Insight, analysis & opinion from Joe Paduda


What exactly is “Single Payer”?

At some point we’ll have some version of “single payer” healthcare – I predict this will happen within a decade (yes, I know I’m usually wrong on the timing of my predictions, but I’m mostly right on the result).

Whether you’re a rabid libertarian or a totally committed Democratic Socialist, you’ll need to know what Single Payer is.

Single Payer is a catch-all term for universal health insurance coverage. In some cases there isn’t a “single payer” in an entire nation – our neighbor to the north being one example, Switzerland and Germany are two others. In Canada, each Province is it’s own single payer; in the two European countries there are a variety of independent companies that provide health coverage.

That’s how the insurance end of things works. Healthcare providers; hospitals, physicians, therapists are the other side.

The UK may be the best-known example of a “true” single payer system; the government runs the health insurance program and employs most of the healthcare providers.

Between the UK system on one end of the spectrum, and the US “system” on the other, there are a lot of variations.

Here are three examples (borrowed from Dr Lynn Blewett of the University of Minnesota):

In Canada, there are some variations among provinces in terms of financing and benefits, but these are pretty minor. People can freely choose their providers, there are no deductibles or other cost-sharing provisions, providers are private (not employed by the government), and hospitals operate under a universal budget.

Funding comes from taxes and provincial lottery profits, and about 2/3rds of Canadians buy supplemental private insurance for non-covered services.

Germany funds its system via general taxes and payroll taxes. There are over a hundred “sickness funds” which are generally equivalent to our health insurers; some charge additional premiums. About a tenth of the population opts out of the national system and buys private insurance coverage. Patients have full choice of the providers they use.

The UK is often held up as the only “pure” single payer system as both providers and the payer are government-based. Funding is via payroll and general taxes. Choice of primary care provider is up to the patient, however PCPs act as gatekeepers to specialty care. Similar to Germany, about a tenth of the population buys supplemental coverage.

California is likely to consider Single Payer after the Democratic candidate for Governor wins the election this fall.  Advocates have described their vision for a state-based “single payer” system this way.

While every system has it’s problems, what is notable is they all deliver better outcomes at significantly lower cost than we have here in the US.

So, when you hear people decrying the ACA, “Obamacare”, or single payer, ask yourself how their “solution” would lower your costs while improving the healthcare you get.

Better yet, ask them…But be prepared for silence.

What does this mean for you?

This will be one of the two most important issues facing us over the next decade. Inform yourself.




Work comp claim counts are dropping – what this means for you

Claims counts are continuing to decline. That’s good news for employers and taxpayers, but not-so-good news for the businesses that service claims.

Ok, counts aren’t falling as fast as that sheep, but you get the point.

Here’s what this means for you and others…

For TPAs – Good news indeed – as counts decline, more insurers are choosing to have TPAs handle more of their claims. That new business is great, but…

That “but” is this – the claims business is going to become ever more competitive.  TPAs are going to have to get a lot more creative than figuring out new ways to charge for bill review and network access. Predictive modeling, narrow network development and operation, outcomes assessment are all paths to take. But become especially adept at taking over claims, because…

Smaller claims staffs = more flexibility for insurers and lower admin expenses.  It is much easier for carriers to adapt to changing markets when they don’t employ their own claims staff.  It also keeps their unallocated loss adjustment expenses lower, allowing them to be more competitive.

Those carriers also don’t have to worry (as much) about investing in new systems, processes, applications or technology when the claims are handled by a third party. This addresses one of the biggest problems in work comp – insufficient (to be kind) IT budgets.

Service companies – investigations, case management, peer review, IME, you name it – are all fighting over a shrinking pie. In this very-mature market, there just isn’t enough business for everyone, so competition is brutal.  Margin pressure, the buying power and IT security resources of very large competitors, the increasing demands made by large buyers are making it tough for smaller suppliers to grow and expand.

Technology firms – bill review, UR, claims and others – are kind of in the middle. If their tech can reduce expense and be implemented with a high chance of success and relatively low expense, they may do well.  But these companies recognize that IT budgets are tighter than ever, and they MUST be creative around pricing, be clear about deliverables and assume as much of the implementation and maintenance as possible.

