Managed Care Matters

From our good friends at WorkersCompInsider comes this entertaining post on the Massachusetts firefighter/bodybuilder. It's always great to have a hobby. Especially when one is totally disabled.

Yes, the bodybuilding ex-firefighter is out on disability. Total, complete, permanent disability.

One has to respect Mr Arroyo - He could have given up, resigned himself to a life in front of the TV, with little to look forward to but the next day's sports pages. But no, in what can only be described as an uplifting (no pun intended) story of perseverance and a willingness to live life to the fullest, Arroyo entered a bodybuilding contest, and competed, just 6 weeks after he was declared fully disabled.

Adding even more drama to the story, Mr Arroyo's disability was due to an injury to his back suffered when he slipped down some stairs. Unfortunately, no one was there to help him during his time of trouble, or to witness the accident itself.

What's even more incredible/unbelievable/ridiculous is Mr. Arroyo's attorney's statement in response to the recent publicity. Here's what Attorney Neil Osborne said:"Nothing in his specialized training regiment [sic] for the competition contradicts his neurologist's documentation of his injuries." And (this just gets better and better) this was our hero's sixth injury while on the job.

Here's a video of Mr Arroyo - got to love the thong.

Oops, late breaking news from another source - this wasn't a miraculous recovery; it turns out Mr Arroyo has been training for years, has won several body-building contests, and perhaps, just perhaps, his completely-disabling injury is somehow due to his avocation instead of the unwitnessed slip down the stairs.

Just perhaps.

Posted by at 8:55 AM | Permalink | Comments (0)

Like a man stumbling through a darkened room full of sharp objects, the individual health insurance industry continues to bash itself bloody.

Today's painful encounter is the news that individual health policy marketer HealthMarkets agreed to pay a $20 million fine to 36 states for failing to educate sales reps, failing to fully inform customers, and allegedly not paying providers promptly. HealthMarkets caved quickly, as the agreement came less than a year after the initial suit was filed.

This isn't the first time HealthMarkets has felt the wrath of regulators.

• In 2006, Massachusetts required HM "reassess denials of policyholders' medical bills dating to January 2002" (Appleby USAToday)
• Maine levied a million dollar penalty earlier this year, while also requiring HM to refund $5.6 million to policyholders
• Delaware fined HM $500k in 2006 (the largest fine in the state's history) for "steering consumers into individual rather than group health insurance policies, failing to provide state-required coverages, engaging in deceptive and improper marketing, mishandling consumer complaints and failing to institute adequate management controls" (Commissioner's statement); the insurer also failed to cover immunizations and mental health benefits, in direct violation of state and Federal law.

The Delaware case is especially revealing. There are better benefits, more state controls, and more regulation of small employer policies. And insurers are required by state law to offer those policies - but HealthMarkets' subsidiary insurer didn't, instead steering applicants to the 'more costly, less benefits, more complicated' individual policies.

HealthMarkets' leadership team should know better. Led by Allen Wise (ex-founder of Coventry), the board includes Steve Shulman (ex-Value Health CEO), Harve DeMovick (ex Coventry CIO), the board also is populated with notables from the various investment firms that bought HM several years ago. Fortunately, HM brought a seasoned compliance officer on board earlier this year, but you've got to wonder why it took them so long. Wise et al have been in the business for many years, the company had a checkered past (to be kind), and the pressure from regulators didn't start last year.

Why am I highlighting a relatively small player (>700,000 insureds) that operates on the fringes of the insurance market?

To show what can happen when the insurance business operates in the 'free market'. This company took advantage of uneducated consumers, sold them policies that weren't as advertised, took their money and left them with lousy coverage. For all those staunch advocates of deregulation - here's what you can look forward to - but on a much grander scale.

What does this mean for you?

Most insurance companies aren't like this. Most are staffed by good people trying to do the right thing, to get policies issues, pay claims fairly and promptly, and operate ethically. But when companies cheat and lie and steal, they make it all too easy for folks to tar all insurers with the same brush.

Posted by at 6:29 PM | Permalink | Comments (2)

Two days after going down in defeat, overwhelmed by the physician lobby and AARP, health plans received another shot into the bow.

Rep Henry Waxman announced his intention to schedule Congressional hearings on insurance companies practices in the individual insurance market. What may have gotten Waxman's attention was the ongoing fiasco in California, where two major health plans joined three others settling claims that they illegally canceled members' policies.

The Congressional inquiry comes on the heels of multiple lawsuits filed in California against multiple health plans claiming various damages due to policy cancellation. Insurers have described some as 'political grandstanding' and 'totally without merit'. Nonetheless, they've also paid fines and agreed to corrective action.

