The more informed your employees are about health and healthcare, the wiser and more confident they’ll be when it comes to making the right lifestyle and healthcare choices.
Health literacy improves health outcomes, while controlling health spending. The Institute of Medicine (IOM) defines it as:
“the degree to which individuals have the capacity to obtain, process and understand basic health information and services needed to make appropriate health decisions.”
What does the IOM mean by “basic health information”? It’s the knowledge necessary to understand the impacts and risks of different health-related decisions or behaviors. For example, basic health information would include knowing why you should complete the full dosage of antibiotics prescribed by a doctor.
However, an even more informed healthcare consumer would know, or at least ask, whether antibiotics are even necessary for the ailment in question.
The Low Health Literacy Rate
Health literacy is very low in the U.S. – “proficiency” is pegged at 12% by the Journal of the American Medical Association, well below the level of other nations where citizens have access to technology.
According to JAMA, having a “proficient” level of health literacy can mean making consistently good healthcare choices and understanding one’s insurance options. Yet, mere proficiency should not be the goal. At Quizzify, where employees are already “proficient,” we continue to learn something every day. For instance, today we learned that pregnant women should avoid consuming black licorice because it contains a chemical that can harm unborn babies. (In this situation, it’s the high-quality candy-store licorice that is the culprit. The version you buy at newsstands is only licorice-flavored.)
A study conducted by the Veterans Administration (VA) on the literacy-cost correlation revealed that veterans with low health literacy spend roughly 50% more on disease management and medical care than veterans with proficient knowledge, other things equal. Think about what that means for your own healthcare budget, and how much you would save by making even a small dent in that.
Health literacy training has far better outcomes than any other employee wellness program. Screenings, for example, do not prevent the utilization of medical care. In fact, they may actually encourage it.
In the Health Enhancement Research Organization Outcomes Guidebook, researchers found that only 7-8% of hospitalizations are “potentially preventable” by wellness programs. They also note that many non-hospital expenses increase as a result of these programs. Meanwhile health literacy applies to the vast majority of decisions and behaviors that affect health.
In contrast, health literacy applies to the vast majority of decisions and behaviors that affect health. Typically, literate consumers spend less. When literate consumers spend more, it is usually an educated decision and may avoid a bad outcome.
Implementing Health Literacy Into the Workplace
The Uphill Battle Toward Behavior Change:
People who are smokers or overweight already realize they should make changes…and yet, for many complex and (in the case of obesity) poorly understood biochemical reasons, can’t. Encouraging smokers to quit or obese employees to lose weight is a totally uphill, probably unwinnable task for an employer, even as a lot of money gets spent trying to move the needle. It is nearly impossible to make significant dents in these two (and related) health issues through behavior change. Furthermore, employers are not especially well-positioned to bring about these changes. Trying too hard can even feel intrusive and uncomfortable for employees.
Knowledge as a Solution:
By contrast, in health literacy, most of the effort is in imparting the knowledge, not changing the behavior.
Every smoker knows he or she is supposed to quit already for health reasons but doesn’t. However, a few smokers may be motivated to quit when they learn the amount of money they are really spending on cigarettes. ($300,000-plus over a lifetime.)
People know that radiation is unhealthy, whereas very few patients receiving CT scans realize they will be absorbing as much as 1000 times the radiation of an X-ray. Simply obtaining the knowledge can change behavior while saving money.
Over the past two decades, there has been a dramatic increase in the use of opioids in workers’ compensation. Opioids are being prescribed for many conditions for which they were not originally intended. Efforts have begun across the U.S. to create opioid treatment guidelines, change medical practice patterns and curb the opioid epidemic. While much has been written recently about the unintended consequences of opioid use, such as how they increase pain sensitivity and level of disability and can lead to addiction, there is little information available about the perspectives of the key players in workers’ compensation on the opioid issue.
Mark Pew, a prominent managed care organization’s spokesman, has said, “Using opioids as a crutch really is the wrong thing. What you need to be focusing on is coping with it and managing it like the vast majority of humanity does with chronic pain or just the fact of getting old.” But what do the injured workers, physicians and claims adjusters say? I conducted confidential interviews with members of each of these groups to get the perspectives of those who so far have had less of a voice in the debate.
Physicians must balance their desire to control their patients’ pain against the known drawbacks of opioids. One physician told me, “When I was in medical school 20 years ago, we were told that we were undertreating pain. Pain was named ‘the fifth vital sign’ (along with blood pressure, heart rate, respiratory rate and temperature), and we were trained to ask patients about their level of pain on a 10-point scale at every visit. At that time, very little was known about the dangers of long-term opioid use. Now, patients with any kind of pain have come to expect to get that narcotics prescription when they see the doctor.”
Interestingly, in response to the current opioid crisis, delegates at the 2016 annual meeting of the American Medical Association passed a resolution recommending that pain be removed as the fifth vital sign in professional medical standards. Critics, many of them pain management specialists, say the move “will make it even more difficult for pain sufferers to have their pain properly diagnosed and treated.” However, a 2006 study in the Journal of General Internal Medicine concluded that “routinely measuring pain by the fifth vital sign did not increase the quality of pain management.”