Brokers and consultants – you’ve got a choice to make. Either skate along, get carriers/TPAs/vendors to cut prices to the bone, and show your employer clients what a great job you’ve done…or keep pushing for value – fewer injuries, faster return to functionality, lower total claims costs, lower medical expense.

What does this mean for you?

Success favors the prepared.


Friday attempt-to-catch-up

This summer has been busier than any I can recall  – new clients, new projects, new work has me waaaay behind on posting to MCM – my apologies.

Here’s stuff that happened this week…

Way too many opioid-related deaths occur in construction, farming, and fishing

According to the Boston GLobe, “nearly a quarter of overdose deaths in a five-year period occurred among people, mostly men, who work in construction…”

Construction workers may well take the dangerous painkillers so they can keep working.

Thanks to Mike Mullen for the tip on this.

Good piece by Louise Esola in Business Insurance about predictive analytics – Friend and colleague Jeff White of Gallagher Bassett draws an interesting parallel with hurricane tracking graphics – the tools can help adjusters figure out where claims are headed – and therefore what to do to prepare/prevent bad outcomes.

Those short-term health plans Trump is pushing – be careful before you sign up. These “association health plans” often don’t cover drugs or pregnancy or out of network care.

That’s why they are cheap.

From the “these people are awful” file comes this – Mississippi’s governor is seeking to force Medicaid recipients to fill out all kinds of forms on line to demonstrate their efforts to find work.

This in the state where almost no one is on Medicaid because you don’t qualify if you make more than $6000.

You won’t be surprised to learn most Mississippi Medicaid recipients are very poor African American mothers in rural areas.

This smacks of racism.

When did it become OK for politicians to do this?

Hope you have a good weekend – it will certainly be better than those poor moms’…


Medicaid – what you need to know

You need to know basic stuff about Medicaid because:

  • Medicaid may well become the model for your health insurance
  • It covers more working-age people than any other payment type
  • Your state and federal tax dollars pay for Medicaid.

So, here are the basics.

  • Medicaid covers one out of five Americans.
  • Most Medicaid dollars go to the blind and disabled.
  • Medical care for poor adults accounts for a third of Medicaid spend
  • Poor kids use a fifth of Medicaid dollars
  • The rest is mostly for nursing home care for folks with very limited income or assets – in fact, Medicaid is the major payer for nursing home and similar medical care.
  • Medicaid expansion (covering people just above the poverty line) is now in place in 34 states (plus D.C.); 2 are implementing, and 3 more are considering expansion.

Lastly, my bet is we’ll have some form of Single Payer within the decade – and Medicaid will be the model.


Where is the work comp insurance industry heading?

Work comp is doing very well – so well that one may want to be a bit nervous.

A couple things you should consider:

Today’s WorkCompCentral arrived with the news that the Hartford’s profits improved markedly last quarter driven in part by “favorable development” in its workers’ compensation business.

Essentially the Hartford determined that it had set aside more funds than necessary to pay for old claims, so a chunk of those funds were removed from “reserves” and became profits.

A bit further down in the Hartford’s filing came a bit more detail, detail that may be illuminating.  For example, “margin deterioration in workers’ compensation and a higher expense ratio” in the company’s middle market sector put a slight dent in that sector’s financial results..

Yet, while work comp renewal premiums for the small commercial sector were down, 4 percent growth in middle market revenue was “principally driven by workers’ compensation” new business.

So, we have better results than expected from old claims, tighter margins, higher expense ratios, and premium growth in a key sector. This may seem inconsistent – but it isn’t.

  • With lower premium rates come higher expense ratios – that’s just math.
  • Lower historical claims costs help reduce current premium levels; insurers may see this as lowering the cost of risk and therefore cut premium rates and/or offer discounts.
  • In turn these lower rates may generate more business especially from employers who want to buy insurance from top-rated carriers.

Quick aside…At Liberty Mutual, work comp accounts for 6 percent of net written premium. As a former Liberty employee, this is a pretty amazing statistic coming from the company that dominated US WC for decades.

From Liberty’s Q1 2018 earnings presentation

In the not-too-distant past, Liberty was at or very near the top of the largest writers of workers’ compensation insurance.  Not anymore.

