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This past Tuesday, I published an editorial in the Wall Street Journal on Obamacare entitled “No, You Can’t Keep Your Health Plan.” That article drew a direct response from the White House in an exchange that reveals the Obama team’s key liability when it comes to their legislation.
My editorial argued that doctors and insurance companies are changing their businesses to adapt to health reform. Their decisions will leave consumers worse off, and the president’s plan harder and more expensive to implement.
Among these changes, doctors are selling their medical practices to hospitals in order to get out from under rising practice costs and falling reimbursement rates.
Meanwhile, managed care plans are “vertically integrating” by trying to buy out medical provider groups, and in other cases tightening the networks of doctors they contract with. Insurers are doing this because the Obama plan strictly regulates their revenues, expenditures, and profits. The only way health plans can control costs is to cheapen the service they provide–and that means cut payments to doctors and limiting their use of expensive medical technologies like radiology.
Insurers are also pulling out of the individual insurance market (historically a more expensive insurance product) because of new regulations that fix their profit margins and impose mandates on how they have to spend their revenues. In time insurers will also start to leave the small group market for similar reasons.
At first blush, Democrats may be inclined to cheer these market changes. For example, many have long wanted providers to become more integrated (and salaried employees of larger institutions). The premise is that this consolidation will make it easier to impose controls on how doctors use medical resources.
But the integration among providers is going to give doctors more market power to raise prices. Meanwhile, the vertical integration among insurers will leave many markets with little or perhaps no choice among health plans. Patients will find it harder to get appointments, or find doctors willing to take their insurance policies.
Insurers and providers are making these defensive business decisions largely because better competitive options are foreclosed to them by the Obama plan. Taken together, these changes will raise premiums over the next several years and increase the number of uninsured Americans. Having passed major health reform, the president will run for reelection in 2012 in a health care market made worse.
That gets to the White House response to my editorial. Nobody can deny that providers and insurers are consolidating, leaving patients fewer options. The White House didn’t try to. Instead, the Obama team argues that these consequences are not a result of health reform, but the reason for pursuing it in the first place.
That may be a tough political sell. The lines between the Obama provisions and the changes underway are easy to connect. Many consumers will find that their health policies, and the doctors they frequent, are no longer available to them as a result of health reform.
Scott Gottlieb, M.D., is a resident fellow at AEI.
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