Business and Economic Assignment
Part 1
Examples that would qualify for the medical loss ratio include physician and outpatient, inpatient, and outside referrals. Insurance, claim process, and payment functions can be considered administrative costs. Medical loss ratio (MLR) is “the amount insurer pays out for the covered health care expenses of its enrollees, expressed as a share of the premium revenue it collects” (Clemans-Cope, Garrett, & Wissoker, 2015, p. 2). Norris (2019, para. 3) claims that establishments “must spend at least 80 percent of premiums on health care quality improvements”. It will inevitably increase the quality of medicine, which is the main positive effect of the MLR on health care delivery. The main drawback, however, is that medical establishments may not administer their funds as they need it at a particular moment.
Administrative costs, however, represent a different situation because they are paid by customers. Even though they are not directly relevant to patient care, these expenses cover numerous areas from managing information systems to sending bills. Frakt (2018, para. 7) states that hospital administrative costs are “over 25 percent of total spending on hospital care” in the USA. On the one hand, higher administrative costs will result in correspondingly higher health care costs, which is the main negative feature concerning this phenomenon. On the other hand, higher administrative costs will make medical establishments increase the quality of their services to improve their competitiveness.
Part 2
Physician Assistants (PAs) perform their functions under the supervision of physicians, which makes them well familiar with the purposes of the latter. As a result, PAs claim that they can provide almost the same services as primary care physicians, but at a lower cost. The level of competition in the physician services market would increase significantly if this demand were satisfied. The fact is that more people would want to become PAs.
Besides, the scenario above would result in two possible consequences. On the one hand, it would make numerous health care services much cheaper, which would be beneficial for customers. On the other hand, the quality of service will decrease because PAs are generally less educated than physicians. Thus, satisfying the demand would result in much higher competition in the physician service market, which would provide customers with services of more mediocre quality.
References
Clemans-Cope, L., Garrett, B., & Wissoker, D. (2015). Health insurer responses to medical loss ratio regulation: Increased efficiency and value to customers. Robert Wood Johnson Foundation, 1-21.
Frakt, A. (2018). The astonishingly high administrative costs of U.S. health care. The New York Times.
Norris, L. (2019). What is the medical loss ratio and why does it matter? Web.