Addressing Health Care Market Consolidation and High Prices

Abstract

Scholarship in the past few years has identified a range of market-oriented and regulatory policy approaches available to the federal government and state governments to address the pervasive problem of high and rising provider prices. Some have focused on the unique attributes of state government to tackle the problem, consistent with the highly varied political economies of the states. In the few years since publication of these reviews, a number of states have studied their options, and some have enacted legislation or taken administrative action to address provider prices. Although state initiatives can both improve health care market function and regulate the results of market failure (e.g., high prices), for purposes of presentation, we separate the discussions into those that primarily attempt to improve competition and those that directly regulate market behavior. However, as discussed in the section on potential state regulatory efforts addressing high and varied prices, we will emphasize that certain approaches to price regulation actually are complementary to efforts to improve market competition. In short, while we divide the paper into two parts, competition and regulation, states do not have to choose one course or the other but rather may well choose to do both at the same time.