This from Chubb’s Q2 2018 earnings call (thanks to Seeking Alpha):

Well, the macro picture, you have record low unemployment, which actually can play – cut both ways on workers’ comp. You have less experienced workers on the job, so you have to be careful. We’ve been seeing frequency up until now, frequency of loss has been down. Severity has been reasonably tame. And so overall loss cost trends have been good in comp. I think you have to – in my own mind, the market is reacting to that, the insurers, and comp has become more competitive. And I think you have to be careful that you’re not too aggressive, you overshoot the market.

Work comp premiums for the big carrier were down just under 6 percent this quarter over last, while YTD premiums were slightly higher.

I won’t attempt to link these data points to strategic moves; you can ponder those yourself.

Rather, my sense of what’s happening is some carriers are really trimming back their work comp books, others are growing it carefully, and all are waiting for an indicator that this historically-long-lived soft market is about to turn.

What does this mean for you?

We do know that very few – if any of us – will time that market turn correctly.

That’s the perspective of my alter ego…Captain Obvious!


Friday catch-up

I thought summer was supposed to be slow…

Sorry for lack of posts last two weeks – just slammed with client work.

here’s what I should have been posting on.

Economy drives employment drives workers comp

The economy boomed in the last quarter, with growth around 4 percent, a number we haven’t seen for four years.

Chart from Statista.

That’s the headline; the real story is less positive. Growth was partially driven by:

Here’s hoping things continue without overheating; forecasts aren’t so positive.

Implications – Lots of jobs open means higher wages and incentives for employers to keep workers on the job and get them back to work ASAP.

For those who just can’t get enough of the tariff issue – here’s the Harvard Business Review’s historical perspective.  Yes, I am a nerd.

Heat = more work-related illnesses/injuries

Deadly fires in Yosemite and California and Greece and Siberia and Sweden. A heat emergency in Japan. Temps in LA at record levels – even overnight. Scorching temperatures here in upstate New York.

Yes, climate change is happening. Yes, humans are the cause. And yes, it’s going to impact workers.

If the wet-bulb temperature (equivalent to that recorded by a thermometer wrapped in a moist towel) exceeds 35°C [95 degrees Fahrenheit], even a fit, healthy youngster lounging naked in the shade next to a fan could die in six hours.

Shifts in weather patterns are far more significant than overall global warming as they lead to very hot and dry conditions some places, hot and wet others, and exacerbate storm intensity among other effects.

Kudos to NCCI – they’ve been producing some highly relevant, much needed, and very useful research of late. Detailed, thorough, and diverse, and well worth your careful review.

One different angle is their ongoing work to highlight the good done by the  workers comp industry every day. Today’s installment is another example of this; there’s a lot more recognition that work comp is about the patients and employers.

Well done.

Opioids in the Federal workforce

Thanks to the great folks who handle my social media, website, and all that technical stuff I don’t understand at all, we’ve got video of testimony before the House Committee on Education and the Workforce.



Doing diligence on a potential acquisition

When they buy a company, investors are betting the story they’re told is accurate, that it fairly represents future opportunities and risks.  They’re betting on management – the people who built the company, that they’re who they appear to be – honest, insightful, decisive, well-connected.

When they get it right, it’s rewarding indeed. But when they don’t, it may be career-limiting.

Investors do diligence – often a lot of diligence – to make those bets as sure as possible. But, most investors aren’t expert in the specific niches occupied by the companies they are buying, so they rely on “Subject Matter Experts.” These are long-time industry people who know the ins and outs; probably know the business and its management; understand markets, regulations, and where things are headed; and have the contacts and relationships who will help give them the real story.

In the ten years or so I’ve been doing this, I’ve learned a lot. Here are a few takeaways.

Dig Deep into the Details

The proof is in the details. Dig deep into the stuff that drives the financial results. Investors are really good at financial analysis, but they don’t understand what drives those finances. Things like procedure codes, billing processes, discount arrangements, fee schedules, workflows and systems connections are where the business succeeds or fails.

Example – Read the actual provider contracts. What do they cover? What are the rates? What is the time frame? Compare the contracts to those provider’s bills – do the billing results match the contractual terms? Is the patient a member of a contracted customer? Did the customer do what was required to “earn” the discount?

