The Future of Health Care Costs: Hospital-Insurer Balance of Power

By: Austin Frakt, PhD, Health Economist, Department of Veterans Affairs and Assistant Professor, Boston University

There has been considerable scholarly and political debate about the extent to which hospital and insurer consolidations are responsible for rising health insurance premiums. In this essay, Dr. Frakt explains how the balance of market power between hospitals and insurers affects premiums. His review of the evidence drawn from prior research on this topic indicates that excessive market power of hospitals is a significant worry as we seek to contain premium growth. Dr. Frakt offers some cautionary thoughts about the potential danger of increasing market power through the formation of new integrated delivery systems and emphasizes the need for careful enforcement of antitrust, fraud and abuse laws as we move forward with implementation of health reform.