Indiana has a small number of large networks of health care providers that generally serve the entire state. Various studies show this may be the reason behind higher health care prices in Indiana. One listener wondered why Indiana doesn’t have more competition.
Nir Menachemi is executive associate dean at the Indiana University Fairbanks School of Public Health at IUPUI.
“I wouldn’t say the lack of competition, I would say the lack of enough competition,” he said.
Menachemi explained that this problem is not specific to Indiana. He said the problem is a “cat and mouse game” between health insurance companies and provider organizations.
“One is always trying to figure out how to have a market advantage for what one values most in terms of how health care should be organized and paid for,” he said.
This often leads to consolidation of healthcare providers, which Menachemi says can “strengthen their ability” to negotiate with insurance companies for optimal pricing.
“Every year, every provider organization has to negotiate with every health insurance company that operates in their state what the rates are going to be for every single procedure that they do in the hospital or you know, surgery or something like that,” he said.
He said that if suppliers are larger, it is often easier for them to negotiate prices that benefit them.
Menachemi said there are also potential benefits that come from this consolidation.
“[Providers] it can potentially offer higher quality of care and better coordination and be a kind of one-stop shop for patients that can be convenient for patients,” he said.
He added that health insurance companies will also consolidate for similar reasons.
“When you’re negotiating with someone, size is always a bigger advantage,” he said.
READ MORE: Why are health care costs so high in Indiana?
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But Menachemi said this system could lead to higher prices for consumers.
“I think the main problem that people complain about is that when you have bigger and bigger provider organizations, they’re going to be able to negotiate higher prices than the health insurers, who have to renegotiate every year,” he said.
The RAND 4.0 study, conducted by a nonprofit public policy research organization, showed some of them high health care costs for Hoosiers, especially with hospital care.
Menachemi explained that increasing competition and therefore reducing costs is a multifaceted solution. In the end, it comes down to balance.
“I would say some of the things that contribute to the checks and balances are just not here,” he said. “And it’s not that it’s anybody’s fault, it’s just what it is. So unless we address some of these issues, I don’t think we’re going to restore some of those checks and balances to the system.”
He said there are many stakeholders in the process, including: consumers or patients, hospitals, health insurance companies, pharmaceutical companies and employers who buy company health insurance. He explained that cooperation between these countries would be vital to ensure a more balanced system of competition.
“If we put everybody in a room and force them somehow, either through policy or through incentives or through threats that somebody else solve this problem for everybody, I think we’ll have traction,” he said.
Menachemi said not enough is being done to bring these stakeholders together and determine these solutions.