If the seller won’t get into those details, you’ve got to ask why. Either A) they don’t have that information available, which is troubling in and of itself, or B) they have it but don’t want to share it, which is also troubling, and/or C) they are paranoid their “secret sauce” will become not-so-secret.

Push, and push hard. Make very sure your client knows exactly why this information is critical.

Pay attention to…

Overnight successes. Businesses that sort of float along, then experience a sudden jump in profits and/or revenues need extra-careful analysis. The seller will claim this was all part of the plan, they built carefully, invested heavily, and now are seeing the benefit of that strategy.

Perhaps…and perhaps there’s been some deep cost-cutting, a change in how they determine what’s revenue and when they can recognize it, a shift in accounting for old receivables, a new billing process. That’s not to say those things are inherently bad, they just may not reflect anything more than a one-time bump, or they may not be sustainable, and/or their suppliers (in many cases these are healthcare providers) may decide they don’t like whatever’s changed.

Vague claims. Stuff like “we keep all our customers”, “our program is clinically based” – where’s the supporting documentation? If the seller says it, they should be able to back it up convincingly.

The SME’s job

The seller will do a fine job of “selling”, my job is to be the realist.

In my view, my job is not to blow sunshine up the buyer’s shirt, but rather to find the potential issues, problems, roadblocks, and concerns and clearly illustrate what they are, the potential implications, and how much of a problem they represent.

There’s a lot of pressure on investors to do deals. They’ve taken millions of investor dollars into their funds, and need to park it somewhere. As potential deals become scarcer and more expensive, the pressure increases.

Strive to be just a bit on the skeptical side, and you’ll serve your client well.

Stick to what you know

I’m often asked “would you invest your money in this business?”  To which I reply, “Look at my investment portfolio and you’ll see why I’m the wrong person to ask about investments.”

Point being, buyers value companies for reasons that escape logic, or at least what I think of as logic.

For example, there’s CorVel. Why this company has a price:earnings ratio of 30 is beyond me. Revenue growth is minimal, operating income grew 10 percent in 3 years…hardly a growth company worthy of that multiple. But hey, what do I know.

Instead, focus on the business itself – let the investors figure out what it is “worth” – they understand valuation, I don’t.

Be clear about your biases

As you know all to well, dear reader, I have strongly held opinions. You should too. Be very careful to support your opinions with facts, based on data, supported by logic. Be transparent to your client.

That doesn’t mean you don’t share your views, just be clear about what they are, and on what they are based. That allows the client to assess how they should value your view on that issue.

One advantage of spending decades in a business is you just know stuff, you see things and instantly have a sense that this is BS, or wow, this is innovative, or huh, that doesn’t look right. You can’t exactly put your finger on it, but it’s there.

Your client is paying you for those decades of experience, the judgment it brings, and must know how you arrive at a conclusion, statement, or opinion. Telling the client that something just doesn’t feel right is fine – but understand they’re going to push you hard to figure out why.

Tomorrow, a couple other things I’ve learned

What does this mean for you?

It’s critical to be critical.


Sloooooow progress in California’s work comp system

That’s the quick takeaway from a review of CWCI’s just-published report on drug prescription management in the Golden State. (there’s a lot more to this study than this…)

As cognoscenti (a fancy word for nerds) know, the utilization review (UR) and Independent Medical Review (IMR) processes were intended to help ensure patients got the drugs they needed quickly, were protected from dangerous or potentially unsafe drugs, and prescribers would learn what was likely to fly and what wasn’t.

This last was based on decades of experience in healthcare, observing what happens when evidence-based guidelines protected by utilization review processes to encourage/require compliance are put into place. In most every other instance, providers adapted their care models to meet the standards, and after a flurry of appeals at the outset, things settled down a lot.

But, well, hey, this is workers’ comp…

The first two (better care and patient safety) seem to have worked pretty well, but up till now, it appeared that WC prescribers were militant non-learners as the volume and type of UR/IMR requests just didn’t taper off.

My assessment of CWCI’s report is (equivocation alert) prescribers MAY BE changing their behavior – a wee bit. 

Here’s what’s driving my optimistic take (from CWCI):

After the formulary took effect last January, prescription drug requests declined from 44.5 percent to 40.7 percent of all UR decisions in the study sample – a relative decline of 8.5 percent.

