Random charts - FDA

Source: The FDA’s Drug Pricing Strategy: What’s New?

"...To help track the FDA’s progress in implementing its strategy, we’ve created a timeline of the major announcements and regulatory actions the agency has taken to encourage a competitive market for biologic drugs, address drug shortages and abuses of the FDA’s citizen petition process, and streamline the Risk Evaluation and Mitigation Strategies (REMS) program, which aims to promote timelier competition from generic drug manufacturers. We’ll be updating this periodically. In a future post, we’ll discuss additional steps the agency and Congress could take to lower drug prices..."

MLR overview

Some previous blog entries referencing the MLR:

Update III - MLR update - Aug 9th, 2014
MLR - Year 2 - Jun 22, 2013

All you ever wanted to know about the MLR - Sep 23rd, 2012

Latest MLR update -  Dec 4th, 2011

The MLR saga continues - May 13th, 2011

Misc update (MLR) - Mar 26th, 2011

Misc update - V - Feb 13th, 2011

Misc updates - MLR - Oct 25th, 2010

MLR Redux - Aug 24th, 2010

MLR update - Jun 27th, 2010

Health care re-form VIII (More nonsense) - August 28th, 2009

Medical Loss Ratio Requirements Under the Patient Protection and Affordable Care Act (ACA): Issues for Congress provides a nice overview of the medical loss ratio, including:

"The 2010 Patient Protection and Affordable Care Act (ACA, P.L. 111-148) requires certain health insurers to provide consumer rebates if they do not meet a set financial target known as a medical loss ratio (MLR). At its most basic, a MLR measures the share of health care premium dollars spent on medical benefits, as opposed to company expenses such as overhead or profits. For example, if an insurer collects $100,000 in premiums and spends $85,000 on medical care, the MLR is 85%. In general, the higher the MLR, the more value a policyholder receives for his or her premium dollar. The ACA requires an annual, minimum 80% MLR for individual and small group insurance plans, and an annual, minimum 85% MLR for large group plans. Congress imposed the MLR to provide “greater transparency and accountability around the expenditures made by health insurers and to help bring down the cost of health care.”...

"... The ACA statute and regulations allow companies to include both quality improvements and medical services when calculating total MLR medical spending. Insurers may subtract (i.e., disregard) state and local taxes and some licensing fees from total MLR expenses... The ACA MLR is now the national minimum standard that must be met by covered health insurers..."

"... The MLR provisions apply to fully funded health plans, which are plans where insurance companies assume full risk for incurred medical expenses. The MLR does not extend to self-funded plans... Non-profit insurers and Medicare plans were not subject to the MLR during the first two years the ACA was in effect... The HHS granted three-year MLR waivers to select states where it determined that MLR implementation could harm the individual insurance market..."

"In general, the higher the MLR, the more value a consumer receives for each dollar of paid premium. For example, an 85% MLR means that 85% of premium dollars paid into a plan are paid out in the form of benefits. A 75% MLR means that just 75% of premium dollars are used for benefits. The MLR is an aggregate measure. Because the ratio is based on a health plan’s overall performance, some enrollees may pay more in premiums during the course of a year than they receive in benefits, while others may receive benefits that far exceed their premium payments..."

"... The ACA MLR standards require that covered insurers in the individual and small group markets meet a minimum MLR of 80%. For insurers that sell large group plans, the minimum MLR is 85%. The higher MLR requirement for the large group market accounts for economies of scale; in other words, it is more efficient to sell insurance to a large company that will offer coverage for many individuals and families than it is to have to market a product to one individual at a time, or to firms that cover a smaller group of individuals. Thus, the higher MLR standard for large companies reflects their assumed lower administrative costs..."

"... Definition of Medical Claims: Incurred claims = direct claims incurred in MLR reporting year + unpaid claim reserves associated with claims incurred + change in contract reserves + claims-related portion of reserves for contingent benefits and lawsuits + experience-rated refunds (exclude rebates based on issuers MLR)..."

