• Shocked! Shocked, I am! Again.

    I said this more than a year ago about my concern with the ACA and ACOs:

    Moreover, this still doesn’t address the real problem that as providers consolidate, they have increased market power, which can lead to spending increases and premium increases. That would be the exact opposite of what people want out of ACOs, and I have not seen this concern yet adequately addressed.

    Austin said this more than two years ago:

    ins-prov power

    Recall that this graph is drawn for a fixed level of provider market concentration. While provider payment reform (via ACOs) may lower public costs, additional provider market power will push the system further toward the left along this curve (toward the point “A”). Private costs and premiums could rise. (Note, this is not the standard cost shifting argument. Private costs don’t rise because public payments fall. They rise due to changes in the balance of market power between providers and insurers.)

    Austin said this more than three years ago:

    If health care providers have relatively more power they can charge relatively higher prices. That’s bad for consumers. On the other hand, if insurers have relatively more power they can bargain down the price of care. That’s good for consumers if those lower prices are passed on to them in the form of lower premiums. (Also, lower premiums mean lower tax-funded subsidies. That’s good for taxpayers.)

    Here’s the shocking news everyone seems to be covering today:

    Greater competition in the insurance industry — either through health insurance exchanges or other measures — may not lower insurance premiums. Weakening insurers’ bargaining power could instead translate into higher costs for all of us in the form of higher premiums.

    There are days I wish everyone would just read this blog already.


    • The public receives contradictory messages unfortunately. The AMA released a study last week and the message to the public conveys one message: less competition amongst insurers equals a market gone amok.

      The AMA’s methodology yields expected results–not wrong, just their skew:
      The 2012 edition of AMA’s Competition in Health Insurance: A Comprehensive Study of U.S. Markets


    • I’m an old, retired Medical Oncologist in L.A. My last go with the liberalism was in 1964 with a trip to Natchez, Miss. where I got my ribs busted by the local non-egalitarians; I hid in the woods for a couple of days, caught a bus back to Cambridge, Mass., married my Wellesley sweetheart, and hightailed it to medical school. I’ve been a Republican ever since.

      But I read your piece, “It’s the Inequality…” with real interest. I started raising issues with analysis of variables, methodology, information sources, blah, blah. But when I figured out where you were going, I became most intrigued.

      I had a professor, Oscar Handlin, who, if he still lived, would have surely said,”I wish I’d written that”. You’ve written a compact, lucid, articulate and thoughtful piece on my generation. It was so good, it made my ribs hurt all over again.

      Peter Kennedy, M.D.

    • >>There are days I wish everyone would just read this blog already.

      Dr. Carroll, I’ve been reading your blog ever since I bought my Focus in Aug. 2009 and started listening to you on Pete Dominick (Best reason to buy satellite radio, by the way). And it’s hurting my marriage!!! Now, whenever someone on TV starts talking health policy, I have to stomp out and leave the room, lest I start throwing things at the uninformed talking heads.

    • I have presented that curve to many people. Most dont understand or refuse to accept it. They just “know” more competition is always good.


    • There are larger forces at work than just consolidation.

      More doctors = more tests = more costs.

      Fools who believe that free market competition will drive down costs dont understand places like Boston and NYC.

      Those cities have the highest healthcare costs per capita in the world, DESPITE the fact that they also have the highest number of doctors per capita in the world. If all those thousands of doctors are competing against each other, then why do the places with the highest number of doctors have the highest costs? The cost discrepancy persists even when you adjust for cost of living differences.