It has been painfully obvious during October that the HealthCare.gov site is not ready to serve large numbers of applicants. One common response from supporters is that “Obamacare is more than a website”, which is true. Getting past the panic and emotional arguments, let’s divide our thinking on the subject into two areas:
- How do we get people registered and signed up?
- Will the young and healthy sign up? Why are some plans being cancelled?
- How will this all work out long-term?
- What happens when there is only 1 insurer in town?
- What about networks with restricted choice?
First, how do we get people registered and signed up?
This is actually the smaller question. The site, along with other, lower tech means of registering (e.g. call centers), will eventually get fixed and people will be able to register through one method or another. There may be some required policy fixes, such as a delay in imposing penalties, but over time, people will be able to register. Compared to decades of a system where many had no hope of coverage, ever, even if it takes 1-2 years to get large numbers enrolled, we will land in a better place.
Please do not misunderstand- I am not saying “so what” to the problems, and I am not brushing them aside. I am simply taking a longer view.
The more interesting question is, “how will this work out long-term?” I am focusing on two issues here, which have the potential to become, or already are serious structural problems within the industry. These issues are:
- What happens when there are only 1 or 2 insurers in town, and prices have remained high?
- What about patient choice and the fact that many emerging networks are narrower, leaving out many popular hospitals and physicians?
Let’s discuss each of these in turn:
How do we get people registered and signed up? Will the young and healthy sign up? And why are some health plans being cancelled?
The phrase “young and healthy” invites us to look at the young and healthy as one monolithic group with similar needs and issues. The current dialogue masks, however, a major issue- one that half of this group feels very acutely- the prices for policies sold to young men will increase dramatically. This is due primarily to the fact that men are now required to buy maternity coverage. Let’s not discuss that men don’t have babies. The present law has been crafted in a way that defines as “gender discrimination” any scenario other than men being required to buy maternity coverage.
I am not trying to start or continue a gender debate. I am simply pointing out that asking young men to accept a large price increase because “it is good for everyone else” is asking a lot. Please do not be surprised when young men decline to accept this dramatic price increase.
A related issue is the cancelling of policies presently in force because they do not meet the “Obamacare Standards”. Same issue- a policy sold in the past to a young man, and which does not include maternity coverage, is no longer allowed to be sold.
So, taking away their present policy, offering only policies that include maternity coverage at much greater cost, and criminalizing those who do not buy these new policies, is a long term issue that will continue to weigh on the potential success of Obamacare.
What happens when there are only 1 (or 2) insurer(s) in town, and prices have remained high?
This is where the market takes over, and this will take time. Annual cycles. When health plans in some states see that the neighboring state, or county, has only 1 or 2 health plans, and that prices are high, they will want to enter that market. In an unrestricted market, large price differences will be evened out through competition. This is exactly why we have such high prices now- competition has been stifled throughout the industry.
So my belief is that long term, new entrants will cause prices to drop in these areas where there is presently little competition.
What about patient choice and the fact that many emerging networks are narrower, leaving out many popular hospitals and physicians?
This is what will cause the large, “elite” institutions and networks to reduce their prices.
When we have a situation where “you can go wherever you want, and somebody else will pay”, guess what? Not only do consumers want to go the hospital of their choice, but that hospital is now incentivized to stand back, saying “that’s not enough money”, and to maintain that position until the payer, whether an insurer or the government, gives in and agrees to the higher prices.
In fact, we see a trend where hospitals are buying up competitors in order to reduce local competition, so the payers have nowhere else to turn, and are forced to pay the higher price. (By the way, these hospitals run very touching ads about how much they care about patients- all while selling the receivables to very aggressive collectors).
Anyway, leaving these hospitals and medical groups out of the network, and making it stick, eventually causes the “elite” institution to reconsider and arrive at a more reasonable price.
Short term, expect much complaining about “limited choice”. Long term, if we do not give in, we will see prices decline- after all, a hospital cannot survive if they won’t accept patients from Medicare and the major local insurers.
I can’t resist ending with a thought question on this point- If we got to eat wherever we wanted, and somebody else paid, where would we eat? And what would happen to the prices at those restaurants over time?
For Obamacare to work long term, we must have sensible answers to these structural issues, namely:
-Requiring young men to purchase maternity coverage will prevent many of them from enrolling, and turning them into criminals is not an efficient or effective answer.
-Markets with a small number of insurers must be made accessible to a larger number of insurers in order to create real competition.
-Limited networks must be allowed to remain. If we bow to political pressure and let the “elite” hospitals and medical groups continue to charge much higher prices, the cost of health care will never become more reasonable.
There’s a lot here- what do you think?