Upgrading America’s Infrastructure
D+. That’s the grade assigned to the overall quality of America’s infrastructure by the American Society of Civil Engineers (ASCE). Just one notch above failure.
ASCE’s economic report on surface transportation, released in July 2011, reported that deteriorating infrastructure will cost the American economy more than 876,000 jobs and suppress the growth of GDP by $897 billion by the year 2020.
Bad infrastructure has a cascading effect on the economy. Lack of capacity and poor road conditions lead to backups and bottlenecks.
That means products sitting in trucks aren’t reaching their destinations in a timely and efficient manner. Commuters are wasting time and fuel sitting in traffic. The cost in wasted fuel and lost productivity is staggering.
“The Federal Highway Administration calculates that highway bottlenecks cause more than 243 million hours of trucking delays each year, costing $7.8 billion.
When shipping takes longer, businesses have to reorient their supply chains and rely on more distribution centers, adding more costs,” said Mark Brockinton, managing director, transportation and logistics practice at Aon.
“In 2011, traffic congestion caused American commuters to purchase an extra $2.9 billion in fuel, costing more than $120 billion in added fuel costs and wasted time.”
The effects of climate change and increasingly severe weather only further constrain traffic flow and worsen road conditions.
“If you look at the severe winter we had in the Northeast, that created a lot of wear and tear on our roads and bridges,” said Andy Herrmann, past president of the ASCE.
“They had to put a lot of de-icing material down to combat that, but that salt mixes with water and accelerates the corrosion of steel and gets into the concrete and starts corroding the reinforcing bars. And when steel corrodes, it expands seven to eight times its volume. So when you look at a bridge deck or a roadway surface and you see a pothole, that’s those reinforcing bars expanding and pushing against the concrete.”
Steve Bojan, vice president of fleet risk services for HUB International, added, “When you talk about climate change and harsh weather, you look at the Northeast and it wreaks havoc. [This past winter] was horrible. All bets were off on everything. Roads, whole cities, interstates were shut down. So you end up backing everything up for days, and at some point, some goods and services are just not produced. It’s in the billions of dollars a day in activity that can’t be done.”
“People are starting to understand that when they rebuild their infrastructure, they have to do it to a new standard.” — Erik Johanson, manager of strategic planning and analysis, SEPTA
Federal and state governments are taking steps to improve infrastructure, especially after Superstorm Sandy demonstrated that the effects of climate change can literally bring major cities to a standstill and incur huge costs.
In 2011, the Federal Transit Administration selected seven transit agencies across the country as part of a pilot program to conduct risk and vulnerability assessments of their systems and create plans for climate change adaptation.
After Sandy, it doled out capital funding to help turn some of those plans into reality.
In Philadelphia, the Southeastern Pennsylvania Transportation Authority (SEPTA) received $87 million to fund seven projects it developed during the pilot program phase.
The authority’s regional rail system in particular has been taking a beating.
“We did a pre-screening process to determine the most vulnerable points in our system, and the Manayunk/Norristown line, which parallels the Schuylkill River pretty close to the level of the river, has flooded 13 times since 2003, out of a total of 21 recorded flood events in history,” said Erik Johanson, manager of strategic planning and analysis.
“So more than 50 percent of recorded flood events that have occurred on that line have happened since 2003.”
While plans focus on flood mitigation and shoreline stabilization, improving the system’s resiliency will also involve building a backup control center and power systems, and insulating bare copper wires that can easily trip and cause signal failure.
In general, extreme temperature changes and powerful storms make any transit system vulnerable to failure.
“For heat, the big things are track buckling and sagging wires, which have major impacts,” Johanson said.
“Once it reaches 90 degrees, we have to slow the trains down, so it has service impacts.”
Snow, ice and strong winds can also lead to downed power lines, damage to signal systems and other equipment, and labor workforce issues associated with snow removal.