Another physician, a medical director at an insurance carrier, said, “When I see the second opioid prescription come through the system, I start reserving for detox.” She meant the second opioid prescription is an indication to her that there is a high likelihood the injured worker is going to become addicted to the opioids.
Claims adjusters have a unique perspective on the direction a workers’ comp claim takes. They usually speak with both the injured worker and the provider and can influence the process to a certain extent. One claims adjuster said, “I’ve been watching the whole opioid crisis unfold for the last 10 years. We see the opioid prescriptions coming through, and we know that many of them are not indicated by the patient’s condition, but we have limited options for preventing problems. It would be nice if we could identify the providers with good prescribing patterns and direct injured workers to those providers.”
Another claims adjuster told me, “In states with drug formularies, where opioids require prior approval, we are seeing much less opioid use on new claims. Our biggest problems are the older claims where the injured workers have been taking opioids for long periods of time. Then we start to see the prescribing of additional drugs just to treat the side effects of the opioids. The worker is already addicted, is not even getting adequate pain relief anymore, and the claim just goes on and on.”
This claims adjuster thought the best approach to the opioid problem would be to have a claims management system that alerted managers every time a new claim had an opioid prescribed. That way, “we could immediately contact the physician and make sure there was an understanding of the opioid treatment guidelines and a plan in place, right from the start, for weaning the injured worker off the drugs at the appropriate time.”
In the current climate of awareness about the risks and dangers of opioids, injured workers are often caught in the middle. They must balance their desire for pain control against their growing concerns about side effects and long-term adverse effects. One injured worker said, “I know I’m getting less pain relief than I used to from the pills, but I’m reluctant to tell my physician because I’m afraid of having to deal with my pain on my own. I’d rather suffer with the side effects I’m accustomed to than risk being in constant pain again.”
Another injured worker told me, “I went from eight pills a day to being totally opioid-free, but it took two stints in rehab and a whole lot of willpower. It’s a seductive thought, to place your trust regarding pain relief in a pill, but it’s not a long-term solution. The pills have too many disadvantages. Sooner or later you have to get off the pills and take control of your pain using other methods.” This injured worker has achieved an acceptable level of pain relief using over-the-counter medication and by practicing mindfulness.
A third injured worker reported, “I’ve been on opioids for two years now. My doctor keeps refilling the prescription, so I keep taking the pills. I have a lot of side effects, but it’s worth it to keep my pain under control. I don’t want to make any changes in my regimen and risk being in pain again. I find the negative publicity about opioids very scary. I guess someday I’ll quit them, but just not right now.”
In conclusion, injured workers, providers and claims adjusters are all seeking the right way to deal with pain. Injured workers in pain need pain relief, but they also need non-pharmacologic pain management techniques. Most treatment guidelines in workers’ compensation now recommend opioids only for acute, post-surgical pain relief for three to seven days, ideally. They are not recommended for chronic, musculoskeletal pain, e.g., for pain lasting longer than three months. Providers must take responsibility for engaging their injured workers in an active pain-management process. It doesn’t have to be a formal program; it can be an agreement between doctor and patient. Doctors have to be ready for this responsibility if they prescribe opioids; it’s poor practice — and violates the physician’s imperative to “do no harm” — to prescribe something addictive if you are not able to assist the injured worker with the weaning process.
For their part, injured workers must accept the necessity of being actively involved in their pain management and buy into not taking pills long-term that are going to result in more harm than good. They should demand that their prescribing physician discuss the medication plan with them, what the adverse effects are and what the weaning process will be like.
Finally, claims adjusters have the responsibility to be on the lookout for opioid prescriptions and to make sure that providers are prescribing them within guidelines. There are technological solutions for this. The best approach to the opioid crisis is a team approach: providers, claims adjusters and injured workers working together to avoid opioid dependence and maximize recovery, restoration of function and lasting relief from pain.
The confusion of these two terms can create issues.
The American Pain Society in 1996 described “pain as the fifth vital sign” (giving it equal status with blood pressure, heart rate, respiratory rate and temperature). The phrase created a perfect storm because it coincided with the message being delivered to medical schools and the healthcare industry that doctors had an opioid phobia and were under-treating pain. That was followed in 2000 by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) establishing standards for pain assessment and management. Then the Veterans Health Administration incorporated the new emphasis into its national pain management strategy. So, regardless of where a patient was treated and by whom, the (subjective, patient-driven) assessment of pain was one of the first questions asked and often drove treatment plans.
Then the new approach began to be questioned. A 2006 study by the VA found quantifying pain “did not increase the quality of pain management.” In June 2016, the American Medical Association recommended removing “pain as the fifth vital sign” and connected the idea to the beginning of over-prescribing of opioids. Opponents of the change say it will “make it even more difficult for pain sufferers to have their pain properly diagnosed and treated.” Proponents of the change say “pain is not a vital sign, but more of a symptom, and cannot be measured.”
