Since I’ve been talking health economics lately:
Suppose there are two insurance companies, CheapoCare and PremiumHealth. CheapoCare is cheap for patients but doesn’t pay doctors very much. PremiumHealth is expensive for patients but pays doctors lots of money.
Suppose you’re a doctor trying to maximize profits. If you see a fixed number of patients a day, you might prefer to preferentially see PremiumHealth patients, and see CheapoCare patients only if you’ve finished seeing all the PremiumHealth patients who are sick that day.
You’re not allowed to do this. It’s against legally-binding ethical guidelines to prioritize some patients over others based on their insurance.
On the other hand, getting approved as a provider for any insurance company is a long and annoying process, and it’s totally ethical not to go through it. So perhaps our money-liking doctor above could just not bother to fill in the five billion forms that she needs to get approved by CheapoCare. Then she could take only PremiumHealth patients, and get her money after all.
The interesting thing about this arrangement is - well, suppose that the doctor can see ten patients a day. Suppose that in her area there are enough PremiumHealth patients to give her a steady stream of 7/day, and the same number of CheapoCare patients. And suppose PremiumHealth pays $200 per patient, and CheapoCare only pays $50.
In the world where there are no ethical guidelines, the money-liking doctor would see the 7 available PremiumHealth patients per day, and fill the remaining 3 slots with CheapoCare patients, for a total of 10 patients and $1550.
In the world where there are ethical guidelines, the doctor could choose to take both insurances to maximize her patient load. In this case, she will see a random mix of PremiumHealth and CheapoCare patients per day - and since there are equal amounts of both, on average she’ll see 5 each - for a total of 10 patients and $1250.
But if she wanted to maximize profits, she would never sign up for CheapoCare at all! If she doesn’t sign up for CheapoCare, she will see 7 PremiumHealth patients and 0 CheapoCare patients, for a total of $1400. Then she’ll go home a little early since she doesn’t have any patients to see the last three appointments of her day.
So the ethical guidelines are suppose to ensure that greedy doctors don’t deny care to the poor. But what they actually do is give doctors $150 extra a day to not even see the poor people they were going to see before!
And it’s actually even worse than this. Suppose you’re a doctor who does two different things. For example, maybe you see patients in your office, and you also go into the hospital to perform surgeries. Suppose that CheapoCare and PremiumHealth pay exactly the same amount per surgery, and PremiumHealth only pays more for the office visits.
In the absence of the guidelines, a greedy doctor would see fewer CheapoCare patients in her office, but she would still perform exactly the same number of surgeries on them. In the real world, agreeing to perform surgery for CheapoCare patients would require signing up with CheapoCare insurance in general, which would obligate her to take a big pay cut in her other job at the office. So the doctor is incentivized not to perform surgeries for poor people even if it’ll earn them exactly the same amount of money!
Note: I haven’t 100% verified this is true, just heard a teacher say it during a lecture on medical business. If it’s wrong for some reason please let me know.