Editor's Note: This piece first appeared in The Hill on February 6, 2021.
It comes as no surprise that the Biden administration has taken ambitious early action to expand the federal government’s jurisdiction over access to health care. After all, President Biden was vice president and an influential advisor in the Obama administration, when the Affordable Care Act (ACA) enlarged the federal government’s role in determining health care access and costs, and greatly constricted options for patients.
Indeed, no one should be surprised by his latest series of executive orders that direct federal agencies to reexamine — and likely revoke — a number of Trump administration rules that had returned some autonomy to patients and state governments. And it’s no surprise that Biden also mandated a reopening of the ObamaCare insurance exchanges from Feb. 15 through May 15, presumably so the administration can shift more individuals from private to public coverage. What’s unlikely — but would be of great value — would be for the Biden administration to go to war against hospital monopolies.
An antitrust agenda, if the administration were to undertake it, would be an acknowledgement that rapid consolidation of health care services over the past 10 to 20 years has contributed to dramatic increases in health care costs. Even so, it would ignore two critical factors: the outsized influence that ObamaCare has had in increasing this trend, and the outsized responsibility that states have had in maintaining their own laws that favor large hospital corporations at the expense of patient access to quality care.
Let’s consider ObamaCare’s role first, since the president has made it clear he plans to maintain it. In research produced by the National Institute for Health Care Management, James C. Robinson of the University of California-Berkeley examined parts of the ACA that encouraged hospitals and physicians to form accountable care organizations, otherwise known as ACOs. These provisions, he says, have “accelerated provider consolidation” in the health care marketplace. He further notes that “hospitals in concentrated markets charge significantly higher prices to private payers than do their peers in more competitive markets.” This dynamic is a key reason for hospitals to merge. In seeking to recoup financial losses from lower Medicare revenue triggered by the ACA, they are raising prices on the privately insured.
Let’s be clear: Any attempt by the administration to clamp down on hospital consolidation through antitrust laws — given that these mergers have increased health care costs and reduced patient choices — would be like applying lipstick to a pig. Without reforming the ACA and eliminating its perverse incentives, Biden has no chance of relieving patients of the mounting prices they’re paying for their health care services.
Next, let’s consider the states’ complicity. In the 1980s, the federal government did the wise (and unthinkable) act of repealing an ineffectual law mandating states to administer “certificate of need (CON)” regulations in order to receive federal health care dollars for state programs. But once that happened, many states chose to keep their regulations anyway. As a result, they force existing health care facilities or new health care entrepreneurs to petition an unelected state board for permission to establish or expand certain health care services. This petition process allows existing competitors to show up to the hearings and explain why the new competition is wholly unnecessary. Think of a similar law that requires one grocery store chain to prove to an official committee that consumers would benefit from it entering a market dominated by another chain, or otherwise be denied a building permit. Such a law would — as CON laws do — raise the cost of doing business and robs consumers of the benefits of competition.
What do CON laws have to do with consolidation in health care markets (fewer hospitals) and rising patient costs? Plenty. As Yevgeniy Feyman and Jonathan Hartley write in National Affairs, CON laws “reduce competitive pressure on existing hospitals (which are in turn protected by regulatory fiat),” benefiting large corporate hospitals with the financial means to navigate the regulatory process.
So, it is states — and not the federal government — that are to blame in this case for making health care costs higher through their CON requirements. As Thomas Tsai and Ashish Jha, health service researchers at Harvard University, conclude: “Higher health care costs from decreased competition should not be the price society has to pay to receive high-quality health care.” States, both red and blue, can’t simply blame Washington for these woes when they continue to be a large part of the problem.
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