Politics

ObamaCare reduces choice in both insurance and medicine

ObamaCare reduces choice in both insurance and medicine

The difference between health care and health insurance is often lost – or deliberately obscured – in our ongoing national medical debate. (We should be suspicious of anyone who claims a particular government program can “settle” the medical debate, because technology and demographics are always changing.  It would be wiser to acknowledge that we’ll always be arguing about the best way to make health care as affordable and available as possible – it’s good that we have such a perpetual argument, and our government policies should be written to allow the American people the greatest possible latitude to conduct it.)

That sure as hell isn’t what we’re getting under ObamaCare, which is destroying not just the health insurance marketplace, but also medicine itself.   The New York Times finally paid official Paper of Record attention to the growing reports of medical choices restricted by ObamaCare’s regulations and perverse incentives:

Federal officials often say that health insurance will cost consumers less than expected under President Obama’s health care law. But they rarely mention one big reason: many insurers are significantly limiting the choices of doctors and hospitals available to consumers.

From California to Illinois to New Hampshire, and in many states in between, insurers are driving down premiums by restricting the number of providers who will treat patients in their new health plans.

When insurance marketplaces open on Oct. 1, most of those shopping for coverage will be low- and moderate-income people for whom price is paramount. To hold down costs, insurers say, they have created smaller networks of doctors and hospitals than are typically found in commercial insurance. And those health care providers will, in many cases, be paid less than what they have been receiving from commercial insurers.

Not only is this bad news for people who liked not just their insurance plans, but their doctor, and were fooled by Barack Obama into thinking they would be able to keep both, but it’s not going to “drive premiums down for long” either.  It is irrational to believe that restricted choices lead to lower costs.  Choice and competition are the only things that reduces cost in medicine, or any other product, in a sustainable manner over a long period of time.

The phenomenon described by the New York Times is essentially a regime of price controls.  Do we really need one more agonizing lesson in how those work?  There might be some short-term, illusory reductions in cost at first, but ultimately price controls reduce quality.  Yes, your price-controlled government-mandated plan might look a bit cheaper at first, but the quality of care becomes poor… and the power of government is deployed to ensure your complaints about lousy quality are pointless.  You’ll take what ObamaCare gives you, and you’ll like it, because the competitive marketplace that could give you better alternatives has been laid waste.

Another common consequence of price controls is reduced supply – in this case, fewer doctors, clinics, and medicines.  Price-controlling bureaucrats respond to these failures by imposing strict rationing, generally accompanied by stern rhetoric that dissatisfaction with your State-mandated ration is unpatriotic and immoral.  The ObamaCare IPAB “death panels” will come in handy when the hard-core health care rationing begins.  Everybody’s got “coverage,” but nobody gets to see a doctor.  The ruling class will, of course, be exempted from this rationing.

The Times touches on this problem, then tries to brush it aside with some weapons-grade wishful thinking:

Some consumer advocates and health care providers are increasingly concerned. Decades of experience with Medicaid, the program for low-income people, show that having an insurance card does not guarantee access to specialists or other providers.

Consumers should be prepared for “much tighter, narrower networks” of doctors and hospitals, said Adam M. Linker, a health policy analyst at the North Carolina Justice Center, a statewide advocacy group.

“That can be positive for consumers if it holds down premiums and drives people to higher-quality providers,” Mr. Linker said. “But there is also a risk because, under some health plans, consumers can end up with astronomical costs if they go to providers outside the network.”

Insurers say that with a smaller array of doctors and hospitals, they can offer lower-cost policies and have more control over the quality of health care providers. They also say that having insurance with a limited network of providers is better than having no coverage at all.

That might be how it works at first, but that will not be how it works over the long run, as anyone familiar with Medicaid knows.  The incentives to increase the supply of medicine have been removed.  That’s not going to result in a high-quality network of doctors offering low-cost care.  It’s going to result in poor quality and painful shortages.

The other thing that happens under price control regimes is that bureaucrats scramble to hide the true costs from as many voters as possible.  The Times concedes this is already happening, noting that the illusion of lower anticipated premiums from some health care plans is offset by higher out-of-pocket expenses.  Of course, the really huge expenses will be paid out of the federal treasury, adding to our growing national debt… and eventually leading to fresh demands for higher taxes.  The Sainted Middle Class, now helplessly dependent on government support to purchase health insurance, will nod obediently when promised that the Evil Rich will be paying those higher taxes.

Obfuscation is a big feature of ObamaCare.  It blows insurance premiums through the roof… and then gets the middle class hooked on soothing subsidy infusions, turning millions of formerly independent people into welfare junkies.  It’s like a drug dealer who can give his captive “customers” a painful ailment, then get them hooked on the sedatives they need to manage the agony.  It’s not a business model that leads to higher quality and reduced costs.

