๐ฃ๐ฎ๐ฟ๐ ๐ฏ โ ๐ง๐ต๐ฒ ๐๐๐ ๐๐ป๐ณ๐น๐ฒ๐ฐ๐๐ถ๐ผ๐ป: ๐๐ผ๐ ๐ ๐๐ฅ ๐ฅ๐๐น๐ฒ๐, ๐ฆ๐๐ฎ๐ฟ๐ ๐ฅ๐ฎ๐๐ถ๐ป๐ด๐, ๐ฎ๐ป๐ฑ ๐ฅ๐ถ๐๐ธ ๐๐ฑ๐ท๐๐๐๐บ๐ฒ๐ป๐ ๐๐ผ๐ฐ๐ธ๐ฒ๐ฑ ๐ฃ๐ฎ๐๐ฒ๐ฟ๐ ๐๐ป๐๐ผ ๐๐ต๐ฒ ๐ง๐ฟ๐ฎ๐ฝ
By 2010, health plans had already cycled through two decades of demand-side strategies: utilization controls in the 1980sโ1990s, and claims-based analytics in the 2000s. Neither produced durable economics.
The Affordable Care Act was supposed to reset the trajectory. Instead, it institutionalized the treadmill.
The MLR Rule: Guardrails That Missed the Point
The Medical Loss Ratio (MLR) rule set fixed thresholds (80% for individual/small group, 85% for large group) requiring plans to spend most premium revenue on clinical care and โquality improvement.โ
The logic was straightforward: limit administrative profit-taking and force reinvestment into care.
But in practice:
Plans redirected enormous resources into projects that qualified as โqualityโ under CMS definitions โ Stars infrastructure, vendor-driven gap closure, and member engagement programs.
These activities consumed billions but rarely bent underlying cost trends.
Worse, the rule created an administrative ceiling that squeezed operational flexibility while doing little to change the economics of chronic disease.
The discipline was supposed to come from spending thresholds. What it created was entrenched administrative inflation.
๐ฆ๐๐ฎ๐ฟ๐ ๐ฅ๐ฎ๐๐ถ๐ป๐ด๐: ๐๐ป๐ฐ๐ฒ๐ป๐๐ถ๐๐ฒ๐ ๐ง๐ต๐ฎ๐ ๐๐ถ๐๐๐ผ๐ฟ๐๐ฒ๐ฑ ๐ฆ๐๐ฟ๐ฎ๐๐ฒ๐ด๐
The ACA tied Medicare Advantage profitability to Stars Ratings and Quality Bonus Payments (QBP). The intention was to link revenue to performance.
Plans responded rationally:
- They built entire Stars departments dedicated to HEDIS gap closure, medication adherence, and CAHPS survey improvement.
- Vendors proliferated, offering point solutions to incrementally boost scores.
- Billions were spent each year, much of it duplicative, all chasing marginal gains in ratings.
But this strategy was brittle. When CMS raised the cut points in 2025, ratings dropped precipitously. Infrastructure designed for scoring couldnโt adapt, because it was never designed to produce structural improvement.
Stars became the most expensive distraction in payer history, chasing optics while margins eroded.
๐ฅ๐ถ๐๐ธ ๐๐ฑ๐ท๐๐๐๐บ๐ฒ๐ป๐: ๐ฅ๐ฒ๐๐ฒ๐ป๐๐ฒ ๐ฃ๐ฟ๐ผ๐๐ฒ๐ฐ๐๐ถ๐ผ๐ป ๐ช๐ถ๐๐ต๐ผ๐๐ ๐ข๐๐๐ฐ๐ผ๐บ๐ฒ๐
Risk adjustment was the third leg of the stool. Properly designed, it should balance payments across populations with different risk profiles.
But under ACA-era incentives, it became a revenue protection mechanism:
- Plans invested heavily in retrospective chart reviews, home assessments, and HCC optimization programs.
- Provider workflows were repurposed around diagnosis capture rather than prevention.
- The system rewarded documentation intensity, not improved clinical outcomes.
- Margins were protected, but only on paper. The economics were fragile because they depended on coding, not health.
๐ง๐ต๐ฒ ๐ง๐ฟ๐ฎ๐ฝ ๐๐ฒ๐ณ๐ถ๐ป๐ฒ๐ฑ
Taken together, the ACA reforms entrenched demand-side behaviors:
- MLR cemented administrative inflation.
- Stars locked payers into score-chasing.
- Risk adjustment incentivized documentation over prevention.
This was the inflection point where health plans stopped experimenting and started entrenching. The treadmill became business model.
๐ช๐ต๐ ๐๐ ๐ ๐ฎ๐๐๐ฒ๐ฟ๐ ๐ณ๐ผ๐ฟ ๐๐ฒ๐ฎ๐ฑ๐ฒ๐ฟ๐ ๐ง๐ผ๐ฑ๐ฎ๐
Margins in Medicare Advantage and Medicaid managed care are under unprecedented pressure. Utilization is up. Benchmarks are tightening. Administrative overhead is higher than ever.
And yet, the dominant strategies in play are still the same ACA-era tools: MLR projects, Stars campaigns, and risk adjustment programs. Executives know the economics donโt add up. But the treadmill keeps running.
The ACA didnโt fail because it was poorly intentioned. It failed because it doubled down on demand-side levers that could never scale into sustainable economics.
The way forward isnโt to optimize the treadmill. Itโs to step off it and build a supply-side engine that creates new inputs, real-time risk visibility, and economics that hold regardless of how CMS redraws the lines.