Suits have also been filed and settlements awarded in Arizona,

Is John McCain paying attention? Remember McCain's reform 'plan' relies on the individual insurance market, a 'market' that has once again proven it is incapable of acting within the law. McCain seeks to end employer based insurance, replacing it with individual coverage purchased on the open market. The companies who would sell that insurance are the same ones now paying fines for illegally cancelling policies and denying claims.

Let us not forget that McCain's 'free market' is built on insurance companies seeking to make money - and the way they do that is by selling insurance to folks who don't need it. Those individuals who really need coverage for their current health conditions cannot get that coverage in the vast majority of states, as the insurance company is allowed to specifically exclude certain conditions and/or to charge significantly higher premiums. In fact, there are only five states that specifically require insurance companies to sell policies to everyone regardless of medical condition. (Maine, Massachusetts, New Jersey, New York and Vermont) If you don't live in the northeast, and if you have any pre-existing condition (and who doesn't?), you're out of luck.

Of course, health plans have a solution to this - they will cover a few more folks with pre-ex conditions, as long as the states agree to cover anyone with more serious problems. Now that's free market business at its best - guaranteeing private companies will take the good risks, and dumping the rest on the taxpayer. The plan, put together after "tireless efforts of the senior leadership of our industry" and seven months of hard work by AHIP's board would require state high-risk pools to take on anyone who may incur medical costs more than twice the state average, while requiring insurers to cover the rest.

If there's a clearer statement of the industry's lack of confidence in its ability to manage health care, I haven't seen it.

AHIP's plan crystalizes the problem - (most) health plans long ago gave up any pretense that they would or could actually manage care.

AHIP should change its name from America's Health Insurance Plans to the ARSC - America's Risk Selection Companies.

If McCain has a solution to this, he hasn't published it yet.

thanks to California HealthLine for the inspiration; for an excellent review of the individual market see Julie Appleby's piece in USAToday.

Posted by at 6:18 AM | Permalink | Comments (6)

Bowing to the reality of the market, the New York Work Comp Board has issued a revised pharmacy fee schedule for workers comp.

The previous fee schedule based WC pharmacy fees on Medicaid - a linkage that was problematic for at least a dozen reasons. Here are the major ones.

1. Medicaid has 'positive enrollment' - members' eligibility is determined instantly, electronically. In WC, there is no upfront enrollment, therefore retail pharmacies don't know where to send the claim, or even if the claim has been accepted by an insurer. Work comp requires a lot of manual work, while Medicaid is electronic and instant.

2. The Medicaid reimbursement schedule has been a political football of late, as state legislators, under pressure from declining revenues and increasing service demands, have looked to cut Medicaid costs by cutting prices paid for drugs. California's decision to cut reimbursement by 10% has resulted in a political/judicial back and forth that is apparently still not resolved. By tying WC reimbursement to Medicaid, pharmacies, PBMs, and payers would be batted back and forth, not knowing from day to day what they should pay for drugs.

3. Medicaid has a formulary which reduces the cost of the drugs to the pharmacies. There is no such formulary in WC (except in a very few states such as Washington), and therefore drug manufacturers won't give discounts in return for preference in a therapeutic class.

4. The Medicaid FS is actually significantly lower than the contracted prices PBMs pay retail pharmacies. Thus there is no benefit to payers, or retail pharmacies, in working with PBMs. This despite the strong evidence that PBMs, properly implemented and managed, can dramatically reduce utilization (the volume of scripts dispensed).

What drove NY to make the change? Access issues. Claimants were not able to get their scripts filled as pharmacies could not afford to do so under Medicaid reimbursement, and PBMs could not afford to operate in the state while losing money on every script.

That's not to say the revised FS is much better. In fact, as the second lowest fee schedule in the nation, it represents an incremental improvement at best, and may not be sufficient to keep all stakeholders participating.

Cynics may point to California, and note that PBMs and pharmacies stayed in that market after the FS was based on Medicaid. True, but each state's Medicaid FS is unique, and CA's is significantly more reasonable than NY's.

Posted by at 10:21 AM | Permalink | Comments (0)

Pundits (myself included) are detecting a sea change on the Hill - the health plans' power meter is just barely registering while physicians are pegging the needle. If you're wondering why physicians were so adamantly opposed to the Medicare reimbursement cut, it is because their compensation is barely keeping up with inflation.

Recall that the GOP was going to cut their Medicare reimbursement by 10.6% (while also reducing Medicaid and other Medicare-linked compensation). And this after physicians had gone several years with their income not even keeping pace with inflation.

