Insight, analysis & opinion from Joe Paduda


HWR’s up and ready

Thanks to Lisa Lines of The Medical Care Blog, the best of the health policy blog-o-sphere is ready for your reading.

Medicare’s hospital readmission program, pharma-sponsored dark money going to political campaigns, and the major technology-driven progress that’s beginning to drive big improvements are all worth your study.

Thanks Lisa!



Some ill-informed but perhaps well-intentioned people opine that all we need to do to solve the healthcare cost problem is unleash the free market.

Their thinking seems to be that creative approaches and Adam Smith’s “invisible hand” will conquer the cost:quality:access conundrum.

That is wrong for several reasons.

First, no for-profit insurance company wants to “insure” a person with cancer, depression, heart disease, asthma. Nor do they want to keep insuring someone who gets sick.

That would be irrational and stupid, a bad business decision indeed.

Second, there has been ample time and much experimentation with various types of “free market” solutions – yet here we are. Family insurance premiums are close to $20,000 and come with sky-high deductibles, medical trend continues to climb, and big insurers are not jumping into markets.

The free marketers will argue that allowing people to buy skinny healthplans like those pushed by the Trump Administration that don’t cover stuff like drugs or pregnancy is the solution, that this keeps insurance costs down by eliminating coverage that’s “not needed”.

Funny thing about health insurance – no one can predict when they’ll find out they have Hepatitis C, have a motorcycle accident, or have an aneurism.

There’s another problem with the skinny plan idea – insurance requires the many subsidize the few. If healthy people aren’t in the regular insurance pool, costs for sick folks will go up a lot – and inevitably lead to insurance market death spirals where only the wealthiest people can afford insurance.

To be fair, free marketers will assert that this is exactly the problem – a big part of healthcare costs (e.g. maintenance drugs, child health, care for chronic conditions) shouldn’t be insured as they are not a classic “insurable risk”; somewhat unpredictable and random. That’s true. But it begs the question – most Americans can’t afford to pay for needed medical care without support from an insurer or third party.

Which leads us to the real problem – healthcare in this country is very much a profit driven business, and the companies and individuals making gazillions on healthcare are going to fight to the death to keep it that way.

As evidence, see California’s attempt to limit the profits of the dialysis industry. The big dialysis companies spent $111 million dollars to prevent this – which makes perfect sense. However, one needs to understand that almost all dialysis treatment is paid for by you, the taxpayer. And a big chunk of Californians’ tax dollars going to fatten up corporate profits – 3 billion dollars to be precise.

It’s not just dialysis.

Investment firms are buying up dermatology practices, and, according to some reports, encouraging providers to order lots of expensive and potentially unnecessary treatments.

I’m not blaming private equity firms – they are doing what they are supposed to do, generate big returns for their investors. (to be fair, I know several PE firms that are NOT like this – they believe in doing well by doing good.)

And they are very, very good at it.

Finally, Invisible Hand fans will argue that dialysis is the issue – if we get government out of the mix, then the consumer will force down the price.


What does this mean for you?

Can you afford dialysis? Is it right for those who can’t afford it to die? Because that’s what the invisible hand would do – push many of us right into a long and painful death.

Note – friend and colleague Tom Lynch must’ve been thinking the same thoughts I have been, as his post is a data-rich, elegant and thoughtful discussion of single payer, and government’s role in healthcare. 



Tuesday catch-up

It’s been a very very busy time.

First, I’m pretty darn excited to note my alma mater’s football team goes into it’s match with Notre Dame ranked 12th in the nation. As a long-suffering Syracuse alum, this is territory we haven’t seen in decades.

Perhaps we’ll see Chris LeStage’s LSU Tigers in a Bowl Game???

OK, on to work.

The National Work Comp and Disability Conference is fast approaching. You can get a discounted registration here.

A bit further out on the schedule is WCRI’s annual confab – which will be in Phoenix AZ next February 28 – March 1.  You can get the details here. DO NOT WAIT to register; this always fills up so don’t procrastinate.

Next, a best-in-class work comp safety program is the product of a “great team” led by a very experienced and very competent leader. Joe Molloy at Northwell Health is innovative, focused on the right things, and committed to partnering with service suppliers. Joe’s team has reduced lost work days at a giant healthcare system by a third.

More proof of the ongoing effort by health insurers to move the US to single payer…this insidious plan is bearing fruit as we just received new evidence of its effectiveness – Americans don’t like their health insurance.

