Antitrust: The Problem and Solution for Health Care

It's a new world for health care, so old antitrust solutions no longer work.

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David Balto is an antitrust attorney, consumer advocate, and former Federal Trade Commission policy director. He is a Program Fellow in the Health Policy Program at the New America Foundation and a former Senior Fellow at the Center for American Progress. The views expressed herein represent only those of Mr. Balto and not of the New America Foundation.

No domestic economic goal is as important as controlling health care costs. Health care costs are increasing dramatically and will exceed 25 percent of the country's GNP by the end of the decade. No matter what measure is used, health care costs are greater in the U.S. and are increasing at a faster rate than any other industrialized country.

Many people have observed that health care markets are increasingly consolidating. But depending upon one's perspective, such consolidation may be the problem or part of the solution to rising health care costs. As noted in "Strengthening Affordability and Quality in America's Health Care System," a report issued yesterday by the National Coalition on Health Care's Partnership for Sustainable Health Care noted:

Two ideas, which at times conflict, have gained acceptance with respect to health care markets: (1) market consolidation has led, in some markets, to anti-competitive developments that could result in the lack of consumer choice and may raise prices for consumers; and (2) the transition to a system of care that is more efficient and higher-quality requires increased levels of coordination among providers, payers, and, in many cases, employers Further complicating the issue is the possibility that some government regulations may impede more efficient forms of provider accountability and coordination.

[See a collection of political cartoons on health care.]

As Secretary of the Department of Health and Human Services Kathleen Sebelius observed earlier this week, aspects of the Affordable Care Act, which encourages health care coordination and integration, are in "constant tension" with antitrust laws. "There is a tight balance between a coordinated care strategy and a monopoly," Sebelius said at a talk at the Harvard School of Public Health.

The apparent conflict is straightforward. Antitrust principles prefer the greatest level of competition and a lack of integration. The greatest rivalry will lead to the best allocation of resources, and hopefully to the lowest prices. At the same time, health care reform attempts to grapple with the current disaggregation in the market which often serves as an impediment to the greatest efficiency, realign incentives, better control utilization, and establish strong consumer incentives.

In testimony I gave in 2010 entitled "The Need for a New Antitrust Paradigm in Health Care," I addressed how the antitrust enforcers needed to grapple with the need to permit greater integration, such as that envisioned under the Affordable Care Act.

[See a collection of political cartoons on the economy.]

I noted three important lessons from the exhaustive examination of health care markets during the debate on health care reform:

  1. Health insurance markets are broken – markets in almost every state are highly concentrated, resulting in supracompetitive profits, escalating numbers of uninsured, an epidemic of deceptive and fraudulent conduct and rapidly increasing costs. The Congressional debate over the ACA clearly and unequivocally established the need for the comprehensive reform that was enacted. Countless Congressional hearings uncovered a disturbing pattern of egregious, deceptive, fraudulent and anticompetitive conduct in health insurance markets.
  2. Integration is not the problem in health care, but is an important solution for improving quality and cost in the fee-for-service health care system. Much of the Congressional health care debate focused on the lack of coordination among healthcare providers and how this led to excessive costs and poor health care results. The purpose of the Accountable Care Organizations (ACOs) established in the legislation is to provide entities that can better coordinate care and be held accountable for overall healthcare results.
  3. If there is a competitive problem in health care markets, it is due to aggregations of market power, such as in health insurance, and not because of improper integration among health care providers.
  4. Attacking these issues will be a sound start as the antitrust enforcement agencies try to reassess the paradigm for antitrust enforcement in the new world of health care reform.

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