Continued from Part 1
Let’s go back to our little button from Part 1. Imagine that our button is one of many buttons, because the button/dial administration is giving them out to anyone who asks for one, no matter if they have any chance of hearing a bell or not. Well, it’s now becoming common knowledge that no-one is really paying any attention to the button pushing. It’s also becoming common knowledge that dial-turning is really getting watched closely. In fact, the button/dial administration is really cracking down on dial-turners. If you’re caught doing that, you don’t get a Christmas bonus. The dial-turners are getting scared (they promised their family an in-ground pool), and they want to get out of the dial-turning business and get into something safer, with lesser penalties for getting caught. So, the dial-turners, who are organized by the way, start asking for buttons, and set them up.
Back to the real world (getting dizzy yet?), and the same thing is happening. Organized crime is real. Illicit drugs, as an example, have been a nice tidy revenue stream for these groups for some time. But life for drug dealers and suppliers, because of things like the War on Drugs, is getting a little harder (I didn’t say the War on Drugs was completely ineffective). Not impossible, mind you (remember the cockroach analogy?) but harder. Many are finding that health care fraud schemes are just as profitable, without as much risk of being shot by a competitor, and with more limited sentences for convictions. Oh – and for years, almost no-one was watching. So, if you’re a criminal looking for an easier row to how, take a look at health care fraud.
But fraud is only a portion (though a big portion) of the issue associated with the fee-for-service payment system in health care. There is also an embedded fatal flaw in the core idea of incenting providers and suppliers on a volume basis. Through fee-for-service systems, we reward “doing” more, even if the more that is being done is unnecessary, is of lower quality than we would expect or want, or is more expensive than an alternative that may be just as, if not more effective than the more being done.
It’s certainly logical, in any endeavor, to pay for products and services that are both valuable to the consumer/stakeholder and are not readily or easily available/doable on your own. I am glad to pay someone a reasonable amount to do things like repair my vehicle, fly an airplane I’m using to reach a far off destination, or provide my home and my family with clean, running water. These are things that I personally do not have the expertise, time or desire to do for myself, and so I gladly give portions of my hard-earned money to others for these acts and products. The same goes for medical care. I’m happy to provide funds to someone else to help me by providing diagnostic services when I’m ill, provide me medications that are needed for my conditions, or even perform surgery when it is needed.
What is not logical is to establish and then support a system where the services are paid for whether they are needed or not, and no matter the outcome of that service. For example, when I take my car into the mechanic for an oil change, I don’t want to pay for a new transmission if I don’t need one. If I board a plane to Atlanta, I don’t want to find out that I’ll also be paying (extra) for a stop over in Detroit that I don’t need (or want for that matter). And I want clean water in my home, but I would not want to pay the utility company if my water is constantly brown, and makes me sick because of contamination.
The same is true for health care. We want to get better, or, better yet, prevent getting sick. For those services, it is logical to pay. However, if, in the process of “getting better” or “preventing illness” we are subjected to service, treatments or medical products that do not help us along the path to wellness (or actively make us more sick), and we are asked to pay for those things, then we have a problem.
So, by using fee-for-service, we have fraud, which will admittedly be present in any system, but is more prevalent in a system that makes it easy to bill, pays quickly, and has so much volume that it’s easy to slip below the radar. We also have a perverse incentive to drive volume of work versus quality of work. We can potentially, through enforcement efforts, keep fraud in check to a certain degree. We cannot, however, eliminate the fatal flaw in how we incent payment without major overhaul.
We must come up with a system for payment in the health care industry that reduces or eliminates the incentive to just do “more” and replaces it with incentives to do what is “right” for the patient and actually “works” to accomplish our end-goal of health. I actually propose we start at the end of the process and develop backwards. Our end goal in health care is (or should be) to improve or preserve health. So, let’s use health status of a patient as a criteria marker for payment. In other words, pay for medical outcomes.
Instead of paying for services, on a negotiated fee schedule, pay for improvements in conditions. If I am diagnosed with high blood pressure, why not pay my health care provider when my blood pressure goes down? If I am diagnosed with diabetes, why not pay my health care provider when my Hemoglobin A1C is brought into a normal range? Take established and accepted treatment goals, and incent health care providers to help the patient reach those goals.
In the same vein, think about paying primary care physicians based upon the health status of their patients overall, instead of based upon how many encounters they have in their medical office. Instead of “visits” they are paid on “wellness.”
I would suggest we pay handsomely for helping patients reach aggressive goals, and pay very poorly for working at it and yet failing to have patients “get there.” At the same time, to engage patients in their own care/health give them an incentive to do their part. I propose you establish cost-sharing schemes that allow the patient to pay less out-of-pocket if they reach their health goals and more out-of-pocket if they don’t.
Suddenly, you have everyone aligned. You have health care providers looking at how to most efficiently and effectively get people better, or better yet, keep them well. Your personal health is now tied to your financial health. Your person health is also tied to your health care provider’s financial health.
Hold on – we’re going back to our button… No-one knew it, but the bell you were hearing was ringing every time a fire broke out somewhere in America. And your button – well, it turned on the sprinkler system to put out the fire. Well worth the $5, right? But, slowly but surely, with all the extra button pushes (yours, your brother-in-law’s and organized crime’s) most of the homes in America are now flooded. So, realizing they have a problem, the button/dial administration undergoes a radical transformation, and emerges as the fire suppression administration. They recall all buttons. Instead, they offer every family in American $10 a week if they do not have a home fire. Instances of home fires drop dramatically. Unfortunately without the extra button income you have to cut back to 2 peppermint mochas a week (using your new fire avoidance allowance). But fortunately your brother-in-law takes his lovely family, RV and yacking dog home, and the dial-turners decide to investigate widget-making as a new profession instead.
Fraud in health care will never be completely gone. No matter the system in place, someone will find a way to game it. At the same time, not payment schema is perfect, and there will always be some illogical aspects. But, with engaged patients, properly aligned health care providers, and sufficient credentialing (and ongoing audits), I believe the majority of the health care fraud we experience today would be gone, overall health care costs would drop and we’d likely be healthier to boot.
Showing posts with label Health Care. Show all posts
Showing posts with label Health Care. Show all posts
Friday, November 19, 2010
Fixing Costs of Health Care - Part 1
Imagine there's a button on your desk, designed to be pressed every time you hear a bell. And every time you press the button, $5 is deposited in your checking account. You hear the bell every few hours, and you push the button each time. Looking around, though, you notice that no-one is watching you press the button. Apparently they trust that you are only hitting the button when the bell rings. But you're a good, honest person... Right?
