- by Kevin Kane, Lead Organizer
This week the Obama Administration released new rules for the first time since 2002 for the insurance companies that manage Medicaid patients. Medicaid in Wisconsin covers programs from BadgerCare, to FamilyCare, to SeniorCare to long term care. Yet most people don't realize that Medicaid and BadgerCare covered individuals actually have their coverage run by an insurance company.
It makes a lot of the fighting over the last few years in Wisconsin seem pretty silly, should people be covered by private insurers or BadgerCare? Well turns out they both are run by the insurance companies.
Which makes these new rules released this week very welcome. Most important is the new "80/20" rule requiring insurers to spend the money they get primarily on healthcare expenses. (This is known in policy circles as "Medical Loss Ratio, or MLR, but we encourage people to not run with this vague term) In the Affordable Care Act insurance companies were required to spend 80 cents of every dollar or more on healthcare costs, and not on administrative costs, paperwork, commissions, CEO bonuses etc. This has been hugely important to ensure our money is spent on actual health care.
This new rule goes a bit further. All Medicaid managed care insurers now must spend 85 cents or more of every dollar on healthcare. This protects state budgets, ensuring that taxpayer dollars provided to these companies go to where they are supposed to - protecting people.
But it's more important than that. The companies that provide his Medicaid managed care are the same ones you've likely heard of - United Healthcare, Anthem Blue Cross Blue Shield, Molina Healthcare, etc - and they've already had to follow this 80/20 rule in private health insurance for years, it's not new. And Wisconsin managed care companies already did better than that generally, averaging 91 cents of every dollar spent on actual health care. It's important because these changes show once again that our democracy can set the rules of the game to drive better value and discourage bad actors.
Requiring insurance companies to spend a minimum amount on healthcare, 85 cents out of every dollar, is a lot like setting a minimum wage. Yes most companies pay far above it but it prevents others from taking advantage of people. That's why we do it, to stop bad companies from using their leverage to take advantage of consumers and workers. A company can't severely reduce what it covers and pocket the difference, or direct excess funds to other areas.
And it drives innovation. If you have a disincentive to spent too much on administration, you're going to do whatever reforms you need to do to increase efficiency, innovate designs, and get more bang for your buck. This isn't the free market driving this efficiency, otherwise it would have happened already, it's our government setting the rules of the game to make a fairer market.
This is the smart thing to do. Managed care companies have been getting a lot more consumers as more and more people have been able to sign up for Medicaid (although fewer than there could've been had Wisconsin accepted the funding for BadgerCare) and it is the fair thing to ensure that if companies are getting a lot more consumers, we are demanding greater value from them.
What do you think? Send me an email or comment below.