October 31, 2011
I’d wanted to write a brief note about the departure of Jeffrey Kang, M.D., as chief medical officer of Cigna earlier this month but got a bit pressed. Alan Muney, M.D., replaces. Kang, who was with Cigna since 2002, has taken a job as senior vice president of health and wellness services and solutions for Walgreen Co.
I always found Kang to be more thoughtful than dogmatic in his approach to the problems surrounding the U.S. healthcare system. I interviewed him in the run-up to healthcare reform, when the insurance industry was circling the wagons in opposition of the public option. Kang noted at the time that health plans would actually “be able to compete favorably with any public option” as long as there was a national provider fee schedule that leveled the playing field — an approach I agreed with then and agree with now.
Former Cigna public relations executive turned industry whistleblower Wendell Potter calls Kang ”a compassionate man,” noting that “he could always be counted on for a reasoned point of view.” Prior to joining Cigna, Kang worked for the federal government, serving stints as chief clinical officer for the Health Care Financing Administration (now CMS) and as chief medical officer for the Office of Managed Care.
October 31, 2011
From Paul Kedrosky’s review of Walter Isaacson’s new biography of Steve Jobs:
Among the book’s telling revelations is Jobs’s decision, after an October, 2003, diagnosis of a rare but treatable pancreatic cancer, to do nothing for nine months. Where he should have gone in for immediate surgery, Jobs engaged in magical thinking, ignoring the problem and self-medicating with bowel cleansings, juice and other mainstays of woo-woo medicine. When he finally went in for surgery in July, 2004, Jobs’s cancer had metastasized to his liver, forcing him to begin chemotherapy. He eventually had a liver transplant in 2009, but that growing cancer finally killed him this Oct. 5, at the age of 56.
October 26, 2011
In Brief: HealthSpring is the largest pharmacy benefit management client of SXC Health Solutions. Cigna is acquiring HealthSpring. Cigna has its own PBM. Shares in SXC fell 23% on word of the deal.
October 26, 2011
David Cordani, chief executive of Cigna, on the scalability of physician engagement tools that will come along with the company’s acquisition of HealthSpring:
We don’t believe it will be a one-size fits all model….We do believe philosophically that at the core aligning the physicians’ incentive and engaging them in a more partnered model using information to help to drive improvement in clinical quality is the sustainable way to drive forward.
October 25, 2011
The latest from The Commonwealth Fund, citing 2011 OECD data.
October 25, 2011
From Costs of War, a study prepared by The Watson Institute at Brown University:
Approximately 8.3 jobs are created by every $1 million in military spending….A million dollars of spending would create 15.5 jobs in public education, 14.3 jobs in healthcare, 12 jobs in home weatherization, or about the same number of jobs in various renewable energy technologies. A million dollars spent on construction (residential and non-residential structures) creates 11.1 direct and indirect jobs….
The (at least) $1.3 trillion of Department of Defense war spending in the past decade averages out to $130 billion per year. While these funds did indeed create jobs in the military and in related sectors….$130 billion per year could have created a net increase of jobs in other sectors: for example, more than 300,000 jobs in construction, or 900,000 jobs in education or about 780,000 jobs in healthcare.
October 24, 2011
Ever since David Cordani took over as chief executive of Cigna, the company has hammered home its strategy of “go deep, go global, go individual.” So it comes as a surprise that the company is now going Medicare in a big way, announcing the acquisition of HealthSpring for $3.8 billion or $55 per share. That’s a 37% premium over HealthSpring’s Friday close. The deal will increase Cigna’s Medicare Advantage membership nearly four-fold to about 457,000 lives.
The purchase price works out to about $11,000 per member for HealthSpring’s 336,000 Medicare Advantage lives, but it’s actually a bit less because the deal includes 835,000 Medicare Part D members and 1350 Medicaid members. Cigna had just 121,000 Medicare Advantage members as of June 30, down considerably from a year earlier. Cigna has no Medicaid members.
The deal also marks a return to large-scale consolidation among health plans — a trend many predicted would return following healthcare reform. A complete assessment of the deal and Cigna’s renewed push into the government market will appear in this week’s Health Plan Market Trends.
