American health care needs more competition, not less, to bring down prices
Here’s a newsflash: when businesses don’t need to compete for customers, they tend to raise prices.
Yet the progressive remedy to perpetually escalating health-care costs is not to increase competition — it’s to eliminate it completely and put the government in charge of health care, via Medicare for All.
There’s ample evidence that a lack of competition is what plagues our nation’s health-care system. Over the past few decades, large health systems have acquired local stand-alone hospitals and physician practices — and used their market power to wallop insurers and consumers.
To fight back, we shouldn’t nationalize health insurance. We should foster more competition among health-care providers.
Hospital systems have steadily bought out their competition. Consider one recent study from the Health Care Cost Institute, which analyzed hospital markets in 112 metro areas in 43 states. Between 2012 and 2016, the hospital markets in more than two-thirds of these areas grew more concentrated. By 2016, 72% of metro areas qualified as “highly concentrated,” meaning that just a handful of hospital systems handled nearly all admissions in the area.
As hospital sectors become more concentrated, the price of inpatient care surges. In Nashville, health costs are approximately 7% higher than the national median. The Nashville metro area’s healthcare prices are in the top third nationwide.
A 2018 paper from researchers at Yale, the University of Pennsylvania, Carnegie Mellon and the Massachusetts Institute of Technology concluded that “prices at monopoly hospitals are 12 percent higher than those in markets with four or more rivals.”
Hospitals aren’t just buying each other — they’re snapping up independent physician practices, too. Between 2012 and 2015, the number of physician practices owned by hospitals increased 86%. As of January 2018, hospitals owned roughly 80,000 physician practices throughout the United States.
This consolidation has cost patients. Physicians in the most concentrated markets charge 14 to 30% more than those in the least concentrated markets, according to a 2014 study. On average, consolidation over the previous two decades caused an 8% increase in physician fees.