I mean, how could one not dance in jubilation, right?

Well, perhaps prescribers have decided to not keep pushing that stone up the hill. Or perhaps it’s just a temporary hiatus.

I’m going to remain optimistic, and you should read the entire report because there’s lots of good info in it.

What does this mean for you?

Less hassle, better care. We hope.



The big story – work comp rates continue to drop

Spent most of this week doing a long bike ride with two great friends – riding thru a 90 minute downpour, falling into a mud puddle, and marveling at two century-old engineering feats.

Glad I missed the poison ivy and horse poop…

Work comp premium rates keep tumbling

This is one of those very big stories that isn’t getting near enough attention. This morning’s WorkCompCentral had two stories that highlight just how much the world is changing.

WCC’s Greg Jones (one of the more diligent reporters I’ve read) noted that California may lose it’s place as the state with the highest work comp rates. 

Ohio’s public employers are looking at a 12 percent drop, capping off a seven-year run of decreases that have slashed premiums by almost 42%.

Meanwhile, despite high medical costs and lots of litigation, Louisiana’s rates have also declined some 30 percent over the last decade.  (thanks to LCTA’s Troy Prevot for the head’s up). While the reduction in employers’ and taxpayers’ costs is a very good thing, too-high medical costs and too-long disability duration are problematic indeed. But the story here is rates are dropping despite these significant cost drivers.

The biggest driver appears to be claims volumes – frequency declined 6 percent last year alone. While some argue that frequency is not a number, and therefore isn’t relevant, as we get very close to full employment, the “gap” between frequency (claims per 100 FTEs) and the actual volume of claims becomes pretty meaningless. (cue disagreement, which is welcomed)

What does this mean for you?

Lower rates will force insurers to reduce administrative expenses, overhead, staff, investments in technology.

Lower rates reduce premium taxes, a funding source for regulatory entities.

Historically low injury rates are continuing to drop, reducing the number of claims – which reduces the need for case management, claims adjusting, bill review, UM, peer review, IMEs…pretty much all claims services.

Insurers seeking to cut fixed costs to reduce Unallocated Loss Adjustment Expenses are moving claims to TPAs, a trickle that may become a flood.


Friday catch-up – Hospitals and a BS alert

Glorious week here in New York’s Finger Lakes – high 70s, lots of sun, nice breeze.  I know, Florida friends, you’ll be gloating in February when it’s 10 below and snowing sideways…


NCCI’s just-released research indicates facility costs are rising, driven at least in part by less competition among hospitals. Key takeaway:

Reductions in hospital operating costs do not translate into price decreases. Research to date shows that hospital mergers increase the average price of hospital services by 6%−18%.

Kudos to NCCI for this research and the piece itself. The article is very well-written, concise, and understandable for us laypersons. NCCI has upped its game considerably of late, producing excellent work and explaining what their findings and implications thereof.

I’m going to focus on this in a post next week – there’s a ton of insights here that demand careful consideration from payers and employers.

For those looking to better understand how hospitals set prices, determine what their actual costs are, and how they use data to reduce costs while improving care, read this piece in HealthAffairs.

And there’s this – a hospital in the Cayman Islands is delivering excellent care at a fraction of the cost of US facilities. The facility is fully accredited, provides a simple, bundled price for each procedure (instead of bills for each doctor, facility fee, procedure, implant…) and will be a very attractive option for many Americans with specific health needs.


My bullshit detector went nuts when a press release hit the inbox this week.

In what has to be one of the crappiest, most distorted, unscientific and biased pieces of “research” ever done, a so-called “non-partisan” entity calling itself one of the nation’s “leading public policy organizations” claims:

in some states, up to 70% of able-bodied adults enrolled in Obamacare expansion earned $0 in income

I’m going to dig into this steaming pile of nonsense next week, but for now, know that this is flat out wrong.  There are so many errors, distortions, flat-out wrong statements, conflations, and unsupported conclusions in this “research” it just boggles the mind.

It’s one thing to have principled disagreements on policy. It’s entirely another thing to lie your ass off.

For those interested in real research by unbiased experts, the Kaiser Family Foundation’s recent report on Medicaid Work Requirements is required reading.

OK, rant over – till next week.


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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