"... The ACA allows insurers (with some exceptions) to include spending for quality improvements in the numerator for calculating the MLR. In other words, companies can meet the federal MLR medical claims requirement, in part, by increasing activities designed to enhance the quality of their insurance products. Thus, the actual definition of what constitutes a quality expenditure is important to the MLR calculation..."

"... Final HHS rules let insurers count money recovered from fraud and abuse initiatives toward the MLR requirement for medical benefits spending, but do not allow companies to count broader fraud prevention activities..."

"... A key part of the MLR calculation is the definition of premiums, which is in the denominator of the MLR formula. Holding medical claims and quality improvement constant, an increase in premium revenues lowers the MLR, while a reduction in premium revenues raises the MLR. The ACA also allows insurers to subtract certain taxes, licensing, and regulatory fees from premiums, which can further increase the MLR amount (and reduce the likelihood of paying rebates)..."

"... Premiums are calculated based on earned premiums, and are defined as the sum of all monies paid by a policyholder in order to receive coverage from a health insurer... Taxes, licenses, and regulatory fees are subtracted from premiums under the MLR formula. Since they reduce premium revenue, higher taxes and fees can raise the MLR... Federal taxes are defined by HHS as all federal taxes and assessments allocated to health insurance coverage that are subject to the MLR reporting requirements under ACA. Federal income taxes on investment income and capital gains are excluded from this component as they are not considered taxes on premium revenues and, thus, should not be used to adjust premium revenues..."

"... The ACA requires that the MLR calculation include methodologies to account for the special circumstances of smaller plans, different types of plans, and newer plans. To that end, the NAIC recommended, and HHS adopted, two “credibility adjustments” designed to address issues associated with random variation in claims data... The first credibility adjustment is intended to address health insurance plans with low enrollment... A second credibility adjustment is available to insurers that have a large share of high deductible health plans (HDHPs)..."

"... The ACA gave the HHS Secretary the authority to adjust the 80% MLR standard for the individual health insurance market if the Secretary determined that applying the standard could destabilize the individual market in a given state. States were allowed to request a temporary adjustment in the MLR ratio for up to three years, to avoid coverage disruptions in their individual markets... Seven states were granted an adjustment: Georgia, Iowa, Kentucky, Maine, Nevada, New Hampshire, and North Carolina. Ten states and a territory were denied an adjustment: Delaware, Florida, Guam, Indiana, Kansas, Louisiana, Michigan, North Dakota, Oklahoma, Texas, and Wisconsin..."

"... Health insurers that fail to meet the minimum MLR requirements must provide rebates to policyholders... The NAIC recommended, and HHS agreed, that the entity distributing the rebates may choose whether to disburse payments to current enrollees as a lump-sum check or a deposit to a credit or debit card..." 

 

Update IV - MDET update

Previous blog entries on the MDET:
Follow-up (MDET) - Jul 4th, 2013
Consequences (MDET) - Jun 1st, 2013

The Medical Device Excise Tax (MDET) has now been in force for some time and Exclusive: IRS collected $1.4B in medtech excise tax payments in 2013 gives us a first approximation of the actual impact on medical device companies...

Update III - MLR update

Some previous blog entries referencing the MLR:

MLR - Year 2 - Jun 22, 2013

All you ever wanted to know about the MLR - Sep 23rd, 2012

Latest MLR update -  Dec 4th, 2011

The MLR saga continues - May 13th, 2011

Misc update (MLR) - Mar 26th, 2011

Misc update - V - Feb 13th, 2011

Misc updates - MLR - Oct 25th, 2010

MLR Redux - Aug 24th, 2010

MLR update - Jun 27th, 2010

Health care re-form VIII (More nonsense) - August 28th, 2009

The MLR - medical loss ratio - was in the news again... First, it was announced that "... U.S. health insurers will send out about $330 million in rebates to employers and individuals this summer... The rebates will go to about 6.8 million people and have a value of about $80 per family. They are to be sent by Aug. 1 either directly to consumers or to the employer providing the health coverage, who is required to pass the savings onto employees..."

