Indiana’s Soaring Hospital Prices and Unaffordable Insurance Premiums: Causes and Potential Solutions

By James R. Godwin, Brent D. Fulton, Daniel R. Arnold, Ola A. Abdelhadi, and Richard M. Scheffler | Published October 6, 2022 | Press Release | Link to Full Report

The residents of Indiana receive healthcare from poorly functioning markets that need immediate attention. Our study of Indiana’s healthcare markets builds on the work of others that found hospital prices in Indiana are among the highest in the country. We provide empirical evidence that shows hospital mergers are an important contributor to these high prices, yet hospital mergers in the state have not been challenged in court by federal or state antitrust regulators. Moreover, the higher prices from these mergers lead to higher health insurance premiums paid by employers, causing a reduction in wages. We examined measures of healthcare quality but found no evidence that mergers produced higher quality. At the same time, the major hospital systems have amassed significant financial reserves, far higher than most hospitals in the rest of the country. On the payer side, insurer markets are highly concentrated, including some markets that became significantly more concentrated over the past decade. Collectively, these factors contribute to health insurance premiums being less affordable in Indiana as compared with neighboring states and the country. Based on these findings, we suggest policies that the state legislature and regulators could implement to ameliorate the situation, so that residents of Indiana will have better access to more affordable and higher quality healthcare.

This study was funded by Arnold Ventures (Grant No. 20-05350).