Health Care Admin. Costs: What’s Worth Debating?
M.S. read some of the papers on health care administrative costs recommended by readers of this blog and put up a new post at The Economist. Like me, M.S. “was hoping for someone who simply addressed the issue of how to calculate administrative costs in the American system.” But it seems much of the literature (or at least that which M.S. read) focuses on comparing U.S. administrative costs to those of Canada or what they might be under a single payer regime.
Since single payer isn’t on the table I don’t find that a very useful exercise. That is, I’m not convinced it is worth debating the relative size of administrative costs in U.S. vs. Canada. M.S. pulls a quote from Henry Aaron’s paper that would seem to be consistent with this notion.
The most important question is what these differences should tell policy makers. I believe the answer is, “Not much.”…The U.S. health care administration, weird though it may be, exists for fundamental reasons, including a pervasive popular distrust of centralized authority, a federalist governmental structure, insistence on individual choice (even when, as it appears to me, choice sometimes yields no demonstrable benefit), the continuing and unabated power of large economic interests, and the virtual impossibility (during normal times in a democracy whose Constitution potentiates the power of dissenting minorities) of radically restructuring the nation’s largest industry — an industry as big as the entire economy of France.
I agree with Aaron here, though M.S. finds it a “strange thing to say” particularly in light of the fact that a significant transformation of the health care system has nearly come to fruition (and may do so next week). But let’s be clear, the reforms that may pass next week are peculiarly American. They are not a step toward a Canada-style single payer system and are the product of (and will reinforce) some of the forces Aaron cites. Substantial though it will be, health reform will not be a radical “restructuring of the nation’s largest industry.”
More generally, this is a perfect example of why I’m usually skeptical of cross-country comparisons or extrapolation of the results of a study on one set of countries in service of predictions about another outside the sample. There are often far too many uncontrolled differences for such comparisons to be meaningful. Perhaps there are some narrow instances where a strong case can be made that such international comparisons and extrapolations are sensible, but I don’t think health care is one of them. The U.S. is quite a different animal.
Health Care Administrative Costs, Continued
I’ve received considerable feedback on my prior post on the size of health care administrative costs, some by e-mail and also in comments to the post itself. Those of you who read it earlier may want to go back and take a another look. The tone has changed a bit. But more importantly there are links to some other papers of relevance. If all you’re interested in is the literature, then the following list is what I’ve learned of to date. I’ll update it if folks send more. So check back here (this post).
Relevant Literature
- Himmelstein, Campbell, and Woolhandler, New England Journal of Medicine, 2003.
- Danzon, Health Affairs, 1992.
- Aaron, New England Journal of Medicine, 2003.
- Casalino, et al., Health Affairs, 2009.
- Sakowski, et al., Health Affairs, 2009.
How High Are Providers’ Admin. Costs?
A post by M.S. on The Economist’s website makes some of the same points I’ve made about the fact that we shouldn’t expect to save a lot of money by squeezing health insurers or increasing competition in that market. But M.S. devotes considerable attention to the profit and administrative costs associated with providers, which is not something I’ve explicitly addressed.
If M.S. is reading the literature correctly (and if that literature is itself correct), then provider profit and administrative costs are higher than those of the insurance industry. M.S. quotes the Physicians for a National Health Program (PNHP),
The estimate that total administrative costs consume 31% of U.S. health spending is from research by Drs. David Himmelstein and Steffie Woolhandler and published in the New England Journal of Medicine in 2003. The figure would undoubtedly be higher today. Insurance overhead accounts for a minority of the overhead. Much more occurs in physicians’ offices, hospitals, and nursing homes—driven by our current fragmented payment system.
Sensibly, M.S. is looking for confirmation of PNHP’s assessment of administrative costs in the health care system and its allocation to insurers and providers. He hasn’t been able to find anything, and he isn’t sure he buys the 31% figure or the notion that most of it can be attributed to providers.
And there are a lot of grounds on which you might argue that the Himmelstein-Woolhandler figure of 31% administrative costs is exaggerated. You might critique their decision to allocate one-third of doctors’ office rent as an administrative cost. Are American doctors’ offices commensurately larger than Canadian ones? Are physicians’ self-reports of time spent on administrative tasks accurate? But the curious thing is, I’ve hunted around for critiques of the Himmelstein-Woolhandler numbers, and I can’t seem to find any. I also can’t seem to find any alternative studies that also tried to measure all of the administration costs incurred by providers, to get a sense of how much the fractured private insurance system really costs.
