Tag Archives: health care

Affordable Care Act: Medical Loss Ratios

Today I received a “Notice of Medical Loss Ratio for your Health Plan”. As a required notice under the Affordable Care Act, it informed me that my plan met or exceeded the minimum required loss ratio of either 80 or 85%. (The minimum refers to the percent of premiums spent on “health care services and activities to improve health care quality”.)

My logical questions are as follows:

  1. What were the medical loss ratios across insurance plans in the 10-20 years before the Affordable Care Act?
  2. Why would an insurer pay more than the minimum medical loss ratio?
  3. For plans failing to meet the minimum ratios, how are insurers held accountable and what compensation would plan members receive?
  4. Assuming it is easier to fraudulently engage in “activities to improve health care quality” than it is to fraudulently provide “health care services”, why wouldn’t insurers try to increase the former and decrease the latter?
  5. In collecting the data, writing the software, producing the requisite paper products, printing the letter and delivering it to my address as required for “MLR Operations” to comply with the ACA, which jobs were counted as saved or created by the current political administration?

8/1/2012 Update: It appears that distribution of premium rebates (arising from #3 above) is dependent on employers, not the insurance companies themselves (who distribute the notices). This further increases costs of business administration, and

“…employers are allowed to hold onto the premium rebates and use them to offset premiums for workers for next year, or apply the money to a company fund aimed at promoting wellness, rather than sending out individual refunds.”

So imagine you are eligible for a rebate, but your employer decides to spend it on wellness initiatives for the next year. Then you leave your employer. Are you entitled to a pro-rated portion of your rebate? How will firms create new policies around how they manage rebates? Why does this law take the worst aspect about healthcare in America (linking to one particular legal/tax definition of employment) and make it more ingrained?

Source: WSJ: Employers Move to Adapt to Health Law (Aug 1, 2012)

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Filed under Consumer, Economics, Politics

Inequality Between Worker Types and Health Tradeoff Horizons

While the shrinking ranks of American blue-collar workers benefit from industrial insurance that protects them from the immediate nature of the risks inherent in their work, the increasing ranks of knowledge workers (myself included) receive little-to-no compensation for the increasingly understood and certain long-term health effects correlated with extended periods of sitting. Some employers explicitly encourage healthy ergonomics without providing for material changes like standing desks; and “taking breaks” during the work day without some formality carries an unspoken stigma. I’m not arguing that the situation (generally) is unjust – people have the right to (voluntarily) make sacrifices for financial advancement. However, because of the time horizons associated with one type of work versus the other, employers will in one case be liable and in the other not. Workers of all types need to be cognizant of a job’s health tradeoffs and include a healthy work environment in wage/salary negotiations.

Yahoo: The Most Dangerous Thing You’ll Do All Day Apr 12, 2011
Consumerist: Sitting Can Literally Kill You Apr 18, 2011
Lifehacker: The “Sitting Is Killing You” Infographic Shows Just How Bad Prolonged Sitting Is May 11, 2011

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Filed under Economics

Aging Population a Red Herring

Does The Aging Of The Population Really Drive The Demand For Health Care?

(from Concluding Comments)

The objective of this essay has been to deconstruct the popular myth that the aging of the population by itself is a major contributor to the annual increase in the demand for health care and, thus, to total national health spending…the bulk of the rapid annual growth in national spending in the past has been driven by other factors that increase per capita spending for all age groups. Key factors include rising per capita incomes, the availability of promising but costly new medical technology, workforce shortages that can drive up the unit cost of health care, and the asymmetric distribution of market power in health care that gives the supply side of the sector considerable sway over the demand side. These other factors will be the dominant drivers of health spending in the future as well. Blaming Medicare’s future economic pressures mainly on demographic factors beyond policymakers’ control is an evasion of more important challenges. [emphasis added]

Reinhardt, Uwe E. Does The Aging Of The Population Really Drive The Demand For Health Care? Health Affairs, 22, no.6 (2003):27-39.

In 1986, Congress enacted the Emergency Medical Treatment and Active Labor Act, which forced emergency care providers (hospitals) to provide care without reimbursement. Hospitals have only survived by shifting the cost of this uncompensated (and unfunded) care to those with the ability to pay. Oddly enough, Uwe does not mention this “key factor”: an implicit subsidy driving demand. Fortunately, some are starting to take notice, ex. Ezra Klein (see below).

Washington Post: Repeal EMTALA! Jan 27, 2011

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Filed under Economics, Politics

On Rationing and "Death Panels"

The public discourse on “death panels”, a term credited to Sarah Palin, has never been addressed to my satisfaction. An article appearing today in the New York Times (Obama to Enact End of Life Plan That Caused Stir) prompted me to consider the debate again.

Those on the left reacted against the term because of its obvious hyperbole, and responded to a straw man of literal interpretation. Hyperbole is a valid rhetorical tool often used in ordinary conversation to “to evoke strong feelings or to create a strong impression”, and therefore is appropriate. (The idea that one party uses emotions more or less than its opponent to control its adherents is, in my observation, without merit.)

Health care must be ‘rationed’, or allocated, as must any other limited good or service. Whether people believe this is best done by the government or private enterprise is oft debated. However, as the government cannot create wealth, its health care expenditures are zero-sum. And to avoid public unrest, the government must not seem arbitrary. (“Why did he get treatment X when I did not?”) Because the specifics of each medical case cannot be known beforehand, the government must establish some rules that will restrict treatments in order to limit costs and appear fair. So, some group (rhetorically, “death panels”) must make the rules.

In a private health care market, individuals can communicate unique risk preferences on medical decisions and can substitute health care for other goods and services. The most important distinction is that, while cost reduction is important in any scenario, health care in a private market is not zero sum. One’s health care expense does not come at the cost of decreased care for all other taxpayers. In a private market, there is no ‘inappropriate’ or ‘wasteful’ care, only care that can be afforded.

The NYT article cites research advocating planning for various health outcomes, but fails to suggest that families and loved ones shoulder the responsibility (Dr. Berwick suggests that patients and families be ‘involved’ in them, as opposed to owning them). Instead, it seems clear the preference is to relegate decision making to a relationship that can be more easily controlled – one between Medicare doctors and their terminally-ill patients.

Two paragraphs from the NYT article:

“Using unwanted procedures in terminal illness is a form of assault,” Dr. Berwick has said. “In economic terms, it is waste. Several techniques, including advance directives and involvement of patients and families in decision-making, have been shown to reduce inappropriate care at the end of life, leading to both lower cost and more humane care.”

For example, Dr. Silveira said, she might ask a person with heart disease, “If you have another heart attack and your heart stops beating, would you want us to try to restart it?” A patient dying of emphysema might be asked, “Do you want to go on a breathing machine for the rest of your life?” And, she said, a patient with incurable cancer might be asked, “When the time comes, do you want us to use technology to try and delay your death?”

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Filed under Economics, Politics, Zeitgeist