carriers decide to get back in the market, premium volume declines, along with the need for those new employees, computers, offices, telephones. In the meantime, any politician can excoriate Fund management for understaffing and the associated service issues in a hard market, then turn around and lambast management for bloated payrolls and inefficiency when demand drops.

Reform

Finally, there's been a bit more discussion about the impact of reform on workers comp. Friend and colleague Greg Krohm, Executive Director if IAIABC, has written an insightful piece about this, and SwissRe's also provided their insights. Mark Walls' Work Comp Analysis Group is also engaged.

It is good to see lots of discussion about this, as the more smart people we have focused on reform's impact, the better prepared we'll all be.

Posted by at 10:25 AM | Permalink | Comments (0)

Brad Wright's edition of Health Wonk Review contains brief summaries of the best of the health policy blogosphere - lots of good information and insights that go waaaay beyond what you'll see anywhere else!

Posted by at 6:56 PM | Permalink | Comments (0)

Last night the Senate passed a bill postponing the cut for Medicare physician reimbursement that was scheduled to take effect at the end of this year. When signed by President Obama, the 13 month fix will freeze Medicare physician fees at their current level until the end of 2011, ostensibly giving Congress time to come up with a more permanent fix.

If history is any guide - and it almost always is - there won't be a permanent fix; instead Congress will punt once again, primarily because almost any revamp of the fee schedule will require 'officially'; adding over $300 billion to the deficit.

Still, for at least the next 13 months, Medicare and Tricare (military family health insurance) beneficiaries will not be threatened by the possibility of their physicians refusing to accept the fee schedule.

According to Dow Jones, "in order to pay for the extension, the bill contains a change to the recently passed health care overhaul, requiring that individuals repay excess federal subsidies for health insurance if their income rises.

Under the law, the subsidies for people earning up to 400% of the federal poverty level are calculated based on a person's expected earnings. Repayment of those subsidies had been capped at $250 per individual or $400 per family, in the event that income exceeded expected levels. The law passed by the Senate Wednesday removes those caps and replaces them with a sliding repayment scale."

What does this mean for you?

For workers comp, no change is good news, as it ensures there will be little need for states to rejigger their fee schedules to address Congress' whim.

For more discussion of this issue click here.

Posted by at 2:49 PM | Permalink | Comments (1)

Yesterday SwissRe published their analysis of the impact of health reform on workers comp. The full report is available here [opens pdf]

It's good to see an international player in the workers comp market consider the potential direct and indirect impact of reform on workers comp. That said, my sense is SwissRe's perspective is narrow and flawed in several respects.

For example, in one section the report states: "Major reductions in the uninsured population could have a positive effect on Workers' Compensation costs. Those newly insured may be less likely to attempt to bring a non-work injury into the Workers' Compensation system."

That's not correct. Studies indicate those with insurance are less likely to file a comp claim, although the correlation appears to be statistical and not causal. For a more in-depth discussion, click here. [opens pdf]

SwissRe missed a much more significant issue - the increase in the number of people with insurance will have a significant - and positive - impact on comp.

Healthier claimants

What may well be the most significant long-term impact of reform is the likelihood that workers will be healthier, their underlying conditions and comorbidities will be addressed by their health plan, and therefore comp payers won't have to pay for treatment of those conditions in order to resolve the work injury. Think diabetes and surgery, spinal stenosis, and hypertension.

Degenerative conditions

For some diagnoses, identifying the cause of the injury is becoming increasingly problematic. It is often difficult for a physician to determine the 'cause' of back pain or dysfunction; it may, or may not be wholly or partially related to a work injury and different physicians often reach different conclusions about the cause of injury. While reform won't clear up those medical mysteries overnight, it will reduce the need for comp payers to pay for what are clearly non-work-related conditions.

Less need to cost shift

Workers comp is the most profitable payer for many facilities; margins are much higher for comp than for medicaid (which pays below cost) and Medicare (which pays right around cost). When more people have health insurance, there will be less need to shift cost to workers comp to cover the expense of providing care to the uninsured. Sure, the ACA will not cover everyone, but it will cover about two-thirds of those currently without health insurance. And most of those newly-covered folks will be the employed (and dependents thereof).