Note there are two issues here. One is the size of U.S. providers’ administrative costs. The other is that size relative to that of a single payer or national health care system (e.g. Canada’s). At the moment I’m more interested in the former than the latter. We’re not going to a Canada-style system anytime soon. But perhaps other more politically feasible reforms could reduce provider overhead. How big is that overhead and what are its components?
In fact M.S. contacted me before publishing his/her post looking for some other evidence, papers, or reports on this topic. I’m not aware of any. But maybe you are. If so, please let me know.
Later: A reader suggests that the 1992 Health Affairs paper by Danzon serves as a response to Himmelstein and Woolhandler. Clearly it isn’t a direct response to their 2003 paper. But it does cite earlier work by Himmelstein and Woolhandler that may be similar or use similar methodology and assumptions (I’m speculating). I gave the Danzon paper a quick skim (so take the following is my initial impression and not necessarily my final opinion). It seems to me that it suggests that U.S. provider overhead is greater than insurer overhead. So, while it may differ from Himmelstein and Woolhandler on some points, it might also corroborate what M.S. was seeking to confirm.
And later still: Another reader suggests taking a look at the response article by Henry Aaron in the same NEJM issue as the Himmelstein and Woolhandler paper cited above.
Two Papers of Interest
Two papers in the current issue of Health Economics look interesting to me. I may not have time to read them but others might wish to. They’re listed below with links and abstracts.
The first addresses the question of whether the fact that individuals switch health plans results in lower use of preventative services. Since provision of preventative services is a current investment for a future return, high turnover offers an opportunity for an insurer to benefit from the investments of others and to dodge the consequences of its own under-investment.
The second paper below documents the variation in value of a quality adjusted life year (QALY) across countries. Since figures are not reported in the same currency they are hard to compare. But the authors also estimated the discount rate of QALY value across countries. The QALY discount rate in Japan is almost twice that in the U.S., for example.
Many preventive healthcare procedures are widely recognized as cost-effective but have relatively low utilization rates in the US. Because preventive care is a present-period investment with a future-period expected financial return, enrollee turnover among private insurers lowers the expected return of this investment. In this paper, I present a simple theoretical model to illustrate the suboptimal provision of preventive healthcare that results from insurers ‘free riding’ off of the provision from others. I also provide an empirical test of this hypothesis using data from the Community Tracking Study’s Household Survey. I use lagged market-level measures of employment-induced insurer turnover to identify variation in insurers’ expectations and test for the effect of turnover on several different measures of medical utilization. As expected, I find that turnover has a significantly negative effect on the utilization of preventive services and has no effect on the utilization of acute services used as a control.
Takeru Shiroiwa, et al., International survey on willingness-to-pay (WTP) for one additional QALY gained: what is the threshold of cost effectiveness?
Although the threshold of cost effectiveness of medical interventions is thought to be £20 000-£30 000 in the UK, and $50 000-$100 000 in the US, it is well known that these values are unjustified, due to lack of explicit scientific evidence. We measured willingness-to-pay (WTP) for one additional quality-adjusted life-year gained to determine the threshold of the incremental cost-effectiveness ratio. Our study used the Internet to compare WTP for the additional year of survival in a perfect status of health in Japan, the Republic of Korea (ROK), Taiwan, Australia, the UK, and the US. The research utilized a double-bound dichotomous choice, and analysis by the nonparametric Turnbull method. WTP values were JPY 5 million (Japan), KWN 68 million (ROK), NT$ 2.1 million (Taiwan), £23 000 (UK), AU$ 64 000 (Australia), and US$ 62 000 (US). The discount rates of outcome were estimated at 6.8% (Japan), 3.7% (ROK), 1.6% (Taiwan), 2.8% (UK), 1.9% (Australia), and 3.2% (US). Based on the current study, we suggest new classification of cost-effectiveness plane and methodology for decision making.
A Bit More on Premium Increases
This post is jointly authored by Austin Frakt and Ian Crosby. It is a supplement to our Kaiser Health News (KHN) column, which I also posted on this site on Sunday. If you haven’t read that column yet, do so first. This post links back to many of our prior posts on related issues. Thus it serves as a portal to further reading.
