Health care regulations in the United States were not designed to keep Americans healthy. The best example of this is what’s known as the medical loss ratio (MLR). This federal requirement establishes how much a health plan can spend on non-medical related items. The goal was to ensure that insurance dollars are being spent on health care, not administrative costs. Today, though, it acts as a barrier to keeping people healthy and preventing medical interventions before they’re needed.
Good health has little to do with what happens in a doctor’s office. In fact, up to 80% of health outcomes and well-being depends on things like nutritious food, stable housing, available transportation, steady income, and community.
I’ve seen this firsthand through my work leading a national agency for aging and disability services which demonstrates the power of beyond-the-clinic services. A standout instance to me is Mrs. T, whose journey from hospital to home following a severe fall was made possible not just by medical interventions but by essential nonmedical services such as home-delivered meals and access to transportation.
Services like the ones that helped Mrs. T fall outside of the traditional definition of medical services. They are part of what’s known as social drivers of health.
The medical loss ratio requirements for Medicaid managed care organizations require that investments in social drivers of health be classified as administrative costs, rather than medical costs, essentially penalizing those making crucial interventions that are improving individual and community health.
Reshaping the MLR to appropriately include spending on social drivers of health interventions will enable more health plans to offer these vital services and enable states to cover more interventions that address key social drivers of health.
Allowing managed care organizations to focus on what really drives health — affordable and accessible housing, nutritious food, transportation, and social support networks — would go a long way in helping Americans stay healthier.
Many leaders and state health plans are paying increased attention to social drivers of health, and Medicaid managed care organizations are developing innovative ways to address the needs of the people they cover. These organizations are showing that by addressing SDOH, many trips to the emergency room never happen, resulting in lives saved and improved, as well as millions in savings to state budgets.
Congress doesn’t often get a chance to dramatically improve the health and lives of so many Americans through one change, but in this case it can. That’s why I’m calling on Congress to update Medicaid’s medical loss ratio classification to allow spending on social drivers of health to be categorized as preventive care rather than an administrative cost.
Health care in the U.S. needs to evolve beyond treating people in clinics or hospitals. A comprehensive revision of how the medical loss ratio is defined can spark much-needed investment in health care, spur innovative solutions, and guide the nation toward a healthier future.
Martha A. Roherty is the executive director of ADvancing States, which represents the nation’s 56 state and territorial agencies on aging and disabilities and long-term services.