Medical Loss Ratio: Friend Or Foe?

Medical Loss Ratio: Friend Or Foe?

As we forge ahead in healthcares post - reform era, one of the hot topics in the industry is medical loss ratio ( MLR ). MLR is the minimum scale of premiums that health plans must devote to clinical services and other activities that improve care, quite than to administrative and overhead costs or revenue. For many plans, its a whopping 85 percent. Initial this year, health plans must meet the new MLR mandates or deduction the dissemblance to policyholders beginning in 2012. The pressure is on, but theres no need to sweat. Many activities in which health plans are currently engaged or planning to deploy, cognate as health information technology ( IT ), meet the requirements.

The MLR mandates might seem a bit not smooth and manifold, but the actuation they befall is relatively simple: profligate spending. It is estimated that the American healthcare system wastes upwards of $1. 2 trillion annually. The legislation, in essence, is seeking to coordinate care to make it more proactive and preventative. The thinking is that keeping people healthy is cheaper than treating them when theyre ill. Ideally, this approach will mean lower expenses, less waste and, most importantly, healthier people.

To test this notion, lets take a glad eye at what contributes waste in the current healthcare system and theorize some ways to reduce it.

The Chronically Ill
Approximately 80 percent of the United States $2. 2 trillion in healthcare costs can be attributed to patients with chronic illnesses. They get the highest levels of medical management from health plans in todays MCO - focused system, yet 60 percent of them copulate ill to evidence - based treatments. This much results in excessive ( and often causeless ) ER visits and hospital admissions.

Duplicate Services
Current malpractice laws often force physicians to practice defensive medicine, ordering multiple and often duplicative and superfluous tests and procedures. The reform law doesnt directions this issue, so its likely to carry forward. Thats more burden for an immediate run-down system.

Provider Utilization
Reform may bring some 50 million uninsured individuals into the ranks of the insured. Its estimated that these patients will receive 40 percent of the amount of health resources of members who ad hoc have insurance. The influx of new patients will dramatically increase provider utilization rates.

So what are some ways to help counterbalance these primary sources of waste?

First, we need health plan members to be more proactive. Too often, chronically ill patients dont fully register their role in the care process, leading to played out drug and care adherence. With the success of email, issue messaging, mobile phone applications and other communications advancements, its easier than ever for health plans to interact with members to keep their care plan on course. As these exchanges advance and expand, it will be vital to dispense health plans with actionable, clinically - accredited data.

In order to prevent the headache of duplicative services and eliminate waste, its also imperative to deliver information to the point of care. Most patients see more than one provider, something even more prevalent among the chronically ill. Through health information exchanges, real - time data can be delivered to providers in virtually any format and through a proletariat of devices to sustain a consonant and more complete view of each patients medical setting.

Another way to inscription the fat costs associated with the chronically poorly is through drug therapy, or medication therapy management ( MTM ). MTM applies analytics technology to the available medical information for individual patients to enable better adherence, avoid drug interactions and distinguish proper hackneyed term of generics. It has been shown to help ascertain and enforce the best use of drugs and default ER visits and admissions. In some cases it has produced a 4: 1 increase.

Also, incentives for payers and providers must be proportionate. Shifting reimbursement models from remuneration - for - service to accountable care organizations will incite providers to proactively engage with patients as providers will share in generated savings. The aggrandizement of the charge - based insurance design perception will have a like impact. All of this will miss unknown technology and care management tools that can link multiple providers and health plans so that care is appropriately coordinated.

Together, each of these methodologies can help foster more coordinated medical management. And, unbefitting reform, the cost of implementing them can be attributed to MLR. To this end, in the next blog Ill closely analyze the Department of Health and Human Services five categories of clinical - and / or quality - related activities that qualify as MLR costs and examine how health plans can employ health IT to meet the MLR requirements.

In the meantime, what do you regard about the impact of MLR regulations? Will they impact health plans as much as some understand? And how can technology help slake the burden?

We talk more about the new MLR mandates in the second of our new series of e - books called MEDecision Insights. I invite you to download your for free copy of Medical Loss Ratios: Important Implications for Care Management and share your thoughts with us today. Get your e - book here: http: / / www. medecision. com / insightseries.