Must-Read: Zack Cooper et al.: The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured

Must-Read: Yes. Constraining hospital and doctor-group market power is very important to creating a more efficient health-care system. Why do you ask?:

Zack Cooper et al.: The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured: “Insurance claims data for 27.6 percent of individuals with private employer-sponsored insurance in the US…

…between 2007 and 2011… [shows] the variation in hospital prices within and across geographic areas…. First, health care spending per privately insured beneficiary varies by a factor of three across the 306 Hospital Referral Regions (HRRs) in the US…. The correlation… [with] Medicare… across HRRs is only 0.14. Second, variation in providers’ transaction prices across HRRs is the primary driver of spending variation for the privately insured, whereas variation in the quantity of care provided across HRRs is the primary driver of Medicare spending variation…. Third, we document large dispersion in overall inpatient hospital prices and in prices for seven relatively homogenous procedures…. Finally, hospital prices are positively associated with indicators of hospital market power… prices in monopoly markets are 15.3 percent higher than those in markets with four or more hospitals.