According to the latest data from 2007, primary care docs enjoyed a 3.35% increase in compensation after inflation (6.3% before accounting for the 2.85% CPI uptick last year). This rather modest increase is way better than their specialist colleagues saw - inflation-wise, specialists broke even. However, specialists' median income was almost a third of a million bucks, while specialists were just over $182k, so the primary care docs have a long way to go to catch up.

And some of them have a really really long way - median general practice income was $119k, whlle Family practice docs made $129k.

Not bad money, but not exactly huge bucks either. The other part of the equation has to do with job satisfaction - if you love your job, you're likely to be less concerned with how much you make. But if you don't love your job, and some damn President/Congressperson is threatening to cut your already low income, while paying big health plans billions more than they should...

Job satisfaction amongst primary care docs is declining. 60% of PCPs (primary care practitioners) would not choose primary care if they got a do-over. 39% would pick surgery or diagnostics, and over one-fifth would not choose medicine.

Looking at changes from 2006 to 2007, the percentage of docs who counted themselves as 'very satisfied' declined from 24% to 18%, while those who were 'very dissatisfied' went up from 9.4% to 13.2%.

So what do these newly-empowered, angry docs want?

36% want a Canadian-style single payer system.

66% agreed that the "US should move to a market driven system that reduces the role of third party payers."

(note these were separate questions and therefore don't add up to 100%)

Yes, working with physicians has heretofore required cat-wrangling skills. And their egos require outdoor meetings as no hall is big enough. And all want more for their specialty and their patients are sicker than average. And they are all better than average.

And they've recently found out what they can accomplish when they stop acting like Augustus Gloop and work together.

Thanks to FierceHealthcare for the triggering tip.

Posted by at 6:16 PM | Permalink | Comments (2)

It's over, done, finished. For a few months, anyway. With the overwhelming Congressional vote to override Pres Bush's veto of the Medicare bill (keeping physician reimbursement levels and cutting subsidies for health plans' Medicare Advantage and Private Fee For Service), the pols can now move on to other issues.

But while they're working on oil drilling and war funding and education and trade, the 'solution' will merely serve to kick the problem further down the road. And when next we round the corner, we'll find that the ball has gotten much heavier (docs are scheduled for a 20%+ cut. We'll also find a rejuvenated physician lobby, one with a renewed strength and sophistication, marked by the 'partnership' with AARP.

The Senate vote was an even louder repudiation of Bush's position than the original vote, with four more GOP Senators joining all their Democratic colleagues and seventeen other Republicans.

Twenty-one Republicans voted to cut health plan subsidies and restore physician reimbursement. Twenty-one.

In the House, 153 Republicans (24 more than voted 'aye' originally') joined the 230 Democrats to overturn the veto.

Some (including Shadowfax) have said physicians don't have pull in Washington. If you don't believe in the power of the AMA now, I respectfully suggest you go back, do the math, and ask the GOP members of the House and Senate what made them change their votes.

The next time Congress tackles Medicare, you can be sure health plans' influence on Capitol Hill will have waned; no, diminished; no, disappeared; no, that's not quite right either. Suffice it to say that health plans lost this round, and lost it badly. And they have no one to blame but themselves. Appalled by stories of health plans canceling policies, wildly overpaying executives, and cutting back on coverage and physician compensation, Congresspeople found it pretty easy to take a few billion out of health plans and give it to docs.

As Bob Laszewski said when asked about health plans, "Now they have zero political capital, and they're just going to have it done to them next year.''

When it will hurt a lot more. By digging in their heels, health plans likely lost their last best chance to play a dominant role in future health care reform negotiations. Instead, they will likely find themselves with a seat or two at the table, but those seats will be at the far end, away from the powerful and influential.

Posted by at 7:06 PM | Permalink | Comments (3)

Several sources indicate Pres Bush is going to veto the Medicare bill (that rescinded physician reimbursement cuts and phased out Medicare Advantage subsidies). The veto may happen today.

Oops, he just did.

The Senate and House are likely to vote to override the veto pretty quickly - perhaps within a day or so. If the veto is overridden, it will be the first time a Bush veto went down to defeat.

A post on the Wall Street Journal's blog is notable not for the content (which appears accurate and timely nonethless) but rather for the tone and anger of the commenters. Remember folks, this is the WSJ, perhaps one of the most conservative publications in the country - yet the WSJ's readers are beyond angry with Bush and his pending veto. Think livid, furious, outraged, hyperventilating mad. This isn't exactly good news for McCain, who now will have yet another opportunity to either avoid voting on this (as he has to date) or will have to actually take a position.

If the veto is not overridden, it is going to be a holy mess out there in IT/reimbursement/physician contracting/patient access/state regulatory land.

Here are a few potential problems.

