The final word: Patients and physicians pay heaviest price if mergers go through
by James L. Madara, MD, AMA CEO
We know from history that competition is essential in a thriving health care environment, promising consumers improved service and better quality care at lower costs. Whenever competition is threatened, as it is now with the proposed mergers of four of our nation’s five largest health insurers, it is patients who stand to pay the heaviest price.
The American Medical Association (AMA) is leading the effort to stop the proposed mergers on behalf of physicians and consumers, a position consistent with our long history of speaking out against the lasting effects of anticompetitive consolidation in the health insurance industry. The AMA has argued before Congress, the Department of Justice (DOJ), state attorneys general and state insurance departments that the mergers would further impair access, affordability and innovation in markets for health insurance. Moreover, the mergers would deprive physicians of the ability to negotiate competitive health insurer contract terms, thereby reducing the quality or quantity of services that physicians offer patients.
Last fall, the AMA released its 14th annual “Competition in Health Insurance” study, which found that the proposed mergers are occurring in markets where there has already been a near total collapse of competition. Seventy percent of American markets were rated as “highly concentrated,” using the same metrics the DOJ and Federal Trade Commission (FTC) use to analyze market competition. In 147 metropolitan statistical area (MSA)-level markets and in 14 state-level markets, a single insurer held at least 50 percent of the commercial insurance market. In 46 states, just two insurers had a combined market share of at least 50 percent of the commercial market.
The AMA has also determined that under market measures utilized by the DOJ and FTC, the proposed mergers are presumed to enhance market power in a vast number of markets. The consolidations are therefore presumptively anticompetitive, the effects of which are likely to be permanent. Barriers to entry, such as the need to have low-cost, high-quality provider networks, and the challenge of overcoming brand-name visibility of established insurers effectively block out new players from entering the market.
The conclusion of a growing body of peer-reviewed literature is that greater health insurer consolidation leads to price increases, as opposed to greater efficiency or lower health care costs. For example, a study of the 1999 merger between Aetna and Prudential found that the increased market concentration was associated with higher premiums, results similar to those following the 2008 merger between UnitedHealth Group Inc. and Sierra Health Services. Recent studies also suggest premiums for employer-sponsored fully insured plans are rising more quickly in areas where insurance market concentration is increasing.
In physician markets, health insurer monopsony (i.e. buyer) power acquired through the proposed mergers would, as the DOJ has found in earlier cases, likely degrade the quality and reduce the quantity of physician services. Consumers do best when there is a competitive market for purchasing physician services. When mergers result in monopsony power and physicians are reimbursed at below-competitive levels, consumers may be harmed in a variety of ways.
Physicians may be forced to spend less time with patients to meet practice expenses. They also may be hindered in their ability to invest in new equipment, technology, training, staff and other infrastructure needed to deliver quality care and enable physicians to successfully transition into new value-based payment and delivery models. In the long run, health insurer monopsony power may cause physicians to retire early or seek more rewarding opportunities outside of medicine. This would exacerbate an already significant shortage of primary care physicians in the United States.
These detrimental effects of health insurer buyer power would not likely be offset by health insurers passing along lower physician reimbursement to consumers in the form of lower insurance premiums. Facing little if any competition, health insurers lack the incentive to lower premiums. As Leemore Dafny, PhD, a noted professor of competition in the health care industry at Northwestern University, told a U.S. Senate Committee last fall:
“If past is prologue, insurance consolidation will tend to lead to lower payments to health care providers, but those lower payments will not be passed on to consumers.”
Crucial physician roles include advocating for patients and navigating their care, tasks that rely on trust and time spent understanding the patient’s needs on the most basic human level. But if these mergers are allowed to proceed, insurers would undoubtedly become less responsive to patient needs.
We cannot allow insurance giants to become so powerful that they can coerce doctors’ decision-making on the course of care for patients.
They cannot become so dominant that they raise fees and premiums without fear of someone offering the same or better services for less.
Fortunately, competition is the simplest and best remedy. The proposed mergers must be blocked.
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