Politics. So giddy was Congressional leadership at the prospect of resurrecting the dream of Harry Truman and nearly every Democratic president since, they failed to consider some unintended consequences of the Affordable Care Act.
Or maybe they did think about them but their confidence in a prolonged majority was so great, they didn’t care.
Not that such a thing is new. President Franklin Roosevelt’s wartime decision to exclude health insurance coverage from the calculation of wage increases has had consequences that reverberate today.
One of the most important provisions of the Affordable Care Act established mandatory Minimum Loss Ratios for Marketplace plans in the individual and small group markets. Ultimately, MLRs were imposed on Medicare Advantage plans and then, through state risk corridor program, Medicaid.
As employers during and shortly after World War II surmised, there was a way around federally imposed limits.
Behold MLR burn!
As UNH announced it employs or is affiliated with just under 10% of the physician workforce, Sen. Elizabeth Warren and Sen. Mike Braun got alarmed and sent a letter to the Health and Human Service’s Office of the Inspector General asking about all the vertical integration at health insurers and if it is connected to raising the reported MLR.
Good luck putting that genie back in the bottle. It is one of the rich ironies of our times that a law designed to expand and extend health insurance coverage has had the effect of destroying the model so cherished by two generations of political leaders.
Policy. The policy question that emerges out of Senators Warren and Braun’s inquiry is whether the “payvider” model is an effective, or even popular one. UNH is slowly assuming an almost quasi-government role as an arbiter of efficacy, which some will translate into rationing care.
The fantasy of the Affordable Care Act was its claim to “bend the cost curve.” There was a little of that in Medicare from about 2015-2018 but the explosion of spending in absolute terms and as a portion of GDP means the only thing that was bent was taxpayers and workers.
UNH’s Optum Health and other “payvider” models present the policy question Congress has attempted through its reliable magical thinking to avoid. Health care must be the only major industry whose objectively powerful innovation has yielded less productivity and higher prices. To reduce health care as a share of GDP, prices must decline in real terms, utilization must be reduced or some combination of the two.
Can the private sector accomplish what Congress failed to do? Possibly, but not without a few nasty-grams from Senators like Elizabeth Warren and Mik Braun.
Power. For years, CVS used the market power of Caremark to make being an independent pharmacy a difficult business. For about a dozen years, independent pharmacists have claimed that CVS used arbitrary metrics to claim performance-related claw backs and Direct and Indirect Remuneration fees, often months after the related transaction.
Congress has been sympathetic and pending legislation attempts to address the issue by requiring standards and limits on retroactive fees. The issue has also gained the interest of the Federal Trade Commission.
The second order effect of CVS’ policies has been increased consolidation of retail pharmacies as independents found their margins squeezed. The choice became sell out, often to CVS, or close.
There is a good reason to think UNH’s explosive growth of employer and affiliated physicians may have a few things in common with CVS. Affiliation with Optum brings with it standardized and UNH-friendly medical policies. It also means relief from prior authorization and other administrative burdens that have made the practice in certain specialties untenable.
Senators Warren and Braun’s letter to the OIG comes tantalizingly close but does not ask exactly the extent of the role played by insurer-imposed operational challenges in turning a practice from independent into a reluctant seller.
Have a great rest of your weekend.
