I'm not saying that doctors have this goal. I am saying that this is what the system incentives are, and we all know how systems respond to incentives.
Hardly anybody is going to actually try to keep a patient sick, but there are many other ways to get the same result.
Does this patient have good insurance? Run lots of tests. All the tests. Do expensive procedures that might help regardless of their cost benefit ratio. Spending a quarter of a million dollars for something that has a 2% better result than an alternative that costs $20 is perfect, because the incremental improvement is real. It's just not worth a quarter of a million bucks. But the patient doesn't care about that when it's the insurance paying.
What might happen is a generous employer funded or government funded (such as Tricare) plan might offer more coverage for brand name drugs, or less requirements for pre authorizations. And a less generous plan such as Medicaid (state government) will try to minimize costs by only covering generics or requiring more pre authorizations.
But the people reviewing the claims at the managed care organizations are not looking at what kind of coverage a patient has to decide if they do or do not need a medical procedure or a lab.
To which I would say that is wrong because the person working at the MCO reviewing the claim would not be evaluating the expensive procedure based on if the insured has Medicare or Medicaid, they will approve or deny it the same if they deem it medically unnecessary.
I agree that healthcare providers get paid differently based on the patient’s coverage, and that would influence the priority they give the patient. In fact, I would say the whole point of the convoluted MCO system (versus a simple taxpayer funded system like UK) is to give the government plausible deniability for segmenting the population into various groups of people getting different quality levels of healthcare.
Doctors love Medicare. It pays them nearly instantly, steady stream of clients, and known fixed rates commensurate with most private negotiated rates.
Medicaid is the one that has much stricter benefit rules and tighter price guidelines.
If the patient has good insurance, they don't really care about providers doing a lot of expensive unnecessary things, because they're not paying.
If they have less good insurance, either the patient is paying more to you out of pocket and is more likely to balk, or you're waiving the patient's portion of the cost and you don't want to be doing unprofitable unnecessary procedures for them.
So the incentive is for providers to do lots of expensive unnecessary things on the patients with better insurance.
I guess doctors could be basing their diagnoses and recommendations on the out of pocket costs for the patient, but I like to think that is not the case, by and large.
Anyone getting rich in the insurance business or hospital administration, writing overpriced administrative tools or telehealth software, selling overpriced medical equipment, etc. is profiting from death and suffering, and should feel terrible for it every time they cash a check, but the thing is, they don't. There are too many exploiters milking health care due to inelastic demand and the extreme depravity of people eager for money that passes for virtue among the depraved.
Unless it either meets preselected criteria (or gets lucky with the RNG for orgs doing random spot review) for manual review, or is an appeal, the “people reviewing the claim” aren’t actually people in many cases.
But, people or not, they don’t care if the patient needs it (well, they do as one factor, but its not the ultimate question), they care whether it meets the plan’s coverage criteria. Outside of what is minimally mandatory under health insurance laws and regulations, the coverage conditions for certain treatments (and even certain tests) are often more restrictive in “less good” plans.
So, yes, the systems and people reviewing claims do look at what kind of coverage you have when deciding whether or not a medical procedure or test is covered (and to what extent it is covered) by your insurance.
(I know, I’ve been deeply involved in building and maintaining some of the involved systems for a public sector payer.)
This is what I am referring to when talking about determining what is and is not medically necessary. If there is clear evidence of a lab or medication being helpful, then it will be covered due to stipulations in the ACA regardless of how expensive the insurance coverage is, since it is proven medically necessary.
Of course this gets into shades of gray, but such is life. However, I have not seen a treatment or lab well supported by data to not be covered because someone was on a worse insurance plan and the treatment or lab happens to be expensive.
One example of a controversial medicine to cover off the top of my head is palivizumab (Synagis) for RSV in babies. There is very sketchy data on its efficacy and in what conditions
https://publications.aap.org/pediatrics/article/134/2/415/33...
But lots of health plans will have varying levels of coverage with varying pre authorization criteria for it because it is extremely expensive. So would it be classified as medically necessary? Probably not in most cases. But still some plans might cover it for whatever political reasons.
I’ve learned to seek this person out (around here, it tends to be mostly women, and usually in their late forties, or so). They can be acerbic and abrupt, but I’ve found that it’s well worth it to treat them respectfully.
