• Physician choice is limited by private insurance, too

    When discussing health care reform options, it’s always important to acknowledge tradeoffs. People who favor private insurance over government involvement will often argue that they want choice. They think that those who accept Medicaid or Medicare (or god forbid, Medicare-for-all) won’t get to choose. They assume private insurance is superior. Here’s the WSJ (of all places) to set them straight:

    This fall, Indiana’s new online health-insurance marketplace will present some tough choices for consumers like John Nowak, who will be able to pick a plan from his current insurer—or go for one that includes his primary-care doctor.

    That is because Mr. Nowak’s current insurer won’t include Indiana’s biggest health-care provider, 19-hospital Indiana University Health, in the plans it sells on the consumer exchange. If Mr. Nowak buys a new exchange plan from WellPoint Inc.’s Anthem Blue Cross and Blue Shield, he will generally have to pay the cost out of his own pocket if he sees the system’s doctors, because they aren’t in the network.

    He’s not alone:

    Similar situations are likely to occur around the country, as details emerge about the coverage available through the new consumer marketplaces created by the federal health law. Many of the plans will include relatively few choices of doctors and hospitals. In some cases, plans will layer on other limits, such as requirements that patients get referrals to see specialists, or obtain insurer authorization before pricey procedures.

    A McKinsey & Co. analysis of 955 consumer exchange-plan filings, from 13 states that were among the earliest to make them public, found that 47% were health-maintenance organizations or similarly designed plans. Such plans generally don’t pay for care provided outside their networks. A number of other plans, though classed as preferred-provider organizations, or PPOs, will also have limited choices of doctors and hospitals in their networks.

    The big reason behind these limited plans: Cost.

    Full disclosure: I work at Indiana University, and after some mergers are finalized, I’ll be part of Indiana University Health. But that’s irrelevant to this story. What you’re seeing is a product of cost control in the private insurance market. Sure, you might not like government regulations or price setting as a means to lower spending. But the tools available to the private market aren’t magical. They can ration, or deny you expensive care. They can use cost-sharing to try and get you not to obtain care. Or, they can contract with certain networks of physicians, getting better deals with them, and making it much more expensive for you to see a doctor they don’t favor.

    If the doctor you like is out of that network, you’re out of luck.

    I can’t stress this enough – this is private insurance. Ironically, the insurance program with the largest network in the country is likely Medicare. You can go to almost any hospital and get care, without worrying if you’re “in network”. I bet more physicians nationwide accept Medicare than almost any other insurance product.

    Remember that the next time someone warns you off public insurance because it limits “choice”. One more piece of irony, for those of you who hate Medicaid (emphasis mine):

    Indiana University Health said it would be included in the exchange plans of at least one Indiana carrier, MDwise Inc., a largely Medicaid-focused nonprofit in which it has an ownership stake.

    Chew on that.


    • “Remember that the next time someone warns you off public insurance because it limits “choice””

      Medicare. One can always get rave reviews of a program from the people on it when they are only paying a fraction of the bill. Tradeoffs were discussed earlier, but forgotten at this juncture for someone else is paying the bill for these rave reviews and having to trade away some of their own needs in the process. I won’t mention the amount of marginal care provided by Medicare or all the fraud and abuse.

    • And, of course, with an out-of-network provider the base price is 5x more, even before the higher cost-sharing kicks in. This may lead people to hate the plans, if they get Balance Bill Shock for the first time on it.

    • A plan can also use a sparse network as a blunt instrument to cut down on utilization, because once people know about Balance Bill Shock, they just never go to an out-of-network provider.

      I’m pretty sure our NC high-risk-pool plan does this. I’m not on it, but having researched it, the network is paper-thin. I mentioned it to a doctor I know and she told me she’d tried to get on that network, agreeing to the rates, but they wouldn’t allow it – this makes me assume they want the network to be sparse, and utilization management seems a likely reason.