The biggest problem is unrealistic expectations – patients often are told or come to believe they will be pain-free. When they’re not, and their condition becomes chronic, it sows doubt in the mind of both the patient and clinician.
The second biggest problem is that often the circumstances beyond their physical pain is ignored. I am convinced that dealing with what happens between the ears and at home is as important as what is physically wrong with the body (i.e. the biopsychosocial model).
1 – Very mild – Barely noticeable pain, like a mosquito bite or a poison ivy itch. Most of the time, you never think about the pain.
2 – Discomforting – Minor pain, like lightly pinching the fold of skin between the thumb and first finger with the other hand, using the fingernails. Note that people react differently to this self-test.
3 – Tolerable – Very noticeable pain, like an accidental cut, a blow to the nose causing a bloody nose or a doctor giving you an injection. The pain is not so strong that you cannot get used to it. Eventually, most of the time you don’t notice the pain. You have adapted to it.
4 – Distressing – Strong, deep pain, like an average toothache, the initial pain from a bee sting, or minor trauma to part of the body, such as stubbing your toe really hard. So strong you notice the pain all the time and cannot completely adapt. This pain level can be simulated by pinching the fold of skin between the thumb and first finger with the other hand, using the fingernails and squeezing hard. Note how the simulated pain is initially piercing but becomes dull after that.
5 – Very distressing – Strong, deep, piercing pain, such as a sprained ankle when you stand on it wrong, or mild back pain. Not only do you notice the pain all the time, you are now so preoccupied with managing it that your normal lifestyle is curtailed. Temporary personality disorders are frequent.
6 – Intense – Piercing pain so strong it seems to partially dominate your senses, causing you to think somewhat unclearly. At this point, you begin to have trouble holding a job or maintaining normal social relationships. Comparable to a bad non-migraine headache combined with several bee stings, or a bad back pain.
7 – Very intense – Same as 6 except the pain completely dominates your senses, causing you to think unclearly about half the time. At this point, you are effectively disabled and frequently cannot live alone. Comparable to an average migraine headache.
8 – Utterly horrible – Pain so intense you can no longer think clearly at all, and have often undergone severe personality change if the pain has been present for a long time. Suicide is frequently contemplated and sometimes tried. Comparable to childbirth or a really bad migraine headache.
9 – Excruciating, unbearable – Pain so intense you cannot tolerate it and demand pain killers or surgery, no matter what the side effects or risk. If this doesn’t work, suicide is frequent because there is no more joy in life whatsoever. Comparable to throat cancer.
10 – Unimaginable, unspeakable – Pain so intense you will go unconscious shortly. Most people have never experienced this level of pain. Those who have suffered a severe accident, such as a crushed hand, and lost consciousness as a result of the pain and not blood loss have experienced level 10.
How many times have people said their pain is a 9 or 10 (or a 47) when they’re conscious, sitting upright and drove themselves to the doctor’s office? I have seen that manifold times in hundreds of chronic pain workers’ comp claims since 2003. But it’s easy to succumb to that kind of self-assessment …
I had the flu in February and went to a CVS Minute Clinic. One of the initial questions the nurse practitioner asked me (having been prompted to do so by her practice management software) was my level of pain. I truly felt miserable — body aches, high temperature, sneezing. For a brief moment, because I wanted to ensure a prescription of Tamiflu, I wanted to catastrophize (“an irrational thought a lot of us have in believing that something is far worse than it actually is“) and say I was a 9 or 10. But then I remembered all the times I had argued against that approach. And I remembered exactly what a 9 or 10 meant. So I resisted the urge and gave myself a 5 rating. I still got the Tamiflu that started the journey to recovery.
Pain is complicated and individual, so there is not a single answer for quantifying and treating it appropriately. However, I have three high-level suggestions:
Re-calibrate the scale. The clinician should educate patients on the true meaning of 0 through 10 and help them decide on a lower number that better describes their pain. That would require an actual dialogue between the clinician and patient. I understand that pain is unique and personal. But if patients can convince themselves their pain is a 6 instead of a 10 (or a 47), then managing it seems much more achievable.
Be honest. If there is going to be residual, chronic pain, the patient should know it. And own it.
Manage the pain. In my opinion, “pain management” is a term that is often misused. You can’t manage your pain if you’re comatose (i.e. sedated on opioids, benzos, muscle relaxants, et al.). Yet we often see “pain management” as a series of pills or injections that are passive and repetitive (in some cases, I think pain management clinics have become “addicted” to the repeat office visits). At some point, patients need to manage their pain rather than allowing the pain to manage them, and be taught how to do that. That could mean yoga, an active lifestyle, better nutrition, biofeedback, proper sleep hygiene, deep breathing exercises, mindfulness, volunteer work or any number of other methods in combination or isolation that work for the patient. The key is an internal locus of control (“he or she can influence events and their outcomes“).
