By D. Andrew Austin and Thomas L. Hungerford
Congressional Research Service
November 17, 2009
Evidence suggests that health insurance markets are highly concentrated in many local areas. Many large firms that offer health insurance benefits to their employees have self-insured, which may put some competitive pressure on insurers, although this is unlikely to improve market conditions for other consumers. The exercise of market power by firms in concentrated markets generally leads to higher prices and reduced output — high premiums and limited access to health insurance — combined with high profits. Many other characteristics of the health insurance markets, however, also contribute to rising costs and limited access to affordable health insurance. Rising health care costs, in particular, play a key role in rising health insurance costs.
Health costs appear to have increased over time in large part because of complex interactions among health insurance, health care providers, employers, pharmaceutical manufacturers, tax policy, and the medical technology industry. Reducing the growth trajectory of health care costs may require policies that affect these interactions. Policies focused only on health insurance sector reform may yield some results, but are unlikely to solve larger cost growth and limited access problems.
http://www.fas.org/sgp/crs/misc/R40834.pdf
About the Congressional Research Service:
http://www.loc.gov/crsinfo/whatscrs.html
Comment:
By Don McCanne, MD
The Congressional Research Service (CRS) has an outstanding reputation for authoritative, objective and nonpartisan analyses, providing Congress with the analytical support it needs to address the most complex public policy issues facing the nation.
In this 65 page report to Congress on the market structure of the health insurance industry, CRS concludes that “policies focused only on health insurance sector reform may yield some results, but are unlikely to solve larger cost growth and limited access problems.”
The conclusions are certainly no surprise. Every reasonable economist agrees that free market principles do not apply to health care. Yet where is Congress on this? They are moving forward with a proposal that relies heavily on the market of private health plans.
Don’t the members of Congress read their own reports? They need to read this one!