Second, a detailed GAO report provided information on the MLR, including: "... When the MLR rules were being considered, there was some concern that insurers would categorize spending on routine operations, such as utilization review, as QI, Jost said. Doing so would move these costs from administration to claims, and thus help them avoid paying MLR rebates to consumers and businesses. “But that does not seem to be happening in a major way" and "...insurers spent less than 1.6 percent of their annual premium income on quality improvements (QI). In 2011, health insurers’ average spending on QI activities as a percentage of net premiums ranged from a low of 0.2 percent (in Wyoming) to a high of 1.5 percent (in Tennessee). The 2012 numbers were similar — Wyoming was still the lowest (at 0.3 percent) and New Mexico was highest at 1.6 percent..." and "... Contrary to predictions that MLR rules would drive up insurers’ costs, the GAO report found that the rules had little influence on insurer spending...", see:

U.S. health insurers to pay $330 million in premium rebates

GAO report on medical loss ratio finds insurers spend little on quality improvement 

Campaign finance redux

In a June 19th, 2008 oped this blogger suggested greatly raising the limits on potential campaign donations while massively strengthening disclosure and transparency with regard to the donations. Well, that's exactly where the law has been going as well, courtesy of a number of Supreme Court rulings...

Rethinking Disclosure in the Wake of McCutcheon v. FEC sums it up:

"'... Earlier this spring, the Supreme Court delivered yet another blow to campaign finance regulation. In McCutcheon v. FEC, the Court invalidated the federal “aggregate limits” — or statutory restrictions on the amount any single individual can contribute to all federal candidates, parties, and committees combined. This decision was the latest in a string of decisions handed down by the Roberts Court removing restrictions on the flow of money into politics. 

McCutcheon is likely to drive significantly more money into the coffers of federal candidates, political parties, and other political committees. While the overall limit on the amount any individual could donate to such entities in a single election cycle was $123,200 prior to McCutcheon, wealthy individuals may now be able to contribute over $3.5 million in a single cycle... 

But less noted in the aftermath of McCutcheon was the fact that the Court went out of its way to affirm the constitutionality of campaign finance disclosure. The Chief Justice’s opinion asserted that disclosure “offers a particularly effective means of arming the voting public with information” and in addition provides “robust protections against corruption.” Indeed, every member of the current Court but Justice Thomas has now signaled strong approval of disclosure..."

The article then goes on to ask if current forms of disclosure are sufficient to meet the Chief Justice's assertion, before deciding that the current reporting/disclosure system need reform. They suggest a number of changes, including standardizing disclosure forms. As did this blogger back in 2002!

Agenda?

In 2013 and following its Brill "expose" on healthcare pricing, TIME also published an infographic: What Makes Health Care So Expensive? (see below).

The infographic had a few questionable things, as pointed out by others e.g. see the below. For example their definition of "Operating Profit" was somewhat unique, and seemed chosen so as to cast the hospitals in a more unfavorable light than perhaps they deserve!

This month another article, 'Hate Obama, Love Obamacare', looked at the PPACA ("health care reform") and the implementation of its health exchanges and insurance products.  It chose a family to highlight (apparently) the benefits of the law and the positive effect it has had on the insurance needs/coverage for one family, the Recchis. However, after reading the article one wonders why TIME couldn't have found a much better example to use... (they exist by the hundreds of thousands!) It seems like it would have been simpler than torturing the facts  as the article appears to do.

• Even before the article starts there is a problem with the setup. The picture of the family at the top of the article has a caption - "When Sean Recchi was diagnosed with cancer, he and his wife Stephanie were billed $83,900 by the hospital, in advance. Now he has insurance." Reading this I naturally assumed (as would presumably almost everyone who read the caption)  that Sean Recchi in fact did not have insurance when he sought care at  the MD Anderson Cancer Center in Houston. However, reading on this is NOT the case, see: "When he was diagnosed with cancer, Sean's policy limited his coverage to $2,000 a day in the hospital, which at MD Anderson barely covers an opening round of blood tests.)" Strange.

