Insight, analysis & opinion from Joe Paduda


NO, higher indemnity payments ≠ longer disability

A recent piece in WorkCompCentral highlighted research that ostensibly said paying injured workers higher indemnity benefits results in longer disability duration and higher costs.

At least that’s what one might conclude from the headline – and the research report itself.

Except the research is preliminary (as noted in William Rabb’s article) , and actually reading Rabb’s WCC article – and the study itself – and doing a little Googling – reveals significant problems with the research.

To the researchers’ credit, they make it clear their conclusions are preliminary and “comments are welcome” but I fear many will read the headline, tweet it out, and use it as justification to reduce workers’ indemnity benefits.

Reality is, the study has multiple flaws, rendering the authors’ conclusion that:

“increasing the generosity of wage replacement benefits does not impact the number of claims but has a large impact on claimant behavior, leading to longer income benefit durations and increased medical spending.”

is baseless at best.

Among the multiple flaws in the study is the failure to account for other factors that may well have driven an increase in disability duration and medical expenses. The researchers based their analysis on workers’ compensation reforms in Texas and data from 2005 – 2009. The reforms, which increased disabled workers’ wage replacement levels, also affected many other parts of workers’ compensation regulations and benefits.

For example, medical reimbursement in 2008 spiked due to changes in the Texas WC medical fee schedule – which were largely driven by increases in Medicare’s fee schedule.

Then there’s the 2008 – 2009 recession, which significantly affected employment opportunities in the Lone Star State. I’d suggest that the recession affected employers’ desire and ability to return injured workers to jobs that no longer existed or where hours had been greatly reduced. It also limited re-employment opportunities for workers who no longer had jobs to return to.

2008 saw a steep decline in jobs towards the end of that year…

And the forecast for 2009 was even worse…

(for more discussion, here’s the Dallas Fed’s analysis. Evidently the authors didn’t read this, or if they did, did not reference it in their footnotes or references.)

What does this mean for you?

I’m no PhD economist – but I can do a Google search. And so can you – I’d encourage all to question “research” that makes bold assertions.

Especially when those assertions support one’s long held beliefs.


Single Payer’s impact on jobs

Reality is, switching to a government-run and administered healthcare system would crush the economy – because millions would lose their jobs.

There are 22 million jobs in the US healthcare and related industries (that includes mine, one of our daughters, and her husband – they are nurses – our other daughter is in the tech business and one of her clients is a large health system; our son is also in tech and his company services medical practices.)

The private health insurance industry alone employs north of a million people. (data on this is spotty; UnitedHealthcare has 300,000, Cigna, Molina, Centene, Aetna and Anthem combined have over 180,000; there are dozens of other healthplans, PBMs, TPAs, and ancillary service providers.

On the provider side, there are over 700,000 management jobs (average salary is $86,000) and several million administrative jobs.

Many large hospitals and healthcare systems need several hundred workers just to handle billing and collections; these jobs would go away under a single payer system.

Let’s add all the college and grad school institutions that employ tens of thousands to educate people on healthcare administration, and the support infrastructure – IT companies, paper form printers, App developers, pundits and commentators, real estate occupied by insurers…you get the idea. The health care industry is at least a fifth of our economy.

If we switched to a true single payer system, millions of administrative, support, and related jobs would disappear. Remember what happened to manufacturing in the rust belt? That happened over 50 years; this would affect a much bigger share of the economy over a much shorter time.

The result would be an economic collapse that would surpass the Great Depression and devastate the economy.

Lest you think this is hyperbole, Taiwan employs a grand total of 300 people to administer a single payer healthcare system for a population of 24 million.

Using Taiwan as a basis, we’d only need 4,125 people to administer a universal single payer system.

All of the people administering Taiwan’s health system work in this one building.

What does this mean for you?

Believing government administered Single Payer can happen anytime soon requires magical thinking.


Single Payer is…what?

(We are reprising several posts about Single Payer; Bernie Sanders’ current status as the sorta-front-runner in the Dem race has folks wondering what this is all about) You’re going to hear a lot about Single Payer over the next few months – mostly from people who a) have an opinion about it BUT b) don’t even know what “Single Payer” is.
Before you get sucked into that discussion/argument, here’s a primer. “Single Payer” – by definition – is government-financed and government-managed health insurance. Beyond that, pretty much every country with Single Payer is unique, each with its own nuances. For example,
  • most don’t have government-employed healthcare providers; in many single payer systems, physicians, therapists, hospitals and other providers are private.
    • The UK is an exception; providers are (mostly) employed by the government
  • many are not government-operated; in many systems private insurers contract with the government to handle administration of health insurance – similar to our Medicare
    • Again the UK is an exception
  • the government sets pricing/reimbursement policy and actual prices – similar to our Medicare
  • funding comes from some combination of employee, employer, and other taxes; in some countries, insureds pay some form of premiums – similar to our Medicare
  • it covers everyone
  • there is little to no paperwork for patients/consumers; all that is handled by the administrative agency
  • there are minimal or no deductibles, copays, or co-insurance requirements
  • people can buy into supplemental insurance through private insurers
What does this mean for you? You are now more knowledgeable than most everyone else about Single Payer.


