Insight, analysis & opinion from Joe Paduda


Could Medicare for All Solve the healthcare cost problem?

This week we are unpacking Single Payer/Medicare for All to better understand the many variations of SP/MFA and now they are different, how those variations might work, and whether some version is a) politically viable and b) would solve the cost/access/quality conundrum.

Yesterday I made the case that voters want healthcare solved, and they don’t much care about the details and nuance. We also showed that employer-sponsored health insurance is a mess.

Can private insurers solve the healthcare cost problem? Well, on one level they get dinged if they control costs. A key point about for-profit insurers – the stock market loves and rewards revenue growth. In health insurance, revenue growth is overwhelmingly driven by higher medical costs. So, medical cost inflation = higher revenues = higher stock prices (yes, this is simplistic, but also mostly true).

Over the last two years insurers have kept premium increases low, but that’s due in large part to cost-shifting to members. In contrast, Medicare can’t cut costs by shifting them to you – benefits are set by law and rarely change significantly.

the big increase in Medicare 2000s was largely drive by the new Part D drug program; focus on per capita costs to account for changes in membership

As we’ve noted previously, facility prices are the biggest driver of cost inflation – and that’s where Medicare outperforms commercial payers. Of course commercial payers will say that’s because Medicare can force payers to agree to its prices – which, although true, begs the question – why can’t commercial payers do the same?

One main reason – in many areas, provider consolidation has given health systems market power – health providers have more leverage so they have an advantage in negotiations.

In 43% of markets, providers are super-concentrated, vs only 5% of markets for health insurers

That said, reality is health insurers have failed to control members’ healthcare costs. There are lots of reasons – including provider market consolidation, but as one of my rowing coaches once said to me; “I don’t want to hear why you can’t, I want to hear how you will”.

What does this mean for you?

If for-profit health insurers had done their job – controlling costs and delivering better outcomes and patient satisfaction – you wouldn’t be reading this.

Medicare has a better track record controlling cost – which is by far the most important issue in healthcare.

Tomorrow – can SP/MFA solve the cost problem going forward?

Note – Here are a couple approaches health insurers are working on, in process, have been tried, or may try in the future. In my view much of this is too little, too late.

Reference pricing has been implemented by some large employers and a handful of insurance plans. In a nutshell, it forces members to ask about prices, because their health insurance will only reimburse up to a “reference” price. One experiment is underway in North Carolina.

Narrow networkshealthplans with very limited provider panels – are gaining traction as healthplans force providers to agree to lower prices and outcome standards in return for patient volume.


One Call withdraws it’s debt exchange offer

Word just in that One Call Care Management has “cancelled a bond exchange intended to rework its $2 billion debt load”. According to Bloomberg, OCCM won’t pursue the debt swap.

The swap would have allowed holders of the current second-lien notes to exchange some for first-lien notes. This would have moved the holders of first-lien notes up in the event there is a restructuring.

Don’t know if this will have any impact on the company’s ratings by Moody’s or Standard and Poor’s; will monitor and let you know.

For now, all we know is One Call attempted to restructure some of it’s debt, then withdrew the offer.


What’s all this about Single Payer and Medicare For All?

It’s the worst kind of government over-reach.

It’s an easy solution to a huge problem that will cost nothing.

And everything in between. Between now and Election Day you are going to hear a lot about Medicare for All and Single Payer, and most of it will be utter nonsense.

So, this week is Single Payer/Medicare For All explanation week.

Proponents of Single Payer/Medicare for All say it will reduce overall costs and ensure everyone in America has great healthcare; At the other end of the spectrum, it’s fiercest opponents say it will bankrupt the country while giving bureaucrats control over your family’s healthcare.

Reality is, since there is no actual agreed-upon “Medicare for All” or Single Payer legislation, each of us sees what we want to see – MFA as the Holy Grail or a Total Disaster.

Let’s take a step back and think about how voters are affected by the core problem – or rather problems, with healthcare and health insurance.

The focus on voters is critical here – most are covered by employer-based health insurance, and most of the rest are covered by Medicare. For the non-elderly:

  • Health insurance is stupid expensive.
  • For many of us, deductibles are so high “insurance” just protects you from catastrophic injuries or illnesses.
  • Insurance companies control the doctors and hospitals you can use and the care you get.
  • The paperwork is mindboggling, confusing, and adds billions in unnecessary cost.

For workers, healthcare “costs” are a combination of insurance premiums and cost-sharing payments – mostly deductibles and copayments. (While about 75% of premiums are paid by employers, economists argue that most of those premium dollars would be paid in cash wages if health insurance wasn’t provided.)