• Further on in the article TIME implies that the Recchi's pre-PPACA insurance policy was an example of 'bait and switch' - "... none of which would be allowed to have the bait-and-switch limits that had left Sean unprotected when he needed lifesaving care." Unless they were sold the policy being told that it would cover 100% of 'out-of-network' expenses (an Ohio patient seeking care at M.D. Anderson in Houston, Texas) which then turned into $2,000/day, this is a new and novel definition of 'bait and switch.' And one could also quibble about the use of "unprotected."


• The article then goes on to provide insufficient information to really understand if the Recchi family found "better" insurance post-PPACA. All we really have in the way of information on their pre- and post-PPACA insurance plans is:


• Pre-PPACA: $469/month, plan covered $2,000 per day for "out of network" hospitalization at M.D. Anderson.
• Post-PPACA; $793/month,  $12,000 deductible, plan provides no coverage for "out of network" hospitalization at M.D. Anderson. (Note: This looks at the cost of the insurance plan, because even if it is subsidized by the government so that the Recchis pay less, the policy still runs $793 per month!)


• Finally, the Recchis end up being covered by Ohio Medicaid, at no cost to them (premium). Here Brill then throws in a 'Well, if John Kasich hadn't opted-in to the PPACA Medicaid state expansion' then blah, blah, blah.... Huh, rather than tossing in a hypothetical situation how hard would it have been to find a real example of a family that actually was hurt by residing in a state in which a Republican governor opted out of the Medicaid expansion? Again, there are hundreds of thousands!

The bottom line? To this blogger it appears that Brill chose to highlight this particular family mainly because they were willing to go on record as initially being against 'Obamacare'  before they saw the light and realized it was actually a blessing! This blogger's take away is different - first, the Recchis appear rather ignorant - first being against 'Obamacare' because "they were clearly people who don't like the President," and second, apparently having no idea what 'Obamacare' actually entailed (as reflected by their ignorant statement "it doesn't cover pre-existing conditions and it's too expensive..", etc. Third, they apparently are quite willing to flaunt their ignorance! Note that instead of taking ownership of their ignorance it is brushed off as due to "a lot of talk," as if the facts were not readily available to them and being repeated daily by those in favor of the PPACA!

Well have the Recchis wised up and become more reticent about displaying their ignorance for all to see? Unfortunately it appears not... "Here I get full protection for $566, compared to no protection for almost $500," Stephanie says, referring to her old plan that had cost $469 monthly and that MD Anderson had scoffed at. "This is wonderful." Aargh!

And TIME? Well, they appear to want to go beyond the facts... Agenda, anyone? Perhaps the Recchis are TIME subscribers!

Random charts - financial systems

 

 

Source: Creating a Safer Financial System: Will the Volcker, Vickers, and Liikanen Structural Measures Help?

Latest MLR update

Implementing Health Reform: Fine-Tuning The Medical Loss Ratio Rules from the HealthAffairs blog and 'HHS Unveils Insurance Rule: Brokers Do Not Count As 'Health Costs' from Kaiser Health News bring us the latest updates on the government's position on the MLR, the Medical Loss Ratio.

From HealthAffairs, a reminder of how the MLR figures in healthcare reform: "The MLR rule has been one of the most controversial provisions of the Affordable Care Act (ACA). The MLR provision of the Affordable Care Act (section 2718 of the Public Health Services Act) requires health insurers in the individual and small group market to spend 80 percent of their premiums, after subtracting taxes and regulatory fees (85 percent for large groups), on payment for medical services or on activities that improve health care quality. Insurers must report their medical loss ratios annually and insurers that fall short of the target must rebate to their enrollees an amount equal to the product of the difference between their actual medical ratio and the statutory target multiplied by their premium revenues"

Insurance agents and brokers had argued in favor of their commissions being excluded from 'administrative costs', but HHS rejected their argument. The latest changes also related to rebates and how they would be paid, tweaked what could be included in quality improvement expenses, and tweaked allowances for a couple of specific plans... Also, rebates to consumers will not be taxable income.

Some previous blog entries referencing the MLR:

The MLR saga continues - May 13th, 2011
Misc update (MLR) - Mar 26th, 2011
Misc update - V - Feb 13th, 2011
Misc updates - MLR - Oct 25th, 2010
MLR Redux - Aug 24th, 2010
MLR update - Jun 27th, 2010
Health care re-form VIII (More nonsense) - August 28th, 2009

Open Society?

