The Management of Health Care Costs: Independent Medical Review after "ObamaCare"

By Berger, Dustin D. | The University of Memphis Law Review, Winter 2011 | Go to article overview

The Management of Health Care Costs: Independent Medical Review after "ObamaCare"


Berger, Dustin D., The University of Memphis Law Review


I. INTRODUCTION: THE RISING COSTS OF HEALTH CARE... ........256

II. BRINGING AMERICANS INTO THE HEALTH INSURANCE MARKET .................................................................................259

A. The Individual Mandate .................................................259

B. Medical Loss Ratios... ............................................... ......261

C. Explaining Increasing Costs ...........................................262

III. THE EMERGENCE OF MANAGED CARE AND UTILIZATION REVIEW...................... ........ ..............................264

A. Managed Care. ....... .................... ................................ .....265

B. The Narratives of Utilization Review Denial ..................270

IV. SUPERVISING MANAGED CARE WITH INDEPENDENT MEDICAL REVIEW ............................................................ ......273

A. Internal Appeals and Judicial Remedies .........................274

B. State Requirements for Independent Medical Review.... .277

C. Effectiveness and Importance of IMR .............................280

D. ERISA Preemption ..........................................................283

E. The IMR Requirement of the Patient Protection and Affordable Care Act. ........................................... ......285

V. REALIGNING INDEPENDENT MEDICAL REVIEW WITH COST/BENEFIT ANALYSIS ..............................................288

A. The Competencies of MCOs and Physicians.......... ...... ...288

B. Discomfort with Cost Control ..................................... ....290

C. The Work of 'Economizing...................... ..................... ....296

D. MCO Cost Control: Version 2.0........ ............................ .299

VI. CONCLUSION.. ............................................................... .........300

By one means or another, the nation will someday have to learn how to economize on medical care even when it hurts.1

I. INTRODUCTION: THE RISING COSTS OF HEALTH CARE

Americans remain in the grip of a sustained and dramatic trend of increasing health care costs. Although we have tried a variety of approaches to reducing or moderating the increases of these costs, our efforts have not yet achieved success. Health care costs have grown faster than the national economy in almost every year since 1985,2 and these cost increases have significantly outpaced both inflation3 and workers' earnings.4 Between 1988 and 2007, health insurance premiums rose faster than incomes, and often significantly.5 hi 1989, for instance, workers' average earnings increased by about 4% while health insurance premiums increased 18%.6 Likewise, in 2003, premiums increased by about 14% while earnings increased less than 3%.7 Unless we can address this trend, health care will continue to be less affordable.8

In addition, compared to the citizens of other developed nations, Americans spend significantly more of their wealth on health care. In 2006, for instance, Americans spent $2.1 trillion on health care, which amounts to over $7000 per person and over 15% of America's gross domestic product.9 By comparison, other developed nations spent an average of only 8.9% of their gross domestic products on health care. I0 In fact, Americans spend more on health care, per capita, than the Chinese spend on everything! 1 1 Absent some change, the Congressional Budget Office estimates that we will spend a massive 25% of our gross domestic product on health care by 2025. 12

In spite of significant differences in political judgment among legislators as to how to address the problem of rising health care costs, Congress recently passed the Patient Protection and Affordable Care Act ("Act"), which President Obama signed into law in 2010.' 3 Although the Act's "individual mandate" provision has been especially controversial, the Act also contains several other notable provisions that seek to improve Americans' access to health care by reducing the costs of health care financing. …

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