This isn't to take shots at SwissRe, merely to point out that their perspective reflects a lack of understanding of the broader problems with the current environment, and the potential positives of reform - at least for workers comp.

Posted by at 9:11 PM | Permalink | Comments (4)

Evan Falchuk of Best Doctors has launched a new blog carnival focused on employee benefits - primarily health benefits. His first edition is here.

While there are a plethora of carnivals out there, this is the first one I've come across that focuses specifically on health benefits. Good quick read too.

Posted by at 8:20 AM | Permalink | Comments (0)

The Texas Division of Workers Comp (DWC) recently released proposed rules for work comp pharmacy billing. Along with the rules are what can perhaps best be described as an 'extensive' list of data elements DWC is looking to collect, a list that includes information that - in the view of most PBMs, retail pharmacies, and chains - is extremely sensitive and proprietary.

This effort is driven by provisions within the Texas Labor Code that, according to DWC, require DWC to adopt CMS' most current reimbursement policies etc.

The draft - and I want to emphasize the form is still a draft - form requires submission of a comprehensive list of data elements, including the actual price paid for the script.

There are a number of concerns with this requirement. Here's a quick list.

- revealing prices paid for individual scripts would potentially enable PBMs - and others - to determine the PBM's contracted reimbursement rates with specific chains and retail stores. This is highly proprietary, extremely sensitive information.

- pharmacies will be quite concerned about release of data that would enable outside parties to find out what they charge specific PBMs. Many, if not most, PBM - pharmacy contracts employ a single rate nationwide, thus any entity that can access the Texas reporting information will quickly be able to determine reimbursement rates not only for that state, but likely all states.

- PBMs are not the only managed care entities that make their margin on the delta between what they receive from the payer and what they pay the service provider. Imaging and physical/occupational therapy networks, durable medical equipment/home health care vendors, designated doctor firms - all are reimbursed by the payer at one rate and pay their service providers - imaging centers, PTs/OTs, suppliers, physicians - another.

Given DWC's current interpretation of the Labor Code, it would not be surprising if these other entities were required to reveal their pricing.

Anyone looking to provide comments on the proposed regs can do so by emailing rulecomments@tdi.state.tx.us. Of course, make sure you read the material on DWC's website and consult counsel before taking up the virtual pen.

Posted by at 6:58 AM | Permalink | Comments (0)

Friday's NYTimes reports Arizona has decided to stop funding certain organ transplants under the state's Medicaid program. According to the article, "lung transplants, liver transplants for hepatitis C patients and some bone marrow and pancreas transplants, which altogether would save the state about $4.5 million a year" were ended in October.

While it's tempting to make political hay out of this, the reality is Arizona's decision, as painful as it may be, reflects decisions we as a society have to make.

The $4.5 million saved could be spent on preventive medicine, diabetes screening, cholesterol medication, pre-natal care, and other high-value services, services that would likely reduce the need for future acute care while improving the health of many more Arizonans. And the decision process used by the state, while not perfect, is one that we as a society must come to terms with.

The reality here is the government - 'faceless bureaucrats' to some, compassionate and caring stewards of taxpayers' funds to others - determined who will live - perhaps if only for a few more months - and who will not.

Before instituting the change, Arizona studied the outcomes of transplants funded by the program. The results were pretty bad - according to the state, 13 of 14 patients under the state's health system who received bone marrow transplants from nonrelatives over a two-year period died within six months.

Other disagreed with the state's assessment; outside specialists said the success rates were considerably higher, particularly for leukemia patients in their first remission.

I'm not qualified to determine which side is 'more right', and anyway, that's beside the point.

Which is starkly simple. We as a nation cannot afford to provide every health care service that may help every patient.

As db said on his blog;

"We can ration health care rationally or irrationally. We can ration health care based upon emotionally appeals or based on data. We must remember that a decision to pay for one treatment or diagnostic test may deprive someone else of a different treatment or diagnostic test. Or even worse, one treatment may cost so much that many other patients will go without a vaccines or preventive visits.

Rationing exists, it will continue to exist, and we have an obligation to ration in a fair way. We should not value some diseases over other disease. We should avoid emotional appeals, but rather look at data to make the difficult decisions that must be made."