    • This sort of tradeoff will always be present in a third-party-payer system. Breaking the chain between employment and group insurance access is the only way to balance the three-legged stool that is US healthcare, but the ACA, commonly called Obamacare, is better tagged as AHIPcare (America’s Health Insurance Plans – the health insurance lobbying arm), since the only group who didn’t lose any power under the ACA was the insurers. Patients? We’re viewed as meat puppets by both payers and providers. Doctors? They’re closer to factory workers in primary care, and not that much better in specialties.

      We should all be buying our own insurance, which would give us a say in the choices available. As long as patients are assigned the meat-puppet role, and ACCEPT that role, we’ll be stuck here in Crazy Town.

    • So, physician choice in exchange plans as a proxy for selection in private insurance plans?

      There are problems there. At least one of the insurers in CA (can’t remember which) said that the exchange plans will have something like 38% of their normal network. Big difference between typical private insurance plans (like large group employer plans) and what will be sold on the exchanges.

      Moreover, private plans typically limit their networks because they establish tight provider networks based on the quality of providers etc. in exchange for lower reimbursements to those providers (but higher volume of patients). Less physician choice in Mcare and Mcaid is a product of nothing more than lower reimbursements; there’s no selective contracting or any other private sector cost-controlling measures. (Exception is obviously managed care plans in Medicare Advantage.)

      But broadly, yes, restricting physician choice as a cost-cutting measure is a private sector invention. Not fair to compare it to Mcare or Mcaid, though.

    • Insurance of any kind is such a bad deal. Apart from returning less than 80 cents on the premium dollar, no matter how well you are covered by private insurance, group insurance, Medicare or Medicaid, when you are traveling or sojourning in a foreign country, EVERY doc and hospital will be out of your network, and you will have to pay out-of-pocket though fully insured!

      • Too broad of a generalization.
        It has been well documented that Medicaid and Medicare have much lower costs than private insurance. Your 80% figure is a good ballpark for private insurance due to profit, sales and marketing expenses but Medicare and Medicaid are more in the range of 95%.
        Foreign coverage for emergency medical expenses is covered under most policies. You probably won’t be able to get them to bill your insurance company directly but you will get reimbursed for most care.

        • It is all a matter of how one determines whether Medicare costs more or private insurance costs more to administer.

          Per dollar Medicare might be less expensive if you don’t count a whole host of things that private insurers have to pay for. Per claim private insurers might be less expensive. Medicare claims are on average higher than private claims but the cost to process a claim remains nearly the same.

          Too many of these quoted numbers are totally fallacious.

    • “Full disclosure: I work at Indiana University, and after some mergers are finalized, I’ll be part of Indiana University Health. But that’s irrelevant to this story.”

      No, that might be the most relevant fact for this story. As you know, we are in the middle of one of the biggest health care provider merger waves in history. Hospital systems are buying independent hospitals and physician practices at a rate not seen since the 1990s (http://www.nytimes.com/2013/08/13/business/bigger-hospitals-may-lead-to-bigger-bills-for-patients.html?pagewanted=all&_r=0). Now, for the first time in history, over 50% of physicians are employees of hospital systems.

      This post seems to imply that private insurers unilaterally choose to selectively contract with providers. It seems to suggest that providers have nothing to do with this. Maybe the reason these exchange plans have so few providers is because mega-systems have bought up most of the providers and refuse to contract with the insurers at reasonable rates. When health care provider systems grow larger, they often gain market power, making it harder for insurers to construct provider networks with good coverage at a reasonable cost.

      Now imagine a one-payer system, like Medicare for all. Suppose this new universal payer paid providers the same as Medicare currently pays. This would likely produce a substantial reduction in overall revenue for most providers, as Medicare pays less than most commercial insurers. Do you honestly think access would be the same under such a system? Maybe the Medicare network would be as large as it is now, but it would probably be harder to get an appointment as physicians would devote more time to their “concierge” patients.

      Or maybe access would be the same, but only because the mega-systems heavily lobby Congress, threatening to pull out of Medicare if the reimbursements don’t increase. How does price setting to “control costs” work in that case?

      My point is: mergers and the market power they often produce are a central part of this discussion and are absolutely relevant for any discussion of cost and access, regardless of the health care system.