A few days in, and Starbucks has re-launched their seasonal peppermint mocha. It's you're favorite. But, expensive gourmet coffee isn't in your budget. No-one's watching, and you really want that mocha. It's for mental health, right? And you've been loyally pressing that button every time the bell rings... And maybe you missed one while you were in the restroom... So, just to be safe, you hit that button one extra time. No real harm, and you get your mocha.
That peppermint mocha was good. You could use one every day. What's the harm? You hit the button just one extra time each day, except Monday - you need two that day. It's hard to get going on Mondays...
I could go on. But everyone can likely see where the normal human response might lead to in this hypothetical scenario. Eventually the person here is hitting the button willy nilly and is buried in coffee and muffins. Heck, maybe they have a Starbucks installed in their office, with a personal barista.
What I describe is not very different from the way that the vast majority of our US healthcare payment system is structured. The term in the industry is “Fee-For-Service” which basically means the payer makes payment to a healthcare provider every time they bill for a service - or every time they hit the button.
But, doctors are good people, right? They go to school for a long time. They have patient best interest in mind (usually – or so we hope). They treat us when we're sick, and help us get well. We like them.
So, what's the problem here? Doctors should be paid for what they do and know, right? Would anyone argue that doctors should be paid for their services? But, doctors are people. And just like the button situation, they get paid for services – so the more services you do, the more money you make. Mix normal human tendencies with cost pressures (think liability insurance to protect against lawsuit) and you have a mixture ripe for problems.
And let me be clear, fee-for-service in healthcare is not just limited to doctors – it’s the basis for payment for all healthcare providers and suppliers. The more you do, deliver, or ship, the more revenue comes in. In fact, when it comes to risk of fraud, generally providers like physicians are seen in the lowest risk category.
Now, let’s look at that button again. Your brother-in-law, who drove his 20 year old RV to your house for Christmas, learns about your button. He’s a slightly less than upstanding citizen, and he’s been out of work since he left the service, and he blacks out every time the microwave is used, because of the plate in his head… (anyone catch the National Lampoon’s Christmas Vacation reference???) He wants a button too. Suppose he can get one, and he sits there, hitting the button once every second, racking up huge sums of money.
Back to reality – and we can talk about hitting the button in healthcare – healthcare fraud. Less than upstanding people, who understand how the payment system works (hit the button, get $$), and they know how to play it - setup companies to bill for services, don’t actually do them (or do them badly) and make tons of money. And for a long time, almost no-one was looking.
So, what to do? There are lots of ideas, some in practice, some not.
First, you declare war on fraud, which is what the government has done recently. Huge sums of money are being fed into the healthcare fraud battle to root out and eliminate fraud, waste and abuse. New contractors, new divisions within Centers for Medicare & Medicaid Services (CMS), strike forces between Department of Justice, Office of Inspector General, Department of Health and Human Services and US District Attorneys and even private-public partnerships (like the National HealthCare Anti-Fraud Association (NHCAA)) are gaining more and more support to combat the “bad-guys.”
But is it enough? If the War on Drugs (similar to this War on Fraud) has shown us anything, it’s that spending tons and tons of money on enforcement doesn’t guarantee you will quickly win the war. The enemy is often agile, flexible, and highly motivated. The enemy in this war always seems a step ahead, and despite spending lots of $ on the battle, they never seem to be eradicated. They’re cockroaches – they never die, and if you stomp on 1, there are 10 in the wall, waiting until you turn out the light.
To be continued…
A few days in, and Starbucks has re-launched their seasonal peppermint mocha. It's you're favorite. But, expensive gourmet coffee isn't in your budget. No-one's watching, and you really want that mocha. It's for mental health, right? And you've been loyally pressing that button every time the bell rings... And maybe you missed one while you were in the restroom... So, just to be safe, you hit that button one extra time. No real harm, and you get your mocha.
That peppermint mocha was good. You could use one every day. What's the harm? You hit the button just one extra time each day, except Monday - you need two that day. It's hard to get going on Mondays...
I could go on. But everyone can likely see where the normal human response might lead to in this hypothetical scenario. Eventually the person here is hitting the button willy nilly and is buried in coffee and muffins. Heck, maybe they have a Starbucks installed in their office, with a personal barista.
What I describe is not very different from the way that the vast majority of our US healthcare payment system is structured. The term in the industry is “Fee-For-Service” which basically means the payer makes payment to a healthcare provider every time they bill for a service - or every time they hit the button.
But, doctors are good people, right? They go to school for a long time. They have patient best interest in mind (usually – or so we hope). They treat us when we're sick, and help us get well. We like them.
So, what's the problem here? Doctors should be paid for what they do and know, right? Would anyone argue that doctors should be paid for their services? But, doctors are people. And just like the button situation, they get paid for services – so the more services you do, the more money you make. Mix normal human tendencies with cost pressures (think liability insurance to protect against lawsuit) and you have a mixture ripe for problems.
And let me be clear, fee-for-service in healthcare is not just limited to doctors – it’s the basis for payment for all healthcare providers and suppliers. The more you do, deliver, or ship, the more revenue comes in. In fact, when it comes to risk of fraud, generally providers like physicians are seen in the lowest risk category.
Now, let’s look at that button again. Your brother-in-law, who drove his 20 year old RV to your house for Christmas, learns about your button. He’s a slightly less than upstanding citizen, and he’s been out of work since he left the service, and he blacks out every time the microwave is used, because of the plate in his head… (anyone catch the National Lampoon’s Christmas Vacation reference???) He wants a button too. Suppose he can get one, and he sits there, hitting the button once every second, racking up huge sums of money.
Back to reality – and we can talk about hitting the button in healthcare – healthcare fraud. Less than upstanding people, who understand how the payment system works (hit the button, get $$), and they know how to play it - setup companies to bill for services, don’t actually do them (or do them badly) and make tons of money. And for a long time, almost no-one was looking.
So, what to do? There are lots of ideas, some in practice, some not.
First, you declare war on fraud, which is what the government has done recently. Huge sums of money are being fed into the healthcare fraud battle to root out and eliminate fraud, waste and abuse. New contractors, new divisions within Centers for Medicare & Medicaid Services (CMS), strike forces between Department of Justice, Office of Inspector General, Department of Health and Human Services and US District Attorneys and even private-public partnerships (like the National HealthCare Anti-Fraud Association (NHCAA)) are gaining more and more support to combat the “bad-guys.”
But is it enough? If the War on Drugs (similar to this War on Fraud) has shown us anything, it’s that spending tons and tons of money on enforcement doesn’t guarantee you will quickly win the war. The enemy is often agile, flexible, and highly motivated. The enemy in this war always seems a step ahead, and despite spending lots of $ on the battle, they never seem to be eradicated. They’re cockroaches – they never die, and if you stomp on 1, there are 10 in the wall, waiting until you turn out the light.
