Tag Archives: Monopolies

From Monopolies to Monopsony

Axios yesterday reported that the US health care system is made up of mostly monopolies, and that the industry is dominated by a small number of companies, according to an article by Sam Baker. And this, critics say, drives up prices for everyone.

The following chart highlights the combined market share of the two largest companies in the selected health care sectors.


Data: Open Markets Institute; Chart: Axios Visuals

Because the US spends more than any other industrialized nation for health care, because our prices are higher, the monopolies that support those high prices could undermine both the liberal and conservative dreams of a more efficient system, according to Baker.

Here is the big picture, according to Baker:

  • Hospital systems continue to merge with each other and gobble up doctors’ practices, which lets them charge more for the care they provide.
  • Insurers and pharmacy benefit managers are also merging, and are now on track to bring in more revenue than the tech industry;s biggest powerhouses.

The trend towards concentration, Baker wrote, extends throughout the system, even into sectors that most patients never directly interact with, according to the data from the Open Markets Institute and shared with Axios first.

Returning to the chart above, let’s look at the suppliers for hospitals:

  • One company controls 64% of the market for syringes. Just 3 companies control the market for IV solution, and two companies make 47% of the hospital beds.
  • The biggest sector is syringes, with $3.8 billion in annual revenue. In a system that is already not very competitive, OMI found, each step without competition feeds into the next one.

Open Markets policy director, Phil Longman stated that, “America’s health care crisis is brought to you by monopoly.”

A particular example, and one that I am familiar with, is Dialysis:

  • Dialysis clinics bring in about $25 billion per year in revenue, and two companies, Fresenius (my clinic) and DaVita — control 92% of the market.
  • Fresenius is the leader, with almost 50% market share.
  • The manufacture of dialysis supplies is also concentrated around two companies, one of which is Fresenius, as my delivery truck and boxes and other materials can attest to. In this, they control 33% of that market.

What then does this monopolization mean for both sides of the health care debate?

This level of concentration can pose a problem for both liberals and conservatives, argues Longman.

  • Conservatives, for example, wanted to shift dialysis away from VA facilities and let veterans use private care instead.
  • Especially in sparsely populated areas, there’s an argument that such an arrangement would be more efficient, Longman said — but without actual competition in the private market, the VA just ends up paying more.
  • But by the same token, large hospital systems dominate some regions entirely. They’re not only the only source of care for miles, but also the largest employer and thus an important political constituency.
  • And that could make it hard for Democrats to follow through on big payment cuts in an expanded public program or “Medicare for All.”
  • “What are the chances the taxpayers get a good price if we don’t fix the monopoly problem?

Here’s a thought. Let there be more competition, but let the financing and paying be done by one entity — the government. In other words, let the providing of care be carried out by many companies, hospitals, etc., but make the financing of health care and the payments for it the responsibility of the government through an improved Medicare for All.

Medicare already pays out to the existing hospitals and providers, irregardless if they are concentrated, and has for some time, so expanding Medicare to all should be the same.

Yet, until the monopoly problem is solved, nothing will change.

Do “Free Trade” Agreements Help or Hinder Medical Tourism and its Implementation into Workers’ Compensation?

Earlier this week, the UK Ministry of Health released new rules for “Health Tourism”, which may have a chilling impact on foreigners seeking medical care in the UK. And last week, I was engaged in a running commentary with an individual who seemed to know a lot about obscure parts of the ACA, the Canadian health system (particularly the provincial system in British Columbia), and trade issues that were way above my head. I must point out that as an undergrad, I studied international relations and foreign policy as part of my Political Science major, and studied what was then called Global Politics way before anyone ever heard the word, “Globalization”, but as far as what this person was saying, it was beyond my ken.

This individual also threw out a lot of acronyms that I was not aware of such as COOP, SHOP and GATS (which I later realized stands for General Agreement on Trade in Services). Some acronyms like ACA and WTO I did know. COOP: Consumer Operated & Oriented Plan (COOP)(state-controlled coops on exchanges) http://cciio.cms.gov/programs/coop/ . IRS 501(c)(29) cooperative healthcare insurance organization http://www.irs.gov/Charities-&-Non-Profits/New-Guidance-for-IRC-501(c)(29)-Qualified-Nonprofit-Health-Insurance-Issuers. And finally, SHOP: SHOP is the small biz component of health exchanges and COOP must have their offerings. http://www.healthexchange.ca.gov/Documents/Small%20Employer%20(SHOP)%20Exchange%20Issues.pdf

When he/she responded to my request for a clarification of COOP and Shop, it got me thinking about trade, medical tourism and workers’ compensation, and is the reason for this current post.

