Saturday, September 17, 2011

Hospital Concentration vs. Insurer Concentration


Here is a very good post on the Incidental Economist discussing the leverage effects on pricing.  The author  posits a “sweet spot” in the middle, ie too much concentration on either the insurer side or the provider side will raise prices.

Something missed:  Regulation.  There is a well established regulatory authority to review insurer pricing and ensure monopoly benefits are passed on to consumers.  The regulatory task actually gets easier and more efficient as the number of insurers drops, and when you take it to the extreme you wind up in Vermont with single payer.  In contrast there is no established regulatory authority over hospital pricing, that’s still the wild wild west.

That suggests the “sweet spot” curve needs to be tweaked…

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