Not a Government Takeover (But Pretty Close)


Last month, I pointed to a Congressional Budget Office memo saying that if the Affordable Care Act had set its medical loss ratios—the rules that require insurers to spend a minimum percentage of their operating budgets on medical care—any higher, it would have transformed the health insurance industry into "an essentially governmental program." Today, the Washington Post helps explain why: In determining how to im

I'd buy *that* for a dollar!

plement the new MLRs, the government has to determine what counts as medical care and what doesn't:

If you were a regulator interpreting the new requirement that health insurers use at least 80 or 85 percent of their premium dollars to pay medical bills or otherwise improve consumers' health, which of the following expenses would you count toward the quota:

1. Combating fraud and other overbilling by doctors and hospitals.

2. Running "utilization review" or "pre-certification" departments to determine whether the insurer should cover treatment that doctors have proposed.

3. Conducting internal or external reviews when patients appeal an insurance company's decision to deny coverage.

Insurers have urged regulators to give them credit for all of the above.

In comments submitted to the National Association of Insurance Commissioners (NAIC), which is helping the government translate the new requirement into detailed rules, members of the industry have asked for permission to count a wide range of expenses.

The BlueCross BlueShield Association, for example, has told rulemakers that its efforts to improve health quality include "reducing inappropriate and sometimes potentially harmful care."

In some ways this is nothing more than typical bureaucratic haggling. But the overall effect is to give regulators significant power to determine exactly how insurers will shape their practices and product offerings. It's no wonder that the CBO warned that if the PPACA's loss ratios were set any higher, the rules would be "likely to substantially reduce flexibility in terms of the types, prices, and number of private sellers of health insurance." Indeed, I suspect we'll see some reduced flexibility and choice with the numbers set where they are.

And, as the piece makes clear, depending on how regulators decide to account for certain practices, the law's high MLRs could result in increased medical costs as well: If insurers have to cut back on anti-fraud programs or reviews that weed out wasteful services, or if they simply decide to let medical costs run wild in order to justify beefed up administrative spending (remember, these are percentages, not dollar-figure caps), we could see health costs begin to increase even faster than they are now.

This is not exactly news, either. As health economist James C. Robinson argued more than a decade ago in the journal Health Affairs, MLRs are merely an accounting tool, and were "never intended to measure quality or efficiency." It's easy to think of MLRs as measures of insurer effectiveness and commitment, but it's also a mistake. "Neither premiums nor expenditures by themselves indicate quality of care," he writes. In fact, he says, the high medical loss ratios that the PPACA requires can be understood as "proof of medical waste"—or, for those who prefer blunter rhetoric, "an accounting monstrosity that enthralls the unsophisticated observer and distorts the policy discourse." On the other hand, it may be that distorting the policy discourse is exactly the point.

NEXT: Where Kagan Is Better Than Stevens on Free Speech

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  1. Dead or alive, you’re paying for me.

    1. Dead or alive, you’re voting for me.

      1. you have twenty months to hide your weapons.

    2. I’d buy that for a dollar!! LOL

      1. The alt-text beat you to it.

  2. Ah, but to a leftist, inputs equal outputs (at least when it comes to government). More spending on health care means better health care. More regulations to stop bad things means fewer bad things. Same with education, etc. It’s all very simple, really.

    (Though I suppose they make exceptions for government actions in areas they don’t much like, such as defense or law enforcement.)

  3. Why does Verhoeven always use Ronny Cox as his go-to bad guy?

    1. Because Brian Cox wasn’t available.

      The Cox family must be proud of their villainous progeny.

      1. Tulpa,

        I’ll cut short the anticipation and type Episiarch’s response to you on his behalf: “Cox sucker!”

        1. I would never make such a sophomoric pun, ProL. Stop projecting.

          1. You are the Platonic form of the sophomoric pun.

    2. He was a pretty fair asshole in Robocop and in Total Recall. He also seems to always have great second bananas.

      1. Also played the best captain of the Enterprise in the entire franchise. In less than 20 minutes he got Troi to start wearing a real Starfleet uniform instead of a ballet outfit AND got that stupid fish out of the ready room.

        1. Well, let’s not be hasty. Kirk would’ve done even better. In fact, I think they should do a movie where Kirk comes back from the dead and temporarily takes command of the Next Generation Enterprise.

        2. Are you retarded? Kirk’s yoe(wo)men wore miniskirts and brought him things to sign off on. Troi had a shitty body and looked bad in whatever she wore.

          All of TNG was a disaster when it came to attractive women. I swear the casting director must have been gay.

          1. They had some nice guest stars, but I agree. It took later spinoffs to remedy the problem somewhat, but nothing has ever compared to TOS in that regard. Why? Because Roddenberry was a slut.

            1. That’s kind of a silly opinion, since some of the same eye candy was on TNG that had been on TOS before (Majel Barret, Diana Muldaur, etc).

              1. If you think those two, who were the worst looking chicks on TOS, are “eye candy”, then I guess you are retarded. Because I can see Corky from Life Goes On thinking Majel Barrett was hot. One chromosome too many.

            2. Or are you saying you wouldn’t relish some sweet Pulaski-Lwaxana shipping fanfic?

  4. It’s death cladding.

  5. Aetna, Wellpoint and crowd preferred MLR limits and other regulations over losing their beloved antitrust status.

    History shows that regulatory capture is more profitable than competition is.

    Bottom line = AET, WLP, and UNH all are “strong buys”. – or as Goldman says “conviction buy”.

    1. What’s the over/under on when the health insurers drop the pretense of being genuine market competitors and become GSEs?

    2. “History shows that regulatory capture is more profitable than competition is.”

      Truer words were never spoken

  6. So let me get this straight:

    Health insurance companies are spending too much money on administrative costs, so we need to create a massive new administrative regulation that will cost significant amounts of money to comply with in order to insure that administrative costs are kept low.

    Oh-Bama, there is no limit to your infinite wisdom and ability to see the virtue of a regulation that us mere mortals see as absolutely self-defeating, counterintuitive, and assinine.

    1. Oh, the irony of the Federal government talking about anybody else’s “excessive administrative costs”….

  7. “You have twenty seconds to comply.”

  8. “Mr. President, Congress….YOU’RE FIRED!”

    1. Thank you.

  9. What this country needs is more highly-regulated utilities.

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