Health insurance competition: effects on premiums, hospital rates, and welfare

In evaluating health insurance mergers recently proposed in the U.S., regulators have grappled with the costs and benefits of reduced insurer competition. Our study examines the direct and indirect effects that a reduction in the number of insurers has on premiums, provider reimbursement rates, and consumer welfare. Using detailed health and enrollment data and focusing on a part of the commercial health care market, we examine whether consumers are typically harmed when an insurer is removed from the market. Absent premium setting constraints, we find that premiums typically rise, and consumers are generally harmed as they suffer from having fewer options. However, we also find that the reimbursement rates negotiated by hospitals need not always increase, and in many cases, can actually fall.

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Medical innovation and the labor market: the importance of reducing drug side effects

Pharmaceutical innovation can be enormously valuable, leading to the development of medical treatments that save lives and improve patient quality of life. However, new medications that are powerful and effective are often accompanied by painful and uncomfortable side effects. This article summarizes a recent paper, “Why Medical Innovation is Valuable: Health, Human Capital, and the Labor Market”. The author develops a dynamic framework to assess the value of pharmaceutical innovation. The framework incorporates patient incentives for long-run health along with their preferences for treatments with fewer side effects. A key finding is that evaluating effective medical treatments without considering their side effects can be misleading.

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