One health insurer has at least 30% market share in virtually all of the nation’s major markets. This finding, published in the AMA’s “Competition in Health Insurance; A comprehensive study of US markets”, indicates that the market’s consolidation has resulted in a monopsony wherein there are few buyers (in this case of provider’s services) and many sellers (again, in this case, providers).
The market is even more consolidated than the above statistic indicates; in 56% of the markets studies, one health plan has over 50% market share, and in one of five markets, a single health plan controls over 70% of the market.
This makes for a small group of companies controlling the buying and selling of health care; they have created a monopsony on the buying end and an oligopoly on the selling end.
What does this mean for you?
US health care may be devolving to a not-quite-single payer system; with three plans dominating the marketplace, providers have little control over selling their services, and health plan purchasers have few sources from whom to buy their health insurance.
The health care market does not lend itself to new entrants as barriers to entry are quite high. Provider contracts are required, and without market share, providers won’t give meaningful contracts. And without meaningful contracts, employers won’t sign up.
So new entrants are stuck in a Catch-22. The result – continued market consolidation, leading to fewer options for providers (sellers) and employers (buyers).
While the “market” may be working here, the result is likely unfavorable for both providers and employers. Wealth is indeed being created at the health plan level, but at the expense of their suppliers and customers.
The net is this. Is it acceptable to allow companies to exert this level of control over health care ?
May
16
Joe- this has been going on for quite some time now. I know you are opposed to the SBHP/AHP legislation. The bill passed by the House would have seriously cut into the ‘oligarchy’ as you call it.
By allowing associations to band together to self insure or contract with the major insurers, this oligarchy would be threatened and insurers would be forced to respond. (The failed Senate bill is much weaker)
But you are opposed.
Congressman Shadegg’s Health Care Choice Act would also impact the market in that we would have truly portable insurance.
Health insurance
Eric – good observations, and thanks for the comment. I’m opposed to the legislation for a couple of reasons. First, it would likely result in an even faster ride down the risk selection slope; enablng tighter medical underwriting would eliminate many folks w pre-existing conditions and other issues that today can’t be excluded due to (some) state regulations and legislation. And decreasing the pool of the insured means more cost-shifting to those with insurance.
Thus, I do not see Enzi’s bill as doing anything to combat the uninsured problem.
In addition, the bill as written in the Senate (and the House version too for that matter) does nothing to lower the barriers to entry for other managed care plans, nor does it make it easier for new or smaller health plans to compete with the oligarchs (is that a word?). In the “old days” METs et al were a special type of plan that truly was an association type of plan, with lower capital requirements and regulatory burdens. larger plans could not (usually) offer them due to their special status. The Enzi version essentially gutted this special status and opened AHIPs to the big plans. When this happened, many of the associations pulled back from or reduced the level of their support for the bill.
Your basic question is why am I opposed to these measures?
1. they do nothing to reduce the number of uninsured and may actually exacerbate the problem.
2. they do nothing to attack the root problems, the cost drivers and factors that have resulted in today’s health care mess.
3. they benefit large entities without creating any reasonable or measureable benefit for consumers or entrepreneurs.
Other than that, it’s a great idea.
The market is “devolving” to a “not quite single payer” market for many reasons, some of which inevitably are related to large payers, but many are not. I won’t bore you with the litany that you’ve already heard.
What is interesting is that the outcomes produced in single payer systems are better at less cost than the American system of health care payment and delivery.
The reason for this is simple: In a utilitarian system where resources are allocated from the top down, a society decides to spend on what benefits the most people most of the time. In a privately funded system, far more resources are devoted to the few who are the sickest in the system (that is IF they have insurance), yet whose outcomes are invariably worse. Thus we spend more and more on fewer and fewer people even though the additional resources produce terrible results. We reached the point of diminishing returns long ago in America.
Point-solution reforms will fail because none of them can take into account the complexities of the ENTIRE U.S. system. Thus,as you rightly point out, most of them actually make things worse because they deal with only a portion of the problem, making something else worse at the same time. The net effect generally is to either raise costs, reduce quality or leave more people without coverage. Sometimes reforms produce all three. (COBRA comes to mind as just one example.)
Unfortunately, this is the path we’ve been on for 40 years and we will remain there until somehow the U.S. can finally come to grips with the inevitable: A single payer system is the only one that can improve outcomes and lower cost while covering everyone.
I know that this system creates new problems, but they are the problems we ought to be working on, not the set we have created by the current “system.”