Consumer Power Report #244

Published October 26, 2010

Welcome to the Consumer Power Report … a couple days late, sorry!

The big news last week came from the National Association of Insurance Commissioners’ conference in Orlando, Florida, where the nation’s state insurance commissioners have come to a consensus on how best to regulate health care spending by insurance companies.

At the core of this effort is statutory language contained in the Patient Protection and Affordable Care Act dealing with the medical loss ratio. Basically, the provision requires insurance companies to spend at least 80 percent of premiums (85 in the large group market) on medical claims; the burden of designing the enforcement mechanism was left to the NAIC.

As Politico reported, doctor’s bills were defined as medical spending, while advertising by insurance companies was defined as administrative costs. But these were the easy items to define. Efforts by insurance carriers to combat fraud were defined as an administrative expense. I tend to agree with that definition, but the NAIC must know that it will only serve to increase the incidence of fraud in private coverage to levels already experienced by Medicaid and Medicare. Medicaid spends about one-tenth of 1 percent of its budget combating fraud, waste, and abuse. The GAO named it a “high-risk” program in 2007.

Several issues–including federal taxes, insurance agents’ commissions, and programs to improve care coordination–are still up in the air when it comes to the medical loss ratio calculations, but HHS will work to certify the NAIC’s recommendations in the coming weeks. As they have done with some corporations seeking waivers from coverage requirements, the administration probably will be considering requests from states for waivers from the medical loss ratio requirements. Some states already have requested waivers from the new requirements, saying their immediate application will destabilize state insurance markets.

Anticipation of problems has not been this administration’s strong suit, and there is no exception in this case. Waivers for what are supposed to be cost-containment measures are being given out like candy to corporations. At some point, the new health care law is going to be meaningless … if it isn’t already.

— Peter Fotos



Our recent health reform has created a situation where there are strong economic incentives for employers to drop health coverage altogether. The consequence will be to drive many more people than projected–and with them, much greater cost–into the reform’s federally subsidized system.

SOURCE: Wall Street Journal


My colleague, Ben Domenech, has done a fantastic job of chronicling the remarkable statements of Dr. Donald Berwick, our new head of the Centers for Medicare & Medicaid Services. Here’s more evidence of how disconnected he is from the facts, saying the administration has hit every statutory deadline laid out in the new health care law. In fact, the Congressional Research Service released a report showing they have missed seven of 22 deadlines. I do not think anyone would argue that enacting a government power grab can happen overnight, but it certainly does not help your cause by glossing over your own incompetence.

SOURCE: Investor’s Business Daily


For years we have been concerned with the shortage of primary care physicians because fewer medical school students were entering the specialty due to low reimbursement rates and exceedingly high costs associated with attending medical school. It’s reported the nation needs 45,000 more primary care doctors by 2020 in order to accommodate the retirement of the baby boom generation. This shortage will be complicated further by Obamacare, which brings more people into Medicaid, which pays physicians even less than Medicare. Moreover, the number of students entering medical school fell by more than a quarter between 2002 and 2007.

Logic dictated that medical students mostly avoid primary care in favor of more-lucrative specialties in order to pay off student loans at a faster rate, but Obamacare will add almost 20 million more Medicaid enrollees. In general, reimbursement under Medicaid is 30 percent below private insurance reimbursement. Thanks to the situation Obamacare puts us in, becoming a doctor is looking more like a headache than a calling for America’s best and brightest.

SOURCE: Boston Herald


Recently, Greg Scandlen wrote in the Consumer Power Report that accountable care organizations would rule the future of health care even though you would be hard-pressed to find someone who could actually define what an ACO is. Now we know that ACOs are merely a means to an end, by pushing physicians out of private practice and into hospitals as salaried employees. At that point the labor unions are going to move in and force all physicians to become part of their membership.

SOURCE: American Enterprise Institute


The health care reform law undermines Americans’ control over their health care in multiple ways. One of the most troubling provisions gives unchecked power to the U.S. Preventive Services Task Force. This task force’s recommendations determine whether an insurance company must cover certain preventive services. If the task force does not favorably endorse a procedure that an individual and his or her doctor decide is important, the patient could be forced to pay for the service out of pocket or choose to forgo it.

SOURCE: The Heartland Institute