And You Wonder Why the Chronic Disease Epidemic Keeps Growing..

People (and businesses) respond to incentives. Healthcare is no exception.

There's a regulation buried in the Affordable Care Act called the Medical Loss Ratio, or MLR, that provides quite a perverse incentive. Once you understand how it actually works, it's hard to un-see the strange incentive it creates.

The rule sounds sensible on paper: health insurers must spend at least 80-85% of the premiums they collect on actual medical care (or "quality improvement"), leaving only 15-20% for administrative costs and profit.

It was designed to stop insurers from pocketing huge margins while patients struggle to get care.

It’s worth being precise about who this rule actually targets, since it's a common mix-up: MLR governs insurance companies, not doctors directly.

But the distortion it creates ripples all the way down to how care itself gets structured.

Here's the twist that makes this incentive perverse in my opinion: because the rule caps administrative spending as a percentage of total medical spending, rather than as a fixed dollar amount, an insurer's allowed profit shrinks and grows right alongside total claims.

If a health plan's members get genuinely healthier — fewer chronic disease complications, fewer hospitalizations, fewer expensive interventions — total medical spending goes down.

And when that number goes down, the absolute dollars an insurer is allowed to keep for overhead and profit go down with it, even though the percentage stays fixed.

The rule turns insurers into "cost-plus" businesses, where raising total spending, not lowering it, is what actually grows profit in real dollar terms.

It gets stranger.

Payments to affiliated providers, pharmacies, and pharmacy benefit managers all count as "medical spending" under this formula.

So what’s a profit-oriented business to do?

What else? Buy up the providers that receive the spending.

Several major insurers have spent the last decade acquiring physician practices and pharmacies outright.

Louisiana's Attorney General filed a lawsuit alleging one such arrangement let a company overpay its own pharmacy subsidiary, then count that inflated overpayment as a qualifying "medical expense" — satisfying the regulation while extracting profit through the back door.

There's a parallel version of this problem sitting closer to the exam room, too.

Most physicians are still paid through fee-for-service billing — reimbursed per visit, test, or procedure performed.

A patient who reverses their type 2 diabetes through diet and lifestyle change, and simply stops needing frequent visits and prescriptions, represents a real loss of billable revenue under that model.

Even though it's the best possible outcome for the patient.

No single doctor is scheming for that outcome — most went into medicine specifically to help people get better. But the financial structure surrounding them rewards ongoing management of disease far more reliably than it rewards its disappearance.

None of this means the people involved are acting in bad faith. Well..maybe some..

We had a cardiologist that talked to our Thrive At Your Home community tell us he left a large medical company because he was helping too many people become healthy. The head cardiologist at the company asked him how they were supposed to make money if he is preventing major surgeries?

The system's underlying math quietly rewards managing chronic disease over resolving it — regardless of anyone's individual intentions. That's exactly we have to take charge of our own health and improve sometimes despite the efforts of the medical system.