1. States that base their WC fee schedules on Medicaid will have to decide whether they are going to follow suit; and for those that are directly tied to Medicare, expect big noise from the occ med, ortho, and neuro physician communities.

2. CMS is going to start processing bills today with the 10.6% cut - and docs are going to start dropping out of Medicare at a rather rapid rate.

3. Republican legislators are going to be mincemeat during the August recess, which will be even uglier than their 'holiday' on July 4.

Posted by at 12:04 PM | Permalink | Comments (2)

Last week the National Coalition on Benefits went public with their position on health reform - they don't want any reduction in the role of employers. The NCB's position was laid out in a letter to Sens. Ron Wyden (D OR) and Bob Bennett (R UT) opposing the Healthy Americans Act. The big issue for NCB appears to be the HAA's focus on providing benefits through state organizations, thereby eliminating employers' ability to offer consistent plans across multiple states.

I don't get it. Or maybe I do, and it smells like good ol' special interest self preservation.

According to their website, the NCB represents employers, health plans, and trade associations that provide benefits under ERISA (Federal law that regulates big employer benefit plans, exempting them from state control). Members like the current employer-based system; their position is that "any change must not erode those parts of the health care system that are working..."

The NCB's letter goes on to claim "The federal ERISA framework also makes it possible for employers to drive value-based strategies that improve the entire health care system by allowing employers to apply leading edge, innovative practices on a consistent, nationwide basis."

That's a puzzler. If the current employer-based system is working so well, why

• have premiums gone up 87% since 2000 while the CPI is only up 17%?
• are 10 million of the uninsured working full time at large employers (>1000 workers)?
• did Safeway and Wal-Mart endorse Wyden's Healthy Americans Act?
• have insurance costs as a percentage of payroll gone from 8.2% to 11% in six years?
• are 30 million uninsured Americans in families where the head of the household is working full time?
  

According to a source in Sen Wyden's office, "what the National Coalition on Benefits is saying isn’t the attitude of all their members, even of some listed in that letter. In fact, the NCB had a conference call [last] week with some of the members listed on the letter who were unhappy because they didn’t agree with it."

Turns out the letter from NCB only reflects the opinions of the dozen members of the steering committee which is comprised of equal numbers of trade associations and employers (e.g. ATT, GM, UPS, Verizon).

The staffer went on to note that "news reports said Boeing was severely disadvantaged in competing with Airbus because of the costs they have to bear for their employees’ health care costs that Airbus doesn’t have to pay because their employees’ health care is paid for by the government. Employers could be relieved of that competitive burden under the HAA."

Wyden himself responded rather acerbically to the NCB (a change from his usual low-key, laid-back-Oregonian style), saying “We may be talking about the coalition of the un-willing. We have talked to several alleged coalition members -- like NIKE, AHIP, Wal-Mart and Johnson and Johnson -- and they all say that the letter does not represent their views on the Healthy Americans Act. As for their message, their defense of the employer-based health system sounds eerily similar to the Titanic’s deck crew hyping the merits of a sinking ship.

Whoever wrote this letter can’t guarantee a single American that their employer-provided benefits won’t be taken away. But of course, that’s not their job. Their job is to protect tax preferences for the status quo."

The Senator has a point. The tax benefits of the employer-based system are well-documented and extensive, amounting to about $200 billion annually for employers. Health benefits save employers and employees taxes as they are paid for with 'pre-tax' dollars - dollars that aren't counted as income for tax purposes. If employer sponsorship of health benefits went away, the assumption is the cash employers spend on benefits would instead be paid as wages (and therefore subject to taxation) or (under the HAA) paid into the state agencies as the employers' contribution for their workers' health benefits. Of note, monies paid to these agencies would still be tax-deductible.

Provisions in HAA allow for a transition from the current system over a two year period. Employers would increase their workers' wages by the amount they had been spending on health benefits. After that two year period was up, employers wouldn't have to pay employees the added wages, but instead contribute to the state agencies running the benefits purchasing groups. Here's what's puzzling about the NCB's position; the amount employers would have to contribute is about 10% of the total cost of health benefits for their employees - a much lower percentage than they are now paying.

Seems like a pretty good deal for employers.

According to the Lewin Group's assessment, "Private employer health spending under the HAA is reduced under the HAA by $309.8 billion, from $428.8 billion under current law to $119.0 billion under the program."

There's a much better reason for employers to maintain a role in the health benefits decision process than the ones claimed by the NCB - benefits directly impact worker productivity. If employers are removed from the process of vetting and selecting health insurance vendors, individuals would be responsible for choosing their carrier. Insurance companies would 'win' based on how cheaply they could provide insurance to individuals and families, and the less care delivered, the lower the premiums. I don't see what would prevent those vendors from suggesting each and every injured or ill worker or dependent tried bed rest and over the counter drugs for two weeks, then an x-ray or basic lab test, and only then would they get to see a diagnostician. In fact that's how group plans treat back pain, while under work comp care is much more aggressive as it is focused on getting that worker back on the job.

