In something as complex and pervasive as, say, changing the entire health insurance industry, the “big” things tend to divert attention from noteworthy items that deserve some attention, too. In my previous post I wrote about the inability of Congress to repeal the 1099 requirement contained in the Patient Protection and Affordable Care Act. As I continue to clean out my (digital) files, there’s a few other items I’ve come across that deserve mentioning.
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Back in October, the Justice Department filed suit against Blue Cross Blue Shield of Michigan claiming the health plan had used its dominant position in the market to force hospitals to charge higher prices to its competitors, a violation of anti-trust laws. According to New York Times, the complaint alleges the “most favored nation” clauses insisted upon by BCBSMi, which “require hospitals to charge other insurers a specified percentage more than they charge Blue Cross — in some cases, 30 to 40 percent more” result in “higher health insurance premiums for consumers and employers.” The clauses also prevent the medical providers from offering any other carrier a better price than they offer to BCBSMi. In exchange for the favorable treatment the suit asserts BCBSMi agreed to pay higher prices themselves.
A spokesman for the health plan was quoted by the New York Times as responding that it was against the insurer’s interests to pay more than they could otherwise negotiate and the “These kinds of low-cost guarantees are widely used in a variety of contracts in a number of industries.”
However the suit turns out, merely bringing the legal action will draw attention to what the Washington Post describes as the “concentration of power that dominant health insurers wield in many parts of the country.” A study sponsored by the General Accounting Office last year found that the median small group market share of the largest carrier in a state was 47 percent. The dominance of a single insurer varied considerably from state-to-state: in Arizona the largest carrier had a 21 percent market share among small businesses; in Alabama the dominant carrier had a 96 percent share.
A government-run health plan, what was called the “public option” during the health care reform debate, was President Barack Obama’s attempt to, among other things, provide competition to these dominant carriers. Of course, in bringing competition to Alabama (where arguably it is needed) he was also imposing a government-run plan on Arizona (where it apparently is not needed). Having failed to secure a public health plan in the PPACA, the Obama Administration is now using the courts to bring about greater competition among health insurers.
The courts will determine if what Blue Cross Blue Shield of Michigan does in its contracts are unfairly (and illegally) anti-competitive. There’s nothing wrong with the Administration bringing suit to find out. That’s how America’s legal system works. But given a recent insurance industry study disclosing that hospital costs in California rose 159 percent over the past 10 years, in part because of the dominant position some medical providers enjoy in parts of the state, it will be interesting to see if the Administration gets around to exploring the anti-competitive activity that may be involved in their business practices.
Doctor Owned Hospitals
The Patient Protection and Affordable Care Act makes it extremely difficult, if not impossible, to create new physician-owned hospitals that bill Medicare for reimbursement. A group of Texas doctors sued to have this provision (Section 6001 of the new health care reform law for those keeping track at home) declared unconstitutional. U.S. District Court Judge Michael Schneider dismissed the suit, but the plaintiffs have pledged to appeal his decision according the Becker’s Hospital Review. The plaintiffs claim the provision, which also limits expansion of existing doctor-owned facilities and freezes the percentage physicians can own of a hospital, is “retroactive in effect.”
It was only last summer when Dr. Atul Gawande, writing in The New Yorker described the impact doctor-owned facilities had on making McAllen, Texas the most expensive town in the country in terms of Medicare spending. His article gained widespread attention and was cited by President Obama during a major speech on to the nation on health care reform. The PPACA attempted to address this cost driver. Doctors are suing to excise that provision. Whether they succeed or not, the law suit will (hopefully) bring additional attention to the advisability of having the those who help determine the amount of demand for care own the source of supplying that care.
And what both these items underscore is the important role courts will play in determining the nature — and affordability — of America’s health care system in the coming years.