That sentiment was echoed by Anthony Wright, executive director of Health Access California, a consumer advocacy coalition.
"This is one of those rare cases where I agree with both sides, just probably not the way either of them wants," Wright says. "Clearly, provider consolidation does have an impact on healthcare costs, but so does the consolidation in the health insurance market. That is true at the insurer level and the provider level. When a provider has such a huge foothold in a given market, then every insurer to do business in that area has to contract with that provider and they are in a privileged position to demand a higher reimbursement, which is reflected in cost."
"At the same time, if there are only a couple of prevalent insurers in a market, like Kaiser and Blue Cross and Blue Shield in California, there is not the robust competition to bring down prices. You need to look at other means of looking at rates, including more vigorous rate review and regulation."
On the health plan side, Pauly says the dominance of the insurance markets has existed since World War II, while the consolidations on the provider side are more recent phenomena.
"There has been a tendency more worrisome to economists that hospitals have been consolidating. That has been more of a change," he says. "The insurance market has been bad but it is not getting worse. But the provider market is getting worse, and on top of hospitals consolidating in many cases, now large physician groups like the orthopedic surgeons are organized into a few large groups that probably also aren't as competitive as they would be if they were individual doctors that insurers could play off of one another."