    • I have *always* marvelled at this claim about “limited choice”. My government operated single payer “health insurance” plan allows me to see any primary care doctor in the province. If I’m travelling within the rest of the country I can see any doctor in the country. None of this will cost me anything. No deductible. No copay. No nuthin’.

      If I’m travelling outside the country I can see any doctor in essentially the entire world, though that doctor will only be paid what the plan would pay at home.

      However my credit card provides 15 days (per trip) out-of-country medical insurance with generous coverage at no additional cost beyond the annual fee. But because I’m sometimes out of the country for more than 15 days at a time, I pay $108 per year, for 30 day extremely generous coverage, over and above the credit card. And on top of that, my employer provided “extended health benefits” provide yet a third layer of out of country coverage.

      Seems to me that government run programs typically provide a great deal *more* choice private insurance.

      Which stands to reason. Private insurers are in business to make a profit. Government insurers are in business to reduce costs and create a healthy population.

      • When I used to spend time in Florida a number of years ago Canadians had great difficulty finding doctors that would accept their insurance even when they bought travel insurance. Too frequently the doctor was not paid his fee.

        A physician friend of mine told me that one weekend he was called by a Canadian insurance company trying to find a physician for their client because no one would see him under his insurance. The insurer puts too many preconditions on the treatment, forces the patient to return home before fully treated and then doesn’t pay the bill in full.

        Most physicians in that area of Florida made Canadians pay cash.

        • Anecdotes are not evidence.

          When I had an apparent TIA in Richmond, VA in August 2000, I had a battery of tests that I think included a pregnancy test. All I did was show my wallet sized policy card, and that was the end of it. I even got a private room.

          It may be that the individual you refer to bought some useless cheap-ass insurance that some travel agents sell, but my travel insurance covered everything and I paid nothing out of pocket. My premium for that year was under $100.

    • Mark Spohr,

      Wrong. Medicare charges me a tax from the moment I start working as a youth, and only pays out after age 65, and then I am subject to a monthly premium, co-pays and deductibles. No private insurance policy I take out at age 65 will assess a tax on every paycheck from age 16. Medicare does NOT generally pay for care in foreign countries.

    • Good luck finding a health insurance policy at age 65!

      • Health insurance at age 65 is easy.
        First there is Medicare. Everyone is eligible… just sign up… $107 per month.
        Second, “Medigap” insurance (thanks to ACA) is guaranteed issue. I was able to get a great policy for $86/mo. including drugs, etc.
        Foreign medical care.
        Most policies cover emergency care overseas. If you want to move somewhere and have regular care, you need to arrange some local coverage. This varies greatly. When I lived in Switzerland it was fairly expensive (but guaranteed issue and still much cheaper than the US). Mexico and Costa Rica are popular with retirees. You can sign on to their local health insurance schemes for very small amounts of money. I have a friend who moved to Brazil and signed up for the national health insurance. Cheap and good quality care. He had both hips replaced and it cost much less than the US where he was eligible for “free” VA care. He has a good outcome, loves his doctor, etc.

    • Omaha

      I assume that University Health is a PHO (Physician Hospital Organization, as defined by the IRS) and that mdWise, Inc. is a standard corporation operating as a non-profit (not a 501c3) according to the provisions of state law in Indiana. What then does it really mean that University Health has an “ownership position” in mdWISE, Inc.?

      I am reminded that a local medical school built a new hospital with equity derived from a “partial ownership” position of a physician group. Any attempt at trust, transparency or collaboration would be difficult in these situations given an institutional commitment to derivative governance. My oh my, we wonder why our healthcare industry is so inefficient when it is distracted, in part, by all of these real and apparent conflicts of interest. I suspect that they are more pervasive than we realize.

    • Excellent post and excellent discussion so far.

      Note to Ken Hamer about the Canadian health system:

      It works well because there is a firm national fee schedule.

      Getting to that fee schedule led to several bitter strikes by doctors in the 1960’s. The Canadian govt brought in doctors from India and Africa for a short time to help break the strike.


      Tight networks are essentially a version of reference pricing……if you want to use a provider that charges more, you pay the difference.
      Eventually I think nearly all plans will incorporate this feature.