I’m not saying pain isn’t real. For those dealing with chronic pain, it is very real. But I’ve chatted with and observed too many people with significant chronic pain who overcome it on a daily basis to live productive and happy lives. I know that chronic pain does not have to win. Instead, we need to re-define pain, re-define suffering and help people take back control of their lives.
Transparent reinsurance programs could emerge as significant opportunities for healthcare providers, issuers, reinsurers, technology innovators and regulators to address health insurance.
The message is clear. Having to factor in higher costs associated with new entrants to the healthcare system gives insurance firms license to charge higher rates. If these new people were put into a reinsurance pot for three to five years with costs spread over all insurers, no one insurer would be unnecessarily burdened. After this period, costs for these entrants could be reexamined and a decision could be made on how to proceed with them, depending upon the deviation from the remaining population.
Several factors are coming into play.
United Health Group indicates it will be leaving all but a few of the 34 states where it is offering health insurance under Obamacare.
A fresh Blue Cross Blue Shield study finds recent Obamacare entrants have higher rates of specific illnesses and used more medical services than early entrants. “Medical costs of care for the new individual market members were, on average, 19% higher than employer-based group members in 2014 and 22% higher in 2015. For example, the average monthly medical spending per member was $559 for individual enrollees versus $457 for group members in 2015,” the study found.
What emerges in conversations with economists, regulators and healthcare actuaries is a sense that properly designed, fair and transparent reinsurance could—and would—advance industry and public policy goals to continue insurance for all at affordable prices. This approach would represent tangible improvements over inefficient, incumbent systems. Information would be used by insurers and reinsurers, providers and regulators and, crucially, insureds to establish best performances for healthcare outcomes and expenses. Virtually everyone knows that state or regional reinsurance would have to be mandated, as voluntary systems could be gamed.
“The implementation of new policies, the availability of research funding, payment reform and consumer- and patient-led efforts to improve healthcare together have created an environment suitable for the successful implementation of patient-reported outcome measures in clinical practice,” fresh research in Health Affairs also indicates.
Risk analysis technologies could help issuers, reinsurers, healthcare institutions and citizens rein in the healthcare system’s enormous costs. Earlier this year, the Congressional Budget Office and Joint Committee on Taxation projected that, “in 2016, the federal subsidies, taxes and penalties associated with health insurance coverage will result in a net subsidy from the federal government of $660 billion, or 3.6% of gross domestic product (GDP). That amount is projected to rise at an average annual rate of 5.4%, reaching $1.1 trillion (or 4.1% of GDP) in 2026. For the entire 2017–2026 period, the projected net subsidy is $8.9 trillion.”
CBO/JCT published this stunning projection amid consensus that $750 billion to $1 trillion of wasted spending occurs in healthcare in the U.S. “Approximately one in three health care dollars is waste,” Consumer Reports says.
Key metrics should focus on estimates of risk using demographics and diagnoses; risk model descriptions; calculation of plan average actuarial risk; user-specified risk revealing and detailing information; drill-down capabilities clarifying research; monitoring and control; and calculation and comparison measures to address reinsurance validation.
Several major refinements yielding and relying upon granular, risk-revealing data and metrics would support more efficient reinsurance. All would, and could, update reinsurance information and address customer experience, trust and privacy concerns.
“Advanced analytics are the key,” remarked John Wisniewski, associate vice president of actuary services at UPMC Health Plan. “Predictive capability that looks at the likelihood a patient admission may be coming is the information that we can give to doctors to deal with the matter. … Whoever develops algorithms for people who will be at risk—so providers can develop plans to mitigate risk—will create value for issuers, providers and members alike.”
Available technologies support the connecting of risk assessments with incentives for risk information.
Michael Erlanger, the founder and managing principal of Marketcore, said,“We cannot know what we cannot see. We cannot see what we cannot measure. These available technologies provide clarity for more efficient health insurance and reinsurance.”
Context: Three Rs: Reinsurance, Risk Corridors and Risk Adjustment
When Congress enacted the ACA, the legislation created reinsurance and risk corridors through 2016 and established risk adjustment transfer as a permanent element of health insurance. These three Rs—reinsurance, risk corridors and risk adjustment—were designed to moderate insurance industry risks, making the transition to ACA coverage and responsibilities. The Centers for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services (HHS) administers the programs. All address adverse selection—that is, instances when insurers experience higher probabilities of losses due to risks not factored in at the times policies are issued. All also address risk selection, or industry preferences to insure healthier individuals and to avoid less healthy ones.
With the expiration of ACA reinsurance and risk corridors, along with mandatory reporting requirements this December, healthcare providers, issuers, reinsurers, technology innovators and regulators can now evaluate their futures, separate from CMS reporting.
Virtually all sources commend reinsurance and risk adjustment transfer as consistently as they deride risk corridors. Reinsurance has paid out well, while risk corridors have not. Risk adjustment transfer remains squarely with CMS.
