GOP lawmaker says medical-loss ratio adds to fraud

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"It is apparent to me that MLR will not reduce the tens of billions of taxpayer dollars lost each year to improper payments, but rather add to it," Pitts said. "And that is a problem."

Defenders of the loss-ratio policy say it is necessary to ensure that premium dollars are spent on medical care rather than administration and profit, which do not directly benefit patients.

The Obama administration has touted the MLR for yielding billions in rebates to consumers every year. The White House has also talked up its policies to fight healthcare fraud, some of which came as part of the Affordable Care Act.

Wednesday's discussion took place during an Energy and Commerce health subcommittee hearing on waste, fraud and abuse in U.S. healthcare. 

Rep. Michael Burgess (R-Texas), the panel's vice chairman, urged the Medicare and Medicaid agency to implement anti-fraud recommendations made by government auditors in recent years.

"Eliminating the waste, fraud and abuse that hemorrhages billions of dollars in our country's government-run healthcare programs should be the foremost priority," Burgess said.

—This post was updated at 12:59 p.m.