      Large hospitals in the USA have been adding to their cost structure for about 40 years non stop. For 20 years Medicare actually encouraged them to do it with its subsidies for construction and for debt.

      If these expensive hospitals are shunned, I have extremely little sympathy. Believe me, a Canadian style Medicare for all would not just shun them, it might close them down.

      • While there are some national standards, fee schedules are determined by provincial governments, not the federal (national) govenment.

        Importing doctors is an urban legend.

        Expensive hospital in Canada is an oxymoron. Hospitals in Canada are not for profit, so there is no incentive to charge more than the fee schedule allows, nor would it be allowed.

      • Forgot to add that even though many doctors fought against the Canadian system when it was first proposed and implemented, it’s a rare doctor now that complains about the concept. They might have lots of complaints about some aspect or another, but it’s very few want it eliminated or even overhauled.

        I’m not certain but I would guess the biggest benefit to Canadian doctors is the ease of billing. From what I read here, it sounds like many doctors in the US in private practice are accountants and bill collectors first and health professionals second.

    • I’m confused. Why doesn’t John Nowak abandon his current insurer and contract with a carrier that includes his primary care doc? What am I missing?

    • Mark Spohr:

      Wrong again! There are lots of folks not covered by Medicare, though they have the option to “buy in” to it for $$,.

      Yet another problem you don’t recognize is the fact that those Amerikans traveling or sojourning overseas, without permanent residency in a foreign country, are subject to Obamacare penalites, even though there is no Obamacare available, and will have to pay out of pocket for care.

      Ditto for those who merely sail around the world for a year or two. Imagine an Amerikan family sailing around the world and having to pay over $20,000 for Obamacare!!

    • Personal experience is not good enough. In order to know the cracks in the system one first has to fall through the cracks themselves or deal with those cracks on a regular basis.

      John Austin at Economix:

      “At the same time, Canadians can be quick to complain about that very system. Their chief complaints include wait times, access to doctors, unusual treatments and specialized imaging equipment as well as its overall cost.”


      “He said that patients in that college town (and prison center) east of Toronto wait nearly a year for knee replacement surgery, six months for hip replacements, and three months for brain, prostate and breast cancer surgeries. And when it comes to cardiac bypasses, Mr. McConnell warned that “patients in Ontario are told they have to wait six months for surgery Americans often get right away.””…

      “Although they might dispute the precision of Mr. McConnell’s statistics, even leading advocates of publicly funded health care in Canada readily acknowledge that wait times are one of its biggest problems.”

      • Not only will I dispute his claims, I’ll call them outright dishonest. Or I would if he actually made those claims in the referenced article. Rather it appears it is unfounded hearsay.

        You may wait for non-urgent care. But if your need is urgent you will be moved to the front of the line and accomodated immediately.

      • Ah, now I get it… I found the actual article:


        where the claim is made, and also figured out who this “Mr. McConnell” guy is. Surprise, it’s one of those clowns from the “stupid party” that can’t seem to stop their outright fabrications — Mitch Mr. McConnell.

        Here’s a link to one of Aaron Carroll’s posts about the various and sundry myths, distortions and outright lies, many originating directly from the Republican Party:


        • Ken H., I wasn’t going to reply to your comments because it seems that the basis of your arguments is to call others dishonest or to continuously knock a political party with generalities instead of specifics.

          However I actually went to the video posted by another at freemarketcure.com which provided some very good real time examples. I think you huff and puff too much and are short on proof.

    • For what it’s worth, Ken, non-profit hospitals in the USA do just as much price gouging as purely private institutions.

      That is because we have no national fee schedule, and many hospitals are so costly to operate that they must get $15-$20K from every paying patient somehow.

