Physician Patient

Archive for December, 2013

Minnesota hospital-clinic and healthplan mergers

Monday, December 16th, 2013

Mergers are for Market Control, Not Competition

BY Robert W. Geist


Lee Schafer’s column “Sanford’s critics asked the wrong questions” (April 13), was both right and wrong. It missed the big picture regarding the latest massive merger proposed between two Midwest hospital corporations — Sanford of South Dakota and Fairview of Minnesota.

First, Schafer was right that Attorney General Lori Swanson’s hearing was partly political theater. That is one way to dramatize a merger proponent’s double-speak. They invariably claim that mergers will mean better care, better community health, and vast savings of money, all from the “synergy” in their newest “coordinated” big box “medical home.”

But Schafer is wrong to say that mergers arise because of “competitive pressures in health care delivery…” This is to believe in “new environment” wonk talk intended to cover-up what is really going on in the nation’s medical sector — frantic efforts to control costs by rationing care.


What does this big picture look like?

Cost control under the Affordable Care Act (ObamaCare) depends primarily on “Accountable Care Organizations” (ACOs), as noted in a recent New England Journal of Medicine article by Jonathan Oberlander, an ObamaCare advocate.

ACOs are commonly envisioned, as hospital and medical staffs united in mini-provider/insurance corporations. But they do not have insurance organization capabilities — a sales force, actuaries, or means to police use of corporate money. Importantly, they lack the ability to accumulate tax-free reserves. Of necessity, they must seek arrangements with, or be acquired by, a commercial HMO corporation.


How would this work?

ObamaCare transfers to these ACO providers the role of gatekeeper previously filled by the old mega “payer” gatekeepers (HMOs and government agencies). The mega “payers” will auction their client populations to ACOs, who will bid fixed annual capitation rates to service the insured. To avoid bankruptcy, the mini-ACO insurance corporation will have to find ways to restrict the utilization of the benefits it insures — called by some, “bedside rationing.”

To legalize ACO-partner collusive capitation bids and in-house distribution of “savings” from rationing care, whether in “non-profit” or for-profit corporate arrangements — the new ObamaCare “Patient Protection” law requires federal waivers from…patient protection laws (an irony that escapes the attention of all but the agenda ridden and cynics). In 2011, the Federal Trade Commission (FTC) granted waivers for ACO violations of anti-trust law (mergers of colluding providers, including in some cases with HMOs), and the Center for Medicare and Medicaid Services (CMS) granted waivers for violation of federal anti-self-referral laws and anti-fee-splitting laws (“gainsharing” ACO rationing profits with the “payers”).


This is the “new environment” to which merger makers allude.

Both the mega HMO and mini ACO corporations see self-preservation in a market controlled by a massively merged, federally protected cartel-like utility system being created with the implementation of ObamaCare. Cartel cost control involves the price fixing of insurance and services and franchising between insurance corporations and their ACO delivery “partners.” These are favored, because they are profit-driven to restrict use of “payer” money for patient care.

Some ACO developers see serial mergers and acquisitions over the next decade that will result in an oligopoly of four massive HMO-ACO “health services” controlling the nation’s entire medical sector — a frightening “too big to fail” scenario.


Public-private cartels are not competition. They are another more powerful gatekeeper scheme to control costs by rationing the supply of care. Our misfortune is that such managed care rationing has failed for decades.

That’s the big picture.

Robert W. Geist, a physician, lives in North Oaks.

Mounting problems with the ACA (Obamacare)

Monday, December 16th, 2013

ObamaCare’s Troubles Are Only Beginning

Be prepared for eligibility, payment and information protection debacles—and longer waits for care.



MICHAEL J. BOSKIN Wall Street Journal
Dec. 15, 2013 6:24 p.m. ET
The White House is claiming that the website is mostly fixed, that the millions of Americans whose health plans were canceled thanks to government rules may be able to keep them for another year, and that in any event these people will get better plans through ObamaCare exchanges. Whatever the truth of these assertions, those who expect better days ahead for the Affordable Care Actare in for a rude awakening. The shocks—economic and political—will get much worse next year and beyond. Here’s why:The “sticker shock” that many buyers of new, ACA-compliant health plans have experienced—with premiums 30% higher, or more, than their previous coverage—has only begun. The costs borne by individuals will be even more obvious next year as more people start having to pay higher deductibles and copays.