In his recent NY Times opinion piece, Reich claimed that the current antitrust exemption for insurers “is why a handful of insurers have become so dominant in their markets.” As we wrote in our KHN column, this claim is extremely dubious. Moreover, it is far more likely that premium increases are largely due to factors other than insurer concentration.
As we’ve noted previously, the exemption (under the McCarran Ferguson Act) is very narrow, and does not apply to mergers, acquisitions, and most other kinds of conduct by which companies get big. We’ve also noted that there are some types of conduct by which insurers could defend and expand their market share that arguably do fall within the scope of the exemption, but they are sufficiently modest and theoretical that is unlikely they bear much responsibility for the current state of market concentration.
We’ve also made the larger point that even if repeal of the exemption or other forms of stepped up antitrust enforcement were to have a material impact on insurer market power, there is little reason to believe it would produce tangible benefits for consumers absent parallel efforts against providers. A recent paper by Berenson, Ginsburg, and Kemper in Health Affairs documents the upward pressure on costs driven by provider organization and concentration. Based on hundreds of interviews with representatives of hospitals, physician organizations, health plans, and other stakeholders in six California health care markets, the authors conclude that
[t]he shift in who holds the upper hand in negotiating payments—once held by health insurance plans but now resting with health care providers—has had a major impact on California premium trends.
… [P]roviders are developing increased leverage through single-specialty group formation and merger-and-acquisition strategies that do not involve integration. Nevertheless, given the push in Congress and elsewhere to restructure health care delivery with accountable care organizations, it is instructive that whatever their merits in improving quality and efficiency, California-style integrated care systems currently produce higher prices that undermine cost containment.
Other work by health economists, reviewed on this blog, indicates that the high degree of market power held by insurers acts as a counterweight to that held by hospitals. Diluting the insurance market may have small downward effects on insurer profit and administrative efficiency, but it could have large upward effects on prices of health care services. Those higher prices would be passed on to consumers.
Therefore, concentration among providers, and in particular hospitals, must also be addressed. Unfortunately, permitting additional provider coordination and integration via accountable care organizations (ACOs), as envisioned in current health reform legislation, may not help matters. The bundling of payments ACOs would facilitate may save money, but only if the greater market power of additional provider integration does not act to offset those savings.
Taming health care costs will be hard. The job is made harder when we’re looking in the wrong place. Insurers may not deserve the special treatment they’ve received from the federal antitrust exemption. But they also do not deserve the level of blame they’ve received for health care costs.
What’s Greater Insurance Choice Worth?
The vast majority of employers only offer one health insurance choice. If/when insurance exchanges become available, individuals will have easy access to more insurance plans. Of course the employer-sponsored insurance tax subsidy will keep many employer plans more attractive than exchange based plans* for individuals who do not qualify for premium credits toward purchase of exchange plans. Still, it is worth asking, what is the social cost of the relatively lower degree of choice among employer plans?
That’s the question posed and answered in a recent NBER paper by Dafny, Ho, and Varela. The authors exploit a proprietary dataset on employer offers and employee enrollment between 1998 and 2006 for over 800 large employers with over 10 million employees, collectively. They imagine a world in which employees receive a voucher equal to their employer’s current contribution toward health insurance and then use the voucher to purchase any plan in an exchange-like setting. Their statistical model of consumer choice permits the calculation of the net gain in consumer surplus resulting from increased choice (the extra amount consumers would be willing to pay for the additional choice).
We find choice is worth quite a bit for most individuals: in our most conservative hypothetical scenario the median employee would enjoy a surplus gain of roughly 20% of combined employer and employee premium contributions. In year 2000 dollars, this gain is approximately $2,025 for a family of four. Combining these figures with data on employer subsidies, we find the median employee would be willing to forego 27 percent of her employer subsidy simply for the right to use what remains toward a plan of her choosing. (© 2010 by Leemore Dafny, Katherine Ho, and Mauricio Varela.)
There are plenty of reasons to support exchanges and a transition away from employer based insurance. In addition to the other distortions of the labor market due to an employer based system (job lock, for one), Dafny, Ho, and Varela point to a substantial loss of economic welfare.
