Why Docs Are Bailing Out of Health Insurance

Why Docs Are Bailing Out of Health Insurance

iStockphoto/The Fiscal Times

• In Texas, percent of doctors are not accepting new Medicare patients or have limited the number of patients.

• In Iowa, 17 percent have shut out Medicare patients

• The American Medical Association says 17 percent of more than 9,000 doctors surveyed restrict the number of Medicare patients in their practice. Among primary care physicians, the rate is 31 percent.

The cost of health care has been a nagging public policy issue for decades, even before the government took on the task of insuring retirees in the 1960s.  The issue continued to fester through the Social Security reform of the 1980s and the attempt at a top-down government restructuring of the health-care industry in the 1990s, spearheaded by Hillary Clinton that resulted in a backlash strong enough to end forty years of Democratic Party dominance in the House of Representatives in the midterm elections of 1994.

Republicans mainly punted on health-care reform except to add an expensive prescription-drug government program to Medicare during the early days of the Bush administration, leaving Democrats an open path to finally imposing the top-down restructuring they had pursued for decades in the Affordable Care Act of 2010. 

The ACA, known as Obamacare, was passed on promises that premiums would decline by forcing everyone into insurance plans, and that top-down mechanisms like mandates on coverage and the Independent Payment Advisory Board (IPAB) would control costs.  That hasn’t proven to be the case, and indeed, both premiums and costs are skyrocketing – just as anyone who understood the impact that mandates would have on risk pools and tax hikes on prices predicted.

As the open enrollment period for 2014 approaches, premiums on individual plans in the Obamacare exchanges for California will double, and will increase 80 percent or more in Ohio.  At the end of its first decade in force, the ACA will leave more than 30 million Americans without insurance – the driving issue behind health-care reform for at least the last twenty years.

The problem with all of the health-care industry reforms has been that precise goal: expanding insurance.  The widespread use of comprehensive insurance policies insulates end users in the system from price signals, especially on routine care.  That eliminates competition on price as insurers use their economic weight to pre-negotiate pricing on every kind of service and product under their coverage, from blood tests to setting broken bones.  Providers locked into a specific schedule of reimbursements have no reason to innovate to either lower costs or increase value, and end up having to spend money and time dealing with insurance companies for delayed payments rather than focusing on the patients seeking treatment in their clinics.

Ironically, the multiplication of mandates and other regulations in the ACA on both private insurers and government-run programs like Medicare and Medicaid have more doctors opting out of the third-party-payer system altogether.  Earlier this week, CNN Money reported on the migration to cash-only services among health-care providers, driven by poor reimbursements, increasing regulation, and high overhead. 

Dr. Doug Nunamaker, a family-practice physician in Wichita, knows that his decision will eliminate some of his demand, but the cost savings and the freedom more than make up for any business lost over his refusal to take insurance.  "The paperwork, the hassles, it just got to be overwhelming," Nunamaker told CNN.

Nunamaker and the increasing number of providers pursuing this option have to court aggressively a smaller market by competing with each other on price.  Fortunately, with the mandates and reimbursement headaches removed, that becomes much easier to accomplish.  Nunamaker structures his business on a membership model, where a flat monthly fee allows customers unlimited access to his clinic.  For most adults, the fee is $50; senior citizens pay $100, but membership for children costs only $10 per month. 

Let’s say that an average family of four, with two adults and two children, sign up for this service.  That would cost $1,440 a year for complete coverage of any services that can be provided within the office.  The least expensive plan on eHealthInsurance.com all-plans for a family of four in Wichita costs $329 a month – and that has a $10,000 deductible. For a deductible of $1500 for the family – the same cost of the membership at Nunamaker’s clinic – the price would jump to $869 per month.

What happens when a patient needs services the clinic doesn’t provide? Nunamaker has created partnerships with providers at costs amounting to fractions of what insurance pays, CNN reports.  A $90 cholesterol test can be purchased for … three dollars. An MRI normally would cost an insurance company $2000, but Nunamaker’s patients can access one for $400. 

Obviously, Nunamaker’s patients need hospitalization coverage in case something significant happens.  Normally, catastrophic coverage would be inexpensive, as hospital visits are relatively rare occurrences, especially for younger and healthier people.  Unfortunately, Obamacare outlaws such plans in the ACA “exchanges” by making them ineligible for subsidies. 

Instead, Americans buying plans on the individual market have to spend much more than they’ll ever pay directly to market-based physicians like Nunamaker, essentially subsidizing the premiums of older and sicker Americans to make Obamacare politically palatable to those demographics who turn out more reliably to vote.  Americans purchasing plans through employers won’t have much more luck buying sensible insurance plans, either, thanks to other mandates within the ACA on employer-provided health insurance.

This limits the potential for physicians like Nunamaker, but it doesn’t bother him.  He earns around $200,000 a year from his cash-only practice, but more importantly, he gets to focus on treating patients rather than fulfilling insurance-company demands.  His patients get to make decisions on care based on real costs and market-based price signals, not on which insurer covers the routine costs for far more than the care itself would usually cost. Nunamaker tells CNN that his practice is “the best it’s been in my 26-year career – by far.”  He’s not alone, either. A survey by Medscape finds that 6 percent of physicians operate on a cash-only basis, up from 4 percent in 2012. 

In a rational world, this is what health-care reform would look like – stripping out third-party price-signal screens, opening competition at a retail level, and allowing patients and providers to drive health-care decisions.  Instead, as we have seen for almost 50 years, the US has moved in the opposite direction to impose a one-size-fits-all solution and mandate-driven health care choices.  It’s no surprise at all that doctors are leaving that system in greater numbers, and that costs are exploding for consumers. If enough doctors leave the Obamacare system, we may end up with true reform from the bottom up.