Managed Care - September 2008 - (Page 5)

LEGISLATION & REGULATION Doctors Seek to Limit Health Plan Profitability Their argument in California is that insurers should spend a minimum of 85 percent of their revenue on services By John Carroll T he California Medical Association (CMA) says it has found more than $1 billion that can be spent on health care in the state. And it’s all in the hands of a short list of the state’s for-profit health plans. The physician group has been championing a bill that would require health plans to spend a minimum of 85 percent of their revenue on claims. The other 15 percent may be used for administrative costs and profits, says the CMA as it wages a new battle in the long-running tug of war between providers and private payers. From the physicians’ perspective, restricting profits and administrative costs to 15 percent of revenue would help to put a brake on the steady Tracking the medical loss ratio Plans with the lowest ratios Percent of revenue used for medical care Percent of revenue used for administration Percent of revenue that is profit/income 6.1 11.3 11.5 11.1 9.1 11.5 6.3 8.7 erosion of benefits and rise in premiums. Armed with a new Rand report on MLR rates, the state’s managed care association is fighting back. Those much maligned administrative costs, they say, also cover important customer services aimed at improving care. Trying to engineer a simple formula restricting profitability and overhead completely ignores the medical cost inflation that is chiefly to blame for those rising premiums and declining benefits. The California legislature had until the end of August to resolve the argument, just past MANAGED CARE’s deadline. But advocates say that regardless of California’s decision, this argument has a long way to run — from California to Maine. The number crunching in California this summer is a lesson in managed care economics that has already fed a growing debate over private Medicare plans’ efficiency. “As health care costs rise, 6.4 there’s increasing concern that we are not spending health care 11.5 dollars wisely,” says CMA spokesman Ned Wigglesworth. “That concern is exacerbated by the administrative costs and profit that we see in the insurance industry.” 82.1 69.4 79.0 79.4 81.4 Pressure on costs At the top of CMA’s list is Great-West Healthcare of California, with the lowest MLR of all, 69.4 percent. “Great-West has declined every year since 2003, when they reported an 86 percent MLR,” says the CMA report. Great-West Healthcare of California Blue Cross of California Community Health Plan Aetna Health Care of California Blue Shield of California Source: California Department of Managed Health Care SEPTEMBER 2008 / MANAGED CARE 5

Table of Contents Feed for the Digital Edition of Managed Care - September 2008

Managed Care - September 2008 Editor’s Memo Contents Legislation & Regulation News and Commentary Medication Management Compensation Monitor Archimedes Lends Hippocrates a Hand Some Other Predictive Modeling Programs Messing With Medicare Advantage The Trouble With MAC MedPAC’s Suggestions Sound Familiar The Leader in Patient Satisfaction Formulary Files Plan Watch Tomorrow’s Medicine Ad Index Outlook

Managed Care - September 2008

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