While House Republican initiatives try and fail to repeal the ACA, and some news programs and pundits say it is unsustainable, approximately 20 million subscribers are enrolled in Obamacare: with 12.7 million as marketplace insureds, with others through Medicaid and as young adults on parent plans. President Obama, in March, remarked: “Last summer we learned that, for the first time ever, America’s uninsured rate has fallen below 10%. This is the lowest rate of uninsured that we’ve seen since we started keeping these records.” Subscription ratios are off the charts. Premium increases have been modest, approximately 6% for 2016, experts find. “I see no risk to the fundamental stability of the exchanges,” MIT economist Jonathan Gruber observed, noting “a big enough market for many insurers to remain in the fold.”
Transitional Reinsurance 2014-16: Vehicle for Innovation
One of the great benefits of the ACA is eliminating pre-existing conditions and premium or coverage variables based on individual underwriting across the board. Citizens are no longer excluded from receiving adequate healthcare, whether directly or indirectly through high premiums. Prices for various plan designs go up as coverage benefits increase and as co-pays and deductibles decrease, but the relative prices of the various plans are calculated to be actuarially equivalent.
To help issuers make the transition from an era when they prided themselves on reducing or eliminating less healthy lives from the insureds they covered, to an era where all insureds are offered similar ratings, the ACA introduced reinsurance and risk corridors to cover the first three years (2014 through 2016), in addition to risk adjustment transfer, which will remain in force.
The concept is relatively simple: Require all issuers to charge a flat per-dollar, per-month, per-“qualified” insured and create a pot of money with these “reinsurance premiums” that reimburses issuers for excess claims on unhealthy lives. Issuers would be reimbursed based on established terms outlined in the ACA.
Reinsurance reimburses issuers for individual claims in excess of the attachment point, up to a limit where existing reinsurance coverage would kick in. Individuals involved with these large claims may or may not be identified in advance as high-risk. The reimbursed claim may be an acute (non-chronic) condition or an accident. The individual may otherwise be low-risk.
The important aspect is that all health insurance issuers and self-insured plans contribute. By spreading the cost over a large number of individuals, the cost per individual of this reinsurance program is small to negligible. Non-grandfathered individual market plans are eligible for payments. A state can operate a reinsurance program, or CMS does on its behalf through this year.
As a backstop, the federal government put some money in the pot through 2016—just in case the pot proved inadequate to provide full reimbursement to the issuers. In a worst-case scenario, the sum of the reinsurance premiums and the federal contribution could still be inadequate, in which case the coinsurance refund rate would be set at less than 100%.
As it turned out, 2014 reinsurance premiums proved to be more than adequate, so the refund rate was 100%, and the excess funds in the pot after reimbursement were set aside and added to the pot for 2015, just in case that proves inadequate.
Reinsurance functions on this timetable through this year:
CMS transferred approximately $7.9 billion among 437 issuers—or 100% of filed claims for 2014, as claims were lower than expected— and it has yet to release 2015 payments. The results for 2015 are coming this summer.
From the outset, states could, and would, elect to continue reinsurance, the CMS contemplated. In 2012, the CMS indicated that “states are not prohibited from continuing a reinsurance program but may not use reinsurance contribution funds collected under the reinsurance program in calendar years 2014 through 2016 to fund the program in years after 2018.”
Subsequent clarification in 2013 did not disturb state discretion. Current regulation specifies that “a state must ensure that the applicable reinsurance entity completes all reinsurance-related activities for benefit years 2014 through 2016 and any activities required to be undertaken in subsequent periods.”
One course of action going forward from 2017 and varying from state-to-state could be mandatory reinsurance enacted through state laws. Healthcare providers, issuers, reinsurers, regulators and legislators could define the health reinsurance best suited to each state’s citizens.
Reinsurers could design and manage administration of these programs possibly at a percentage of premium cost that is less than what is charged by the federal government today. While these reinsurance programs would be mandated, they could include a component of private reinsurance. For example, reinsurers could guarantee the adequacy of per-month reinsurance premiums with provisos that if these actuarially calculated rates turned out to be inadequate in any given year or month, there will be an adjustment to account for the loss in the following year. Conversely, if those rates turn out to be too high, 90% or more is set aside in an account for use in the following year. This way, reinsurers could participate by providing a private sourced solution to adverse claims.
Risk corridors apply to issuers with Qualified Health Plans (exchange certified plans) and facilitate transfer payments. The CMS noted: “Issuers whose premiums exceed claims and other costs by more than a certain amount pay into the program, and insurers whose claims exceed premiums by a certain amount receive payments for their shortfall.” Technically, “risk corridors mean any payment adjustment system based on the ratio of allowable costs of a plan to the plan’s target amount,” as the CMS designated.