Today family health insurance premiums are almost certainly more than $20,000 a year.

Over the last two decades, healthcare costs have eaten up wage increases – one of the main reasons families aren’t getting ahead.

For those who actually have to use their health insurance, it’s worse. Deductibles are so high that many families can’t afford them.

Add this all up, and you understand why healthcare was the top issue for most voters in the mid-terms.

Voters like simple answers to complex questions – and for many, some form of Single Payer sounds great.

The takeaway – voters want healthcare solved and they don’t care much about the details.


The week that was…

Couple quick items from the week that was.

Heard from WCRI that they are close to capacity for the annual confab. If you haven’t registered, you’d best do so now here.

Rating firm Moody’s released an announcement regarding OneCall Corp.’s recent debt offering.[link accessible for registered users; registration is free]. This follows OneCall’s announcement last week that it would be offering to exchange new debt for existing debt.

Moody’s announcement indicates it is “likely” the debt exchange will be viewed as a “distressed exchange”; there is no change to ratings at this time.

S&P released a note indicating it lowered it’s long-term issuer credit rating for One Call Corp to ‘CC’ from ‘CCC+'[free registration required].

From S&P – “An obligor rated ‘CC’ is currently highly vulnerable. The ‘CC’ rating is used when a default has not yet occurred but S&P Global Ratings expects default to be a virtual certainty, regardless of the anticipated time to default.”

New CEO Rone Baldwin released a letter to all earlier this week.


Research Roundup – or, stuff you don’t have to read because I did.

There’s so much great research published every day – and a lot of crap too – that it is impossible to figure out A) what should I read and B) what does it mean.

So, here’s what I found worth reading of late.

A Dutch study on the impact of automation on the workforce found:

  • annually. 0.7% of workers left their employer due to automation
  • higher-educated and higher-paid workers are MORE likely to be affected than their lower-wage colleagues
  • overall the impact of automation is a lot less than from mass layoffs.

Employer sponsored health insurance:

  • covers more Americans than any other type of insurance
  • 156 million of us get insurance from our employers – Medicare is second, at less than half that number

BUT – the percentage of Americans covered by employer-sponsored health insurance actually DROPPED over the last 20 years.

Of course, it’s not so much if you have insurance – it’s how much you have to pay out of pocket. Which, to coin a phrase, is becoming a ship-load as deductibles have exploded. Total worker cost sharing has increased about 50% over the last decade.

Meanwhile, employer-sponsored health insurance costs per member have gone up a lot faster than Medicare and Medicaid.

Finally, the good folks at WCRI have published a new compendium sure to be of interest – State Policies on Treatment Guidelines and Utilization Management: A National Inventory. Get it here. Kudos to  Dongchun Wang, Kathryn Mueller, and Randy Lea for what was undoubtedly a LOT of work.


The soft target that is work comp, part 2 – Solutions

Yesterday’s post covered why work comp is a soft target for “revenue maximizers” – particularly facilities. Today we’ll talk solutions.

First, on a macro level, states need to develop and use fee schedules based on Medicare. For inpatient that’s MS-DRGs – and there should be no outlier provisions. A number of states do just that, and their facility costs are pretty much under control. WCRI has an excellent compendium of state fee schedules etc here.

Here’s one chart that shows how effective flat-rate fee schedules are at controlling costs (credit to WCRI’s Olesya Fomenko and Rui Yang)

there’s a lot more to this – see

Second, on a pre-claim level, payers should analyze hospitals’ and health systems’ actual paid amounts to determine what their costs are. Not the discount, the net cost.

Researchers will most likely find net costs are lower for not-for-profit healthcare systems/hospitals, regardless of the discount level. That’s because many for-profits have really high chargemaster prices that they then “discount” so payers can show a lot of “savings.”

Then, wherever and whenever possible direct patients to those lower cost facilities that have equal or better outcomes.

Third, the services have been rendered and a bill for a gazillion dollars appears.

Briefly, unlike group health and Medicare/Medicaid, many work comp payers don’t do much more than apply fee schedules, rules, some clinical edits and check for UR compliance, and perhaps do pre-payment audits. In the Medicare/medicaid/group health world there are both pre- and post-payment approaches, generally known as “payment integrity.”

Going beyond bill review, there’s Payment Integrity solutions.  Here’s where I need to turn it over to Anthony Pelezo MD of Equian, an expert in payment integrity solutions (and an HSA consulting client). I asked him how work comp is different from other payers.

Dr Pelezo: [a] key difference between group health (commercial), Medicare and Medicaid versus Worker’s Compensation involves the number of layers of payment integrity, the type of integrity, and the way those layers are implemented. In group health programs we have the core processing platform plus the implementation of at least one if not two large-scale industry editing software packages, and in some cases additional pre-payment fraud, waste and abuse software.

…there may be three or four payment integrity companies scrubbing the same bill set after payment has been made, each finding something that the prior vendor did not detect. In total you may have six or seven layers of protection in place. These key observations served as the impetus for Equian’s formation of a seamless second pass editing solution targeted specifically to Worker’s Compensation programs, one that would impact bill processing in all States. Remember, these are industry leaders in payment integrity – and this speaks to how difficult it is for any single entity or organization to detect ‘all’ improper payments, and frankly how much overpayment is present in any given environment.

I asked Dr Pelezo what payment integrity is and how it is different from bill review:

Dr Pelezo: In its simplest form payment integrity is payment to the right party, for the right medical products and services, in the right amount. In different forms every healthcare payer in the industry deploys various degrees of payment integrity – a worker’s compensation bill review engine in and of itself is a form of payment integrity.

Dr Pelezo: many worker’s compensation carriers are dependent upon bill processing systems and limited internal resources to manage the entire spectrum of payment integrity…the expertise, tools, and funding required to implement effective programs for all aspects of payment integrity is a daunting task (and a daunting ask). Even one ‘simple’ aspect of payment integrity (nothing here is simple) – bill auditing – can be subdivided into professional, outpatient, inpatient, pharmacy, durable medical equipment and supplies, etc. Securing true expertise in each of these individual areas can be difficult. Compound that issue with an ever-changing landscape of payment policies and methodologies and it is easy to see why managing payments is challenging for even the largest healthcare organizations. In bill auditing alone, one has to tackle validating/aligning new State requirements with bill processing outputs, CPT code updates, AMA CPT Assistant code clarifications, evolving specialty society guidance, National Correct Coding Initiative policy updates, hundreds of pages of CMS final rulings that impact CMS-based payment methods, medical policy updates, bulletins and banners, and all other information and reference material that impact how payment should be made.

What are some of the issues you’ve seen with outpatient services?

Dr Pelezo: I continue to see an expansion in billed amounts for outpatient surgical services, especially in those States that pay for services based on ‘usual and customary’ or percent of charge methods. Programs that participate in Medicare should not bill other payers differently than Medicare is billed for the same set of services, from a pure compliance perspective. I’m not convinced this is always the case, however, and I have encountered these variations in Worker’s Compensation data. I’m disappointed when I encounter an ambulatory surgical center bill for hundreds of thousands of dollars for surgeries that last a couple of hours; surgeries that under other programs – lock, stock, and barrel – are only reimbursed a very small fraction of the reimbursement received under Worker’s Compensation. [emphasis added]

What does this mean for you?

One of the fun things about working in this business is finding people like Dr Pelezo whose depth of knowledge and level of expertise reminds me that there’s always a lot more to know – and a lot more we can do.


Work comp – a soft target for “revenue maximizers”

Last week we dove into the fastest growing medical cost driver in work comp – facility costs. (I’ve dug into this many times over the last fifteen years.)

A key question – Why?

The simple answer is from Willie Sutton; when asked why he robbed banks, he said “because that’s where the money is.”

notorious bank robber Willie Sutton

While it is indeed true that facility bills are orders of magnitude more expensive than most comp services, there’s a lot more to this. I asked Dr Anthony Pelezo of Equian to expand on Mr Sutton’s meme.

Dr Pelezo runs Equian’s Payment Integrity operation. A physician by training, Dr Pelezo’s depth of knowledge of all things coding, billing, reimbursement, and facility revenue cycle management coupled with his clinical background brings a level of practical expertise I’ve not seen anywhere else. (I consult with Equian’s Clinical and Coding Logic operation).

Here’s part of my conversation with Dr Pelezo about the soft target that is workers’ comp.

Briefly, “following the path of least resistance is a common theme for many things, and healthcare payment is no exception. As a simple matter of physics (Newton’s third law of motion), every action has an equal and opposite reaction. Market pricing pressures from both government programs and group health programs places pressure of other available revenue sources (such as Worker’s Compensation). 

From a purely financial perspective Worker’s Compensation is generally off the radar of many of the larger payment integrity companies. Overall Worker’s Compensation may represent 1% of the $3-4 trillion in U.S. healthcare payments…we add to this fact that Worker’s Compensation payment programs are unique State to State (like Medicaid)…[and] Programs like Medicare and Medicaid make up around 60% of the nation’s healthcare spend. Group health plans make up another third of healthcare payments. The result has been that many worker’s compensation carriers are dependent upon bill processing systems and limited internal resources to manage the entire spectrum of payment integrity. Worker’s Compensation payment has certainly not fallen off the radar of the provider community.

Dr Pelezo elaborated on work-comp specific issues:

Policy foundations (or lack thereof) are also an issue inside of Worker’s Compensation…Payment, administrative, and medical policies are all part of this equation. Some States have more comprehensive policies than others, though almost all lack any meaningful library of medical policy. In group health programs there are hundreds if not thousands of medical and administrative/payment policies in play; medical policy sets alone can number near 1,000 in some group health programs. Only a handful of States’ Worker’s Compensation programs have true fraud, waste and abuse legislation; insurance fraud is addressed, though healthcare billing fraud is rarely addressed. We also have the issue of State-specific code use, which contradicts the standard transaction code set adopted in 2003 as part of HIPAA; a lack of a standard transaction code set creates opportunity for confusion and errors within billing practices.

The net – most payment integrity firms focus on the big payers – group health Medicare and Medicaid because workers’ comp medical spend is tiny in comparison. Add to that the inter-state variation in policies, coding, reimbursement regulations and the lack of consistent payment policies along with providers’ ever-more-sophisticated billing techniques and the problem becomes apparent.

Tomorrow – solving revenue maximization. Also known as how to get Willie Sutton to look elsewhere.


WCRI’s John Ruser on why you need to come to Phoenix

I caught up with WCRI CEO John Ruser PhD last week to find out why the WCRI Conference is in Phoenix, what we’ll learn, and why this event sells out every year. (register here)

  • Why move this to Phoenix?

Traditionally, our conference has been held in the Boston/Cambridge area (east coast). This year we want to make it easier for our members and others interested in our research who live on the west coast to attend. We know traveling can be expensive in time and money, so we sought to lower the threshold for those on the west coast to join us. Although we will be back in Boston next year, we will review the success of having this year’s conference in a different location and, based on that review, consider moving it around to other cities.

(Paduda comment – and Phoenix is a lot sunnier than Boston in March…)

  • What is the hot topic this year?

Coordinated services – getting employers, providers, patients to work together. We have two sessions on this.

The first features Prof. Tom Wickizer, with the Ohio State University College of Public Health, who helped create a pilot of these coordinated services in Washington state. He will talk about how this program came to fruition and the challenges and successes they had.

Joining him is Jennifer Sheehy with the U.S. Department of Labor’s Office of Disability Employment Policy. She will talk about the considerable investment the federal government is making to stimulate this approach in eight states. She’ll explain to us the motivation behind this move as well as give us a status update.

The second session features Dr. Cameron Mustard, president and chief scientist at the Institute for Work & Health, who will discuss the challenges and successes a large acute-care hospital system and it’s three unions faced in developing an innovative and collaborative return-to-work program.

  • How did Coordinated Services become the lead topic this year?

Whether it is in the political realm, the boardroom, or the workplace, when people fail to work together, it is difficult to innovate and address complex challenges. The workers’ compensation environment is no different.

At this year’s conference, we are featuring some of WCRI’s latest research, as well as engaging sessions on the latest trends and examples of industry stakeholders coming together to tackle some of the system’s most important challenges, such as opioid misuse, return to work, and providing the worker the highest standard of care.

It fits into a broader focus of many stakeholders in workers’ compensation who see the benefits of collaboration and working together to improve injured worker outcomes.

  • On the topic of erosion of benefits, my guess is the lower frequency rate is a factor.  Is this a correct assumption? And have worker indemnity benefits on a per-claim basis actually eroded?

Yes, correct assumption. I will present National Academy of Social Insurance data to show that workers’ compensation benefits as a percent of covered wages are at their lowest level since 1980 and that this share has been declining for over a quarter century. Some say that’s an erosion of benefits, but there’s much more to it.

In my presentation, I will highlight contributors to this trend, emphasizing the ubiquitous declines in injury rates and workers’ compensation claim rates that are partially offset by increases in injury and claim severity. I will also identify factors responsible for these offsetting trends, including improvements in safety, changes in the mix of jobs and compensability rules, the aging workforce and economic conditions. 

  • What other sessions should we know about?

I am very excited about our keynote speaker, Princeton University Professor Alan Krueger, who is considered one of the 50 highest-ranked economists in the world.

He will be giving a presentation on the economics of the opioid epidemic and how it affected the labor force participation rate. Then he will sit down with me to discuss his research and thoughts about the future of work and the impact of technology on the economy.

I will also ask him about his experience working in Washington, D.C. as the former chair of the White House Council of Economic Advisers (CEA).

