10/31/2009

Is Healthcare's Future Monopolies?

Another issue in the list regarding the health care issues that seem to be never ending pertains perfectly to the topic we have been studying in this very course. What topic would that be? The topic of monopolies and there effects on markets prices and efficiencies.

With the help of Obama and his view that if we consolidate and create networks between health care providers we can come to a reasonably priced health care. I can see where he is coming from if it is done in moderation but forcing companies to come together is basically giving them the green light to form monopolies. In the short run prices might fall but in the long run the prices will be in the hands of the monopolized health care companies and not in the hands of the consumer.

This would not be the first time that monopolies have occurred in the health care industry in the article it mentioned Partners Health care and its 4000 physician network who was accused of using its clout to set prices and marginalize competitors. Health care is already in a position to set prices in that when you need health care services you don’t usually have time to shop around so giving them the power to band together and monopolize leaves no chance for a competitive price of health care.

I am not trying to say it is inevitable that health care will be monopolized but the workings are there to lead health care in that direction. With the government getting involved you never know what will happen other than it will probably be less efficient than a competitive market.

Integrated Care's Drawback: It Could Lead To Health Monopolies

3 comments:

Dr. Tufte said...

Your economics needs clarification.

Obama's main (economic) plan for reducing prices is to use monopsony rather than monopoly power. Monopsony is where you have a single buyer that can dicate favorable term. In fact, we already partially do this with our healthcare sector: Medicare and Medicaid are not true monopsonists, but they do have enough market power to set their prices below the equilibrium price.

Brooklyn is correct that some medical groups exercise market power through monopoly, but a better example would be the American Medical Association. They explicitly limit medical school enrollment and graduation to limit the number of M.D.'s in the country. This gives them some ability to mark up prices over marginal cost (this is why in most countries, doctors are not as relatively rich as they are in the U.S.).

Lucas said...

I do not think that the future in health care is in monopolies as that would harm the delicate system that is already failing. A Utah company has a pretty good option and that is to allow employers to sign up on the website and then allow the employees to choose which option fits them best.

They are saying that it is similar to travel sites such as Travelocity where employees can input their criteria and then select the plan that is best for them. Once they do this, the employer will put a specific amount of money towards the plan and the employee covers the rest. The employee is aware of the amount of money the employer will put towards the plan before the employee chooses which plan he wants.

This will go live on Monday I believe and they are doing some test runs with employers that have already signed up. It seems to be a success already and will hopefully alleviate some of the issues that goes along with pricing and being locked into a single plan that the employer chooses.

Devin said...

One comment in this post that I find interesting is "Health care is already in a position to set prices in that when you need health care services you don’t usually have time to shop around so giving them the power to band together and monopolize leaves no chance for a competitive price of health care." The main reason that health care service have the ability to set prices is the consumer has given it to them, but not because of lack of time.
When the average consumer goes into receive health care service they do not know the price prior to the service. They pay the $20 co-pay and don't worry about it. By doing this the consumer has given up his ability to shop around by price. The consumer does not look at the true cost. They don't care that their insurance has been bill $180 for 10 minute of the doctors time. If the consumer saw the price prior to the service they would have a better ability to shop around by price and quality of service. Sure there are times when shopping by price is not a priority, i.e. emergencies, but these are the exception not the rule.
The real fix for health care will come when the health care system is allow to work as a free market. Until the consumer stops letting the government and large insurance companies dictate what is paid for the services, health care will not be fixed. The health care market needs to be pushed toward the free market not a monopoly in order to be fixed.