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Viewpoint: Market control is not healthcare's silver bullet

Managed competition is not the solution to America's healthcare pricing issues, according to Richard Scheffler, PhD, professor of health economics and public policy at UC Berkeley.

The issue is simply that many markets are too highly concentrated, Dr. Scheffler writes in a Health Affairs blog. Dr. Scheffler argues market control is good in theory, but impossible in practice, especially in markets like California, where payers and providers are so concentrated they are noncompetitive.

Based on an antitrust measurement used by the Department of Justice and the Federal Trade Commission, California's hospital market is more than double the benchmark of what is considered "highly concentrated," or noncompetitive. The state's insurance markets are also above that threshold, according to Dr. Scheffler. Research shows California's highly concentrated markets have created the perfect environment for prices to rise, he writes.

"Without government intervention, it's unlikely that a reliance on competition can work to make coverage and care accessible and affordable in California," he writes.

Dr. Scheffler believes the choice between market control and political control is false, and in fact, a little bit of both are likely needed to drive down healthcare prices. For example, greater intervention and scrutiny by state attorneys could help, or independent state commissions to monitor prices could be a solution. California's ACA exchange — which as an active purchaser exchange allows states to negotiate with payers — demonstrates Dr. Scheffler's point. The exchange is "quasigovernmental" and uses its monopoly power to lower prices, but it still allows for some freedom in the marketplace, according to Dr. Scheffler.

"Perhaps a bolder approach is needed across the entire California landscape," he writes. Read his full column here.


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