More on Medical Loss Ratio

August 26, 2009 at 7:01 pm (Politics, Uncategorized) (, , )

I wanted to update the former post with the following, which is a bit better.

The host of issues surrounding the healthcare debate continues to grow on a daily basis as each of the bills in Congress are scrutinized by groups on both sides. However, one piece of the puzzle, the actual administration of the program, has been for the most part ignored as even the best crystal ball is unable to peer through the bureaucratic fog of a government program yet to be realized.

It IS clear though that the very foundations of the administration of the healthcare plans are set in quicksand and are likely set up to ensure that a public health plan becomes the only option available to anyone. The offending idea is that of using medical loss ratio as the basis for judging current insurance offerings as to their efficiency, and that the Secretary of Health and Human Services will be given the broad power to define the medical loss ratio as it pertains to ensuring adequate participation, competition, and value for customers “so that their premiums are used for services.”

In other words, so all money goes to services, and none to administration costs.

This sounds all well and good. It harkens to the scandals of the early 21st century in regards to the ratio of charitable contributions which went to the administrative costs (most notably salaries) of charities as opposed to funding actually reaching the needy, whether they be the poor or panda bears. Medical loss ratio is simply defined in the same manner. It is the difference between how much of your premium goes to actual medical care and how much goes to administrative costs and profit of the insurer. It has become the equation used to judge the success and efficiency of health care.

I’ll use the conclusion of an article by James C. Robinson, Kaiser Permanente Distinguished Professor of Health Economics at University of California at Berkeley, published in Health Affairs, Volume 16, Number 4 (1997) to illustrate why medical loss ratio is a baseless foundation for determining administrative or clinical success in healthcare.

“The medical loss ratio is an accounting monstrosity, a convolution of data from myriad products, distribution channels, and geographic channels that enthralls the unsophisticated observer and distorts the policy discourse. The hard but inescapable conclusion is that informed choice and sophisticated purchasing of health care must rely on a more extensive set of performance measures, no one of which is as comprehensive as the medical loss ratio is purported to be but each of which has some of the analytic validity that the medical loss ratio lacks.”

The de facto holder of the biggest megaphone, President Obama, has certainly used at least the idea of medical loss ratio in his impassioned speeches about dirty profit-minded “big insurance” in his drive to socialize health care in America. Medical loss ratio is an easy target to sway emotion and distinguish the difference between benevolent, socially responsible change and evil capitalists profiting on the sick.

Now, this illogical, emotionally driven accounting gimmick has become the basis of administering health care in America. Time and time again it is referred to in the House Bill as the measurement tool of success in both administrative and clinical settings. With the Secretary of Health being given the broad power to define (and adjust) medical loss ratio, it is easy to see that the bar will be set high enough that few, if any; private insurance plans will be able to reach the standard set by the government. One by one, they will fall and their members transferred to a public plan until there is not one non-governmental entity providing insurance.

By simplifying the complexities of clinical care and insurance administration down to this lowest common denominator, we are ensuring the economic and administrative failure of any health reform in America. Junk science is rampant in governmental policy…has been for decades. We allow emotion to generate legislation instead of looking directly at the facts, no matter how complex they may be. There is no doubt that junk economics is being used in the health care bill. The US health care system is a wildly complex system that is, admittedly, bleeding in several locations. Using an obscure accounting trick to fix it is like treating a laceration with blood thinners.

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The Healthcare Debate (Part 2)

August 21, 2009 at 8:27 pm (Politics)

I’ve been spending a lot of time looking through the House Healthcare Bill and looking for things that you may not have heard about from the media.  After quite a bit of research, I discovered something I think is critical.  To sum up at the start, the very foundation of how the program would be administered is built in quicksand.

Medical Loss Ratio.

Medical loss ratio is basically defined as the amount of your insurance premium goes to actual medical care as opposed to how much goes to administrative costs of your insurer.  A good medical loss ratio is considered anything above 75% (3/4 goes to medical care, 1/4 goes to administrative) and there are some non-profit insurance providers which have achieved a ratio of 96%.

The House and Senate bills go into great detail about how the Secretary of Health and Human Services will use medical loss ratio as a measurement of success and failure as they regulate current insurance companies, but also as the building block of the public healthcare option (the government health plan).

Sounds reasonable doesn’t it?  I mean, we all looked closely at similar ratios a couple years ago when we discovered several of the largest charities in the US were using way more money to cover salaries, perks and offices than actual money going to those in need?

