Forget about keeping your doctor and your plan under ObamaCare
posted at 4:50 pm on May 18, 2010 by Ed Morrissey
Barack Obama promised that people who currently have health insurance would not have any changes to their status forced onto them by ObamaCare. “If you like your doctor, you can keep your doctor,” Obama repeatedly promised, adding that the hundreds of millions of Americans currently insured would not have to change plans, either. Dr. Scott Gottlieb explains in a Wall Street Journal essay exactly how wrong Obama and the Democrats were in making that promise, and describes the “defensive business arrangements” that will eliminate many provider choices for consumers:
President Obama guaranteed Americans that after health reform became law they could keep their insurance plans and their doctors. It’s clear that this promise cannot be kept. Insurers and physicians are already reshaping their businesses as a result of Mr. Obama’s plan.
The health-reform law caps how much insurers can spend on expenses and take for profits. Starting next year, health plans will have a regulated “floor” on their medical-loss ratios, which is the amount of revenue they spend on medical claims. Insurers can only spend 20% of their premiums on running their plans if they offer policies directly to consumers or to small employers. The spending cap is 15% for policies sold to large employers. …
One of the few remaining ways to manage expenses is to reduce the actual cost of the products. In health care, this means pushing providers to accept lower fees and reduce their use of costly services like radiology or other diagnostic testing.
To implement this strategy, companies need to be able to exert more control over doctors. So insurers are trying to buy up medical clinics and doctor practices. Where they can’t own providers outright, they’ll maintain smaller “networks” of physicians that they will contract with so they can manage doctors more closely. That means even fewer choices for beneficiaries. Insurers hope that owning providers will enable health policies to offset the cost of the new regulations.
Doctors, meanwhile, are selling their practices to local hospitals. In 2005, doctors owned more than two-thirds of all medical practices. By next year, more than 60% of physicians will be salaried employees. About a third of those will be working for hospitals, according to the American Medical Association. A review of the open job searches held by one of the country’s largest physician-recruiting firms shows that nearly 50% are for jobs in hospitals, up from about 25% five years ago.
The end result of the consolidation that will follow ObamaCare will be increased bureaucracies and fewer choices. The mandate burden will mean fewer independent clinics and providers, thanks to the increased start-up costs. Doctors will look for the economies-of-scale approach and join a decreasing number of larger networks. Insurers will affiliate themselves with fewer providers and networks as they pare down their offerings, which will already be constrained by the mandates for minimum coverage. The so-called “Cadillac tax” will eliminate the high-end policies now offered as insurers attempt to avoid the ruinous taxes and fees imposed on those plans.
Meanwhile, insurers in Massachusetts have already felt the damage from its ObamaCare predecessor:
The state’s four biggest health insurers today posted first-quarter losses totaling more than $150 million, with three of the carriers blaming the bulk of their deficit on the Patrick administration’s decision to cap rate increases for individuals and small businesses.
Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, reported a $65.2 million net loss for the three months ending March 31. Its operating loss was even steeper, $95.5 million. The company drew $55 million from its reserve to cover the anticipated losses from the state-imposed premium cap in the second quarter, accounting for the majority of its operating loss. …
Harvard Pilgrim Health Care of Wellesley posted a quarterly net loss of $27 million and an operating loss of $28.6 million, drawing $21 million from its reserve against losses because of the state’s limits on rate hikes. In last year’s first quarter, traditionally a weak period for insurers, Harvard Pilgrim had a $3 million net loss and a $6.9 million operating loss.
Tufts Health Plan of Watertown, reported a first quarter net loss of $51.9 million and an operating loss of $59 million. That included $40 million drawn from its loss reserve. During the same period in 2009, Tufts had a $13.1 million net loss and a $16.5 million operating loss.
Megan McArdle sizes up the problem well:
The Massachusetts governor’s answer to this problem was to simply deny the Massachusetts insurers the right to raise their prices. Then, when they refused to quote prices on the exchange at the old, controlled prices, the government essentially argued that they were a bunch of whiny liars who didn’t need all that extra money, and commanded them to list their insurance at the old prices. As far as I know, they never did find an actuary to sign off on the mandated prices, but the insurers lost their hearing.
Well, now the whiny liars have upped the ante, claiming that they lost a bunch of money in the first three months of 2010, mostly thanks to the extra money they had to reserve against the losses they anticipate under the new rates. It will be interesting to see whether we get another War on Accounting, where Deval Patrick accuses the state’s biggest insurers of the dastardly use of Generally Accepted Accounting Principles in order to embarrass his awesome government program. …
It’s hard to simultaneously expand demand, while lowering the incentives for supply (i.e. Medicare reimbursements), without having some pretty dramatic mismatches between the two. There’s an old adage common in restaurants and engineering that goes “Good. Fast. Cheap. Pick Two.” Change that middle word to “Universal” and you’ve got a pretty good summation of the problem that Massachusetts now faces–and that the rest of us soon will.
I’m not even sure we’ve gotten one from ObamaCare. So far, we’ve learned that it isn’t cheap, it won’t be fast (thanks to consolidation), and it’s still not universal. Thanks to the disincentives placed on innovation, even good may be at risk in the mid to long term.
Update (AP): And the good news keeps on coming. In Texas, the implosion of Medicare has begun:
Texas doctors are opting out of Medicare at alarming rates, frustrated by reimbursement cuts they say make participation in government-funded care of seniors unaffordable.
Two years after a survey found nearly half of Texas doctors weren’t taking some new Medicare patients, new data shows 100 to 200 a year are now ending all involvement with the program. Before 2007, the number of doctors opting out averaged less than a handful a year.
“This new data shows the Medicare system is beginning to implode,” said Dr. Susan Bailey, president of the Texas Medical Association. “If Congress doesn’t fix Medicare soon, there’ll be more and more doctors dropping out and Congress’ promise to provide medical care to seniors will be broken.”…
Ending Medicare participation is just one consequence of the system’s funding problems. In a new Texas Medical Association survey, opting out was one of the least common options doctors have taken or are planning as a result of declining Medicare funding — behind increasing fees, reducing staff wages and benefits, reducing charity care and not accepting new Medicare patients.
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