Importance of Medicine

NEW REPORT: Insurers May Re-Label Administrative Costs As Medical Care To Meet Health Reform’s Requirements

The new federal health care law requires that insurers spend at least 80% of customers’ premiums on medical care in the individual insurance market, and 85% in the employer/group market. Starting in 2011, insurers that don’t meet these requirements will have to issue rebates to consumers “based on the amount insurers’ spending falls below these minimums.” Yesterday, a new report released by the Senate Committee on Commerce Science and Transportation found that while many of the nation’s largest insurers “modestly increased the percentage of premium dollars they spent on medical care in 2009,” the disparities “in medical spending between market segments remained larger than ever.

Health insures, in other words, still view the individual and small group markets as their most profitable sectors and they continue to spend a smaller percentage of premium dollars on actual medical care — shifting a significant amount towards administrative expenses and profits. For example, while the largest insurers used about 15 cents out of every premium dollar for administrative expenses in the large group market, “they used more than 26 cents out of every individual premium dollar for administrative expenses,” the report notes. [Note: the original report says "medical expenses" rather than "administrative expenses." I contacted the staff and they said that this was a mistake.]

Some insurers are already meeting the new federal requirements, while others will have to spend more on medical care to comply with the law:

The analysis found that the largest for-profit health insurers spend a lower percentage of their customers’ premium dollars on patient care than other health insurers. The analysis also found that in the individual and small group markets, health insurers spend a significantly smaller portion of each premium dollar on medical care than they do in the large group market.

Look:

The problem will come when insurers that fall short, try to meet the new minimums. The ratio is closely monitored by Wall Street investors and so insurers will have every incentive to continue spending less on care and increasing profits. They may try to artificially inflate their MLR by reclassifying administrative costs as ‘medical care.’ Already, WellPoint — the nation’s largest insurance company — announced that it has reclassified some of its administrative costs as medical spending in order to increase its medical loss ratio. As the report notes, “By reclassifying these expenses as medical benefits, the executives projected that WellPoint’s 2010 medical loss ratio (which the company calls its “benefit expense ratio”) would increase by 170 basis points, or 1.7%. Because WellPoint expects to collect more than $30 billion in premiums from its commercial health care customers in 2010, this “accounting reclassification” means that the company has converted more than a half a billion dollars of this year’s administrative expenses into medical expenses.”

Health and Human Services Secretary Kathleen Sebelius has written a letter to the National Association of Insurance Commissioners (NAIC) requesting their assistance in defining medical loss ratio (MLR) standards in the new health care law and has issued two formal requests for public comment on how best to define the term. Since the MLR requirements are one of the few ways to prevent insurers from earning outrageous profits before most of reform’s provisions kick in, HHS “and state insurance commissioners will have to remain vigilant and focused on ensuring that consumers get the benefit of the new federally mandated medical loss ratios.” These definitions, in other words, have to be air tight to ensure that companies can’t simply reclassify their expenses.

Is there any circumstance when animal experimentation or the use of animals in medical education would be warranted?

"No."

That brief, to the point, and definitive answer came from John J. Pippin, MD, a cardiologist and senior medical and research advisor for the Physicians Committee for Responsible Medicine (PCRM). I was doing a phone interview with him after attending "The Art of Compassion," an event celebrating PCRM's 25th anniversary. They gave an award to Marilu Henner, a vegan who's been working to reform the Child Nutrition Act so kids at school can eat something other than chicken fingers.

Good cause. But it was another issue - the use of animals in experimentation and education - that really got my attention. I figured that if a surgeon was going to cut me open, he or she better practice on a pig first, right? Actually, wrong. I thought if an experimental medication was to be proven safe and effective on people, it had better first be tested on animals, right? Also wrong.



Only three accredited medical schools in the whole country use animals to teach surgery. According to PCRM, the schools are Johns Hopkins University School of Medicine, the Uniformed Services University of the Health Sciences, and the University of Tennessee College of Medicine, Chattanooga campus. Dr. Pippin told me there's a good reason all the other 150-plus medical schools in the country don't use animals in surgical education: There are better ways to teach surgery. Surgical simulators and supervised operating room experience work just fine. Harvard and Yale don't see the need to use (or kill) animals, so why do those three schools still do it?



"They don't want to use the new methods because they're comfortable with the old methods. But we all have to change our beliefs when the science changes," Dr. Pippin told me. A paper published by the New England Journal of Medicine backs him up, asserting that simulators are effective training devices for medical residents.



What about animals who give their lives to test new medication? Bad for the animals, but good thing for people, right? Actually, no.

The history of cancer research has been a history of curing cancer in the mouse. We have cured mice of cancer for decades - and it simply didn't work in humans.


Dr. Richard Klausner, a former director of the National Cancer Institute

Dr. Pippin said that using animals to study human diseases is "an abject failure." Look at the track record for pharmaceuticals. The former vice-president of genetics at GlaxoSmithKline has said, "The vast majority of drugs -- more than 90 percent -- only work in 30 or 50 per cent of the people."

If pharmaceuticals only work for half the population why do we still need to test them on animals? Bottom line: Money. "If funding is available to do research on animals, they do research on animals," Dr. Pippin pointed out. The money is there. According to a Freedom of Information Act request initiated by The Chronicle of Higher Education, the National Institutes of Health reported that 42 percent of its research grants involved animals. The NIH budget is $30 billion - 42 percent of that, some $12 billion, is a lot of animal research funded by taxpayers like you and me. Can you get your tax check to the IRS out of the mailbox? Hmm, too late.



I'd like to know why those three medical schools still use animals for surgical training - so I'm going to ask them and tell you what they say.

Photo credit: Lee Schneider

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