CAHC Provides Four Options for Congress to Help Restore Competitive Health Markets

Contact: Paul Hewitt
202-510-5644 or paul.hewitt@cahc.net


FOR IMMEDIATE RELEASE September 9, 2011


WASHINGTON, DC – In submitted testimony on health care industry consolidation at a hearing today by the Ways and Means Subcommittee on Health, Coalition for Affordable Health Coverage (CAHC) Executive Director Joel C. White warned that concentration was driving up the private premium costs, and proposed a series of measures designed to reduce or eliminate uncompetitive practices.

White cited research showing that 90 percent of Americans face hospital markets that are highly concentrated, according to Federal Trade Commission (FTC) standards.

“Oligopoly and monopoly are the rule, not the exception, in America’s health markets,” White said. “Under these conditions, necessary and appropriate efforts to limit Medicare and Medicaid reimbursement growth often show up as rising private premiums, which, like payroll taxes, are deducted from cash wages.”

White called on Congress to:

Require CMS to measure local market concentration as a first step in assessing propensity to shift costs.

• Enforce existing antitrust law, to both prevent further consolidation and perhaps even de-concentrate uncompetitive markets through the retroactive enforcement of existing standards.

• Modify antitrust law, to permit the supervised collusion of payers (insurers, employers, consumer organizations) in the most concentrated markets. In the current issue of Health Affairs, Glenn Melnick and colleagues show that consolidation on the payer side can constrain the power of oligopoly. Ending FTC’s ban on insurers from publicizing the prices they pay to specific providers could facilitate price transparency and consumer choice, if pursued in concert with other pro-market policies.

• Prohibit practices conducive to price fixing, such as anti-steering, guaranteed inclusion and product-participation parity (e.g., “In no event will [hospital] providers be singled out in a tier, limited network, or other product…”) Most favored nation clauses prohibit providers from charging rival insurance plans less for their services. Concentration across markets can circumvent antitrust restrictions—for example, when systems give health plans the choice of contracting with all or none of their facilities in multiple markets. Such facilities should be required to negotiate prices independently.

White warned that market concentration had weakened the health industry’s incentives to pursue efficiencies. “Dramatic improvements in health productivity—exceeding 30 percent—are well within the reach of American medicine,” he said. “Price fixing by oligopolies or monopolies is just as inefficient as price setting by government regulators.”

To read the full testimony, click here.