This is what this individual said in his/her reply:

The COOP is the 501(c)(29) coop health care insurer under ACA for the state-controlled public option on exchanges. It will compete with private insurance for the Obamacare subsidies. This has small business programs under SHOP. If the self-insured programs could fall under SHOP to qualify for subsidies is undetermined. If HHS regulations will allow any overseas options is also unanswered, too. If not, then there are trade questions for the Mode 2 cross-border users and providers under GATS. There are WTO trade questions on public/private monopolies with designated providers. There are WTO trade questions on public/private monopolies with designated providers. This cozy arrangement is trade protectionism, and WC or Obamacare exchanges are public monopolies with the private sector. If this creates an unreasonable trade barrier to foreign providers, then there are monopolistic characteristics. Obamacare creates a paradigm shift, and GATS will export that across our foreign borders under Mode 2 for both the consumer and providers. With Canadians coming down for care, the Canadian system might be the first to feel the impact from exchange fallout. See Health Tourism by David Reisman on page 22. Medical providers can already cross the 49th parallel for licensing (e.g. doctors), but medical providers might find the patient quota system under the Canadian Health Act is far too protectionist. Does the provincial public/private system create a trade barrier to foreign medical providers? British Columbia might find rationing is market protectionism, and Washington Nobody is really discussing this and I wonder about the MTA marketing machine for WTO trade issues. Their clients are more savy about the WTO than Americans, but they might not know if Mode 2 liberalization will impact their domestic programs. Obamacare is really a potential game changer when the US Trade Representative files a WTO trade complaint against these foreign markets. From British Columbia, the Mode 2 migrations will flow into Australia, Singapore, Hong Kong, and China. BC might be forced into a new version of “exchange programs” under GATS.State providers are deterred from entering the Vancouver market. It is restrictive for consumers, too.

One thing this individual did not understand was that Workers’ Compensation does not have, nor will have exchanges as under the ACA. I tried to tell this person that only ACA requires exchanges. This individual also misconstrued the concept of a “Monopolistic State” as it pertains to Workers’ Compensation.

Will monopolistic arrangements require market exchanges?

If there was a state monopoly like the provincial system in British Columbia, then perhaps yes.

You noted the four monopolistic state systems for work comp. This would mirror the BC health system as I understand it under Canada Health Act which is like ACA. Reisman (Dr. David Reisman, who I met at the MTA Congress in October 2012 is a Professor of Economics at Nanyang Technological University, Singapore and Professor Emeritus of Economics, University of Surrey, UK) suggests that Mode 2 cross-border providers and consumers would be impacted. Washington consumers might cross-borders into BC for a medical provider under Mode 2. The state monopolies might be trade protections because of public/private networks. The providers and consumers are impacted.

I tried to explain that for purposes of Workers’ Compensation insurance, state monopolies are only for the purchase of insurance, not treatment. He seems to think that states like Ohio, North Dakota, Washington and Wyoming, all “monopolisitic states” for the purchase of insurance is somehow involved with the WTO. Notice also that this person lumps WC with ACA and says that WC or ACA exchanges are public monopolies with the private sector.

I might point out here that WA State allows injured workers to get care in other countries by providing a page on their website that allows a worker to choose a doctor in certain countries, as I mentioned in my white paper, Legal Barriers to Implementing International Medical Providers into Medical Provider Networks for Workers’ Compensation. Oregon also allows workers to seek care outside the US, but does not have a page or a list of physicians abroad. Also, my paper discusses how California and Florida view treatment in other countries, so there is no monopoly of care.

As I said, above, I studied international relations, but international trade agreements are a little out of my league. I’ll leave that to the economists, international lawyers, and diplomats to figure out. All I am interested in is seeing that injured American workers get the best care at the lowest cost and with the best quality of care. If that happens here, that’s good. If it happens overseas, that’s even better because it will afford the injured worker a chance to recuperate in a relaxed environment, and maybe even in familiar cultural surroundings if they are of Hispanic or Caribbean descent and receive treatment in a hospital in Latin America or the Caribbean, as I discussed in my blog, No Back Alleys Here.

I don’t know much about the WTO, trade barriers, trade protectionism and so on, but it makes me think that medical tourism in general, and more specifically, medical tourism being implemented into workers’ compensation is going to engender a great deal of trade issues that neither I, nor perhaps many small medical tourism facilitators have understood. Add to that what the Ministry of Health in the UK did this week, and it would seem that what sounds like a great idea, may actually be a nightmare in waiting.

I thought that as we get closer together as a world community, that one day it would be possible to travel from one part of the world to another in less time than currently available by jet aircraft, and therefore would make medical tourism much more feasible if distance was not an obstacle.

Such transportation systems found in science fiction like the sub-orbital plane (Land of the Giants), which has been worked on for some time, or the subterranean shuttle (Genesis II and Planet Earth, both Gene Roddenberry pilots for failed series), and of course, Star Trek’s Transporter (scientists have transported a molecule from one place to another, but that is a far cry from actually doing it with humans), may one day make trade barriers and protectionism a thing of the past. If you can dematerialize in one city and materialize in another a minute later, why would there be a need to have borders, and all the hassles that come with them.

So what we need to do if we are truly interested in realizing medical tourism in this century and with our current level of technology, is to figure out how to break down barriers of trade and to eliminate all forms of protectionism.