“People are starting to understand that when they rebuild their infrastructure, they have to do it to a new standard,” he said.
Building in Resiliency
That new standard may include building with new materials and technologies.
According to the ASCE’s Herrmann, “The University of Michigan came out with a concrete that can take some tension. Concrete is a compressive material, but if it can take tension, it can prevent it from forming the little cracks that allow salty water to get into it and start the corrosion cycle.”
Monitoring devices can also be built into bridges to track ground movement.
“When it comes to settlements of soil or ground movements, those things can change just due to small gradual movements, but can also be drastic. It has impact on the stability of a structure,” said Guido Benz, head of engineering and construction at Swiss Re Corporate Solutions.
“Structural elements today have more up-to-date monitoring tools that can be built in during construction, which was not the case in the ‘50s. — Guido Benz, head of engineering and construction, Swiss Re Corporate Solutions
“Structural elements today have more up-to-date monitoring tools that can be built in during construction, which was not the case in the ‘50s.”
When bad weather strikes, lower salt and salt-free mixtures can also be used on roadways to melt ice. There are also new high-performance forms of concrete and steel, which are less permeable, more resistant to corrosion, and higher strength.
“But those things come with a cost,” Herrmann said. “State departments of transportation have hard decisions to make — what to do with limited dollars. Do they do maintenance, repairs or replacements with new structures? Maintenance can get put off, and it just gets more expensive the longer you put it off.”
By Bojan’s estimates, “It’s probably at least 20 years to uncork this. These projects are all very long term and take a lot of planning.”
Critical infrastructure may also be delayed due to lack of will.
“Infrastructure is not sexy, for lack of a better word,” Bojan said.
“People are much more likely to want a park on the lakefront. They’ll spend $150 million for that, but to spend $100 million for a viaduct, for example, they react negatively.”
Lack of funds is another primary reason that necessary upkeep and upgrades to transportation infrastructure have not been made.
“Investments needed are in the billions of dollars. They’re massive numbers. The big question is: Where will the funds come from?” Benz said. The ASCE estimates it will take a $3.6 trillion investment by 2020 to bring the many components of America’s infrastructure up to an acceptable standard, and that total could increase if higher-strength, weather-resilient tools and materials are considered.
The federal government may invest in rebuilding efforts after a disaster, but these long-term projects need a steady stream of capital for maintenance.
Public-private partnerships (PPPs) are one way to attract investors to costly infrastructure projects.
“Models that bring in private investors but also involve project parties in long-term operational contracts generate revenue to maintain the structure. Achieving proper maintenance and keeping infrastructure upgraded is the critical element,” Benz said.
“In times of financial difficulty, maintenance gets cut short, so the quality will decay over time. So the benefit of the PPP approach is that the upkeep as well as the operations of the infrastructure is outsourced, and that presents a business opportunity for the private parties. From the investor’s point-of-view, it’s attractive because they can make a profit off of tolls, for example, and sell the property back when their contract is over.”
Other experts say a fuel tax increase is necessary to move projects forward at a steady pace. As vehicles have grown more fuel-efficient, the fuel tax percentage has remained static, meaning that more miles are being driven while fewer funds are collected. The revenue can’t keep up with the demand for repairs, upgrades and maintenance.
“The fuel tax needs to be raised an additional 40 cents to a total of 65 cents. The federal diesel tax hasn’t changed since 1993,” said Aon’s Brockinton.
“The American Trucking Association actually is pushing for higher taxes now,” HUB’s Bojan said.
“Freight is good, profits are up, and they’re saying, ‘We need to improve our lanes and infrastructure so we can improve our throughput, otherwise we’re just getting clobbered by constraints.’ ”
Planning for the Storm
The Environmental Protection Agency predicts that unless greenhouse gas emissions decrease substantially, temperatures will continue to climb, the world’s oceans will become more acidic and the frequency of severe storms and precipitation levels will increase.
