The two major afflictions besetting the U.S. healthcare system are that its prices are too high and that although big-spending should give us a better quality of care, it doesn’t.
These two conditions arise from the same cause: American healthcare is becoming less competitive. Hospital chains are growing larger, and within some specialties, providers have become more concentrated.
The result is that Americans get the worst of all possible worlds. Only two conditions can keep prices in check–competition, or regulation. The utility sector is monopolistic, but also price-regulated. As American healthcare becomes increasingly monopolistic, the absence of utility-style price controls means the sky’s the limit.
The late healthcare economist Uwe Reinhardt, and his colleagues saw the consequences clearly in his seminal paper on the fundamental malady of our system. It was titled, “It’s the Prices, Stupid.”
Lack of oversight results not only in higher prices but lower quality. As a new study of the dialysis industry asserts, the acquisition of thousands of dialysis centers by major commercial firms resulted in higher hospitalization and mortality rates of patients and less access to kidney transplants.
“For-profit acquirers’ explicit mandate to maximize profits may lead them to sacrifice patient outcomes,” says the study, prepared by a team from Duke University on a grant from the National Science Foundation.
Their peer-reviewed paper is scheduled to be published by Harvard’s Quarterly Journal of Economics in an upcoming issue. The firms say the study is based on old data and outdated practices and fails to acknowledge overall improvements in the health of dialysis patients over the years.