Massachusetts has the lowest workers comp rates among the major industrial states and just about the lowest rates in the nation. The cost of comp in the other New England states is roughly double that in the Bay state. So you would think that the rates in MA would at best stay the same from year to year, or increase slightly. Well, think again. Martha Coakley (yes, that Martha Coakley), the current and future Attorney General, has brokered a deal for yet another rate reduction: an average of 2.4 percent across all classifications. The insurance industry had argued for an increase of 4.5 percent. I guess they did not exactly convince Martha.
The AG thinks that the insurers are overstating future losses. In my experience with carriers operating in MA, they are actually understating losses, but that’s a matter for the actuaries. If, as the AG argues, rates are too high in MA, what can you possibly make of rates in the other New England states and across the country? Are MA employers really that much better at preventing injuries and at getting injured workers back to their jobs? If you buy that argument, I have a nice bridge spanning the Mystic River that you might be interested in owning.
The trends in MA are no different from those across the country: while frequency is down, severity is rising at an alarming rate. In MA, severity is spiraling out of control. The state’s generous wage benefit structure, combined with a first rate (and pricy) medical system and a judiciary that tilts strongly toward the injured worker, are making six figure reserves all too common. It’s truly puzzling that the AG can look at the performance numbers for the insurance industry and conclude that rates are too high. They are way too low.
Politics: Local and Loco
It’s not hard to fathom why an elected official chooses to drive deflated rates even lower. It’s politically popular; any rate increase – even the marginal bump proposed by the industry – would be met with howls of outrage from small businesses, who are already under seige in a struggling economy. Strange to say, the depressed cost of comp is subsidizing the otherwise high cost of doing business in MA.
The AG is not finished with her rate scalpel: she thinks a few more points can be carved out next year. It will be fascinating to see how the carriers respond. Not too many folks think there is much money to be made in MA comp. And that rapidly dwindling club is about to get a lot smaller.
Posts Tagged ‘politics’
The Politics of Workers Comp Rates
Wednesday, May 12th, 2010Medicare and Physician Pay: Jim Bunning’s Bean Ball
Wednesday, March 3rd, 2010There are four things that are memorable about Jim Bunning’s professional baseball career: First, tossing a perfect game for the Philadelphia Phillies against Trace Stallard and the New York Mets on the afternoon of 21 June 1964, lowering his ERA to 2.07 in the process (Phillies: 6 runs, 8 hits and no errors; Mets: Zip, Nada and Zilch); second, finishing second in the Cy Young voting in 1967 (Mike McCormick of the Giants won with 18 first place votes; Bunning got one, but, hey, it was good enough for the silver medal); third, from 1955 to 1963 while pitching for the Tigers, striking out Ted Williams more than any other pitcher Williams faced (and, as Jim Bouton’s Memoir, Ball Four, tells it, Teddy Ballgame did not like it one bit); and fourth, entering the Hall of Fame compliments of the Veterans Committee in 1996.
About this time in Washington, DC, there are many Republican Senators, baseball fans all, who are wishing that the 6’3″, 190 pound righthander had called it quits right there and retired to the backwoods of Kentucky. But, of course, he didn’t. He had to go ruining it all by running for and winning a Senate seat from the blue grass state in 1998; and then he did it again in 2004! The political version of the Peter Principle.
Republicans politely call him “cantankerous” – at least that’s what they say in public. Behind the scenes, they’re not so nice about it. Senator Bunning marches to his own drummer, and always has.
One Pitch, Three Strikes
He’s retiring this year, but not before throwing one more hard-breaking slider (his best pitch back in the day). On Monday he managed something he never could in the Big Leagues – he threw three strikes with one pitch. By preventing a vote on an emergency spending bill, Senator Bunning: first, at least temporarily, killed an extension of unemployment and COBRA subsidy benefits for more than a million long-term unemployed Americans; second, shot down a short-term extension of the Highway Trust Fund, which is a federal fund set up to pay for transportation projects nationwide, after which Transportation Secretary Ray LaHood said that up to 2,000 employees at the Transportation Department will be furloughed without pay as a result; and third, insured that Medicare would immediately reduce fees to physicians by 21.3% via the Medicare Sustainable Growth Rate Factor (SGR). Wow, a “threefor!”
