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The Buck Stops – Where?

Insurance companies aren’t completely innocent, but Obama is responsible for the turmoil in the health insurance market.

Writing in the National Journal,  Sam Baker tries his darnedest to minimize some of the effects of Obamacare.

He notes that some people are concerned about the limited networks offered by some of the plans on the Exchanges. In fact, he writes, “Republicans have pounced on the narrow networks, citing them as further proof that President Obama lied when he said the Affordable Care Act would not cost people their doctors.”

But Mr. Baker wants you to know that none of this is Obama’s fault (nothing ever is) — “…it’s a market dynamic that Obamacare really didn’t cause: It’s a business balance between price and quality that existed long before the law was created.”

He even quotes GW professor Sara Rosenbaum (who couldn’t possibly be biased) as saying, “The administration has shouldered the blame for things that are so vastly beyond its control, and has attempted valiantly to work these problems out.”

You see, it’s just that those mean old insurers have chosen narrow networks in order to lower premiums — Obamacare has nothing to do with that decision even though it is valiantly shouldering the blame. Not only that, but “it’s largely up to the states to determine whether an insurance plan’s network is adequate enough to actually make those benefits accessible.”  So poor Obama is being blamed for things that are entirely the doing of insurance companies and state regulators.

But before you get out your hankies to weep for Obama’s victimhood let’s consider a couple of things:

Maybe insurers are trying to do what they can to keep down costs despite those extraordinary requirements.

Mr. Baker also minimizes the effect of skinny networks by suggesting that the main consequence is that there are fewer providers available and that people who were previously uninsured didn’t have a doctor to lose, so wouldn’t be bothered. The problem with that line of thinking is that it isn’t just the number of providers, but the quality of those providers. If an insurance company reduces its payments by, say 40%, the best doctors and hospitals will decline to participate. They are in high demand and don’t need to cut their fees to attract new patients. That leaves the second-rate doctors in the network. The newly insured will be getting second-rate care. One might think even Democrats would be concerned about that.

Now, I wouldn’t let the insurers off the hook here, either. Reducing their networks is not the only way to hold down premium costs. They might, for instance, simply limit what they pay to a fixed amount regardless of who provides the service. They could agree to pay $65 for a doctor’s office visit — any doctor, anywhere. You might go to Dr. Jones who charges $65, while I much prefer Dr. Smith who charges $85. I am willing to pay the extra $20 to see the doctor I trust. The insurer is no worse of because Smith is not in the network. It pays the same $65 regardless.

This doesn’t have to be confined to physician visits. WellPoint in California has decided to pay a flat $30,000 for a joint replacement regardless of the hospital. John Goodman of the National Center for Policy Analysis puts it like this:

Like other third-party payers, WellPoint discovered that the charges for hip and knee replacements in California were all over the map, ranging from $15,000 to $110,000. Yet there were 46 hospitals that routinely averaged $30,000 or less. So WellPoint entered an agreement with CalPERS (the health plan for California state employees, retirees and their families) to pay for these procedures in a different way.

The results were dramatic. Costs dropped by almost 20% in just a couple of years as facilities dropped their prices to attract CalPERS enrollees.

So, yes, insurers could get a lot more creative about how to lower costs, but it is beyond comprehension that Mr. Baker and other administration apologists are now claiming that Mr. Obama is somehow not responsible for the turmoil in the health insurance market. Will these people ever take responsibility for anything?

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