Insurance companies often have a parent company. That parent company owns healthcare providers and pharmacies.
So it goes something like this
United Health Group -> United Health Insurance
United Health Group -> Sunshine Hospital.
United Health Insurance has a profit cap, it’s a % of revenue. Sunshine Hospital has no cap. So Sunshine Hospital charged United Health Insurance X$ and that profit rolls up to United Health Group.
United Health Insurance has a profit cap, it’s a % of revenue. Sunshine Hospital has no cap. So Sunshine Hospital charged United Health Insurance X$ and that profit rolls up to United Health Group.
That doesn't really work as a strategy unless UHI cornered the insurance market within a given region, otherwise they'd lose business to competing hospitals. You might then say "hospitals aren't competitive, they're (regional) monopolies!", which might be true, but if that were the case, you'd expect them to raise prices anyways. They're profit maximizing companies after all, not operating out of altruism.
Uhh...? We know for a fact that this is how it works.
It's actually far more insidious.
The payer will have non-owned providers on their network, and by virtue of processing those claims they will understand a lot about the provider. They use this info to decide which providers to acquire. If the provider declines acquisition, the payer will use their member population (i.e. customers/patients of the provider who are covered by the payer) as leverage in negotiations against the provider, effectively crippling their business.
Once a practice is sufficiently maimed, they come back with another acquisition offer, and ta-da, the big player gets bigger.
Yes, all of this only works if the payer is large relative to other payers. There was a period of history where this was a caveat, now it's just an observation about history. Now, there is 1 or 2 mega-players in each region. They've divvied up the country into their own territories and will extract rent henceforth.
It's very important to understand that this model also eliminates all incentives to reduce costs of care. There is not a single player in the entire ecosystem who is incentivized to reduce cost of care except patients, but even there, most patients' health insurer is selected by their employer. Then what is an employer going to do? Select a health plan that doesn't have any local healthcare providers?
Yes, all of this only works if the payer is large relative to other payers. There was a period of history where this was a caveat, now it's just an observation about history. Now, there is 1 or 2 mega-players in each region. They've divvied up the country into their own territories and will extract rent henceforth.
...which is specifically what I acknowledge in my original comment:
... unless UHI cornered the insurance market within a given region, otherwise they'd lose business to competing hospitals.
For all the words you wrote, it doesn't seem like you're disputing this point, and you're not providing any evidence that UHI has monopoly/monopsony powers, only postulating that it's probably true.
So your very substantive contribution to "they're abusing market power" is the observation "they could only do this if they have market power?"
And you're wanting someone else to go demonstrate to you that the single entity that is both 1) largest health insurer and 2) largest health provider in the country has significant market power?
I'll assume that this is legitimate ignorance and not a bad faith attempt to muddy conversation, and I'll direct you to a few resources where you can read several years of extensive investigative reporting on the myriad ways the pay-vider structure enables acquisition and exploitation of market power:
I'll assume that this is legitimate ignorance and not a bad faith attempt to muddy conversation, and I'll direct you to a few resources where you can read several years of extensive investigative reporting on the myriad ways the pay-vider structure enables acquisition and exploitation of market power:
I read through the first 3 and can't tell how they're related, so I'm not going to check the rest.
These only claims that united health is the "biggest", but that's not the same as having monopoly in a given market, which is needed for the scheme to work. Otherwise if you only have say, 30% market share, and your associated hospital charges sky high rates, you might be able to get slightly fatter margins on your insurance side, but you'll be losing money to other competitors that can out-compete you through greater economies of scale. I did a cursory search and their national market share in insurance is around 15%, which really seems tough to have the economics work out, especially given how capital intensive hospitals are.
What does "Medicare Fraud" have to do with the question that they're a monopoly or not?
This and the other links feels like trying to smuggle in a specific claim about what united health might be doing (ie. they're charging irrationally high prices just so they can pump their insurance margins), by pointing to a bunch of other shady stuff that they do.
You read through the first 3 links, including what... all 8 parts of the deep investigative work done by the leading healthcare publication with the subtitle "How UnitedHealth Group wields its unrivaled physician empire to boost its profits and expand its influence", and you came away thinking that this was unrelated to the topic at hand?
You read through all those 8 parts and didn't see how, for example, Part 5, titled "UnitedHealth pays its own physician groups considerably more than others, driving up consumer costs and its profits" is related to the question of whether or not they have and exploit market concentration to increase their profits?