According to a national survey by ACSI, consumers rank their satisfaction with health insurance as equal to airlines. “Health insurance satisfaction is flat after two years of gains, staying lowest in the Finance/Insurance sector” Ouch.

I find it increasingly likely we’ll have some form of single payer, perhaps Medicaid for all – within a decade.  Health insurers continue to piss off customers on a regular basis, can’t control health care cost increases, and are lousy at branding.

They do have gazillions of dollars which they will spend to kill MFA or any other version of single payer – and they are pretty darn good at the government lobbying thing.

That said, when things can no longer continue, they won’t.

What does this mean for you?

It’s not a question of “if” we end up with single payer, it’s a question of when.


Work comp claim counts – part 4

Two important data points hit the news this week, both worthy of your attention.

First, BLS data indicates private industry employers reported 47,000 fewer occupational injuries and illnesses in 2017 compared to the previous year, a decrease of about 1.7 percent.

The rate, or frequency of total reportable cases declined by 0.1 cases per 100 FTE. As we’ve reported in the past, BLS data does not precisely mirror work comp claims – but it’s very close.

(Note this does NOT include public sector employer data)

So, occupational injuries and illnesses, along with work comp claims frequency, both dropped last year.

Next, insurer CNA CEO Dino Robusto said this in CNA’s earnings call:

we’ve been seeing negative sort of mid single-digit frequency trends over the past several quarters, which is less negative than a year ago. Now, while we’ve seen some pockets, where frequency has increased, the negative frequency trend overall is still favorable to our long run trend assumptions, because we did not lower our long run frequency assumptions despite the actual frequency consistently more negative than our assumption. [emphasis added]

(thanks to SeekingAlpha for the transcript)

Recall the Hartford has seen an uptick in claims frequency of late, one their CEO opined is not unique to his company.

I checked on other major workers’ comp insurers, including the Travelers, and  AIG and did not find anything useful pertaining to frequency or claim counts.

So, what does this mean for you?

Watch your claim frequency carefully, especially in geographic areas and business sectors where hiring is very tough. It could be you’ll see an uptick in claims, due probably to compromises in hiring due to the tight labor market.


And the big winner of the 2018 midterms is…Medicaid.

Three deep red states voted to expand Medicaid, and a fourth voted in a Governor who will comply with her state’s 2017 referendum results and do the  same.

Four states; Montana, Utah, Nebraska, and Idaho, all consistently Republican – had Medicaid expansion on the ballot. Montana’s results are not yet final, but the measure passed in the other three states. [Montana had temporarily expanded Medicaid about two years ago; the vote was to decide whether or not to make expansion permanent.]

53 percent of Nebraskans voting checked the “expansion” box, despite strident requests from Gov Pete Ricketts (R) to vote NO. Utah passed the referendum by about the same margin, while Idahoans were even more supportive, with 62 percent voting in favor.

Departing Maine Gov Paul LePage refused to expand Medicaid even after more than 60 percent of voters demanded just that in a referendum last year. Gov. Elect Janet Mills has promised to begin expansion on day one of her term in office.

Montana might be a different story. Early returns indicate a $20 million anti-Medicaid campaign backed by the tobacco industry may have been effective. The measure would have increased the price on a host of tobacco products by $2 to cover the state’s costs.

Notably, hospital groups in each state were strong supporters of each initiative, as they have been in pretty much every state since the ACA was passed. I’d expect to see more states expanding Medicaid in the future in a replay of the original Medicaid roll-out from the mid-nineteen sixties.

With the rollout, rural hospitals and those with higher proportions of poorer patients are getting a financial lifeline, one that they sorely need.

What does this mean for you?

Medicaid expansion is inevitable, and that is good news for hospitals and decreases pressure to cost-shift to other payers.


What this election means to you.

This election is about your health and your family’s, because:

“Virtually every American has someone with an existing health condition in their family at any given time” 

Dan Mendelson, CEO, Avalere

(Note to readers – this isn’t a “liberal” or Democratic post, it is a factual description of reality. If you disagree, please provide citations to support assertions)

Today, you are protected because under current law (the ACA, aka “Obamacare”)  insurance companies can’t refuse to provide coverage or charge you more if you have a medical condition.  

Those protections will go away if Republicans have their way. 

According to Avalere,

Over 50% of Americans enrolled in coverage outside of the major public programs could face medical underwriting or be denied access to coverage or care without the protections for people with pre-existing conditions contained in the ACA.

Here’s why.