Here’s the problem.  Medical Loss Ratio is an accounting gimmick.  The math they will be using to control, regulate, and build this massive program is an “obscure statistic”(1).

James C. Robinson, a professor of economics in the School of Public Health at the University of California, Berkeley wrote an article called “Use and Abuse of Medical Loss Ratio to Measure Health Plan Performance.”(1)  The subtitle of the article says it all…”This accounting tool was never intended to measure quality or efficiency.”

To add to the whole argument…and I’m not sure if Mr. Robinson will appreciate me pointing this out today…he said in the article “Juxtaposition of low medical loss ratio with for-profit status has fed the flames of HMO bashing but is completely without substance.”  So…all the “big-insurance” claims by Obama and Congressional Leaders is also based on bad math.

The main point here, is that an accounting gimmick is being used as the foundation of the entire administration of this healthcare program. Haven’t we had enough accounting gimmicks in our recent history?  Aren’t the very people proposing this massive expenditure the ones who have been screaming about corporations that used accounting gimmicks to pad their profits? 

Do they know this is a gimmick?  If they do, they’re intentionally screwing all of us in the name of ideology.  If they don’t, they’re being irresponsible and screwing us.

Look.  I’ve been watching crappy science and crappy math become the basis for policy for years.  For my regular readers, check this article out (MIT Scientist sez Carbon Dioxide irrelavent in climate debate)… Once again, we are using emotion to make decisions, not science, not math, NOT LOGIC. 

This has to stop. 

Get informed or stay out of the argument.

(1) HEALTH AFFAIRS, Volume 16, Number 4

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The Health Care Debate (or is it Debacle?)

August 11, 2009 at 5:16 am (Uncategorized)

It’s been a long time since I last wrote; but the Health Care Dilemma has me very concerned and I’ve been taking some time to actually read through the current legislation brought forward by the House of Representatives and entitled “America’s Affordable Health Choices Act of 2009.”  I’m going to cover different parts of the legislation as often as I can in the hopes that you will learn what is happening and hopefully can make your own informed decisions.  I cannot claim absolute journalistic integrity, but I will not lie about what I find.  So, let’s get started.

If you want to see (and save) a copy of the bill, you can find it here.

On page 30 of the document, in Sec. 123, the bill outlines the Health Benefits Advisory Committee. This “private-public” committee is charged with creating the baseline health standards for Americans and passing these standards on to the Secretary of Health and Human Services.  Here’s how the membership breaks down.

  1. Surgeon General of the United States (Chairperson)
    1. Nominated by the President of the United States (President Obama nominated Regina Benjamin on July 13, 2009)
  2. Nine (9) members who are not Federal employees or officers and are appointed by the President
  3. Nine (9) members who are not Federal employees or officers and are appointed by the Comptroller General of the United States.  The Comptroller General is the head of the Government Accounting Office, which is charged with keeping Government in check. Comptroller Generals serve a 15 year term and are nominated by the President.  Our current Comptroller General is an “interim” fill-in for a recently resigned CG and will continue to serve until President Obama nominates someone else to the post.
  4. An even number (not to exceed eight) of Federal employees or officers which the President will appoint.

Is anyone seeing a trend here?

The makeup of the committee (Page 32 – Line 25)  is interesting.  It includes all the people you would expect to serve in such a post…experts in health care financing, labor reps (unions), health insurance providers, etc.  Two things caught my eye though… First,  ”experts in racial and ethnic disparities” and second, “at least one practicing physician or other health professional.”  If we are to provide health care for all Americans, why the ethnic and racial disparity people.  And for that matter, why do unions have to be involved?  And why in the world would you write “at least one practicing physician?”  Wouldn’t it make much more sense for a panel deciding medical benefits to be stacked with practicing physicians?

THE SIMPLE TRUTH
President Obama, through this legislation, is given the ability to completely control who will sit on this panel.  He will succeed in this through a combination of straight appointments, and his ability to nominate and push through a majority Congress the Surgeon General and Comptroller Generals of his choice.  There is too much power in his hands to stack the Health Benefits Advisory Committee to his liking, and too much power granted to the Committee itself to decide the baseline of standards.  And as if we aren’t moving a little too fast for comfort right now, once the legislation is passed into law, this committee will be completely staffed in less than 60 days and has 12 months to establish all the baselines for care.

Read it.  Understand it.  Make your decision, do something about it.

Oh, and please comment on what you see here.

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