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Continuing consolidation in the health industry has enabled providers to raise their prices without improving the quality of their services. At an AEI event on Friday, a panel of economists and lawyers discussed the economic and legal causes of the concentration among health care providers and insurers and its pernicious effect on health costs.
Martin Gaynor of Carnegie Mellon explained the existing evidence corroborating rising consolidation, noting that the hospital sector has seen over 1,000 merger and acquisition deals from 1994 to the present. The resulting lack of competition among hospitals and other providers allows those providers to monopolize the market and charge higher prices. These higher prices, Robert Murray of Global Health Payment LLC explained, contribute significantly to growth in health spending.
Health insurance compounds the problem, Barak Richman of Duke University School of Law emphasized. Because most patients have insurance, often financed in part by their employers and the federal government, they are not sensitive to the cost of their care; therefore, their demand for care does not decrease as its cost increases.
Although the absence of competition in the health industry is a long-standing issue, the panelists agreed that the incentives in the accountable care organizations created by the Affordable Care Act may exacerbate the issue by encouraging further consolidation.
US health care markets have become more concentrated over the last decade. How should policymakers ensure that the forces of competition will improve the cost and quality of health care?
Traditional antitrust enforcement tools have done little to halt extraordinary consolidation in local hospital markets, and the Affordable Care Act may encourage other health care providers and insurers to grow larger as well. Our expert panel will examine the current state of US health care competition and review policy reform options.
If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.
Martin Gaynor, Carnegie Mellon University
Robert Murray, Global Health Payment LLC and Catalyst for Payment Reform
Barak Richman, Duke University School of Law
Thomas P. Miller, AEI
For more information, please contact Catherine Griffin at firstname.lastname@example.org, 202.862.5920.
For media inquiries, please contact MediaServices@aei.org, 202.862.5829.
Martin Gaynor is the E. J. Barone Professor of Economics and Health Policy in the H. John Heinz III College and the department of economics at Carnegie Mellon University. He is also a research associate of the National Bureau of Economic Research in Cambridge, Massachusetts, and the Centre for Market and Public Organisation at the University of Bristol in the United Kingdom. Before coming to Carnegie Mellon, he was on the faculty of Johns Hopkins University. He has also taught at a number of other universities and was a visitor at the Institute of Economics of the Hungarian Academy of Sciences in Budapest, Hungary, in 1991. Gaynor has served as a consultant to the Federal Trade Commission, US Department of Justice, and the California Department of Corporations on antitrust issues. He serves on the editorial boards of the American Economic Review; Health Services Research; the International Journal of Health Care Finance and Economics; Rand Forums for Health Economics and Policy; Health Economics, Policy, and Law; and edited a symposium on incentives and competition in health care markets for the Rand Journal of Economics.
Thomas P. Miller is a resident fellow at AEI, where he focuses on health policy with a particular emphasis on information transparency, health insurance regulation, and consumer-driven health care. He was a member of the National Advisory Council for the Agency for Healthcare Research and Quality from 2007 to 2009. Before joining AEI, Miller served for three years as a senior health economist for the Joint Economic Committee, where he organized a series of hearings focusing on promising reforms in private health care markets. He has also been director of health policy studies at the Cato Institute and director of economic policy studies at the Competitive Enterprise Institute. Miller’s writings have appeared in publications such as Health Affairs, The Wall Street Journal, The New York Times, The Washington Post, the Los Angeles Times, Reader’s Digest, National Review, and Forbes.com. Before moving to Washington, DC, to work on public policy, he was a trial attorney, journalist, and radio broadcaster.
Robert Murray is president of Global Health Payment LLC, a management consulting firm specializing in the design of health care reimbursement systems, including population-based payment, global budget, patient-centric medical home and pay-for-performance methodologies. He has also worked as a short-term consultant to the World Bank and is currently advising the Chinese Ministry of Health in its payment reform efforts. Murray is also a writer and health-service researcher. Previously, Murray served as executive director of the Health Services Cost Review Commission, Maryland’s all-payer hospital-rate-setting agency for 17 years.
Barak Richman is a professor of law at Duke University School of Law. His research interests include the economics of contracting, new institutional economics, antitrust, and health care policy. He teaches contracts, antitrust, and health law, and he has guest taught classes at the Fuqua School of Business and the Sanford School of Public Policy. He was invited to the Yale/Stanford Junior Faculty Forum in 2004, received Duke Law School's Blueprint Award in 2005, and was a recipient of the Provost's Common Fund Award in 2006. His recent work has been published in the Columbia Law Review, the University of Pennsylvania Law Review, Law and Social Inquiry, Health Affairs, and the New England Journal of Medicine. He is the author of the fourth paper in AEI’s Beyond Repeal and Replace series, titled “Concentration in Health Care markets: Chronic Problems and Better Solutions,” which was published in June 2012.