Right Thinking From The Left Coast
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Missing the Forest for the Fire

Ezra Klein:

In the modern health-care system, there is no higher power than the insurance market. And the insurers who populate that market have grown all the stronger. The Justice Department judges an industry “highly concentrated” if a single company controls more than 42 percent of the market. By that definition, 94 percent of statewide insurance markets are highly concentrated. A recent study by the advocacy organization Health Care for America Now showed that in Indiana, WellPoint controls 60 percent of the insurance market; in Iowa, Wellmark accounts for 71 percent; and in Alabama, Blue Cross/Blue Shield holds 83 percent. In the past 13 years, there have been more than 400 corporate mergers involving health insurers.

Economics textbooks tell us that concentrated markets reduce the competitive behavior that benefits consumers and lead to outsize profits for the dominant firms. Predictably, health-care premiums shot up more than 90 percent between 2000 and 2007, while the profits of the 10 largest insurers increased 428 percent over the same period. Clinton had promised us managed care within managed competition. Instead, the insurers took control of our care and managed to effectively end competition. Neat trick.

So ... the solution is to give one insurer 100% of the market?  To allow the same oligarchy that controls state insurance laws to control federal insurance laws?  Only someone as glib as Ezra would use monopsony abuses to argue for a monopsony.

Actually, I’m being unfair.  Klein actually uses this to argue for “managed competition” where the Feds control insurance exchanges.  But that’s almost as bad.  Gee, Ezra, who do you think is going to wield authority over that managed competition?  Monied interests or average joes?  I’ll wait while you think about it.

Maybe the solution is to break those local monopolies by allowing insurers to compete across state lines.  That would bring federal anti-trust law to guarantee that no player build up a controlling interest in healthcare.  That would force insurers to expand their networks.  That would allow individual doctors and hospital to belong to hundred of networks and have access to more patients.

“Managed competition” is an oxymoron.  In a free market, competition manages itself.  That’s the whole point of competition.

Posted by Hal_10000 on 07/27/09 at 10:21 AM in Health Care • Permalink

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