To be continued…
Thursday, November 11, 2010
Short Cycle Dispensing Shaping Up
As previously discussed in my post from October 11th, the pharmacy industry that services patients receiving care in what are termed "Long Term Care Facilities" is about to experience a major shake-up. The Affordable Care Act calls for a very specific change in how pharmacy services are provided to these patients when receiving coverage under Medicare Part D.
The Affordable Care Act (ACA) calls for dispensing of Part D covered medications to residents of these long term care facilities (more commonly known as nursing homes) in 7-day supplies or less, in an attempt to curb costs associated with wasted medications. The was scored in such a way that this particular provision was expected to generate $6 billion in Part D savings within 10 years.
CMS's proposed rule(s) for changes to Medicare Advantage and Medicare Part D plans for the year 2012 is about to be released (though it may have been held up (purposefully???) waiting for the mid-term election to pass), and here's a preview of some of the highlights related to the 7-day-or-less provision:
This is all based on a first read, and is just reflective of a "proposed" rule, which is subject to update and change based upon comments CMS receives. However, there are some interesting thing here.
Brand Only -
Certain parts of the pharmacy industry have been lobbying for a brand-only exclusion, arguing that added costs of dispensing more often would not be offset by cost savings related to waste on less expensive products. The proposed $ cutoff being tossed around was $400. CMS seems to have bitten on this, at least partially, and at least temporarily. However, CMS will require generics later (I guess they are leveraging the no later than January 1, 2012 implementation requirement in the legislation, at least for generics).
Personally, I see it as difficult for pharmacies and nursing facilities to operationalize brand only 7-day-or-less, and would expect at least some just do it for all meds since they have to do it for some. There are likely some, however, who will try to implement 7-day-or-less for just the ~20% of scripts that are currently brand.
New Reporting -
CMS has apparently added a new "reporting requirement" for plan sponsors related to unused medications. This can only be accurately reported by the pharmacies, and for pharmacies to report the amount of unused medications, they have to take it back... And so, CMS has required that pharmacies take unused medications back and report the amounts to the plan sponsors (who will, in turn, report to CMS). The idea is apparently for CMS to measure the amount of waste still in the system, AND to correlate the amount of waste with the types of dispensing techniques that allowed the waste to occur.
This is interesting because they have also inferred that dispensing fees paid to pharmacies (which are most certainly to be renegotiated based upon this change to the industry) can include amounts to pay for processing of returned unused producs (something not common in Part D today, though seems to occur for some state Medicaid programs).
Facility/Pharmacy Choice on Dispensing Technique -
CMS will require the dispensing technique to be consistent within a particular facility (to meet requirement within the legislation's language around uniformity) but will allow the facility and the pharmacy determine the appropriate dispensing technique for each location. The plans will simply have to live with and support whatever technique is in place for the facility in which their member resides.
There also appears to be a requirement placed upon plan sponsors to ensure that pharmacies are being uniform within each facility they service, which is new as well. I hear audit bells...
Dispensing Technique Reported on Each Claim -
I read that CMS will require Part D sponsors to report, at a claim level, the dispensing technique used for each claim. This can only be reported by the pharmacy, and can only efficiently be accomplished using a field on the claim transaction. The National Council on Prescription Drug Programs (NCPDP) has been working on an update to the codes available to accomplish this. (see my previous post about NCPDP and the influence it has in the pharmacy industry)
My question is where this will be reported on the Prescription Drug Record (PDE) submitted by plans to CMS. I don't believe a field exists today, and so the PDE record layout (which is changing from 2010 to 2011) may need to be updated (again) in order to accomodate this.
Copayment Logic Variability -
An interesting and dissapointing fact is that CMS did not mandate a logic for how to handle copayments. This lack of direction may lead to confusion in the industry, as plan sponsors appear to be able to choose first fill, last fill, or pro-rate. I'm not sure, at this point, how pharmacies will know if a copayment has been pro-rated or not.
Automated Remote Dispensing -
CMS all but endorsed automated remote dispensing (currently offered by technology companies like Talyst) as the most efficient dispensing technique in reducing waste in LTC pharmacy services. This may offer a big opportunity for companies offering this technology, as the current ROI models have really been focused on the Medicare Part A pharmacy segment. This change, in total, offers remote dispensing technology providers a new market of buyers.
Also of note is the allowance that plans can negotiate different dispensing fees for different dispensing techniques. This further strenthens the opportunity for these technology suppliers, as pharmacies may be offered higher dispensing fees from plans if they adopt these technologies. Nothing like a regulatory boost to get your business going.
All in all, I'm still not convinced that the waste budgeted to be saved by this move will be found under the conditions set forth in the proposed rule. But, it sure will keep the software programmers (and technology suppliers) busy for the next 12 months as the industry grapples with how to be compliant with this new requirement, and how to make it a profitable change.
***
UPDATE 12/11 - Follow-up Post
The Affordable Care Act (ACA) calls for dispensing of Part D covered medications to residents of these long term care facilities (more commonly known as nursing homes) in 7-day supplies or less, in an attempt to curb costs associated with wasted medications. The was scored in such a way that this particular provision was expected to generate $6 billion in Part D savings within 10 years.
CMS's proposed rule(s) for changes to Medicare Advantage and Medicare Part D plans for the year 2012 is about to be released (though it may have been held up (purposefully???) waiting for the mid-term election to pass), and here's a preview of some of the highlights related to the 7-day-or-less provision:
- The 7-day-or-less requirement will only apply to Brand Name medications, though Generics are encouraged to be included as well - and CMS indicates they will require Generics at another (future) time
- Products for acute care and those that are "difficult to dispense in 7-day-or-less supplies" are excluded from the requirement (think antibiotics and eye-drops and inhalers)
- CMS will require reporting from plan sponsors (and thus plan sponsors will require reporting from pharmacies servicing LTC facilities) that quantifies "wasted" products. The rule also requires LTC facilities to return unused medications to the pharmacy for accounting for this purpose (new requirement)
- Part D plan sponsors will basically be required to support all iterations of different 7-day-or-less dispensing techniques, but techniques must be uniform within each facility
- Dispensing methodology must be reported for each LTC pharmacy claim (likely through PDE reporting)
- Copayments will be allowed to be applied on the first transaction of a month, last transaction of a month, or be prorated by days supply, in most cases (pro-rated not allowed on Low Income beneficiaries)
- CMS appears to endorse automated remote dispensing as the most efficient and waste-reducing dispensing technique
- CMS seems to endorse (or at least allow) Plan sponsors negotiating different fees to be paid for transactions dependent upon the dispensing technique used
This is all based on a first read, and is just reflective of a "proposed" rule, which is subject to update and change based upon comments CMS receives. However, there are some interesting thing here.
