Stanley Feld M.D.,FACP,MACE

Ann Braly’s ( CEO of WellPoint), article in the Wall Street Journal on February 7,2007 signaled an aggressive campaign by the healthcare insurance industry to force the federal government to subsidize healthcare insurance even more than it is presently.

The healthcare insurance industry wants the passage of Obamacare with the deal President Obama made with them. Part of the deal was to mandate insurance and increase deductibles from 20% to 30%.

“This scheme presented by Obamacare would have been, and might still be, imposed on the rest of the country.”

The original scheme (Obamacare1) was forced to be modified because mandating healthcare insurance was challenged as being unconstitutional.

Thirty two states have passed laws prohibiting healthcare insurance mandates. Mandates would be great for the healthcare insurance industry. They would increase the number of customers insured.

The more insured the lower the actuarial risk. The healthcare industry claims it could lower the cost of healthcare insurance. Obamacare 1 would also increase consumers’ deductibles saving more money for the healthcare insurance industry and increasing the burden to consumers.

At the request of several congressmen last year, including some Democrats, WellPoint mined its own actuarial data to model ObamaCare and found that it would as much as triple premiums for the small businesses and individuals who are most of the company’s customers.

WellPoint is declaring that Obamacare 2 will triple premiums. It is important to note that WellPoint did the math using accounting practices permitted by the government. The result is loading the overhead.

There is no evidence that any congressmen or the President has challenged WellPoint’s estimates until Mrs. Braly’s WSJ interview. No one has challenged the accounting methodology. The government is assuming the healthcare insurance industry numbers are correct. It would also be important to understand the math in the actuarial estimates.

The government should be looking at the defects in accounting methods. It should also look at the accuracy of the actuarial calculation.

“The White House political shop promptly compared WellPoint to a tobacco company.

President Obama uses political sound bytes all the time. His sound bytes have little substance. He should become aware of the fact that the average citizen is tired of his nice sounding rhetoric.

The healthcare insurance industry is ripping off the consumer and the government. The government should make the right accounting rules, incentivize the consumer and physicians to decrease the cost of healthcare and get out of the way.

Four days after Mrs. Braly’s statements about premium increases, Anthem, a California subsidiary of WellPoint, announced it was increasing its insurance premium by 39% for individuals insured.

I knew it would not stop at Anthem in California. The healthcare insurance industry is exempt from antitrust laws. I predicted that WellPoint’s argument is paving the way for other healthcare insurance companies to increase its rates.

“For example, Anthem in Maine was denied an 18.5 percent increase last year and is now requesting that state regulators approve a 23 percent rise.

Michigan’s Blue Cross Blue Shield plan requested approval for premium increases of 56 percent in 2009. And in the state of Washington, rates for some individual health plans increased by up to 40 percent until regulators cracked down.

Other states cited in the report were Connecticut, Oregon and Rhode Island.

The premium increases affect the most vulnerable part of the health insurance market, policies marketed individually to customers buying their own plans.”

The goal of WellPoint is to raise the rates on individual plans which have patients at risk for using healthcare insurance. Its position is the government should pay for the risk and that is the deal they made with President Obama before he changed the deal.

“According to the Census Bureau, only about 9 percent of Americans purchase coverage directly, while nearly 60 percent are covered under employer plans. Family premiums for those with workplace coverage rose 5 percent last year, even as inflation fell 1 percent, but nowhere near the rates seen in the individual market.”

The mandate to the healthcare insurance industry is they must accept all employees regardless of pre existing illness in group plans. They can raise the rates of group plans depending on the demographics of the group rather than community rate the group. Community rating should add a community pressure point to individuals that do not take care of their health.

Older self employed individuals cannot qualify for healthcare insurance under present healthcare insurance company rules. Even if they qualify for insurance these consumers have to pay for insurance with after tax dollars. The existing rules decrease individuals’ ability to afford healthcare insurance.

On top of that the insurance industry demands unconscionable premium increases. The solution is for State Insurance Boards to refuse to grant these companies a license to sell insurance in their state.

