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Medical Cost Containment – What are the cost drivers?. Scott Brener, J.D. Vice President and General Counsel with SFM Mutual Insurance Company Dr. Nicholas Tsourmas Medical Director with Texas Mutual Shannon Pounds, J.D. Staff Attorney with Texas Mutual. The Context - MN.

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Medical cost containment what are the cost drivers

Medical Cost Containment – What are the cost drivers?

Scott Brener, J.D.

Vice President and General Counsel

with SFM Mutual Insurance Company

Dr. Nicholas Tsourmas

Medical Director with Texas Mutual

Shannon Pounds, J.D.

Staff Attorney with Texas Mutual


The context mn
The Context - MN

  • Injury rates have fallen dramatically in Minnesota…

  • Yet, costs since 1997 have taken a different trajectory:

Paid claims per 100 full-time-equivalent workers, injury years 1997-2008

System cost per $100 of payroll, 1997-2008

Minnesota Workers’ Compensation System Report, 2008


The context
The Context

  • Medical benefits now cost more than wage benefits

medical

wage

medical

wage

(inclusive of vocational rehab benefits)

Minnesota Workers’ Compensation System Report 1999 and 2008


The context1
The Context

Robertson J, Corro D, Schaff D “What Can Workers Compensation Learn From Group Medical Insurance?” NCCI Research Brief July 2005

Similar injuries cost more in workers’ compensation than in general health


The current controls

An 18.5% reduction in average medical cost per claim from 1992 to 1995.

Research & Statistics, Minnesota Department of Labor and Industry, 2005

The Current Controls

Fee Schedule - Managed Care - Treatment Parameters

… did work at first


The current controls1

A 68% increase in average medical cost per claim from 1997 to 2006.

Research & Statistics, Minnesota Department of Labor and Industry, 2007

The Current Controls

Fee Schedule - Managed Care - Treatment Parameters

… and then not so good


The battlegrounds
The Battlegrounds to 2006.

Provider Reimbursement / Fee Schedule

Pharmaceuticals

Hospital Costs

Managed Care

Treatment Parameters


Provider reimbursement fee schedule
Provider Reimbursement/Fee Schedule to 2006.

  • Inflationary spiral

  • Service coverage has eroded


Pharmaceutical dilemma

Pharmaceutical Dilemma to 2006.

Nationwide & TX

Dr. Nicholas Tsourmas

Medical Director with Texas Mutual


Prescription drugs misuse and abuse
PRESCRIPTION DRUGS to 2006.Misuse and Abuse

10



Facts
FACTS to 2006.

Drug users at a minimum consume almost twice the medical benefits as non-users, are absent 1.5 times as often, and make more than twice as many workers’ compensation claims.Source: U.S. Center for Substance Abuse Prevention, NCADI

Most people take prescription medications responsibly; however, an estimated 48 million people (ages 12 and older) have used prescription drugs for non-medical reasons in their lifetimes. This represents 20 percent of the U.S. population.Source: Online NIDA Research Report from the Director, April 2006.

12


PRESCRIPTION DRUG SPENDING to 2006.Increased Spending is primarily due to increased use. (Reinhardt et al., 2004)

13


Prescription drug spending prescription drugs are consuming more health costs reinhardt et al 2004
PRESCRIPTION DRUG SPENDING to 2006.Prescription Drugs are consuming more health costs.(Reinhardt et al., 2004)

14


Texas facts
TEXAS FACTS to 2006.

  • The total impact of alcohol and drug abuse in Texas cost the state’s economy an estimated $25.9 billion for 2000.

  • The cost is representative of significant direct and indirect costs in the form of reduced and lost productivity (43.1%), crime (27.7%), premature death (18.6%), health care, law enforcement, property damage, motor vehicle accidents, and social welfare administration.

  • On a per capita basis, this represents $1,244 for every man, woman and child in Texas.

    Source: TCADA Media Archive, December 12, 2002

15


Types of drugs
Types of Drugs to 2006.

Hydrocodone, alprazolam, and benzodiazepine products continue to comprise the majority of prescription controlled drugs abused in North Texas.

OxyContin has surpassed hydrocodone as the drug of choice for abusers seeking pharmaceuticals in the Tyler area.

The most commonly abused pharmaceutical drugs in Houston continue to be Hydrocodone, Promethazine with Codeine and other Codeine cough syrups, and Benzodiazepines (mostly Alprazolam).

OxyContin abuse is on the increase, with most illegal prescriptions being written by pain management doctors.

In addition to the aforementioned, commonly abused pharmaceutical drugs in San Antonio include Morphine, Dilaudid, Diazepam, Xanax, Tussionex, Lortab, Vicodin, and Ketamine.

http://www.dea.gov/pubs/states/texas.html

16


Threat assessment
Threat Assessment to 2006.

The recent increase in the extent of prescription

drug abuse in this country is quite likely the result

of a confluence of factors, such as significant

increases in the number of prescriptions; significant

increases in drug availability; aggressive

marketing by the pharmaceutical industry; the

proliferation of illegal Internet pharmacies that

dispense these medications without proper prescriptions

and surveillance; and a greater social

acceptability for medicating a growing number

of conditions.Source: Statement by National Institute on Drug

Abuse Director Nora D. Volkow, M.D., before the

Subcommittee on Criminal Justice, Drug Policy, and

Human Resources, U.S. House of Representatives,

July 26, 2006.


$$$$ to 2006.

Illicit Finance

Insurance fraud is used to finance the purchase

of CPDs. According to law enforcement

reporting, some individuals and criminal groups

divert CPDs through doctor-shopping and use

insurance fraud to fund their schemes. In fact, Aetna,

Inc. reports that nearly half of its 1,065 member

fraud cases in 2006 (the latest year for which data

are available) involved prescription benefits, and

most were related to doctor-shopping, according

to the Coalition Against Insurance Fraud (CAIF).

