Will ObamaCare Result in More Health Care Fraud?


One of the most controversial new rules in the PPACA is the medical loss ratio requirement, which forces insurers to spend either 80 or 85 percent of their premium revenue on health services. The idea is to help safegaurd against insurance industry waste—too much money spent on overhead, marketing, advertising, or profits. But the rule may, in fact, encourage waste and fraud, as it now appears that insurers will not be allowed to count fraud-prevention activities as health services:

At issue is the law's medical loss ratio provision, which mandates that health plans spend a minimum portion of premiums on medical care or on activities that improve the quality of care. State insurance commissioners tasked with writing the definitions are considering draft rules that would treat fraud as administrative rather than healthcare expenses; they're expected to adopt the regulations later this month.

"There is undoubtedly a direct connection between health care fraud and health care quality," National Health Care Anti-Fraud Association Executive Director Louis Saccoccio wrote Monday on the Kaiser Health News Web site.

After praising the Obama administration and Congress for making healthcare fraud prevention a "national priority," Saccoccio argues that "this commitment is being undermined by the National Association of Insurance Commissioners' recent draft regulation on medical loss ratios, which treats private plans' spending on fraud detection and prevention as nonessential to quality health care."

Supporters of the MLR provision frequently tout it as a way to keep health care prices down by discouraging administrative waste and excess profit. But because the requirement is based on a percentage, insurers will actually have an incentive to drive overall spending up. And a rule that discourages insurers from spending on fraud prevention is only likely to make overall costs swell further.

More on medical loss ratios here, here, and here

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  1. Would a bill running in the thousands of pages that no one has read written by lobbyists and idiot sons working as congressional staff lead to more fraud and waste? Yes.

    1. Now see, that wasn’t so bad, was it?

  2. The bill vastly expands the scope, budget and bureaucracy of federalized health care payment.

    Of course it will result in more fraud. How could it not?

    1. As you say, a known consequence is not unintended.

  3. Would a bill————————————–lead to more fraud and waste? Yes.

  4. Supporters of the MLR provision frequently tout it as a way to keep health care prices down by discouraging administrative waste and excess pro[f]it.

    We’re already in trouble when the main argument for something begs the question – what’s an “excess profit”?

    But because the requirement is based on a percentage, insurers will actually have an incentive to drive overall spending up.

    Indeed, for a very simple reason: They have to answer to their stockholders. Only government would think that industries would simply suck it up and lose revenue without passing those costs to their clients.

    1. Come on Old Mexicans, just because price controls have produced nothing but shortages and misery every time they have ever been tried doesn’t mean they won’t work this time. Health care is different.

    2. what’s an “excess profit”?

      That share of money that someone else thinks he or she could put to better use.

    3. I’m always a bit confused how democrats have been able to run on this evil profit seeking insurance company line. Some of the biggest health insurers are non-profits- Kaiser and Blue Cross/ Blue Shield in many states to name two of the biggest. This report says that 40% of enrollees in private insurance plans are insured by non-profits.

  5. Hey, we told you it wasn’t a perfect bill!

  6. What the feds are trying to do here is implement the utility model in health insurance.

    The classic version of this model deals with local monopolies, who have to go to their masters in government every year to get their rates approved. Rates are generally set at a level that “guarantees” a modest return on investment.

    The game, of course, is that utilities try to overbuild, to increase their base, so that their fixed return is larger in absolute terms.

    1. And the fact that utilities are actually the service providers. Health insurers are not the service providers. The rates will still reflect all the waste and “excess profits” by the service providers.

    2. It’s a lot like cost-plus bidding in the defense industry as well. Which creates incentives to create program delays and run over budget. The more you spend the more you make.

  7. You would think that the GOP, when they maybe finally try and start getting specific about what they are going to do different than the Dems should they retake Congress, would focus on stuff like this; say that they’ll fix it or change it or whatever.

    But I have a feeling they won’t.

    1. This.

      It is sickening how both sides basically state a problem and try to spin that very statement as a solution. “Many people do not get proper health care, yet the taxpayer cannot afford to pick up their tab. This is unacceptable. We must enable people to have proper affordable health care in a manner that all will find acceptable. Thank you. Oh, and note that my opponent has no ideas for addressing this situation. Thank you very much.”

      1. That is called a plan (to a politician).

        Remember all the “plans” that Kerry had?

  8. It’s almost as if Peter thinks that ObamaCare is about anything other than the misguided liberal obsession with equality of outcomes.

    Health care and education education is the most useful parallel to look at: The liberal mindset doesn’t care about the expense of schools or the quality of teachers, they only care about equality of outcome. (Even more, in my mind, than paying off union votes.) They are fine if everyone gets the same shitty result as long as that result is equal.

    It’s the same in healthcare. Look at how many of them still get a chubby over Cuba. “Universal Access… [sigh]” They don’t give a shit that the access is made possible by half-trained doctors and a lack of modern medical equipment. As long as everyone gets a ride, they don’t care about how shitty the rollercoaster is.