Another solution should be making healthcare insurance tax exempt just as employer insurance is tax exempt. Obamacare wants to make all insurance payments non tax exempt to increase government revenue while placing a bigger burden on individuals and groups.

The healthcare reform bill should change the rules so that all insurance is community rated and everyone is qualified to buy insurance regardless of preexisting illness. The bill should create ideal medical savings accounts for everyone so they become responsible for their own health and healthcare dollars.

“Insurers say the push for higher premiums reflects supply and demand. Medical costs keep going up, even in a weak economy. Many healthy people are dropping coverage or switching to bare-bones policies to keep their bills down. That leaves a higher proportion of people with health problems in the risk pool, forcing the steep rate increases.”

This is the reason to start from scratch with the Ideal Medical Savings Account. Medical Savings Accounts are an insurance product Democrats refuse to consider. It will decrease the power of the federal government’s ability to keep the citizens in a state of fear and them in power. (Shock Doctrine).

It is time for us to say we are not going to take this anymore.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

Ann Braly, WellPoint’s CEO, launched a new offensive to protect the vested interests of the healthcare insurance industry now that Obamacare seems to be dead.

The healthcare insurance offensive began with her op- ed article in the Wall Street journal on February 7,2010. Readers will have a deeper understanding of the offensive if they follow the underlined historical links in this article.

It will destroy President Obama’s credibility, the practice of medicine, patient access to care and increase the number of uninsured. It will bankrupt the country if her offensive is successful.

The healthcare insurance industry is killing the goose that laid its golden egg.

WellPoint is the largest U.S. commercial health insurer by membership. Wellpoint’s affiliated health plans are in 14 states and insure over 34 million people or 11.1% of the population.

Wellpoint also has reimbursement contracts with 82% of the nation’s primary-care physicians, 84% of specialists, and 94% of hospitals.

Anthem Blue Cross is California’s largest for-profit insurer and is an affiliate of Wellpoint. Anthem insures 800,000 people.

Four days after Ms. Braly’s article blamed all the other stakeholders for the rising cost of healthcare insurance, Antham announced it will raise member premiums by as much as 39% on March 1.

The parent company, Wellpoint had a net profit of $2.7 billion in the last quarter of 2009 alone.

Since the healthcare insurance industry has an antitrust exemption I expect every other healthcare insurance company will raise its premiums. Extrapolating the profit to the entire population insured, the total net profit in the healthcare insurance industry would be 144 billion dollars. This does not include the inflated and wasted administrative expenses.

Somewhere between 35-65 cents of every healthcare dollar goes to administrative expenses. Assume that 50 cents of every healthcare dollar is expenses plus net profit to the healthcare insurance industry. The healthcare system consumes $2.5 trillion dollars. That means $1.25 trillion dollars goes toward expenses and profit. The profit is distributed to employees and stock holders.

President Obama says;

"I mean, to be fair, the status quo is working for the insurance industry, but it’s not working for the American people," Mr. Obama said recently.”

Ann Braly CEO of Wellpoint says;

“It’s hard to see how WellPoint could be to blame for surging health spending, Mrs. Braly says, when 85 cents out of every premium dollar or more "is paid out in the actual cost of care, doctors, hospitals, suppliers, drugs, devices." Confiscating the 2009 profits of the entire insurance industry would pay for two days of U.S. health care.”

The question is who is incorrect? Are Wellpoint’s financial statements incorrect or is Ann Braly’s sound byte incorrect? I think everyone would agree that $2.7 billion dollars net profit in the last quarter of 2009 is not shabby.

Wellpoint is using a well worn public relations technique by pointing a finger at the other stakeholders. All its administrative costs, additional reserves, and investment costs are included in the “85 cents out of every premium dollar figure.”

Wellpoint makes money on the money withheld from physicians for reimbursement. Wellpoint has held back reimbursement to physicians often. When it was sued in California (at an extra cost to the healthcare system) the settlement was for a fraction of the reimbursement owed. The settlement was a pretty good way of making money.