Brand Only -
Certain parts of the pharmacy industry have been lobbying for a brand-only exclusion, arguing that added costs of dispensing more often would not be offset by cost savings related to waste on less expensive products. The proposed $ cutoff being tossed around was $400. CMS seems to have bitten on this, at least partially, and at least temporarily. However, CMS will require generics later (I guess they are leveraging the no later than January 1, 2012 implementation requirement in the legislation, at least for generics).
Personally, I see it as difficult for pharmacies and nursing facilities to operationalize brand only 7-day-or-less, and would expect at least some just do it for all meds since they have to do it for some. There are likely some, however, who will try to implement 7-day-or-less for just the ~20% of scripts that are currently brand.
New Reporting -
CMS has apparently added a new "reporting requirement" for plan sponsors related to unused medications. This can only be accurately reported by the pharmacies, and for pharmacies to report the amount of unused medications, they have to take it back... And so, CMS has required that pharmacies take unused medications back and report the amounts to the plan sponsors (who will, in turn, report to CMS). The idea is apparently for CMS to measure the amount of waste still in the system, AND to correlate the amount of waste with the types of dispensing techniques that allowed the waste to occur.
This is interesting because they have also inferred that dispensing fees paid to pharmacies (which are most certainly to be renegotiated based upon this change to the industry) can include amounts to pay for processing of returned unused producs (something not common in Part D today, though seems to occur for some state Medicaid programs).
Facility/Pharmacy Choice on Dispensing Technique -
CMS will require the dispensing technique to be consistent within a particular facility (to meet requirement within the legislation's language around uniformity) but will allow the facility and the pharmacy determine the appropriate dispensing technique for each location. The plans will simply have to live with and support whatever technique is in place for the facility in which their member resides.
There also appears to be a requirement placed upon plan sponsors to ensure that pharmacies are being uniform within each facility they service, which is new as well. I hear audit bells...
Dispensing Technique Reported on Each Claim -
I read that CMS will require Part D sponsors to report, at a claim level, the dispensing technique used for each claim. This can only be reported by the pharmacy, and can only efficiently be accomplished using a field on the claim transaction. The National Council on Prescription Drug Programs (NCPDP) has been working on an update to the codes available to accomplish this. (see my previous post about NCPDP and the influence it has in the pharmacy industry)
My question is where this will be reported on the Prescription Drug Record (PDE) submitted by plans to CMS. I don't believe a field exists today, and so the PDE record layout (which is changing from 2010 to 2011) may need to be updated (again) in order to accomodate this.
Copayment Logic Variability -
An interesting and dissapointing fact is that CMS did not mandate a logic for how to handle copayments. This lack of direction may lead to confusion in the industry, as plan sponsors appear to be able to choose first fill, last fill, or pro-rate. I'm not sure, at this point, how pharmacies will know if a copayment has been pro-rated or not.
Automated Remote Dispensing -
CMS all but endorsed automated remote dispensing (currently offered by technology companies like Talyst) as the most efficient dispensing technique in reducing waste in LTC pharmacy services. This may offer a big opportunity for companies offering this technology, as the current ROI models have really been focused on the Medicare Part A pharmacy segment. This change, in total, offers remote dispensing technology providers a new market of buyers.
Also of note is the allowance that plans can negotiate different dispensing fees for different dispensing techniques. This further strenthens the opportunity for these technology suppliers, as pharmacies may be offered higher dispensing fees from plans if they adopt these technologies. Nothing like a regulatory boost to get your business going.
All in all, I'm still not convinced that the waste budgeted to be saved by this move will be found under the conditions set forth in the proposed rule. But, it sure will keep the software programmers (and technology suppliers) busy for the next 12 months as the industry grapples with how to be compliant with this new requirement, and how to make it a profitable change.
***
UPDATE 12/11 - Follow-up Post
Thursday, November 4, 2010
Republicans on Health Care Reform Post Election
Finally, it’s over. The mid-term 2010 election season has finally come to a merciful end. For now, no more radio and TV ads of candidates trying to expose how their opponent is either stupid, crazy, or just a plain @ss-hole.
Now the pundits will begin to theorize on how the now Republican-controlled House will impact things like economic stimulus, job creation, and the well-beloved health care reform bill.
Many Republicans (and I include the Tea-Party as Republicans for purposes here) ran, at least partially, on the platform that they would work to repeal the health care reform law. Even the man who is likely to become Speaker, John Boehner of Ohio (I used to live in that district BTW) made the statement Wed, the day after the election - “We have to do everything we can to try to repeal this bill and replace it with common sense reforms to bring down the cost of health care.”
Just one teensy, tiny problem there… Republicans only control the House, and the Senate remains in Democrat hands. Not to mention that man living in the White House. He might have something to say about it.
So the idea that the health care reform law passed under the Democrat-controlled Congress and White House earlier in 2010 is going to be repealed is unrealistic. If you truly believe it to be possible, tell me how, because I don’t see Democrats in Congress or the White House abandoning their ideas and going along with a repeal, no matter the reasonability or the superiority of any alternative plans offered by Republicans. (which have not been offered yet)
What is much more likely would be Republicans putting healthcare reform on a diet. Another part of the Republican platform is fiscal control. Spend less, tax less, reduce deficits, etc. It is conceivable that Republicans could attempt to alter the course of healthcare reform by treating it like they will likely attempt to treat many spending initiatives – with a scalpel.
What Republicans may do is work to slash the funding necessary to implement many parts of health care reform. The House-version of the next federal budget could include little, if any $ for implementation, while the Senate version might contain more. (donkeys and elephants at their finest) They would have to work it out in conference committee, but the net result would likely be an inability (or reduced ability) at HHS to efficiently implement what the legislature has dictated.
Unfortunately, for stakeholders involved in this mess, while HHS would not have the $ to implement their portions, it’s likely that would not mean the reform measures would be dead. Given HHS’s recent stance about insurance companies, it is likely that HHS, despite limited funding, would still attempt to require compliance with the law (taking action against those who are not compliant with requirements) despite this lack of funding.
The impact of such a scenario playing out is hard to predict. In any event, despite Republican speeches to the contrary, health care reform is likely not to be repealed, and “fixing” it (as best as we can) should be the agenda of the day. Focusing rhetoric on a repeal is only going to hurt Republicans and tax payers in the long run, as it’s not an achievable (though worthy) goal.
