NCPA - National Center for Policy Analysis


July 20, 2010

The growing number of private health plans that are giving consumers fewer choices among doctors surprises proponents of President Obama's health care reform.  Consumers should expect more health plans to offer increasingly slim rosters of "in network" doctors and hospitals to choose from, with large co-pays for going "outside" to doctors that don't contract with a plan.  Some insurers will demand patients pick up the full cost for seeing a doctor outside a health plan's network, says Scott Gottlieb, M.D., and resident fellow at the American Enterprise Institute. 

If this sounds like a throwback to the managed care model of the late 1980s and early 1990s, it is.  That was the approach to managing care that consumers despised and overturned.  The revolt led, in part, to passage of the "Patients Bill of Rights."  Today's reversion to that old HMO model is a direct consequence of the peculiar economics set in motion by the Obama health care plan, says Gottlieb: 

  • The Obama law tightly regulates the health benefits that plans must offer, but also the premiums they can charge.
  • At first premiums are fixed through political jawboning, but more direct controls are just around the legislative corner.
  • In so doing, the Obama health plan creates a market where insurers will have both their costs and their revenues controlled by the federal government. 

In this kind of economic model, the only way to control expenses is to lower the cost of the product that's actually being delivered -- in this case, the cost of insurance coverage.  In turn, the most efficient way to cheapen the cost of health insurance is to maintain tight reigns on the doctors who are delivering the health care, says Gottlieb: 

  • That means maintaining tight networks so that insurers can provide close supervision (leverage) over the decisions physicians make.
  • Health plans will employ this control to cut down on excessive use of costly services like radiology scans.
  • In many cases, keeping networks small won't provide enough leverage.
  • Health plans will go one step further and purchase provider groups outright, owning the doctors. 

Source: Scott Gottlieb, "Obama's Health Care Reform Gives Consumers Fewer Choices," American Enterprise Institute, July 18, 2010.  

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