How Will Obamacare Affect Competition in Healthcare

Wednesday, 30 Oct 2013 02:46 PM

By Robert Feinberg

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The American Enterprise Institute (AEI) hosted an informative and entertaining panel on Oct. 23 titled "From Multiple Choice to One Size Fits All? Obamacare and the Future of Competition in Healthcare."

The panel featured three experts in the field: David Hyman, director of the Epstein Program in Health Law and Policy at the University of Illinois; Thomas Miller, a resident fellow of AEI; and Elizabeth Teisberg, a professor at the Dartmouth Center for Healthcare Delivery Services. The panel was moderated by Timothy Carney, a columnist for the Washington Examiner and director of AEI's Culture of Competition program.

Panelists responded to questions from Carney beginning with the fundamental question of whether competition is good for healthcare. Hyman spoke of sources of market failure, and he mused that advocates of increased regulation are having success at the federal level, and it would take 20 years to achieve major change.

Teisberg was equally pessimistic, declaring bluntly that the skewed incentives of the present system cannot be fixed, because any reforms lead to problems elsewhere, like a game of whack-a-mole. Continuing her critique, she complained that services aren't organized to create value for the customer.

Miller added that most of the competition is over how to protect incumbent providers. The patient isn't the customer. Antitrust considerations came late to this industry, which is often anti-competitive in its culture. Insurers rehabbed their model accordingly, he added.

Teisberg said she has found startling difficulties with payment systems, sometimes having to go through three for a single transaction.

Miller reported that despite the diversity of healthcare systems, there is a high level of dissatisfaction worldwide.

Teisberg cited diabetes as an example. A diagnosis of this disease implies 35 follow-up appointments, and these tend to lack continuity and coordination.

Hyman suggested that tax subsidies be rolled back as a method of funding healthcare.

Miller pointed out that there is still controversy over to how to resolve the so-called Medicare donut hole. This refers to a period between 2011 and 2020 when there will be a gap in coverage for prescription drugs once the annual limit is reached. It is scheduled to be gradually closed during the period according to a complicated formula for calculating subsidies and resulting copayments. He asked for consideration of the "all-in" costs of these subsidies.

Only at this point did Carney raise the issue of Obamacare.

Teisberg allowed that not everything about the law is bad. She credited it with some good provisions requiring the measurement of patient outcomes.

Miller blamed Obamacare for setting the table as to which providers will survive after the dust settles. He predicted that "creative destruction" would not have a chance to operate. Returning to the antitrust theme, he found a bias toward concentration. He quipped that the law provides for the funding of experiments he derided as "science fair projects." These enable proponents of Obamacare to take credit for ideas that are already working in the private sector. The system creates a false impression of transparency, he stated.

Teisberg argued that hospitals aren't the right level to measure patient outcomes. This is like surveying dental visits and recording as a success every procedure that the patient survives.

It has become a cliche to say that legislation has unintended consequences. Perhaps in the case of Obamacare, the ingenuity of the American people and their ability to take advantage of the ingenuity of foreign competitors may yield competitive opportunities in spite of the best efforts of the administration. This idea is not the fruit of uncharacteristic optimism, just recognition that the circumstance is still fluid enough that many surprises are in store.

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