These are the “rainmakers.” They know how to make bills disappear by simply recoding a procedure, or will tell you how to approach your insurance company.
They will probably be unhappy at the new law; mostly because it will force them to have to learn a new workflow. I have every confidence that they will learn it, inside and out, in time.
Of course I can! Obamacare requires that at least 80% of money must go to medical costs. Profits and administration come out of the rest. So the only way to keep profits rising for insurance companies is to arrange for payments to rise at a predictable rate. And therefore insurance companies are happy to be complicit in rising medical costs, so long as it is predictable and other insurance companies wind up with comparable rates.
As long as there are competing businesses, and/or sufficiently low barriers to entry, then this mechanism to earn ever increasing profits is mitigated by the fact that a competitor will come in and take your business. Managed care organizations (MCOs), i.e. health insurance, has many competitors, UNH/Anthem/Cigna/Humana/CVS/Molina/Centene, etc.
Either they are all colluding to keep prices going up, or they actually are trying to negotiate the best prices they can with healthcare providers for their customers in order to offer the best value to continue to win business.
Considering all of the above companies have many years of single digit profit margins, almost all 5% and below, I would say the business line is quite competitive, and barring evidence of collusion, it seems spurious to claim they are profiting off of regulations requiring minimum medical loss ratios.
Pretty much no businesses have that percentage fixed by legislation.
If you make hammers and your customers are willing to pay $10 for a hammer and your costs are $9, your profit margin is 10%. If you can lower your costs to $8, you can still get $10, so now your profit margin is 20%. You have an incentive to reduce costs. And maybe even to reduce prices, because the higher number of hammers you sell at $9 might make up for the lower margin.
The main exception are utility companies and government contractors and it leads to the same perverse incentives there as in heath insurance.
> As long as there are competing businesses, and/or sufficiently low barriers to entry, then this mechanism to earn ever increasing profits is mitigated by the fact that a competitor will come in and take your business.
The way this works is that the lower cost insurer denies coverage for medically unnecessary procedures and the higher cost one doesn't. Then medical providers find someone who got denied and bring the story to the press that Discount Medical Insurance Co is intentionally murdering people by denying their health insurance claims! They must be stopped!
Then the bad PR loses them more customers than the lower price gained them, and the higher price makes them more money anyway. This continues until nobody is offering the lower price anymore.
Setting a minimum medical loss ratio is not setting a minimum profit margin.
>The way this works is that the lower cost insurer denies coverage for medically unnecessary procedures and the higher cost one doesn't. Then medical providers find someone who got denied and bring the story to the press that Discount Medical Insurance Co is intentionally murdering people by denying their health insurance claims! They must be stopped!
>Then the bad PR loses them more customers than the lower price gained them, and the higher price makes them more money anyway. This continues until nobody is offering the lower price anymore.
That is not how it works at all. MCOs do not have a team of doctors and pharmacists scheming to approve medically unnecessary procedures. The business is extremely competitive and much of the denial/approval criteria is in the hands of the payer, for example Medicaid/Medicare/Tricare/CMS.
It's setting a maximum profit margin.
We don't have problems with businesses trying to minimize their own profit margin.
> MCOs do not have a team of doctors and pharmacists scheming to approve medically unnecessary procedures.
All their competitors have to do is convince one of their patients that one of the procedures they're denying is medically necessary and they still get the bad press.
Is this a problem? As demonstrated by audited financial reports, there are many competing MCOs with many years of very small profit margins. These businesses clearly do not have pricing power, and are not businesses you get into to pocket lots of profit.
>All their competitors have to do is convince one of their patients that one of the procedures they're denying is medically necessary and they still get the bad press.
There is bad press about every single MCO out there, and they are processing millions of claims per day. I would need evidence to see that the bad press even means anything. Majority or at least plurality of people do not even get to choose their MCO.
You're arguing against yourself there. If the market is really competitive then there is no need to set a maximum profit margin because anyone who tried to charge that much would lose business.
Meanwhile, suppose that one provider was much better managed than the others. The mismanaged ones would simultaneously have high prices and low margins, because they're wasting the money. The well managed one could then have much higher margins even at the same or lower price.
