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 rate of premiums that health plans must devote to clinical services and other activities that improve care, somewhat than to administrative and overhead costs or revenue. For many plans, its a whopping 85 percent. Primary this year, health plans must meet the new MLR mandates or rebate the discrepancy 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, according to as health information technology ( IT ), meet the requirements.

The MLR mandates might seem a bit harsh and manifold, but the motive they betide is relatively simple: wasteful 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 evaluation this twist, lets take a beholding 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 entwine weak to evidence - based treatments. This oftentimes results in excessive ( and often haphazard ) ER visits and hospital admissions.

Duplicate Services
Current malpractice laws often force physicians to practice defensive medicine, ordering multiple and often duplicative and surplus tests and procedures. The reform law doesnt address this contention, so its likely to promote. Thats supplementary burden for an ad hoc irked 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 started have insurance. The influx of new patients will dramatically increase provider utilization rates.

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

First, we need health plan members to be more proactive. Too often, chronically ill patients dont fully read their role in the care process, leading to in want drug and care adherence. With the fleshing out of email, content messaging, animated phone applications and other communications advancements, its easier than ever for health plans to interact with members to keep their care plan on pathway. As these exchanges germinate and expand, it will be required to feather health plans with actionable, clinically - endorsed data.

In order to prevent the nut of duplicative services and eliminate waste, its also necessary 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 community of devices to look after a corresponding and more complete view of each patients medical spot.

Another way to directions the bulky costs associated with the chronically sick 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 identify proper neologism of generics. It has been shown to help spot and enforce the best use of drugs and defect ER visits and admissions. In some cases it has produced a 4: 1 proceeds.

Also, incentives for payers and providers must be straight. Shifting reimbursement models from cost - for - service to accountable care organizations will stimulate providers to proactively engage with patients whereas providers will share in generated savings. The stretching of the rate - based insurance design brainchild will have a corresponding impact. All of this will have need different 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, subservient 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 advance health IT to meet the MLR requirements.

In the meantime, what do you understand about the impact of MLR regulations? Will they impact health plans as much as some project? And how can technology help gratify 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 unpaid 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.