Correction (Oct. 26): Number of Medicaid lives was originally reported incorrectly.
October 24, 2011
Carl McDonald of Citi on the final regulations for Accountable Care Organizations:
The final Accountable Care Organization (ACO) regulations are out, and the changes are meaningful enough that ACOs now have the potential to be a much bigger competitive threat to the Medicare Advantage industry than was the case previously. The financial incentives for providers are better, and ACOs will now have real time info on their members, rather than finding out after the fact who was actually enrolled. Providers won’t face nearly as much anti-trust scrutiny as the initial rule envisioned.
October 21, 2011
From the Pharmacy Benefit Management Institute’s 2011-2012 Prescription Drug Benefit Cost and Plan Design Report, which is based on a survey of 274 employers representing 5.2 million lives.
October 20, 2011
Bloom Health (Minneapolis) — which provides an online administrative platform for defined contribution health benefits — expects its biggest gains to come from health plans, according to Abir Sen, chief executive.
That’s not surprising considering that last month three top health plans — WellPoint, Health Care Service Corp. and Blue Cross Blue Shield of Michigan — acquired a majority stake in the company from Sand Box Industries. BCBS-MI, which was already an investor in the company and increased its stake in the latest transaction, began using the Bloom platform to offer employers defined contribution insurance products earlier this year. Medica does the same. WellPoint and HCSC will follow.
Bloom began in 2009 by targeted employers directly — offering a wide variety of options from various health plans. To date, it has about 50 employer clients with 20,000 members. Now it appears a growing share of business will come through health plans offering their own plan options to new and existing employer clients. Bloom receives a per member per month platform licensing fee from the plans.
What’s interesting is the press release announcing the transaction touts it as a first step by the parties in the construction of a national, private insurance exchange. My guess is the plans want to avoid leakage of employers to the public exchanges mandated by healthcare reform. For complete coverage, see the latest issue of Health Plan Market Trends.
October 20, 2011
The irony surrounding the individual health insurance mandate continues to mount. As Mitt Romney pointed out in the Republican presidential debate yesterday, the idea of the individual mandate came from conservatives — specifically the Heritage Foundation. There appears to have been a difference in scope between the version in ObamaCare and the one Heritage proposed — along with some other twists to the story (Heritage later repudiated the mandate) — but as James Taranto of The Wall Street Journal notes, “the Heritage mandate was indistinguishable in principle from the ObamaCare one.” (Hat tip, Avik Roy).
As I’ve noted before, Obama never wanted the mandate and had to be dragged on board. Now he takes heat from conservatives (who invented the concept) for something he didn’t want in the first place. As for the health insurance industry, it pushed hard for a mandate to protect against adverse selection (i.e., only the sick buying insurance) and to ensure membership growth.
I think the health insurance industry is right, and so was the Heritage Foundation before it was wrong. Universal coverage works best if everyone is in the pool.
October 19, 2011
I’ve harped on the health insurance industry before about high administrative costs. A new study from the Commonwealth Fund comparing the U.S. healthcare system to others around the globe reiterates the point. Insurance administration costs — at about 7% of total healthcare spending in the U.S. — is about three times higher than in Japan, Finland, Australia and Austria, the study says. Why?
Private health insurance in the United States is characterized by complex benefit packages and cost-sharing designs and high rates of turnover in health plan enrollment. Plans also incur significant marketing and underwriting costs.
O.K., but what about compared to nations like Germany, Switzerland and the Netherlands, where private health insurance is a big player? The U.S. is still 30% to 75% higher, the study says. Per capita administrative costs in the U.S. nearly doubled to $532 from 2000 to 2009 and are twice those of France, which spends the next highest amount per capita at $271, the study says.
The U.S. could save $55 billion annually, the study projects, by simply getting its administrative costs in line with other nations that have a mixed public-private insurance system like the U.S. The savings would top $100 million if the U.S. could meet international benchmarks — in other words the entire cost of ObamaCare.
