Dr. Scheffler and Dr. Arnold’s new paper “Insurer Market Power Lowers Prices In Numerous Concentrated Provider Markets” was released in Health Affairs this week. The paper uses prices of hospital admissions and visits to five types of physicians to analyze how provider and insurer market concentration—as measured by the Herfindahl-Hirschman Index (HHI)—interact and are correlated with prices. Scheffler and Arnold find evidence that in the range of the Department of Justice’s and Federal Trade Commission’s definition of a moderately concentrated market (HHI of 1,500–2,500), insurers have the bargaining power to reduce provider prices in highly concentrated provider markets for cardiologist, radiologist, and hematologist/oncologist visit prices. However, a policy dilemma arises from these findings: there are no insurer market mechanisms that will pass a portion of these price reductions on to consumers in the form of lower premiums. The paper concludes that large purchasers of health insurance, such as state and federal governments, as well as the use of regulatory approaches, could provide a solution.
The September issue of Health Affairs features a collection of papers addressing health care market concentration. Earlier versions of these articles were presented at the “Impact of Healthcare Market Concentration on Healthcare Prices and Premiums: What Can and Should Be Done” conference, organized by the Petris Center, at the Robert F. Wagner Graduate School of Public Service, New York University, New York City, on April 14, 2017.