Rising health care costs and the impending expiration of expanded Obamacare subsidies fueled the record-setting government shutdown that ended this week.
But there’s another driver of escalating costs and prices playing out in a far broader, more impactful way: the rapid consolidation of insurers, hospital systems, doctors’ groups, and pharmacies into behemoths, effectively giving them monopoly power.
Calling it “mutually enforced monopolization,” Barak Richman, the Alexander Hamilton professor of business law at George Washington University, told me: “It’s not competition. It’s more like collusion. They don’t care about price.”
In our market-based system, the price of each service is determined through a complex set of negotiations between an insurer and a provider. An insurer might agree to pay grossly inflated prices for a hospital system’s labs to gain access to that system’s must-have cancer center – and that cancer center might be in a town halfway across the country, where the insurer has a lot of clients.
The result is high prices: A patient who visits a hospital lab for a simple blood test could be stuck with $1,000 or more in deductibles, copays, and coinsurance.
Studies show the escalating consolidation in health care is driving up prices, harming patient outcomes, and decreasing choice for people who need care. A recent study found that six years after hospitals acquired other hospitals, they had raised prices by 12.9%, with hospitals that engaged in multiple acquisitions raising their prices by 16.3%.
At first, anti-competitive consolidation was easy for government regulators such as the Federal Trade Commission and the Justice Department to spot, because it involved hospitals acquiring other hospitals or providers in their own market area. But in recent years, new types of deals have been harder to police. Giant hospital systems now acquire providers far away, deals known as trans-market mergers. Insurers acquire doctors’ practices and specialty pharmacies, often called vertical mergers.
President Joe Biden had made oversight of health care mergers a priority, issuing 2023 guidelines that included these new types of consolidation. His FTC chair, Lina Khan, was vocal in her criticism of the trend.
Her successor under President Donald Trump has signaled a more moderate approach. But in an exclusive interview with KFF Health News, Daniel Guarnera, the director of the FTC’s Bureau of Competition, said that the new leadership at the FTC and the Justice Department has endorsed the 2023 guidelines “as a framing device” for companies contemplating a merger.
What this means going forward remains unclear. Khan is now advising New York City Mayor-elect Zohran Mamdani.
KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.
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