“You don’t need to be an economist to understand that any middleman interposed between seller and buyer raises the price of a given service or product. Some intermediaries justify this by providing benefits, such as salesmanship, advertising or transport. Others offer physical facilities, such as warehouses. A third group, organized crime, utilizes fear and intimidation to muscle its way into the provider-consumer chain, raking in hefty profits and bloating cost, without providing any benefit at all.”

The healthcare insurance industry is the middleman that controls the healthcare system. The government through Medicare depends on the healthcare insurance industry to be the third party administrator for Medicare. The healthcare insurance industry sets the prices and the benefits using an unscientific social science called actuarial science.

“The health insurance model is closest to the parasitic relationship imposed by the Mafia. Insurance companies provide nothing other than an ambiguous, shifty notion of "protection."

In order to control the healthcare system the healthcare insurance industry has managed to control the process of authorized treatment and reimbursement for the government and private insurance.

Mrs. Braly says;

“To actually be fair, the insurance industry was a cheerleader for the plan, at least until the policy substance congealed sometime in September.”

"Obviously, we’ve been involved in this discussion for a while—more than a year—and if you think about it we came to the table early, early on and said we’re going to be advocates for responsible, sustainable health-care reform done right. We really do have to get at the underlying question of health-care costs."

It is certainly to Wellpoint’s and Mrs. Braly’s advantage to have universal healthcare that is mandated and subsided by the government. Prior to September the healthcare insurance industry had it all set up with President Obama.

Universal healthcare would provide more customers and more premiums. The healthcare insurance industry also worked out a deal with the government to increase the deductibles from 20% to 30% so they could provide affordable healthcare insurance at a lower price.

The $2.7 billion dollars in profit for the last quarter drove me to look at the salaries and stock options posted on the web for officers of Wellpoint. Mrs. Braly’s salary was not available.

CEO, Divisional/Presidents’ salary was 1.18 million and 8.4 million dollars a year.

The CEO and Chairman of the Board made 23.9 milliona year .

Executive VP/CFOs’ made 8.42 million dollars a year.

Geographical CEO/Geographical President/Executive VPs’ made between 15.56- 6.39 per year

The stock options awarded are even higher.

In a March 2007 post I stated that “ UnitedHealthcare claims that costs are out of control. Why? Who paid their CEO $1.8 billion dollars over 8 years? The amount equals $300 million dollars a year or $821,917 a day in salary and benefits to one person. < a href="http://stanleyfeldmdmace.typepad.com/repairing_the_healthcare_/2006/11/administrative_.html">What are the other top executives at UnitedHealthcare receiving in salary and benefits? Do you think these salaries affect the cost of insurance?”

Consumers only realize that health insurance increases yearly. In November 2006 I wrote;

“No leader has the courage to step forward and do something about it. I have emphasized much of the leadership can be exerted at the state level by state boards that license the insurance industry, hospitals and physicians. No one has organized the people to protest. The excuse is that the healthcare system cannot be fixed. It is impossible to control physicians. I believe all these excuses are smoke to cloud the solution. The facilitator stakeholders are simply holding on to what they falsely perceive is their vested interest.
“A theory of limits applies here. In a voluntary market, healthcare purchasers–employers or taxpayers–will tolerate only so much cost growth. Then they’ll recede. It is preposterous to believe the well won’t run dry.”

All of these pricing mismatches and excess non medical value added costs can be eliminated by permitting patients to be in control of their healthcare dollar and selling pure insurance that is fairly priced. The Ideal Medical Savings Account system represents pure insurance in the form of high deductible health insurance and motivation for the patient to become an informed consumer.

The cost of processing claims could be eliminated completely. The service claims could be adjudicated instantly with a credit card. Thousands of diverse businesses adjudicate claims on purchases instantly daily at a low cost. The use of credit cards to pay for Medical Savings Accounts could provide an instant savings of $150 billion dollars in costs in the healthcare system. The losers will be the non competitive insurance companies. The winner will be the bright flexible company that puts the correct 21st century system in place.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP, MACE

President Obama’s healthcare reform bill is not about healthcare. It is about government having control of our freedom of choice, mandating behavior, decreasing healthcare coverage, increasing out of pocket insurance expenses, decreasing Medicare and Medicaid entitlement benefits and squelching innovation in America.