Could Medicare for All solve your healthcare cost problem?

You can’t afford other stuff because healthcare is so expensive. Would Single Payer/Medicare for All fix that?

I’m revisiting the topic so we can better understand the many variations of SP/MFA, how 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.

Last week 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

But – in over half of the markets, insurers are highly concentrated – which means they have significant market power.

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.


What’s up with WCRI 2020?

I asked WCRI President John Ruser PhD for the scoop on the upcoming WCRI annual conference…here’s the interview.

  1. What is different this year (format, topics, approach)?

Same credible WCRI research, but different topics (e.g., How Injuries, Claims, and Outcomes Change with Age; Alternatives to Opioids for Pain Management; Readmission and Re-operation Rates among Workers’ Compensation Patients, etc.).

Same focus on the pressing issues of today, but different ones compared to 2019 (e.g. Generational Differences and Stereotypes in the Workplace; Economic Cycles and Their Impact on the Labor Market; Prioritizing Mental Health for Workers Injured on the Job, etc.).

  1. What are the issues your members are most concerned about?

The issues on this year’s agenda (e.g., opioid alternatives, generational differences, the impact of the economy on the workers’ compensation system, and mental health) are issues that all of our diverse membership is concerned about and would benefit from learning more about, which is why the theme of our conference is Gaining Clarity Through Research.

  1. There are some deeper dives into aspects of medical care delivery and outcomes (e.g. readmission rates), which appears to be a change from previous conferences, can you talk about that?

We are continuously looking to help all stakeholders understand the most significant issues in the workers’ compensation system today. Naturally, these are going to change from year-to-year based on what we are seeing; external actors and factors (i.e., business cycles, elections, etc.); new technologies; and new research, etc.

  1. What are the work comp issues that are least understood and most impactful on employers that will be addressed by this year’s conference?

Although many of the topics our sessions delve into may not be new to employers, they will benefit from the independent research and expert perspectives that is the hallmark of our sessions and conference.

That said, one issue that we could all stand to better understand is our panel on prioritizing mental health, since serious workplace injuries can lead to anxiety, depression, and other mental health issues. Indeed, new research from Boston University (BU) Professor Les Boden found that an injury serious enough to result in at least a week off work almost tripled the risk of suicide among women, and increased the risk by 50 percent among men.

To help us better understand the challenges workers face to their mental health after a workplace injury, as well as to learn about initiatives to address those challenges, we have assembled a distinguished panel: Prof. Boden; President Steven Tolman of the Massachusetts AFL-CIO; Dr. Kenneth Larsen of the New England Baptist Hospital; and Mary Christiansen of Southern California Edison.

  1. What has been the most significant change in the conference over the last five years?

We seek to continue to identify those topics that are of greatest interest to attendees.  An indication of our success is that our conference keeps growing, and based on registration today compared to last year, we are on course to do so again.

Those who attend value that this a research-based conference, that there are high-level networking opportunities, and that the conference is of appropriate length.

This combination brings a diverse and dedicated (senior-level) crowd of people who are interested in understanding the trends that are occurring in workers’ comp and learning actionable items they can use in their jobs.

I’d add that the Conference always sells out.  To make sure you’re not this guy, register here.



Single Payer – what’s the real scoop?

(this is an update of a post from last year; given all the attention, it’s timely) 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.

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 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.


Now’s the time to fix that roof.

Barring some catastrophic exogenic event (war with Iran, pandemic, sudden recession) – workers’ comp premiums will continue to shrink.

Meanwhile, despite compelling evidence work comp execs are worried about the opposite problem – that they won’t be able to raise rates high and fast enough if something bad happens. This at a time when industry profits have never been higher, insurers are awash with cash and all indicators point to continued low combined ratios.

Claim frequency continues to decline (yes there are increases here and there but these are NOT altering the decades-long trend). I penned a four-parter on frequency a while back that provides more detail.

The large and mid-sized payers I speak with are seeing declines in claim counts.

Medical costs are flat – and have been for several years.

Yet NCCI’s poll of workers’ comp execs finds these folks are worried about rate adequacy. (that means claims costs will go up faster than insurance premiums, leading to financial losses for insurers)

Wrong problem, folks.

The real issue facing C-Suiters is declining premium dollars – which means less money to pay for administrative expenses – which means fewer dollars to invest in:

  • IT and new IT projects
  • revamping claims systems
  • electronic connections to providers, vendors, and other third parties
  • adjuster training and retention
  • innovation

I get that CEOs have to do worse-case scenario planning – but the chances of that worst-case (claim costs increase and rate increases can’t keep up) happening are minimal. Yet this “problem” is top-of-mind (according to NCCI) – so execs are:

investing in predictive analytics to help with pricing and dedicating more resources to actuarial research and analysis. Insurers are closely evaluating and monitoring risks for the purposes of acceptability, pricing and coverage.

