Competition Matters Wisconsin Association of Health Plans September
Competition Matters Wisconsin Association of Health Plans September 16, 2016 Barak Richman Duke Law School & Fuqua School of Business
Overview 1) Competition Works BUT: 2) Competition only happens with policymakers’ support Competition can be enhanced with pro-competition policies 3) A View of Wisconsin 4) Issues ahead
Backdrop: The Crisis in Health Care Spending
Why Rising Spending? Rising Prices Factors Accounting For Growth In Per Capita National Health Expenditures, 2004 -2014
Why Rising Spending? Rising Prices Changes In Utilization And Prices Of Medical Service Categories, 2014
Why Higher Prices? Lessening Competition
Competition is Good for Quality Too Research Findings: • Less Competition Higher AMI Mortality • Following Hosp. Merger Increase in Heart Attack, Pneumonia, Stroke Mortality • In NHS: Less Competition Higher Mortality, Slower Improvements in Heart Care & MI Mortality
More Mergers Have Brought Less Competition Vogt & Town (2006): Hospital Consolidation raised healthcare prices by at least 5%, by 40% when hospitals were near each other
Insurers Too: Less Competition, Higher Prices Dafny, et al. , (2010): Health insurance premiums increased 7% from 1998 -2006 because of greater consolidation
How Did This Happen? The Role of Judges “Defendants’ nonprofit status also militates in favor of finding their combination reasonable. Defendants’ boards of directors both include business leaders who can be expected to demand that the institutions use the savings achieved through the merger to reduce hospital charges. ” -- U. S. v. Carilion Health System (W. D. Va. 1989) “In the real world, hospitals are in the business of saving lives, and managed care organizations are in the business of saving dollars. ” “Even though competition may be lessened, the interests of consumers are, under the unique circumstances of this case, likely to be advanced rather than hurt. ” -- FTC v. Butterworth Health Corp. (W. D. Mich. 1996)
How Did This Happen? The Role of Judges “I don’t feel that the Federal Trade Commission has shown sufficient factual basis that they are entitled to a TRO. . I don’t think you’ve got any business being in here. I don’t see how the Federal Trade Commission can claim there is lack of competition when there [are] four or five hospitals in the area, and reducing it by one is not going to wipe out competition. . It looks to me like Washington D. C. once again thinks they know better what’s going on in southwest Missouri. I think they ought to stay in D. C. ” -- FTC v. Freeman Hosp. (8 th Cir. 1995) “We find it no small irony that the same federal government under which the FTC operates has created a climate that virtually compels institutions to seek alliances such as the Hospitals intend here. Like the corner store, the community medical center is a charming but increasingly antiquated concept. It is better for the people they treat that such hospitals unite and survive rather than remain divided and wither. ” -- FTC v. Penn State Hershey Med. Ctr. (M. D. Pa. 2016)
How Did This Happen? The Role of States Phoebe Putnam Hospital (2013) • Phoebe Putney Health System wanted to purchase Palmyra Hosp, the only other hospital in Dougherty County, Georgia • But. BUT: merger law (and would not allow Some state. FTC) policymakers have helped promote competition: • So, the Dougherty County Hospital Authority purchased Palmyra using Phoebe Putney • funds, and then leased to Palmyra to Phoebe Putney Attorneys General help enforce antitrust laws (MA, for ID, $1. NY) • Insurance Commissioners can maintain competitive markets (MO, CA) In re Cabell Huntingtoninsurance Hosp. (2016) • Medicaid programs can encourage adoption of new • Cabell Huntington Hospital and St. Mary’s Medical Center, two hospitals located efficient technologies, facilitate competition among three miles apart in Huntington, West Virginia, proposed to merge MMC plans (AK) • The FTC concluded theorganize merger would create a market, dominant firm with a near • objected, State health plans can a competitive encourage monopoly over inpatient hospital services outpatientchoices surgical(CA) services subscribers to make and cost-effective • West Virginia legislature passed “SB 597”, providing an antitrust exemption and allowing hospitals to collaborate under a “cooperative agreement. ” • The FTC gave up
Wisconsin’s Story: Competitive Insurance Market NUMBER OF INSURERS WITH >5% MARKET SHARE
Wisconsin’s Story: A National Leader
NYT: Dec. 15, 2015
Wisconsin’s Story: Unappreciated!
Looking Forward (and Towards Policymakers): 1. Critical to preserve market competition – Resist consolidation trend, enforce antitrust laws – Resist arguments suggesting that competition isn’t necessary – Resist arguments suggesting that competition is bad (for patients, for community) – Resist arguments suggesting that competition does not require active attention 2. Develop strategies to make local markets competitive – Monitor dominant providers & payors, challenge any abuse of market power – Give subscribers choices (of plans, of providers) – Give subscribers information (prices, quality) so they make informed choices – Allow entry, innovation 3. Consider state policies that affect statewide markets. Pursue policies that instill widespread competition (see: debate over self-insuring state employees) 4. Be creative, be vigilant, stay committed
- Slides: 17