Risk corridors are politically contentious. Sen. Marco Rubio (R-Florida) likened risk corridors to bailouts. The HHS acknowledged it will “explore other sources of funding for risk corridors payments, subject to the availability of appropriations… includ[ing] working with Congress on the necessary funding for outstanding risk corridors payments.” And, a knowledgeable analyst, Dr. David Blumenthal, noted that risk corridors are not bailouts.
Going forward, evaluations of risk corridors will demand due diligence. Several health exchanges failed from any number of factors—from too little capital for growth experienced, inadequate pricing, mismanagement or risk corridor payments.
Whether innovation can yield effective risk corridors or whether risk corridors will simply fade out as transitional 2014-2016 regulation will depend on institutional and industry participants. Risk corridors did not score unalloyed approbation among sources.
Risk Adjustment: Permanent Element of ACA
Risk adjustment remains in force and impels issuers with healthier enrollees to offset some costs of issuers with sicker ones in specific states and markets and of markets as a means toward promoting affordable health care choices by discouraging cherry picking healthier enrollees.
The HHS transferred approximately $4.6 billion for risk adjustment among issuers for 2014.
At first blush, one might postulate that risk adjustment does the job and that reinsurance and risk corridors could just as reasonably fade out. There is some logic to that argument.
On the other hand, state or regional level reinsurance could make up for risk adjustment shortfalls. In some instances, risk adjustment seems to be less friendly to issuers that take on higher-risk individuals, rather than rewarding high tech issuers and providers with back office capabilities coding claims in such a way as to tactically game risk adjustment.
Evaluating and cultivating these opportunities are timely amid the uncertainties of the presidential and congressional elections that may yield executive and legislative lawmakers intent on undoing ACA provisions, starting with risk corridors. Such legislation could produce losses for issuers and reinsurers.
Nelson A. Rockefeller Precedent
In 1954, then-Undersecretary of Health Education and Welfare Nelson A. Rockefeller proposed reinsurance as an incentive for insurers to offer more health insurance. S 3114, A Bill to Improve the Public Health by Encouraging More Extensive Use of the Voluntary Prepayment Method in the Provision of Personal Health Services, emerged in the first Eisenhower administration to enact a federally funded health reinsurance pool. Rockefeller intended the reinsurance as a means toward an end, what would eventually be dubbed a “third way” among proponents of national health insurance. President Truman and organized labor championed the approach into the mid-’50s. So did the Chamber of Commerce and congressional Republican adversaries of the New Deal and Fair Deal, who were chaffing to undo Social Security as quickly as they could. The American Medical Association also supported this third way because it opposed federal healthcare reinsurance as an opening wedge for socialized medicine. Despite limiting risk and offering new products, insurers demurred because of comfort zones with state regulators and trepidation about a federal role.
Nelson A. Rockefeller, then-undersecretary of the Department of Health, Education and Welfare, presenting a federally funded health reinsurance plan, 1954.
Source: Department of Health Education and Welfare—now Health and Human Services
Rockefeller’s health reinsurance plan would “achieve a better understanding of the nation’s medical care problem, of the techniques for meeting it through voluntary means, and of the actuarial risks involved,” HEW Secretary Oveta Culp Hobby testified to a Senate subcommittee in 1954.
Rockefeller’s health reinsurance plan did not make it through the House. Organized labor decried it as too little, the AMA said it was too intrusive. Upon hearing news of the House vote, a frustrated Dwight Eisenhower blistered to reporters, “The people that voted against this bill just don’t understand what are the facts of American life,” according to Cary Reich in The Life of Nelson A. Rockefeller 1908-1958. “Ingenuity was no match for inertia,” Rockefeller biographer Richard Norton Smith remarked of industry and labor interests in those hard-wired, central-switched, mainframe times.
“’It’s déjà vu all over again’ like Yogi Berra,” said one insurance commissioner immersed in the ACA on hearing Ike’s quote.
The idea of national health insurance went nowhere despite initiatives by Sen. Edward M. Kennedy (D-Massachusetts) in the late ’70s and President Bill and First Lady Hillary Clinton roughly 20 years ago, until Congress legislated Obamacare.
Innovative, Transparent Technologies Can Deliver Results
Nowadays, more than 60 years after Rockefeller’s attempt, innovative information technologies can get beyond these legislative and regulatory hurdles. Much of the data and networking is at hand. Enrollee actuarial risks, coverage actuarial values, utilization, local area costs of business and cost-sharing impacts on utilization are knowable in current systems. Broadband deployment and information technology innovations drive customer acquisition and information management costs ever lower each succeeding day. Long-term efficiencies for reinsurers, insurers, carriers, regulators, technology innovators and state regulators await evaluation and development.
Reinsurance Going Forward From 2017
So, if state reinsurance programs can provide benefits, what should they look like, and how should they be delivered?
For issuers, state-of-the-art transparent solutions improve the current system by enabling issuers to offer more products and services and becalm more ferocious industry adversaries while lowering risks and extending markets. Smaller, nimbler issuers may provide more innovative solutions and gain market share by providing the dual objectives of better health outcomes with lower costs.
