The Incidental Economist

There is, however, another reason to be skeptical about these mergers, not so much because they will reduce competition in today’s insurance market, but because they foreclose potential competition in an evolving health-care market in which one organization will provide both health care and insurance.

In the old days we called these health maintenance organizations, such as Kaiser Permanente. Under the new health reform law, they are called accountable care organizations, or ACOs. The principle is the same: A group of doctors and hospitals and other providers agree in advance to provide most of the medical care that a person requires for x-dollars a year. Such “capitation” gives the providers the incentive to keep people healthy and provide all the really necessary care, or risk losing the patient during the next open enrollment. But it also gives the providers the incentive to keep costs down and eliminate unnecessary or marginal care just to run up the bill, which is what often happens under the current system.

More from Pearlstein in his column, and more from me on ACOs and capitation of the “old days” later in the week. As for provider-plan vertical integration, see these prior posts.

@afrakt

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