His goal is to decrease the growth of the entitlement programs. Medicare and Medicaid are both out of control . Both programs at the current trajectory of growth will consume over 100% of America’s GNP in 40 years.

In 1965 the government as intervenor set up Medicare and Medicaid incorrectly. The unintended consequences led to more government intervention over the years. Rather than fixing the problems for the long term, the government instituted short term fixes. These short terms fixes have made the programs’ sustainability worse.

President Obama’s healthcare reform bill will not fix the problem. He is trying to “fake us out” in order to control government expenses. He should be Repairing the Healthcare System creatively.

President Obama believes increasing government control over our lives by increasing bureaucratic agencies and farming out enforcement will relieve the government of the entitlement expense. He is wrong. It will increase the government deficit as Medicare Advantage has recently demonstrated.

Seth Godin had a wonderful little blog the other day. He wrote;

The relentless search for "tell me what to do"

If you’ve ever hired or managed or taught, you know the feeling.

People are just begging to be told what to do. There are a lot of reasons for this, but I think the biggest one is: "If you tell me what to do, the responsibility for the outcome is yours, not mine. I’m safe."

When asked, resist.

Today the majority of Americans are not asking for the government to tell them what to do.

On July 5, 2009, I published an article entitled “Did Your Representative Read The House Of Representative Healthcare Bill HR 3200.”

A reader of my blog sent me a summary of HR 3200 written by Larry Schweikart. Mr. Schweikart is contributing editor of FamilySecurityMatters.org , the author o 48 Liberal Lies About American History: (That You Probably Learned in School) and A Patriot’s History of the United States: From Columbus’s Great Discovery to the War on Terror.   He blogs at patriotshistoryusa.blogspot.com. Mr.Schweikart’s analysis is about 80% accurate by my reading.

There has been a lot of noise in the traditional media about the meaning of President Obama’s healthcare reform bill during the last 7 months. The actual text in the bill has been ignored. The text reveals the consequences we can expect from the healthcare reform bill.

President Obama keeps telling us, as he did in his State of the Union address, (start at minute 4 of the You Tube segment) healthcare reform is for the financial protection and healthcare security of Americans.

I have pointed out reasons this is not true in the series of blogs entitled “The House and Senate Bills are terrible Bills.

I have also pointed out the tricks the administrations and the Democratic congress have played on the American people to ram this bill through congress. Last week Nancy Pelosi said “we will have a healthcare bill even if the gate is closed. We will climb the fence. If we cannot we will go under the fence or if necessary parachute in. “

A reader just sent me a you tube interpretation of the bill for those who like to watch it on television. It seems to me to be more graphic and have more impact than the presentation in written form.

We should take a fresh look at the bill’s text and its meaning line by line. Please download the entire bill to check the You Tubes allegations.

The obvious questions are;

1. Who can we trust?
2. Is the actual wording in the bill consistent with what President Obama is telling us?
3. What are the potential unintended consequences?
4. What is the true intent of President Obama’s healthcare reform bill?
5. Does the bill fix the systemic problem in healthcare delivery system?
6. Do you think it will save America and Americans money?
7. Will President Obama’s healthcare reform bill protect our freedoms?

Our country needs healthcare reform badly. President Obama’s healthcare reform bill is not the route to take.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

I am a big fan of Peter Senge’s “The Fifth Disciple”. President Obama’s healthcare reform bill is not solving the underlying systemic problems in the healthcare system. It may bring him fame and glory in the short term. It will be a financial disaster in the long term as many entitlement programs have been.

Peter Senge’s wrote (page 61);

“ The long term, most insidious consequence of applying non-systemic solutions is increase need for more and more of the solution.

This is why ill-conceived government interventions are not just ineffective, they are “addictive” in the sense of fostering increased dependency and lessened abilities of local people to solve their own problems.

