This paper examines how two major government regulatory frameworks — Medicare reimbursement policy and the Health Insurance Portability and Accountability Act (HIPAA) — produce unintended consequences that limit patient access to care. While both programs were designed to improve quality, equity, and efficiency in healthcare delivery, the paper argues that low reimbursement rates discourage provider participation in Medicare and Medicaid, creating shortfalls precisely when newly insured patients flood the system. Similarly, HIPAA's mandates for electronic medical records and e-prescribing impose steep technology costs and introduce new prescription errors. Drawing on academic literature and firsthand professional experience, the paper concludes that large-scale regulatory programs inevitably generate barriers alongside their intended benefits.
The paper demonstrates policy consequence analysis: it identifies the stated intent of a regulation, traces the mechanism by which implementation diverges from that intent, and supports each claim with a peer-reviewed or primary source. This approach is common in health policy writing and shows students how to critique institutional programs without dismissing their value entirely.
The paper opens with a framing introduction that establishes the regulatory watchdog role of government agencies, then narrows to two extended case studies — Medicare reimbursement (including Part D pharmacy impacts) and HIPAA's electronic-records mandates. Each case study moves from program overview to specific harm mechanism to supporting evidence. A brief conclusion synthesizes both cases under the theme of unavoidable unintended consequences. The structure is effectively a two-body-paragraph argumentative essay scaled up to full academic length.
The role of government regulatory agencies and government regulations is particularly important in healthcare. The most important reason for this is that healthcare delivery is a special case with regard to consumer use: to some degree, all individuals have the right to safe and ethical treatment — treatment that, above all else, does no harm. Government regulatory agencies therefore serve as a watchdog for healthcare, attempting to ensure that treatment for all patients is safe, ethical, and equitable. These agencies are especially focused on identifying universal barriers to healthcare by establishing public insurance programs, rules, and regulations, as well as funding mechanisms, while also attempting to eradicate some of the healthcare disparities that exist today.
To achieve these goals, regulators have created and continue to oversee many pieces of legislation that serve as standard bearers for healthcare delivery. In doing so, however, they can also cause unintended complications that result — for some — in greater barriers to care rather than fewer. This paper briefly discusses the ways in which two government regulatory frameworks create unintended consequences that erect new barriers to care for some consumers, and examines how these regulations affect providers.
This may seem contradictory, since the full intention of many government regulatory agencies and regulations is clearly to improve quality and access for millions of people — and for the most part, most do. The exceptions occur when programs create consequences such as refusal of service to patients, or complicated, costly, and difficult-to-apply programs and services. The two examples discussed here — the Medicare reimbursement schema and the Health Insurance Portability and Accountability Act (HIPAA) — demonstrate the effects of regulatory programs on healthcare delivery for both individuals and organizations. Though both programs at their core serve to improve quality and access for consumers, some of their legislative consequences are ultimately the opposite.
With regard to Medicare — the universal health coverage program for those over 65 — the program and its administering agency revolutionized the manner in which healthcare providers bill for services by creating diagnostic codes as well as standard reimbursement caps for nearly all procedures performed by providers. In other words, the program created a billing guideline — one often used for privately insured, private-pay, and Medicare patients alike — that sets a limit on how much a provider can bill for any given procedure. Medicare then attempts to control how much it and the patient pay for those services by allowing reimbursement on a scale ranging from 50 to 80 percent of the total billable amount. What this essentially communicates to the provider is: "This is how much you can bill us for a given procedure, but we will only pay you for part of it, and the rest you must either collect elsewhere or go without." Medicare reimbursement percentages are also based on provider experience, meaning that providers who are new to the system receive a lower percentage than those who have been participating longer, who receive the maximum 80 percent reimbursement — still lower than what they would receive from private-pay patients or private insurers.
This system inherently discourages providers from treating Medicare patients. With changes associated with the Patient Protection and Affordable Care Act (PPACA), as amended by the Health Care and Education Reconciliation Act, Medicaid — public insurance for the poor, reimbursed at only 72 percent of Medicare rates — will be expanded greatly. As Rothstein (2011) notes, "Already, some physicians decline to participate in the Medicare program because of low reimbursement rates, and linking Medicare participation with accepting Medicaid patients is likely to accelerate this trend" (p. 92). The result will be a growing number of providers who opt out of treating Medicare and/or Medicaid patients, as well as those who carry both forms of insurance.
