Yesterday, Georgia Governor Sonny Perdue — who is also suing the federal government over health care reform — signed the “Healthy Georgians Act of 2010,” a bill providing that no law, regulation or rule can force anyone in the state to “participate in any healthcare system.” Georgia is only the 4th state to actually enact anti-mandate legislation. Missouri has approved a ballot initiative for August 3, along with Florida and Arizona, both of which have placed measures on the November ballot.

The fine folks at Progressive States tell me that 25 states have now rejected anti-mandate bills:

A relatively small number of states are actually succeeding in passing nullification bills — probably because the federal law still supersedes any state effort — and while these stories are flashy, the real heavy lifting is being done in states like California, where legislators are “taking the initial steps to implement the complex series of overhauls prescribed by the federal government.” “More than 20 bills have been introduced and as many as a dozen might be voted on this week as lawmakers face a deadline to pass bills out of their house of origin.” Yesterday, the assembly passed a bill requiring health insurers “to obtain prior approval before raising premiums, copayments or deductibles” and also approved a measure “that would require health insurers to offer maternity coverage in all health plans.”

In fact, while support for reform has flat-lined nationwide, about “half of California voters say they support the nation’s new health care law to some degree.” According to a Field poll, “30 percent strongly support the nation’s new health care law, and another 22 percent somewhat support it.” Fifty-eight percent say the new law is an “important first step but many more changes still need to be made,” according to the poll.

On Tuesday, the National Association of Insurance Commissioners — which has already issued a series of interim reports — officially notified the Department of Health and Human Services that it would not meet the agency’s deadline for submitting recommendations for the new medical loss ratio (MLR) requirements and promised to “complete this project as soon as possible.”

The new health care law tasks the NAIC with establishing “uniform definitions and standardized methodologies for calculating the medical loss ratio and rebates outlined in the law,” subject to the Secretary’s certification. It also “permits health insurers to add their costs for “activities that improve health care quality” to their costs for “reimbursement for clinical services provided to enrollees” for purposes of calculating their MLR under the PPACA.”

During the open comment period, the health insurers asked for fairly broad provisions that would allow insurers to reclassify certain costs as “activities that improve health care quality”, thus inflating insurers’ medical loss ratio percentage without improving efficiency. Now, the American Hospital Association is using the delay to its advantage and urging the NAIC to issue recommendations that would prevent insurers from counting past administrative expenses as medical costs. In a letter to the group, the lobby argued that “costs and expenses that are classified as activities that improve health care quality need to meet specific criteria“:

We would caution that the addition of the health care quality component should not be construed to permit health insurers to reclassify as health care quality costs that the insurers historically considered to be the administrative costs of doing business.

The MLR regulations must clearly define which activities do and do not improve health care quality and restrict the ability of health insurers to subjectively make such a determination. The AHA recommends that resulting regulations require that the activity be performed by a professional licensed to perform the service or activity, and employ a decision tree analysis to distinguish between an activity that is intended to limit services or reduce expenditures (e.g., utilization management) or to improve health (e.g., a diabetes management program, care coordination or shared-savings programs).

Before health care reform became law, insurers had every incentive to limit the growth of their medical loss ratio, which is closely monitored by Wall Street investors as an indicator of profitability. In other words, insurers used to keep strict definition s of medical expenses to deflate their MLR and please investors. Now, they’re looking to shift the gameby announcing to Wall Street, ‘our MLR is going to go up by a couple of points but don’t worry we’re shoving administrative costs into it.’

In today’s New York Times, Reed Abelson and Gardiner Harris challenge the findings of the now infamous Dartmouth Atlas of Health Care health economists, whose maps of U.S. health care spending variation have convinced generations of policy makers that more is not always better. While the debate around the Dartmouth research has been ongoing, Abelson and Harris focus on the claim that lower spending regions have better health outcomes than higher-spending regions:

But while the research compiled in the Dartmouth Atlas of Health Care has been widely interpreted as showing the country’s best and worst care, the Dartmouth researchers themselves acknowledged in interviews that in fact it mainly shows the varying costs of care in the government’s Medicare program. Measures of the quality of care are not part of the formula.

For all anyone knows, patients could be dying in far greater numbers in hospitals in the beige regions than hospitals in the brown ones, and Dartmouth’s maps would not pick up that difference. As any shopper knows, cheaper does not always mean better.

It’s certainly true that non health economist types may have used to Dartmouth’s “sexy maps” to make blanket statements like: ‘regions that spend less always have better health outcomes or ‘we’re spending more and getting less.’ But an overreading does not undermine the researcher’s fundamental conclusion: more expensive services do not necessarily improve health outcomes. As the Times’ article itself points out, other non Dartmouth studies support this conclusion. “A 2003 study found that patients who lived in places most expensive for the Medicare program received no better care than those who lived in cheaper areas,” the authors note.

Whatever methodological problems exist — and I would be surprised if the Dartmouth research didn’t account for the fact that patients are dying in greater numbers in higher-spending regions — it’s clear that “there are substantial variations in the cost of care for people of similar health depending on which institutions they go to—and also that clinicians with the best results often have lower, not higher, costs than average.” As our in house payment reform expert Ellen-Marie Whelan points out, “the Dartmouth Atlas research remains very important because it was the first to show regional variation in Medicare spending – it helped to identify the problem.” “In part because of the success the Dartmouth researchers had in helping to identify this variation — and the fact that these spending differences are probably not often associated with better outcomes — there is now increased focus on how we can offer better care at lower costs. This also reinforces the importance of the “Center for Innovation” at CMS which is allowing groups of providers to present how they propose to deliver care that is better at lower costs.”

The NYT criticism is important, but it should not swing the pendulum in the other direction and encourage policy makers to spend more money to lower-spending regions. As Merrill Goozner observes in his response to the NYT, “Higher quality care lowers costs, it doesn’t raise costs.” “Take a few additional steps to keep operating rooms germ free and rates of hospital-acquired infections and their attendant higher costs plummet. Do a knee implant right the first time and you don’t have a patient back within a year for a revision.”

“A careful mapping of quality, which has never been done by Medicare or anyone else since good data isn’t available, and cross-checking it with spending patterns may provide researchers with crucial clues for determining what accounts for variations in spending across the U.S.,” he concludes.