October 18, 2011
Health plans have been enjoying strong profits almost entirely because member utilization of healthcare services (and in turn healthcare costs) has been growing at historically low rates. So it’s no surprise that when UnitedHealth Group reported today it expects an upswing in utilization trends, shares in the company sank (down nearly 4% as of presstime).
UnitedHealth chief executive Stephen Hemsley said on the company’s third-quarter earnings call that “medical utilization will trend toward more normal historical and seasonal levels” in the fourth quarter of 2011 and into 2012. The upswing is expected to impact all product lines (including commercial, Medicare and Medicaid) and will largely be for services performed in physician and outpatient settings, Hemsley says. Inpatient utilization remains flat to down. The company is also seeing treatment costs rise for hepatitis C because of the introduction of certain new drugs.
Overall, UnitedHealth expects consolidated medical cost ratio to increase to 81% in 2011 and to rise again 2012. Commercial medical costs are expected to increase about 6% in 2011, driven by unit costs. Meanwhile, the company is beginning to see pockets of price competition, says United Healthcare president Gail Boudreaux, especially in California and parts of the northeast and mid-Atlantic regions. Still, she notes, price competition is far from across the board.
UnitedHealth tends to be a bellwether of industry performance, so health plan observers will be waiting to see if other insurers report similar trends.
October 14, 2011
The year 2011 is shaping up to be a good one for California HMOs, which reported net income of $2.4 billion through the first six months of 2011, up 44% from the same period a year earlier, according to an analysis of data from the state Dept. of Managed Health Care. Enrollment fell 3% to 14 million (excluding Medicare cost, MedSupp, PPO, and other lives). Excluding Kaiser – which reports both hospital and HMO figures — the rest of the state’s HMOs had net income of $859 million, up 48%.
October 6, 2011
Those are the stats so far for the Lowe’s Companies’ year-old heart surgery benefit offered through the Cleveland Clinic, according to Kyle Wendt, vice president of benefits for Lowe’s. Wendt delivered the information during a webinar sponsored by Cleveland Clinic and hosted by CRG.
Under the arrangement, Lowe’s pays to send employees and dependents in need of cardiac surgery to Cleveland Clinic. Lowe’s pays Cleveland Clinic a case rate for the surgery, with no out-of-pocket costs to patients. Lowe’s also pays travel and hotel costs for the patient and a companion. The program is optional to Lowe’s employees and dependents; about 125 were deemed potentially eligible. Those who don’t wish to use Cleveland Clinic can receive heart surgery as part of Lowe’s regular medical benefit, but must pay associated copays and deductibles.
Why don’t more Lowe’s employees and dependents use Cleveland? Wendt attributes it to the “dynamics of choice.” He also stresses the need to continue to educate employees about the benefits of the program, which he says is designed to provide the highest quality at no cost to the patient. As for cost savings to Lowe’s, Wendt says that isn’t a focus and hasn’t been measured to date.
Michael McMillan, executive director of market and network services at Cleveland Clinic, also spoke at the webinar — delivering quality data on the organization’s heart surgery program (see charts below).
October 5, 2011
Health savings account assets jumped 31% to $7.2 billion at 19 leading banks as of June 30, 2011, compared to a year earlier, according to a tally in Health Plan Market Trends. The number of accounts rose 17% to 4 million. ACS BNY Mellon HSA Solutions had the most HSAs at 784,000. OptumHealth Bank, a unit of UnitedHealth Group, had the most deposits at $1.35 billion.
October 4, 2011
You don’t hear much buzz about consumer-directed healthcare anymore, which is ironic given that quietly high-deductible health plans tied to health savings and health reimbursement accounts continue to grow at a double-digit pace. See our latest free Quick Take white paper for details.
October 3, 2011
The beat goes on for health plan enrollment. Second-quarter 2011 fully funded membership is down, mirroring long-term trends. Meanwhile, HSA/HRA plan membership continues to show substantial gains, while self-insured and individual are up more modestly. Complete details appear in this week’s issue of Heath Plan Market Trends. Membership growth projections for 2012 and beyond will appear in the Outlook for Managed Care 2012.