“Consider Arlington, Va., our best guess for where you might be reading this article.”
That is from an excellent NYT piece on health care and prices. The very interesting original research is here (pdf), main point is that where (properly adjusted) Medicare spending is high is surprisingly uncorrelated with where private health care spending is high. Furthermore policy may have been encouraging too many hospital mergers.
Here is Kevin Drum summarizing the study’s results on the importance of competition.
My anecdotal observations are that policy is encouraging too many mergers in too many things, from airlines to grocery stores, to chemical companies. I would love to know what is the meta-reason for this.
I’m not sure what meta-reason you are looking for. Companies prefer oligopolistic markets to competitive one. They make more money that way. Unless someone stops them they are going to achieve it where ever they can.
Yeah. A free market is a really testing environment in which to try to make a living.
I am looking for one that explains government’s acquiescence to these mergers.
A mixture of literal corruption and ideological capture.
AKA ‘Crony Capitalism’
http://www.againstcronycapitalism.org/what-is-crony-capitalism/
People have been reading Polanyi’s The Great Transformation.
Companies prefer oligopolistic markets to competitive one
Yeah, let’s have backyard steel mills, like they had during the Great Leap Forward.
Maybe there’s a middle ground?
Steel is easily traded across international borders and is a commodity, which is quite different from hospitals or airlines.
Non sequitur of the day. I don’t think being skeptical about the benefits to consumers of, say, a merger between Time-Warner and Comcast necessarily makes one a Maoist.
regulators prefer excessive regulation that has fixed compliance costs that favor larger organizations.
not sure what you mean on grocery stores though, still many out there. however, the lack of differentiation between companies means they might as well merge.
the excessive standardization of medical pushes things in this direction. If you can’t create value by creating new services and solutions, but only offer services from a government defined menu, most competition is severely limited to cheapest provisioning that meets the criteria to get paid.
Unless the state takes active steps to prevent it, the natural state of a ‘free’ market is oligopoly or monopoly. We had that sort of intervention for a good chunk of the 20th century, and are now slowly but surely reverting to the non-interventionist norm.
“the natural state of a ‘free’ market is oligopoly or monopoly. ”
That seems like something you made up out of thin air. There are few monopoloy’s that are a direct result of government interference. The natural market state seems to be a lot of small firms competing with each other. The fields with a lot of government regulation and/or government money tend to have few firms. The fields with few regulations seem to have a lot of competitors.
“There are few monopoloy’s that are a direct result of government interference. ”
LOL, should read: Most monopoly’s are a direct result of government interference.
Most? Are you counting patent law as government interference?
Jan,
First of all patents are not monopolies in the sense we are discussing, second of all patents are essential to small companies, third patents are government-granted monopolies.
So, yes?
the natural state of a ‘free’ market is oligopoly or monopoly.
No, it is not. The ‘natural state’ is one derived from the properties of an industry. Very few natural monopolies exist and those which do have either ready substitutes or are subject to state mandated price regulation. Oligopoly is characteristic of industries where entry is difficult. Even in those circumstances, some oligopolistic industries are intensely competitive, like airlines. Get it through your head: manufacturing accounts for 12% of the value added in the economy. Oligopolistic heavy industry is not half that. Another 3.5% of value added is attributable to oil and gas extraction or public utilities.
The reason is economies of scale. The end.
Oh and that one should need valid reasons to impede freedom.
And regulatory capture. Firms need to be large to comply with the onerous regulations they orchestrated
The meta-reason is to enable politicians and bureaucrats to extract rent to allowing you to live in their world.
The full quote is:
“Consider , our best guess for where you might be reading this article.”
You probably think this song is about you.
Tyler fell for the IP location trick.
And it is pretty obvious that he takes absolutely no measures to even notice when such geolocating is being used.
My guess is most NYT readers are not in Arlington. They’re in Hell.
A touch class to let everyone know you mean business.
Not yet, but soon.
The internet in Hell is awful, by the way, so they prefer the print version, even with the ink that sticks to your fingers. According to Dante.
I get
“Consider Atlanta, our best guess for where you might be reading this article.”
And also “Atlanta” in the graphs.
Agreed, this is the important point: The New York Times will rewrite a news article based on their assessment of who you are.
Actually, you have heard of the idea of regional editions, right? You know, where the paper prints items that are modified to be appropriate to where that edition is read (the weather forecast, to give one trivial example). Because if you were unaware of this fact, maybe you should have been reading newspapers just a bit more critically a couple of decades ago.
Actually, the conclusion was that where Medicare spending is low, private insurance spending is high. Why? The authors speculate that hospitals make up for low Medicare reimbursement by higher private insurance reimbursement. Further, in markets with few or one hospital, or one health care “system”, the hospital’s market power gives the hospital leverage in negotiations with private insurance for higher reimbursement rates. Duh! As I have commented before, it’s competition from independent health care facilities (such as outpatient surgery centers) that is mostly responsible for the bend in the cost curve for health care spending. Unfortunately, it is the experts who are overly impressed with the integrated model for delivery of health care who have been setting policy; they have actually promoted consolidation (of both hospitals/health care facilities and physician practices) and integration (where physicians are employed by hospitals), the exact opposite of what has helped bend the cost curve. Here’s the rub: consolidation and integration probably delivers better health care, but at a much higher cost. Which do you prefer? If you want both, there is but one solution, a solution that would send Cowen and Tabarrok round the bend.
