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.















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