Ah yes, Bahrain, an open society... and "a flourishing democracy" which has "demonstrated remarkable strides in political governance, including an impressive movement towards the inclusion of women in politics"... even if they do say so themselves... If there is a snake in this Garden of Eden, it surely must have slithered in from Iran!

Openness, freedom, democracy, the love of a people towards their rulers.... in a nutshell paradise, Bahrain. The proof? Why, the King very generously appointed some non family members to be cabinet ministers! And also allows the populace to vote for the 40-member Chamber of Deputies (note: the King appoints the 40-member Consultative Council, which can block any legislation that passes the Chamber of Deputies). What more could the hoi polloi want?

Hamad ibn Isa Al-Khalifah - King
Salman bin Hamad bin Isa Al Khalifa - Crown Prince, Commander in Chief of the Bahrain Defense Forces.

Shaikh Khalifah ibn Sulman al-Khalifah, Prime Minister.
Shaikh Mohammed bin Mubarak Al-Khalifa - Deputy Premier Minister.
Shaikh Ali bin Khalifa bin Salman Al-Khalifa - Deputy Premier Minister.
Jawad Salem Al-Urayyedh - Deputy Premier Minister.
Shaikh Khalid bin Abdulla Al-Khalifa - Deputy Prime Minister.
Shaikh Mohammed bin Abdulla Al-Khalifa - Minister of Defense Affairs.
Fahmi Al Jowder - Minister of Electricity & Water.
Abdulaziz Al-Fadhel - Minister of Parliamentary Affairs.
Shaikh Rashed bin Abdulla Al-Khalifa - Minister of Interior of Bahrain.
Shaikh Khalid bin Ahmed bin Mohammed Al-Khalifa - Minister of Foreign Affairs.
Hassan Abdulla Fakhro - Minister of Commerce & Industry.
Essam bin Abdullah Khalaf - Minister of Works.
Shaikh Ahmed bin Mohammed Al-Khalifa - Minister of Finance.
Majed Ali Al No'aimi - Minister of Education.
Majeed Mohsen Al Alawi - Minister of Labor.
Abdulhussain Mirza - Minister of Oil & Gas.
Faisal Al Hamar - Minister of Health.
Fatima Mohammed Al-Balooshi - Minister of Social Development.
Shaikh Khalid bin Ali Al-Khalifa - Minister of Justice & Islamic Affairs.
Juma Ahmed Al Kaabi - Minister of Municipalities Affairs & Urban Planning
Nizar Sadeq Al-Baharna - Minister of State for Foreign Affairs.
Shaikh Ahmed bin Attiyatallah Al-Khalifa - Minister of Cabinet Affairs.
Sheikha May Bint Mohammed Al-Khalifa - Minister of Culture and Information.
Shaikh Khalid bin Ahmad bin Salman Al Khalifa - Minister of the Royal Court
Shaikh Ali bin Isa bin Salman Al Khalifa - Minister of Royal Court Affairs.
Shaikh Ahmad bin Atiyatallah Al Khalifa - Minister of the Royal Court for Follow-Up Affairs

Bahrain (CIA World Factbook)
Bahrain (Fullbright Scholar Program)
Bahrain links (University of Oklahoma)
Embassy of the Kingdom of Bahrain (Washington, D.C.)

Ed.Note: No guarantee that I got this 100% correct, it's hard to keep this lot straight! However, even if there's an error or two, it doesn't invalidate the point being made...

Misc update (MLR)

The last blog entry in February noted that there was still lots of activity swirling around the definitions and calculations of the Medical Loss Ratio, capped by the Patient Protection and Affordable Care Act (PPACA) at 80% (small groups) and 85% (large groups)... The MLR calculations promulgated by the U.S. Dept. of Health and Human Services (HHS) included the fees paid to insurance agents and brokers in administrative expenses, while the National Association of Insurance Commissioners (NAIC) proposed that they be counted toward care dollars. Industry groups are fighting to have commissions treated as a pass-through expense, as commissions are being reduced. Democratic legislators and liberal groups are dead set against any such change....