Failure to address the risks to infrastructure will not only worsen congestion, but threaten to totally shut down transit if roads, bridges and rails become too dangerous to use. Safety also becomes a major issue.
“Certain insurance companies have products insuring against a loss a company might have within the transportation infrastructure, such as a port delay, local embargo, or a natural disaster,” Brockinton said.
“The products would include business interruption, contingent business interruption, trade disruption, political risk, logistics insurance.
Certain companies will insure risks without an actual loss of product under certain circumstances, which would include a delay or non-delivery of product due to a strike or natural catastrophe.
“A well-performing transportation network keeps jobs in America. It allows businesses to expand, and it allows businesses to manage their inventories and transport goods more cheaply and efficiently.”
Benz of Swiss Re said companies should view infrastructure failure as an “operational risk,” and mitigate it by building redundancies into their supply and delivery chains. As harsh weather presents an ever-growing challenge, it becomes more and more important for risk managers to “always have a Plan B ready to go.”
States Ponder PTSD Coverage for First Responders
First responders who suffer emotional trauma after on-the-job tragedies are the focus of state legislatures in Arizona, Connecticut, Ohio, and South Carolina.
Arizona lawmakers did not vote on a measure that would have created a presumption that post-traumatic stress disorder is occupational for first responders. Instead, the legislators passed and Gov. Doug Ducey signed into law a measure creating a group to study the issue.
H.B. 2438 will allow for a 15-member panel to examine and report on the effects of PTSD on state and local law. The panel must report on its findings by September 2016.
Meanwhile, Connecticut lawmakers continue considering legislation to provide workers’ comp coverage to first responders who suffer mental trauma after witnessing the death or maiming of a person. The measure would expand coverage for police officers, firefighters, and ambulance workers who meet all of the following conditions:
- Saw a person’s death or maiming or the scene of such an incident within six hours after law enforcement officers secured the scene.
- The death or maiming was caused by a person rather than a motor vehicle accident or natural cause.
- A licensed psychiatrist or psychologist determines the worker’s mental or emotional impairment originated from seeing the death or maiming or its immediate aftermath.
The bill would take effect upon passage. It would require “the state, by October 1, 2015, to purchase a workers’ compensation insurance policy to provide coverage for any claims for workers’ compensation benefits for the above injuries,” according to a legislative summary of the bill. “Because the state does not have to purchase the policy until October 2015, municipal employers must cover their own emergency responders’ workers’ compensation claims, as is the practice under current law, between the time the bill is enacted and the state purchases the required policy.”
Opponents have testified that the measure would impose too much of a financial burden on municipalities. Supporters say mental health benefits are just as important as are physical health benefits.
This is the second attempt at such legislation. The first was introduced in 2013 after the Sandy Hook school shootings in December 2012 but was rejected by the state Senate. The latest measure has been referred to a legislative committee.
Legislation before Ohio lawmakers would provide benefits for emergency responders with PTSD. Current law allows coverage only when a related physical injury or forced sexual conduct was present. The head of a legislative panel said he wants to meet with interested parties before the committee votes on the issue.
South Carolina lawmakers are weighing a proposal to also allow first responders to be covered for PTSD. The legislation would provide coverage if the impairment arises from the worker’s “direct involvement in, or subjection to, a significant traumatic experience or situation,” regardless of whether the incident was “extraordinary or unusual in comparison to” the person’s normal working conditions.
The Tools of the Trade
Integrating medical management with pharmacy benefit management is the Holy Grail in workers’ compensation. But getting it right involves diligence, good team communication and robust controls over the costs of monitoring technology.
Risk managers in workers’ compensation can feel good about the fact that opioid use is declining slightly. But experts who gathered for a pharmacy risk management roundtable in Philadelphia in June pointed to a number of reasons why workers’ compensation professionals have more than enough work cut out for them going forward.