If, as many predict, too few healthy young people sign up for insurance that is overpriced in order to subsidize older, sicker people, the insurance market will unravel in a “death spiral” of ever-higher premiums and fewer signups. The government, through taxpayer-funded “risk corridors,” is on the hook for billions of dollars of potential insurance-company losses. This will be about as politically popular as bank bailouts.

This December 3, 2013 photo shows a message indicating that a connection cannot be established with the insurance marketplace internet site. Bloomberg News

The “I can’t keep my doctor” shock will also hit more and more people in coming months. To keep prices to consumers as low as possible—given cost pressures generated by the government’s rules, controls and coverage mandates—insurance companies in many cases are offering plans that have very restrictive networks, with lower-cost providers that exclude some of the best physicians and hospitals.

Next year, millions must choose among unfamiliar physicians and hospitals, or paying more for preferred providers who are not part of their insurance network. Some health outcomes will deteriorate from a less familiar doctor-patient relationship.

More IT failures are likely. People looking for health plans on ObamaCare exchanges may be able to fill out their applications with more ease. But the far more complex back-office side of the website—where the information in their application is checked against government databases to determine the premium subsidies and prices they will be charged, and where the applications are forwarded to insurance companies—is still under construction. Be prepared for eligibility, coverage gap, billing, claims, insurer payment and patient information-protection debacles.

The next shock will come when the scores of millions outside the individual market—people who are covered by employers, in union plans, or on Medicare and Medicaid—experience the downsides of ObamaCare. There will be longer waits for hospital visits, doctors’ appointments and specialist treatment, as more people crowd fewer providers.

Those with means can respond to the government-driven waiting lines by making side payments to providers or seeking care through doctors who do not participate in insurance plans. But this will be difficult for most people.

Next, the Congressional Budget Office’s estimated 25% expansion of Medicaid under ObamaCare will exert pressure on state Medicaid spending (although the pressure will be delayed for a few years by federal subsidies). This pressure on state budgets means less money on education and transportation, and higher state taxes.

The “Cadillac tax” on health plans to help pay for ObamaCare starts four years from this Jan. 1. It will fall heavily on unions whose plans are expensive due to generous health benefits.

In the nearer term, a political iceberg looms next year. Insurance companies usually submit proposed pricing to regulators in the summer, and the open enrollment period begins in the fall for plans starting Jan. 1. Businesses of all sizes that currently provide health care will have to offer ObamaCare’s expensive, mandated benefits, or drop their plans and—except the smallest firms—pay a fine. Tens of millions of Americans with employer-provided health plans risk paying more for less, and losing their policies and doctors to more restrictive networks. The administration is desperately trying to delay employer-plan problems beyond the 2014 election to avoid this shock.

Meanwhile, ObamaCare will lead to more part-time workers in some industries, as hours are cut back to conform to arbitrary definitions in the law of what constitutes full-time employment. Many small businesses will be cautious about hiring more than 50 full-time employees, which would subject them to the law’s employer insurance mandate.

On the supply side, medicine will become a far less attractive career for talented young people. More doctors will restrict practice or retire early rather than accept lower incomes and work conditions they did not anticipate. Already, many practices are closed to Medicaid recipients, some also to Medicare. The pace of innovation in drugs, medical devices and delivery is expected to slow significantly, as higher taxes and even rationing set in.

The repeated assertions by the law’s supporters that nobody but the rich would be worse off was based on a beyond-implausible claim that one could expand by millions the number of people with health insurance, lower health-care costs without rationing, and improve quality. The reality is that any squeezing of insurance-company profits, or reduction in uncompensated emergency-room care amounts to a tiny fraction of the trillions of dollars extracted from those people overpaying for insurance, or redistributed from taxpayers.

The Affordable Care Act’s disastrous debut sent the president’s approval ratings into a tailspin and congressional Democrats in competitive districts fleeing for cover. If the law’s continuing unpopularity enables Republicans to regain the Senate in 2014, the president will be forced to veto repeated attempts to repeal the law or to negotiate major changes.

The risk of a complete repeal if a Republican takes the White House in 2016 will put enormous pressure on Democratic candidates—and on Republicans—to articulate a compelling alternative to the cost and coverage problems that beset health care. A good start would be sliding-scale subsidies to help people buy a low-cost catastrophic plan, purchasable across state lines, equalized tax treatment of those buying insurance on their own with those on employer plans, and expanded high-risk pools.

— Mr. Boskin, an economics professor at Stanford University and senior fellow at the Hoover Institution, was chairman of the Council of Economic Advisers under President George H.W. Bush.