Meanwhile HHS granted the State of Maine a three-year 'hardship' waiver from the MLR rules... "... Three other states (Kentucky, New Hampshire, and Nevada) have already filed waiver requests with HHS, and an additional eleven states are reported to be preparing waiver requests..." (see here)

Medical loss ratio issues still up for grabs
Senate Dem opposes brokers' MLR bill
Maine Waiver Expected To Increase Insurer Pressures on States

Some previous blog entries referencing the MLR:
Misc update - V - Feb 13th, 2011
Misc updates - MLR - Oct 25th, 2010
MLR Redux - Aug 24th, 2010
MLR update - Jun 27th, 2010
Health care re-form VIII (More nonsense) - August 28th, 2009

Misc update V

The August 28th, 2009 blog entry Health care re-form VIII (More nonsense) introduced and discussed the "medical loss ratio." It also spoke to the use/misuse of this metric in the context of the health care reform (or more correctly, health insurance reform)... The June 27th, 2010 blog entry MLR update linked to articles discussing what insurance company expenditures should count towards the MLR calculation, while the August 24th, 2010 entry MLR Redux noted that the NAIC Executive Committee was putting together a recommended formula for calculating the MLR. The October 25th, 2010 blog entry Misc updates - MLR noted further developments...

This month the American Hospital Association called on the HHS to modify its final MLR-calculation rules, see AHA calls for changes to MLR rules

Great quotes II

"For the first time, there are rules to hold the insurance companies accountable for huge rate hikes by shining light on the financial data they claim justifies double-digit rate increases year after year. The days of insurance companies running roughshod over consumers and jacking up our rates whenever they want are over. The new rate review rules represent a key step toward finally ending the insurance companies’ stranglehold on our health care." - Ethan Rome, executive director of Health Care for America Now, in a statement Tuesday after HHS issued rules on health insurance rate hikes....

Eh? From this quote one wouldn't know that in most states insurance companies already have to get their rate increases approved by the state insurance commissioners... and that this remains the case under the HHS rules issued...

A more measured (and accurate) quote on the changes:

“Consumers across the country have struggled to keep up with health insurance rate increases that have piled up year after year—especially for those who work for small businesses or have to buy their own coverage. Until now, states have been responsible for overseeing health insurance rate increases, but many states don’t go far enough to protect consumers from unjustified rates. Under these proposed rules, insurance companies will have to explain why they are seeking a large rate hike. This should be a help for consumers in two ways. First, it provides a strong incentive for insurers to do a thorough review of their justifications before asking for big rate increases. And second, it will help consumers better understand why their rates are going up and they can decide to look for better plans.” - DeAnn Friedholm, the director of Consumers Union’s health reform campaign.

Random charts

Source: The National Commission on Fiscal Responsibility and Reform - Co-Chairs' Proposal - Slides related to Social Security

Misc updates - MLR

The August 28th, 2009 blog entry Health care re-form VIII (More nonsense) introduced and discussed the "medical loss ratio." It also spoke to the use/misuse of this metric in the context of the health care reform (or more correctly, health insurance reform)... The June 27th, 2010 blog entry MLR update linked to articles discussing what insurance company expenditures should count towards the MLR calculation, while the August 24th, 2010 entry MLR Redux noted that the NAIC Executive Committee was putting together a recommended formula for calculating the MLR...

Some further developments:

• In September "... More than 30 state insurance commissioners lobbied President Obama and his senior policy staff on Wednesday to slow down the phase-in of the medical-loss ratio rule or risk driving insurers out of the market... ", see States want slower Medical-loss ratio phase in.
• On October the 21st, "... the Executive and Plenary committees of the National Association of Insurance Commissioners (NAIC) voted to adopt a model regulation containing the definitions and methodologies for calculating medical loss ratios as required by the Patient Protection and Affordable Care Act (PPACA). The model will be delivered to Health and Human Services (HHS) for certification by the Secretary...", per the NAIC press release...
• Some reaction to the proposed rules:

  • From the NAIC: "... “I commend the work of our regulators and staff as we considered a number of very challenging issues as it moved through the committee process. The committee model regulation on MLR passed with only technical amendments, which is a testament to our inclusive and transparent process ..."
  • From the insurers, via America's Health Insurance Plans (AHIP, their industry group), "... "The current MLR proposal will reduce competition, disrupt coverage, and threaten patients' access to health plans' quality improvement services."
  • From observers, State Regulators Recommend New Health Insurance Rules
  • And from HHS Secretary Kathleen Sibelius: "... We thank the NAIC for the recommendations, which the Commissioners finalized today on how best to implement the medical loss ratio policy, which will ensure consumers get the best value for their health care. We recognize that these recommendations are the result of many months of hard work by the Commissioners and their staff and we commend them for their open process and their responsible, thoughtful work.These recommendations are reasonable, achievable for insurers and will help to ensure insurance premiums are, for the most part, supporting health benefits for consumers. Not only do they ensure consumers receive better value for their health care dollar, they recognize special circumstances in different markets to preserve market stability and employee coverage as we transition to the new marketplace in 2014...."

HHS will soon be publishing the regulations to implement the recommendations. Stay tuned!

MLR redux

The August 29th, 2009 blog entry, 'Health care re-form VIII (More nonsense)', discussed the medical loss ratio in some detail, how it is being 'misused', and also touched upon some of the demagoguery surrounding this subject...

Fast forward a year - health care reform legislation has passed and minimums have been set for insurance company MLRs (80 percent for individual and small business plans, 85% for large employers). Of course, having read the earlier blog entry the reader knows there is no standard definition and a lot of "wiggle room" in the calculation of MLR. Thus it has become necessary to develop a standard definition and calculation methodology.

Meeting in Seattle, the National Association of Insurance Commissioners' (NAIC) Executive Committee has developed a recommendation (see suggested template) that is being forwarded to Health and Human Services Secretary Kathleen Sibelius. The recommendations in theory should form the basis for regulations that will be issued by HHS. However, Democratic legislators, advocacy groups, and other will no doubt be soon weighing in, see 'Sebelius could face health-reg fight'. Let the simplification and demagoguery begin!

Transcript: Health On The Hill - August 16, 2010

Figuring Out How Much Insurers Spend On Care Takes New Math
Insurers Defend Less Generous Policies, Medical Loss Ratio Definitions; Obama To Talk With Insurance Commissioners
NAIC Approves Medical Loss Ratio Template
Texas Hospital Association recommendations on MLR
Medical Loss Ratio Rules For Insurers Could Bring Controversy To Sebelius' Office

MLR update

The Aug 28th, 2009 blog entry 'Health care re-form VIII (More nonsense)' discussed the use and abuse of the medical loss ratio, tried to explain what it really represents, and why "... high medical loss ratio good, lower medical loss ratio bad is about as useful a bleat as Animal Farm's "Four legs good, two legs bad! ..." and a misuse of the ratio.

Medical Loss Ratios & Health Insurance: Are You A "Constructionist" or an "Activist?" asks the question: "Will the Patient Protection and Affordable Care Act's (PPACA) 80% to 85% MLR requirement make this mash-up "better?" and suggests there are two ways to look at the subject (... what the writer terms "constructionist" and "activist", and not "yes" or "no").

Medical Loss Ratio: What Really Counts As Quality? asks the question, and gets answers/opinions from five 'experts.'

Meanwhile the Department of Health and Human Services is drawing up the regulations (on this subject) that insurers will have to follow to satisfy the new health law's requirement that insurers spend either 85% of premiums collected on medical expenses (large group market ) or 80% of premiums (small group and individual markets)...

A prediction: in a relatively short period of time, and as a result of this legislation, no health plans will have MLRs that exceed the statutory requirements... (though many do currently).

Huh?

As part of health care reform's package of revenue measures, the Congress decide to levy a tax on the medical device industry. Much lobbying by this industry, while failing to totally derail it, managed to push the implementation of this measure off for several years.