Their paper provides one other tremendous service: a more complete literature review on insurer loading fees (the proportion of premiums that support non-medical costs) than any I’ve seen (pages 28-31). They cite literature that reports loading fees that range from 7% for large insurers to 30% for the non-group market and an overall average of 12.8%. They write that the Lewin Group has predicted a loading fee of 10.7% for an exchange for which all workers are eligible to participate. Note that these loading fees (LFs) can be converted to loss ratios (LRs) via LR = 1/(1+LF). The implied range of loss ratios is consistent with what I wrote in an earlier post (phew!).
* Small businesses will be permitted to offer exchange based plans as their employer plan. So workers in such firms will be able to enroll in exchange plans and receive the tax subsidy.
Popular But Ineffective: Repealing Insurers’ Antitrust Exemption
This post is a slightly modified version of one by Austin Frakt and Ian Crosby that originally appeared at Kaiser Health News last week. Full references have been added for academic papers cited.
It is well known that concentration in the health insurance industry is to blame for rapidly rising premiums. Well known, but wrong. Taking political advantage of this common misconception, last week the House passed a bill to repeal insurers’ antitrust exemption. But even if that bill becomes law it won’t do much good, and politicians’ distraction could actually harm consumers. It’s far more likely that premium increases are largely due to other factors.
Those who claim that the antitrust exemption is the main reason a few insurers have substantial market power don’t understand the narrowness of that exemption’s scope. The law at issue, the McCarran-Ferguson Act, shields most aspects of “the business of insurance” from federal (but not state) antitrust oversight. This means that only those insurer activities dealing directly with providing insurance–think underwriting risk, setting rates, defining benefits, and the like–are not ordinarily subject to federal antitrust scrutiny.
There are exempt insurance practices that, at least in theory and under certain conditions, could help insurers defend and expand their market share against competitors. But the exemption simply does not shield the most straightforward kinds of conduct that make companies big.
Activities not connected with the basic risk-spreading function of insurance are deemed “the business of insurers” rather than “the business of insurance” under the law, and do not enjoy any federal antitrust exemption. Thus mergers and acquisitions among health insurers are as aggressively (or passively) scrutinized as those in any other industry by federal antitrust enforcers.
Health care reform advocates concerned about the high degree of concentration in today’s insurance market cite the more than 400 mergers among health plans allowed over the last 13 years. But repeal of the McCarran-Ferguson antitrust exemption would have literally no effect on this trend. Even if other forms of stepped-up antitrust enforcement or other means of encouraging competition were to have a material impact on insurer market power, there is little reason to believe it would produce tangible benefits for consumers absent parallel efforts targeting the provider side of the market.
While there is some evidence that insurers’ market concentration plays a role in premium increases, that role is small. For example, a National Bureau of Economic Research paper [1] found that only 2.1 percent of employer-sponsored health insurance premium increases between 1998 and 2006 were due to insurer concentration.
It is far more plausible that a high proportion of premium increases are due to a combination of concentration in the provider market and adverse selection, especially in the nongroup market. After all, most premium dollars are not kept by insurers and go toward payment of health care services [2]. Insurers take a little off the top, but not enough to be blamed for anything like the perennially large rate increases.
A recent Health Affairs paper [3] describes the upward pressure on costs driven by provider organization and concentration. Based on hundreds of interviews with representatives of hospitals, physician organizations, health plans and other stakeholders in six California health care markets, the authors conclude that “[t]he shift in who holds the upper hand in negotiating payments—once held by health insurance plans but now resting with health care providers—has had a major impact on California premium trends.” And we all know what those trends have looked like lately.
Perhaps counter-intuitively, large insurers can be bulwarks against high costs driven by provider consolidation. Two papers [4, 5] by health economists in the International Journal of Health Care Finance and Economics indicate that the high degree of market power held by insurers acts as a counterweight to that held by hospitals. Therefore, diluting the insurance market may have small downward effects on insurer profit and administrative costs, but it could have large upward effects on prices of health care services. Those higher prices would be passed on to consumers.
That’s why those who understand our health care system know that costs will not be tamed by a focus on the insurance market alone. The Congressional Budget Office has scored the likely effect on premiums of health insurer antitrust repeal as insignificant. Therefore, concentration among providers, and in particular hospitals, must also be addressed.
Don’t get us wrong–we don’t think that the current antitrust exemption is good law or policy. But cracking down on insurer market power without doing the same against providers may well have the opposite of its intended effect. Taming health care costs will be hard. Attacking insurers is, by comparison, very easy, as well as popular. But in this case, what is popular will not be particularly effective.