CAIF further reports that diversion of CPDs collectively

costs insurance companies up to $72.5 billion


$$$$$ to 2006.

Individual insurance plans lose an estimated

$9 million to $850 million annually, depending

on each plan’s size; much of that cost is passed

on to consumers through higher annual premiums.

CAIF also reports that a typical doctor-shopper can

cost insurers between $10,000 and $15,000 per year

in total costs related to diversion as well as emergency

room treatment, hospital stays, physician’s

office visits, tests, and rehabilitation.


Addressing the issue
Addressing the Issue to 2006.

RX Program

Letter to treating doctor-medication profile

Response-positive changes or no changes

Peer Review

Second letter with Peer

Response-positive changes or no changes

Telephonic contact with doctor by designated physician

Consideration to MQRP


New solutions in minnesota pharmaceutical treatment parameter initiatives

New Solutions in Minnesota: to 2006.Pharmaceutical Treatment Parameter Initiatives

Scott Brener, J.D.

Vice President and General Counsel SFM Mutual Insurance Company


New solutions in process
New Solutions- to 2006.In Process

  • New Solutions- In Process

    • New treatment parameters for commonly used medications

    • Rules requiring use of older, less expensive drugs in most situations

    • Time and quantity parameters for the use of selected drugs for specific conditions


Hospital issues in minnesota

Hospital Issues in Minnesota to 2006.

Scott Brener, J.D.

Vice President and General Counsel SFM Mutual Insurance Company


Hospital costs
Hospital Costs to 2006.

WC pays 85-100% of the bill compared to 46-65% paid by other types of insurance

More services are being provided by hospitals

Hospital charges have risen faster than those of other providers (except pharmacies)

Only a small proportion of hospital services are subject to meaningful cost controls


Hospital costs1
Hospital Costs to 2006.

Medical Fee Schedule

  • Does not apply at all to small hospitals*

    - They are paid 100% of whatever they bill for both in-patient and outpatient services

    ( * small hospitals have less than 100 beds – set by statute)

  • And, there is no fee schedule for in-patient services at large hospitals- They are paid 85% of whatever they bill for in-patient services


Hospital costs2
Hospital Costs to 2006.

Implants

Prior proposals included:

  • Limited mark-up:

    • 50% for devices ≤ $500

    • 30% for devices from $500.01 to $1000.00

    • 25% for devices > $1000.00


Managed care in minnesota

Managed Care in Minnesota to 2006.

Scott Brener, J.D.

Vice President and General Counsel SFM Mutual Insurance Company


Managed care
Managed Care to 2006.

Number of plans has dropped from 10 in 1995 to 3 currently

Plans are not allowed to negotiate payments with network providers

Plans are required to provide a large set of services even if duplicative of insurer activities

Employees are not required to use the network


Managed care1
Managed Care to 2006.

Research in a number of states shows that managed care reduces both medical & indemnity costs with the same functional outcomes

In other states, up to 15% of the reduction in costs is due to negotiation of fees with network providers

In other states, costs are up to 10% lower when employees are required to use the network


Treatment guidelines

Treatment Guidelines to 2006.

Shannon Pounds, J.D.

Staff Attorney with Texas Mutual


Cost containment strategy treatment guidelines
Cost containment strategy: treatment guidelines to 2006.

Texas adopted Official Disability Guidelines – Treatment in Workers’ Compensation, effective May 2007, for all non-emergency, non-network health care.

Follow up to reforms to preauthorization requirements: spinal surgery (2002), work hardening/conditioning and rehab services (2004), and PT/OT (2005)



Cost containment strategy treatment guidelines1
Cost containment strategy: treatment guidelines to 2006.

  • Effects of reforms:

    • Excessive service utilization has reduced significantly since 2003:

      • Total costs decreased by 24%

      • Average claim cost lower by 17%

        • 12% from effects of preauthorization reforms (2006)

        • 5% from effects of adoption of ODG (2007) and residual preauthorization effect

    • Reductions mainly in physical medicine services, especially chiropractic services


Cost containment strategy treatment guidelines2
Cost containment strategy: treatment guidelines to 2006.

  • Treatment guidelines not (yet) as effective as preauthorization reforms.

    • Preauthorization reforms had immediate effects due to regulatory requirements

    • No universal approach to how we use treatment guidelines

      • Cannot just start denying care

      • Prescription medications


Cost driver legal challenges
Cost driver: legal challenges to 2006.

  • Gianzero v. Wal-Mart (filed 3/24/09)

    • U.S. District Court of Colorado

    • Class action (certified on 3/29/10)

      • All persons who have received or have attempted to obtain, or will in the future receive or attempt to obtain workers’ comp benefits for compensable injuries sustained while an employee of Wal-Mart

    • Violations of RICO and Colorado Consumer Protection Act


  • Gianzero v. Wal-Mart to 2006.

    • Allegation: Defendants conspired to control and manipulate the system of medical care providers that provides medical treatment to employees of Wal-Mart who are injured on the job.

    • Lead plaintiff injured thumb in 2005. ALJ found that

      • Concentra delayed referral to specialist

      • Treatment protocols did not cover chiro visits

      • Preauth required for PT and specialist referrals


Cost driver aging workforce
Cost driver: aging workforce to 2006.

  • Degenerative conditions

    • Current science → evidence-based medicine

    • Disputes/acceptance of conditions, not body parts

    • Strengthened causation standards

      • Transcontinental Ins. Co. v. Crump, 2010 WL 3365339 (8/27/10)

      • “Producing cause” means "a substantial factor in bringing about the injury or death and without which the injury or death would not have occurred."


QUESTIONS? to 2006.


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