Our health care system might be in such a mess in part because carriers are incentivized to back provider monopolies.
Barak Richman testified on Capitol Hill this week that antitrust regulators have let hospitals –including nonprofits – use mergers, acquisitions and regulatory moats to buy and crush competitors and jack up prices.
Carriers have exacerbated the situation, treating big hospitals too gently and letting them charge far higher prices than average, "textbook monopolies" would be expected to, Richman said.
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"Insurers all too often become co-conspirators with provider monopolists, agreeing to exclusive agreements that protect both themselves and monopolists but unforgivingly gouge consumers," Richman said.
In some cases, carriers have been weak shoppers because they know consumers want "the very best," but, in some cases, they're taking advantage of a lack of cost awareness, Richman said.
Richman, a Duke University economist, talked about the state of competition in the health care market at a House Judiciary subcommittee hearing on the effects of the Patient Protection and Affordable Care Act on competition.
But, by adding red tape, PPACA also could strangle any efforts to reconfigure the system, Richman added.
Other witnesses defended both providers and carriers.
Sharis Pozen, a witness who spoke for the American Hospital Association, said provider price growth has settled at a historic low and clearly isn't the main driver of premium increases.
From 2010 to 2011, premium growth doubled the rate of underlying health costs, such as hospital services, Pozen said.
Joseph Miller, who spoke for America's Health Insurance Plans, said carriers strongly support efforts to promote a more competitive market, in part by ensuring consumers get detailed information about the cost and quality of care.
In some cases, Miller said, hospital systems have been acquiring physician groups, or physician groups have been merging with others in ways, that could cut competition and hurt consumers.
Richman said authorities could help by requiring big providers to untie bundled packages of services so smaller providers could compete.
Regulators also should challenge anticompetitive terms in carrier-provider contracts, such as "most-favored nation"clauses. Those clauses can push up prices by keeping competitors from bargaining for lower rates, Richman said.
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Allison Bell
Allison Bell, a senior reporter at ThinkAdvisor and BenefitsPRO, previously was an associate editor at National Underwriter Life & Health. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached through X at @Think_Allison.