I find it intriguing that a state governed by the GOP is in the forefront of this issue (along with Oregon, which has been addressing Medicaid rationing for years). I sincerely hope - but highly doubt - this will result in an honest, open, and non-politicized discussion of what we can and cannot afford, and why, and how we're going to allocate scarce resources.

Because that's exactly what we must do.

Currently, Medicare is legally prohibited from setting payment based on the efficacy of a specific procedure/medication/treatment. This has to change. It is fiscally irresponsible to pay the same amount for treatments that have a one percent and a one hundred percent effective rate.

Unless and until we address this issue head on, our efforts to reduce the deficit are pointless.

Posted by at 6:14 AM | Permalink | Comments (3)

Gosh, since the judge in Sandy Blunt's case rejected his request for a new trial, a lot has happened. As winter settles in on the plains, allow me, dear reader, to separate the wheat from the chaff (a bit of a NoDak metaphor, doncha know...).

First, Blunt's attorney appealed his case to the US Supreme Court. It was highly unlikely those worthies will consider the case, but in a case as unfair as Sandy's, one can always hope. Unfortunately, his case will not be heard.

Second, one of the prosecution's chief witnesses against Blunt, James Long, lost in his effort to gain whistleblower status. Long had filed a civil suit against WSI (the ND State WC fund) seeking to get back pay, (Long was fired by the agency Blunt led) but lost; the jury found he did not qualify for whistleblower status and thus was not protected from dismissal

Even more telling, during the course of the discovery process for his trial, it became clear that Long and his attorney both communicated with Cynthia Feland, (the prosecutor in the Blunt case) yet not one of these statements/communications was ever acknowledged or provided to Blunt during discovery.

This withholding goes to the heart of the issue I (and others) have been pounding on for over a year; Long in his email was requesting some type of special assistance or consideration from Feland due to his part in presenting allegations against Blunt, yet Feland withheld exculpatory evidence from Blunt, evidence that would have proved the main charge against him was without merit.

Sources indicate Cynthia Feland's ethics trial is on schedule and word is things are not looking good for her. The ethics trial relates to her purposely withholding evidence from Blunt.

Meanwhile, back over at WSI, things are progressing about as well as one would expect in an organization led by a person with absolutely no qualifications for the job. That's not to say there aren't a number of quite competent and highly effective people at WSI, but they are a bit...hamstrung by the current leadership.

To wit - the ongoing effort to implement a new IT platform at the ND state work comp fund continues to proceed - over time and over budget, despite Executive Director Bryan Klipfel's strenuous efforts. (note Klipfel's still listed as the Superintendent of the North Dakota State Police). In fairness, Klipfel had zero experience in workers comp, and less in managing complex IT projects before he was appointed ED at WSI.

Then again, Klipfel has been in the job for a couple years; the outside consultants working the project are, by all accounts, extremely capable; and there was a clear workplan and timeline in place - and in progress - when Klipfel walked into the executive suite.

It is interesting to note that in Klipfel's recent report to the ND Legislature on WSI's 2010 performance, many of the 'positives' listed by Klipfel were the result of efforts initiated, or significantly enhanced, by Blunt - Klipfel's predecessor.

Some may think I'm being too harsh on Mr Klipfel. As I've said before, Klipfel may, or may not, be a highly motivated, diligent, and hard-working guy. He walked into a tough situation - but he did so of his own volition. No one forced him into the job - a job for which he was completely unqualified. Now, the taxpayer and employers of ND are suffering the consequences.

One has to wonder what Klipfel would have thought if roles were reversed, and the former Executive Director of the ND state WC fund had been installed as Superintendent of the ND State Police.

Posted by at 7:41 AM | Permalink | Comments (0)

So, you want to get serious about reducing the cost of entitlement programs? How does $25 billion a year, or a quarter-trillion over ten years sound?

Does it sound even better if there's no increase in taxes? How about if there's no reduction in services? And what if beneficiaries didn't have to pay any higher fees, or suffer a reduction in benefits?

What's the catch?

It would require one simple change in Federal law - allow the Secretary of HHS to negotiate prices with pharmaceutical manufacturers.

According to an analysis done three years ago, that's exactly what would happen.

