May 28, 2014

Don’t Confuse Health Insurance With Health Care

By: Hadley Heath Manning

Home health care worker and an elderly couple

Forty-six percent of respondents in a recent American College of Emergency Physicians survey said they’d seen an increase in emergency room visits in 2014, compared to 23 percent who had seen a decline. Fully 86 percent of these physicians say that they expect emergency room use to increase in the next three years.

These survey results underscore one of the failures of the 2010 health reform law – namely, the confusion of health care with health insurance.  Even if Obamacare reaches its goal of reducing the number of Americans without insurance, it cannot guarantee that patients –insured or otherwise – can access health care services, meaning more people may seek care in an emergency department setting.

Supporters of the health law no doubt would argue that health insurance and health care are closely tied, and traditionally they have been.  Americans with health insurance have typically been able to access health care more easily than those who are uninsured.

But not all insurance is created equal. Take for example the government–provided insurance for low-incomes people: Medicaid. Compared to private insurance, Medicaid reimburses doctors only about 56 percent. As a result, about a third of primary care physicians closed their doors to Medicaid patients, even before the program’s expansion under the Affordable Care Act.

Unsurprisingly, this makes it harder for Medicaid patients to get appointments with primary care doctors. Too often, Medicaid patients don’t get the preventative care they need, resulting in higher emergency room use and worse health outcomes for this population.

Instead of reevaluating the Medicaid program and addressing these issues, Obamacare’s expansion simply seeks to add millions more into this poorly functioning system. Early evidence from the state of Oregon shows that the Medicaid expansion led to a 40-percent increase in emergency room use among new beneficiaries.

Troublingly, the Obamacare exchange plans mimic Medicaid’s too-low reimbursement rates and too-small doctor networks. For all the promises of broader coverage, an insurance plan is only as good as the providers who will accept it.

As more Americans demand more health care services, the result will be a shortage. Absent Obamacare, the United States was already on track to face a physician shortage.  The Association of American Medical Colleges says that next year, there will be 30,000 fewer doctors than needed to meet the country’s health care needs, and this gap will widen as more people gain coverage.

Shortages in health care are not necessarily as evident as widgets missing on an empty shelf; they manifest in longer waiting times for visits, treatments, or procedures, or in fewer minutes spent with a physician who has a bigger patient load. Or, as emergency physicians predict, more people may end up seeing care in the ER.

It’s easy to come up with the talking point that a government health program expands insurance, especially if participation is mandatory (as is the case with Obamacare). Similarly, it’s relatively easy to manipulate costs with price controls and subsidies. What’s much harder is matching each patient’s needs with the resources available in our health care system. In other words, matching demand with supply.

The shortcoming of a government-centric approach to health care is basically what economist F. A. Hayek would have called a knowledge problem. Not only does the government lack the knowledge of each American’s individual preferences in health care and insurance, but it’s simply not agile enough to allow all the moving pieces within our health system to respond to changes quickly.

A freer market in health care services would do a better job adjusting to this mismatch of supply and demand.  The economic incentives in our current health system encourage medical students to choose specialization over primary care. In fact, Obamacare’s impact on reimbursement and administrative costs may be enough to influence many doctors to “go Galt” or give up the medical profession entirely.

Instead, we should pursue public policies that allow primary care doctors the freedom to sell their services directly to patients with as little influence from insurers and government agencies as possible.  This focus on health care should have been the starting point for health reform, not health insurance coverage.

So President Obama or any representative from the Department of Health and Human Services shouldn’t make the mistake of referring to Obamacare enrollment as  “quality, affordable health care” for millions of people.  In doing so they are inappropriately confusing the term health care with health insurance. ObamaCare may expand insurance, but it cannot deliver on health care.

Follow Hadley Heath on Twitter. Image courtesy of Big Stock Photo.