Another Way Obamacare Will Raise Costs
Yesterday a health care institute released its first analysis of a newly created database featuring claims information provided by several private insurers. The report found that from 2009 to 2010, health costs rose by 3.3 percent, even though actual utilization declined for many health care services. The reason for this seeming anomaly? Price levels charged by medical providers rose – meaning individuals paid more to receive the same, or in some cases less, medical services.
This development is particularly troubling, given that Obamacare has raised concerns that consolidation among medical providers will encourage powerful hospitals and physician groups to charge patients and insurers more – thus raising costs rather than lowering them through better coordination of care. A New York Times article from late 2010 noted that “consumer advocates fear that the health care law could worsen some of the very problems it was meant to solve,” as a “growing frenzy of mergers involving hospitals, clinics, and doctor groups” could prompt providers to raise their prices after establishing a dominant market position.
Other studies have confirmed these anecdotal results. One analysis released last November found that “the integration of hospitals and physicians into the accountable care organizations encouraged by [Obamacare] is expected to accelerate provider consolidation in local markets.” And the result of that consolidation? “Hospitals in concentrated markets charge significantly higher prices to private payers than do their peers in more competitive markets. Furthermore, these prices are significantly above their direct costs of providing care.” For instance, prices for angioplasty procedures were nearly 50% higher in consolidated (i.e., non-competitive) markets than in competitive markets.
Of course, some conservatives argue that a move away from third-party payment, and moves to make patients more aware of and sensitive to the price of health care services, would mitigate against potential adverse effects coming from provider consolidation. But Obamacare reduces these consumer-oriented incentives – it further entrenches the third-party payment system, and the law’s individual mandate, coupled with the restrictions placed on government-defined insurance, will discourage rather than encourage individuals to take control of their own health care. It’s one more reason why reports like the analysis issued yesterday – showing patients are paying more but getting less – could become par for the course in a health care system governed by Obamacare.