GREAT MOMENTS IN MEDICAL POPULISM.

Last weekend, on the way home from the train show, I dipped into one of the latest things self-styled progressives are getting worked up about.  (Can't write"the latest thing" as it is the nature of self-styled progressives to be worked up about multiple things, all the time.)

Blue Cross and Blue Shield of Illinois, which has agreed to pay a $339,000 state fine stemming from the insurer's almost year-long contract dispute with Springfield Clinic, says the clinic is making unreasonable demands.

Blue Cross divisional senior vice president Krishna G. Ramachandran said the for-profit, multi-specialty clinic, in its "first very specific counter-offer," is demanding a 75% increase in reimbursement rates "even though their rates are already the highest in the Springfield market and tower 60% more than those in the Chicago market."

It gets better. Springfield wanted to be reimbursed for offering high end services, while the Blues were trying to convince Springfield to accept Medicare reimbursement rates.  The article linked above does not mention that dimension, although it came up on the radio discussion.

Don't say I didn't warn you.  "Apparently, the government wishing that hospitals and clinics accept a greater discount, or requesting hospitals and clinics to lower their usual and customary charges, is by some magic transmuted into lower outlays for taxpayers. Whether fees rise for cash patients or for participants, if any remain, in private insurance plans, is apparently for another day."

Don't say I didn't call attention to what was likely to happen.  "Yes, and what happens when that Federal Insurance Provider takes sole control of the reimbursement rate to health care providers? Does anybody seriously expect that Wal-Mart-like methods to bend down the cost curves are going to work any better because it's Washington optimizing against the marginal factor cost schedule?

But when it's an insurance company, rather than politically reliable commissars in Washington, using those Wal-Mart methods, the griping comes through loud and clear.

The aggressive stance by Chicago-based Blue Cross, the state's largest insurance company, comes as thousands of central Illinois patients deal with the ramifications of Blue Cross removing the clinic's doctors and other medical providers from the insurer's preferred-provider network last summer and fall.

Illinois' insurance department is evaluating whether Blue Cross' remaining central Illinois provider network meets adequacy standards without Springfield Clinic's more than 600 medical providers.

Department officials said the fine was based on Blue Cross failing to notify the department that the removal of the clinic was a "material change" in the network that justified the insurer filing documents proving adequacy.

The jumble that is in-network, out-of-network, covered, not covered, subject to Medicare or Medicaid reimbursement rates, taken together, makes a pretty strong case for trade-tested betterments in medicine.

In City Journal, Tom Coburn and Paul Howard summarize their case thusly. "State and federal mandates hamstring competition in the name of protecting consumers and providing charity care, but they don’t do either job particularly well."  The details are complex in places, but the political economy is straightforward.  Why should a medical cartel be different from any other cartel?  The purpose of a cartel is to generate monopoly rents for insiders and then dissipate them in ways that get spun as in the public interest but in a full analysis generate deadweight losses.

In the case of the Springfield Clinic Blues, the rent-seeking takes convoluted forms.

"Central Illinois is not Chicago," he wrote. "We have strong relationships with more than a dozen commercial insurance companies that recognize the value and quality of care that Springfield Clinic provides to our patients. BCBS is the only insurer that jeopardizes access to that care by significantly undervaluing our market to increase its own profits. Thankfully, there are laws in place to protect employers and patients from the very type of 'ghost networks' that have recently been exposed, and we applaud the Department of Insurance for working to uphold the law."

Springfield Clinic has declined to provide data supporting its statement that Blue Cross is jeopardizing access to care from clinic providers.

Illinois State Medical Society President Dr. Regan Thomas said in a statement that the state fine "is a critical first step for ensuring patients get the access to medical care they deserve.

"The practice of 'ghost networks' must end. Insurance company provider directories often list doctors who are unavailable, not taking new patients, are located far away or who don't work at the listed medical facility, or are no longer a part of the network."

State Rep. Sue Scherer, D-Decatur, who said many of her constituents have lost access to their regular doctors because of the contract dispute, on March 23 introduced House Bill 5729, which Gov. JB Pritzker said would "make our system operate more transparently and give people and regulators more tools to hold health care insurers accountable."

I'm skeptical, though, that a new patch managed by Chicago politicians in Springfield, is going to do people caught in this tussle between a private sector monopsonist and a public sector monopsonist much good.  That's too adult a problem when there are opportunities to spew populist froth.  "The insurance company, which operates as a non-profit mutual reserve corporation and has stockpiled billions of dollars in profits while paying lavish bonuses to executives, argued that if it paid higher reimbursement rates to a few hundred doctors in Springfield, it would be forced to pass those costs on to customers and businesses in the area through higher premiums."