And yes I can see how the Medicare fraud could seem unrelated to someone who demonstrably lacks curiosity while feigning it. But it's actually just a special variant of the exact same strategy someone else described at the top of this thread.
UHG takes on Medicare Advantage patients. Medicare pays UHG depending on the delta between the amount of care those patients are expected to receive versus the amount they actually receive.
The payer is incentivized to make their patients look sicker and to deliver less care to them. Traditionally, the provider has no such incentive and the payer has few levers to encourage them to do either behavior, but in this vertically concentrated model, they are the same entity and now the payer has tons of levers to get specific coding and care practices out of their owned providers.
Exact same dynamic as described in the very first comment, but under a VBC rather than fee-for-service model, and Medicare pays the bill.
I did a cursory search and their national market share in insurance is around 15%, which really seems tough to have the economics work out
Maybe cursory searches of national market share is not the best way to understand market dynamics in something as complex as the US healthcare system. This is not an industry in which "national market share" is the same as actual market power. Healthcare is intrinsically hyperlocal – obviously. There are thousands of distinct healthcare markets, and UHG and its ilk are systematically capturing them one by one. We are trending toward a situation where 5 payviders each own 20% of the national market, but 100% of actual markets are owned by one player.
You would be naive to look at the 20% figure and say "no monopoly here! No need for me to look further into this despite clear evidence of successful execution of strategies that, by my own admission, could only possibly work with excessive market power!"
That doesn't really work as a strategy unless UHI cornered the insurance market within a given region, otherwise they'd lose business to competing hospitals.
Welcome to the Certificate of Need. A legal requirement in most states for creating a new healthcare facility. Ostensibly to make sure that the population in that area has adequate healthcare options. But lobbied for by healthcare facility and hospital owners, it actually surveys other providers (your competitors) in the area and asks if their revenue would be adversely affected by you opening up. Too much of this (i.e. "we're worried that a hospital might reduce coverage or shutdown if there's too much risk to their profit"), and no CoN for you.
And this is to say nothing of Pharma Benefits Management. Steering you towards their own more expensive pharmacy (which isn't profit-capped). Mine does it by saying "you want a more convenient >30 day prescription? Only through our wholly owned mail-order subsidiary". 30 day scripts at your local pharmacy. 90 day for the same med? Denied.
which might be true, but if that were the case, you'd expect them to raise prices anyways. They're profit maximizing companies after all, not operating out of altruism.
Comments
Insurance companies often have a parent company. That parent company owns healthcare providers and pharmacies.
So it goes something like this
United Health Group -> United Health Insurance United Health Group -> Sunshine Hospital.
United Health Insurance has a profit cap, it’s a % of revenue. Sunshine Hospital has no cap. So Sunshine Hospital charged United Health Insurance X$ and that profit rolls up to United Health Group.
That doesn't really work as a strategy unless UHI cornered the insurance market within a given region, otherwise they'd lose business to competing hospitals. You might then say "hospitals aren't competitive, they're (regional) monopolies!", which might be true, but if that were the case, you'd expect them to raise prices anyways. They're profit maximizing companies after all, not operating out of altruism.
Uhh...? We know for a fact that this is how it works.
It's actually far more insidious.
The payer will have non-owned providers on their network, and by virtue of processing those claims they will understand a lot about the provider. They use this info to decide which providers to acquire. If the provider declines acquisition, the payer will use their member population (i.e. customers/patients of the provider who are covered by the payer) as leverage in negotiations against the provider, effectively crippling their business.
Once a practice is sufficiently maimed, they come back with another acquisition offer, and ta-da, the big player gets bigger.
Yes, all of this only works if the payer is large relative to other payers. There was a period of history where this was a caveat, now it's just an observation about history. Now, there is 1 or 2 mega-players in each region. They've divvied up the country into their own territories and will extract rent henceforth.
It's very important to understand that this model also eliminates all incentives to reduce costs of care. There is not a single player in the entire ecosystem who is incentivized to reduce cost of care except patients, but even there, most patients' health insurer is selected by their employer. Then what is an employer going to do? Select a health plan that doesn't have any local healthcare providers?
...which is specifically what I acknowledge in my original comment:
For all the words you wrote, it doesn't seem like you're disputing this point, and you're not providing any evidence that UHI has monopoly/monopsony powers, only postulating that it's probably true.
