The Broken Health Care “Marketplace”
Filed under: Private Insurance, Proposed Legislation, Public Plan
"Joust in the Marketplace," Lucas Cranach the Elder, 1506
While Mitch McConnell goes on Meet the Press to praise free enterprise in American health care, he ignores the market concentration that gives us vastly more expensive care than comparable countries. As Blue Dogs and other Dems start to tap on the brakes of health reform efforts, they would do well to consider the work of Tim Greaney and David Balto. Both have recently delivered Congressional testimony that indicates just how far health care is from a well-functioning, competitive market.
Balto is hardly a leftist on antitrust matters; for example, he has aggressively defended some Google initiatives now under scrutiny by the DOJ. But even he is alarmed by the extraordinary trends toward concentration in health care:
Few markets are as concentrated, opaque and complex, and subject to rampant anticompetitive and deceptive conduct. As the health care debate progresses, many advocate for limited reform of the health insurance system. Their belief is that it is a fundamentally sound market and with a little dose of additional regulatory oversight, all the ills of the market will be cured. They could not be more mistaken.
As a former antitrust enforcement official, I strongly believe the mission of the Federal Trade Commission and Antitrust Division of the Department of Justice is vital to protecting consumers and competition. However, in the past administration, the priorities of those enforcement agencies were not effectively aligned with the critical priorities in the health care market, with the result that there is substantial anticompetitive and fraudulent activity that raises prices and costs for consumers and the American taxpayer, especially conduct by certain health care intermediaries—Health Insurers, Pharmacy Benefit Managers, or PBMs, and Group Purchasing Organizations, or GPOs.
The full testimony appears here. Balto argues that “the Bush administration did not bring a single case challenging anticompetitive conduct by insurance companies,” while it “spent a hugely disproportionate amount of time, money and effort prosecuting relatively small groups of doctors.” By the end of the testimony, it almost appears that Balto has made his case too well, given the limited resources of current antitrust enforcers. It is hard for me to imagine them investigating even a fraction of the schemes and situations he describes, though perhaps some high profile cases (and partnerships with state attorneys general) would have an in terrorem effect.
Tim Greaney’s testimony before the Senate Commerce Committee paints a similarly grim picture. Greaney notes that, “by 2003, ninety-three percent of the nation’s population lived in concentrated hospital markets.” He quickly identifies the core problem in an increasingly sickly health care antitrust jurisprudence: courts’ short-sighted failure to understand the unconventional economics of medicine:
Legal decisions approving mergers of competing acute care hospitals have been roundly criticized. The judicial missteps can be traced to the courts’ tendency to oversimplify antitrust analysis by adopting plain vanilla, Chicago School assumptions about markets while failing to incorporate the effects of market imperfections in their analyses. Most of these decisions found extraordinarily large geographic markets for basic acute care hospital services as they ignored the heterogeneity of demand for care and the fact that consumers exhibit different preferences for [and ability to] travel.
Other cases refused to recognize supply side heterogeneity, failing to appreciate that mergers of “must have” hospitals may give rise to anticompetitive effects. To right the ship, the FTC has brought two recent hospital merger cases and undertaken retrospective reviews of the outcomes of several hospital mergers. Unfortunately, developing legal precedent takes time and effort and mergers may be attractive to the hospital industry during a period of legal uncertainty and regulatory change. An important priority for the FTC therefore should be to undertake close scrutiny of all horizontal consolidations by hospitals– including joint ventures involving physician-controlled specialty hospitals and outpatient facilities, none of which have been challenged to date.
Greaney also notes substantial failures in antitrust enforcement against physicians, health insurers, and PBM’s.
While Balto and Greaney focus on improving competition policy, I’m left wondering: can this market be saved? Greaney argues that “the nation’s competitive infrastructure — provider and payor markets — is not well designed to produce cost savings if reform proposals simply turn over the job to the private market. . . . [and] this quandary lends strong support to the idea of having a public plan option to nudge private insurers toward more vigorous competition and to serve as a backstop where markets fail.” A highly concentrated health care marketplace has neither the means nor the motive to discipline costs–external competition has to prod it in that direction. Well-designed health insurance exchanges will be key to success here.
Posts from Health Reform Watch have been cited by media sources throughout the country, including The New York Times, Washington Post, L.A. Times, Kaiser Health News, The Health Care Blog, NPR's Planet Money Blog, Duke Univ. Med. Center News, American Health Line Alerts, BusinessWeek.com, Concurring Opinions, Balkinization, The New England Journal of Medicine, Harvard's Nieman Foundation for Journalism, Las Vegas Sun, Maggie Mahar, Ezra Klein, Tom Geoghegan, and the official homepage of the Office of the Democratic Majority Leader of the House of Representatives, Steny Hoyer.
33% of Americans think the US health care system needs a major overhaul
Only 16% think we should leave it just as it is
http://www.commonwealthfund.org/~/media/Files/Publications/Data%20Brief/2008/Aug/Public%20Views%20on%20U%20S%20%20Health%20System%20Organization%20%20A%20Call%20for%20New%20Directions/How_Public_Views_Organization_exhibits_FINAL%20pdf.pdf
We are the only developed nation in the world that doesn’t provide healthcare in some form to all it’s citizens. In fact many of us have no health insurance
http://www.nchc.org/facts/coverage.shtml
Other developed nations have found their solution to heath care
How do they do it? Compare
http://www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/countries/
The question is, though, do they really like their system. Or would they prefer a system like ours.
http://www.google.com/url?sa=t&source=web&ct=res&cd=2&url=http%3A%2F%2Fharrisinteractive.com%2Fnews%2Fnewsletters%2Fhealthnews%2FHI_HealthCareNews2008Vol8_Iss6.pdf&ei=B45MSqa7LIyysgP6vsHpBQ&usg=AFQjCNGM1zYK2DPagCQo8YL3pcxQ1BqVxA&sig2=LI7fTuwMzp51R-jbby39SQ
The vast majority of Americans feel that we need health care reform this year.
http://www.gallup.com/poll/121664/majority-favors-healthcare-reform-this-year.aspx
Both Republicans and Democrats have come up with their plans for health reform
Let’s take the best ideas from each side, add in the best of systems from around the world and come up with something that will work.
No one is going to get everything they want. But at least we can fix some of the major problems.
Iinaction is totally unacceptable. And just taking something to dull the pain isn’t going to really solve the problem
We have a tendency in America to argue for or against a concept based on our own personal philosophy or view of the world, what advances our personal interests, or the interests of our party, family, organization, or region. Perhaps viewing the issue from a management or systemic perspective might result in innovative approaches to the issue. The American national mindset, citizen philosophy, lack of citizen motivation to be proactively healthy, and governance model make the socialization of health care in America very problematic, particularly at this point in time. A country needs to know its limitations.
Sure, everyone admits that the health care system is flawed. That doesn’t mean that we welcome Obamacare as a panacea. Physicians like me are increasing worried about his proposals that the evolving methods to fund them. Opposition is not simply a partisan GOP lockstep maneuver. Many Dem legislators and governors are very wary of the plan - and for good reason. Just last wk, the non-partisan Congressional Budget Office testified that Obamacare will add to the deficit. Why should we embrace a program we can’t afford whose cost is unknown? Do the Dems have any more creative method to make the system more affordable and efficient besides taxing highly successful Americans? Is this the only arrow in their quiver? See http://www.MDWhistleblower.blogspot.com