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Kimberly Amadeo

Is Health Care a Monopoly?

By July 5, 2012

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The problem? Rising health care costs. The solution? Well, according to the law of demand, if prices rise, then the quantity demanded should fall. Unfortunately, the demand curve for health care services is very inelastic -- when you are having a heart-attack, you aren't in a position to shop for the best price.

At the same time, health care providers such as hospitals, doctors' offices, prescription drug companies and insurance providers, are following the same trends as other industries, and consolidating services. For example, it's estimated that the top five health insurance providers control 50% of the U.S. market. In 38 states, the top two insurers control nearly 60% of the business. This may not be a monopoly per se, but some wonder whether it is heading dangerously in that direction.

Of course when it comes to health care, price is not really one of the determinants of demand anyway, at least for those who have health insurance. When most costs are covered under insurance, there isn't much incentive to shop for the best price. Those without insurance avoid going to the doctor altogether, because they know it will set them back at minimum $100-$300 a visit, depending on what tests are run.  If they need an MRI or colonoscopy, that's $1,000 extra.

As a result, the health care industry is protected from price competitiveness. And maybe that's a good thing -- you'd hate to think that someone would die from cancer simply because they couldn't afford the $30,000 needed to treat it. That's why people have health insurance, to protect their finances, and pay for the unthinkable. Under Medicare and Medicaid, the government steps in to pay for those who don't work for employers who can subsidize the insurance, and can't afford it themselves.

Of course, that still leaves 32 million Americans who aren't below the poverty level guidelines, or who just don't want insurance. The Obamacare bill attempts to address this gap. However, is this just compounding the problem by giving more customers to the monopolies? What's your opinion?

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Comments

April 22, 2013 at 10:27 am
(1) FR Nelson says:

My opinion? The healthcare industry has become a monopoly — no ifs, ands or buts about it. There is no honest competition among healthcare providers and insurers. Not today, not anymore. If there were, it would put a lot of the healthcare outfits quickly out of business, and rightfully so. Healthcare organizations, as well as the politicians who back them, know they can charge monopolistic fees for their services and get it, because people are fearful, naturally, of not getting help and treatment when they are sick, injured or dying. Healthcare organizations and insurers are FULLY conscious of that fear (behind all the “advertised concern” for sick or injured people) and they willfully exploit that fear. What the healthcare industry does works a terrible hardship on people and would be just about as wicked as some organization monopolizing food or water and forcing people to pay exorbitant prices for those essentials. Healthcare rates and charges are based upon people’s innate fear of illness, a fear which can and is exploited for fat profits. The “Afforable” (hahaha) Care Act, aka ObamaCare, rates and charges, coming to everyone in 2014, is just a way for the politicians to get themselves a bigger piece of the health industry cash-cow, and they will get their new source of loot, because they will have 16,000+ new IRS agents ready to use force if necessary to sqeeze the money out of the taxpayers. It’s time to drop the pleasant-sounding rationalizations and propaganda, put out by the big healthcare corporations and profiteers, and call it what it has become — a “protection” racket.

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