References
[1] L Dafny, M Duggan, and S Ramanarayanan (2009). Paying a premium on your premium? Consolidation in the U.S. health insurance industry. NBER Working Paper 15434.
[2] L Dafny, K Ho, and M Varela. (2010). Let them have choice: Gains from shifting away from employer-sponsored health insurance and toward an individual exchange. NBER Working Paper 15687.
[3] R Berenson, P Ginsburg, and N Kemper. (2010). Unchecked provider clout in California foreshadows challenges to health reform. Health Affairs Web Exclusive, February 25.
[4] R Feldman and D Wholey. (2001). Do HMOs have monopsony power? International Journal of Health Care Finance and Economics 1(1).
[5] L Bates and R Santerre. (2008). Do health insurers possess monopsony power in the hospital services industry? International Journal of Health Care Finance and Economics 8(1).
Debt, Medicare, Politics, Etc.
As per my post earlier today, there is at least one reader of this blog, along with his/her gang of macroeconomics-minded teens, interested in the U.S. debt. I’m guessing many other readers are interested in this topic too. To all such readers, please don’t expect me to be your sole source of information on it. That would be a big mistake.
But, reading Krugman on the topic would not be an obvious mistake. It just so happens that he put up a marvelous post moments ago that explains why he’s not worried about the U.S.’s current debt level. At the end it nicely ties into all the political footballs of the day, tightly spun in standard Krugman style.
What this means is that if you’re worried about the US fiscal position, you should not be focused on this year’s deficit, let alone the 0.07% of GDP in unemployment benefits Bunning tried to stop. You should, instead, worry about when investors will lose confidence in a country where one party insists both that raising taxes is anathema and that trying to rein in Medicare spending means creating death panels.
The title of Krugman’s post is “Debt is a political issue.” No kidding! It is worth a full read.
Your Share of U.S. Government Debt: One Year of Work
A reader wrote me,
In trying to explain to some teenagers what the importance of the national debt is to them, I decided to try and figure out how many years an 18 year old would have to work if he contributed every penny he made to pay off his current portion of the national debt. I am NOT an economist, and found relevant information confusing. I realize that the resulting figure would have some guesstimates in it (like how much an 18 year old would make in a year), but I’m stumped. Can you give me any ideas or direction?
I’m not an expert on the national debt, but I know enough to tell that this is a potentially loaded question (even if it wasn’t intended to be). What makes it loaded is that the extent and timing of concern over the debt are politically charged. That is, there is a strong temptation by some to use debt figures and projections to argue against spending and borrowing for things that might reasonably be viewed by others as good investments. For instance, a time of high unemployment is not an especially good time to tighten the fiscal belt even if it might someday require some tightening. Having said that, there is no harm in understanding the debt a little better. I could use some education in it myself. So here is what I can say about it. I will rely on readers to chime in with supplemental information. (Factual corrections, elaborations, and URLs to sober analysis and discourse welcome. Rants are not.)
The national debt is customarily broken down into two components, debt held by government accounts and debt held by the public. The former includes U.S. government securities held in the Social Security trust fund. According to Wikipedia,
As of 2008, Social Security Federal Old-Age and Survivors Insurance Trust Fund holds about half of the government held portion of the debt … with other large holders including the Federal Housing Administration, the Federal Savings and Loan Corporation’s Resolution Fund and the Federal Hospital Insurance Trust Fund.
Note that the official government held debt figures exclude Fannie Mae and Freddie Mac obligations ($5 trillion), as well as other loan guarantees made during the liquidity crisis of 2008-2009. Officially, the 2010 estimates for the size of the debt are $14.5 trillion in total, $4.6 trillion in government accounts and $9.9 trillion held by the public. The ordinary way of understanding the debt is to put these figures in terms of GDP: 98%, 33%, and 67%, respectively. Note that Paul Krugman is not alarmed by this or a substantially higher debt level, but James Hamilton is.
Putting the debt in terms of GDP already begins to address the reader’s question. In what follows I am implicitly assuming that the rate of growth of incomes and GDP equals the interest rate on the debt and that we do not incur any additional debt. Neither are good assumptions. (For historical and projected GDP growth see the Congressional Budget Office. For average interest rates on U.S. government debt see Treasury Direct. For potential debt growth see the Center on Budget and Policy Priorities.)