  1. Last year Republicans came within one vote of repealing the ACA – with NO replacement plan in place.
  2. Senate leader Mitch McConnell has said he will try to repeal ACA next year.
  3. House Republicans voted over 54 times to repeal ACA – with NO replacement plan in place.
  4. The “short-term” and “association” healthplans proposed by Republicans let insurance companies charge you anything they want if you or a family member have a pre-existing condition.
  5. These short-term and association healthplans can pick and choose what healthcare services they cover – they don’t have to cover drugs, pregnancy, or emergency room care, or anything else they bury in the fine print.
  6. Republicans are backing a lawsuit that would overturn the ACA in its entirety – and many of the Republicans behind the suit are running for Congress.

If you or someone in your family has had:

  • heart disease, high cholesterol, or high blood pressure
  • anxiety or depression or any other mental health condition
  • obesity
  • diabetes
  • cancer
  • or is pregnant,

your healthcare is at risk.

I have no problem whatsoever with principled Republicans – or anyone else – wanting to overturn the ACA. I have a big problem with anyone who’s lying about what they are doing.


Fact is the GOP has tried over 50 times to let insurance companies refuse to cover your pre-existing conditions, they are pushing a suit that would do the same thing, their bills in Congress will let insurance companies charge you anything they want, yet they are claiming they will protect you.

That’s just a lie.

What does this mean for you?

Do you want insurance to cover your pre-existing medical conditions? 


Workers’ comp claims, OSHA reportables, and why both are dropping

Well, some posts get a life of their own, and so it is with this discussion of claims frequency and claims counts. After much discussion with colleagues and several back-and-forth emails with WCRI CEO John Ruser PhD about the correlation of OSHA recordable data and work comp claims and why both are declining, I decided the best way to get this to you, dear reader, is via an interview. So, read on.

MCM – I believe that you were responsible for the BLS OSHA-recordable injury data for years. What are a couple key points readers should know about the OSHA-recordable reports?

Dr Ruser – Yes, I was BLS Assistant Commissioner for Occupational Safety and Health Statistics for over 5 years and was a researcher of the BLS OSHA data for many years before that.

While there has been some controversy about the completeness of reporting in the OSHA recordkeeping system (see below), the BLS OSHA-recordable injury rate data are extremely valuable for several reasons.  They are very detailed by State, by industry, by establishment size and by worker characteristics, so that are an important benchmarking tool for risk managers and others seeking to compare their company’s injury rates against their peers.  From the perspective of focusing injury risk reduction efforts, they are important in identifying those groups of workers at higher risk of injury and they are used by OSHA to identify high-risk industries for inspections.  And, with their long relatively-consistent time series and detail, they are a valuable tool for researchers seeking to understand factors that contribute to workplace injuries.

MCM – Where does BLS get the data for the OSHA-recordable reports?

Dr Ruser – BLS’s estimates of OSHA-recordable injuries are based on a very large annual survey of about a quarter-million establishments (that is, specific locations of a company or organization) called the Survey of Occupational Injuries and Illnesses (SOII).  The SOII contains employer-reported data drawn from the OSHA logs that establishments keep throughout the year.  SOII covers non-fatal occupational injuries and those illnesses that can be directly linked to a workplace.  A separate BLS program, the Census of Fatal Occupational Injuries, uses multiple data sources, such as death certificates, OSHA reports and many other sources, to track workplace deaths due to injury.

MCM – there’s been questions about the decline in reportables over the years. Can you comment on these questions?

Dr Ruser – Some skeptics of the declines in the BLS OSHA-recordable injury rates attribute these declines to changes in OSHA-recordkeeping rules and practices or tightening in WC compensability rules, meaning the declines in injury rates are at least in part an artifact of reporting.  External research supported by BLS and other non-BLS-supported research does suggest that the number of injuries captured in SOII undercounts the true number of OSHA-recordable injuries.  (BLS has a very complete webpage on SOII data quality research that you can access here:

But, while the numbers (levels) of injuries and claims may be undercounted, the issue for the observed declines (trends) in injuries (and WC claims) is whether underreporting has grown.  There is little direct research on this.  A study by Washington State comparing SOII data to WC claims found that during the first five years of the study period (2002 – 2006), underreporting decreased, while it increased from 2007 to 2011.  Importantly, the Washington State researchers concluded that the total estimated actual number of SOII-eligible WC time loss injuries decreased over the ten year span, meaning there were real declines in injuries (and some underreporting too).

The Washington State study was excellent, but it focused on one state and a relatively short time span, which included a great recession during the second half of the study period when underreporting was identified.   Another approach to validating the time trends is to compare to other data that should not be susceptible to the concerns raised about reporting.