For one, although opioid use is declining, its abuse and overuse in legacy workers’ compensation claims is still very much a problem. An epidemic rages nationally, with prescription drug overdose deaths outpacing those from the abuse of heroin and cocaine combined.
In addition, increased use of compound medications and unregulated physician dispensing are resulting in price gouging and poor medical outcomes.
Although individual states are attempting to address the problem of physician dispensing of prescriptions in workers’ comp, there is no national prohibition against it: That despite substantial evidence that the practice can result in ruinous workers’ compensation medical bills and poor patient outcomes.
“The issue is that there isn’t enough formal evidence to indicate improved outcomes from the use of compounds or physician dispensed drugs, and there are also legitimate concerns with patient safety,” said roundtable participant Jim Andrews, executive vice president, pharmacy, for Duluth, Ga.-based pharmacy benefit manager Healthcare Solutions.
Andrews’ concerns were echoed by another roundtable participant, Dr. Jennifer Dragoun, Philadelphia-based vice president and chief medical officer with AmeriHealth Casualty.
“When we’re seeing worsening outcomes and increasing costs, that’s the worst possible combination of events,” Dr. Dragoun said.
Whereas two years ago, topical creams and other compounds with two to three medications in them were causing concern, now we’re seeing compounds with seven or more medicines in them.
How those medicines are interacting with one another, and in the case of a compound cream, how quickly they’re being absorbed by the patient, are unknowns that are creating undue health risks.
“These medicines haven’t been tested for that route of administration,” Dragoun said.
In other words, the compounds have not been reviewed or approved by the FDA.
Carol Valentic, vice president of cost containment and medical management with third-party administrator Broadspire, said her company’s approach to that issue is to send a letter to providers, through the company’s pharmacy benefit administrator, alerting them to the fact that compounds are not FDA-approved and could be dangerous.
Other roundtable participants said they employ utilization review of every prescribed compound medication. They’re finding that the inflation of the average wholesale price for prescriptions that pharmacy benefit managers are battling in the case of single medications is happening with compounds as well, to the surprise of probably no one.
“The cost of compounds is doubling every year,” Healthcare Solutions’ Andrews said.
Kim Clark, vice president of utilization management with Patriot Care Management Inc., a division of Patriot National, Inc., said Patriot has their own software, DecisionUR, and opioids as well as compound prescriptions can be directed from the PBM to Utilization Review.
In the area of new worries in workers’ compensation, and there are plenty of them, Dragoun also pointed to the introduction of extremely high cost, albeit extremely effective specialty medications, such as those being used to treat Hepatitis C. Treatments in this area can run into the hundreds of thousands of dollars.
Domestic drug manufacturers, pressed to pursue profits as their product lines mature and their margins level off, are jockeying for dominance in this area.
“This seems to be a route that a lot of drug makers are going after. Very narrow markets but with extremely high cost medications,” said Deborah Gleason, clinical resources manager, medical programs, with ESIS, the Philadelphia-based third-party administrator that is part of ACE Group.
Tools of the Trade
Given how substantially the use of prescriptions can balloon the cost of a workers’ compensation claim and undermine outcomes, a number of tools are in the market that can help risk managers rein in costs.
One is urine drug monitoring, which can catch cases of drug diversion, or instances where an injured worker is ingesting unprescribed substances. But the use of that test can create its own problems, namely overutilization.
Gleason, with ESIS, Inc., and others use urine drug monitoring. But when the test is overused, say by being conducted every month instead of quarterly as is recommended, the members of the Philadelphia roundtable said its costs can outrun its usefulness.
Test results are frequently inconsistent, signaling that the injured workers aren’t taking the prescribed medication or are taking something they shouldn’t be. Drug testing shouldn’t be used in isolation but rather as a component of integrated medical management.
“What’s emerging today, and in some companies more prevalently, is the integration of managed care with pharmacy benefit management,” roundtable participant Valentic said.
“When we’re seeing worsening outcomes and increasing costs, that’s the worst possible combination of events.”
