Artificially creating dysfunctional competition through limited-network plans
Navigating the Health Care Maze
By Abby Goodnough
The New York Times, June 12, 2012
Even if the Supreme Court strikes down the federal mandate, many people believe that some form of exchanges could still be crucial to expanding coverage in a number of states. In Massachusetts, insurers bid to participate in the Connector — offering plans that include some level of hospitalization, prescription drugs, maternity care and other services deemed essential by the state — and the Connector uses its market leverage and unique guidelines to promote innovation and competition among them.
"It can — and it has — helped people find more affordable options than they otherwise knew existed," said Glen Shor, executive director of the Connector.
A vast majority of the people who have gotten insurance through the Connector since the economic downturn began have not had to worry about deductibles because they qualify for subsidized coverage. In that program, the big challenge has been keeping costs down as enrollment has steadily climbed.
One strategy has been to reward the lowest-cost insurers in Commonwealth Care, the subsidized program, by driving customers to them. (For example, people who pay no premium because of their income can choose between the two lowest-cost insurers.) Some insurers have responded by limiting which doctors and hospitals customers can use.
Such limitations are controversial, but Mr. Shor said limited-network plans are just the kind of cost-saving innovation that exchanges are well-positioned to bring about by promoting competition in the market.
By Don McCanne, MD
One of the greatest strategic errors in this entire health care reform process has been to fixate on the promotion of competition in the health care market. An example of how deviant this has been is the push to expand limited-network plans.
Think about it. What we want is our choice of hospitals and our health care professionals. What the insurance industry has done is to package their own selection of hospitals and professionals into limited networks, and then prohibit our access to out-of-network care unless we pay prohibitive financial penalties. For this, collectively we are paying even more in wasteful administrative costs. It is totally illogical to pay for extra administrative services designed to artificially take away our choices in the health care market.
Think of what it would be like if we did that with housing. Imagine the government mandating us to select a residential benefits plan. Suppose when we were ready to rent or purchase a residence the third party administrative agency told us that we could have access to only residential buildings within their limited network, though we would have our choice of bronze, silver, gold or platinum houses or apartments. Adding to the insult, collectively we would have to pay extra to this administrative agency that artificially takes away our choices.
What if third parties in the private market were able to corner the food industry and contract with them to create artificial limited-network food plans, with a government mandate that we had to select one of the plans? Within the segregated food market you could shop bronze, silver, gold or platinum selections based on the food insurance premium paid. You could shop outside of the segregated markets, but only by paying large financial penalties. Again, collectively we would be paying extra to meet the costs of this intrusive third party administrator that would be taking away our choices.
Shifting competition in food markets from producers and retailers to an artificial third party administrator, or shifting competition in housing from the builders or landlords to an artificial third party administrator is about as logical as shifting competition in health care from the hospitals and professionals to an artificial third party administrator, all of which would charge us extra for taking away our choices. We wouldn't tolerate that in food or housing. Why should we continue to tolerate it in health care?
Another word about our obsession with competition. The policy community recognizes that much of the dysfunction in health care is related to fragmentation of our system - both in financing and in health care delivery. Efforts are being made to integrate health services to provide an efficient, coordinated flow of health care. These efforts require cooperation between the various sectors of the health care delivery system. Competition is a divisive, destructive, evil force when it occurs within a system that should be joining together in cooperation for the public good.
Private insurers compete. Public administrators cooperate. In health care, we need more cooperation. 'Nuff said?