MCM – what analyses did you do to explore that issue?

Dr Ruser – I compared the SOII data with data from other sources.  First, I looked at how the US injury rate for 3 or more days away from work tracks with the NCCI indemnity claiming rate.  The declines in these two data series track extremely closely.  So, while the OSHA recordkeeping system is technically independent of workers’ compensation, the BLS injury data and the NCCI claims data are telling the same story and the BLS data can be used to try to identify factors associated with the decline in the NCCI WC claiming rate.

Regarding whether the BLS injury rate decline is real, I created an index of the OSHA-recordable case rate for cases with 3 or more days away from work and lined it up with a similar index for 15 EU countries for injuries with 4 or more days away from work (the series most comparable to the US data).  The chart that is attached shows how similar the trends are in the US and in the EU.  The index was set to 100 for injury rate values in 1998 and the other values in the chart are injury rates relative to 1998.  As of 2014, the US injury rate was 54 percent of its value in 1998, while the EU injury rate in 2014 was 49 percent of its value in 1998.

MCM – what does this mean (for our readers)?:

Dr Ruser- The remarkably similar trends in the US and EU data suggest that we need to look beyond US-specific explanations (such as OSHA-recordkeeping rules or WC compensability rules) to understand what is responsible for the long-run aggregate declines in injury rates and WC claims rates.  While there may be some changes in reporting at least over part of the past quarter century, the good news, I believe, is that there has been a remarkable improvement in safety and this improvement is seen in most industries and in many developed countries.


Workers’ comp claim frequency – part 2

Two messages from colleagues about yesterday’s claim frequency post add important nuance and depth to the issue.

First, thanks to WCRI CEO John Ruser PhD for his note with more current information on recordable data.

These data are critical as they are the only source I know of that records the actual injury numbers, or counts of occupational injuries and illnesses. Almost all other sources document percentages based on premium dollars or FTEs. While those are useful, service providers really want to know the actual number.

Ruser [emphasis added]

BLS has data through 2016 on its website (the chart book is easiest to digest and can be found here:  The data show continued decline in OSHA-recordable rates through 2016, particularly among “other recordable cases.”  BLS will release updated non-fatal injury data through 2017 on November 8.

I agree with you that credible research on why rates are declining is lacking.  There simply aren’t good data to tease out the possible factors.  Interestingly, shifts in hours worked away from high hazard industries does not explain the long decline in rates.  The vast majority of industries are experiencing declines.  I documented this in a paper I wrote for the American Journal of Industrial Medicine. 

I’d emphasize John’s comment on high hazard industries. I’ve opined that fewer injuries in heavy manufacturing and construction were a likely contributor to the reductions in trend; thanks to John for correcting my error.

Next, from a former state workers’ comp director. [emphasis added]

as I look at chart provided in your blog today it took me back to the early days after the reform of XXXX. As can clearly be seen in the chart starting in 1992 the trend started down and has continued ever since.  A lot of risk managers and safety staff took a lot of credit for those numbers as proof that they were doing a good job. I remember at the time thinking boy this looks really good but surely there is another explanation other than the [legislated] reform and all that we were doing in safety and I was right. Even after the… emphasis on safety [was reduced]…the number continued to go down. As I look back I was just in the right place at the right time.  But when good things happen that can not be explained we tend to take credit for them

This expert’s view is well worth repeating, perhaps best said by Tacitus:

victory is claimed by all, failure to one alone

What does this mean for you?

Claim counts are dropping – and will continue to do so. There is little “white space”, so growth for claims service companies will come from taking business from competitors.


Workers’ comp claim counts are down…right?

A recently-released analysis of workers’ comp claim frequency tells us what we’ve known for years – the percentage of workers that gets hurt on the job has been and continues to drop.

Yet one major insurer indicates there are warning signs that frequency may be ticking back up, albeit in a tightly defined sector of the economy. More on that below.

There are many theories about why frequency has declined for decades – more automation, more emphasis on safety programs and loss control, less heavy industry here in the US, low investment in infrastructure leading to fewer jobs doing heavy construction. Many theories, but I have yet to see any credible research into exactly why frequency is declining.

This is one of those data points that is enormously important, yet it doesn’t get enough attention. So, here’s the skinny.

Claim frequency is a percentage  – the number of injuries compared to premium dollars or FTE workers. Therefore the number of work comp claims is driven by the denominator; if premium or employment goes up, that can offset a decline in the percentage of claims.

But employment is about maxed out, so any changes in the percentage of claims will closely mirror the actual number of claims.