Now the pundits will begin to theorize on how the now Republican-controlled House will impact things like economic stimulus, job creation, and the well-beloved health care reform bill.
Many Republicans (and I include the Tea-Party as Republicans for purposes here) ran, at least partially, on the platform that they would work to repeal the health care reform law. Even the man who is likely to become Speaker, John Boehner of Ohio (I used to live in that district BTW) made the statement Wed, the day after the election - “We have to do everything we can to try to repeal this bill and replace it with common sense reforms to bring down the cost of health care.”
Just one teensy, tiny problem there… Republicans only control the House, and the Senate remains in Democrat hands. Not to mention that man living in the White House. He might have something to say about it.
So the idea that the health care reform law passed under the Democrat-controlled Congress and White House earlier in 2010 is going to be repealed is unrealistic. If you truly believe it to be possible, tell me how, because I don’t see Democrats in Congress or the White House abandoning their ideas and going along with a repeal, no matter the reasonability or the superiority of any alternative plans offered by Republicans. (which have not been offered yet)
What is much more likely would be Republicans putting healthcare reform on a diet. Another part of the Republican platform is fiscal control. Spend less, tax less, reduce deficits, etc. It is conceivable that Republicans could attempt to alter the course of healthcare reform by treating it like they will likely attempt to treat many spending initiatives – with a scalpel.
What Republicans may do is work to slash the funding necessary to implement many parts of health care reform. The House-version of the next federal budget could include little, if any $ for implementation, while the Senate version might contain more. (donkeys and elephants at their finest) They would have to work it out in conference committee, but the net result would likely be an inability (or reduced ability) at HHS to efficiently implement what the legislature has dictated.
Unfortunately, for stakeholders involved in this mess, while HHS would not have the $ to implement their portions, it’s likely that would not mean the reform measures would be dead. Given HHS’s recent stance about insurance companies, it is likely that HHS, despite limited funding, would still attempt to require compliance with the law (taking action against those who are not compliant with requirements) despite this lack of funding.
The impact of such a scenario playing out is hard to predict. In any event, despite Republican speeches to the contrary, health care reform is likely not to be repealed, and “fixing” it (as best as we can) should be the agenda of the day. Focusing rhetoric on a repeal is only going to hurt Republicans and tax payers in the long run, as it’s not an achievable (though worthy) goal.
Sunday, October 31, 2010
Is Birth Control Preventive Medicine?
Almost no-one will argue that effective preventive medicine is the future. Preventing a disease is almost always less expensive than treating that disease after a diagnosis.
Less clear is the answer to the question, "What is a disease?"
Seems simple, right? Well, maybe not...
Webster's Dictionary defines the word disease like this - a condition of the living animal or plant body or of one of its parts that impairs normal functioning and is typically manifested by distinguishing signs and symptoms.
With that in mind, let's move to this question, "Is pregnancy a disease?"
Oh... A little harder... Objectively, pregnancy is manifested by distinguished signs and symptoms. Yes, occasionally a man can get himself in some social trouble mistaking some extra pounds for a motherly glow... But, for the most part, it's pretty clear when a woman is expecting - at least after she crosses the 6 month mark or so.
I think the more important point on the definition of a disease is "impairs normal functioning." This is likely even more contentious. Are there things that a person of the female perspective can't (or shouldn't) do while pregnant? Should a woman be considered "impaired" while pregnant. Now, my wife was certainly a little less emotionally "stable" while pregnant (and right after birth...) but I wouldn't agree that she was "impaired." About the only "normal" thing impaired during pregnancy might be menstruation.
So, according to my incredibly skilled analysis above, preventing pregnancy could not be claimed to be preventive medicine, as I don't believe we can classify pregnancy as a disease. A physical (and maybe mental) condition, yes. But, not a disease.
But, pregnancy IS expensive. Now, if you're willing to boil water, clench your teeth on a stick, and do it the old fashioned way, maybe not. But, to do it according to current American standards, it is.
So, the point of this post... Should pregnancy prevention be considered preventive medicine? A panel will begin meeting in November to decide that, among other questions. If birth control is found to be preventive medicine, it could come to pass that insurance companies will be required to provide birth control to women at no cost.
Dr. David Grimes, an obstetrician-gynecologist who teaches medicine at the University of North Carolina makes this argument:
"There is clear and incontrovertible evidence that family planning saves lives and improves health. Contraception rivals immunization in dollars saved for every dollar invested. Spacing out children allows for optimal pregnancies and optimal child rearing. Contraception is a prototype of preventive medicine."
To me, from a cost perspective, this argument is pretty sound. Save lives. Optimal pregnancies. Good return on investment. Sounds good.
Others are not so convinced, and it is rooted in the disapproval of birth control in general.
"We don't consider it to be health care, but a lifestyle choice," says John Haas, president of the National Catholic Bioethics Center. "We think there are other ways to avoid having children than by ingesting chemicals paid for by health insurance." Not a surprising stance from the Catholic church.
Objectively, and if you ignore the argument about the morality of birth control, preventing unplanned or unwanted pregnancy could be a good thing financially for both the health care system and individuals who are impacted by lifelong costs (that they may have otherwise not incurred). About the only group negatively impacted could be hospitals. If estimations that about half of all pregnancies are unplanned, and we assume that half of those (25% of all pregnancies) would be delayed and the other half would have been prevented all together, then revenue for hospitals could be reduced and postponed if birth control was utilized at near-universal levels.
So, there are really unarguable financial benefits to universal availability of birth control (especially those that are more effective, like implants and intrauterine devices) and so the support for coverage really comes down to your position regarding the morality of birth control.
My crystal ball tells me we'll see universally covered (at little to no patient cost) birth control.
Less clear is the answer to the question, "What is a disease?"
Seems simple, right? Well, maybe not...
Webster's Dictionary defines the word disease like this - a condition of the living animal or plant body or of one of its parts that impairs normal functioning and is typically manifested by distinguishing signs and symptoms.
With that in mind, let's move to this question, "Is pregnancy a disease?"
Oh... A little harder... Objectively, pregnancy is manifested by distinguished signs and symptoms. Yes, occasionally a man can get himself in some social trouble mistaking some extra pounds for a motherly glow... But, for the most part, it's pretty clear when a woman is expecting - at least after she crosses the 6 month mark or so.
I think the more important point on the definition of a disease is "impairs normal functioning." This is likely even more contentious. Are there things that a person of the female perspective can't (or shouldn't) do while pregnant? Should a woman be considered "impaired" while pregnant. Now, my wife was certainly a little less emotionally "stable" while pregnant (and right after birth...) but I wouldn't agree that she was "impaired." About the only "normal" thing impaired during pregnancy might be menstruation.