Ignoring a few details of the income method of GDP calculation, a total debt level of 98% of GDP (the 2010 estimate) could be paid off in one year if all but 2% of income and business profit was devoted to it (*). There are about 130 million workers in the U.S. So it would take about 130 million worker-years to pay off the debt.
But that way of looking at it assigns business profit to workers and also imagines that workers could spend their non-wage compensation on the debt. That’s not what the reader had in mind. So, another approach would be to consider the average lifetime earnings of a college graduate. It’s about $2.1 million. To pay down a debt of $14.5 trillion (the 2010 estimate) it would take the lifetimes of 7 million such individuals, or 7 million times the lifetime of one such individual, assuming that one individual would earn $2.1 million over each of his 7 million lifetimes of work. Of course the figure is higher if we only consider high school graduates, who earn one million dollars less. (I don’t know what the average lifetime earnings are for the mix of education levels that currently exist in the workforce.)
One works perhaps about 40 years in a lifetime, and 40 x 7 million years is 280 million years. (By way of reference, dinosaurs emerged about 230 million years ago.) That 280 million figure is higher than the 130 million years calculated above because it imagines using only worker income, not business profits or non-wage compensation, to pay off the debt. (Also, this is all very back-of-the-envelope so one should not be so picky.) But one individual isn’t responsible for the whole debt. If we assign an equal amount of it to each of the 312 million individuals in the U.S. as of this writing then we get back to something pretty close to one year to pay off one individual’s share of the U.S. debt burden (280/312 = 0.90).
So, to the reader who posed the question, go tell your teenagers to work a solid year and put every penny of earnings toward the debt. They’ll have to forgo all other consumption (food, shelter, clothing, transportation, etc.). Also, they won’t really be able to pay down the debt even if they wanted to. There’s no way for a citizen to do that. It’s a government decision. What I’d really tell them is to pay attention to the issues (it seems they’re off to a good start), read widely, think deeply, not to be fooled by populism, and to vote.
(*) National income is $12.5 trillion which is nearly 90% of GDP.
Sympathy for the Insurance Companies
When assessing the effects of market concentration on competition, antitrust authorities look not just at how many competitors there are in a market, but also how they compete. In one standard model, called Cournot competition, producers set levels of output, and prices adjust in relation to supply. In another model, called Bertrand competition, producers set prices, and produce quantities sufficient to meet demand at the prices they set. In pure Cournot competition, prices vary substantially based on the number of competitors in the market. In a Cournot duopoly (a market with two competitors setting output), the producers will between them extract half of a monopoly profit. But pure Bertrand competition pushes prices down toward marginal costs no matter how many competitors there are.
While the differences between Cournot and Bertrand competition are fundamental concepts of antitrust economics, they seem to have been lost in the race to pin responsibility for rising premiums on concentration in the insurance industry. While the details of competition among insurers is complex and does not strictly follow any simple model, at a basic level they appear to engage in Bertrand competition for the business of insureds, i.e., they set premiums, and write as many policies as corresponding demand requires. In this case, we should expect them to compete prices down toward their costs regardless of market concentration. And we in fact see that insurers’ profit margins are relatively modest despite a longstanding trend of consolidation in the industry.
Providers, on the other hand, seem to engage (again, at a basic level) in Cournot competition. They produce a given amount of capacity — building hospital beds, hiring physicians — and then negotiate with insurers over the price to use it. If this is correct, then concentration in the provider market should have a significant impact on the prices that providers can charge insurers, and that insurers ultimately pass on to insureds. By the same token, concentration in the insurer market should allow insurers to pay lower prices to providers because they are also engaging in Cournot competition on the buy side — they have a certain amount of demand that is set by the needs of their insureds, and they bargain with providers over the price of fulfilling it. But because insurers are engaged in Bertrand competition on the sell side, they will tend to pass these savings on to their insureds notwithstanding their market concentration.
In this simple model at least, the ideal situation for insureds is to have a concentrated insurance market that approaches Bertrand duopoly on the sell side and Cournot duopsony (two buyers who set demand and take prices) on the buy side, with a competitive market for providers. Of course, there are complexities — such as product differentiation, switching costs, and homing asymmetries — that can both attenuate and amplify the effect of this basic market structure for consumers, and I hope to address some of them in later posts. But other things being equal, the implication is clear: concentration in the insurance industry does not necessarily harm and may well benefit consumers, while concentration among providers is a prescription for higher costs.
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