Managed Care Contracts & Trend Factors


By Molly Mulebriar

Are escalator clauses, common to most Managed Care Contracts, the driving force behind trend factors?

An actuary’s primer I stumbled upon while reading incredibly boring stuff (my answer to sleeping pills) may provide a clue:

“Medical cost trends include components for many drivers.  Net unit price increases from providers drives half of the effect in general.  So a 5% increase in a schedule will drive a 10% overall cost increase.  The rest of the components include: increased utilization, coding creep, deductible leveraging, etc…”

This is wildly interesting!

Escalator clauses average 5% and more (“more” being more common), compounded year after frigging year! (Excuse me but I do get emotional sometimes and it’s not a women thing!) That equals 10% compounded year after year after year.

What has managed care wrought?

P.S. – when you post this, make sure you put my piece about:

The Truth About Managed Care Contracts -“Paying protection money for the promise of no balance billing against egregious,arbitrary sticker pricing that has no relationship to costs whatsoever, and agreeing to provider reimbursement levels based upon secretive contracts you cannot see or audit, violates fiduciary duties and is contrary to basic, common American business practices”  – Molly Mulebriar 

Editor’s Note: Mulebriar is out of control. She insisted we put this on our blog immediately. Judging by the timing of the demand (hours past Happy Hour and close to Wednesday morning Margarita breakfast time) we suspect she is really “telling it like it is!