Introduction
The State of Georgia (GA) is the ninth most populous American state and the third most populous southern state in the US. However, the health coverage in Georgia remains rather weak, particularly due to the state’s government refusing to proceed with the 2014 Medicaid expansion act, as well as due to the exit of several big insurance competitors from the market.
Current Health Care Delivery Structure
Georgia uses a federally-run health insurance exchange (Norris, 2017, para. 1). There are currently five carriers on the Georgian healthcare marketplace offering plans: Blue Cross Blue Shield of Georgia, Human, Kaiser Permanente, Ambetter from Peach State Health Plan, and Alliant. The only carrier that has a full coverage of the state, however, is the Blue Cross Blue Shield of Georgia, whereas the only area where all five choices are present in the Atlanta metro area (Norris, 2017, para. 15). During 2016, the number of people enrolled in private plans through the Georgia exchange was 587,845, which made Georgia fourth in the ranking of states with the highest enrollment among the Healthcare.gov users (Norris, 2017). The majority of registered people (almost 90%) in 2016 received premium subsidies – on average, about $290 per month, out of the effectuated enrollment cost of $478 (Norris, 2017).
However, given that there were nine carriers on the market in 2016, in 2017, there will be a noticeable reduction in health plans available, and their cost since less competition will allow the companies to raise their pricing. This might further affect the overall availability of health insurance to the population of Georgia, making health plans less affordable to the majority of people. The state’s health care accessibility rankings are already quite low: “The state ranked in the bottom 20 percent on 12 of 44 measures, faring worst in terms of uninsured adults (46th) and adults who went without care in the past year because of cost (50th)” (Dorsey, 2016, para. 5); however, given the state’s refusal to proceed with the expansion of Medicaid, which would make more people eligible to get free care, the decrease in the number of insurance providers could reduce the overall healthcare availability in the region even further.
Determinants of Market Power
The determinants of market power are different for insurance firms and healthcare providers. For instance, in the case with insurance providers, most employers embrace health insurance products with broad provider networks (Ginsburg, 2011, p. 1), so having a broad range of providers available in the insurance plan is one of the primary sources of market power for insurance firms. On the contrary, the main determinants of market power among healthcare providers in the plan generosity (Baker, Bundorf, & Kessler, 2015a) and the range of services provided – for instance, hospital ownership of physicians’ practices (Baker, Bundorf, & Kessler, 2015b). This can be justified by the fact that the two types of structures target different types of customers: for example, insurance firms mainly provide plans for corporate buyers who often value the accessibility of healthcare over its cost. In contrast, hospitals service individuals, who are more interested in the quality and range of service.
Competitive Forces in the Healthcare Industry
As shown above, the main competitive force in place in the healthcare industry is a competitive rivalry. The higher amount of competitors affects the pricing strategy of insurance providers, causing them to decrease the prices, while at the same time pressuring them into increasing the quality of customer care and the range of providers included. However, the sudden reduction in the number of providers at the end of 2016 also created a decrease in supply. Given that the demand remained the same, there will be less pressure on the insurance providers to keep their prices low and to enhance the quality of care. Another significant competitive force is the pressure of substitutes. The main substitutes for private insurance are government health plans, such as Medicare and Medicaid. However, given the state government’s decision to not expand its Medicaid provision, it is unlikely that this force will have a significant influence on private insurers in the next year.
Pros and Cons of HMO-Managed Care
Both from the provider’s and the patient’s point of view, HMO-managed care has its advantages and disadvantages. For example, the cost of such care for the patient is significantly lower than the cost of private insurance, which makes healthcare more affordable to a wide range of people. When the provider is governed by an HMO, it also means that the quality of care the patient receives will be higher than in other types of low-cost medical care. It is also not necessary to wait for the service to be authorized by an insurance company, which allows receiving care more quickly in case of an urgent need. On the other hand, though, managed care restricts its users to a single primary care provider, who is generally not authorized to provide specialized care. If the patient requires specialized care, it will be necessary to obtain a referral from the primary care provider before that type of care is arranged. Moreover, HMO-managed care does not cover medical treatment received outside of the pre-arranged network, except for emergency cases.