Over time, those insurers who best manage chronic conditions (which drive most health care spending) will have lower costs and therefore deliver lower premiums. But the key issue is this - health plan incentives under an individually-driven system are different from an employer-based system. Over the long term, payers would figure out how to best care for medical conditions, and over that long term, the ones who do it right will win. However, that may not be the case over the short term - wherein low price based on denial of care or very conservative care would 'win' in the individual market.

Of course, studies show the number of employers who actually understand the linkage between health benefits and productivity is identical to the number of Yankee fans living within two blocks of Fenway. Yes, employers are ignorant of the real reason they should be involved in health benefits. But that doesn't mean we shouldn't protect them from themselves.

The net is this. The Healthy Americans Act would save employers a shipload of cash. It would also allow them to focus on running their businesses and get them out of the health plan management business. Those are good things.

Yet the impact of health benefits on productivity is undeniable - and has to be part of the cost:benefit calculus.

Posted by at 9:26 AM | Permalink | Comments (1)

Insurance Journal's new pub MyNewMarkets has an entertaining piece about the history of workers comp, which according to author Chris Boggs, began back in the days of the pirate.

Boggs does allow opinion to influence his rendering of history - notably he claims former German Chancellor Otto von Bismarck "was not known as a socially-conscious ruler; the working conditions of the common man were not necessarily foremost in his mind."

I beg to differ.

von Bismarck was nothing if not pragmatic, and the fact that he forced passage of the first national health insurance, pension, and disability legislation shows that if anything, he was extremely socially conscious. Any ruler of a European country in the latter half of the nineteenth century had to be socially conscious, as the locus of power was moving rapidly away from the genetically-chosen elite.

The ones who were not socially conscious (e.g. Czar Nicholas Alexander) didn't survive very long.

Other than that difference of opinion, the piece is well done and provides a brief intro with a promise of more to come.

Posted by at 3:05 PM | Permalink | Comments (1)

The Medicare vote to rescind the 10% cut in physician reimbursement likely kept many docs in the business of providing medical care to workers comp patients.

But that 'stay of execution' ends Jan 1 2010 when a 21% cut is scheduled to go into effect.

As Bob Laszewski has been noting, the current incredibly stupid way we are addressing Medicare physician compensation is resolving nothing, while ensuring we're right back on the edge in eighteen months.

Long-time readers are undoubtedly tired of me reciting the myriad reasons it is dumb to base WC reimbursement on Medicare. But here's yet another example - WC is a state-based system where reimbursement is controlled by a political process completely unconcerned about its implications for comp insurers, employers, physicians, or injured workers.

A study completed in 2007 illustrated the problem - low reimbursement rates mean few physicians are willing to treat comp claimants. Among the five states that based their fee schedule on low percentages of Medicare (109% to 125% of Medicare), the percentage of neurologists and orthopaedists that participated in workers’ compensation tended to be a fraction of the available population (9% to 27% for neurologists, 23% to 46% for orthopaedists).

Among the states using Medicare's RBRVS as the basis for physician reimbursement are Florida, Pennsylvania, West Virginia, Hawaii, Maryland, California, Michigan, Ohio, Tennessee, Minnesota, Oregon and Texas.

Yes, most pay above the Medicare rate, and many have built-in inflation adjustments. But physician compensation is still primarily controlled by the politics of Washington.

Posted by at 10:33 AM | Permalink | Comments (0)

Yesterday's 69-30 Senate vote to reduce the subsidies for Medicare Advantage and Private fee for service plans and rescind the cut in physician reimbursement will have far reaching implications. I watched the historic vote while sitting in a bar in DC (only in DC would the TV over the bar be tuned to CSPAN); when Sen Kennedy walked on the Senate floor in his first appearance since being diagnosed with cancer the outcome was foregone conclusion; his vote would be the 60th. Faced with the inevitable, nine more GOP senators switched their votes to side with the Dems, despite the looming threat of a veto.

The margin in the Senate and the House is enough to overcome that veto. It will also serve notice that the physician lobby and the AMA remains a very powerful force, a lesson that will be heeded when the health care reform process gets serious next year.

The vote is another body blow to big health plans.

Coming amidst announcements of declining revenue projections and battered earnings forecasts, the cut in the MA and PFFS subsidies (13% and 19% respectively) is going to further the slide of healthplans' financial fortunes... At least for those plans with significant MA and PFFS exposure. Think UHC, Humana, Coventry, and Universal American.