There is compelling evidence that rates are too high now – and will remain too high for some time to come.  The cause is the steep drop in opioid usage among work comp patients, a drop that is slashing claim duration, increasing claim closures, and reducing reserves.

Opioid users’ claim costs are more than double non-opioid users. As usage plummets, rate decreases lag far behind. The result – today’s rates are based on what happened years ago – not what’s happening now.

Graph courtesy CWCI, p 19, The Impact of Declining Opioid Use on Lost-Time Claim Development & Outcomes in California Workers’ Compensation 

While the impact of rapidly decreasing opioid usage – and concomitant reduction in claims costs – is real indeed, rating models and methodologies haven’t caught up to this reality.

This is the problem execs should be devoting most of their time to – how will they manage their business with less revenue than they have today.

The time to fix the roof is when the sun is shining. Work comp execs would be well-advised to invest their record profits in ways that:

  • improve efficiency,
  • automate low-value tasks, and
  • most importantly – assure effective medical care.

What does this mean for you?

You don’t want to be on a roof in a rainstorm.

More on this in a free webinar hosted by WorkCompCentral February 27. Register here.



What about your pre-existing conditions?

Let’s get real folks.

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

Dan Mendelson, CEO, Avalere

The Texas lawsuit filed by Republican Attorneys General and supported by the Trump Administration would end the ACA, aka Obamacare.

In so doing, it would end protections for those with pre-existing conditions.

Make no mistake, if Trump et al win the suit and you have to change health insurance plans, you are at real risk of losing coverage  – or having to pay so much you can’t afford it.

Despite President Trump’s assertions, there is No Republican plan to assure those with hypertension, diabetes, a history of heart disease, cancer, anxiety disorder, or any other health condition will be able to afford health insurance.

Not sure if you have a pre-ex?  Here’s a list.

What does this mean for you?

For some, this election is a matter of life and death.


PBMs and legacy work comp claims

Employers, state funds, and insurers are focusing more and more on closing old claims; the most successful ones are partnering with their Pharmacy Benefit Managers.

The logic is clear – the older and more costly the claim, the greater the percentage of spend is for drugs (except for those cat claims needing long-term home health/facility care).

And, the higher the reserves, the greater the percentage of those reserves is for drugs (except for those cat claims needing long-term home health/facility care).

Both graphs from NCCI; Medical Services by Size of Claim—2011 Update.

While some very large payers (e.g. Ohio BWC, Washington L&I, State Fund of California and Sedgwick) have strong clinical pharmacy capabilities, most payers don’t.

If you are looking to reduce your claims inventory, partnering with a PBM with:

  • real expertise in analyzing legacy claim information,
  • very strong clinical capabilities, and
  • a demonstrated ability to help manage legacy claims is mandatory.

What does this mean for you?

Find out if your PBM has these capabilities – and ask how they can help you. If you aren’t impressed, find another PBM.



The Healthcare Election

Healthcare is the central issue in the 2020 election.

If Republicans are able to keep healthcare out of the conversation, they win. If Democrats make healthcare THE issue, they win – with one big caveat.

Insurers and hospitals are making record profits, while a family of four has to spend $21,000 before they get any coverage.

Healthcare is unaffordable for middle-income families without subsidies or employer support. In many areas, the cheapest bronze plan is around $13,000 and comes with an $8000 deductible. Before mom dad and the kids get any benefit other than preventive care, they’re out $21,000.

Rural Americans are more likely to have high-deductible plans. And, even if the premiums are subsidized, there’s still their monthly cost plus an $8,000 deductible.

That is, if they can find a provider when they need care.

121 rural hospitals have closed over the last 10 years – 44 in the past three years. with the biggest impact in states in the south and central US where the combination of under-insured patients and no Medicaid expansion has left many small facilities on the brink of bankruptcy – while dozens more have closed.

Meanwhile, back in DC…

There’s been zero meaningful progress on drug prices, an issue of particular concern to seniors. Likewise, all the talk about surprise medical bills has yielded exactly no solutions, as hospital lobbyists have successfully quashed meaningful reforms.

Millions of us have pre-existing conditions; we risk losing coverage – and paying much more – if the Trump-supported Texas lawsuit to overturn Obamacare is successful.

While consumers are getting hammered, hospitals, health systems, and health insurers are raking in the billions.  Near-record profits for insurers, and very strong margins for pharma device manufacturers and hospitals stand in stark contrast to flat wages for most Americans.

Here’s the caveat. Sure, Republicans have no solution to the healthcare coverage and cost crisis. But Americans – at least the ones who vote – don’t want Single Payer.

What does this mean for you?

If Democrats stay focused on healthcare reform and avoid Single Payer, they win.

If not, they lose.

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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