The real story in this article is step two of the demonization process: first it was the insurance companies that were demonized, step two is to demonize the medical care givers. Price controls are coming:
“To try and get a handle on rising costs, the Obama Administration will start to go after the healthcare providers. ” Medicare +40% (see article below this one) is going to begin to look damn good to the provider community.
A California insurance broker, who sells health plans to individuals and small businesses, told me that she’s prepping her clients for a sticker shock. Her local carriers are hinting to her that premiums may triple this fall, when the plans unveil how they’ll billet the full brunt of Obamacare’s new regulations and mandates.
California is hardly alone. Around the country, insurers are fixing to raise rates by double digits. They’re privately briefing politicians in Washington on what’s in store. Those briefings are leaving a lot of folks up and down Pennsylvania Avenue jumpy.
What’s gives? President Obama, after all, said he’d prevent these sorts of prices. His new health law gave state regulators the power to block premium increases. It even created a federal agency to oversee insurance rates. But these bureaucrats are spectators to the price hikes. They’re mere wallflowers. Even in the bluest of states.
Their silence is the best evidence of who is culpable for the increases. It’s the policymakers. It’s Obamacare. The President is accepting the premium hikes as an allowable consequence of his healthcare policies.
There’s buzz in Washington that to ease the price hikes, the Obama team may slow down some of the most expensive regulations. This might include the law’s mandatory community rating. One approach they’re said to be considering is allowing some of the historically based underwriting to stay in place for a time.
But premiums will still rise because, in the end, everything has a price. The law’s prohibition against traditional insurance underwriting is just one of its costly provisions. Washington can try to force health plans to price insurance below the cost of these mandates. But then the health plans will simply lose money and move out of markets. To keep the insurers whole, and accommodate new rules, the cost of insurance must get re-priced higher. That re-pricing is what’s coming this fall.
This lesson was learned by Massachusetts, after it adopted its own skinny version of Obamacare. To meet the law’s costs, insurers hiked premiums. Massachusetts’s regulators blocked the increases. All the plans reported losses the very next quarter.
This simple economic axiom doesn’t mean the higher premiums were tolerated in Massachusetts, or will be embraced by Washington. What Massachusetts did afterwards is a lesson for where the entire nation is heading under Obamacare.
Massachusetts regulators went after the underlying source of spending – peoples’ use of medical services. First and foremost, that meant taking on the providers. Massachusetts moved to regulate the prices that doctors and hospitals could charge and the kind of services that they could offer. Rates are rising nationally because, like Massachusetts, Obamacare guarantees more free medical services while doing nothing to make the market for these things more efficient, or competitive. Like Massachusetts, some form of price controls is the next political chapter.
The Obama team can’t merely squeeze the insurers. That’s why our political elite will tolerate many of the looming premium hikes. In the end, health plans are mostly just passing along the costs of the underlying services. That’s even truer today now that Washington is directly regulating insurance company profit margins.
To try and get a handle on rising costs, the Obama Administration will start to go after the healthcare providers. The President seemed to hint about all this when he referenced the need to “lower the cost” of healthcare in his inaugural address.
Simply cutting payment rates has consequences, or course. It reduces reimbursement without regard to value or need. But indiscriminate cuts to fixed rate schedules for everything from doctor visits to hospital stays are Washington’s standard approach for sanding down Medicare costs. The Affordable Care Act will institutionalize these same political tactics across the rest of the healthcare market.
This is the next iteration of healthcare reform. Call it Obamacare 2.0. Doctors will become the next bogyman in Washington. The target is already being fixed to their hide. As for the rest of us, our health insurance will become increasingly illusory.
The prices Washington pays for medical services will gradually fall below the rates where things will be readily supplied. That’s the legacy of Medicaid, and increasingly Medicare as well. Don’t worry, though. The medical services that you’ll have a hard time accessing are mostly the stuff you’ll only need if you get really sick.
Dr. Gottlieb is a physician and Resident Fellow at the American Enterprise Institute.