The Politics of Health Care Reform… Accounting

Uwe Reinhardt is not only the best named health care economist, he’s also an excellent writer and reporter. In his latest piece in the NYT, he discusses a particular formula embedded in the new health care reform bill which mandates that insurers spend 80 or 85% of their premiums (depending on size) on “medical benefits and activities that improve health care quality.” What counts as an expenditure on “medical benefits” or “activities that improve health care quality”? it turns out to be not so clear – and to be a kind of decision that has significant consequences for the negotiations between insurers and providers. Reinhardt provides one clear example:

The American Medical Association, the Federation of American Hospitals and the American Hospital Association, for example, have urged the commissioners to make a “clear distinction between ‘quality assurance,’ an activity that has long been understood to be an administrative expense, and ‘quality improvement’ expenses which will count toward minimum medical loss ratio levels.” That distinction might escape the detached observer.

When most people think of politics, they probably think of elections, campaigns, voting, mass protests, legislatures, committee hearings, and all that. When I think of politics, I think of those things, but I also think of doctors, accountants, and actuaries arguing over how to expense quality control costs on the balance sheet of an insurer. That’s what’s so fascinating about accounting and other related practices – every decision has consequences, and given a finitist world were there are many justifiable, relatively consistent choices from a professional standpoint, what gets counted and how becomes a very real form of politics enacted by a very small set of individuals with weird and interesting sorts of loyalties. I’m with Uwe – in modern politics, the devil is in the details.



  1. mike3550

     /  September 3, 2010

    There is one big group that you missed — regulatory agencies in the Executive Branch that actually write the regulations and where the AMA, et al. will square off against the health insurance companies. I think of legislation as the casing of the sausage, the meat is in the regulators offices.

    Unfortunately this only becomes obvious when a regulatory agency fails — like with the Office of Thrift Supervision or the Minerals and Mines Service. A well-functioning regulatory body will hardly be noticed except by the players with a stake in the outcome.

    • Mike – completely agreed. I was trying to highlight exactly that kind of politics, but I should have been clearer. It’s a governmental form of politics that we routinely ignore.

  2. Matt

     /  September 11, 2010

    Quite true. This has been the bane of many earlier proposals in healthcare (and beyond).

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