Another way to track the number of claims is to compare it to Federal data on the actual number of occupational injuries and illnesses. The graph below shows that the actual number of claims per 100 workers…

You’ve already figured out that the graph ends in 2013…so what about the intervening years?  Fortunately NCCI provides ongoing research into just that here.  When you dig deeper, we learn that total frequency dropped almost one-fifth from 2011 to 2016, led by office and clerical job classes.

As we learned at AIS in May, NCCI estimated frequency declined another 6 percent in 2017; the average decline over the last two decades has been 3.7 percent.


Last week the Hartford announced it is seeing early indications of an uptick in claims volume. Chairman and CEO Chris Swift said [emphasis added]:

“workers’ compensation 2018 frequency trends are elevated from expectation…

our frequency in small commercial and middle market has turned positive this year. Based on our business and economic analysis, we view this trend as broader than just our book of business.

Many businesses are struggling to find qualified employees and beginning to add more new workers to their payroll, generally increasing the risk of workplace injury versus what it would have been say a year or two ago.

Additionally, the tightening labor market produces more hours work for employee often resulting in fatigue and less training time compounding the risk of injury for the less experience workers.

Our uptick in frequency change has been moderate turning positive on a rolling 12-month basis. The actual frequency levels are now comparable to what we experienced in 2016 which is a very manageable shift in a book of business as large as ours.

The frequency increase is more pronounced among less tenured employees and it can be several times that of experienced workers.”

Notably, the Hartford attributed a 3.5% increase in Accident year combined ratio for its middle market business to this increase in frequency.

Couple of key points about this.

  1.  The Hartford is the largest national seller of work com policies to small employers, and thus has the broadest lens.
  2. As a major writer, it also has lots of dollars to invest in business analytics – so it knows more faster than many insurers do. This from Hartford President Dough Elliott:

we have now installed a new claim platform over our 5,000 desk throughout claim. And the ability to access what I’ll call structured data and to slice and dice and be on top of it and to look at your metrics and watch your trends is much advanced from where we were five years ago. And so we have monthly and weekly discussions but we’re sitting on top of trends that candidly five years ago were very manual in nature to try to get our arms around and they were slower than we’d like to them to be.

What does this mean for you?

  • This is not unexpected; we are close to max employment; small employers are desperate for workers and don’t have the time/expertise/resources to screen/train/protect those workers.
  • Time to look at your data – closely.
  • And likely time to dust off those underwriting, safety, and loss prevention manuals.



Tulips, winter, and value – the world of work comp services investments

Over the last decade I’ve worked with over 30 investment firms on perhaps 60 deals.  One question I almost always get is:

Would you buy this company?

And a related question:

What would you pay for this company?

For years I tried to answer those questions, factoring in the company’s service reputation; the uniqueness of it’s services and/or business model; experience of management; value delivered to it’s customers; and a bunch of other stuff.

I finally realized those criteria often had little to do with the “value” defined by most investment firms. And much more to do with Dutch Tulips.

To most private equity firms, “value” is what can they sell the company for in a few years. One would think the selling price would be driven in large part by those other criteria; in many cases, one would be wrong.

Recent valuations of some work comp service companies are – in my view – completely disconnected from the actual value inherent in these companies – actual value defined as the value they bring to their customers and the potential for those companies to grow and prosper.

In fact, what seems more important than actual value is the ability of the seller to craft a story about how the company is going to grow, it’s unique business model, it’s scalability and potential to be a platform to which other acquisitions can be added. This is typically future-forecasting, theoretical stuff based on assumptions thin enough to blow away in the slightest of headwinds.

But more often than not, enough potential investors buy into the story to create a bit of a feeding frenzy, until one agrees to pay way more than that company’s actual value.

I’m far from an investment expert – one look at my personal portfolio will prove that – and in no way am I saying the brilliant folks at private equity firms don’t know what they are doing.  Far from it – these people are doing exactly what they are supposed to do – make gobs of money for their investors.

What I am saying is these firms are rewarded when they sell the companies they bought for a lot more than they paid. That works out really well – if they can find someone to buy it at a hefty markup. At some point the next owner – or the one after that – finds out that the actual value of that company is far less than they thought.

It’s also known as the Greater Fool Theory, or the Dutch Tulip problem. You know the asset isn’t worth what you’re paying, but you’re sure you can find someone else who will pay more than you did.

What does this mean for you?

Beware of tulips. They flourish until winter comes. And winter ALWAYS comes.

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.



© Joe Paduda 2018. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.