Medical cost Ratio

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Cross post from another list.

Interesting info...kind of suggests how small groups are powerless.

Locke, MDhttps://www.theverdengroup.com/uploaded/Verden%20Report_SE_Cost%20vs%20Profit%20in%20Managed%20Care%20Today.pdf

Medical cost Ratio

Why not? Because of something called Medical Cost Ratios (or MCRs). MCR is simply the percentage of premium money that is spent on reimbursement to providers for rendered health care services. At a time when we have the largest number of uninsured individuals, decreasing MCRs and increasing premiums have combined for record profits to insurers. That is, the profit margin comes not only from increasing premiums, but by lowering the amount MCOs spend on health care. Insurers reduce what they spend by controlling costs in a number of ways. In its finest form, cost-cutting comes about through efficient operations, negotiating better contracts with such high volume service management companies as labs and diagnostics, and actively promoting well care programs to achieve healthier members. Some of this happens, of course, but there is a growing trend across the board to simply cut reimbursement rates to providers and erode their revenues through policy and procedure changes. We believe that the results of such strategies are a major contributor to the ever-growing profits of publicly traded MCOs this year. Below, we examine ratios for four of the five5 largest publicly traded national managed care organizations.

Looking at the three quarters ending September 2007, we can see how MCRs have decreased period to period.

And while the percentage points appear small, the financial impact is mighty.