When Part D legislation was passed back in 2003, the Feds were expressly forbidden to negotiate drug prices for Part D. Despite a long and successful history of the Feds doing just that, Congress decided that the private market would do a better job of controlling cost than the gubmint. In actuality, "A report by Families USA, which looked at the top 20 drugs prescribed to seniors, found that VA prices were substantially lower than the cheapest Part D plans, with a median price difference of 58%.6"

That 'VA' is the Veteran's Administration, a federal government entity.

The study indicated "An annual savings of over $20 billion could be realized if FSS [Federal Supply Schedule] prices could be achieved by the federal government for the majority of drugs used by seniors in 2003-2004..."

And that's in 2003 dollars. Recall that brand drug prices increased over 9 percent last year alone; In 2010 dollars, we're easily above the $25 billion per year number for savings.

In a 2006 House analysis, a report "released by Democratic staff on the House Government Reform Committee showed that under the new Medicare plan, prices for 10 commonly prescribed drugs were 80% higher than those negotiated by the Veterans Department [emphasis added], 60% above that paid by Canadian consumers and still 3% higher than volume pharmacies such as Costco and Drugstore.com."

I don't know why the Bowles-Simpson deficit commission didn't consider this in their just-released deficit reduction strategy. After all, Part D alone is responsible for $15 trillion in ultimate deficit dollars. You would think this would be enough to get liberals, conservatives, Druids, Neanderthals, John Birchers, hippies, Greens and Flat-earthers all clamoring for action.

You would think...

Posted by at 6:17 AM | Permalink | Comments (1)

A couple weeks ago I started what was going to be a discussion of how we should 'fix' health reform that was intended to run on consecutive days - only to have that sidetracked by goings-on in the health, political, and financial worlds that pushed reform to my back burner.

Let's get back to reform.

First, the easy part. There's no question Congress has to address the 1099 issue - the requirement that all businesses have to inform the IRS when they pay anyone more than $600 over a year. As a small business person myself, I have zero time to send out 1099s to my cell phone, internet access, web hosting, legal, accounting, admin support and other suppliers. No brainer.

Here's a much harder one. Medical loss ratios (MLR).

For politically-obvious reasons, the Senate included requirements that health insurers spend a set percentage of their premiums on actual medical costs and quality improvement activities; at least 80% for individual/small group policies and 85% for larger group coverage. If an insurer's admin expense (all costs EXCEPT medical costs are higher than 20%/15%, policyholders get a refund/rebate of the 'extra'.

The rebate requirement kicks in on January 1, 2011; insurers are already scrambling to figure out how to identify, aggregate, and report costs; lobbying HHS and the National Association of Insurance Commissioners to consider medical management and prevention expenses part of the medical cost category; and crunching numbers to figure out what their medical costs will be in 2011, and based on that, what premiums they can charge.

The MLR requirement is going to require health plan execs to spend an inordinate amount of time and energy figuring out what costs go where and how they need to report those costs to HHS. If they screw up and their medical costs and quality improvement expenses are below the threshold, they have to pay a penalty.

While one can make a rather superficial argument that this is all to the good as it improves transparency, I'm hard pressed to understand how this ultimately benefits anyone.

Health plans that do a great job managing chronic conditions may well be 'penalized' for that success. Plans that contract with providers who deliver excellent preventive care, ensure expectant moms take their vitamins and don't smoke, and get their tubby patients to drop a few pounds may find they are cutting checks come MLR audit time. Payers channeling patients to hospitals with low infection rates and few re-admissions will be in the same situation, as would those that carefully monitored potential diabetics' health status and clinical signs.

These programs are costly, many have unproven benefits and/or won't pay off for some years, and therefore the cost of the programs today (if they don't qualify as 'quality improvement') will add to expenses, driving down the MLR.

While I'm not a believer in the infinite wisdom of the free market, I do know that the health plans that deliver lower costs - over time - will have a major competitive advantage over their less-capable competitors. While insurers and providers need very, very close watching when it comes to risk selection, rescission, underwriting, and care authorization, we don't need to waste their time - and ours - worrying about their MLR.

