Obamacare Creates A Two Tiered Health Care System And Concierge Medicine Is Ready

The concierge medicine and direct pay care industry has known this was coming and has seized the opportunity to disrupt the process by creating a viable solution

By Jeffery Dorfman, Contributor, FORBES, 12/12/2013

More Americans will soon have health insurance than ever before, thanks to the Affordable Care Act, commonly known as Obamacare. From the scarce data provided on signups so far during the first open enrollment period under Obamacare, the majority of people gaining new coverage are being declared eligible for Medicaid rather than being provided with subsidies to purchase private insurance through the health care exchanges. While that will create severe problems for the financial stability of the system, regardless of which way the government provides health insurance to these new enrollees, the American health care system is heading for a split into two (or even three) almost completely separate tiers.

The federal government will be in control of the health insurance for a majority of Americans starting in 2014. The government provides health insurance for seniors through Medicare, teams up with the states to extend insurance to poor people through Medicaid, and will be providing subsidies for and otherwise heavily involved in the insurance policies offered by private insurance companies through the health care exchanges.

As part of that control, the federal government is setting prices either directly (for Medicare and Medicaid) or indirectly (for exchange plans). Medicare reimbursement rates are much lower than posted prices at most health services providers, generally only about 40 percent of the full posted price. (Most private insurance companies also pay less than the full posted price.) Medicaid reimbursements vary considerably relative to Medicare, both by services and by state, but on average Medicaid paid 34 percent less than Medicare.

Reimbursement rates for policies offered in the health insurance exchanges vary by plan, but early reports are that they are quite low with doctors and hospitals not willing to accept those low rates excluded from the networks assembled for those plans. While offered by private insurance companies, government pressure to hold down costs is leaded to low reimbursement rates in these plans.

Doctors, nurses, other health care professionals, and hospitals are not excited about having their pay cut by low reimbursement rates and some have responded by refusing to take patients with those insurance plans. Only about 50 percent of doctors accept new Medicaid patients. While a much higher percentage of doctors accept Medicare patients, PBS recently reported that in Texas less than 60 percent of doctors are taking on new Medicare patients because of the low payment rates.

Come January 1, unless Congress acts between now and then, Medicare reimbursement rates will be cut by 24 percent under a law passed in 1997 to prevent Medicare from going broke. Generally Congress passes what is known as the “doc fix” and postpones those cuts for a year. With the budget negotiations underway and all the attendant pressure on spending, will Congress allow the cuts to go into effect or delay them again?


About Concierge Medicine Journal

Concierge Medicine Journal (CMJ) curates breaking concierge medicine news, and editorial opinion on a wide variety of topics relevant to the practice of Concierge Medicine.

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