A columnist for the Los Angeles Times recently skewered UnitedHealth for what he says was aiding and abetting a $43-million medical scam involving bogus weight-loss surgeries.
The health plan failed to scrutinize bad claims, the columnist says, until long after money was out the door.
Whether or not the harsh criticism is justified, we’ll leave to others to debate. But if UnitedHealth and others are not investing in expanded anti-fraud efforts, there’s likely a good reason:
Federal law discourages it.
One of the least publicized provisions of the Affordable Care Act is intended to make health insurance more affordable. Health reform governs the percentage of premiums health plans can dedicate to non-claims business expenses, such as marketing, salaries, administration, profit and yes — anti-fraud activities.
The so-called Medical Loss Ratio requires health plans to spend 80 to 85 percent of premiums they collect on claims.
In essence, anti-fraud expenses must be paid out of profit. That’s enough to discourage most health-insurance companies from growing their anti-fraud programs.
In some instances where insurer expenses are out of balance, paying suspect claims could boost profits — or at least not affect them. Now most health insurers wouldn’t intentionally pay suspect claims, but bad claims can be harder to detect when the anti-fraud efforts haven’t grown commensurate with the growth in policies and claims.
And thanks to Obamacare, policies and claims are growing. But anti-fraud efforts are not.
The Medical Loss Ratio is a good idea in theory. It prevents insurers from spending all the new-found premium money on frivolous expenses, such as corporate bonuses.
But good legislation also has unintended consequences — such as discouraging investment in fraud.
If fraud is allowed to increase — such as the $43 million that reportedly was spent on unnecessary and phantom stomach lap-band surgery — then upward pressure will continue on premiums, and everyone loses — except the fraudsters.
The time has come to rethink how the MLR is calculated.