How the Power Shift in Healthcare from Providers to Insurers is Eroding Physician-Patient Relationships

Eshan Mehra

Abstract

Healthcare differs from other industries in that consumers of healthcare services often do not pay providers directly. In healthcare systems like the one employed by the US, many patients pay insurance providers as an intermediary between themselves and the hospital system. This makes the pricing of medical services extremely ambiguous as coverage and costs of services vary depending on the influences of several key players. To further complicate matters, federal-state programs like Medicaid cause hospital systems to receive reduced profits from patients enrolled in government-sponsored healthcare. Thus, in cases when resources are to be diverted between patients on Medicaid or private insurance, they are frequently allocated to the latter. Such unintended repercussions continue to grow in magnitude as power in healthcare shifts from providers to insurers, eroding physician-patient relationships in the process.

Introduction

The rising opioid epidemic poses an escalating and uncontrollable threat to hundreds of thousands of lives. An increasing number of legislators and patients seem to hold physicians liable for overprescribing opioids as pain medications. However, opioid overdoses happen at a disproportionately higher rate for those covered by Medicaid, suggesting that insurance coverage rather than physicians are contributing to opioid overuse.⁷ In the US, insurance coverage largely dictates patients’ treatment due to high list prices for drugs and relatively high costs for standard procedures.⁴ What is affordable is prioritized over what is appropriate. With Medicaid’s relative ease in covering opioids as pain medicine³, overprescribing opioids is unfortunately one of the many consequences of the increasing power of health insurers in healthcare. As private health insurers become increasingly prominent players in US healthcare, the shift in power degrades physician-patient relationships. Degradation stems from the increasing prioritization of profits for insurers over patients’ well-being, resulting in decreased utilization of healthcare services by uninsured individuals, rising costs for health services, and lower quality patient care as insurers threaten to set physician payments below competitive levels and limit coverage to broader networks.^1,9,12

Physician-patient relationships often cannot exist without health insurance coverage

Insurance coverage often correlates with appropriate engagement in seeking out healthcare services. A large majority of American citizens are covered by private insurance through employers or through Medicaid/Medicare, government-run public insurance programs.² Medicaid is a joint federal and state program in which states can determine eligibility requirements. In some states like Texas, where Medicaid is only offered to parents whose income level is 16% of the federal poverty limit (FPL), government-run insurance is inaccessible to those who are not provided private insurance by employers or cannot pay for private insurance. A lack of insurance repeatedly proves to be a leading cause for proper treatment’s low utilization. In the US, 20.7% of uninsured nonelderly adults went without needed care due to cost compared to only 6.1% covered by Medicaid and 5% covered by employer-based insurance.⁹ This striking difference signals a significant disparity in health resource utilization. Those who cannot afford treatment are left to forgo treatment. High costs of healthcare degrade physician-patient relationships because healthcare systems with emergency provisions for uninsured individuals have limited resources and thus can fall short in providing the necessary treatments.10 When uninsured individuals forgo treatment, it terminates physician-patient relationships before they form while also increasing frustration due to an inaccessible healthcare system.

The complicated ecosystem in drug pricing further erodes patients’ trust in physicians

To further increase costs for patients – especially those who are uninsured – insurers negotiate rebates with pharmaceutical companies through pharmacy benefit managers (PBMs). PBMs make more profit with higher rebates and have no obligation to cut fair deals for consumers because they are third-party intermediaries. Although most drugs have list prices, insured consumers do not pay the advertised price. Insurance companies, especially large insurance companies, can negotiate prices lower than list price for their clients through intermediary PBMs. However, this has two significant consequences. Firstly, pharmaceutical companies can raise the list price to compensate for higher rebates – a win-win for the pharmaceutical company and the PBMs. However, this ultimately comes at the expense of consumers who have to pay copays, do not have extensive health insurance, or are uninsured altogether.¹² Secondly, patients seek out specific drugs that their insurance plan covers, not necessarily the drug that has the cheapest list price or is most helpful for their particular medical need. This pattern is demonstrated by increased costs in inpatient/outpatient care associated with more restrictive drug coverage.⁶ The complicated ecosystem in drug pricing has caused many patients to receive improper treatment and has increased frustration with the medical system. Any consequences of this ecosystem are readily attributed to physicians without knowing the more complicated forces at play. With so many different components in the healthcare system in the US, patients and lawmakers can easily lose trust in physicians, as physicians are the main point of contact with the healthcare system, not the PBMs or drug manufacturers that ultimately reach the deal that affects consumers.

The standard care model is evolving to increase profits for insurers

Beyond receiving increased criticism as a repercussion of the complicated role insurers play in the healthcare system, physicians themselves also directly suffer from the growing influence of insurance companies. As insurance companies grow larger, health insurers can make deals with a few select hospital networks to limit patient choice in healthcare services and lower physician payments by threatening to otherwise remove coverage of their medical services. According to Branning and Vater: In geographic markets where an insurer is a dominant player, physicians may have little choice but to accept the reimbursement offered by the insurer or risk going out of business because of a diminished volume of patients…This practice may limit physicians' autonomy and may negatively affect individual patients whose circumstances do not fit the standard care model.¹ The standard care model – the set of treatments, care, and appropriate practices for each medical situation agreed upon as the baseline level of care for all patients¹¹ – has increasingly been manipulated to raise profits for insurers. Certain healthcare delivery protocols and qualifications for medical services are required to obtain coverage. As insurance companies consolidate and grow, the frightening lack of checks and balances – apart from the courts – allows insurance companies’ negotiating power to overpower the interests of patients and healthcare providers. From a physician’s point of view, they must either conform to insurance companies’ lower reimbursements for medical services and their established standard care model, or risk losing many patients covered by that particular insurance company to other medical institutions. Furthermore, hospitals are for-profit institutions, so uninsured individuals effectively have a different standard care model than insured individuals to maintain reimbursements from insurers. One can see this in the fact that hospitalized, uninsured patients – who ultimately receive fewer appropriate diagnostic and therapeutic services – have a 37% higher mortality rate compared to hospitalized, insured patients.¹³ For uninsured individuals, the financial interests of hospitals work in opposition to the meaningful physician-patient relationship and trust upon which medical systems are based, thus preventing physicians from fulfilling care for the patient. The appropriate treatments for uninsured patients are often too expensive without any coverage and may have to be covered by hospital charity care programs.⁵ Physicians are therefore forced to accommodate a standard care model that varies between patients and make ambiguous decisions when a patient’s particular circumstances do not fit within the guidelines of the standard care model. The shifting healthcare landscape has created a new standard care model full of administrative and financial hurdles that move health systems away from what they were initially meant to do: be a framework conducive to physicians helping patients.

Possible solution

Urgent action is needed to reform and put insurers’ power into check; otherwise, financial gains will overshadow patients’ interests. From the opioid epidemic to disincentivization in engaging in appropriate healthcare services, the many byproducts from the consolidation and growth of insurers’ power in US healthcare necessitate timely remedies. One such solution could be implementing a system of value-based healthcare, which could revolutionize healthcare by tying improved conditions of the patient to value rather than pre-negotiating prices and coverage based on the particular service.⁸ This could level the playing field between different levels of insurance coverage by ensuring all patients receive equal quality of care. A value-based system would disregard the type of insurance patients are covered by because the hospital’s reimbursement will largely be dependent upon patient outcome. Enacting substantial change may seem overambitious at a surface level. However, given the magnitude of reform that could result in healthcare with its implementation, such substantial change is necessary, both in policy and practice.

References

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