Some criticized this revenue measure, saying that it would raise health care costs as the industry would simply pass on the added cost to its customers (providers and hospitals) in the form of higher prices for medical equipment. The rebuttal from legislators pushing this measure was that competitive market forces would probably prevent these costs from being fully passed on. Hmm, even if correct, it is not clear to this blogger that it is appropriate for the Congress to capriciously pick on one industry to permanently reduce its margins... As to why they chose the medical device industry, this blogger has not seen an explanation , and speculates that perhaps the industry didn't donate enough scratch to Congress to "buy" immunity.

Well, the Wall Street Journal just published an article on the medical device industry, Medicare hospital payment proposal could benefit devices. Per the article:

"...New proposed Medicare payment rates for inpatient hospital treatment would generally increase reimbursement related to important medical devices, which suggests the system won't ramp up pressure on device prices in the near term. The proposal late Monday from the Centers for Medicare and Medicaid Services, coupled with a strong first-quarter report the next morning for Johnson and Johnson's (JNJ) huge medical-devices business, boosted stocks across the medical-devices space on Tuesday. The Medicare payment news was particularly welcome for a sector where investors and analysts have worried that changes to the healthcare system will put a squeeze on product prices. Such pressure may still build over the long haul, but the proposed Medicare rates for the fiscal year starting in October could ease worries about a more immediate impact. Medicare payments to hospitals don't directly impact devices prices. But they can have an indirect influence because the amount hospitals receive in reimbursement for procedures affects what they can afford to pay for devices used in those procedures. Analysts' estimates differed slightly, but they generally found modest proposed increases to reimbursement rates for procedures involving top cardiology and orthopedic devices, such as drug-coated heart stents and replacement hips ..."

So, apparently increased Medicare payments for inpatient use of some devices will reduce the pressure for higher device prices? Why? What absolute nonsense!

Consider a medical device company that gets hit with a new tax on its products. If it sells its devices to the hospitals (providers) at its usual pre-tax price then its margins will decrease. Now, if pursuant to the Medicare rules there are increased payments for device use, that would be increased revenue to the hospital and will do nothing for the manufacturer! If the manufacturer keeps its prices fixed it will lose and the hospital will gain. As such, this blogger doesn't see why better Medicare payments would be an inducement of any sort to the manufacturer, and thus they would probably seek to increase prices to offset their added expense.

OK, so if the manufacturer does raise prices and get it to "stick", then the devices will cost hospitals more. However, they (the hospitals) may be made partially or completely whole due to the increased Medicare payments, so they won't be too badly hurt. However, the net result would be an increase in costs across the board - for the commercial payers costs will be higher (might or might not translate to higher premiums); for the government (Medicare) revenue will increase via the tax collections and expenses will increase via the increased payments (unsure re the net effect here).

Bottom line: strange article, strange argument...

Misc update

The August 28th, 2009 blog entry 'Health care re-form VII (More nonsense)' discussed the medical loss ratio and how the politicians were misusing this indicator, reducing its complexity to an Animal Farm-like bleat of "high medical loss ratio good, lower medical loss ratio bad." The article Let the (Accounting) Games Begin! speaks to some of the consequences of legislation trying to impose a simple, single answer to a complex issue...

Incoherence

“When you don't (have) a bill yet, anyone can characterize it any way you want. I think that while there's some well-intentioned people who have concerns about budget and this and that, a lot of that sentiment was hijacked by a concerted effort on the part of the insurance companies and their supporters to make sure we don't a bill... They could characterize it any way they wanted, they could focus the debate... If you are an insurance company, you want to take down public option, right? You want to get rid of that. But as you do it, you want to confuse the issue on health care reform... So as long as people are talking about this — the public option — they're not talking about what is in the bill for the American people... It's unfortunate, because I think if we had a bill much sooner, all of its merit, of course, would be better known, and it would not have been a piñata for six months..."

- Nancy Pelosi, claiming that health care reform had been "hijacked". Not sure if this was before or after she told the Legislative Conference for the National Association of Counties that Congress had "... to pass the bill so you can find out what's in it, away from the fog of controversy..."

Random chart

Source: Health Care Reform: State Winners And Losers