Obamacare Is Fixing Insurance. Now We Need to Fix Health Care Providers.

Commentary about business and finance.
Jan. 24 2014 12:46 PM

The Next Health Care Reform

Once everyone has insurance, we need to fix health care providers.

Doctor and patient
Because Medicaid payments to health care providers are relatively stingy, many providers refuse to treat Medicaid patients.

Photo by Thinkstock

A Gallup survey released Thursday showed a large and sudden decline in the share of Americans lacking health insurance. It’s a potent reminder that despite the problematic launch of HealthCare.gov and continued discontent around many aspects of the Affordable Care Act, it is fundamentally succeeding in providing health insurance to people who previously lacked it. And that progress is likely to continue.

One of the main means through which Obamacare is expanding access to health insurance is to give states the money they need to expand their Medicaid programs. Many Republican-controlled states have so far declined to do so. But as Jonathan Bernstein points out, GOP gubernatorial candidates in the states that have expanded aren’t promising to roll the expansion back. And indeed, Republican governors in non-expanded states aren’t proposing to scale back existing programs. As Paul Pierson and other political scientists have argued, social welfare programs exhibit a strong ratchet effect whereby once expanded they rarely shrink.

In other words, starting in 2014 and continuing in years to come, more Americans are going to be able to get health care services.

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But far from an end to the cause of health care system reform, this is really just the beginning of a new chapter. If one extra person gets health insurance, she can just walk up and use the health care system we have. But if millions of additional people get insurance, we need to build a system capable of accommodating them. Even in a down economy, the country is not full of unemployed doctors and half-empty hospitals.

That’s not to say there’s been no structural reform in the Affordable Care Act. It contains a number of provisions designed to restrain aggregate health care spending, most notably by reforming the way Medicare pays medical care providers. In fact, health care spending has been slowing down in recent years, and there’s some evidence that Obamacare deserves the credit. Still, that slowdown was happening before the major expansion of insurance coverage kicked in. It’s useful and important, but it doesn’t precisely speak to the question of whether the system is prepared to accommodate an influx of new patients.

This is a particular concern for recipients of the new Medicaid plans. The Affordable Care Act relies on Medicaid expansion to cover many new people because Medicaid is one of the cheapest ways to deliver health insurance. But the main reason it’s so cheap is that its payments to health care providers are relatively stingy. Since the payments are stingy, some providers refuse to treat Medicaid patients. Since Obamacare gives non-Medicaid insurance to many currently uninsured people, providers may actually find it easier than ever to fill their schedules with high-paying non-Medicaid customers—even at a time when Medicaid expansion means we need more providers. 

The good news is that the steps that could expand health care access on the supply side aren’t necessarily as ideologically contentious as Obamacare itself.

For example, a grab bag of states—ranging from liberal Maryland and Rhode Island to conservative Idaho and Utah—allow nurse practitioners to diagnose and treat a variety of ailments without a doctor’s involvement. Other states, including big ones like California, Texas, New York, Florida, and Illinois, do not. Evidence suggests that health outcomes are no worse for patients treated by independent nurse practitioners. If they’re wise, more states will liberalize their “scope of practice” laws and let nurse practitioners do more autonomously. That will directly increase the supply of health care services, and also lay the groundwork for even more supply in the future, since it’s easier to qualify as a nurse practitioner than as an M.D.

The doctors lobby is strong enough in some state legislatures to block smart, money-saving deregulations. But that’s no reason for taxpayers nationwide to foot inflated bills. Because the federal government is so deeply involved in the financing of health insurance, it shouldn’t leave this kind of regulatory issue purely up to the states. Congress ought to use the power of the purse strings to “encourage” states to emulate best practices and let nurses do more. 

Another important trend to watch is hospital consolidation. The industry has seen an enormous wave of mergers in recent years, justified in terms of economies of scale and risk management. There’s something to that, but officials and the public also have to keep their eyes on reduced competition and price gouging. The worry isn’t really about the creation of national monopolies. It’s more about the fact that health care markets are fundamentally local—the relevant question for a patient isn’t how many hospital networks there in the country, but how many there are in a given city or metropolitan area. Federal antitrust regulators haven’t traditionally had much to say about the health care industry, but that needs to change.

Last but by no means least, we need to bust up constraints on the total supply of doctors. American doctors are paid more than doctors in almost any other country, and yet we have fewer doctors per capita. One possible solution would be immigration: creating clear pathways for foreign-born medical professionals to come to this country and work, especially general practitioners who are in short supply compared with higher-paid specialists. We should also be training more doctors at home. Medical schools have gotten steadily more selective over the past generation rather than expanding with the size of the population, and Congress has refused to pony up the money to finance more residencies.

None of these fixes is easy, exactly. But none of them cuts to the core of partisan and ideological conflict in America the way the Affordable Care Act did. And all of them are necessary to make the ACA work in the long term. Making sure everyone has access to health insurance is important, but to make sure everyone has access to quality health care, we need the infrastructure to deliver it.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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