On the contrary, once the subsidy addiction is firmly in place, the ruling class will soon lose interest in touting the alleged “quality” of health care.  All that matters will be a) the public desperately needs health care, which is b) too expensive to afford without government welfare payments.  The political power derived from this formula should be enough to crush complaints about long waiting lines, scarce treatment, and poorly trained physicians pumped out of government-subsidized doctor mills to cope with the tidal wave of demand.

Chris Conover at Forbes tears back the veil on all that hidden cost by doing a little basic math with estimates from the Medicare actuary:

It was one of candidate Obama’s most vivid and concrete campaign promises. Forget about high minded (some might say high sounding) but gauzy promises of hope and change. This candidate solemnly pledged on June 5, 2008: “In an Obama administration, we’ll lower premiums by up to $2,500 for a typical family per year….. We’ll do it by the end of my first term as President of the United States.”

Unfortunately, the experts working for Medicare’s actuary have (yet again[1]) reported that in its first 10 years, Obamacare will boost health spending by “roughly $621 billion” above the amounts Americans would have spent without this misguided law.

$621 billion is a pretty eye-glazing number. Most readers will find it easier to think about how this number translates to a typical American family—the very family candidate Obama promised would see $2,500 in annual savings as far as the eye could see. So I have taken the latest year-by-year projections, divided by the projected population and multiplied the result by 4. Simplistic? Maybe, but so too was the President’s campaign promise. And this approach allows us to see just how badly that promise fell short of the mark. Between 2014 and 2022, the increase in national health spending (which the Medicare actuaries specifically attribute to the law) amounts to $7,450 per family of 4.

Naturally, the Left will try to hide those exploding costs from voters as long as possible, beneath a thick blanket of tax and deficit dollars.  When that little game becomes impossible to sustain – probably around the time this ten-year Medicare projection ends – it will be too late for surprised and enraged voters to do anything about it.  Indeed, the faster ObamaCare can pump up the deficit, the better for “progressives”… because they’ll be able to portray every effort at spending reform, and every bit of resistance to tax increases, as an assault upon the very health of the Sainted Middle Class.

But it’s not all bad news, because as Conover notes, Obama’s lousy economy has caused health care spending to decline – that’s a natural consequence of economic slowdowns – and there’s every reason to believe the sort of economic boom that would increase medical spending lies far beyond the horizon.  As long as Americans are satisfied with a New Normal of flaccid growth, rising government debt, and low-quality medicine, ObamaCare should hold up for ten or fifteen years.

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  • RenegadeScholar

    While money has had an effect on what the quality of medical care you could get in the past (i.e. better doctors are more expensive except when they donate their time to the needy), going with ObamaCare, it will be POLITICS that determines the quality of your healthcare.

    Not necessarily how you voted or what party you belong to (although NSA+ Centralized electronic medical records+IRS+Death Panels is a toxic combination), but because of the POLITICS of success as defined by the government.

    Bureaucrats will fudge numbers to keep their budget needs up; importance will be measured in money spent rather than outcome (just like in the educational system), and running out of money will be blamed on greedy taxpayers not wanting to be taxed more rather than bureaucrats wasting money and funneling it to their cronies.

    It’s life and death here, folks, and the left essentially wants the equivalent of DMV, the USPS, the public schools, and the FAA airport screeners to decide your health and the health of your children.

    Prediction: Medical tourism will skyrocket

  • Concerned4America

    They also say that having insurance with a limited network of providers is better than having no coverage at all.

    Translation: a little is better than none so shut up.

    I am not sure how deceived the middle class is but I know there are a lot of talking heads on the tube that don’t seem to get the concept that the subsidies are nothing but a way to hide the true cost by putting taxes on your medical care (devices, drugs, etc) and printing more valueless paper money.

  • flmom0f4

    When insurance marketplaces open on Oct. 1, most of those shopping for coverage will be low- and moderate-income people for whom price is paramount.

    ———–

    Top executives in Britain enjoy a private health insurance plan as part of their pay package, it’s called BUPA. Anyone with BUPA coverage are able to see a specialist without seeing their NHS primary care doctor and are first in line for their appointments. This is what will happen here, with the consequence that there will be a two-tier system. One with far superior service for those who can pay and steerage service for the rest of the schmucks.

