An interesting paper in Health Services Research by Dr. Seidu Dauda* looks at market power between payers and providers to tease out the effects of increasing concentration on prices. The effect that is actually being measured is how does the changing relationship of market power between payers and providers change prices.
The results aren’t surprising. Concentrated providers lead to price increases. Increasingly concentrated payers lead to price decreases. This is expected.
A hypothetical merger between two of five equally sized hospitals is estimated to increase hospital prices by about 9 percent (p < .001). A similar merger of insurers would depress prices by about 15.3 percent (p < .001). Over the 2003–2008 periods, the estimates imply that hospital consolidation likely raised prices by about 2.6 percent, while insurer consolidation depressed prices by about 10.8 percent....
What does this mean for policy?