Posted by at 3:18 PM | Permalink | Comments (3)

The one-month Medicare physician payment fix passed the House yesterday and will be signed by President Obama. As Congress is operating under 'Pay as You Go' rules, the additional cost of the increased 2.2% for physicians had to be offset - and physical therapy was picked as the victim. PT will take a big hit - a 20% reduction in Medicare reimbursement.

This umpteen-gazillionth short-term Medicare physician payment fix will expire at the end of 2010, and when it does, Congress will have to either:

a) pass a long term fix, or

b) pass another extension/short term fix.

As loyal readers know all too well, I don't see this ridiculously ludicrous situation getting resolved anytime soon, because a permanent fix will require the fixers to acknowledge a $300 billion (and growing) addition to the deficit. While no one likes the Sustainable Growth Rate methodology, it's a heckuva lot more likeable than having your name associated with yet another addition to the deficit - especially these days.

The Medicare SGR formula/process was set up seven years ago to establish an annual budget for Medicare's physician expenses. Each year, if the total amount spent on physician care by Medicare exceeded a cap, the reimbursement rate per procedure for the following year would be adjusted downward.

And for the last seven plus years, reimbursement - according to SGR - should have been cut, but each year it was actually raised, albeit marginally. The result is a deficit that is now almost 300 billion dollars.

Way back in the early days of this blog, I wrote about what was then a 4% cut and the attendant furor surrounding the issue: "Complicating the matter is the pending 4.3% decrease in the fee schedule slated to go into effect on 1/1/06. If Congress reverses the cut, then 2007 premium and deductible increases will be even higher than projected."

Congress couldn't muster the votes/guts/brains to deal with a 4% cut five years ago, so now we're facing a 25% reduction on 1/1/2011...

So, what's going to happen>

Well, a couple of folks in Congress are pushing for a twelve month extension so they have time to work on a permanent solution. While I admire the intent, I just don't see the Dems and Reps coming together on a solution to such a politically-charged issue.

As I said a couple weeks back, the new Congress is all excited to change the way business is done in Washington.

How they deal with SGR, the $300 billion deficit recognition problem, furious seniors and really cranky physicians will tell us a lot about whether they're serious about making hard decisions, or just naive.

My money's on the latter.

Posted by at 12:39 PM | Permalink | Comments (5)

We've all had a few days to digest the recently announced Humana - Concentra deal, and perhaps think thru what this means for Humana, why they did the deal, and if this gives any insight into what other health plans may do.

Perhaps the best one-sentence synopsis of the deal was provided by a Humana spokesperson: "This acquisition is consistent with the goals of health reform".

Here's the slightly longer version.

1. Three million Humana members are located in close proximity to Concentra facilities.

2. Concentra knows how to deliver primary care efficiently. They are also working hard at wellness and health promotion.

3. Health plans are going to be desperate for primary care providers come 1/1/2014, when their membership will explode.

4. Health plans that can keep patients away from specialists, expensive diagnostics, and facilities are going to do very, very well. That can only be accomplished with good primary care.

5. Concentra has very strong relationships with local employers, and solid experience selling to those employers.

I was a little surprised to read some of the financial community's statements about the deal.

For example, AM Best said "This transaction is expected to be a source of business diversification for Humana as well as unregulated cash flows."

This was the lead sentence in their comment on the deal, and while it mentions a couple benefits, I doubt they were the primary reasons Humana decided to shell out almost $800 million. Sure, the cash flow is unregulated, and business is different, but workers comp also faces a structural issue with declining claims frequency and is highly vulnerable to regulatory risk, two factors that would militate against a 'diversification and cash flow' rationale.

Then there was this gem from Marketwatch: "Plus, the company said it was buying privately held insurer [emphasis added] Concentra Inc. in Addison, Texas, for $790 million in cash."

There has also been some speculation that the deal was - at least partially - due to a desire on the part of Humana to buy a provider and thus get around, avoid, or mitigate Florida MLR rules. While this may have been a contributing factor, it is highly unlikely it was one of the top reasons Humana did the deal. Humana already has primary care centers in Florida as a result of the CarePlus deal in 2005 and Concentra doesn't have a lot of facilities in the Sunshine State.

