Competition can’t rein in health care costs

[eridani]

http://justcareusa.org/competition-cant-rein-in-health-care-costs/

Proponents of competition to bring down costs have little data to support their position. It’s hard to imagine how consumer choice would bring down costs because the health care market differs from other markets in three fundamental ways. First, insurance keeps people from making health care decisions based on price, as they do with other goods (although copays and deductibles can keep people from getting needed care altogether). Second, putting aside insurance, there’s precious little reliable health care data that allows people to make decisions based on price and quality that would drive competition. And, third, even with good data, we generally defer to health care experts to decide the services we need. Medical professionals are trained, and we lack the skills to know better.

Furthermore, commercial insurers are unable or unwilling to use their market power to rein in prices in meaningful ways. In fact, the Medicare managed care plans tend to piggy back on the prices Medicare has negotiated for health care services. As Wendell Potter explains, insurers drive profits by dropping unprofitable business lines not by bringing down prices.

To make matters worse, consolidation of provider markets has led to insurers having even less clout today than they’ve had in the past to drive down prices. Areas with consolidated provider markets have been shown to drive up prices 12 percent in a year.

The health care marketplace is always in flux, with new entrants, as well as mergers and acquisitions of companies, which often drives up prices. And, while these market shifts also may drive innovations, it can be hard to see the value. No commercial business worth its salt is prone to share its best practices with its competitors.

In sharp contrast, an all-payer or single-payer system, like Medicare, can both drive system change and control prices. Medicare is our most powerful tool for driving system-wide improvements in the health care marketplace. It can offer price and quality transparency. It also reins in prices through negotiated rates. Some argue that if we extended Medicare to the entire marketplace it would disincentivize market winners and losers from innovating. But, many innovations happening today are not public and not benefiting our health care system.

[abelenkpe]

1. K&R

[Cassiopeia]

2. A 4th point would be

you're not going to start shopping prices in the middle of a serious medical event which are generally the most expensive healthcare costs.

[eridani]

3. I always ask people if they think that if their city had threee competing fire departments--

--that emergency response costs would go down. It is the nature of public goods that competition harms rather than benefits delivery.

[elleng]

5. Costs probably wouldn't go down.

Service is improved. (Happens in DC area; where possible, call Chevy Chase and NOT DC!)

[eridani]

6. You mean service gets better when three different companies show up for the same--

--incident?

[elleng]

7. No, 3 don't show up,

residents call the service with best service; known for years. Avoid calling DC at all costs.

[eridani]

8. Irrelevant in most places.

I live just outside of Seattle, and can never call the Seattle fire department because they don't have a mutual aid agreement with any neighboring city. What kind of service they have is therefore beside the point.

[jeff47]

4. It's not just Medicare Advantage plans that are Medicare + (some percent)

Virtually all private health insurance plans do the same thing. They are all Medicare + (something).

Also, the medical loss ratio limits mean private insurance makes more profit if medical costs go up. 20% of $100 is less than 20% of $200. They're not going to drive costs down when they lose money by driving costs down.

[dembotoz]

9. as local heathcare continues to flee the central city to the burbs we now have a burb city with 2

big fricken hospitals

talk about over served

COSTS HAVE NO WAY GONE DOWN

[Thor_MN]

10. Commercial insurers are limited to a percentage profit based on total revenue.

They have absolutely no incentive to reduce costs, as their profit goes up with increased costs.