`Doc Shock' On Deck in Obamacare Wars

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of “The Up Side of Down: Why Failing Well Is the Key to Success.”
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Come January, when some number of Americans have bought insurance on the new health exchanges and are starting to use the services, you can expect another controversy to arise when many of them find out just how few doctors and hospitals they have access to. Call it "doc shock," though the biggest outcry will not come when people try to schedule an appointment with their physician, but when someone gets sick and they learn they cannot go to whatever top-notch hospital they want, only to the hospital that is included in their plan.

The problem varies across the country. In Washington, where I live, it basically won't be a problem at all; exchange policies have mostly the same provider networks as regular policies from those insurers. On the other end of the spectrum, in California, where the exchange put heavy pressure on insurers to keep premiums low, most exchange policies have bare-bones coverage that excludes top-tier hospitals such as UCLA and Cedars-Sinai. The industry calls these "narrow network" plans, but consumers are likely to have some more pungent names for the stripped-down provider offerings.

In those places where insurers are narrowing their networks, it's likely to become a big issue -- not just a public-relations one, but legal. Seattle Children's Hospital is already suing over its exclusion from most of the area's exchange policies.

Over at California Healthline, however, Dan Diamond argues that maybe we shouldn't be so negative. Sure, if you call them "narrow networks," that sounds bad. But we shouldn't lose sight of the reason that insurers are turning to these programs, which is that they control costs. And arguably, done right, they can actually improve the quality of care; after all, one of the things that makes the Mayo Clinic or the Cleveland Clinic so good at what they do is that health-care professionals can manage the entire "continuum of care" rather than forcing a patient to assemble a hodgepodge of providers who never talk to each other.

I'm a little skeptical, however, that this argument is going to win the day. For starters, insurers are not moving to these narrow networks because they're easier to manage, enabling patients to get more coordinated care; they're moving to these networks because the doctors in them are cheaper. It's true that narrowing your networks gives you more leverage to negotiate prices with doctors -- if you're willing to exclude most of the doctors in the state, you're in a better bargaining position than you are if doctors know that you're selling customers the ability to see any doctor they want. But the doctors who are in really high demand can simply refuse to take the lower price. And unfortunately, there does seem to be some correlation between how much we spend on health care and how good the results of treatment are.

But even if it were true that we could get better treatment at a lower cost by restricting peoples' choices, people would still hate having their choices restricted. Americans love choice! There is a reason that the abortion-rights movement has framed itself around the concept of choice and keeping medical decisions between a woman and her doctor, rather than around a more straight feminist argument about the life limitations imposed by an untimely pregnancy.

If narrow networks could give everyone in the country access to health-care outcomes no worse than 90 percent as good as the folks with the best doctors at 75 percent of the price we'd pay for broader networks, the health-care wonks would jump on that deal as an unbelievable bargain. But I think it's pretty clear that average folks don't think like health-care wonks.

Rationally, you should get the policy with the highest possible deductible and coinsurance, because more comprehensive insurance basically just means that you're prepaying the deductible in advance. But people hate those policies. The most bitter union fights are usually when management tries to increase the copays and deductibles on health insurance -- even though the union knows exactly how much this is costing, because they're basically making a dollar-for-dollar trade of wage compensation for health insurance premiums. That's what the membership wants.

So even if narrow networks actually were better, people would resist them. And they'll fight with every fiber of their being when you tell them to take their kid with leukemia to a community hospital rather than the top-notch children's hospital nearby. Expect the fight over doc shock to be bitter and long -- and to end when insurers cave and start adding pricey doctors back to their networks.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net