High Healthcare Costs Continue to Provoke Finger Pointing

Jeff Elliott, for HealthLeaders Media, February 9, 2011

Healthcare providers and health plans are at it again, bickering over who holds the cards when it comes to negotiating rates. If you recall, late last year the Center for Studying Health System Change issued a report stating that in many markets, providers had enough clout to negotiate "higher-than-competitive prices," putting insurers at a disadvantage and ultimately driving up premiums.

In Miami, for instance, average inpatient hospital payment rates of four large national insurers were nearly 150 percent of Medicare's rates and 210 percent in San Francisco. "In extreme cases, some hospitals command almost five times what Medicare pays for inpatient services and more than seven times what Medicare pays for outpatient care," according to the study.

The American Medical Association (AMA) delivered its retort via the annual "Competition in Health Insurance: A Comprehensive Study of U.S. Markets" report. With 2008 enrollment data from HMOs and PPOs in from 359 metropolitan statistical areas throughout the country, AMA found that in 60 percent of the markets, the two largest insurers had a combined market share of 70 percent or greater.

In 18 percent of the metropolitan statistical areas, at least one insurer had a market share of 70 percent or greater, indicating "a significant absence of competition among insurers," according to the AMA. "When insurers dominate a market, people pay higher health insurance premiums than they should, and physicians are pressured to accept unfair contract terms and corporate policies, which undermines the physician role as patient advocate," said association President Cecil B. Wilson in a statement.

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