The phenomenon of short term improvement leading to long term dependency is so common, it has its own mane among systems thinkers- it’s called “Shifting the Burden to the Intervenor.”

The intervenor may be federal assistance to cities, food relief agencies, or welfare program.

All “help” a host system, only to leave the system fundamentally weaker than before and more in need of further help.

Please consider Peter Senge’s concept as it relates to President Obama’s healthcare reform bill. His bill ignores or proposes the wrong solutions to the five most important systemic dysfunctions in the healthcare system.

The five most important systemic dysfunctions are:

1. Excessive defensive testing.

Effective malpractice reform would correct this problem

The partial cost of defensive medicine extrapolating the Massachusetts Medical Society survey is at least $75 billion dollars a year. If extrapolated to all medical specialties the cost is in the range of $300 billion dollars a year. The cost excludes time wasted and the stress to both the physicians and patients.

1. Healthcare insurance industry’s abuse of the system.

Real healthcare insurance reform is needed as described previously. The ideal medical savings accounts, as opposed to health savings accounts or the present healthcare insurance product would eliminate bureaucratic ineffiency and put consumers in control of their healthcare dollars.

Patients must be incentivized to conserve their healthcare dollars and be responsible for maintaining their own health and well being

1. Administrative services accounting abuse.

The elimination of the abuse and waste by the healthcare insurance industry is necessary. This can be achieved by effective accounting regulation reform for reporting Medical Loss ratios. The Medical Loss ratio accounting abuse adds little value to patient care.

At the same time the regulations for the healthcare insurance industry exemption from antitrust laws should be eliminated.

1. A lack of efficiency in the physicians’ offices.

The elimination of administrative waste and paper work in physicians’ offices by creating a completely functional and effective electronic medical record in the “cloud” is needed.

The installation, updating and use of the ideal electronic medical record should be simple, customizable and inexpensive. The electronic medical record should t fit the physician’s work flow. Physicians should be charged by the click.

Physicians should not be expected to make large capital expenditures for electronic medical record systems that might not be totally functional and then be financially responsible for upgrading to improve functionality.

President Obama’s proposed system for implementing the electronic medical record will only delay adoption and functionality needed to reduce the cost of healthcare.

1. A lack of chronic disease self-management tools.

Systematic educational programs for patient self care and management of chronic diseases must be developed for all physicians. These chronic diseases include diabetes mellitus, chronic lung disease, asthma, hypertension, coronary artery disease, certain gastrointestinal diseases, osteoporosis, and arthritis.

Internet information sources can be constructed within physicians’ ideal electronic medical record. The information sources can be customized to the physicians’ office to educate patients. It must be constructed as an extension of a physician’s care. All of the instructional information is presently on the web. The trick is for physicians to pick appropriate sites with information that will be an extension of the physician’s care. Physicians have to have incentive to do this easily.

Along with cancer the complications of these chronic diseases consume 80% of the healthcare dollars paid to hospitals and physicians. The complications of these chronic diseases can be decreased by 50% is systems of self-management are developed. If the costly complications of these chronic diseases decrease healthcare spending can decrease by at least 50%.

If healthcare reform concentrated on these five areas, with a minimum increase in governmental bureaucratic agencies, America would be well on the way to placing control of the healthcare system in consumers’ hands. Consumers would have the incentives and freedom to choose. Consumer driven healthcare would force hospitals and physicians to either shape up or perish.

Government should make the rules, then get out of the way. Consumers must be empowered choose and be responsible for their own care. Consumers will drive the medical costs down.

Consumers have shown, in many areas of our economy, that they have the power to make efficient and wise decisions. We have only to look at the auto industry, the supermarket industry, the telecommunication industry, and the airline industry to realize that consumers are not dumb.

The government can make effective rules for the healthcare industry and let the consumer drive the healthcare system.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

The Democrats having no clear path going forward on major healthcare legislation. They have put healthcare reform on hold.

They should shred and burn the present healthcare reform bill. It will not Repair the Healthcare System.

