Two health care reform developments last week provide good and bad examples of how to curtail costs.
On a positive note, the Kaiser Family Foundation estimated that more than 3 million insurance policyholders will divvy up $1.3 billion in rebates this year as a result of the new health care reform law. The average rebate for individual policyholders is about $127. As for group insurance, employers can keep the rebates or treat them as discounts on next year’s premiums.
The rebates are triggered by a section of the law that calls for insurers to spend at least 80 percent of premiums on medical care, as opposed to paperwork, marketing, executive compensation and other administrative expenses. Any insurer that posts a “medical loss ratio” under 80 percent must refund the difference to policyholders.
The point is to encourage efficiency. The report says the change has encouraged insurers to seek lower premium increases because they know they will have to refund any excess amounts, and that their substandard medical-loss ratios will be publicized.
“This ‘sentinel’ effect on premiums has likely produced more savings for consumers and employers than the rebates themselves,” the report states.
If you – or your employer – aren’t getting a rebate, it’s because you’ve already been the beneficiary of more efficient health care delivery.
Historically, health care delivery in Washington state has been efficient, and that’s reflected in the Kaiser report. The average rebate in this state is 64 cents, which is a direct result of the healthy medical-loss ratios among the state’s insurers. Some examples for 2010, according to the Office of the Insurance Commissioner, are: Group Health, 89.9 percent; Community Health Plan, 85 percent; Regence Group, 82.5 percent; United Health Group, 82.5 percent; and Premera Blue Cross, 81.9.
Those scores align with what we’ve long said about health care. If the rest of the country could deliver care – private and public – as efficiently as Washington’s medical providers, health care costs would drop considerably.
Now for the negative story. As part of health care reform, Congress clamped down on Medicare Advantage, which is a program that offers subsidized health care plans with extras, but at higher costs per enrollee to taxpayers than regular Medicare. Given the dire finances of Medicare, the nation can ill afford this.
Congress cut payments to these plans to save $158 billion over the next decade, and added financial incentives for insurers who could still deliver high-quality care. So far, so good.
However, the Obama administration is doling out $8 billion in performance bonuses so liberally that the incentives have lost their meaning. Under the law, about 33 percent of Medicare Advantage enrollees were to be in plans that got bonuses, but the administration is expanding that to 90 percent.
The plans are popular, and it is an election year.
The Government Accountability Office studied the issue and recommended ending the bonus program, calling it a waste of money. If the administration continues to play politics with these rewards, we concur.
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