    No argument about price or quality of service is ever going to trump equality in their mind. The comparable disconnect on the right is $400 hammers for the Army. That just doesn’t register when you are concerned about kicking furriner ass.

    1. Who on the right thinks $400 hammers is a good idea? And if you ever look into the subject, you will find that the famous $400 hammers were the result of cost plus contracts that were a creation of the Johnson Administration that reached their height during the Carter Administration and were largely ended under Reagan.

      1. Not “Not a good idea,” John. “Don’t give a shit.”

        The military wastes oodles of money all over the globe, but the suggestion of the smallest cuts is met with cries of “You want a terrorist to rape my grandma!”

        Does everyone on the right not care about military waste? Of course not. But they aren’t the loudest voices by a 80 db.

      2. Cost plus contracts ended!!!! HAHAHAHA!!!! Welcome to the real DoD where cost contracts are all over the place, standard practice in any weapons systems development, contingency operation and everywhere else there’s real money being spent.

      3. “”Who on the right thinks $400 hammers is a good idea? “”

        Depends on the hammer? If it’s required to be made with special materials to work on a stealth aircraft, that might be the price. But of course, that probably not the case.

        I liked it when the defense contractor was testifying to Congress and justifying the cost by claiming not only could the wrench put the bolt on, it could take it off too. Classic.

    2. No argument about price or quality of service is ever going to trump equality in their mind.

      This is the worst part. I’ve discussed this stuff with (well-meaning) leftists/progressives, and you can literally–literally–watch their eyes glaze over when you start talking about tiered service, etc. It is fundamental to them that “equality of outcome = fair = right”.

      It’s a basic faith for them, and trying to convince them otherwise is like telling a devout religious person that god doesn’t exist. It just does not compute.

      1. Liberals refuse to face the fact that there are hard choices and life is generally pretty awful. Lots of horrible, unjust and tragic things happen every day. You and I look at those things and are disturbed but also understand that there is a price to be paid for preventing those things and that price is often worse than problem. Liberals can’t do that. They cannot step back and think rationally about these things. For them, the existence of any tragedy is a nullification of the entire system. That is what produces the thinking you are talking about.

        1. Liberals think there is no problem that can’t be solved by passing a law.

      2. Yes, try asking what the rich should have that the poor don’t. Follow-up
        with why anyone would strive to be rich, if they don’t get more than if
        they were poor.

    3. They are fine if everyone gets the same shitty result as long as that result is equal.

      Let’s be fair. They would LIKE it if everyone got a great result. They just think quality of outcome for individuals is less important than equality of outcome.

      Which is to say, they are willing to sacrifice overall quality (and individual opportunity for some of the best students) if it means everyone has an equal “starting position”.

      The downside of this, IMO, is not just in the fact that the potential of some really bright kids gets sacrificed just to make things more equal, but also that society as a whole suffers due to an overall less educated workforce.

      This is one reason this country is falling behind in technical and scientific capability. Our kids on average just can hack the math, so we’re losing our technological edge.

      Liberals who believe strongly in equality of opportunity need to think about that – the collective impact of focusing on equal opportunity at the expense of educational quality for the brightest.

      The country needs those kind of high profit-margin technical jobs and skills if we’re going to be able to raise the taxes to profit the kinds of services they want.

  9. So, wait, wait, let me get this.

    Price controls and profit/revenue controls? How could this possibly go wrong?

    (Of course, they got the support of the industry, whose executives probably see dollar signs when they think how much money they will get personally when the feds nationalize them.)

    Bunch of scumbags.

  10. $400 hammers for the Army

    Geez, you can buy one handforged by a modern blacksmith for less than half that price.

  11. Does a bear shit in the woods?

  12. Will ObamaCare Result in More Health Care Fraud?

    Is the Pope the Whore of Rome? No, he is Catholic.

  13. “There is undoubtedly a direct connection between health care fraud and health care quality,”

    I sincerely hope he means “an inverse relationship” by this.

  14. What still just floors me is that the latest lowball estimates Via ABC News– that a “staggering $60 billion is stolen from tax payers through Medicare scams every year. Some experts believe the number is more than twice that.”

    So almost 15% of the budget for medicare is essentially thrown out the window?

    I don’t understand why this isn’t a bigger deal. And it furthers any reasonable argument that a single payer system would be a financial disaster the likes of which have never come before.

    1. But but…medicare has really low administrative costs and spends a higher percentage that private insurance on health care services….by spending very little on fraud prevention (administration) and tons on fraudulent claims (health care services).

    2. Well, they did tell us that if we pass the bill we could finally get started going after the fraud.

  15. Of course it leads to more fraud. Medicare brought us Rand Paul.

  16. “Saccoccio”

    The alignment/shape of these letters annoys me.

  17. The waste in the healthcare system is in excessive testing and unnecessary procedures.

    But this provision actually actively ENCOURAGES doctors to perform unnecessary procedures and tests, and to charge excessively, because now the insurance companies have even less reason to say no to anything.

    In fact, insurance companies may even be positively incentivized to get doctors to perform unnecessary procedures, just so they can get their medical loss ratio up.

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