The traditional media has published quotes from elected officials. These quotes make it clear that elected officials really do not understand the problems in the healthcare system much less repair them. All the Democrats want is to pass a bill. They think passing a bill will save President Obama’s presidency.

Many Democrats up for election are starting to face reality. The American people want healthcare reform. They do not want this healthcare reform bill. The process the Democrats and the President have used to advance the healthcare reform bill has only made the public more cynical and suspicious of the President and the Democrats in congress.

Democrats up for election are afraid of the same backlash seen in Massachusetts, New Jersey and Virginia. They are backing off President Obama’s healthcare reform bill.

The President has not backed off his healthcare reform plan. He is willing to bring the entire Democratic Party down in the 2010 election because of his convictions. He does not want to understand that his healthcare reform plan makes no sense. His statement during the State of the Union address is riddled with half truths. It’s plan will not serve the interest of the American people. It will increase government control of citizens’ lives, increase the deficit and increase the profits of special interests.

“The Senate majority leader, Harry Reid, Democrat of Nevada, deflected questions about health care. “We’re not on health care now,” Mr. Reid said. “We’ve talked a lot about it in the past.”

He added, “There is no rush,” and noted that Congress still had most of this year to work on the health bills passed in 2009 by the Senate and the House.”

Nancy Pelosi wants President Obama’s bill passed. She does not have enough Democratic votes in congress. She is mapping out a way to complete a health care overhaul in coming months. It looks as if the Democratic leadership and the President want to sneak the bill over, under, or through the fence using procedural tricks.

It is just what the public does not want. Public opinion could not be clearer.

“At the same time, two centrist Democrats who are up for re-election this year, Senators Blanche Lincoln of Arkansas and Evan Bayh of Indiana, said they would resist efforts to muscle through a health care bill using a parliamentary tactic called budget reconciliation, which seemed to be the easiest way to advance the measure.”

Recently, President Obama has said that he would support that approach.

Representative S. Hoyer added, “I think by next week we need to come to focus on the way we want to move forward.”

“Frankly, we’re trying to figure out what is possible,” Mr. Hoyer said.

Mr. Hoyer does not know what to do.

Representative Charles B. Rangel, Democrat of New York and chairman of the Ways and Means Committee, said, “We are not passing the Senate bill period.”

I think it is pretty clear Mr. Rangel does not want to swallow a healthcare reform bill he does not support.

“Senator Joseph I. Lieberman, independent of Connecticut, urged caution, saying, “The White House and Democratic leaders should reach out one more time to Republicans to see if they can find a common ground.”

Reaching out must be done in a honest and sincere way, My way or the highway will not work. The President has to formulate a bill that is bipartisan and directed to serving the interest of the people. His healthcare reform bill does not do that.

Senator Dianne Feinstein, Democrat of California, said Democrats were assessing their options on health care. “It’s a timeout,” she said. “The leadership is re-evaluating. They asked us to keep our powder dry.”

Ms. Lincoln, who faces one of the toughest re-election bids among Democrats, said, “I am opposed to and will fight against any attempts to push through changes to the Senate health insurance reform legislation by using budget reconciliation tactics that would allow the Senate to pass a package of changes to our original bill with 51 votes.”

Ms. Lincoln is co
rrect. The people are tired of closed door tricks. President Obama promised us transparency and bipartisan debate during his presidential campaign..

Mr. Bayh said, “It would destroy the opportunity, if there is one, for any bipartisan cooperation the rest of this year on anything else.”

It will also destroy Mr. Bayh’s chances of getting reelected.

The Senate Republican leader, Mitch McConnell of Kentucky, said White House comments on health care suggested Mr. Obama was not listening to the American people.

What do I think? I think the bill should to shredded and burned. It is a terrible bill for all the reasons I have outlined.

The government is broke. It is spending over 1 trillion dollar more a year than its revenue. Adding another entitlement program makes no sense no matter how well President Obama presents the case. His case is hollow. He has intensified cynicism and mistrust.

