The Monday Nut

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.