But if there is a profit cap and you're already at it, searching for further efficiency improvements costs you profit. If your margin is 20% and that's the cap, but you can get a 10% cost reduction, what do you do? If you lower prices, your competitors lower prices, and then you still have a 20% margin and they drop to a 10% margin. You gain no customers and reduce your absolute profits by 10% by making the same 20% margin on a 10% smaller total. If you burn the efficiency improvement on purpose, or don't look for it to begin with, you make more money.
> Majority or at least plurality of people do not even get to choose their MCO.
Somebody is choosing for them and that person doesn't want to take the blame for choosing one that denies claims.
This is part of the reason why it works -- some HR drone making the decision isn't spending their own money, but they're the one who takes the blame for choosing the disreputable discount provider if there are problems.
However, since current profit margins are no where near 100% minus minimum medical loss ratios, I do not see how the existence of the minimum medical loss ratios would cause any MCO to be less incentivized to seek further efficiencies.
This also lines up with the PR benefit in being able to claim a low profit margin and overhead on paper.
https://www.investopedia.com/terms/t/transfer-pricing.asp
I also do not see what the gain for shareholders would be in reporting lower profit margins.
IIRC, in Germany and Switzerland medical insurance is mandated non-profit, and can only meet the costs of running the company. The insurers could just give themselves high salaries, but to cover those premiums would need to be higher, which could cause the insured folks to seek out lower priced coverage.
I think people conflate two separate issues when considering health care costs in the US. The first is high costs. The second is increasing costs.
There is no doubt about it when it comes to high costs. We pay more than other first world countries for comparable levels of care.
When it comes to increasing costs though there isn't much difference between the US and many other first world countries. The US rates rise just a little faster than the rates in the other G7 countries, for example.
It's been this way for a long time. Here's how much various counties' costs went up from 2000 to 2018: US 2.3x, Germany 2.1x, France 1.8x, Canada 2.0x, Italy 1.7x, Japan 2.6x, and UK 2.6x. The US costs relative to 1980 were in 1990, 2000, 2010 2.6x, 4.4x, 7.7x, and 10.2x. For UK it was 2.0x, 4.1x, 7.5x, 10.6x. France did better: 2.2x, 4.1x, 6.1x, 7.5x.
Much of the focus on health care cost reform is on the high cost compared to other countries, with the assumption that we are doing something wrong that the others are avoiding and this is what leads to our high costs.
But our costs were about as much higher relative to the others 50 years ago as they are now. It is just that it wasn't as big a deal back then because costs were much lower as a percentage of GDP then both in the US and in the other first world countries.
In a sense then the US isn't actually doing much worse than the rest of the world (see note below). We are just farther ahead on the same curve they are all following, so we've reached the point where it is painful first.
This is not good. It means that fixing this is going to be a lot harder than most reform advocates think.
Note: when I say we aren't doing much worse this is just on costs. We are way behind in access.
Here are a couple of past comments with cites for the above numbers [1] [2].
SF General isn’t in network for any insurer. Let that sink in. Why? They mostly treat indigent, so shit, insurance has nothing to do with it most of the time. Otherwise it’s revenue maximizing. And this is a government run hospitals. Let that point sink in too.
And I wouldn’t give physicians such an easy pass. I had conversations with a few community oncologist practices and they know the game very well. Ask them to take a 1% cut in revenue and you’d think you were throwing them in the poorhouse.
They could e.g. force hospitals to publish pricing information so that it becomes common knowledge and a market is created with accurate pricing.
Or offer to replace overpriced medical supplies used by doctors on their own, which they acquire separately from the manufacturer and in bulk.
Or - worst-case - start buying hospital stock at up to 2x market value so the profits accrue to them, and use investor pressure to start replacing hospital administrators with their own efficient bean counters.
These are public companies, if they could get that 3% quarterly growth cutting costs from somebody "milking" them, why isn't that priority #1?
Maybe not an explicit goal, but I think it's pretty easy for say an anesthesiologist who blows into the OR, talks to the patient (maybe) for 30 seconds, then powers through the surgery and on to the next one to lose touch with the core motivations for why they are there. In fact anyone who works with sick and hurt people needs to develop this dettachment as a survival mechanism. The administrators who create and operate these money machines are never connected with the patients in the first place. Not unlike a lot of software developers in this aspect!