Soon after Thanksgiving the debate on health care reform begins in earnest before the Senate. Competition issues, normally a backwater concern for Congress, will be front and center. The Senate will grapple with the difficult question: how to make competition work in health care markets?
If there is anything that the health care debate has made clear, it is that there is a lack of competition in health care markets, especially health insurance. Competition is the lodestar of the free market, and a solid dose of competition is essential to making health care markets work. Competition, however, requires three components that are largely absent from our health care markets: transparency, choice, and a lack of conflicts of interest. Some markets, like the market for health insurance, fundamentally lack choice, where dominant insurer often enjoy monopoly power. Other markets such as pharmaceuticals take advantage of regulatory structures to maintain market power, as in the case of brand-name drugs paying off generic drug manufacturers to stay off the market. And in other markets, a complete lack of regulation allows health care middlemen—like pharmacy benefit managers ("PBMs")—to engage in fraudulent and deceptive practices, all while earning sky-high profits.
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