Page 34 - FPGEE Management Q&A Book

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In short, MLR is the cost of providing healthcare
divided by the premium.
For example, for every $100 of insurance premium
paid by a plan member or an employer to an HMO,
$75 (75%) is spent on the actual provision of
healthcare; the remaining $25 (25%) would be
spent by an HMO for administrating expenses.
Thus, in this case the MLR ratio would be $75/$100,
or 0.75. Generally, employers seek higher MLRs
since that may suggest that more of the plan
premium is actually being spent on the provision of
healthcare.
41. (c) Pharmacy program performance metrics
typically include the measurement of cost,
utilization rate, and member satisfaction with
program components. These include:
1. Per member per month (PMPM) cost.
2. PMPM utilization.
3. Average prescription cost.
4. Generic utilization rate.
5. Percent DAW prescriptions.
6. Percent formulary compliance.
1. PMPM cost: It can be calculated by dividing the
total claims cost for prescriptions for a month by
the number of covered members for the same
month.
Total cost for RX per month
PMPM Cost =
No.of covered members (same month)
PMPM cost is most often used to evaluate overall
financial performances of a PBM. A few PBMs
evaluate PMPM cost by considering different
variables such as age, sex, or illness. However, when
evaluating the financial performance of PMPM, a
few PBMs don’t include certain claims that are
expensive due to terminal illnesses such as cancer,
HIV, brain tumors, etc. The reason not to include
these types of claims in financial evaluation is to
avoid the costs burden on other members of the
healthcare plan.
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Krisman
PMPM ratio is normally affected by the following
factors:
1. Cost of medications.
2. Pharmacy network discount.
3. Percent generic use.
4. Co-payment fee structure.
Each factor may affect the PMPM cost, both directly
and indirectly. For example, if a co-payment rate is
high, it will provide more benefit to the health plan
(directly) and also discourage unnecessary use of
medications by an individual due to the high co-
payment rate; thus it affects the PMPM cost
indirectly.
2. PMPM utilization: It can be calculated by dividing
the total number of prescriptions filled in a month
by the total number of covered members for the
same month. This ratio helps to determine how a
change in utilization may affect the total
prescription costs.
PMPM utilization is affected by the following
factors:
1. Age of plan members.
2. Drug advertising by media directly to consumer.
For example, as the age of a plan member
increases, the rate of utilization will also increase.
3. Average prescription cost: It is the total
prescription costs divided by the total number of
prescriptions dispensed. This ratio allows the user
to find out how brand name drug utilization or
generic drug utilization may affect the total costs of
a healthcare plan.
An average prescription cost is affected by the
following factors:
1. Inflation.
2. Economy.
3. Prescription utilization.
4. Cost of medications.
5. Generic utilizations.
6. Manufacturer’s discount policy.