So, according to my incredibly skilled analysis above, preventing pregnancy could not be claimed to be preventive medicine, as I don't believe we can classify pregnancy as a disease. A physical (and maybe mental) condition, yes. But, not a disease.
But, pregnancy IS expensive. Now, if you're willing to boil water, clench your teeth on a stick, and do it the old fashioned way, maybe not. But, to do it according to current American standards, it is.
So, the point of this post... Should pregnancy prevention be considered preventive medicine? A panel will begin meeting in November to decide that, among other questions. If birth control is found to be preventive medicine, it could come to pass that insurance companies will be required to provide birth control to women at no cost.
Dr. David Grimes, an obstetrician-gynecologist who teaches medicine at the University of North Carolina makes this argument:
"There is clear and incontrovertible evidence that family planning saves lives and improves health. Contraception rivals immunization in dollars saved for every dollar invested. Spacing out children allows for optimal pregnancies and optimal child rearing. Contraception is a prototype of preventive medicine."
To me, from a cost perspective, this argument is pretty sound. Save lives. Optimal pregnancies. Good return on investment. Sounds good.
Others are not so convinced, and it is rooted in the disapproval of birth control in general.
"We don't consider it to be health care, but a lifestyle choice," says John Haas, president of the National Catholic Bioethics Center. "We think there are other ways to avoid having children than by ingesting chemicals paid for by health insurance." Not a surprising stance from the Catholic church.
Objectively, and if you ignore the argument about the morality of birth control, preventing unplanned or unwanted pregnancy could be a good thing financially for both the health care system and individuals who are impacted by lifelong costs (that they may have otherwise not incurred). About the only group negatively impacted could be hospitals. If estimations that about half of all pregnancies are unplanned, and we assume that half of those (25% of all pregnancies) would be delayed and the other half would have been prevented all together, then revenue for hospitals could be reduced and postponed if birth control was utilized at near-universal levels.
So, there are really unarguable financial benefits to universal availability of birth control (especially those that are more effective, like implants and intrauterine devices) and so the support for coverage really comes down to your position regarding the morality of birth control.
My crystal ball tells me we'll see universally covered (at little to no patient cost) birth control.
Wednesday, October 27, 2010
Healthcare Reform - A Gloomy View
Many things have been said and written, both positive and negative, about the Affordable Care Act(ACA) (if you have some spare time, you can click here to read it in full text). Many continue to claim it's virtues, but Senators Tom Coburn (R-OK) and John Barrasso (R-WY) have a different opinion. Their report, Grim Diagnosis, lays out 9 areas of concern (though only 7 are unique in my view) where the Senators feel the ACA is harmful both from both financial and job perspectives.
1 Jobs -
The Senators first point to a CBO analysis that says that expanding Medicaid coverage and the phasing out of subsidies on expensive insurance will diminish some individuals' incentives to work. On the one hand, it is argued, an increased availability of Medicaid will lead to some workers reducing or eliminating the hours they currently work. For the subsidies, the Senators connect the reduction in subsidies to an effective increase in marginal tax rates, which reduces the incentive for a worker to work more hours.
The report goes on to look at the new "excise tax", estimated to bring $20B, imposed on manufacturers of medical devices. The tax is based on gross sales by the manufacturer (2.3% to be exact). While margins will vary from company to company, it is not unreasonable to think that companies currently experiencing a 2.3% net margin (or less) would now be in a bad place. In order to maintain profitability, some may consider off-shoring or reduced investment in innovation, and also may not grow at the pace (growth = jobs) previously expected.
2 - Penalize Low Income Workers
While many are aware of the relatively unpopular "individual mandate" (the part that effectively allows insurance companies to eliminate coverage denials for pre-existing conditions, among other things), there is also an effective "employer mandate" of sorts embedded in the new law. Beginning in 2014, businesses with more than 50 employees will be "fined" $2,000 per employee if they choose not to provide approved insurance for their employees. So, an employer of 51 employees would pay $102,000 in fines annually for not providing coverage (or for providing coverage that for some reason does not get "approved" status). Alternatively, the employer could provide coverage, which would likely cost much more. At best, this would give a disincentive to businesses around 50 employees from growing (preventing new job creation). At worst, employers could be in a position to reconsider the employment of low-wage employees, finding that the additional cost of employing them no longer is financially beneficial due to increased cost. Somewhere in the middle is the idea that employees will be kept on, but wages will drop to compensate for the added costs. In any case, the majority of impacted workers will likely be low-wage, less-skilled employees, likely in the retail or food service industries.
3 - Rising Deficits
The Senators point out an interesting point about the way the Congressional Budget Office (CBO) reviews legislation for cost. The CBO looks at the immediate 10 year budget window and determines net cost. The ACA begins to "generate revenue" (taxes) year one, but does not implement many costs until many major insurance market changes take effect, in 2014. This front-load of revenue, while delaying the implementation of costs, skews the review of the 10 year window. So, while the bill was scored as a savings in the first 10 years, it is likely that costs will catch up with the taxes quickly, then adding to the deficit.
4 - Challenging Increases to State-Level Costs
Anyone who followed the health care debate remembers the Nebraska provision called the "Cornshucker Kickback." Under the agreement, which was later abandoned and removed from the law, the federal government was to fully absorb and fund the estimated $100 million increase in Medicaid costs (though actual costs will likely be much more in Nebraska). All states will experience in costs, and this is expected to further challenge cash-strapped treasuries. With limited options for deal with state-level budget deficits, we're likely to see increases in tax burden or decrease in state spending to compensate.
5 - Increased ER Waits and Costs
Common ground covered by advocates of the health care reform bill was the idea that unfunded health care utilization, by those without health care coverage, increases the bill for all of those who are covered. Family USA estimated the cost of unfunded care at more than $1000 annually in premium cost for each insured family. Much of this unfunded care is thought to be in ER visits, as hospitals are federally required to provide basic care, even if they know they will not be paid.
The health care overhaul will not eliminate ER wait times or costs. In fact, because of network restrictions within Medicaid programs, many Medicaid patients have issue quickly getting access to their primary care physician, driving them to visit ERs. (not to mention limited out of pocket costs to help deter ER utilization) Increasing the Medicaid roles will only exacerbate this wait time issue.
Also, increasing coverage to 30 million additional people (many through state Medicaid programs) will no decrease costs. The unfunded ER costs will now be covered under Medicaid (no real change expected to the utilization) and some people who DO avoid using the health care system due to their inability to pay will no longer have that barrier. All in all, increased cost AND increased waits at emergency rooms.
