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, reasonably than to administrative and overhead costs or revenue. For many plans, its a whopping 85 percent. Inceptive this year, health plans must meet the new MLR mandates or repayment the peculiarity 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, consistent as health information technology ( IT ), meet the requirements.
The MLR mandates might seem a bit unrelenting and multiple, but the inducement they transpire is relatively simple: lavish 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 abstraction, lets take a hinge 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 coalesce weak to evidence - based treatments. This oftentimes results in excessive ( and often worthless ) ER visits and hospital admissions.
Duplicate Services
Current malpractice laws often force physicians to practice defensive medicine, ordering multiple and often duplicative and unneeded tests and procedures. The reform law doesnt directions this affair, so its likely to never cease. Thats more burden for an instant narcoleptic 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 being 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 penetrate their role in the care process, leading to impoverished drug and care adherence. With the upping of email, subject messaging, moving phone applications and other communications advancements, its easier than ever for health plans to interact with members to keep their care plan on path. As these exchanges ripen and expand, it will be obligatory to add health plans with actionable, clinically - accredited data.
In order to prevent the question 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 race of devices to sustain a related and more complete view of each patients medical seat.
Another way to directions the enormous costs associated with the chronically ailing 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 commonplace term of generics. It has been shown to help identify and enforce the best use of drugs and dearth ER visits and admissions. In some cases it has produced a 4: 1 benefit.
Also, incentives for payers and providers must be consistent. Shifting reimbursement models from charge - for - service to explainable care organizations will restore providers to proactively engage with patients due to providers will share in generated savings. The progress of the equivalent - based insurance design concept will have a in agreement impact. All of this will wish newfangled 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 employ health IT to meet the MLR requirements.
In the meantime, what do you be convinced about the impact of MLR regulations? Will they impact health plans as much as some conceive? And how can technology help allay 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 unrecompensed 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.
