Individual Medical Loss Ratios and luck

The Medical Loss Ratio is the percentage of total premium revenue that an insurance company spends on medical care (and a few other minor things) for its members.  PPACA requires a large group insurance premium pools to have an MLR of 85% and small group or individual premium pools to have an 80% MLR.  The difference is because there are significant scale differences.  For instance, the things that I do are required for both small and large groups but take the same amount of time, so my costs can be spread over 5,000 people or fifteen.

Most people in most years will never come close to costing the insurance company the full individual medical loss ratio slice.  That is typical because insurance is a guaranteed small loss to avoid a possible large loss.  Most people are reasonably healthy in most years or have frequent but cheap contact with the medical system in the form of PCP visits, physical therapy, perhaps a broken bone that needs nothing more than a cast or a single incident of kidney stones.

With the exception of the years when the Kids were born, my family has never had a personal medical loss ratio above 35%.  And that is a good thing.  That means we’ve been relatively healthy and what ailments have been minor, transitory and acute.

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Improvements and payment models

From one of my favorite new blogs, Not Running a Hospital on a staffing change in a hospital in Toronto that has shown significant clinical and cost improvements:

 While I had heard about the concept of a patient navigator before today, including at my own former hospital, the navigator service was usually designed to help people of different cultural backgrounds maneuver through the complicated labyrinth of the tertiary care system. At Mt. Sinai, they have taken the concept to its logical conclusion, providing patient navigators for all general internal medicine, surgical oncology, and inflammatory bowel disease patients….

When a patient arrives on the floor from the emergency department, Heather is already on the case, handling a multitude of tasks that previously would have taken time away from nurses or other clinical staff. Heather’s academic training? Fine arts!

This program is supported by philanthropy, as the payment regime from the province of Ontario does not include funding for this kind of service. It is so effective, though, in terms of patient satisfaction and clinical improvement, that the hospital is working on a way to provide sustainable funding.

Ontario Health Insurance Program (OHIP) is a single payer system which primarily uses a fee for service model. A provider does service X and receives so many loonies for that service.  Providers get paid for the services they rendered and not the services that they did not render.  It also means it is an extreme challenge to get paid for services provided by someone without initials after their name.  The incentives don’t line up for the hospital in a fee for service model to make sure their patients know what is going on, know what is expected and needed from them and know where to find follow-up information.

Models where there are fixed fees attached to either a diagnosis or a population change this incentive.  The incentive is to find some way for the patient to manage their own health through their own understanding of requirements and expectations.  A navigator allows the higher skilled and more expensive nurses and doctors to provide high value care instead of setting up follow-up appointments at the rehab center or scheduling a PCP visit in three weeks as well as transportation to the office.


We get what we paid for

Back when I was young and idealistic, I worked for several years at an entity that managed mental health case and care coordination.  I never provided front line service, that is not what I do, but I routinely saw reimbursement fee schedules for mental health providers.  They were absysmal.  A master’s level provider could expect to receive between $45 to $70 per hour for their time in an office setting and perhaps $15 more for in-home services.  The higher rates tended to be from government programs.  That sounds like a lot but that fee has to be able to cover wages, overhead, infrastructure, insurance and education expenses.  As a comparison, when I took Kid #2 into the pediatrician last week for suspected croup, the CRNP was able to get paid $108 for a ten minute visit.  She can do four or five of those visits in an hour.  When I called a plumber over the summer to fix the shower, she got paid $240 for forty five minutes of service.  What we pay is a decent indicator of what we as a society value.  We value working showers and acute medical care far more than mental health care.

Mental health services have always been done on the cheap, and that means there is very little capacity in the system.  Hospitals are more than willing to build $230 million dollar proton beam therapy centers that offer minimal marginal improvement in results for cancer treatment because cancer pays.  At the same time, in-patient psych beds have been cut dramatically.  Some of this is a long term trend, but a signficant amount has been due to state level budget cuts of the past five years. 

Commenter CzarChasm has this to say in an e-mail to me as a front line mental health provider in Virginia concering the Deeds stabbing and suicide:

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November enrollment pace

The LA Times has some really good news on Obamacare enrollment pace:

A number of states that use their own systems, including California, are on track to hit enrollment targets for 2014 because of a sharp increase in November, according to state officials….
California — which enrolled about 31,000 people in health plans last month — nearly doubled that in the first two weeks of this month…
Connecticut saw growing enrollment in November: 3,201 people signed up for health plans in the first two weeks of this month, nearing the 4,371 total for all of October….

As I had updated in my post concerning the October enrollment pace, Pennsylvania (a federal exchange state) seems to be seeing a quadrupling of pace in the first two weeks of November compared to October.  This is evidence that the kinks are getting worked out in the process and people are still willing to look for a good deal on the Exchanges.

Baby, I want you in my network

Hill  Dweller asked a good question about networks yesterday:

Does the doctor decide which policies he/she will accept?

Yes and no.

Providers in most plans that offer multiple lines of business (Medicare, Medicaid, CHIP, Exchange, PPO, HMO etc) have a two stage process of being offered in a network.  An insurance company that only offers one product in a single line of business consolidates the two steps into a single one. 

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