In the case with care providers, there are two main benefits of HMO-managed care: the reduction in competition and a stable flow of patients, both resulting from the fact that patients are tied to the provider, and in the case of health problems they will have no choice other than to go to that particular provider. The main disadvantages of this practice, though, are the increased control from HMO and the need to go through a complex credentialing procedure. The latter process is time-consuming and difficult for larger providers, whereas the control by an HMO is on-going and can be challenging for some workers and managers.
Incentives to Healthcare Providers
Two major types of incentives are available to medical care providers in Georgia. First, the Medicaid EHR Incentive Program provides incentive payments for the meaningful use of certified electronic health record technology by eligible providers (GDCH, 2012, p. 1). The aim of the program is to promote the correct use of electronic health record technologies to improve the efficiency of health care provision. Electronic health records allow quick access to the patient’s medical history, lab results, and other medical information through electronic technology. As a result, both patients and care providers can spend less time and effort on accessing the past information, which allows them to increase the efficiency of the medical institution’s operations, as well as to potentially transfer the data between the institutions to reduce the need for repeated tests and examinations. The incentive program is available to all kinds of providers, including physicians, nurse practitioners, certified nurse-midwives, and dentists (GDCH, 2012, p. 1). Incentives for eligible professionals are $ 21,250 in the first year and $8500 in every subsequent year, with a total of over $63,000 during the six years of the program.
This incentive program is quite useful, considering both the benefits of the EHR use and the financial incentives available to the participants. The payment amount will attract both large and small providers, introducing them to technology in the first year. The reduction of the payment amount in the subsequent years will not decrease the effectiveness of the program, as by this time the providers would have already discovered the non-financial benefits of using the EHR.
Another incentive program available to health providers relates to workforce development. This is one of the problem areas in the Georgia health system, as access to medical care in the countryside remains very limited. The program of Georgia’s Board for Physician Workforce aims to use incentive programs to motivate graduate medical specialists to work in the areas with lower healthcare access by helping them to pay their student loans (Sweeney, 2016, p. 8). The loan repayment program is available to 30 physicians a year, who can receive up to $100,000 during the four-year period (Sweeney, 2016, p. 8). However, this program is not nearly as effective as the EHR Incentive Program for several reasons. First, the payments only cover less than half of the total cost of medical school tuition. Given the fact that medical specialists working in the countryside are likely to be paid less than those working in large cities, covering half of the tuition costs is not enough to motivate them to stay working in the rural areas. Furthermore, the selected number of practitioners is not sufficient to promote a significant development of healthcare in rural areas. With 9 million of people scattered around Georgia’s 159 counties, 30 professionals will not have a significant influence on the availability of healthcare in the rural areas: once their student loan is paid, the participants might seek employment in regions with higher pay, and thus a permanent increase in the number of rural health practitioners will not be achieved.
Capitation Risks
Another method of improving the providers’ efficiency is the use of a capitation payment system. However, there are many financial risks associated with this system. For instance, if the volume of patients decreases, so will the provider’s pay. It is hard for the providers to estimate and evaluate all the risk factors that could influence the outcome in the same way that insurers do, which is why the financial risks should be addressed by the consumer-driven health plan itself – for instance, by providing fair compensation in case the patient number decreases due to reasons not related to service quality.
Conclusion
Overall, the health system of Georgia has some significant gaps that have to be addressed to improve the accessibility of healthcare and its coverage of the area. One of the crucial steps in achieving this would be accepting the Medicaid expansion, thus allowing access to affordable healthcare to a wider population. Addressing the issues in healthcare would help to increase the overall health of the people in the region and, consequently, their quality of life.
References
Baker, L. C., Bundorf, M. K., & Kessler, D. P. (2015). Does health plan generosity enhance hospital market power?NBER Working Paper No. 21513. Web.
Baker, L. C., Bundorf, M. K., & Kessler, D. P. (2015). The effect of hospital/physician integration on hospital choice?NBER Working Paper No. 21497. Web.
Dorsey, J. (2016). Georgia health insurance. Web.
Georgia Department of Community Health (GDCH) (2012). An overview of the Medicaid EHR incentive program. Web.
Ginsburg, P. B. (2011). Health care provider market power. Web.
Norris, L. (2017). Georgia marketplace history and news. Web.
Sweeney, T. (2016). Prescribing remedies for Georgia’s medical provider shortage. Georgia Budget & Policy Institute Report. Web.