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More Insurers May Not Result In Lower Health Costs

Will costs be better-controlled with more independent insurers competing in local markets?  Writing in Health Affairs Blog, health economist Uwe Reinhardt thinks not, concluding that it's difficult to see how fragmented buyers will compete effectively with ever-more concentrated sellers.
"Over the past decade, the supply side of the health care sector in many localities has become ever more concentrated, as hospitals formed systems and physicians joined together in larger groups. The current nouvelle vague – so-called Accountable Care Organizations (ACOs) – will only further encourage that concentration. I find it hard to believe that, in the face of this trend, fragmenting the buy side of health care even more would serve the goal of cost containment.

"Ideally, in my view, the market for health insurance would be oligopolistic, which means that only a few insurers — each with some market clout vis à vis providers — would compete for enrollees in a local market. What the ideal number would be is an interesting question on which economists can have a lively debate."
A lively debate indeed.

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