Health care is a dynamic industry; I know because that’s what I do. I have spent the past 25-30 years helping create independent (of hospitals) health care facilities, mostly outpatient surgery centers which operate far more efficiently and at much lower reimbursement rates. Hospitals are responding rationally: they are buying up the independent facilities and employing the physicians who owned them! As for the independent facilities, owners are concerned that the days of independent medical facilities are numbered, as being outside a network that includes a hospital will mean eventual death. Hence, many owners are motivated to sell out to the hospitals. On the other hand, I work with some very smart and successful people who believe independent health care facilities are the future. Unfortunately, I don’t have a crystal ball.
Drum’s quote from the research:
In terms of policy, our work suggests that vigorous antitrust enforcement is important and that hospital prices could be made more transparent.
How about before we go in guns blazing as if there are market forces leading to oligopolies, we get rid of all the nonsense like Certificates of Need that are legislated enforcement of oligopoly. The way things go, we will keep stuff like CONs, but meanwhile the Feds will still be suing some hospital chain in 2030 under anti-trust laws, 5 years after they have gone bankrupt.
Hospitals at one time were either “public” or operated by charitable organizations (such as churches); hence, the motivation to protect them from market competition that would drive down the revenues of all providers. For profit hospitals are a recent development; Florida’s governor was CEO of one of the largest for profit chains, which paid the largest Medicare fraud penalty ever while the gov was the CEO. Paradoxically, when the gov was CEO, he complained constantly that the not for profits had an unfair advantage in that they didn’t pay taxes. I suppose he tried to level the playing field by aggressive billing to Medicare. In any case, even the not for profits are only nominally not for profit. For example, for whom do the Seventh Day Adventists operate one of the largest hospital chains. Not to mention the salaries paid the executives at the not for profits and the “volunteers” who sit on the Hospital Boards. My state deregulated outpatient surgery centers in the 1980s, which resulted in an explosion in the number of them, making patients happy if not the hospitals with whom they competed. Of course, the horse has already left the barn, as hospital consolidation has turned most cities and towns into one horse towns. How many times can HCA go private, then public, then private, then public, enriching a very few with each turn of the screw.
This is a customized piece of code that is based on your location. Mine says Boston and has a fact that correlates to Boston (which happens to be the same fact as used for Arlington, to no one’s surprise).
About 15 years ago myself and some other docs in town went to great organizational length in trying to create a second local hospital. This one was to be community based vs the current corporate one. The project failed as the competition bought everyone out. Including paying an above market price for adjacent land to prevent access to our new hospital. I actually thought I was hiring a lawyer to sue on anti-trust grounds, but naive me, he was already working on the enemy’s side!
The result is that we whores/docs make a lot of arms length rent money in a joint venture with the enemy. Which of course remains an extremely profitable entity.
e.g. We would have lowered local hospital prices through close and direct competition.
Umm, so you would have been good but you got greedy. Well ok, charming story. Really.
That’s overly harsh and my apologies.
Already called himself a whore….
Also, never underestimate the power of free stuff. You’d think a cheap, free lunch from a drug rep–no matter if the doc is pulling $300k–would have a minimal impact on prescribing.
What about the information provided by the drug reps?
That information is easily accessible through other means. It is the free stuff that makes the difference in prescribing, even without educational information. This has been demonstrated.
Why not try again? You might get bought out again!
Try scaling down. Take common, predictable procedures, and build a surgery clinic for them. The orthopedists, ENTs, and urologists have all done that to decent effect in the market I track. (Turns out to be a very low cost market for all, and the health care system does not seem obviously broken.)
Try offering to pay doctors (and nurses, and everyone else) more than the hospital does. If you can’t afford to do that, what efficiency are you actually bringing?
This is a customized piece of code that is based on your location. Mine says Boston and has a fact that correlates to Boston (which happens to be the same fact as used for Arlington, to no one’s surprise).
Using TOR, their best guess is that I am in New York City. Model that. (But not The Bronx part, apparently.)
But who are those they that are guessing?
I thought it was interesting that one of the experts they interviewed “suggested policy makers look to Maryland, where a government board sets standard prices for hospital services.” That prompted me to plug some Maryland cities in their tool, and lo and behold, Maryland has some of the largest disparities between Medicare and private spending out there.
What is surprising is that someone would expect crowding out to occur among between one source of fund that is amortized and distributed (insurance) and another source that is publicly shared (medicaid). money taken from one pocket does not affect the money available to be taken from the other pocket. There is no price signaling going on here.
At the point of sale neither comes from the pocket of the individual demanding them, but two separate third parties, only to be charged back later not on an individual but collective basis, completely breaking prices signalling in another place.
Why anyone expects price signaling to work in this case is what I am trying to grasp, maybe they don’t believe in price signaling in the first place?