Health-Care Overhaul Could Ironically Increase Consumer Power—for Some
President Obama’s health care law will bring a major transformation of the nation’s health care over the next decade in the form of a large migration of patients, doctors, facilities, and services out of the third-party payer system.
It will cause a major increase in concierge doctors, concierge facilities, and concierge-type services. It will lead to the creation of new markets where providers are free to repackage and reprice their services without third-party payer approval; where transparency of price and quality becomes the norm for patients; and where suppliers of services compete for patients on price, quality and amenities.
Explosion of Costs
Millions of people will soon be forced to buy a health plan whose cost will grow at twice the rate of growth of their incomes. The combination of the 32 million newly insured plus those with more generous insurance will push health care spending higher than it otherwise would have been.
Traditional tools to control costs—limited benefits, greater cost sharing, etc.—will be limited. One of the few tools employers and insurers will have left is to use limited networks. You may end up in a plan that covers only half the doctors in your area, and you may have to pay full cost if you go outside your plan’s network.
More likely, most services will be subjected to “reference pricing,” under which your plan pays 100 percent within network and you pay 100 percent of any extra cost you incur outside the network. This type of reimbursement mechanism will lead to the steady exodus of providers from the insurance system and allow an unfettered market to develop outside of it.
With community-rated premiums, insurers in the exchanges will try to attract the healthy and avoid the sick. After enrollment, their incentive will be to overprovide to the healthy (to keep the ones they have) and underprovide to the sick (to encourage their departure from the plan). For people who go without insurance while they’re healthy and enroll after they get sick, the fines are going to be small and may be nonexistent.
Inevitably, the health plans in the exchanges will have severe quality problems—problems people with money will want to escape from.
Problems for States
For people with below-average income, the subsidies in the exchanges will be significantly greater than the health insurance subsidy at the place of work. Competitive pressures alone will cause these people to gravitate to this exchange.
Why is this so important? At the place of work, all these people had an employer who functioned as a protector in the health care system. In the exchange they will seek insurance on their own.
Thus, the number of people in the exchanges will be many millions more than what the Congressional Budget Office (CBO) is predicting—creating state budget problems and exacerbating the quality problems.
Massive Increase in Demand
If the economic studies are correct, 32 million newly insured people will try to double their consumption of medical care. Most of the rest of the population will have increased access to preventive services, without copayments and deductibles.
As an illustration of where we are headed, if everyone in the nation got all the preventive medicine the Preventive Services Task Force says we should get, the average primary care physician would have to spend more than seven hours a day delivering services to basically healthy people—leaving little time for anyone who is actually sick.
Ultimately, we are going to have a huge increase in demand with no change in supply. Since we primarily pay for care with time rather than money, the time price of care (waiting) will shoot up almost everywhere—at the emergency room, at primary care facilities, and for most specialist services.
Redistribution of Services
Even without the transformation I am predicting, there will be a redistribution of health care services from those who currently have less to those who already have more. Anyone who is in a plan that pays below market will have increased difficulty getting care. These are people in Medicare, Medicaid, and possibly (as in Massachusetts) people in subsidized plans sold in the health insurance exchanges.
Every time a doctor leaves the insurance system to become a concierge doctor, he or she will take only a fraction of the patients the doctor was previously seeing. The doctor/patient ratio for everyone left behind will worsen. As doctors and patients seek better, more timely care, they will make matters worse for all those who stay in the third-party payer system.
The average concierge doctor already does most of the things the Commonwealth Fund thinks all doctors should be doing. They use telephones and e-mail, they often have same- or next-day services. They keep medical records electronically. They prescribe electronically. When patients pay the marginal cost of their care, there is almost always price competition, which tends to produce quality competition as well.
The new legislation may indeed cause the transformation of medical practice Obama’s law seeks to bring about. But it will not occur because of the guidance Washington gives to providers in the third-party payment system. It will occur because of the competitive pressures that everyone who escapes from that system and practices outside it will face. And it won’t be available to those who need it most.
John C. Goodman (firstname.lastname@example.org) is president, CEO, and Kellye Wright Fellow of the National Center for Policy Analysis.