    • I don’t know about what Ken Hammer believes. I can only state what I have read, studies I have seen and actual first hand experience though much of that personal experience is several years old. South Florida seems to have a lot of Canadian doctors that apparently weren’t so happy in Canada. In fact one well loved and respected Canadian surgeon in Canada complained that certain tests were being denied in Canada where such denial in the US would be malpractice. I think he was talking about estrogen receptors at the time. That test tells the surgeon the best type of treatment after breast cancer surgery. Today I believe the test is done in Canada routinely. Another Canadian doctor said his sister practiced back in Canada and didn’t have some of the equipment in her office that almost every generalist in the US has. He said she spent a good part of her day filling out forms explaining absence from work. He is a fantastic physician as were most of the Canadian physicians I have known and dealt with, so don’t think I don’t appreciate Canadians. I limited myself to two comments from two different ex Canadian physicians and some other things known to those in the area, but they just touch the surface.

      As far as patients go whether rich or poor, educated or uneducated many learned their insurance at the time would not generally be accepted in physician offices and many physicians learned that they couldn’t count on the insurer to pay their charges once the patient left. They also complained of the fact that treatment would be started, but the patient had to return home in the middle of treatment which sometimes led to a bit of discomfort for the patient’s safety.

      I note that to another poster Ken disparaged a political party instead of dealing with ideas. I’ll let Ken say what he wants, but that type of rhetoric doesn’t lead us anywhere and makes whatever Ken says very difficult to accept. I personally like Canadians and believe they have one of the better health care systems in the world, but some people go a bit too far and let nationalism overtake common sense and fact. Along with having its good points Canada like all nations has some of its own warts that can be easily seen if one only looks. One interesting place to look is at freemarketcure.com

    • Interesting debate

      Canadian wait times:

      Patients wait longest for orthopaedic surgery (39.6 weeks) and wait least for medical oncology treatment (4.1 weeks).

      [Personal note: 4.1 weeks can be way too long for cancer treatments.]

      After an appointment with a specialist, Canadians wait
      approximately 3 weeks longer than what physicians believe is “reasonable” for elective treatment.

      In 2012, throughout the provinces people are waiting for an estimated 870,462 procedures.

      [personal note: The US population is almost 10 times as large so if one wanted to look at what that would mean in the US, one would see 8 million waiting for procedures.]

    • Thanks to Milo for the information.

      This make me ask the following question:

      Canada has the equivalent of 8 million persons waiting for procedures.

      America has how many persons deep in debt from health care bills, and how many persons with pinched standards of living due to health insurance premiums?

      Is this the way to measure our trade-offs?

      I do know this.

      In order to have minimal waiting times for insured Americans, we allow many under-utilized hospitals to stay in business. This does drive up insurance costs.

      Comments welcome. I think I have a theory here.

      Bob Hertz, The Health Care Crusade

    • @Bob: “the health care bills”

      The vast majority of the times bankruptcy is not caused by health care bills. When it is a cause and it saves someone’s life or limb, then it is a great trade off to be alive.

      What does bankruptcy mean? For the person with assets it can be catastrophic, but it is his own fault as those assets should have been protected by insurance just like one protects homes and cars. I do not have to spend the hard working people’s money to correct a problem created by the individual that seeks immediate pleasure instead of long term security. If it is a person is without assets then nothing or very little is lost through bankruptcy. A benefit is that all debt such as credit card debt goes away as well. This is simplistic, but basically the way things are.

      The real problem with healthcare and bankruptcy is that when a person becomes ill they frequently lose their job which means they lose their source of income to pay their debts and frequently lose their insurance since they are unable to pay COBRA. The other problem is that during the recovery period the individual might have a job, but their insurance payments might have climbed because of the illness and sometimes during a recovery period a person cannot earn as much as they did before.

      These problems can relatively easily be solved.
      1) Individuals should be owning their own policies whether or not obtained through their employer.
      2) Policy deductibles should only be required to be met every 3 years (pick your own number) They should start when the deductible is reached and end 3 years later (most recoveries are over by then).
      3) Provisions within the policy should cover premium payments for the length of the illness and perhaps a bit longer.
      4) Provisions for an additional insurance premium to maintain a policy at usual rates even if serious illness should occur.
      5) Direct premium subsidies should be there to help borderline cases. These subsidies could help pay for the premium, the deductible and/or the copayment.
      6) High deductibles should be utilized
      7) Medicaid should be tightened up and should be treated as if those receiving it were paying for it so if they wished to change to another insurance they would just have to add a Medicaid voucher and their payments to pay for the premium.