The ongoing battle over Medicare reimbursement is another wake-up call to state legislators and regulators. Many states base workers comp fee schedules on Medicare, thereby ceding control over medical payments to a third party that could not care less about the impact of their decisions on a state's work comp system and the willingness of physicians to participate in that system.

Finally, the vote is a major victory for Senate majority leader Harry Reid. According to sources close to the Senator, "there was no plan B" if the required 60 vote threshold wasn't reached.

From here it looks like the back-against-the-wall was just what the doctor ordered, and may well strengthen Reid and his fellow Democrats.

Posted by at 6:55 AM | Permalink | Comments (1)

I'd been meaning to get to the Center for Studying Health System Change's annual Wall Street comes to Washington meeting for several years - finally made it and it has been well worth the trip from Conn.

There were two sessions, one devoted to health plans and the other to providers. I'll be reading thru my notes today and tomorrow to come up with a couple unified-theme posts. For today, we'll focus on what health plans are doing to prepare for health reform.

Panelists opined that there are two issues health plans have to address - dealing with the newly-insured and preparing for the possibility that the employer will not be the locus of control for health insurance purchasing. Christine Arnold noted that Cigna, Humana, and Coventry recently entered the individual market, with Aetna expanding its role while also acquiring Schaller Anderson, a veteran of the Medicaid world. UHC has been in the individual business for a while (post purchase of Golden Rule) and also has significant experience in the Medicaid and special needs populations (high cost, high risk Medicaid folks).

The individual market expansion is a hedge against McCain's plan becoming the law of the land. As I've noted, McCain wants to discard the employer-based health system and rely on the market to cover individuals (while doing nothing to prevent medical underwriting or exclusion of pre-existing conditions). As Arnold noted, the individual market won't cover many more folks unless there is a requirement for guaranteed issue and a significant penalty for those who refuse to enroll (otherwise they'll just wait till they get sick, then sign up).

For those who question whether an individual program will work, Bob Laszewski noted that the Feds already have experience with a large scale, community-rated guarantee issue voluntary benefit plan - Part D. In terms of enrollment, the plan has been extra-ordinarily successful (despite my prognostications to the contrary). In terms of financial rewards, the numbers are good for those sponsors that excluded many of the most popular drugs, and pretty dismal for the two biggest players - Humana and UHC. These companies cover all of the most popular drugs, so seniors interested in a drug plan found the plans that covered their drugs and then checked prices.

And promptly used their cards and that's why UHC and Humana are getting killed by Part D.

So what's the lesson here? Health plans need to understand the individual market, but they also need to remember that benefit design drives adverse selection, which drives higher loss costs. While selling individual policies may seem like good preparation for a possible McCain-type plan, examining the results of Part D may be more instructive.

Posted by at 1:33 PM | Permalink | Comments (0)

There are few issues that do more to crystalize the balance between personal freedom and personal responsibility than motorcycle helmet laws.

Twenty states require motorcyclists to wear helmets, which means thirty do not. Opponents of helmet laws see it is a personal choice and often claim wearing a helmet increases visibility and situational awareness. Could be.

Proponents of mandatory helmet laws note that fatality rates appear to be higher in states without helmet laws; common sense indicates that falling off a bike onto one's head without a helmet is likely to cause a more serious head injury than if one was wearing a helmet.

And there is an ongoing back and forth debate on the merits of statistical analyses and the results thereof, a debate that leads nowhere and gets folks all wrapped up in numbers, thereby obscuring the real issue - ultimately wearing a helmet is a personal decision, until you get a traumatic brain injury, whereupon it becomes a societal issue.

Here's an idea.

Those who want to ride without a helmet have to buy insurance that reflects that decision. That insurance must provide comprehensive coverage for medical care for associated with the covered individual, including long term custodial care, with a really high limit - say $10 million, that is indexed to the medical CPI to account for inflation. Upon showing proof of coverage, they get a special license plate. Insurance companies take the risk, society does not get harmed due to the adverse consequence of a personal decision, and those who want to ride with their hair blowing in the wind are free to do so.

Oh, and they should be required to be organ donors as well.

Posted by at 8:18 AM | Permalink | Comments (6)

In yet another blow to the big health plans, giant UHC will be cutting 4000 positions as part of a restructuring plan. The plan involves ditching the Uniprise brand and putting all commercial products under the UnitedHealthcare banner.

The announcement comes at a time when UHC's stock has been battered by bad news throughout the sector, with UHC recently announcing it is projecting weaker earnings. On the heels of Coventry's missed forecast and following the CalPers settlement (see below), the bad news has driven UHC's stock price to less than half its 52 week high.