As a community healthcare provider, I have heard from many patients the experience of calling more than ten doctors and clinics per day before finally — after months of established eligibility under Medicare and/or Medicaid, or after their former doctor retires — finding a single provider who will accept them as a new patient. In the end, these patients do not have a meaningful choice of providers; they simply take the first provider who agrees to treat them.
Additionally, it is clear from current enrollment trends that possibly more than 50 percent of providers currently participating in the Medicare program will retire within the next ten years, leaving a gap that will be difficult to fill by providers who receive even less reimbursement than their predecessors — in an economic climate that requires considerably greater expenditure to operate a medical practice (Rothstein, 2011, p. 93). What this essentially creates is a potentially severe shortfall of providers precisely when new regulations are set to flood the system with millions of newly insured healthcare consumers.
A similar issue is occurring in pharmacy provision with the passage of the Medicare Part D drug plan. Under this program, individuals covered by Medicare receive coverage for a large number of their prescriptions, but reimbursement to the pharmacy — the total amount paid by Medicare and the patient combined — can and often does result in a significant reduction compared to private insurance and private-pay rates, and can even result in filling prescriptions at a loss. Though Medicare Part D is not as severe as the new drug reimbursement formularies under Medicaid, the program as a whole is hitting retail private pharmacy providers very hard.
These pharmacies were already struggling with costly technology upgrades, an increased number of mandated licensures driven by other regulations, and the ability of corporate chain stores to charge low prescription prices as a standard practice — since chains do not rely heavily on pharmacy profits to maintain overall store profitability and can purchase medications in large quantities at lower rates. As one independent pharmacist put it: "It's like asking someone to sell $20 bills for $5 a piece — you'll do a lot of business for a while, but you won't stay in business for long," said Matthew Kopacki, owner of Rock Ridge Pharmacy (Prial, 2007). According to the same source, "independent pharmacists say the new formula requires them to accept reimbursement for generic drugs that average about 36% less than the price they have to pay for the drugs" (Prial, 2007).
As standard-setting programs, Medicare and Medicaid may also serve as a signal to private insurers — of which all Medicare Part D providers are — to lower reimbursements to comparable levels, driving profitability even lower. After nearly four years under these reimbursement schedules, insurers across the board have become increasingly bold in setting contract prices for prescription drugs below cost.
This is not to say that the Medicare system is entirely flawed, or even that the reimbursement and billing caps do not serve an important purpose — they reduce the potential for abuse in charging for services and give many providers a useful guideline for treatment and care. The reality is that with any large-scale program there will be drawbacks, but this particular drawback may seriously affect the quality of care for millions of people and result in large numbers of elderly individuals without access to even the most basic services.
Though both the Medicare system and HIPAA regulations are ultimately designed to improve access to care and make the care patients receive of higher quality and equity, it is also clear from the above research and professional experience in medical care that these government regulations and agencies also create barriers to provision of care. It is very unlikely that any sufficiently complex regulatory program will ever pass every test, result in a fully error-free system, or universally achieve the goals it was designed to meet. A great many serious unintended consequences will likely continue to follow and affect healthcare delivery as a result of government agency regulations for a long time to come.
By the Numbers. (2011). Modern Healthcare, 41(27), 9.
Prial, D. (2007, July 18). A painful prescription. The Record (Hackensack, NJ).
Rothstein, M. A. (2011). Currents in contemporary bioethics. Journal of Law, Medicine & Ethics, 39(1), 91–95. https://doi.org/10.1111/j.1748-720X.2011.00553.x
U.S. Department of Health and Human Services Centers for Medicare & Medicaid Services. (2010). HIPAA general information: Overview. Retrieved from http://www.cms.hhs.gov/HIPAAGenInfo/01_Overview.asp#TopOfPage
Webster, P. (2011). Value of e-prescribing questioned. CMAJ: Canadian Medical Association Journal, 183(14), 1575.
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