The Right Prescription

Medical Losers

According to Obamacare, it's good for consumers to have to pay more for less and less coverage and treatment.

By 11.24.10

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Tim Jost, a self-described health care expert and well-known Obamacare shill, hailed new Department of Health and Human Services regulations dictating how much health plans have to spend on medical services as "good… for consumers."

The goal of imposing a fixed medical loss ratio (MLR) is to force health plans to lower prices, cut costs and provide more care. Like other aspects of Obamacare, the mandatory MLR will have the opposite effect: mandating that at least 80-85 percent of premiums be spent on medical care will lead to a rapid consolidation of health plans, reductions in physicians pay, cuts in services, and hospital closures.

The history of controlling health insurance premiums by requiring a minimum of spending consists of one failure after another. As the Heartland Institute noted: "Both Kentucky and North Dakota passed higher loss ratios as part of a series of reforms in the 1990s. Kentucky's loss-ratio bill was part of larger health reform legislation that destroyed the state's insurance market. Not until the loss ratio was lowered to a more reasonable 65 percent did the individual market finally begin to recover. North Dakota has faced a similar crisis. Carriers have abandoned the market, leaving consumers with fewer choices and higher premiums."

Similarly as I noted in a column earlier this year, Missouri nearly killed off its health insurance market by imposing controls on premiums and medical expenses. Jay Angoff, who is now in charge of MLR enforcement for Obamacare, was in charge of a similar effort in the Show-Me State. He acknowledged: "One of the reasons that our state health plan in Missouri is not doing as well today as it did in the first five years is that we got greedy. We had so much bargaining power that we kept rebidding the contract and kept squeezing these guys because we had the power to do so."

And power is what Obamacare is all about. The Congressional Budget Office all but conceded that point when it stated that a high mandated MLR would, along with other government regulations, lead to a government takeover of healthcare. CBO concluded, "Insurers operating at MLRs below a minimum [of up to 90 percent] would have a limited number of possible responses. They could change the way they provide health insurance, perhaps by reducing their profits or cutting back on efforts to restrain benefit costs through care management. … Alternatively, they could exit the market entirely.… Taken together with the significant increase in the federal government's role in the insurance market under the PPACA, such a substantial loss in flexibility would lead CBO to conclude that the affected segments of the health insurance market should be considered part of the federal budget."

The decision to go with 80-85 MLR instead of 90 percent was made so CBO wouldn't rule Obamacare was a government takeover. But that doesn't mean it is not so. The concentration in purchasing power among government bureaucrats and a few large health plans is underway and would be worse but for hundreds of temporary and politically parsed waivers. The ensuing cuts in what doctors and hospitals get paid and what services are covered will lead to less of everything.

This is not an unintended consequence but part of Obamacare's grand plan. As Tom Daschle notes: "Instead of a market, we could have a smoothly functioning system, with a central decision-making authority for coverage and payment decisions."

Last week Donald Berwick told the Senate Finance Committee: "My principle is that patients should get all of the care they want and need, when and how they want and need it." Which is sort of like saying you can keep the health insurance and doctors you have. Under Berwick's definition of want and need as established by a central authority, Medicare has delayed payment for new cancer vaccines, genetic tests to personalize care, refused to pay for Vitamin D deficiency and diabetes strips.

Yes, that's right: Medicare is limiting the number of blood sugar test strips, to six per day for insulin-dependent seniors and cut the number of strips to one a day for those diabetics who use oral medications. And it will not pay for a Vitamin D test (to determine if someone needs Vitamin D) unless a doctor can demonstrate a patient has a Vitamin D deficiency. If you're wondering how you can demonstrate Vitamin D loss without testing for it, ask the central authority.

In his essay, "Use and Abuse of the Medical Loss Ratio to Measure Health Plan Performance," James Robinson observed: the best indicator of future value in a market economy is the willingness of the consumer to purchase and retain the product. Under Obamacare the MLR will eliminate choices and let government decide what is valuable. Maybe Jost and Berwick can explain how this is good for consumers.

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About the Author
Robert M. Goldberg is vice president of the Center for Medicine in the Public Interest and founder of Hands Off My H ealth, a grass roots health care empowerment network. His is new book, Tabloid Medicine: How the Internet is Being Used To Hijack Medical Science For Fear and Profit, was published last month by Kaplan.