PNHP comments on the "Obamacare bomb"

[eridani]

The Bomb Buried In Obamacare Explodes Today-Hallelujah!
By Rick Ungar
http://www.forbes.com/sites/rickungar/2011/12/02/the-bomb-buried-in-obamacare-explodes-today-halleluja

I have long argued that the impact of the Affordable Care Act is not nearly as big of a deal as opponents would have you believe. At the end of the day, the law is - in the main - little more than a successful effort to put an end to some of the more egregious health insurer abuses while creating an environment that should bring more Americans into programs that will give them at least some of the health care coverage they need.

There is, however, one notable exception - and it?s one that should have a long lasting and powerful impact on the future of health care in our country.

That would be the provision of the law, called the medical loss ratio, that requires health insurance companies to spend 80% of the consumers' premium dollars they collect - 85% for large group insurers - on actual medical care rather than overhead, marketing expenses and profit. Failure on the part of insurers to meet this requirement will result in the insurers having to send their customers a rebate check representing the amount in which they underspend on actual medical care.

This is the true "bomb" contained in Obamacare and the one item that will have more impact on the future of how medical care is paid for in this country than anything we?ve seen in quite some time. Indeed, it is this aspect of the law that represents the true "death panel" found in Obamacare- but not one that is going to lead to the death of American consumers. Rather, the medical loss ratio will, ultimately, lead to the death of large parts of the private, for-profit health insurance industry.

Comment by PNHP cofounders Himmelstein & Woolhandler:

Limiting overhead to 15%-20% is far from the stringent regulation that Ungar implies. Private insurers' overhead currently averages about 14% nationwide, and they will probably be able to reclassify some items currently classified as overhead into the patient care expense category (despite regulations that attempt to stop this). Moreover, some current sales expenses will be offloaded to the insurance exchanges, which are likely to have overhead of 3-4%, and the exchanges' expenses will not count as part of insurers' overhead. Finally, ACOs will take over many of insurers' administrative tasks and expenses, but these ACO overhead expenditures will not count toward the 15%-20% overhead limit. In sum, total insurance overhead (and profit) is likely to grow, not fall in the years ahead."


Comment by Don McCanne of PNHP:

Never have we received as many requests to comment on an article as we have on Rick Ungar's "The Bomb Buried in Obamacare..." He is to be highly commended for his enthusiastic support of single payer, but his analysis that the insurers' requirement to comply with the statutory medical loss ratios is an Obamacare bomb that will cause so much damage that we'll be on an inescapable path to single payer might represent... well, perhaps a touch of hyperbole, intended or not.

In the response above, David Himmelstein and Steffie Woolhandler explain how the medical loss ratio will have very little impact on reducing total insurance overhead and profit, although some recategorization will likely take place. Thus it isn't quite the bomb that will relieve us of their excesses and intrusions, nor relieve the health care providers of the administrative burdens that are placed upon them by the insurers and by the general complexity of our fragmented, dysfunctional health care financing system.

That said, it is political season. We can thank Rick Ungar for providing us with well-meaning hyperbole that that is appropriately provocative and makes people want to look once again at single payer as an answer to our health care mess. As Ungar says, "we are now on an inescapable path to a single-payer system for most Americans and thank goodness for it," even if the medical loss ratio bomb won't really budge us in that direction.

My comment: What will lead single payer is the continued spiraling of health care costs completely out of control. Hopefully, by the time the wheels come off of PPACA, we will have implemented single payer in at least a few states.

[eridani]

1. Informational kick n/t

[Cleita]

2. It does turn back the clock to when Blue Cross, et al were non-profit and their insurance was

structured like Medicare with a $100 deductible, payment for 80% of the bill and a 20% co-pay. Hopefully, it will drive many of the insurers out of the business and pave the way for Medicare for all.

[eridani]

3. Not quite

As late as the 1990s, MLR rates were 95%.

[ProSense]

4. That

"As late as the 1990s, MLR rates were 95%."

...was never a standard and the MLR was never enforced. Medicare has an MLR of about 97 percent. Private insurers were never as efficient as Medicare.

Wendell Potter Says Franken Bill Will Go Far to Control Medical Costs

<...>

When Wall Street isn't calling the shots, the outcome is decidedly better for health care consumers. Government-operated plans, such as Medicare, and some organizations that provide coordinated care, consistently maintain higher medical loss ratios. Kaiser had a 90.6 percent MLR in 2007. Between 1993 and 2007, Medicare's MLR hasn't dropped below 97 percent.

<...>

http://crooksandliars.com/susie-madrak/wendell-potter-says-franken-bill-will

The current MLR is a big deal because it's part of comprehensive reform, which includes rate reviews, regulators and other enforcement mechanisms.

[eridani]

5. It isn't a big deal because insurance companies provide the data

Lots of ways of fucking with it, which is why MLR regulation has failed in 15 states to rein in costs.

See the following.
http://www.democraticunderground.com/100211120