Friday, June 13, 2014
Planned vs Market Economy
We remain attracted to the idea that health care should be
organized as a planned economy rather than as a market, but we aren’t sure
about it.
The issue is nicely illustrated by a current situation in
Massachusetts. Partners Health Care,
formed some years ago by the merger of two health care giants – Massachusetts
General Hospital and Brigham and Women’s Hospital – has been enlarging its
network by acquiring hospitals and medical groups in eastern Massachusetts and
now seeks to acquire two hospitals in the North Shore area and one in the South
Shore, together with some 500 doctors.
Partners, with its two premier hospitals, is a powerhouse in
the Boston area healthcare market – sufficiently so that it is almost
impossible to sell a health insurance policy that does not include them. Taking advantage of that, Partners has forced
health insurance companies to pay them rates that exceed by considerable margin
what they pay anybody else.
In any other form of enterprise that would look very much
like a monopoly but apparently not so in health care. Martha Coakley, Massachusetts Attorney
General and Democratic candidate for governor, recently announced the general
terms of an agreement being negotiated with Partners, under which the
acquisitions would be permitted but Partners would be limited in how much it
could raise its rates during the next five to ten years.
If Partners was in the business of making ball bearings or
oatmeal, we would depend on the market to limit what it could charge. But General Coakley apparently thinks it
better if she does it.
Competing hospitals have in the past been rather subdued in
their complaints about Partners but apparently no longer. As reported in the June 11 issue of The
Boston Globe, they have submitted a letter of protest to the Attorney General,
claiming that the announced Partners deal would increase cost and perhaps cause
some hospitals to close.
My own view is that the Partners merger should never have
been allowed in the first place, that it has contributed significantly to the
cost of health care by exercising the power that resulted, and that the
proposed acquisitions would just make things worse.
We’ll see how it all comes out.