— Dr. Jennifer Dragoun, Vice President and Chief Medical Officer, AmeriHealth Casualty
In other words, it’s not enough to flag a script or pick up a urine drug monitoring test result. There needs to be a plan or a system in place that says what action should be taken with the patient once that information has been received.
Identifying a potential problem early and taking action on it is key, said ESIS’ Gleason. She added that the patient’s psychological state, including how they react to and perceive pain, is something that more risk practitioners should consider.
Obstacles to assessing someone’s psychological or psychosocial state, according to roundtable members, include a lack of awareness or acceptance of its possible advantages on the part of patients and physicians. After all, we’re talking about an assessment, a list of questions, that should take no more than 15 minutes to carry out.
If a treating physician or case manager doesn‘t conduct a psychological test but is still concerned about the potential for pain medication abuse, there is one key question they can ask an injured worker, according to AmeriHealth Casualty’s Dragoun.
“There is one question that predicts far more than any other attribute of a patient whether they are likely to abuse narcotics, and that is if they have a personal or family history of substance abuse,” Dragoun said.
“You know they may ask that about the patient, but I don’t know how many ask it about the family,” Patriot Care Management’s Kim Clark said.
Pharmacogenetic testing, that is testing an individual for how they might react to certain drugs or combinations of drugs, and not — let’s be clear about this — whether they are predisposed to addiction, is also entering the market.
But as is the case with urine drug monitoring, the use of pharmacogenetic testing is no cure-all and the cost of it needs to be carefully managed.
Some vendors are pitching that it be applied to every case in a payer’s portfolio. The roundtable participants in Philadelphia agreed that it should be used with far more discretion than that.
Regulating the Regulators
It’s a given in the insurance business and in workers’ compensation that regulators in all 50 states call the shots. There are few national laws that regulate the hazards faced by workers’ compensation risk managers and injured workers.
Having said that, is it really such a pipe dream to think that the federal government could step in and provide leadership in an area that is so prone to confusion, risk and self-serving behavior on the part of some vendors and medical practitioners?
If the Philadelphia roundtable as a group could point to one place where federal regulators could do some good it would be in the area of physician dispensing. Many states have enacted legislation to curb the practice, as there is no data to prove better outcomes, and regulation by the federal government would be of benefit, the Philadelphia roundtable concluded.
Another area would be to require FDA oversight for compounds.
“The minute you need to have FDA approval of a compound, that’s going to stop it,” Broadspire’s Valentic said.
It’s a notion worth considering. After all, lives are at stake here.
Given the lack of oversight from the federal government, the roundtable participants pointed to measures in a number of states that are worth emulating. The Texas closed formulary, which limits the range of medications that can be prescribed, is one example.
The requirement in the State of New York that a prescribing physician check a state registry — what’s known as a prescription drug monitoring program — to check whether a patient is already taking or has a prescription for a controlled substance, is another good example of a state government stepping in to ensure the safety of its residents.
“The minute you need to have FDA approval of a compound, that’s going to stop it.”
— Carol Valentic, Vice President of Cost Containment, Medical Management, Broadspire
Pennsylvania also earned praise from the roundtable for recently passing a measure limiting the amount of medication that a physician can dispense to an initial supply.
With different regulations in every state and with the average wholesale cost of prescriptions constantly on the rise, pharmacy benefit management is an art requiring constant vigilance.
“It’s not an original thought, but if you stop and think about all the things that are happening in society with the addictions and the costs, the cost of doing nothing is greater than the cost of doing something.
I think that’s why everybody is doing something,” Healthcare Solutions’ Andrews said.
For more information about Healthcare Solutions, please visit www.healthcaresolutions.com.
Opinions of the roundtable participants are the opinions of each individual contributor and are not necessarily reflective of their respective companies.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Healthcare Solutions. The editorial staff of Risk & Insurance had no role in its preparation.