For regulators, innovative, timely information sustains the indispensability of state regulators ensuring financial soundness and legal compliance—while allowing innovators to upgrade marketplace and regulatory systems, key regulatory goals that Iowa’s insurance commissioner, Nick Gerhart, pointed out recently. Commissioner Gerhart envisions regulators as orchestra conductors, acknowledging that most insurance regulatory entities are woefully understaffed to design or operate such reinsurance programs themselves, but they will, and they can lead if the participants can provide turnkey capabilities.
Think of health insurance and reinsurance as generational opportunities for significant innovation rather like the Internet and email. When the Department of Defense permitted the Internet and email to evolve to civilian markets from military capabilities in the 1980s, the DOD initially approached the U.S. Postal Service. Senior Post Office management said it welcomed the opportunity to support email: All users need do is email correspondence to recipients’ local post offices by nine p.m. for printing, enveloping, sorting and letter-carrier delivery the following day.
Similarly, considerable opportunities chart innovative pathways for state and regional health reinsurance for 2017 and beyond.
One path, emulating the post office in the ’80s, keeps on coding and bemoans a zero sum; it would allow the existing programs to fade away and will respond to whatever the president and Congress might do.
Another path lumps issuer health reinsurance as an incumbent reinsurer service without addressing the sustainability of state health exchanges or, indeed, any private health insurers in the absences of risk spreading with readily available information technologies.
The approach suggested here—mandated state health reinsurance—innovates to build sustainable futures. Enabling technologies empower all stakeholders to advance private and public interests through industry solutions advancing affordable healthcare.
Unnecessary surgery: When is it going to end? Not any time soon, unless a documented and proven approach is used by health benefit plan sponsors.
I began my healthcare career 35 years ago when, as a graduate student at Columbia University School of Public Health, I was awarded a full scholarship as a public health intern at Cornell Medical College in New York City. Dr. Eugene McCarthy at Cornell was the medical director of a Taft-Hartley joint union/management health benefits self-administered fund at the time and my mentor. I worked on the Building Service 32 B-J Health Fund, which was the focus of an eight-year study sponsored by the then-Department of Health, Education and Welfare (now Health and Human Services, or HHS) and which was the first study on second surgical opinions.
The study (1972-1980) followed union members and their families who were told they needed elective surgery and documented that roughly 30% of recommended surgeries turned out to be medically unnecessary. The study found 12 surgeries that generated the most second opinions that didn’t confirm the original diagnosis. This list comprises: back surgery, bone surgery and bunions of the foot, cataract removal, cholecystectomy, coronary bypass, hysterectomy, knee surgery, mastectomy, prostatectomy, hip surgery, repair of deviated septum and tonsillectomy.
What has changed on this list 35 years later? Very little, if anything.
USA Today on March 12, 2013, reported on a study that found that; “tens of thousands of times eachyear patients undergo surgery they don’t need.” After the release of this study, a former surgeon and professor at the Harvard School of Public Health stated that: “It is a very serious issue, and there really hasn’t been much movement to address it.”
A CNN special on March 10, 2013, reported that the U.S. spent $2.7 trillion on healthcare per year and that 30%, or roughly $800 billion, was wasted on care that did not improve outcomes. Sound familiar? The Cornell study said the same thing 31 years earlier.
Public and private employers, health, disability and workers’ comp insurers and state and federal programs such as Medicare and Medicaid are doing very little, if anything, to effectively address this problem. The solution to preventing unnecessary care and surgery is not in raising co-pays and deductibles and other out of pocket costs unless they are tied to consumer education and well-designed second-opinion programs.
In response to the USA Today article, a leading medical expert said, “You can shop for a toaster better than prostate surgery, because we don’t give patients enough information.” Another leading surgeon stated; “Far too many patients are having surgeries they don’t need, with associated major and severe complications such as long-term disability and even death.” Furthermore, “I see patients with neck and back problems, and at least 1/3 are scheduled for operations they don’t need, with no clinical findings except pain.”
What is the principal focus of today’s multibillion-dollar managed care industry, especially in workers’ compensation? Provider discounts, that’s what. But how is it a savings if the patient receives a discount on an operation he doesn’t need?
Most often, when I ask that question I am met with blank stares.
The New England Journal of Medicine in 2009 stated that a common knee surgery for osteoarthritis “isn’t effective in treating patients with moderate to severe forms of the disease.” Yet, according to federal researchers, 985,000 Americans have arthroscopic knee surgery each year, and 33% (more than 300,000) are for osteoarthritis “despite overwhelming medical evidence that arthroscopic surgery is not effective therapy for advanced osteoarthritis of the knee.”
According to the chairman of cardiovascular medicine at the world-renowned Cleveland Clinic, the U.S. health system is “doing a lot of heart procedures that people don’t need.” For example, angioplasty stent surgery in heart patients will likely relieve pain but “will not help a person live longer and will not protect against having another heart attack… What’s worse is that many of these surgeries will lead to bad outcomes.” He said, “This procedure should be performed for patients having a heart attack, but 95% of patients who have angioplasty surgery are not the result of a heart attack.”
