"Coordination without consolidation!"

This month, the findings of a rigorous study of new data on healthcare spending in the U.S. private market hit healthcare policymakers and scholars with gale force. The main findings:

1. While U.S. cost control efforts, through the ACA and more generally, are focused mainly on reducing wasteful care, in the private market the price of care is the primary driver of spending differences within and between regions, and so of high overall costs (or, as Sarah Kliff put it three years ago, it's  the prices, stupid).

2. Region by region, there's very little relationship between Medicare spending and private market spending. Many regions with low Medicare spending have high private market spending.

3. "Hospital prices are positively associated with indicators of hospital market power." The more concentrated the market, the higher the spending.

Points one and three have bene recognized to some extent for years -- though the new data is very valuable for boosting the growing attention to antitrust enforcement, which Hillary Clinton has promised to ramp up. Point two -- the lack of correlation between Medicare spending and private spending, -- is the surprise, and would seem to suggest a need to recenter cost control efforts to some degree, especially since out-of-pocket costs for the privately insured seem to keep rising relentlessly.

I'd like to highlight one point in the study's framing that may be obvious to healthcare professionals, but seems worth thinking about:

What if all private health insurers paid 120% Medicare rates?

In my last post, I noted that some insurers fielding narrow networks plans in the ACA marketplace appear to be paying providers at rates as low or even lower than a strong public option would have. That left me wondering why those lower payment rates don't translate into much lower costs for plan holders willing to put up with the limited choice of providers. (One part of the answer may be that the ACA subsidy and benefit structure partly insulates subsidized buyers from the actual cost of care, potentially for worse as well as for better.)

The broader question is, what would be the effect on US healthcare if insurers generally paid a reasonable multiple of Medicare rates -- say, Medicare plus ten or twenty percent? And I just came across a short answer of sorts in a study that's having a swift impact on healthcare scholars' understanding of what drives healthcare prices. That's The Price Ain't Right? Hospital Prices and Health Spending on the Privately Insured, by Zach Cooper, Stuart Craig, Martin Gaynor and John Van Reenen,  which analyzes a huge new database of payments to hospitals for privately insured patients. Here is one conclusion that bears on the broad question: