Tag Archives: Medical Costs

Another Scheme to Delay the Inevitable, part 2

Last week, I reported on an effort to create payer-provider partnerships, and said that it was another scheme to delay the inevitable move towards a Medicare for All, single-payer system.

Thanks again to Dr. Don McCanne for this week’s article from Modern Healthcare, on yet again another delaying tactic. This time it is from Congress, and while it purports to be “bipartisan”, it really isn’t, because they are very partisan in Congress today; partisan to the health care industry’s profit-making off of sick people.

Without further ado, here is the article in full:

http://www.modernhealthcare.com/article/20170803/NEWS/170809957

IT IS HIGH TIME TO STOP WASTING TIME, WASTING ENERGY AND THE PATIENCE OF THE AMERICAN PEOPLE WITH “SOLUTIONS” THAT ONLY MAKE THINGS WORSE, NOT BETTER. IT IS TIME TO EXPAND MEDICARE TO EVERYONE, WITH NO BUY-IN, AND BE DONE WITH IT.

 

 

Now It’s Personal

Last week, some of my LinkedIn connections, as well as several other connections, learned of my recent hospitalization. The reason for this was not mentioned at the time, but I will tell you now.

Not having health insurance through an employer, and being denied renewal of a local county health care program, led to my going from Stage 4 to End Stage Kidney Disease.

The hospitalization last week was to place a catheter in me for peritoneal dialysis, and to repair an umbilical hernia.

My hospitalization was brought to light quite unexpectedly by my friend, Maria Todd. Maria’s sending best wishes for my speedy recovery and quick discharge from the hospital was much appreciated, and the warm words by others in response, and the thirty plus “likes” made me feel that people cared. For that. I am grateful.

But the events of the past month have brought home to me one very important point, given the current activity surrounding the so-called “repeal and replace” of the ACA, and the two Congressional bills that many consider doing more harm than good.

This nation needs Medicare for All.

There, I said it.

I know in the past, I have advocated single payer for others, but my illness has shown that anyone who loses health care for any amount of time, once they have reached adulthood, cannot go without health insurance.

This is what happens when men and women are removed prematurely from the workforce, for whatever reason, employer decides you are no longer wanted, economic downturn or just to eliminate positions that affect the bottom-line of the company, and are generally targeted to individuals in their 40’s, 50’s and early 60’s so that the company can save on health care costs for those employees, and so that younger workers can be hired to replace them.

This is not something new, and not related to automation and artificial intelligence disrupting whole industries, which is inevitable.

My initial view on single-payer was that if employers were no longer responsible for the health insurance of their employees, and they were guaranteed full coverage by the government, some of the job losses of the past decades would not have happened, and many talented men and women out of the workforce would be employed until their retirement.

If you don’t believe me, go to LinkedIn and read the many posts from such individuals who are still unemployed. One fellow in Texas even got turned down from jobs at fast food restaurants.

So, now it is personal for me.

I also know that many of you make your living from the health care system we currently have, and that some of you have expounded on why you think a single payer system is unrealistic.

I get it that your financial outlook depends on working in a broken, free-market system because it pays your salary, but healthcare was not supposed to be a business, nor was it supposed to marketed like any other commodity.

If you don’t believe me, read what Pope Francis said: “health is not a consumer good, but rather a universal right, and therefore access to health care services cannot be a privilege.”

But try telling that to Messrs. McConnell, Ryan, Paul, et al in Congress, and the current POTUS, all of whom want to eliminate medical coverage for millions of Americans they received under the ACA, cut back Medicare and Medicaid, and destroy Social Security.

Now that I will be receiving dialysis, and quite likely will qualify for disability, the prospect of not having those resources is very personal to me, and could literally mean my life.

Look in the mirror, then look at your spouse, your children, your parents, your neighbors, friends, etc. What do you think would happen to them if these programs were eliminated? Would you have enough money to care for them? Would you have money to pay for private insurance?

I lost my mother last month to dementia. She died on her 85th birthday in a nursing home some miles from my home (the home she and my father bought), but if the Republicans in Congress had gotten their way, and she had lived longer, I feared she would have been forced out of that nursing home, with no place to go, and would have been an even bigger burden to me.

So, I really don’t care if you are a Democrat, Republican, Independent, Libertarian, Socialist, Liberal, or Conservative, we all need health care at some point in our lives.

One of the friends I met here in Florida back in the 90’s died last July of a stroke. He was 73. He worked out, never smoked, had a good life, three kids, and like many of you, worked in Risk Management, as well as Human Resources, the legal profession, and served in Vietnam. But despite all that, he died prematurely, and went into involuntary retirement because he was in his 60’s. Luckily, his wife worked. But you get the picture.

We must all do our part to see that every American can get health care. Not just access to care, which is a Republican euphemism for being able to afford it, and if you can’t, too bad. But actual health insurance. Medicare for All.

Trumpcare and Medical Travel: What Will Happen

The following infographic shows what will happen to the US healthcare system when the Senate rams the ACHA down our throats, as many are indicating will occur because McConnell and a group of GOP Men are hiding behind closed doors and won’t even tell their own party what’s in the bill they are writing.

What this will mean for medical travel is not hard to figure out. For some, it will offer an opportunity to seek lower cost medical care due to premiums that will increase and costs rising as well.

This will be especially true for self-insured employers who will want to save money by offering this to their employees.

Here is the infographic:

fa97feb3-c0f5-4fdb-9c79-6cfe82add29e-original

A Deeper Dive into Medical Cost Rising for Lost-Time Claims

It is said, a picture is worth a thousand words, and I have ten pictures, courtesy of NCCI’s Barry Lipton’s presentation on that subject.

It was brought to my attention by my fellow blogger, James Moore, of J&L Risk Management Consultants. I met James back in February at the NCCI 2017 Data Education Program in West Palm Beach.

Mr. Lipton is the Senior Actuary and Practice Leader, and his presentation was called, “Medical Cost Trends Then and Now.

Yesterday’s posts regarding the slight increase in the average medical costs for lost-time claims only scratched the surface of the subject. I hope this post will dive deeper into it, so that we can see the whole picture.

In my first post from yesterday, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 1”, I discussed how physician costs and prescription drug costs impacted medical costs for lost-time claims.

On the issue of physician costs, Mr. Lipton showed that there was a decline in the 2015 medical payments per claim due to physician costs, but as the following chart proves, despite this decline, physician costs contribute a larger share of the total costs.

Chart 1.

Chart 6.

Source: NCCI Annual Issues Symposium 2017

According to James, the main reason for the reduction in costs is the physician utilization per claim. Even though it is only a3% reduction, it is significant, James says, in a time of upward spiraling medical costs. Chart 2 bears this out.

Chart 2.

Chart 7.

Source: NCCI Annual Issues Symposium 2017

The second part of my post yesterday, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 2”, looked at the steady rise of the average medical cost for lost-time claim.

If we compare the chart from yesterday’s post to the one Mr. Lipton presented, we will see that his chart does show increases and decreases over time in the average medical costs per lost-time claim, but my chart indicates that ever since 1995, it has been rising steady.

Both charts, do show that the average medical cost per lost-time claim is hovering around $30,000, and if the numbers are consistent with ones for earlier years, represents almost 60% of the total claims cost.

My Chart.

Chart 2.

Chart 3.

Chart 4.

Source: NCCI Annual Issues Symposium 2017

To examine this in greater detail, Mr. Lipton broke down the Accident Years into three separate periods and slides, to show the change in medical cost per lost-time claim. He compared the change in Personal Health Care (PHC) Spending per Capita with the Medical Cost per Lost-Time Claim.

In the period, 1995-2002, the average growth rate (AGR) for WC was 9%, and the AGR for PHC was 6%. In the next period, 2002-2009, WC AGR was 6%; PHC AGR was 5%, and finally, in the last period, 2009-2015, the WC AGR was 1%, while the PHC AGR was 3%, as seen in chart 4.

Chart 4.

Chart 10.

Source: NCCI Annual Issues Symposium 2017

To understand what was driving the decline in Accident Year 2015, Mr. Lipton identified six different drivers, as indicated in chart 5.

Chart 5.

Chart 8.

Source: NCCI Annual Issues Symposium 2017

Finally, Mr. Lipton discussed how hospital costs contributed to medical cost per lost-time claims by highlighting the difference between inpatient and outpatient costs, which are rising.

The following chart looks at the four years prior to the 2016 Accident Year, 2012-2015.

Chart 6.

Chart 9.

Source: NCCI Annual Issues Symposium 2017

In 2012, Hospital Inpatient Paid per Stay amounted to $19,514, in 2013, it rose to $22,944 (18% increase), in 2014, it was $24,558, or a 7% increase, and last, in 2015, it was $25,320, or 3% increase over the previous year.

As for Hospital Outpatient Paid per Visit, the number are considerably lower for each year when compared to Inpatient Stays, but nonetheless have been rising.

So perhaps this, at the end is why the average medical cost per lost-time claim has been rising over a period of over twenty years, from 1995 to 2015.

I wrote to James last night when I saw his recent posts on this presentation, and he responded that we are both correct in our analysis, but looking at it from different points of view.

My conclusion after reading this presentation and my discussion with James suggests to me that there are two things going on here. One, when a worker is injured and receives medical care, unless and until he or she goes to a hospital, the best way to lower costs is through what James calls one of his six keys to reducing workers’ comp costs. One of those keys is medical control by the employer, which James said reduced cost by 75%.

But I also realized that when an injured worker goes to the ER or an Ambulatory Service Center as an Outpatient, has an Inpatient stay, that this is where the medical costs go up.

Naturally, Workers’ Comp medical spending is only a fraction of the overall health care spend of the US, and as costs for health care in general rise, so too does costs in workers’ comp.

So, while many have argued or shown that they can lower costs on the front end, from time of injury to return to work for most claims where no surgery is required, one of the largest reasons for the steady rise in the average medical cost per lost-time claims is hospital costs.

On this, both James and I agree. However, it is important that many in the industry see this as well. Keep thinking that it will change by doing this or that has not worked, the numbers prove that. Maybe it is time for something out of the box.

Slight Increase in Average Medical Costs for Lost-Time Claims, Part 2

Ever since I began my MHA degree, I have analyzed the average medical cost severity for lost-time workers’ comp claims.

The average medical costs for lost-time claims have been rising steadily for the past two decades and only recently had a negative change.

The data for average medical lost-time claims severity comes from all jurisdictions where NCCI provides ratemaking services. The data is valued as of 12/31/2005, and accident year 2016 is preliminary as of 12/31/2016.

NCCI estimated that Accident Year 2016 was 5% higher than the corresponding 2015 value, as seen in Chart 2.

Chart 2.

Chart 2.

Source: NCCI’s Financial Call Data p Preliminary based on data valued as of 12/31/2016.

Comparing the above chart with last year’s chart, you will notice that there is a difference of 0.4% for 2015.

Looking at both charts, it is easy to see that the average medical cost for lost-time claims is still going up, and is now closer to $30,000. The trendline has been increasing since 1991.

I have been advocating every year that doing the same things repeatedly, and expecting different results is not only crazy, it is not lowering the average medical cost for lost-time claims.

It is also apparent that the enactment of the ACA has not done much to lower the average; in fact, just the opposite.

avg-med-cost-2016

NCCI went further in analyzing average medical cost by examining the cumulative change in the Medical Lost-Time Claim Severity from 1995 – 2016, as indicated in Chart 3.

Chart 3.

Chart 3.

Sources: NCCI’s Financial Call Data; Centers for Medicare & Medicaid Services p Preliminary based on data valued as of 12/31/2016.

The growth in the corresponding Personal Health Care Chain-Weighted Price Index (PHC), a proxy for medical care price inflation that responds to changes in the blend of different medical services over time, varied from 2.6% in 1995 to 1.3% in 2016p.

The takeaways here are:

  • In the latest year, medical lost-time claim severity increased by 5%, compared with a 1.3% growth in the PHC.
  • In 2015, medical lost-time claim severity decreased by 1.4%and the PHC presented its lowest increase in years (0.5%).

When the changes in medical lost-time claim severity is compared to the change in the growth of the PHC index over three time periods, any change over and above the change in PHC is considered a change in the utilization of medical services.

Key takeaways:

  • From 1995 to 2001, PHC increased by about 16% and utilization of medical services increased 56.6% for an overall combined increase in medial lost-time claim severity of 72%.
  • Compared with the prior period, 2002 to 2008 saw a similar rate of increase in the PHC, but utilization slowed
  • In the most recent period, the change in utilization is almost nonexistent.

The key takeaways for the five previous years, 2011 – 2015 are:

  • The majority of the observed changes are increases, indicating that the average medical benefit level across most states was higher in 2015 than in 2011.
  • Mississippi’s relative higher average medical severity change is primarily the result of larger losses.
  • Virginia is in the process of developing a medical fee schedule, which may put downward pressure on that jurisdiction’s average medical lost-time claim severity.

What does this mean for you?

This is the eighth Annual State of the Line report I have examined, and from all the data I have seen in this period, the average medical cost for lost-time claims has never shown a marked decrease with all the various methods employed to lower costs so many in the industry have touted.

And while there have been cases where costs have gone down for individual employers and states; overall, this is not the case. Perhaps it is due to medical cost inflation, or perhaps to the cost of health care generally, but either way it is not getting better.

Slight Increase in Average Medical Costs for Lost-Time Claims, Part 1

It’s that time of the year again, the time when I review the NCCI State of the Line Report.

As an added feature this year, I am including a look at the Medical Cost data, a new subject which I heard about back in February, when I attended NCCI’s 2017 Data Education Program.

First up is the distribution of medical costs by category. NCCI supports regulatory and legislative initiatives by providing State Medical Data Reports using data from their Medical Data Call.

For Service Year 2015, the distribution of payments across the various categories is based on data for all jurisdiction where NCCI provides ratemaking services, except Texas.

The key takeaway, as the following table will show, is that in 2015, physician costs were almost 40% (38%) of total medical costs, combined inpatient and outpatient hospital costs were approximately 30% (31%), and prescription drug costs were about 11%.

Table 1.

Table 1.

Source: NCCI’s State Medical Data Reports

Drilling down further, the distribution of physician costs for Service Year 2015, indicates that the bulk of the costs were associated with physical medicine, 30%, and surgery was associated with 24%, 10% associated with radiology, as shown in Table 2.

Table 2.

Table 2.

Source: NCI’s State Medical Data Reports

Getting even further, the next area the report covered was prescription drug payment changes over time.

The key takeaways here are the following:

  • In 2011, generic equivalents represented 47% of payments for all drugs prescribed. This increased to 58% by 2015, and driven largely by brand-name drugs.
  • Repackaged drugs now represent a small portion of overall drug payments because several states have implemented regulation on reimbursement.

Table 3.

Table 3.

Source: NCCI’s Medical Data Reports

NCCI analyzed the impact of prescription drug fee schedules on the cost of drugs by classifying states into one of four categories. States that had fee schedules were classified as Low, Medium, or High, based on the size of the Average Wholesale Price (AWP). The fourth category were states without a schedule.

The key takeaways here are:

  • Transitioning from not having a schedule to a low-fee schedule significantly reduces prices for WC prescriptions
  • Moving from no schedule to a high-fee schedule may increase drug costs, as shown in the following chart.

Chart 1.

Chart 1.

Source: NCCI’s Medical Data Reports

NCCI also looked at physician payments as a percentage of the Medicare reimbursement rate. In most states, they said, WC physician services are subject to fee schedules, just like the ones in group health and Medicare.

One way to measure physician costs across the states is to compare WC payments to the Medicare reimbursement rate.

The key takeaway from this is:

  • Prices paid relative to Medicare vary widely, from about 100% (Florida – 101%) to over 250%
  • Of the five jurisdictions with the largest percentage, all but Alaska (263%) are currently operating without a fee schedule
  • Countrywide the average is 150%

What does this mean for you?

While there are some positives in these numbers, especially with the cost savings from going to a low fee schedule for drugs, and an increase in the use of generic over brand-name drugs, and a decline in the percentage of repackaged drugs, medical costs are still very high for workers’ comp.

In the next post, I will look at the medical lost-time claim severity.