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The Need for a New Antitrust Paradigm in Health Care

Testimony Before the House Judiciary Committee, Subcommittee on Courts and Competition Policy

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SOURCE: Center for American Progress

CAP fellow David Balto testifies before the House Judiciary Committee Subcommittee on Courts and Competition Policy. Read the testimony (CAP Action).

Chairman Conyers, Ranking Member Smith, and other members of the committee, I appreciate the opportunity to come before you today and testify about antitrust enforcement in the health care industry. As a former antitrust enforcement official I strongly believe the mission of the Federal Trade Commission and Antitrust Division of the Department of Justice is vital to protecting consumers and competition. However, the paradigm of health care antitrust enforcement needs to be revised in order for enforcement to fully support the objectives of health care reform. This nation’s year-long debate on health care reform illuminated many faults and weaknesses in our health care system, while highlighting the potential for meaningful reform to improve health care results and better control costs. It is time for antitrust enforcers to fully embrace the results of that inquiry and realign priorities in order for antitrust enforcement to become a tool and not an obstacle to improving our health care system.

Today’s hearing on antitrust enforcement in the health care industry could not be more vital. The nation is taking the first critical steps toward implementing reform and making sure health care markets are competitive. That is why at the Center for American Progress we held a program on health care competition this summer that brought together key regulators from the Office of Consumer Information and Insurance Oversight, OCIIO, the Antitrust Division, a State Insurance Commissioner and a prominent health insurer. The program highlighted many of the obstacles to effective competition in health insurance markets, and how regulators and antitrust enforcers can work together to make the market work. We plan similar programs on health insurance competition and consumer protection in the near future.

What are the important lessons from the health care reform debate that both regulators and antitrust enforcers need to embrace?

  • Health insurance markets are broken—almost all markets are highly concentrated with resulting supracompetitive profits, escalating numbers of uninsured, an epidemic of deceptive and fraudulent conduct, and rapidly escalating costs. The Congressional debate clearly and unequivocally established the need for the comprehensive reform that was enacted. Countless Congressional hearings uncovered a disturbing pattern of egregious, deceptive, fraudulent, and anticompetitive conduct in health insurance markets.
  • Integration is not the problem in health care, but is an important solution for improving quality and cost in the fee-for-service health care system. Much of the health care debate focused on the lack of coordination among health care providers and how this led to excessive costs and poor health care results. The purpose of the accountable care organizations, ACOs, is to provide entities that can better coordinate care and be held accountable for overall health care results.
  • If there is a competitive problem in health care markets it is due to aggregations of market power, such as in health insurance, and not because of improper integration among health care providers.

Many of these findings directly undermine the underpinnings of the current antitrust paradigm in health care. That paradigm assumes that health care intermediaries, such as health insurers or pharmacy benefit managers, PBMs, are an appropriate proxy for the consumer in health care markets. The paradigm assumes that consumers will be better off if health insurers can use their power to drive down reimbursement rates relentlessly. It suggests that it is necessary to harbor deep suspicion over integration by health care providers, particularly efforts by providers to collaborate. Antitrust agencies appear to prefer a system of autonomous providers, who are fundamentally powerless to deal with insurance companies.

CAP fellow David Balto testifies before the House Judiciary Committee Subcommittee on Courts and Competition Policy. Read the testimony (CAP Action).

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