Obamacare: The Return of the HMOs
I wrote last week about the "magic pot of money" that everyone thought they had found to fund the Patient Protection and Affordable Care Act -- money that didn't harm patients or anger important interest groups. One of those magic pots was Medicare Advantage overpayments; it costs more to provide Medicare Advantage (in which Medicare money is used to purchase a private insurance policy) than it does to run patients through traditional Medicare.
At the time the law was being debated, folks like Alex Tabarrok pointed out that those "overpayments" were actually being used to fund extra benefits, as the law required, and that cutting them would be politically difficult. But cuts to Medicare Advantage nonetheless ended up in the law. In fact, they're one of the major revenue-raisers. The administration has balked at actually letting them go into full effect in the past, but now, reports the New York Post, they are beginning to bite:
"Elderly New Yorkers are in a panic after getting notices that insurance companies are booting their doctors from the Medicare Advantage program as a result of the shifting medical landscape under ObamaCare.
"That leaves patients with unenviable choices: keep the same insurance plan and find another doctor, pay out of pocket or look for another plan where their physician is a member."
Of course, if their doctors accept Medicare, people with Medicare Advantage may simply be able to switch to traditional Medicare. But that will mean losing the extra benefits they're currently enjoying. At which point, many of them are going to call their representatives and start screaming.
This is what health-care cost control mostly looks like: It means people losing benefits that they used to take for granted. You can tell them how great Obamacare is and how happy the folks are who have it, but they're still going to call their representatives and suggest, not gently, that their costs should be decontrolled.
Nor is it just Medicare Advantage. This weekend I spent quite a bit of time talking with a journalist friend in California who has had her own individual health insurance policy canceled because of the new Obamacare rules. And no, before you ask, it wasn't somehow "not really insurance" --she is quite economically and financially literate, and she was not buying some sort of doctor discount plan that doesn't cover hospitalization or what have you. It was canceled because the Barack Obama administration thinks that she should buy more coverage than she wanted.
She's been planning on buying a policy on the exchange, but she can't find out which doctors and hospitals are covered. Even the insurers don't seem to know who's in their network. What we do know is that those networks are narrower than the old network she had. Moreover, the narrow networks apply to all policy levels -- you can't get access to Cedars-Sinai or UCLA by buying a "platinum" policy instead of a "silver" or "bronze" policy.
Nineteen million people were buying insurance on the individual market; an estimated 16 million of them will need to switch to policies on the exchanges or Medicaid. Those policies may end up costing them less, after subsidies (especially if they go on Medicaid). But they will also force them to go to cheaper doctors and hospitals. The young won't care, but the middle-aged will chafe at the loss of freedom. Especially because the expensive doctors and hospitals are often the ones most in demand -- the ones with cutting-edge technologies and skills. Cost is not a perfect proxy for quality, of course. But it is not unrelated, either.
Now, maybe that's all they do: chafe and complain. But maybe they contact their state or federal legislators and demand that carriers be required to cover all the expensive doctors and hospitals. This is basically what happened in the 1990s: Health maintenance organizations achieved significant cost controls by limiting patient choices, and patients got their legislators to put a stop to it. With so many people being affected, it would be surprising if that didn't happen again.
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Megan McArdle at email@example.com