It’s refreshing to hear President Joe Biden call for more competition in health care. “Too often,” the President noted recently, “the government has actually made it harder for new companies to break in and compete.” Let’s see if his actions match his words.
For too long, people have mistakenly believed that the American health care system is a free market—indeed, some have blamed its many woes as the fault of capitalism itself.
But the American health care system is anything but a free market. Crony capitalism—characterized by policies that empower and enrich a few organizations—has increased the barriers for companies seeking to enter various segments of the industry. President Biden acknowledged this point by saying, “Capitalism without competition isn’t capitalism; it’s exploitation. Without healthy competition, big players can change and charge whatever they want and treat you however they want. And for too many Americans, that means accepting a bad deal for things that … you can’t go without.”
This is an interesting take from President Biden, though, because his beloved Affordable Care Act, also known as Obamacare, contributed to an increased rate of consolidation that further reduced competition.
According to research from the New England Journal of Medicine, “The Affordable Care Act (ACA) has unleashed a merger frenzy, with hospitals scrambling to shore up their market positions.” These mergers have created regional monopolies that have also led to those hospitals and corporate organizations funded by private equity to employ those physicians, further driving up the cost of care while negatively impacting the quality of care being delivered.
Consolidation among the insurers has been as aggressive as the hospital industry, if not more so. According to data, “345 insurers offered coverage on the exchanges in 2013. By 2019, that had fallen to 202.” According to a 2021 Statista survey, more than half of direct premiums written were represented by only seven health insurance companies. This concentration of market share is exactly what President Biden is talking about when he talks about a lack of competition.
The presenting challenge is how the President and Health and Human Services Secretary Xavier Becerra will execute this order, when the very policies they promulgate have promoted this exploitative environment. Not only have we seen incredible merger and acquisition activity, we also have seen policies that have hindered other competitive models such as Direct Primary Care (DPC) and cost sharing coverage models. Rather than an objective view of correcting course, the Administration has doubled down by continuing to enrich and empower special interests by subsidizing and funding insurers and hospitals rather than giving patients relief from their burdensome policies.
An example of this from recent months is when the Biden administration announced that it had invested $100 million in a new ad campaign to raise awareness for the 2021 emergency special enrollment period (SEP). The $100 million in marketing funds is being spent on ads for television, radio and 30 second YouTube videos like this (production cost unknown). This is the only time a SEP has received federal advertisement funding. These dollars represent advertising for private industry that is further subsidized by the federal government for each enrollment.
President Biden correctly ended his remarks by saying, “I believe the experiment failed. We have to get back to an economy that grows from the bottom up and the middle out.” Let’s hope his administration truly will focus on restoring competition, without looking through the lens of political ideology.