NCPA - National Center for Policy Analysis

Health Reform's Competition Crushers

November 29, 2010

Accountable care organizations (ACOs), which put hospitals in control of all the doctors in their outlying areas, will lead to concentrated power over the provision of medical care -- turning physicians into salaried employees and reducing consumer choices, says Scott Gottlieb, a resident fellow at the American Enterprise Institute.

ACOs were invented as a way to cut costs in Medicare.  But the administration plainly means to use them as the tools for vastly greater government control of the health care system, by having them displace traditional health plans.

  • The ACOs will offer coverage directly via the insurance exchanges that the ObamaCare law orders into being in 2014.
  • These exchanges are where most Americans will eventually buy their "private" insurance -- and the White House is working to give the ACOs privileges that will let them undersell normal health insurers.

The ACO concept aims to copy groups such as Kaiser Permanente, where providers are salaried employees of a large (preferably not-for-profit) entity.  The assumption is that insurers are just costly middlemen and doctors financially conflicted unless they are given a salary rather than a fee for each service they provide.

But ACOs are no miracle cure.  If they squeeze out insurers, that will invariably limit the choice that patients have on the new exchanges, says Gottlieb.

Private health plans vie to contract with the best doctors and hospitals, creating market prices for services and competition to improve outcomes.  If the ACOs squeeze out this competition, the result will be a de facto "single payer": Every market will be controlled by a single ACO, which will in turn answer directly to the feds, with government regulators setting the prices and all the terms of care.

There's nothing inherently wrong with the concept of giving providers a financial incentive to band together and coordinate patient care.  The problem isn't the ACOs, but the government rules that will anoint hospitals as the stewards and then tilt the marketplace in their favor, helping them to prevail over private health plans regardless of the quality and efficiency of the care that the ACOs deliver, says Gottlieb.

Source: Scott Gottlieb, "Health Reform's Competition Crushers," New York Post, November 23, 2010.

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