Perhaps Humana is going to add occ med services to the ten or so CarePlus facilities; this would help it's soon-to-be subsidiary and give analysts evidence of that oft-cited 'synergy' thing.

The net is this. Reform is coming, healthplans must drastically change their operating models, and winners will be the ones that figure out how to market to and manage previously-uninsured, and solve primary care.

Humana's got a good start.

Posted by at 4:37 PM | Permalink

That's the answer to the question posed by Bob Laszewski in a post this morning; to paraphrase:

When will the US get serious about controlling health care costs?

Right after the bond market collapse...

Health care is the single largest contributor to our deficit, as well as being a huge drag on our international industrial competitiveness. For now, foreign countries and investors are seemingly fine with the historically-low rates of return they get from governmental bonds.

For now.

But not forever.

When the Chinese - or the Germans - or the Scandinavians - decide they want a better return, we may well see the collapse of the bond market. Ivestors will demand much higher returns, which will lead to intolerable budgetary pressure as debt service costs skyrocket.

In turn, this will force us to adopt draconian measures to rein in spending.

Which will - inevitably - lead to big cuts in Medicare, Medicaid, Part D, and other entitlement programs.

What does this mean for you?

It's not a question of 'If?' but 'When?'

Posted by at 10:17 AM | Permalink | Comments (2)

WorkCompCentral's Mike Whiteley has the scoop [subscription required] of the month; he reported this morning Governor-Elect Rick Scott of Florida has renewed his promise to cut employers' work comp costs by 35% .

(That was one of the lead lines I considered - the other was "Is it April Fools?")

No, it's true. According to the article, in a speech last week, the new governor said "We also need serious tort reform, and a 35% reduction in workman's [sic] compensation costs."

Wow.

That's one ambitious guy! Another 35 percent on top of the 40 percent reduction most employers have seen since reform passed in 2003?

How's he going to do that? Let's see...

1.) Scott could immediately reduce the maximum maximum weekly wage basis to $0.00; or

2.) require all medical providers to treat work comp claimants for free, or maybe

3.) make workers comp optional for employers while prohibiting suits against employers for occupational illnesses or injuries (that'd be part of his 'tort reform' plank...)

Short of those rather draconian measures, all of which would require a compliant Legislature and Senate, I'm not seeing where he's going to get another 35%.

I'm not the only one wondering, as Mike Whiteley reported on WCC; one local expert (Christopher Smith of Florida Workers' Advocates) said "It's our belief he's relying on information that's 10 years out of date. [emphasis added]...It appears to be based on some statistics that were advanced during the time running up to the 2003 changes."

Well, perhaps the soon-to-be Gov is going to ask the Senate to overturn his predecessor's veto of a bill reducing costs for physician dispensed drugs; perhaps but highly unlikely, as Scott reportedly convinced the new Florida Senate leader to not seek an override.

Here's how the Palm Beach Post described the...episode.

"Concerning the workers comp prescriptions bill, Cannon first said the reason for his reversal was because Democrats had objected to the override and that he and Haridopolos had targeted measures that were non-controversial and had received unanimous or near-unanimous support during the regular session.

But he later conceded that a dispute among major Republican Party donors had foiled the override attempt planned for Tuesday.

"In the lobby corps there has emerged this debate and discussion and controversy. . . . If there's that much debate and disagreement, that's the type of thing that should be run through the entire committee process and should come back in regular session," Cannon said.

Associated Industries of Florida supported the bill, saying it could have saved private companies $34 million in workers' compensation costs, whereas the Florida Medical Association and the Florida Orthopedic Society supported the veto.

Also supporting the veto was Automated Healthcare Solutions, a Miramar-based company headed by a pair of doctors, Paul Zimmerman and Gerald Glass, who later gave more than $1 million to political spending committees headed by Haridopolos and Cannon.

The company provides software that helps doctors dispense and manage patient prescriptions, a profitable sidelight for many doctors.

After Scott's primary election victory, Zimmerman and Glass also contributed $735,000 to the Republican Party of Florida and $175,000 to Scott's political committee, according to The Miami Herald."

So, Scott may cut 35% from employers' workers comp costs, but he's going to make them pay political contributors $34 million more than they would have.

Good luck with that...

Posted by at 3:37 PM | Permalink | Comments (3)