  • terry ellis

    Ah, the things one leaves out…

    1. Of course, no mention of current coverage/quality problems and escalating health insurance & health care costs.
    2. Or of people who lost coverage when they lost their jobs in the recession.
    3. Will those young healthy people who happen to have kids want to risk their kids’ health by depending on Emergency Room care? Not if they’ve ever been to a big city ER.
    4. Do you think doctors who opt out of ACA are going to lower their charges? Sure.

    And a big part of “quality” is what’s covered and what is not.

    ACA improves coverage:

    a. Cover preventive care
    b. Allow people to stay on parents’ insurance until age 26
    c. Increase annual coverage limits
    d. Cover children without regard to pre-existing conditions

    The public’s going to hate this stuff. Sure.

    The CBO and FactCheck.org say the bottom on on changes in costs is not yet known.

    http://www.factcheck.org/2011/10/factchecking-health-insurance-premiums/

  • terry ellis

    The market for health insurance/care is very different than that for food.

    Everyone breathing needs to have food everyday; very few people need daily healthcare.

    A relatively small number of people will, at some point, need a lot of (costly) healthcare— far more than those who will never need any (so to talk tech, there’s a long tail on one side of the curve). Putting aside the obese, not many people gobble up way more food than the average.

    There are a lot of probabilities/gambling/guesswork in forecasting how much healthcare you and yours will need and when you’ll need it.
    People are not always rational gamblers, or no one would play the lottery. Food needs are far more predictable; not many people will blow the food money on a vacation to the shore, guessing that their kids will not need to eat next week.

    etc. etc.

    The upshot is that consumer behaviors for buying health insurance/care are not influenced the same way as buying/needing food, and people’s decisions are not always good. But most important, there’s a cost to society for bad decisions; and hence, a role for government.

    Most people are not so good at making decisions about the stock market, they’re better on health insurance, but make by far decisions about food purchasing. Unless you know a lot of people who don’t eat until they’re really, really hungry.

  • John

    I suppose a person who has lost their job, or who has had their hours cut because of Obamacare would need all the good news they can get…….Sure.

  • John

    Thanks to Obamacare’s gutting of the full-time workforce, there are now and will continue to be those who test your theory about being really, really hungry………but, at least they will have healthcare. Sure…..

  • John

    Everybody has to have food……true…….and now, thanks to Obamacare, everyone HAS to have health insurance………

  • terry ellis

    Well, at least such a person can count on Food Stamps, Dem job creation programs, unemployment compensation and the other safety net programs if the GOP can’t manage to eliminate them (the programs, not the poor); and the radical conservatives take a break from deriding them.

    It’s touching to see a RadCon’s outrage on behalf of the imaginary downtrodden oppressed by ObamaCare. Right.
    You can get back to trashing the actual poor tomorrow.

  • terry ellis

    And everyone has to have auto insurance. You prefer a world where cars have better coverage than people?

  • terry ellis

    Of course, there is not a shred of statistical evidence for “gutting the full-time workforce,” not that evidence has any connection to radical conservative posts. Assertion is enough.

    I’m sure that if there is such factual evidence (not another person’s assertion: hint- someone else making the same claim you make does not create a fact) I’m sure you’ll provide the link to the relevant Bureau of Labor Statistics CPS data.

    By the way, being “really, really hungry” was not posited as a “theory.” For cryin’ out loud, look up the word before you try to use it, why don’cha?

  • Mindy Robinson

    First and foremost, gov is the very reason health care has become unaffordable. Second, gov has no business involving themselves in healthcare. Third, the greatest exp involved in health care is not your dr, not surgeries , it’s meds. Fourth, many politicians are heavily invested in meds. Fifth many of the rich, dems , are heavily invested in meds. Let me be very clear! Gov has no right to be involved in health care , business, schools, land. Gov is no longer gov, it is a body of criminals who have betrayed what was once a great nation, filling their pockets with money and feeding their ignorant arrogance with power. Welcome to tyranny America, welcome to your destruction. This nation was once great, strong, due to the people, not gov. Now the people are weak and pathetic, this is reflected in a weak and pathetic nation. Our time draws to an end.

  • John

    The statistical evidence is on the news almost every day. Employers are cutting hours to comply with the law, using the Administration’s definition of a full-time worker as their guide. The employers have been telling us why they are making these changes.

    I find it odd that you make some personal assertions about me and apparently others you assume are like me, but you say I am the one making the assertions.

    Being really, really hungry isn’t a theory – did someone say it was? Neither is being unemployed or underemployed.