Congress and the President must take a hard look at where the healthcare dollars are being wasted. They then have to fix the inefficiencies in a constructive way.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

Why did the healthcare insurance industry, big pharma, and the medical device industry sponsor a fund raiser for Democratic Senatorial candidate Martha Coakley in Washington D.C.?

She would represent the 60^th Democratic vote in the Senate. The 60^th vote in the Senate would prevent a Republican filibuster and assure passage of President Obama’s healthcare bill.

Why would the healthcare insurance companies want this bill to pass when President Obama promised the public that his healthcare reform plan would control the healthcare insurance industry abuses and profits?

President Obama’s healthcare bill is good for the healthcare insurance industry’s business!! How is it good for the healthcare insurance industry’s business?

The bill would force more people to buy healthcare insurance. The result would be an increase in profit. The healthcare companies are not bothered by preexisting illness because the increased actuarial risk will be subsidized by President Obama and ultimately the taxpayer.

President Obama’s healthcare bill permits the healthcare insurance industry to control the healthcare dollars. Its profits are protected by maintaining the present accounting standard for the calculation of the Medical Loss Ratio.

Few people understand the rules for calculating the Medical Loss. The rules for calculating the Medical Loss Ratio permits the healthcare insurance industry to rip off the purchasers of healthcare insurance. (The government, the employees and individuals). The healthcare insurance industry is the administrative service provider for all. It sets insurance premiums through the Medical Loss Ratio.

If the government wanted to do something significant to lower the cost of healthcare, it would change the accounting standards use to calculate the Medical Loss Ratio. A change in rules would decrease the grotesque profits made by the healthcare insurance industry.

The accounting methods for the Medical Loss Ratio are to the disadvantage of third party payers, patients and patient care.

The definition of Medical Loss Ratio is Incurred Claims divided by Earned Premiums. In order to provide a better idea of the true meaning of Medical Loss ratio it should be defined as the earned premiums divided by the incurred claim.

This accounting sleight of hand is to the healthcare insurance industry’s advantage not the public. The Medical Loss Ratio should reflect insurers’ expenses for paying claims. However, it also reflects overhead and investments that can be duplicated, inflated, and abused. The slide below indicates other expenses included in incurred expenses.

The greater the incurred expenses, the less money is available to cover medical expenses. The artificial Medical Loss Ratio justifies increases in premiums by the healthcare insurance industry to cover the decrease in money available to pay medical claims even as physician and hospital reimbursement decreases.

President Obama’s healthcare reform bills are not fixing the accounting standards that generate enormous profits for the healthcare insurance industry because of inflated incurred expenses at consumers’ expense.

What exactly are we paying for with our healthcare dollars? Sixty-five cents of every dollar goes to the healthcare insurance industry. Only fifteen cents of every healthcare dollar goes to physicians and twenty cents of every healthcare dollar goes to the hospitals.

There is something terribly wrong with this expense load.

George Axelrod, President Obama’s senior adviser does not understand these numbers. He said in a TV interview recently:

“One thing we ought to do, the House bill has in it provisions that — that says that if they fall below a certain level of return of these medical loss ratios — in other words, the amount of money that they spend on actual health care, that they — they need to rebate some of that money to consumers. That seems like a good idea.”

Year after year taxpayers have paid higher and higher premiums to the healthcare industry for inflated incurred expenses. Most of the incurred expenses are for the healthcare insurance industry’s inflated overhead.

If Mr. Axelrod believes that the healthcare insurance industry will lower its incurred overhead expenses and give refunds to payers for premiums I have a bridge to sell him.

President Obama should be focused on the Medical Loss Ratio accounting standard. If he did the fair thing there would be no need for his disastrous healthcare reform legislation.

President Obama’s healthcare reform plan is not for the people by the people. It is for special interests. The special interests are government and its control as well as the profit of the healthcare insurance industry. It is not about patients, affordable care and improvement in the quality of medical care.

This is the underlying reason the healthcare insurance industry sponsored the
Washington fund raiser for Massachusetts Senatorial candidate Martha Coakley in order to maintain the sixtieth seat in the Senate.

President Obama’s healthcare reform bill is good for the healthcare insurance industry’s business.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.