ACA’s Medical Loss Ratio provisions

Today’s press release by the Health and Humans Services states that the Affordable Care Act’s Medical Loss Ratio floor provisions will “increase value for consumers.” In effect, the law requires health insurers to provide rebates to their policyholders if their MLR is less than 85 percent in the large group market or less than 80 percent in the small group market and individual market. There are two points that I’d like to make on these interim final regulations. The interim final regulations can be found here.

First, the regulations recognize important Quality Improvement functions that managed care purports to offer to consumers. The interim regulations define Quality Improvement as activities “grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized medical associations, accreditation bodies, government agencies, or other nationally recognized health care quality organizations.”

In addition to the obvious case/disease management initiatives, these activities include:

• “Any HIT expenditure that is attributable to improving health care, preventing hospital readmissions, improving patient safety and reducing errors, or promoting health activities and wellness to an individual or an identified segment of the population, is classified as a quality improvement activity”
• “Fraud recovery expenses … up to the amount of fraudulent claims recovered.”

The second point I want to make is regarding the regulation comments that state, “if the activity is designed primarily to control or contain costs, then expenditures for it may not be included as a quality improvement activity.” On the face, this seems to increase the “value to the consumer.”

The assumption with this comment is that more medical care is good, and that less healthcare (especially when spent on administrative activities) is bad. This is a fallacy debunked by the work done at the Dartmouth Atlas. As summarized by Dr. Skinner, “a high-intensity practice pattern is associated with lower quality of care and worse outcomes than a more conservative practice pattern.”

So, it can be said that managed care activities that control inappropriate utilization of medical care that may decrease quality healthcare outcomes. Numerous studies over the years support this notion. Here is a table of some common inappropriate treatments.

Service	% Inappropriate	Study
Childhood tube insertions	23%	Kleinman et al., 1994
Antibiotics for the common cold	60%	Mainous et al., 1996
CABG surgeries	14%	Winslow et al., 1988
Carotid endarterectomies	32%	Chassin et al., 1987
Upper GI endoscopies	17%	Chassin et al., 1987

Let me know your thoughts on the matter.