Millions of Reasons to Repeal Obamacare, But Here’s Another

The Examiner reports that Obamacare’s new Medicare payment rules have led to hospital consolidation, with small practices selling out to big hospitals, which is driving up costs for consumers.  Who could have predicted that Obamacare would result in cost-shifting to consumers?!  Heritage predicted it, for one, but there were others who began to observe this trend from early on.

Jordan Rau of Kaiser Healthcare News Blog noted soon after the law’s passage:

new study in Health Affairs provides more reason for concern that the trend of hospital consolidation, which may have been accelerated by the health care law, will lead to higher prices for the privately insured in places where hospitals have lots of market power.”

This problem is complex, but in order to better understand exactly how Obamacare does this, it’s helpful to look at one very specific failure of Obamacare: Accountable Care Organizations (ACOs).  An ACO is a new, federally financed mechanism for health care delivery via Medicare. 

Rita E. Numerof explains that ACOs are intended to “provide incentives to health care organizations to reduce costs and improve quality.”  However, in reality, they will only “concentrate more and more power into fewer and fewer organizations.”  The result is a system that “undermines competition and entrepreneurship—the bedrock of innovation and job growth in this country.”

The ACO model is designed to encourage different health care organizations to work together to reduce costs.   The problem with this, Numerof explains, is that “Past health care initiatives that have relied on organizational structure to address the complex challenge of delivering higher quality at lower costs have not succeeded in improving either efficiency or performance.”   So what’s to make us think that it will work now?  Nothing.

Such a system fails to empower consumers to be stakeholders in their own care because it does not allow for market-based solutions or institutional accountability.  Moreover, it creates an unfair competitive advantage for large organizations which are often not under financial pressure to improve efficiency.

In other types of markets, competition is constantly encouraging producers to improve their products to attract more consumers.  However, in health care services, where “employers contract with insurers who inter into arrangements with providers,” competition is limited, and “the real consumer—the patient—has no part in driving that competition.”

Heritage explains:

Obamacare expands central planning and tightens price controls on providers. These recycled mechanisms have yet to show any success in driving down costs without harming patients’ access and quality of care. Even the program’s chief accountant says many Medicare providers cannot survive the cuts.”

The bottom line is that Obamacare is not patient-consumer centered, it is not market driven, it does not increase institutional accountability, and it has not and will not result in lower costs for consumers.   In fact, it seems the only thing it will accomplish is lower quality, less accessible health care for all.

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