6 - CLASS
Admittedly, before I read the Grim Diagnosis report, I was not aware of the inclusion of the "Community Living Assistance Services and Supports" program (CLASS). This is will basically be federally guaranteed Long Term Care insurance, designed to help people stay in their homes longer, by paying for assistance with activities of daily living, like bathing, eating or dressing. Premiums would be based on the age of a participant when they enter the program, and would remain relatively fixed as long as they remain in the program.
The CLASS program sounds good overall, but unfortunately is a potentially unfunded liability, much like Social Security... If managed poorly, the program could quickly be underwater, with no one left to bail it out but the American taxpayer.
Also, CLASS was an additional budget trick. Participants must be enrolled in the program for 5 years before benefits begin to be paid out. So, for the 10 year budget period reviewed by the CBO, there was 10 years of premiums to be considered, but only 5 years of cost. Sound familiar?
7 - Medicare Remains Underfunded
Medicare's unfunded liabilities are in the trillions of dollars. Unfortunately, the health care reform bill did little improve this.
The report goes on to talk about impacts to young workers entering the workforce, and higher expenses for employers, which are both extension of points made before.
Overall, the report focuses on the negatives (or potential negatives) that are outputs of the health care reform, and spends no time looking at potential positives. Even so, these are mostly valid points and perspectives that raise serious questions about the viability of the future of the health care system in America - specifically the purpose of the bill to begin with.
1 Jobs -
The Senators first point to a CBO analysis that says that expanding Medicaid coverage and the phasing out of subsidies on expensive insurance will diminish some individuals' incentives to work. On the one hand, it is argued, an increased availability of Medicaid will lead to some workers reducing or eliminating the hours they currently work. For the subsidies, the Senators connect the reduction in subsidies to an effective increase in marginal tax rates, which reduces the incentive for a worker to work more hours.
The report goes on to look at the new "excise tax", estimated to bring $20B, imposed on manufacturers of medical devices. The tax is based on gross sales by the manufacturer (2.3% to be exact). While margins will vary from company to company, it is not unreasonable to think that companies currently experiencing a 2.3% net margin (or less) would now be in a bad place. In order to maintain profitability, some may consider off-shoring or reduced investment in innovation, and also may not grow at the pace (growth = jobs) previously expected.
2 - Penalize Low Income Workers
While many are aware of the relatively unpopular "individual mandate" (the part that effectively allows insurance companies to eliminate coverage denials for pre-existing conditions, among other things), there is also an effective "employer mandate" of sorts embedded in the new law. Beginning in 2014, businesses with more than 50 employees will be "fined" $2,000 per employee if they choose not to provide approved insurance for their employees. So, an employer of 51 employees would pay $102,000 in fines annually for not providing coverage (or for providing coverage that for some reason does not get "approved" status). Alternatively, the employer could provide coverage, which would likely cost much more. At best, this would give a disincentive to businesses around 50 employees from growing (preventing new job creation). At worst, employers could be in a position to reconsider the employment of low-wage employees, finding that the additional cost of employing them no longer is financially beneficial due to increased cost. Somewhere in the middle is the idea that employees will be kept on, but wages will drop to compensate for the added costs. In any case, the majority of impacted workers will likely be low-wage, less-skilled employees, likely in the retail or food service industries.
3 - Rising Deficits
The Senators point out an interesting point about the way the Congressional Budget Office (CBO) reviews legislation for cost. The CBO looks at the immediate 10 year budget window and determines net cost. The ACA begins to "generate revenue" (taxes) year one, but does not implement many costs until many major insurance market changes take effect, in 2014. This front-load of revenue, while delaying the implementation of costs, skews the review of the 10 year window. So, while the bill was scored as a savings in the first 10 years, it is likely that costs will catch up with the taxes quickly, then adding to the deficit.
4 - Challenging Increases to State-Level Costs
Anyone who followed the health care debate remembers the Nebraska provision called the "Cornshucker Kickback." Under the agreement, which was later abandoned and removed from the law, the federal government was to fully absorb and fund the estimated $100 million increase in Medicaid costs (though actual costs will likely be much more in Nebraska). All states will experience in costs, and this is expected to further challenge cash-strapped treasuries. With limited options for deal with state-level budget deficits, we're likely to see increases in tax burden or decrease in state spending to compensate.
5 - Increased ER Waits and Costs
Common ground covered by advocates of the health care reform bill was the idea that unfunded health care utilization, by those without health care coverage, increases the bill for all of those who are covered. Family USA estimated the cost of unfunded care at more than $1000 annually in premium cost for each insured family. Much of this unfunded care is thought to be in ER visits, as hospitals are federally required to provide basic care, even if they know they will not be paid.
The health care overhaul will not eliminate ER wait times or costs. In fact, because of network restrictions within Medicaid programs, many Medicaid patients have issue quickly getting access to their primary care physician, driving them to visit ERs. (not to mention limited out of pocket costs to help deter ER utilization) Increasing the Medicaid roles will only exacerbate this wait time issue.
Also, increasing coverage to 30 million additional people (many through state Medicaid programs) will no decrease costs. The unfunded ER costs will now be covered under Medicaid (no real change expected to the utilization) and some people who DO avoid using the health care system due to their inability to pay will no longer have that barrier. All in all, increased cost AND increased waits at emergency rooms.
6 - CLASS
Admittedly, before I read the Grim Diagnosis report, I was not aware of the inclusion of the "Community Living Assistance Services and Supports" program (CLASS). This is will basically be federally guaranteed Long Term Care insurance, designed to help people stay in their homes longer, by paying for assistance with activities of daily living, like bathing, eating or dressing. Premiums would be based on the age of a participant when they enter the program, and would remain relatively fixed as long as they remain in the program.
The CLASS program sounds good overall, but unfortunately is a potentially unfunded liability, much like Social Security... If managed poorly, the program could quickly be underwater, with no one left to bail it out but the American taxpayer.
Also, CLASS was an additional budget trick. Participants must be enrolled in the program for 5 years before benefits begin to be paid out. So, for the 10 year budget period reviewed by the CBO, there was 10 years of premiums to be considered, but only 5 years of cost. Sound familiar?
7 - Medicare Remains Underfunded
Medicare's unfunded liabilities are in the trillions of dollars. Unfortunately, the health care reform bill did little improve this.
The report goes on to talk about impacts to young workers entering the workforce, and higher expenses for employers, which are both extension of points made before.
Overall, the report focuses on the negatives (or potential negatives) that are outputs of the health care reform, and spends no time looking at potential positives. Even so, these are mostly valid points and perspectives that raise serious questions about the viability of the future of the health care system in America - specifically the purpose of the bill to begin with.