      The above list is not meant to be complete.

    • Items 2–3-4 are great ideas. I have been reading health care pieces for years and rarely heard such good ideas.

      However, based on my experience selling different kinds of insurance, the protections in #2-3-4 would drive up premiums.

      Which are high enough already!!

      I am not a great fan of comparing health insurance to home insurance.

      If my home catches fire, the fire department does not care if I have fire insurance. Instead the firemen and fire trucks are paid by taxes or donations, maybe a small property tax, depending on the community. I do not need to buy a policy to save my property.

      I do need a policy to replace my property.

      For that reason, I would like to see emergency rooms and part of each hospital funded by taxes. Health insurance would be for long term cures.

      • ” the protections in #2-3-4 would drive up premiums.”

        Surely your joking Mr. Feynman…I mean Mr. Hertz.

        Bob, good ideas might cost a bit more initially, but being penny wise and pound foolish doesn’t make sound policy. The ACA has portions of it that cost a fortune and only get worse with time, not better, and don’t teach us the right way of managing things. Initial premiums might go up, but total costs, benefits and long term advantages outweigh the proposals in the ACA and eventually will cost less.

        If you worry about high premiums which relates to costs then pretending they don’t exist only makes things worse. Among other things that are bad the ACA is hiding costs and hidden costs are dangerous and generally grow at a rate much faster than if they are transparent.

        “I am not a great fan of comparing health insurance to home insurance.”

        Then why do you do it? Fire (home insurance) cannot be bought after the fire breaks out. Home insurance does not pay for normal maintenance.

        Fire departments exist on a local level and need not be run by government. A large number of departments are volunteer run. Government costs for fire insurance is spiraling upwards very quickly and is causing strain on local communities. Fire departments do not use a one shoe fits all approach. They do not have ladders or special equipment for high rise buildings when a community has a zoning code limiting height to 30 feet.

        “I am not a great fan of comparing health insurance to home insurance.”

        If you recognize the poor comparison of home and fire insurance to health insurance how can you base your reasoning on such a comparison?

        ” I would like to see emergency rooms and part of each hospital funded by taxes.”

        I don’t know why you don’t want taxes to pay for our food, housing and clothing as well as they are far more necessary than health care and much of health care is a luxury. Maybe we should use taxes to pay for Rolex watches as well.

    • Clothing is so cheap that it would seem absurd to have taxes pay for it.

      We do pay for food with taxes in the food stamp program.

      Housing has a second hand market. You can live in an old house, half a house, an apartment, etc.

      Health care has a Cadillac effect. There are no used drugs or discount brain surgeons.

      I still think that emergency services should be a community responsibility.

    • Bob writes, “Clothing is so cheap that it would seem absurd to have taxes pay for it.”

      Really? Ever try and buy winter clothes that keep you warm and dry along with everything else? Not only that, but these things have to be maintained and cleaned or the dirty clothing can lead to health care expenses. It is a big expense for families, but you would have little children go to school with ripped old smelly clothing that doesn’t fit instead of taxing them. How can you be so cruel to little children?

      The food stamp program is a subsidy not insurance. There is a difference.

      An old house requires maintenance and a rental requires a premium to pay for taxes, the cost of money, maintenance, losses, insurance etc.

      “Health care has a Cadillac effect. There are no used drugs or discount brain surgeons”

      That is not true. New drugs would be the brand name and used drugs the discounted version. We don’t have a market so yes we don’t see commonly see discount brain surgeons, but we see discount heart surgeons in India, where an American trained surgeon is trying to reduce the price of bypass surgery from around $1,200 to $800. Rich people go to Costa Rica for expensive cosmetic surgery at very low prices. Some on the borders will go to Canada to get their care or Mexico on the southern border.

      I am not saying we shouldn’t carry insurance because I believe we should, however, the way to get that done requires a little more common sense then was seen in the creation of the ACA.

      “I still think that emergency services should be a community responsibility.”

      They are a community responsibility and anyone that needs urgent or emergency care must be seen by law so I don’t really understand your point.