In a way, we have been brainwashed, fed propaganda by the business of healthcare and our elected officials for decades.

The message we have been given from all forms of media, third party insurers and government officials is ‘Increasing healthcare cost is a difficult and complex problem to manage. There is no simple solution.’

I am not alone in believing there a relatively simple solution to what turns out to not be a complex problem.

Chart: Essential Service Spending as Percent of U.S. Economy (GDP)

The Healthcare Oligopoly

The oligopoly consists primarily of hospitals, physicians, and prescription drug companies. Each have high barriers to entry and each is financially dependent on health insurance. (Here, they are referred to healthcare providers or, or simply the providers.

The fact is insurance, (i.e. risk sharing enterprises, commercial, governmental, or not-for-profit) is essential for the delivery of modern healthcare. The question is, whether high-quality healthcare is delivered at the highest possible or the lowest possible price. Imagine a private health insurer who decides to lower premium rates to attract more business. Lower premium rates mean reimbursement rates (dollars paid to providers for medical services) will be lower. The first thing that would happen is that healthcare providers would stop accepting that insurance.

Breaking up an oligopoly to foster competition would not work in the case of healthcare because it is necessary by circumstance.  It is the private health insurance companies who control health insurance prices for the benefit of their customers – the healthcare systems individual providers, not those covered by insurance

If you can imagine healthcare without any insurance, then you can imagine price competition between providers. But because private insurance is not going away, price competition among providers cannot exist in any meaningful form.

The private health insurers have long managed the competing interests of health providers, largely by acceding to higher reimbursement rates and the premium rate increases that go with them. Across America, there are slight differences in the premium rates charged by private insurers for a given level of coverage.

The solid line on the chart is essentially proof of the existence of a healthcare provider oligopoly. Made possible by private third-party insurers’ power to increase premium rates with no external oversight or price regulation.

Federal and State Government Roles

The federal government and the states, who now pay more than 50% of the insured healthcare bill, are obliged to match private insurer reimbursement rates. If they do not, Medicare would quickly become second-class insurance, not widely accepted, and causing a break in the 1965 Great Society promise of quality health insurance for all retired Americans.

Print Friendly, PDF & Email