The estimate on the direct medical costs to American businesses for low back pain is $90 billion a year; this doesn’t include workers’ compensation indemnity and litigation costs, disability costs, sick days and indirect costs such as lost productivity. As reported in my previous article, The Truth about Treating Low Back Pain, the Journal of the American Medical Association (JAMA) estimated that 40% of initial back surgeries, which amounts to more than 80,000 patients per year, have “failed back surgeries.” These unsuccessful back surgeries most often lead to a lifetime of debilitating back pain and billions more in long-term disability and Social Security Disability Insurance (SSDI) costs. These patients — four out of every 10 — all wish they had received a second opinion now. Yet when I recommended a second-opinion program to a union health fund in New Jersey, the manager said: “I am not going to tell my union members they need to get a second opinion.” True story.
Although we were scheduled to have an informal lunch meeting, after I recommended the fund consider a second-opinion program the “lunch” part of the meeting disappeared, even though I had driven two hours to get there. Maybe that is where the expression there is “no such thing as a free lunch” comes from? The health fund manager was downright indignant about my suggestion even though the first-second opinion program was conducted on behalf of a union health fund and was overwhelmingly successful.
He did describe, however, how upset he was about the fund’s rising healthcare costs. I guess he just wanted to be able to complain about it instead of actually doing something about it on behalf of his members. (The president of the union confided in me afterward that he had failed back surgery many years ago and wished he had gone for a second opinion.)
A colleague of my mine who is a senior vice president of product development for a leading third-party administrator (TPA) confided that insurance companies and TPAs will not implement programs that I could design and implement for their clients because they would never admit it was a good idea, given that they didn’t invent it.
I also hear all the time from so-called experts that second surgical opinions don’t work and don’t save money.
But large self-insured employers and health, disability and workers’ comp insurers should follow the lead of the top sports teams who send their top athletes for second opinions all the time to places like the Hospital for Special Surgery (HHS) and New York-Presbyterian Hospital/Columbia Medical Center in Manhattan or UCLA Medical Center in Los Angeles.
When I send client employees or friends and neighbors for second opinions, they often tell me that their appointment was with the same doctor Tiger Woods or Derek Jeter went to. My response is, “exactly.” Very often, conservative treatment is recommended and produces great patient outcomes, especially for back injuries and diagnoses for conditions like carpal tunnel syndrome. (See Carpal Tunnel Syndrome: It’s Time to Explode the Myth.)
Most, if not all, top surgeons I have met welcome second opinions for their patients because, when surgery is recommended, they want their patients to be assured that another expert also believes it is in their best interests.
I interned at the first second-surgical opinion in the country. I wrote my master’s thesis at Columbia on what I learned and how to improve upon the design and administration of the very successful Cornell program. Although the phrase, “I want a second opinion,” is now common terminology in America from auto repair to surgery, it has not reduced the overall amount of unnecessary surgery. If your program is not successful or not saving money it is because there is a serious flaw in the design and administration.
What I have documented since I designed or administered the first corporate second-opinion benefit programs back in the early 1980s are several key components of a successful program. First, it must be mandatory for the plan member to receive a second opinion for selected elective surgeries. Remember, elective surgery, by definition, means scheduled in advance, not for life-threatening conditions. Second, the second-opinion physician must not be associated with the physician recommending surgery. The physician must truly be an independent board-certified expert. Third, the second-opinion physician cannot perform the surgery; this provision removes any conflict of interest.
In addition, although a plan member should be required to receive a second opinion to receive full benefits under the health plan, the decision on whether to have surgery is entirely up to the patient. The whole idea is to educate the patient on the pros and cons of proposed surgery and the potential benefits for non-surgical treatment or different type of surgery (lumpectomy vs total mastectomy, for example). (I also developed a process of administrative deferrals for instances when it would be impractical to obtain a second opinion or when the conditions were so overwhelming that the need for a second opinion could be waived.)
It is only by helping to make patients truly informed consumers of healthcare and educating them on the benefits of alternative surgical treatments that a program can be successful. Voluntary programs simply don’t work. Rarely do patients seek second opinions on their own, and most often do not know where to obtain and arrange for a top-notch second opinion. In addition, they often feel uncomfortable and do not want to tell their physician they are seeking a second opinion. That is why I found that a program only really works when patients can state that their “health plan requires that I get a second opinion.” The mandatory approach reduces unnecessary surgery dramatically and saves the plan sponsor money with at least 10:1 return on investment.
The most amazing reduction of unnecessary surgery and resulting savings to the plan sponsor comes simply by implementing and communicating the benefits and requirements of the program design that I outlined above. The reason is known as the “Sentinel Effect.” What the original Cornell study and others have documented is at least a 10% reduction in the amount of recommended elective surgery simply from announcing the program is now in effect. No need for an actual second opinion; merely require one!