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John C. Goodman / Jul. 7, 2013

What ObamaCare Is Going to Do to Your Doctor

You should care a lot about how health reform will affect your doctor. The reason: it will also affect you. Here's what's happening: hospitals are merging and they are acquiring doctors. In the process, they are making the market less competitive, gaming third-party payment formulas and doing other things that make our health insurance premiums and our taxes higher than they otherwise would be.

You should care a lot about how health reform will affect your doctor. The reason: it will also affect you.

Here’s what’s happening: hospitals are merging and they are acquiring doctors. In the process, they are making the market less competitive, gaming third-party payment formulas and doing other things that make our health insurance premiums and our taxes higher than they otherwise would be.

None of this is the result of any plan the administration ever announced, however. What did the Obama administration intend to happen? The clearest explanation of their vision of health reform comes from Harvard Medical School Professor Atul Gawande, who thinks that medicine should be more like engineering – with all doctors following the same script, rather than exercising their individual judgments:

This can no longer be a profession of craftsmen individually brewing plans for whatever patient comes through the door. We have to be more like engineers building a mechanism whose parts actually fit together, whose workings are ever more finely tuned and tweaked for ever better performance in providing aid and comfort to human beings.

Karen Davis, president of the Commonwealth Fund, explains what this will mean for the organization of medical practice:

The legislation also includes physician payment reforms that encourage physicians, hospitals, and other providers to join together to form accountable care organizations [ACOs] to gain efficiencies and improve quality of care. Those that meet quality-of-care targets and reduce costs relative to a spending benchmark can share in the savings they generate for Medicare.

To assist in this effort, millions of dollars have been spent on pilot programs and demonstration projects to find about “what works” so the ACOs can go copy them. We’ve had demonstration projects for coordinated care, integrated care, medical homes, electronic medical records, pay-for-performance and just about every other faddish idea. Unfortunately, the Congressional Budget Office has found in three separate reports that that none of this is working (see here, here and here.)

When I say that none of these techniques work, what I really mean is that projects designed, approved and paid for by the demand side for the market aren’t working. Many of these techniques actually do work when they are instituted by entrepreneurs on the supply side. But these innovations have nothing to do with ObamaCare. They are happening in spite of ObamaCare.

[Oops, there was one demo project that actually worked and worked well. The government is shutting it down.]

Meanwhile, more than half the doctors are working for hospitals and other institutions, rather than working in private practice. And hospitals are using their new doctor employees to get more money out of Medicare. Even the Medicare Payment Advisory Commission (MedPac), the federal agency responsible for overseeing Medicare fees, has noticed – although belatedly – that hospitals can charge Medicare more for the same services than doctors can charge if they bill Medicare as an independent practitioner. As reported in The New York Times:

Medicare pays $58 for a 15-minute visit to a doctor’s office and 70 percent more – $98.70 – for the same consultation in the outpatient department of a hospital. The patient also pays more: $24.68, rather than $14.50.

Likewise, the commission said, when a Medicare beneficiary receives a certain type of echocardiogram in a doctor’s office, the government and the patient together pay a total of $188. They pay more than twice as much – $452 – for the same test in the outpatient department of a hospital. (The test is used to evaluate the functioning of the heart.)

…From 2010 to 2011, the commission said, the number of echocardiograms provided to Medicare beneficiaries in doctors’ offices declined by 6 percent, but the number in hospital outpatient clinics increased by nearly 18 percent.

On the positive side, a major unintended consequence of health reform is the boost to consumer directed health care. In the health insurance exchanges, the cheapest plans are going to have deductibles of $5,000 or more. And lots and lots of people are going to choose the cheapest plans. Avik Roy reports that employers are going for Health Savings Accounts (or Health Reimbursement Arrangements) in a big way. Bottom line: millions of patients are going to be buying care with their own money, rather than with a third-party payer’s money.

I’m sure this thought is causing heartburn for those on the left who view high deductible plans as “under-insurance.” But this development is viewed as opportunity by health care entrepreneurs.

One study is predicting that the number of walk-in clinics is going to double in the next few years. The Obama administration doesn’t like them because they are not part of integrated care/coordinated care/medical homes/etc., etc., etc. Even so, they are doing what the ACOs are unlikely to do: lowering costs, increasing quality and improving access to care.

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