  • WillHart

    “The market for health insurance/care is very different than that for food.”
    Thank you for your feedback… I enjoyed what you had to say. It was the first sentence that tipped me off that you do not accept the point I was making with the food example. I can’t disagree with your assertion based on today. However, in 5 years, under a single payer system, there will be no health insurance “market” as the government will play that role. Under single payer (Medicaid for all) Americans will be shopping for health care with an all-you-can-eat card, funded by federal and/or state taxes as in Medicaid. 300+ million people will be vying for the very highest quality care they can find. How would that be different than 300+ million people shopping for the very highest quality food they can find, knowing someone else was paying for it?

  • PapayaPicker

    “everyone has to have auto insurance”. Really. If I desire not to own a vehicle, I don’t have to have insurance. If I ride a bike, I don’t need auto insurance. The only insurance I am “required” to carry is to pay for injuries I may do to another person’s property or body. I DON’T have to carry auto insurance that covers ME or MY vehicle (as long as it is fully paid for).

  • terry ellis

    Glad you enjoyed my post.

    As someone on Medicare (admittedly not exactly Medicaid), I can confirm it’s not an all-you-can-eat card good at the best eateries in town. My secondary insurer, BC/BS who essentially handles the tip (to hang onto the dietary metaphor), would second that. And at today’s prices, even the “tip” isn’t trivial.

    As for what will happen to ACA at full throttle, you may be right; I don’t pretend to know.

  • WillHart

    Terry,

    I don’t pretend to know either. So what if there was another approach that would be “Fail-Safe.” My guess is that few others are paying attention to this string any longer so I am sending you my general ideas for
    such an approach… hoping there won’t be harsh criticism of admittedly half-baked thoughts. Keep up your good posts.

    Let’s stipulate that Medicaid and Medicare need drastic reforms… but they will still exist in some form to
    serve children, the very poor, and all but the wealthiest of the very old (Part of saving Medicare will likely include much higher premiums and means
    testing… for the wealthy.) For the rest of the population, we should consider government-funded (through taxes) catastrophic coverage for all, kicking in at
    various percentages of income/net worth. For example, this coverage could kick in at thousands of dollars on the low income end, and go all the way to millions for
    the very wealthy. This approach also “covers” people with pre-existing conditions as they will pay something every year and then the catastrophic coverage will kick in. Side note… Anybody who thinks we can keep on paying 20-30% of health care dollars for end of life care is just not being realistic. I know, this destroys market forces for the high end of the health care delivery system, but in my opinion we must isolate the big ticket costs to create robust competition for the routine care.

    People will then have the option to buy new, innovative, and competitive private insurance plans, that will cover them up to where their catastrophic coverage kicks in. Many may choose to pay cash (often remarkably inexpensive!) for all or part of their costs up to their government coverage. That will reintroduce robust market forces into a huge segment of health care insurance AND delivery, driving innovation to
    capture market share in this new “consumer-driven” market. Take a look at ads for Lasik Surgery in the Sunday paper and it is easy to envision ads to help people shop for office visit packages, MRIs, lab tests, physicals… etc.

  • lottopol

    “..The USA
    spends about twice as much per person on health care as other developed
    countries. However, the prices paid by Americans or their insurance carriers
    for medical procedures are typically about triple what is paid in other
    developed countries. Hence, Americans consume less health care services than their foreign counterparts. Obamacare does not seriously address the price problem and would thus appear likely to only exacerbate the problem.

    Government spending has been increasingly driven by medical
    care prices. Government pays half of the costs of health care in the USA.
    When the tax spending aspects of the tax deductibility and exclusions of
    medical care and insurance expenses are included, the impact of health care
    costs on the deficits is even larger. In many respects, the health care price
    crisis in uniquely American. Our Government spending on healthcare per capita exceeds that of any other country in the world, including those where there is very little private health care expenditures,

    Adopting the second worst healthcare system in the world, Canada, Germany
    and the UK are probable the best candidates for that dubious honor, would allow the USA to eliminate much of the Federal budget deficit. That would probably be beneficial to financial markets. Being the second worst healthcare system after the USA, is like being the second worst nuclear accident in the last decade after Fukushima. There probably
    was another nuclear accident where a few people were injured in the last
    decade, but none comes to mind immediately…”
    http://seekingalpha.com/article/1647632

  • lottopol

    “…

    Communism which once prevailed in the entire “second world”
    persists today only in North Korea
    and Cuba.
    Communism failed because of the basic laws of supply and demand which form the
    basis of economics. Among developed nations, market-priced medical care
    persists only in the USA.
    It is those same fundamental principals of economics, not humanitarian
    concerns, which will eventually end market-priced medical care in the USA. Investors
    who ignore this do so at their peril.

    For 75 years, it was said that Roosevelt’s
    New Deal saved capitalism. By softening the rough edges of the free market
    capitalism with reforms such as social security and unemployment insurance, FDR
    may have prevented adoption of much more radical changes.