  • What will those attending the conference come away with?

Apart from networking with experts and other high-level workers’ compensation professionals, we want our attendees to walk away from the conference having learned valuable things they didn’t already know.

This conference sells out every year – so get your registration in soon here.


Friday catch-up

It’s been a crazy busy week – here’s the notable stuff you may have missed.

Pharma and Transparency

There’s a good bit to unpack here – the two big things you need to know are:

Chart and research credit IQVIA,

Rebates reduce what payers’ and PBMs’ pay for expensive branded drugs; the problem is patients that need those drugs don’t get the benefit of this cost reduction. While PBMs and payers argue that they use rebates to reduce the total cost of the pharmacy benefit, reality is the folks who need a lot of expensive branded drugs end up subsidizing everyone else’s pharmacy benefits.

There’s an excellent explanation of this by Adam Fein PhD here.

For workers’ comp folks, the impact of these potential changes to rebates will depend on your contract terms with your PBM.

Thanks to Steve Feinberg MD for alerting me to an NPR piece on the big growth in prescribing of benzodiazepines by primary care providers. It appears these drugs, usually prescribed for anxiety, insomnia and seizures, are being used by patients with back and other chronic pain. More troubling, the long-term use of these potentially-addictive substances is on the upswing.

Managing disability is the focus of a terrific new publication from Mathematica; included are some particularly useful articles about data mining to identify claims that may be good candidates for early intervention.

The soft target that is workers’ comp

Yesterday’s post on facility costs elicited several emails from hospital and health system folks asserting their billing practices and discount arrangements result in lower costs for workers’ comp payers. None provided any data supporting those assertions; hopefully that is forthcoming.

Next week I’ll be publishing an interview with Equian’s Anthony Pelezo MD; it is a deep dive into the world of hospital “revenue maximization” and what you can do about it. (Equian is an HSA consulting client)


Facility costs are the problem. Here’s why.

Costs for hospital-based care – driven by large price increases – are increasing faster than any other medical service.

This from HealthAffairs:

in the period 2007–14 hospital prices grew substantially faster than physician prices. For inpatient care, hospital prices grew 42 percent, while physician prices grew 18 percent. Similarly, for hospital-based outpatient care, hospital prices grew 25 percent, while physician prices grew 6 percent. [emphasis added]

While there are any number of public policy changes that could address the problem, group health and workers’ comp payers can’t wait for legislative or regulatory action – they need solutions now.

First, we have to know why and where prices are increasing to come up with viable solutions. The study referenced above used case-mix adjusted data from 3 large health insurers – Aetna, Humana, and UnitedHealthcare, using the actual prices negotiated by these giant healthplans. (these plans cover over a quarter of all Americans with employer-sponsored health insurance.) I won’t get into the nits of the research – for wonks, it’s all in the link (subscription required).

Hospitals and health systems are able to raise prices because – in many areas – they have close to monopolistic pricing power. That is, even giant health insurers aren’t able to negotiate low prices because health systems have dominant market share.

If giant healthplans don’t have much bargaining power, workers’ comp networks and payers have next to none. Remember, the total amount of medical spend from all payers in the US is about 1.25 percent of total US medical spend. From another HealthAffairs article:

other insurers [defined as auto and work comp] typically lack sufficient patient volume to establish network contracts with hospitals because they usually insure only a small proportion of a hospital’s patients.

The article is well worth purchasing, however it does have a possibly significant limitation; it uses Florida data – the Florida work comp fee schedule is easily and usually gamed by hospitals, so the research may not be applicable to other states. That said, here are the key takeaways:

  • For-profit hospitals charge significantly higher prices than not-for-profits
  • For-profit hospitals generate almost a quarter of their margin from “other payers” (that’s you, auto and work comp)
  • Hospitals affiliated with HCA had the highest price increases during the study period and the highest prices for “other payers”
The solid line shows prices that “other payers” including auto and workers’ comp – pay; the dotted lines are what HMOs and PPOs pay.
Graph credit HealthAffairs

So, what to do? There are two issues here – what facilities your claimants use, and how those facilities bill you.

  1. Review your PPO contracts to identify for-profit health systems
  2. Do a quick analysis to compare what you pay (NOT THE DISCOUNT, WHICH IS IRRELEVANT) different facilities for similar services
  3. Direct your patients to the lower-net-cost facilities.
  4. Or, skip the analysis and just direct patient to not-for-profit facilities.

Tomorrow, we’ll focus on cutting costs on individual bills.

What does this mean for you?

Work comp and auto is a very soft target for profit-maximizing providers – but you aren’t powerless.

Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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