No single, sweeping governmental approach can adequately nationalize or, in the case of the Patient Protection and Affordable Care Act (“PPACA” or “Obamacare”), semi-nationalize one-sixth of the American economy without dramatic unintended consequences. Economic self-interest demands that businesses find ways to maximize profit and minimize the restrains of governmental interference.
When the Obama administration set out to write and implement PPACA, it did so with two overarching goals:
- To cover the 45 million uninsured Americans; and,
- To stop insurers from underwriting plans with restrictions against new, sick, uninsured members.
Yes, I remember the original second stated goal was to rein in costs, but even many of the law’s staunchest supporters have abandoned that mantra, as it is clear PPACA is going to cost far more than it purports to save. At passage, Obamacare was slated to cost just under $1 trillion over the first decade. In June, the Congressional Budget Office (CBO) set the 10-year cost at $1.4 trillion.
As for the first goal, the CBO predicted in June that the law will only make a minor dent in the size of the nation’s uninsured population. There were 45 million uninsured people when PPACA. After spending 10 years under the law, we’ll still have 31 million uninsured people.
Well, at least supporters of PPACA’s 2,500 statutory pages and 30,000 to 40,000 pages of regulations can point to the fact that insurers may no longer turn away potential customers. Even the sickest among us who show up after they have been diagnosed with a devastating illness won’t be denied care. And, on its face, that is true. But again, our country’s infatuation with the elimination of all consequences for individual decision-making has simply added confusion, complexity and deep market distortions to an already overly complicated industry.
Insurers are not sitting back with open arms and welcoming all of the poorest, sickest and most costly patients. Instead, we are now in a brave new world of rationing, restriction, and manipulation in order to nudge the worst risk among us to choose the other insurer’s plan. Below, there is an overview of the allowable ways insurers can restrict sick folks from flocking to their plans under PPACA.
1. Doctor rationing
Nothing in Obamacare keeps an insurer from reducing its costs by eliminating the top 10 percent, 20 percent or even 50 percent of the most expensive doctors from its network.
In California, we have seen nearly every insurer implement this strategy at some level both in and out of the public exchanges. In fact, insurers are now being sued by consumers who claim that they have been denied the right to healthcare by the insurer’s severe restriction of available doctors.
Contracting with fewer doctors than your competitor presents two economic advantages to an insurer. First and most obviously, you reduce the cost of your medical service team by eliminating, for example, the top third of most expensive doctors. Secondly, offering fewer doctors means longer wait times. The customers most likely to put up with longer wait times are the healthiest ones that never need to go to the doctor anyway. Intensive plan users don’t put up with excessive wait times because they can’t. Healthcare policy expert, John Goodman has written extensively on this principle of rationing by waiting.
2. Treatment rationing
Another very simple way to keep costs down and ensure that the very sickest Americans don’t sign up for your plan is to remove or greatly curtail access to costly centers of excellence. High-end treatment centers for cancer, transplants and dialysis represent a massive portion of any group’s medical claims. By removing those places from your network, an insurer creates a poignant disincentive for the sick to enroll. For the limited number of high-cost specialists that are available, the insurer can further restrain utilization by checkering the process for care with a litany of required referrals, second opinions and tests before treatment can begin.