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The role of competition in health care

The problem is not the lack of competition among insurers. The problem lies in the labyrinthine thicket of tax law, employment law and insurance regulation.

By Jeffrey Spiers | Updated on October 28, 2009

In the analysis of health care reform, something needs to be said about calls for increased competition as a way to lower health care cost. On one hand, we have calls for increased competition via the introduction of a public health option. On the other hand, the repeal of federal law to induce interstate sales of insurance policies is proposed. Both ideas represent novel ideas. Both are flawed.

The current proposals from the left embrace a newfound fondness of increased competition in the health care market a la the public option. We are told that the use of a public health insurer will keep the heat on insurance carriers via increased competition and thus lower costs. It is as if the health insurance market suffers from a complete lack of competition. But with 1,300 or so health insurance carriers in the United States today and how does one seriously conclude there is a general lack of competition in the health insurance market?

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