    75 years from today it is unlikely that anyone will think
    Obama saved market-priced medical care. Rather, he only prolonged it, and that
    will not be thought of as a good thing. In the developed world, market-priced
    medical care still exists only in the USA. It is only a matter of time
    until market-priced medical care joins communism, slavery, racial segregation
    and fascism as systems that no longer exist in developed nations.

    The USA
    is the last holdout with market-priced medical care not because of any inherent
    conservative or free market ideology. Rather, as the wealthiest nation that
    ever existed we are the last ones who can afford it. Switzerland was one of the last
    advanced economies to abandon market-priced medical care. It is arguably a greater
    bastion of conservatism than the USA. Switzerland’s women were not granted the right to vote until 1971.

    During the debate as to whether Switzerland would abandon
    market-priced medical care there was considerable concern about how it would
    affect the major Swiss pharmaceutical giants such as Hoffmann-La Roche (RHHBY)
    and Novartis (NVS) which was Sandoz prior
    to the merger with Ciba in 1996. However, it was then realized that the Swiss pharmaceutical
    giants made much of their profits in the American market.

    The reason that no nation, including the wealthiest can
    allow markets to set the prices of medical care indefinitely is that demand for
    medical care is inelastic. Demand for a good or service is inelastic if a
    percentage increase in price results in a smaller percentage decrease in the
    quantity demanded. Basic economics tells us that sellers facing inelastic
    demand will continuously raise prices until prices reach the elastic portion of
    the demand curve. Consequently in every developed country in the world, all goods
    or services with inelastic demand have their prices regulated by government.
    Medical care in the USA
    being the only exception.

    Health care is one of the very few things for which the
    sellers face inelastic demand. The prices of all other goods and services
    facing inelastic demand in the USA
    are regulated by government. Retail electricity service providers face
    inelastic demand. Consequently, their prices are strictly controlled by all governments
    worldwide, including the USA.

    The inelasticity of retail electricity is obvious. If Consolidated
    Edison (ED) or any other electric utility were to triple retail service prices,
    people might be a little more careful about turning off the lights. Turning off
    their refrigerators? Watching less television? Not likely. Thus, tripling the price would result in only
    a small reduction in kilowatt-hours sold. Almost all other goods and services
    are price elastic. That includes non-medically necessary elective cosmetic and
    lasik surgery whose prices have actually relatively decreased over time.
    Medical care in the USA
    is the only instance in any developed country where any product facing
    inelastic demand is not substantially price regulated.

    Medical prices are controlled in various ways in the rest of
    the developed world. In Japan,
    the land of $100 melons and tiny $10,000 per month apartments, all medical care
    prices are listed in a book, thicker than the Manhattan telephone directory. The prices set
    in the book are usually less than a third of those in the USA. An MRI
    that costs $1,200 in the USA
    costs $88 in Japan.
    Japanese insurance companies are private as are most doctors. Japan spends less than a third per capita on
    medical care than America.
    However, the Japanese are greater consumers of medical care than Americans. They
    visit doctors and hospitals more often, have much more diagnostic tests such as
    MRIs. They also have better health outcomes as measured by all metrics such as
    life expectancy. They also wait less for treatment than Americans do as
    Japanese doctors work much longer hours for their much lower incomes.

    Japan’s
    explicit price controls are roughly emulated in other countries via the use monopsonistic
    systems. Monopsony, meaning “single buyer” is the flip side of monopoly. A
    monopolist sets prices above free market equilibrium. A monopsonist sets prices
    below free market equilibrium. It does not matter if there is an actual single
    payer or many buyers (or payers) whose prices are set by the government or by
    insurance companies in collusion with each other. More competition among
    sellers generally leads to lower prices. However, more competition among buyers
    leads to higher prices. In the health insurance industry the beneficial effects
    of more insurance companies competing for patients are far outweighed by the
    adverse effects of insurance companies competing for doctors and hospitals in
    their HMO plans. This was completely misunderstood during the recent debate on
    health care reform. With health care, more competition among insurance
    companies on balance results in higher prices.

    Focusing attention on the insurance companies, which are
    simply intermediaries between the doctors and the patients, was a tragic error.
    It would like trying to solve a problem of high energy prices by focusing on
    gasoline stations. Only if the government sets prices can health care prices be controlled. Controlling prices does
    not automatically result in longer waiting times. Japan
    and Switzerland generally have
    shorter waiting times to see doctors than does the USA. Additionally, if prices were
    controlled there would be no such thing as “in-network” or “out-of-network”
    since all doctors would accept all insurance plans…”
    http://seekingalpha.com/article/1647632