Price controls and Obamacare

Eli,

In order to control health costs Obamacare will at some point resort to price controls. We're already seeing that in Massachusetts with Romneycare. The legislature has mandated a certain level of costs and if providers go over that level they'll have to explain themselves to a board of specialists. (Why are so many things in New England still reminiscent of the Puritans: Going in front of the board to explain your behavior?) The board may then roll back prices. 

Price controls will lead to exit by providers, like Medicaid (see below). How this is good for patients and doctors is my standing question to all supporters of the Affordable Care Act.

The article is rather rich. The author seems surprised that lower prices results in lower supply, "States have significant control over their Medicaid programs. They get to decide, for example, how much doctors get paid. That variation in payment rate turns out, in Decker's study, to be pretty important." And when patients see doctors less they see hospitals more, "Prior evidence suggests that physicians' acceptance of Medicaid patients will increase as Medicaid payment rates increase," Decker notes. "Evidence also suggests that this may increase the number of times that a Medicaid patient sees a physician and decrease reliance on hospitals for outpatient care."

Oh well. I guess we have to re-teach every generation the same lesson.

Bill

http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/06/study-one-third-of-doctors-wouldnt-take-new-medicaid-patients-last-year/?print=1

Study: One-third of doctors wouldn't take new Medicaid patients last year

Sandra Decker, an economist with the Center for Disease Controls, recently poured over the 2011 National Ambulatory Medical Care Survey, which asks doctors whether they would accept new Medicaid patients.

What she found could spell trouble for the health care law: More than three in ten doctors – 31 percent – said no, they would not.

Her research, published this afternoon in the journal Health Affairs, is the first that has ever given a state-by-state look at doctors' willingness to accept Medicaid. That makes it a helpful report to understand the factors that influence doctors' participation in Medicaid, alongside the public policy levers that could encourage them to join up.

First, let's look at the data: Decker used a survey of 4,326 office-based physicians from across the country to find that 69.4 percent said they were accepting new Medicaid patients. That number was significantly lower than those accepting privately-insured subscribers (81 percent) or Medicare patients (83 percent), indicating that this wasn't just about doctors being overbooked – it was specific to the Medicaid program. The lower acceptance of Medicaid programs also held when Decker broke down doctors by specialists and primary care providers.

The next obvious question was: Why? What was it about the Medicaid program that was turning doctors off? That's where the state-level data comes in handy. States have significant control over their Medicaid programs. They get to decide, for example, how much doctors get paid. That variation in payment rate turns out, in Decker's study, to be pretty important.

Here's the correlation she found between how much a state pays its Medicaid doctors (indexed as a percent of the Medicare reimbursement rate) and the percent of physicians accepting new Medicaid patients:

Decker finds a positive correlation between Medicaid reimbursement rates and how many providers accept Medicare. In Wyoming and Alaska – largely rural states that pay Medicaid providers about 50 percent more than Medicare reimburses – the vast majority of providers accept Medicaid. In New Jersey – where reimbursement is the lowest – only about 30 percent say they'll take new patients.

"Prior evidence suggests that physicians' acceptance of Medicaid patients will increase as Medicaid payment rates increase," Decker notes. "Evidence also suggests that this may increase the number of times that a Medicaid patient sees a physician and decrease reliance on hospitals for outpatient care."

There are a few interesting points to draw from this. The first has to do with what this will mean for the health law's insurance expansion. As Avik Roy pointed out a few weeks ago, states with Democratic governors actually tend to have lower reimbursement rates. Faced with crunched budgets, some have chosen to cut provider payment rather than reduce services.

That could mean that the states with the highest likelihood of expanding Medicaid might be those with the lower reimbursement rates – and fewer doctors willing to accept these patients by proxy. That could prove true in a state like California, where 1.8 million residents are expected to gain coverage – but fewer than 60 percent of providers accept new patients in the program.

It could also speak to the importance of some of the payment increases in the Affordable Care Act. The law increases Medicaid reimbursements for primary care doctors to match those of Medicare providers. That means that everyone on the right side of this chart will move over to the left. And that could entice more providers to participate. Decker estimates using this data set that it would raise the Medicaid participation rate to 78.6 percent, an 8.6 percent increase from where it stood in 2011.

How long it would stay that high, however, isn't clear. The payment bump only lasts for two years – 2013 and 2014, although some interest groups already have their eyes on an extension. It only goes to primary care doctors, meaning that specialty providers will not get any more financial incentives to open up their doors.