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Tuesday, September 25, 2012

Oligopoly in competition's clothing?

Competition is the cornerstone of most procurement regimes, but doesn't always yield lowest price, as anecdotally seen in a recent post. I would also want to have more information about the anomalous result indicated in the following story. (It would help to read the whole story to understand the context of this extract, as is usually the case in items reported here.)

Health insurance costs grew slowly for two years. Now, they’re speeding up.

Anderson argues that stronger government intervention is necessary to slow price growth in the health-care market. He points to the example of Maryland, the only state where the government sets the rates that hospitals can charge insurance companies.

The program began in 1976, when Maryland’s per-admission hospital spending was 26 percent higher than in the rest of the country. Between 1977 and 2009, the state’s hospitals “experienced the lowest cumulative increase in cost per adjusted admission of any state in the nation,” researchers in the Journal of American Medical Association concluded.

“Hospital prices have been held down substantially,” Gerard said of the Maryland experience. “And private insurers pay the same rates as public insurers.”

Such efforts, however, have fallen out of favor in other states. Congress gave states the authority to set payments in the early 1970s. About 30 states went on to do so. All states except Maryland gravitated away from those models, as states have looked for more competition and less regulation in health-care markets.

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