Thursday, October 21, 2010
Medical "Lost Their Minds" Ratios
A majorly contentious portion of the "health care reform" debate (which was more of a debate about health insurance, as little about "health care" was really reformed) was the minimum Medical Loss Ratios(MLRs) that would be applied to commercial health insurance coverage. MLR is basically the % of the premium $ collected by an insurer (that chunk of change taken out of your paycheck PLUS the amount paid by your employer, if you're employer covers you) that ends up paid out by the insurer to pay for medical claims.
For the individual and small-group markets, the minimum MLR contained in the Affordable Care Act is 80%. That means, for every $1 paid in premium, $0.80 must be paid out for claims or "activities that improve health care quality." Said another way, insurance companies are limited, for this market, to spending/keeping $0.20 per $1 collected in premiums for everything else, like administrative expenses (rent, payroll, travel, etc.) and profit. In the large-group market, the minimum MLR is 85%. A carrier who exceeds the MLR for a line of business must "pay-down" the difference in the form of a rebate to policyholders.
The intention is obviously to limit the profits of insurance companies, who were generally vilified during the debate. But let's take a look at some big round numbers to see how this might play out.
United Health Group (UNH) had premium revenue of approx $79B in 2009. They had approx $65B in "medical costs", which, using simple math, gives them a MLR of ~82%. This MLR calculation doesn't take into consideration the new "activities that improve health care quality" allowance, so, if restated in "new" math, expect that MLR to be higher.
UNH also has a mix of small and large group clients, and the MLR on their different lines of business would be done separately. Blended, expect their MLR "requirement" to fall somewhere in the 83-84% range. I don't think they'll have any trouble meeting that.
So, for a mamoth of an insurer like UNH, who is running relatively efficiently, MLR reform doesn't seem to present much of an issue. But the American economy's lifeblood is small business - and in health insurance, these would not be mom and pop insurance stands, but smaller, regional competitors of companies like UNH, who don't have some of the efficiencies and scale of UNH, who employes somewhere around 80,000 employees.
These smaller insurers will have a tougher time meeting the MLR requirements. Many may have MLRs much lower than UNH using today's math, and will be scrambling to come into compliance. They'll likely do it in a few different ways.
First, they will get "creative" on what they will count in the quality bucket. Don't worry, the regulators and auditors are already smaking their lips... That won't last long for those who try it (and are not successful). Next, they'll cut their expenses, likely drastically. More lost jobs - lovely - and they will start to lose the ability to provide service (call centers) for their membership, who will begin to defect. Finally, they'll look for a buyer. Someone like, you guessed it, UNH.
In the end, MLR minimums will simply drive additional consolidation in the marketplace, leaving fewer, larger insurers. Of course, without the ability to pile up cash from profits (remember profits are limited here), this will only last a short while. Big companies will run out of money to buy little companies (and won't be able to pile up cash quickly to replenish their coffers) and then the little guys who are left will simply close up shop. Imagine a news story telling you that your health insurance company simply shut down...
In a matter of a few years we could have significantly less health insurers, all of which (remaining) will be attempting to find new ways to make a larger profit, which means lower levels of personal service (lay off workers to increase the portion of premiums that end up on the bottom line).
And all of this does almost nothing to actually impact the true driver of health care cost growth - utilization of new, more expensive treatment options, with little to no evidence of superiority over existing treatment options. So, we've reformed health insurance to something likely less desirable than it is today, and still will be experiencing huge increases in cost, because that premium (the ever growing paycheck whitholding) is and always has been tied to the costs of the medical claims coming in, which will keep on coming.
For the individual and small-group markets, the minimum MLR contained in the Affordable Care Act is 80%. That means, for every $1 paid in premium, $0.80 must be paid out for claims or "activities that improve health care quality." Said another way, insurance companies are limited, for this market, to spending/keeping $0.20 per $1 collected in premiums for everything else, like administrative expenses (rent, payroll, travel, etc.) and profit. In the large-group market, the minimum MLR is 85%. A carrier who exceeds the MLR for a line of business must "pay-down" the difference in the form of a rebate to policyholders.
The intention is obviously to limit the profits of insurance companies, who were generally vilified during the debate. But let's take a look at some big round numbers to see how this might play out.
United Health Group (UNH) had premium revenue of approx $79B in 2009. They had approx $65B in "medical costs", which, using simple math, gives them a MLR of ~82%. This MLR calculation doesn't take into consideration the new "activities that improve health care quality" allowance, so, if restated in "new" math, expect that MLR to be higher.
UNH also has a mix of small and large group clients, and the MLR on their different lines of business would be done separately. Blended, expect their MLR "requirement" to fall somewhere in the 83-84% range. I don't think they'll have any trouble meeting that.
So, for a mamoth of an insurer like UNH, who is running relatively efficiently, MLR reform doesn't seem to present much of an issue. But the American economy's lifeblood is small business - and in health insurance, these would not be mom and pop insurance stands, but smaller, regional competitors of companies like UNH, who don't have some of the efficiencies and scale of UNH, who employes somewhere around 80,000 employees.
These smaller insurers will have a tougher time meeting the MLR requirements. Many may have MLRs much lower than UNH using today's math, and will be scrambling to come into compliance. They'll likely do it in a few different ways.
First, they will get "creative" on what they will count in the quality bucket. Don't worry, the regulators and auditors are already smaking their lips... That won't last long for those who try it (and are not successful). Next, they'll cut their expenses, likely drastically. More lost jobs - lovely - and they will start to lose the ability to provide service (call centers) for their membership, who will begin to defect. Finally, they'll look for a buyer. Someone like, you guessed it, UNH.
In the end, MLR minimums will simply drive additional consolidation in the marketplace, leaving fewer, larger insurers. Of course, without the ability to pile up cash from profits (remember profits are limited here), this will only last a short while. Big companies will run out of money to buy little companies (and won't be able to pile up cash quickly to replenish their coffers) and then the little guys who are left will simply close up shop. Imagine a news story telling you that your health insurance company simply shut down...
In a matter of a few years we could have significantly less health insurers, all of which (remaining) will be attempting to find new ways to make a larger profit, which means lower levels of personal service (lay off workers to increase the portion of premiums that end up on the bottom line).
And all of this does almost nothing to actually impact the true driver of health care cost growth - utilization of new, more expensive treatment options, with little to no evidence of superiority over existing treatment options. So, we've reformed health insurance to something likely less desirable than it is today, and still will be experiencing huge increases in cost, because that premium (the ever growing paycheck whitholding) is and always has been tied to the costs of the medical claims coming in, which will keep on coming.
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