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Doctors and Plans Blame Each Other for Costs

John Commins, for HealthLeaders Media, November 29, 2012

The release of the AMA report prompted a swift rebuttal from America's Health Insurance Plans. The health insurance industry's lobbying arm published a statement on its website Wednesday that called the study's methodology "fatally flawed" and laid the blame for rising healthcare costs on provider consolidations.

"Families and employers in every state have multiple choices of both insurance plans and types of coverage. Moreover, research clearly demonstrates that provider consolidation—not concentration of health plan markets—is driving up healthcare costs for consumers and employers," AHIP said in the statement.

Mark Pauly, a healthcare economist at the Wharton School at the University of Pennsylvania, says both sides are correct. "Insurance markets aren't very competitive and healthcare services markets, particularly hospital markets, are not very competitive," he says.

"It's like two devils pointing the finger at each other from the point of an economist interested in competition, but they are both right. In economics, we have a name for the situation where you have a monopolist buyer and a monopolist seller. It's called bilateral bargaining, and consumers are left in the middle. So it's doubly bad for consumers."

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3 comments on "Doctors and Plans Blame Each Other for Costs"


JosiePatrick (11/29/2012 at 3:20 PM)
Let me get this straight. Dr. cannot make enough money unless they form larger and larger provider groups and reduce duplication and overhead. And insurers don't want to enter markets because they can't make enough money. Single payer would get rid of both these concerns and get costs under control. Do healthcare consumers really want to pay for either the inefficiencies of competition or the overpricing of monopolies? It's time for insurers to rethink their business model. Time for employers to get out of the healthcare business. And time for providers to carefully consider what their career expectations are.

kerry willis (11/29/2012 at 2:46 PM)
40% of the healthcare dollar is spent on administration...How come the insurance companies only want to "save" on the 60% of healthcare spending that provides jobs and bonuses to administrators...what a joke Additionally the biggest area of spending on physicians that is increasing is with Docs employed by a hospital where the Hospital charges excessive facility fees and negotiates larger reimbursement rates than insurance companies allow private Docs......and the spending increase is whose fault again?

jkuriyan (11/29/2012 at 10:08 AM)
Because of the promotion of integrated care management & delivery ACA encourages provider consolidation so we cannot just talk about breaking up provider groups as a way to increase competition.