The company also will be paying a fine of just under $900 million to settle CalPers' lawsuit stemming from UHC's stock option manipulation - while admitting no wrongdoing. Got to love that last phrase - if there was no wrongdoing I kind of doubt UHC would have agreed to pony up $895 million.

Apparently United has decided to fix its finances by cleaning out its book of business by dumping less-profitable business and tightening underwriting. These moves, coupled with increased premiums, will cut the medical loss ratio, but at the cost of membership. Expect UHC's trend-neutral revenues to decline in 2008 and possibly 2009 (remember that all health plans have a built-in annual growth rate equivalent to medical trend; to accurately calculate growth one has to correct for that trend).

Over the long term, I don't like UHC's chances. This is not a company that invests in medical management - despite its trove of data, analytical expertise, participation in NCQA accreditation and inhouse capabilities, UHC has always been about managing reimbursement, not care. Their latest move to increase premiums is the way United has always reacted to bad financial results. And it may work for a while, but over the long term the winners in the health plan business will be those who actually understand how to manage care.

And United doesn't.

Posted by at 8:51 AM | Permalink | Comments (2)

Fiserv has sold 51% of its insurance business, including third party biller Third Party Solutions to a private equity firm. The buyer, Stone Point Capital, also owns workers comp managed care firm Genex and multiple other insurance-related companies, including brokerage, investment, distribution, reinsurance, technology, and claims services.

Fiserv will continue to own 49% of the new company, to be titled Fiserv Insurance Services (I'm hoping they didn't pay a naming consultancy a lot for that).

Close watchers of the work comp pharmacy business (both of you) will recall that TPS acquired WorkingRx last fall, at the time its sole competitor in the third party biller industry.

What does this mean for you?

Folks familiar with the industry are of the opinion that TPS was a throw-in; Fiserv sought to sell TPS eighteen months ago, and has been trying to sell it off every since. Don't be surprised if TPS is back on the market once this transaction closes later this month.

Posted by at 12:18 AM | Permalink | Comments (1)

GOP Senators better wear their cheap suits while marching in Independence Day parades this weekend, as it is tough to get tomato stains out of nice wool.

As Bob Laszewski pointed out, Republicans were boxed into a very tight corner by their Democratic colleagues after GOP Senators blocked a bill that would have prevented a drastic cut in physician fees. The maneuvering was ugly, as the Dems apparently backing out of an earlier deal that would have restored the cuts. Once the bill was overwhelmingly passed by the House, Senate Democrats were presented with a very big cudgel they could use to smack their Republican colleagues around. And with Congress heading out for the 4th of July recess, they have done so - publicly, loudly, and repeatedly.

Republican Senators now find themselves defending their vote to reduce physician fees by 10% (that's not exactly what happened, but close enough for politics) while refusing to reduce payments to big insurers. Payments that most view as far too generous.

Politically, the picture could not be better for Democrats. Republicans will be vilified for their vote to cut payments to Dr. Welby, everyone's kindly neighborhood physician while continuing to pay huge sums to big, faceless, bureaucratic insurers located far away staffed by nasty clerks who delight in forcing new moms to leave the hospital mere moments after giving birth.

And in an election year too.

There is a good bit of substance to the argument against continuing the massive subsidies for Medicare Advantage (MA) and Private Fee for Service plans (PFFS). These payments were supposed to be temporary, used to motivate health plans to set up alternative Medicare programs, to make it worth their while to get started. Now that many of these plans have been up and running for several years, they should be able to survive on their own.

And as far back as 2005, health plans in these programs were doing just fine. In an example of exquisite timing a GAO audit revealed health plans in the program made over a billion dollars more than they expected; $1.14 billion in extra profit.

Yet healthplans are fiercely lobbying to hold onto the subsidies, and their GOP allies are marching in lockstep - right off a cliff.

Health plans, and their Republican allies, now look like they won't pull their heads out of the public feedbag, even when it is obvious they are getting fat on taxpayer-funded subsidies.

Politically, both the GOP and health plans are being stupid. There's no other word for it. Not only is this politically suicidal, the longer term implications are obvious. Health reform is coming, and private health plans will want to play a major role. They will claim that the market is the solution (a point I have also been making).

Yet these free-market companies continue to argue they can't compete with the government-run Medicare program without massive subsidies.

Posted by at 7:24 AM | Permalink | Comments (4)

Opponents of universal care often cite awful stories of Canadians and Brits hurt, killed, or dead of neglect or bad care. And there's no doubt that people in Canada and Britain are the victims of poor medical care.