Strike 3 is what concerns us here. We’ve written often about the steep and steadily rising costs of Medicare, and now along comes Senator Bunning saying we have to lower costs and let’s do it on the backs of hard-working primary care physicians. He certainly has a point that we need to lower Medicare costs, although he expressed it in a wild pitch sort of way. Here’s a chart from the Centers for Medicare and Medicaid Services (CMS) that shows what will happen to Medicare costs in the future if nothing changes. The vertical axis is percentage of GDP:
And here’s a summary from a Congressional Budget Office (CBO) Issue Brief on the Medicare Sustainable Growth Rate Mechanism (PDF). It’s from September, 2006, but is still appropriate: The Supplemental Medical Insurance program (Part B of Medicare), which will cost about $158 billion in 2006, pays for physicians’ services, outpatient hospital services, durable medical equipment, physical therapy, and certain other outpatient services. About 38 percent of those expenditures are payments for services provided by physicians, which are based on a schedule of fees that specifies the amount to be paid for each type of service. Most of Medicare’s payment rates are simply adjusted each year for inflation–but not those for physicians’ services (emphasis added). Those rates are governed by a complex formula — the Sustainable Growth Rate (SGR) mechanism.
The SGR is pegged against a target originally established in the 1997 Deficit Reduction Act. Its aim is to hold down Medicare costs. It’s calculated every year, and every year since 2004 this complex and nearly Byzantine calculation has called for an annual reduction of physician reimbursement rates by an average of 3% to 4%.
Nonetheless, every year since 2004 Congress, yielding to the medical lobby, has voted to override it by delaying the triggering of it. The trouble is, the law is cumulative. So, what Congress has done in a typically heroic display of moral courage, is to dig itself into an ever-deepening hole by not facing up to yet another looming catastrophe. Sound familiar?
Docs Rush the Mound
The AMA is nearly apoplectic about the SGR and the prospect of Senator Bunning causing it to be finally triggered. Monday, the organization was out in force in DC making its views known. The current President, Dr. James Rohack, went on Bloomberg and, later, CNN with Larry King. President-Elect Dr. Cecil Wilson even did an hour on Washington Journal C-Span answering questions from Democrats, Republicans and Independents, and, generally making his case.
And his case was that for a while now, physicians have been abandoning the Medicare ship, because, even though their Medicare fees have remained steady due to the congressional overrides, they claim they’re losing money with Medicare patients because their costs have been inexorably rising. Moreover, it’s no secret that there is an ever-increasing shortage of primary care physicians, and CMS reports that, while 92% of primary care physicians participate in Medicare, only 73% are accepting new patients. If nothing changes, that will surely drop precipitously.
Case in point – the Mayo Clinic, President Obama’s iconic national model of high-quality health care efficiency, lost $840 million on Medicare in 2008, and, as of January 1, 2010, stopped seeing Medicare patients at its Glendale, AZ, clinic. The Mayo claims Medicare covers only 50% of its costs every time it sees a Medicare Patient.
So, we’re left with another one of those rock and hard place things. Medicare could bankrupt the nation, but physicians don’t get paid enough from it.
Yesterday, Congress stole second base on Bunning by extending unemployment and COBRA benefits for another month and by delaying the 21.3% Medicare physician pay cut until the end of March, at which time we’ll probably have to go through this whole thing all over again. (Yogi Berra’s “déjà vu?)
Perhaps Senator Bunning’s out of left field move will actually cause Congress to do something it has thus far been absolutely incapable of doing regarding our nation’s health care. That is, fix it.
Right. And tomorrow 78 year old Jim Bunning will quit the Senate and to great expectations accept a $100 million free-agent contract to rejoin the Phillies as their Pitching Ace.
Health Wonk Review: SCHIP Veto, Health Reform Prospects, and more …
Friday, October 5th, 2007Jane Hiebert-White has posted a most excellent edition of Health Wonk Review at the Health Affairs Blog. Among other matters, she takes the pulse of the blogosphere in the aftermath of the presidential veto of the State Children’s Health Insurance Program (SCHIP). As the political debates about health care and health care policy heat up from now to the election, HWR offers a great bi-weekly snapshot.