Kevin Drum remarks that it’s not entirely the insurers’ fault in the medical explosion of costs:
Source: Saint Peters Blog
There are two takeaways here. First, these hospitals charge private insurers a lot more than Medicare. The average for outpatient care was 258 percent more. For inpatient care it was 117 percent more.
Second, there’s stunning variation in prices. This is an old story, but it’s an old story that never gets old. The least expensive hospital charged private insurers 71 percent more than Medicare for outpatient services. The most expensive charged 396 percent more than Medicare for the same basket of services.
What accounts for the difference? Did big hospitals with economies of scale, lots of competition, and tight relationships with physicians charge less? In a word, no. In two words, hell no:
At the bottom of the price distribution are the independent CAHs [critical access hospitals, which are all small and rural] and three small systems….Although CAHs are, by definition, geographically isolated and have no nearby competitors, that lack of competition does not correspond to higher negotiated prices. The upper end of the price distribution is dominated by five large hospital systems, with Parkview Health standing out for having exceptionally high prices. Hospital systems and consolidation among hospitals have been cited as drivers of high and increasing prices, and these findings are consistent with that argument.
This is the not-so-hidden story of exploding medical costs. We’ve become so accustomed to hating on insurers that we hardly notice that hospital consolidation is a much bigger villain. When a big insurer has a local monopoly, it can usually negotiate lower prices from hospitals because the hospitals have nowhere else to go. But when there are lots of insurers and only one or two local hospitals, it’s the hospitals that have the upper hand. They can charge high prices because the insurers have no choice except to do business with them. As hospital systems get steadily larger and rope in more and more physicians, their effective competition decreases and they have the ability to demand ever higher prices.
Where hospital consolidation is the equivalent of local monopolies. Perhaps, if we’re going to stick with this idea of free enterprise and the health system being compatible, we should also inject the old idea that government must exercise its oversight responsibilities and break up monopolies which are regressive to price competition.
Which all sounds a little silly when it comes to your health and life, but there it is. In for a penny, in for a pound.
