(p. B10) If the fries at your local burger joint are soggy or if you’re suddenly charged $25 for ketchup, you’ll probably eat somewhere else next time. That’s the beauty of competition.
Healthcare doesn’t quite work that way. For starters, you don’t always get to choose your medical provider—your insurer often does by contracting with them. And even the insurer can’t easily walk away, either: Giant hospital systems are swallowing up big chunks of the country’s healthcare system through vertical and horizontal integration. That leaves fewer parties with which to negotiate.
If McDonald’s bought Burger King and then Wendy’s, you could always cook at home instead, but nearly everyone needs to go to the doctor or the hospital at some point. Patients also aren’t nearly as cost sensitive as they would be with other purchases because employers and insurers pick up much of the tab. They often don’t even know the price ahead of time.
Hospital executives argue that mergers lead to improved efficiency and better outcomes for patients. But, after years of rampant consolidation between hospitals, most regions in the U.S. are now dominated by a few large players. That has led to higher prices and no significant improvements in patient care.
Rising costs don’t just lead to alarmingly high medical bills—they also make all of us worse off by increasing premiums, the bulk of which are paid by the nation’s employers. That affects even people who rarely visit a doctor. As those premiums soar and employers look to offset the cost, they indirectly eat into people’s paychecks.
Over the past two decades, there have been more than 1,000 mergers among the country’s approximately 5,000 hospitals, according to a forthcoming paper in American Economic Review: Insights.
For the full commentary see:
(Note: the online version of the commentary has the date June 6, 2024, and has the same title as the print version.)
The paper in American Economic Review: Insights, mentioned above, is: