Experts: Health Care Needs More Competition

Obamacare could spur greater consolidation of health care providers, triggering higher prices


The health care market in the United States needs greater competition and antitrust enforcement to keep prices from rising further, experts said at a congressional hearing Thursday, although they disagreed on the extent to which Obamacare will help or hurt competition.

The House Judiciary Committee Subcommittee on Regulatory Reform and Antitrust Law held the hearing on Obamacare and health care consolidation to examine the effects of competition and the Affordable Care Act on health care costs.

“The past several decades have witnessed extraordinary consolidation in local hospital markets, with a particularly aggressive merger wave occurring in the 1990s,” said Barak Richman, a professor of business administration at Duke University, in his written testimony.

“This wave of hospital consolidation alone was responsible for sharp price increases, including price increases of 40 percent when merging hospitals were closely located,” Richman said.

Obamacare regulations have caused more integration and consolidation, “mostly in the form of acquisitions of physician practices by hospitals,” said Thomas Miller, a health care expert at the American Enterprise Institute.

Bigger businesses are better able to handle the law’s regulatory burdens and to form political connections that will help them with a more involved government, Miller said.

“Too big to fail may not be guaranteed, but too small to survive becomes more likely,” Miller said.

The Obama administration has repeatedly argued over past months that the law’s new exchanges are promoting competition between health insurance companies.

“Competition in the marketplaces is causing competitive rates to be available to many consumers,” one official told Congress Thursday morning at another hearing.

A couple of health care experts cited the new exchanges, which are scheduled to open on Oct. 1, as evidence of the law’s pro-competitive orientation.

Thomas Greaney, a law professor at St. Louis University, said some health care providers are consolidating in response to the law. But Greaney said providers are making their changes in an effort to avoid the law’s pro-competitive policies, a fact that cannot be blamed on the law itself.

Some parts of the law do promote consolidation, the experts said, but these measures are meant to tackle other problems in health care, such as the fee-for-service payment structure that many experts fault for further spiking costs.

For example, Obamacare promotes Accountable Care Organizations (ACOs), which coordinate care between doctors to improve care while reducing costs. Traditional antitrust regulations have impeded ACOs and other coordination efforts in the past, said David Balto, a former policy director of the Federal Trade Commission.

However, while ACOs provide one way to reduce costs and improve care, regulators should not have unfettered faith in them, Miller warned. Companies could exploit ACOs to further consolidate and monopolize the health care industry, Miller said.

Further, ACOs only work if they are competing against other ACOs, Greaney noted after the hearing.

Andrew Evans   Email Andrew | Full Bio | RSS
Andrew Evans is an assistant editor at National Affairs and a former reporter for the Washington Free Beacon, where he covered government accountability and healthcare issues.

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