Politics & Policy

Under Obamacare, Hospitals Merge, Doctors Merge, and Patients Pay More for Less

(Clearviewstock/Dreamstime)

Years after the initial rollout of the Affordable Care Act, the American people, the health-care industry, and the courts still struggle to navigate the law. Its heavy regulations and new tax burdens have generated numerous consequences, many of which are harmful to patients and families. Although supporters point to the millions of newly insured under the law, the truth is, that as many as 90 percent of those are estimated to have enrolled into Medicaid, second-class coverage that, according to a 2014 Merritt Hawkins report, most doctors do not even accept.

Even worse, the government’s Department of Health and Human Services reported in December 2014 that 51 percent of doctors on official Medicaid state lists are not available to new beneficiaries. Meanwhile, millions of other families have lost their previous private insurance directly because of ACA decrees. For new private coverage, insurance premiums have continued to skyrocket. Most alarmingly, the premiums of what were low-cost high-deductible plans are accelerating faster than any other coverage after the passage of the ACA, directly countering the promise of more affordability when the bill was passed. Choice of doctors and hospitals through the government’s exchange-based coverage has also narrowed compared with pre-ACA individual market plans.

Still unbeknownst to most consumers, though, a more insidious and even more damaging threat to health care for Americans is afoot. Under the ACA’s heightened regulatory environment and anti-competitive dictates, we have witnessed a striking acceleration of consolidation within virtually all of the important sectors of health care.

Hospital mergers are on a blistering pace this year, continuing the striking trend of increasing consolidation related to the start of the ACA, as reported in the New England Journal of Medicine, when they immediately shot up by almost 50 percent from 2009. In the five years leading up to the ACA passage, hospital mergers averaged about 56 per year. Over the five years since ACA implementation, that number has nearly doubled, according to Irving Levin Associates research, with this year’s pace the highest in 15 years. The last period of hospital mergers in the late 1990s increased medical care prices substantially, at times over 20 percent, according to M. Gaynor and R. Town’s report for the Robert Wood Johnson Foundation.

ACA regulations on insurers and on physician practices are also driving historic merger activity among doctor practices. This also raises prices significantly for patients. J. Robinson and K. Miller in the Journal of the American Medical Association reported that when hospitals owned doctor groups, per-patient expenditures were 10 to 20 percent higher, or an extra $1,200 to $1,700 per patient per year. C. Capps of Northwestern University’s Institute of Policy Research in 2015 found that physician prices increased on average by 14 percent for medical groups acquired by hospitals; specialist-services prices increased by 34 percent after such groups joined a health system.

As a result of the anti-competitive ACA edicts, including requiring uniformly bloated benefit packages, limits on deductibles, and intrusive subsidies distorting market forces, health insurers have been engaged in a merger frenzy. Already among the nation’s five largest insurers, Aetna’s takeover of Humana this year and then the proposed Anthem–Cigna merger would harm patients. According to the AMA’s analysis, these two mergers would diminish competition in up to 154 metropolitan areas in 23 states. This consolidation not only reduces consumer choices for insurance but inevitably leads to serious restrictions of access to medical care.

The latest alarm sounded when UnitedHealth, the nation’s largest insurer, announced that it might opt entirely out of Obamacare’s insurance exchanges. It forecast a $275 million loss on its exchange insurance business next year and traces the loss to the ACA reforms. But the failure of private insurers was fully predictable.

It should be no surprise that younger, healthier consumers say no to overpriced coverage that subsidizes premiums for everyone else and that contains bloated coverage of no value to them.

Indeed, it was predicted from the start. It shouldn’t be a surprise that younger, healthier consumers would say no to buying overpriced coverage that artificially cross-subsidizes premiums for everyone else and that contains bloated coverage of no value to them, thereby leaving a pool of sicker enrollees. And it was fully predictable that people would wait to buy insurance just before they incurred large medical expenses, since the law requires guaranteed issue of insurance at any time, without consequence. Of course, why would those individuals keep their insurance after their needed care was received? They could just re-enroll later, if and when they needed more care. Coupled with new taxes and caps on insurance prices, the eventual failure of insurers on the hyper-regulated Obamacare exchanges was inevitable.

Consolidation within each of these sectors can be explained by the shared need to acquire sufficient size to deal with the hyper-regulatory environment of the Obamacare era. Such significant consolidation minimizes competition and limits the power of consumers. Prices increase and patient choices decrease. Ultimately, a heavily consolidated industry is also an easier target for even further government control, which could soon be felt via the ACA’s Independent Payment Advisory Board, a group of appointed bureaucrats assigned unprecedented power to cap prices that will assuredly lead to rationed care.

As the ACA proceeds to erode the positives of U.S. health care, expanding government’s role as insurer while creating even worse access and higher prices for patients, the need for a fundamentally different approach is urgent. It is clear that the Democrat solution to unfolding problems will be more government involvement, including new caps on prices of drugs and services, and likely a push toward a bigger role for government insurance.

That would be the wrong approach. The essence of ensuring affordable, high-quality health care rests on restoring the appropriate incentives for consumers, insurers, companies, and health-care providers. The effort to modernize U.S. health care should center on expanding affordable private coverage, especially high-deductible insurance and health-savings accounts, and removing the perverse incentives of the tax code that have exacerbated spiraling costs and removed value-based decisions from health care. These reforms expand the purchasing power of consumers, the necessary basis for enhancing market competition, which will ultimately lead to better value and more consumer choices.

And voters overwhelmingly support more free-market competition over more government regulation, by 62 to 26 percent in a recent Rasmussen survey. An even greater majority, 85 percent to 7 percent, said individuals should have the right to choose between two kinds of health plan — plans with higher deductibles and lower premiums, and plans with lower deductibles and higher premiums. It is the responsibility of government leaders to reform our health system to reflect these important principles held by the American people.

Scott W. AtlasScott W. Atlas, MD, is the David and Joan Traitel Senior Fellow at the Hoover Institution, and senior fellow by courtesy at the Freeman Spogli ...

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