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Fri May 16, 2014, 03:47 AM

More Insured, but the Choices Are Narrowing

The New York Times
More Insured, but the Choices Are Narrowing

In the midst of all the turmoil in health care these days, one thing is becoming clear: No matter what kind of health plan consumers choose, they will find fewer doctors and hospitals in their network — or pay much more for the privilege of going to any provider they want.

These so-called narrow networks, featuring limited groups of providers, have made a big entrance on the newly created state insurance exchanges, where they are a common feature in many of the plans. While the sizes of the networks vary considerably, many plans now exclude at least some large hospitals or doctors’ groups. Smaller networks are also becoming more common in health care coverage offered by employers and in private Medicare Advantage plans.


Nonetheless, for people who are directly picking plans in the open markets, insurers say price is turning out to be critical. People “are weighing affordability and breadth of network,” said Karen Ignagni, the chief executive of America’s Health Insurance Plans, an industry trade group. “What we’re finding is individuals are experiencing a preference for affordability,” she said.

White House defends cost-containment efforts in health-care reform bills


Critics of the Democratic bills point to cost control as a chief deficiency. Karen Ignagni, president of America's Health Insurance Plans, said the Senate bill includes only "pilot programs and timid steps" to reform the health-care delivery system, "given the scope of the cost challenge the nation faces."

Unless lawmakers institute changes across the entire system, Ignagni said in a statement Wednesday, "Health costs will continue to weigh down the economy and place a crushing burden on employers and families."

Comment by Don McCanne of PNHP: During the health reform process, AHIP health insurance lobbyist Karen Ignagni stated repeatedly that health insurance is not going to be affordable unless lawmakers do something to control health care costs. So is health care cost containment a function of the government or a function of private insurers? Let see how this is playing out.

According to Ignagni, in 2009 the Senate bill - the Affordable Care Act - contained only timid steps to control costs. It was clear that the government was not going to play any major role in controlling costs - certainly not in regulating health care prices, as they do quite successfully in most other wealthy nations.

The public sector uses administered prices. The private sector depends more on price competition within the marketplace. Because the government did not act, the insurance industry has to depend on private market approaches, even though Kenneth Arrow had shown long ago that market dynamics do not work in health care.

In markets, price competition is an important tool. But in health care, only at the margin can price shopping be effective. The private insurers have been inserted as our price shopping intermediaries. They force hospitals and physicians to compete on price, and they then exclude from their plans those that fall short of the lowest bids. Even though they claim that they select their networks based on quality, it is the lower prices that allow them to keep their insurance premiums competitive.

This process is not new. Establishing plan networks with contracted payment rates was the most important innovation during the managed care revolution. That did slow temporarily the rate of increase in health care costs. What is new is that the plans are trying to drive much harder bargains with providers that want to be part of their now narrower networks. In response, hospitals and physicians are now consolidating in order to be “must have” providers that insurers need for their networks. Of course, that weakens the negotiating position of the insurers. So we are seeing a loss of choice of health care professionals and institutions in exchange for only very modest reductions in health insurance premiums.

More recently, Karen Ignagni is claiming that consumers are choosing “affordability” (lower premiums) over “breadth of network” (greater choice of providers). According to the industry, it is the patients who elect to go the cheap - a classic example of blaming the victim. Most people buying insurance are relatively healthy but are concerned about the very high premiums, so they will choose plans with lower premiums, often not even knowing which providers are in the networks. But that does not mean that they would prefer to give up access to physicians and hospitals whom they trust and where they believe that they could get the best care.

Thus we can have distorted price competition in the dysfunctional health care marketplace with the self-serving insurers functioning quite ineffectively as our price shopping intermediaries as they take away our choices in health care, or we can have a single government entity that uses administered pricing in a system that allows us free choices in health care and makes it affordable for all through progressive public funding. Price competition in establishing provider networks is a very weak tool to contain costs, and losing choices in health care is too great of a price to pay.

We do not have to choose between affordability and breadth of network. We can make health care affordable for all of us while getting rid of the insurers and their restrictive networks, that is if we’re willing to quit playing the victim role.

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