There is certainly some truth to the stories of bad Canadian and British medicine. It is also true that raising this issue doesn't help make the case against universal health insurance.

News flash - American patients often suffer pain, injury, or death from bad medicine. Here are a few examples. California hospitals recently disclosed hundreds of medical errors, "including wrong-organ surgeries, administration of incorrect drugs and neglect of serious medical conditions. This is a small percentage when weighed against the 4 million hospital admissions that occur in California each year, but still serious..." (quote from FierceHealthcare citation).

In Pennsylvania, wrong-site surgeries happen often - very often.

Nationally, between 48,000 and 98,000 Americans die each year due to medical errors. More people are killed by bad medicine than die in auto accidents or succumb to breast cancer.

A report on medical errors in the US blamed the system. Our system, one that does not offer universal coverage. According to the Institute of Medicine's 2000 report; "most of the medical errors are systems related and not attributable to individual negligence or misconduct. The key to reducing medical errors is to focus on improving the systems of delivering care and not to blame individuals. Health care professionals are simply human and, like everyone else, they make mistakes. But research has shown that system improvements can reduce the error rates and improve the quality of health care."

(I'd note that the IOM is a universally respected, highly regarded organization, unlike the agenda-driven think tanks typically cited by opponents of universal coverage).

Let's not forget the people without health insurance who die as a result of poor access to health care - late diagnosis of cancer, poor preventive care, and untreated hypertension, cardiovascular disease, asthma and diabetes.

And in the "did they even think about this before they wrote it" category comes this gem from biggovhealth.com; "Since 1997, the U.S. has made further improvements to the quality and accessibility of our health care, including the creation of Medicare Part D."

Uhh, folks, Part D is a government-run drug program that has resulted in many seniors getting access to pharmaceuticals, thereby potentially improving their health. Kind of like what universal coverage aims to do.

Contrasting the IOM's estimate that there are 18,000 excess deaths in America among uninsured adults to the anecdotal examples of poor care in Canada and Britain provides a much clearer picture of the 'dangers' of universal medicine. A picture of kids getting health screens, diabetics getting insulin, asthmatics receiving education and primary care, expectant mothers getting pre-natal care, and high-risk women getting mammograms.

Now that's a scary world.

Posted by at 6:38 AM | Permalink | Comments (6)

Last Thursday's post showed that workers comp is a huge money maker for hospitals, generating about 16% of their profits on less than 2% of revenue.

The attempts to date to control hospital costs have been to set WC reimbursement using primarily DRGs (Medicare Diagnosis Related Groups) (NY), a percentage discount below charges (as in Florida), or on the basis of the facility's cost to deliver that service (Connecticut).

But it is never as simple as setting rates at DRGs or a discount below charges.

For the latter, a hospital could charge a billion dollars for an epidural, and the payer would (conceivably) have to pay 60% or 75% of that rate. So states add language around that provision requiring payment to be based on 'usual and customary' charges - which sounds fine until you try to define usual and customary. Florida is in the midst of just such an effort, and the process has become pretty contentious.

Using Medicare as a basis is also problematic. DRGs were developed for Medicare patients - older with different conditions and often not working. The resources - procedures, services, therapies, setting, providers - employed in providing care to an 88 year old with herniated disk are likely quite different from those provided to a 33 year old with the same condition.

Yet these differences have never been evaluated. To my knowledge, there has never been any thorough study of how the inpatient or outpatient hospital resources used by workers compensation patients compare with resources used by Medicare patents per Medicare's inpatient MS-DRG groups or Medicare's outpatient APC groups.

Another option, and one I would argue is highly problematic, is to pay based on some multiple of Medicare. Several states use this methodology, including South Carolina (which has seen rapidly rising WC medical expenses). Texas recently announced that it is moving in this direction. The problem for payers, is that Texas is paying hospitals an extremely high multiple of Medicare. According to FairPay Solutions CEO VIncent Drucker (and HSA client); "This provides huge financial incentives for over-utilization of high cost hospital and hospital-based-specialist services [emphasis added]. Over utilization that Wennberg, for example, reports account for 25 percent of wasted dollars for Medicare chronically ill patients." (Drucker is referring to Dr John Wennberg's recently-published Dartmouth Atlas of Health Care.)

As a commenter noted last week, "TX and CA have a Medicare based system with a mark-up ranging from 25% - 100%. However most hospital contracts with group health insurers and PPO networks are below Medicare rates."

Why?

Why do workers comp payers consistently overpay for hospital services? Why can't comp networks deliver the kind of reductions that are commonplace among group health insurers?

And why do employers allow their payers and managed care firms to spend their dollars so carelessly?

Posted by at 7:08 AM | Permalink | Comments (7)