So your very substantive contribution to "they're abusing market power" is the observation "they could only do this if they have market power?"
And you're wanting someone else to go demonstrate to you that the single entity that is both 1) largest health insurer and 2) largest health provider in the country has significant market power?
I'll assume that this is legitimate ignorance and not a bad faith attempt to muddy conversation, and I'll direct you to a few resources where you can read several years of extensive investigative reporting on the myriad ways the pay-vider structure enables acquisition and exploitation of market power:
https://www.economicliberties.us/data-tools/unitedhealth-gro...
https://www.statnews.com/unitedhealth-group-investigation-he...
https://www.wsj.com/us-news/unitedhealth-medicare-fraud-inve...
https://www.wsj.com/health/healthcare/medicare-health-insura...
https://publicintegrity.org/topics/health/federal-programs/m...
You can also read the public filings of the payviders to read them bragging about their use of these techniques.
Here's direct reporting on the concentration itself: https://www.ama-assn.org/press-center/ama-press-releases/ama...
I read through the first 3 and can't tell how they're related, so I'm not going to check the rest.
https://www.statnews.com/unitedhealth-group-investigation-he...
These only claims that united health is the "biggest", but that's not the same as having monopoly in a given market, which is needed for the scheme to work. Otherwise if you only have say, 30% market share, and your associated hospital charges sky high rates, you might be able to get slightly fatter margins on your insurance side, but you'll be losing money to other competitors that can out-compete you through greater economies of scale. I did a cursory search and their national market share in insurance is around 15%, which really seems tough to have the economics work out, especially given how capital intensive hospitals are.
What does "Medicare Fraud" have to do with the question that they're a monopoly or not?
This and the other links feels like trying to smuggle in a specific claim about what united health might be doing (ie. they're charging irrationally high prices just so they can pump their insurance margins), by pointing to a bunch of other shady stuff that they do.
You read through the first 3 links, including what... all 8 parts of the deep investigative work done by the leading healthcare publication with the subtitle "How UnitedHealth Group wields its unrivaled physician empire to boost its profits and expand its influence", and you came away thinking that this was unrelated to the topic at hand?
You read through all those 8 parts and didn't see how, for example, Part 5, titled "UnitedHealth pays its own physician groups considerably more than others, driving up consumer costs and its profits" is related to the question of whether or not they have and exploit market concentration to increase their profits?
And yes I can see how the Medicare fraud could seem unrelated to someone who demonstrably lacks curiosity while feigning it. But it's actually just a special variant of the exact same strategy someone else described at the top of this thread.
UHG takes on Medicare Advantage patients. Medicare pays UHG depending on the delta between the amount of care those patients are expected to receive versus the amount they actually receive.
The payer is incentivized to make their patients look sicker and to deliver less care to them. Traditionally, the provider has no such incentive and the payer has few levers to encourage them to do either behavior, but in this vertically concentrated model, they are the same entity and now the payer has tons of levers to get specific coding and care practices out of their owned providers.
Exact same dynamic as described in the very first comment, but under a VBC rather than fee-for-service model, and Medicare pays the bill.
Maybe cursory searches of national market share is not the best way to understand market dynamics in something as complex as the US healthcare system. This is not an industry in which "national market share" is the same as actual market power. Healthcare is intrinsically hyperlocal – obviously. There are thousands of distinct healthcare markets, and UHG and its ilk are systematically capturing them one by one. We are trending toward a situation where 5 payviders each own 20% of the national market, but 100% of actual markets are owned by one player.
You would be naive to look at the 20% figure and say "no monopoly here! No need for me to look further into this despite clear evidence of successful execution of strategies that, by my own admission, could only possibly work with excessive market power!"
Welcome to the Certificate of Need. A legal requirement in most states for creating a new healthcare facility. Ostensibly to make sure that the population in that area has adequate healthcare options. But lobbied for by healthcare facility and hospital owners, it actually surveys other providers (your competitors) in the area and asks if their revenue would be adversely affected by you opening up. Too much of this (i.e. "we're worried that a hospital might reduce coverage or shutdown if there's too much risk to their profit"), and no CoN for you.
And this is to say nothing of Pharma Benefits Management. Steering you towards their own more expensive pharmacy (which isn't profit-capped). Mine does it by saying "you want a more convenient >30 day prescription? Only through our wholly owned mail-order subsidiary". 30 day scripts at your local pharmacy. 90 day for the same med? Denied.