Comment by phil21
1 year ago
> Go ahead and get rid of MCOs, and at best you will reduce costs by 5%. That’s an objective fact.
That doesn't make any sense. Profit margin is meaningless if you are spending billions on a bunch of useless administrative staff pushing paperwork for no reason.
Obviously some of that is necessary, but certainly not nearly all of it. I don't care about a company making 5% on top of a $150k/yr admin salary. I care about the $150k/yr salary which is the true cost added to the system.
Having watched from afar my friends in healthcare who actually provide bedside care vs. the administrative bloat - it's going much like education. Tons of admin staff added that don't ever touch patients that seemingly just get in the way of the folks doing the actual work.
Margin is a meaningless number if you can just pump your expenses to increase the total dollar amount.
> Margin is a meaningless number if you can just pump your expenses to increase the total dollar amount.
That doesn’t make any sense. If one MCO were to pump their expenses, there are 4 to 6 others waiting to take their customers with lower premiums.
Currently, medical loss ratios are around 85% to 90%, which means MCO administrative costs are 8% or maybe 10%, at most.
However, getting rid of the MCO doesn’t mean those costs go away. Government employees will have to do the prior authorizations rather than MCO employees. So I split the difference, and you end up with a net savings of 5%. Make it 10% if you want to be super optimistic and think the government will streamline paperwork for healthcare providers.
The other 90% of healthcare costs are still there.
>there are 4 to 6 others waiting to take their customers with lower premiums
Why do people believe this?
Healthcare isn't widgets and factories in an ECON-101 class.
The chances of anything short of an extremely large and well-funded consortium of investment bankers and private equity firms starting a new MCO is exactly and precisely 0.0%.
And those groups have the same incentives to maximize the payouts to all parties involved that the incumbents do.
Of course, they would never do that because increased competition would threaten their already-extensive investments in the sector.
The problem isn't regulation, or regulatory capture, or any other buzzword a podcast full of morons bandies about.
The problem is that you need at least $10 billion just to open the doors.
> Why do people believe this?
Because there are.
UNH/Elevance/CVS/Cigna/Humana/Centene/Molina are just the biggest publicly listed ones. They might not all offer plans in all states on the exchange, but there’s a decent amount of competition for employer subsidized plans.
The low single digit profit margin proves the competition exists such that the sellers don’t have pricing power to earn a higher profit margin.