Obamacare allowed health providers to form vertical monopolies, raise costs

It took 13 years, but Elizabeth Warren is at long last acknowledging that ObamaCare has increased healthcare prices and industry consolidation. Who would have believed it? Government price controls and profit caps have resulted in unintended consequences.

(Elizabeth Warren is a Senator from the Democratic Party who was a Presidential candidate in the 2020 election. She came in close second place to getting the nomination, right behind Joe Biden)

The Massachusetts Senator and Republican Senator Mike Braun of Indiana this week wrote a letter to the Health and Human Services Department inspector general complaining that the nation’s largest health insurers are dodging ObamaCare's medical loss ratio (MLR). The result, they say, is higher costs for patients.

The MLR is a de facto cap on profits. It requires that insurers spend at least 80% or 85% of premium dollars on medical claims. Democrats claimed the rule would make health spending more transparent and reduce insurer spending on overhead. “Consumers will receive more value for their premium dollar,” the Obama HHS said.

Instead, as we’ve been pointing out for years, the rule has spurred insurers to merge with or acquire pharmacy benefit managers (PBMs), retail and specialty pharmacies, and healthcare providers. This has made healthcare spending less transparent since insurers can shift profits to their affiliates by increasing reimbursements.

The Senators cite a Journal news story in September that found insurers were paying affiliated specialty pharmacies more than 20 times for generic drugs what manufacturers charged. Patients can get slammed by hefty out-of-pocket cost for these drugs if they have high deductibles or co-insurance requirements.

“Even worse,” the Senators write, “insurers can use their PBMs to steer patients to their own pharmacies, while disadvantaging competing pharmacies with lower reimbursements and predatory fees.” In a 2017 editorial we highlighted complaints that CVS’s PBM was paying independent pharmacies less than the wholesale drug cost while billing Medicaid for significantly more.
The Senators complain that insurers have evaded the MLR by vertically integrating with other companies in the healthcare supply chain. “Cigna, United Health, and CVS Aetna each own or are affiliated with the country’s three largest PBMs,” they write. Insurers are also increasingly buying providers. CVS this year acquired primary care provider Oak Street Health.

“Just a year after the MLR requirement was put in place, UnitedHealth Group formed Optum, which now includes a PBM and a specialty pharmacy, as well as over 70,000 physicians,” the Senators write. Coincidence? “Today, UnitedHealth Group sends 25 percent of its medical claim revenue to its Optum subsidiaries--in other words, to itself.”

They correctly point out that an insurance conglomerate can inflate medical payments to affiliates to comply with the MLR “while keeping more money for itself.” Market competition would normally act as a check on premiums and profits. However, by driving industry consolidation, ObamaCare has reduced healthcare competition and increased costs.

Hospitals have acquired independent physician practices to gain more leverage with vertically integrated insurers, allowing them to bill more for services. Independent pharmacies have closed or been sold to the giants. It’s no surprise, then, that health premiums have risen on average about 20% faster since 2011 when the MLR took effect than in the five preceding years.

ObamaCare’s market distortions are spurring a bipartisan movement in Congress to regulate PBMs. It’s a familiar story: Big government intervention creates incentives and raises costs that help big business, and then politicians demand more government intervention to fix the distortions they caused.​

Elizabeth Warren Has an ObamaCare Epiphany, The Wall Street Journal, Nov 2023
https://www.msn.com/en-us/money/other/elizabeth-warren-has-an-obamacare-epiphany/ar-AA1kunTI


Once again, it looks like insurance companies have found a way to rig the system.
So it looks like the passage of one comprehensive system of laws has caused a problem, and now it looks like they're going to have to pass another law to patch the problem.
Only I suspect this new law, to limit monopolies, will end up having unintended effects combined with the original package and will push up prices and reduce the possibility for health savings, which was part of the whole package deal in Obamacare. It was argued that through vertical integration, insurance companies would be able to achieve cost savings.

I bet the insurance companies only avoided pouring money behind opposing Obamacare, back during the time it was passed, because of provisions like this that they knew would benefit them. So part of this does seem like a little bit of a "bait and switch".

 

What’s that mean for working folks with health insurance provided thru their employer, with the employee paying a percentage of the coverage? Well - my Chevy coverage as been reduced to Yugo…. with only slightly higher out of pocket expenses, but a significant lose of coverage.

 

republicans not allowing the public option is causing higher prices

 

This article provides a long explanation why Obamacare ended up driving insurance coverage into monopolies.

Obamacare Works Better With Monopoly Insurers – People's Policy Project (peoplespolicyproject.org)

It had to do with incentives built into Obamacare for the ACA's market exchanges. If an insurance company became the only one in the marketplace providing coverage for a local area, then it could increase the price difference between the "lowest cost silver plan" and "second lowest cost silver plan". With competition out of the way, an insurance provider could game the system and maximize the government subsidy provided to consumers.
This drove insurance companies to consolidate, to allow their lower income consumers to get a bigger subsidy that could be used to help pay for the insurance.

 

I thought Democrats forcing mandatory health insurance was the problem.

 

the individual mandate was a Republican add on, not in the original Obama plan

http://swampland.time.com/2010/02/16/health-care-republicans-oppose-their-own-idea/

"In fact, says Len Nichols of the New America Foundation, the individual mandate was originally a Republican idea. “It was invented by Mark Pauly to give to George Bush Sr. back in the day, as a competition to the employer mandate focus of the Democrats at the time.”"

Republicans also tried to push the individual mandate under Clinton...

 

https://www.axios.com/2021/06/17/supreme-court-affordable-care-act-trump

Republicans tried to oppose Obama’s ACA

 

Democrats are eager to revive their health care playbook from 2018, when the party rode a "blue wave" to the House majority by aggressively campaigning on Republican attempts to gut Obamacare.

https://www.axios.com/2023/11/28/trump-obamacare-aca-alternatives-democrats-biden

 

Really it was about bureaucratizing small practices out of business to drive more folks to the corporate hospitals. With less competition, we can be gouged more thoroughly, and then we'll demand what the corporations and govt have wanted all along- single payer. And if you thought it was easy to hide corruption now, this aint nothin compared to a centralized federal bureaucracy.

 

You're free to form your own public option. The reason Republicans didn't want a public option was they were afraid the public option would get unfairly subsidized more than the private insurance options.
It's not an issue of money, is it? Don't be dumb, think about that before you answer.
Government is just a collection of people. You and a bunch of other people who like the idea of communism could get together. Don't know why you'd think that would be different from government doing the organizing, in this situation.

Something tells me you don't actually really understand what the "Affordable Care Act" was or did.

 

the public option would be cheaper for society as a whole

anyone that has gotten sick and lost their job, knows employer health care has its flaws

 

So you're saying the whole society has to get together and organize it, rather than a large group of people who want to be members.
Can you attempt to explain to us, FreshAir, why you think that will make it cheaper?

Keep in mind, under the ACA (as originally envisioned before the public option was dropped) the private sector gets the same subsidy as the public option would.

 

we currently have the private option, it's not working

 

So why has no Democrat state wanted to try the public option?

Remember, it's not really an issue of money. The federal government would (under the ACA that is now law) automatically give any state-formed plan the same subsidy that they would have given to the private option.

Something tells me that the "public option" that you want has nothing to do with the public option (that would have existed) under the ACA.

 

let's try it at federal level, let the people decide, they can pick the best plan

 

Why not try at the state level? Or even just a couple of counties getting together, like around the NYC area, for example.

You seem to be avoiding the issue.

 

Dems haven't really been campaigning on ACA this campaign season. But now that Trump has resurrected his opposition to it, the Dems are only too happy to have that discussion.

 

That's not true, FreshAir. The individual mandate may have originated from some Republicans very early in 1991, then got shelved for 18 years, but the idea was at the heart of the Obamacare idea (the ACA).

Are you claiming Obama originally wanted to do something else?
When you talk of "the original Obama plan", you're not talking about the ACA?

 

I am talking about the public option, which we did not get because of the deal with republicans

 

you mean like Romney Care

 

Yep, and he wants to eliminate Obamacare. What do you think he would do about the 40 million people that would leave with no insurance?

 

You're still not being clear what you're talking about. I suspect you don't understand the difference.

I don't think Democrats were ever really going to give you the one you wanted. That wasn't really on the table.

The "public option" that you had a chance at would have been funded by forcing people to buy it.

Pretty much same as the private option -- just a matter of who is put in charge of running it.

It feels like we are going around in circles. Do you understand what I am telling you?

 

dems wanted Republican buy in, they gave in way too much, but they did not have the votes.... even republics could not pass their healthcare bill

"Obama, GOP's Snowe work on health care compromise"

http://www.cnn.com/2009/POLITICS/09/02/health.care.compromise/

"The compromise plan would lack a government-run public health insurance option favored by Obama, but would leave the door open to adding that provision down the road under an idea proposed by Snowe, the sources said."

 

The Democrat policymakers and architects of the ACA knew that such a government-run insurance option would probably not have been able to offer competitive pricing with the private insurance options, and thus no one would choose it. It would end up being an embarassment, and show how redudantly absurd the idea of a "public option" was within the framework of the ACA plan.

On the other hand, Republicans opposed it because they feared (and perhaps correctly) that the public plan would end up being given subsidies by the government that the private plans would not, and that this would end up in the future driving people into the public plan. That would not have been in the ACA, but could easily have been effected through policy, change in law, or allocations in the budget, and there are all sorts of indirect ways it could be done. Likely government would be injecting money to pay the salary for administrators for first few years, and any years when revenue was running short.

Of course for the dumb voting masses, the idea of a "public option" held out hope that government was just going to pay for it. But that was never going to happen under the government scheme involving private insurance plans. Anyone who thought that didn't really understand what the ACA was even actually about.

FreshAir, since you are talking about something that is pretty much the same as a private insurance company, except with some people appointed from the government to run it, I'll ask you again, why do you need it?
Why do you need government, why can't you and other people who want it organize it yourselves?

Because that's what we're talking about.

Unless you're imagining a different "public option" that has nothing to do with the ACA. And like I told you, that was never going to be put on the table together with the ACA.
I think the reasons why should be obvious for anyone who thinks about it.

 

totally disagree, republicans knew what success it would be and that most would choose it

in the old says jobs respected their employees, today if one gets sick, their employment is questionable, and no job, no insurance - jobs are more short term these days, not life long like in the past