The Industrial Organization of Health-Care Markets

TLDR

The U.S. health‑care sector is large and growing, with 2011 spending at $2.7 trillion and 18 % of GDP, and about half of output is allocated via markets. The paper analyzes the industrial organization literature on health‑care markets to assess how competition affects price, quality, and treatment decisions for providers and insurers, and concludes with a discussion of research opportunities for economists, including those created by the Affordable Care Act. The analysis focuses on how competition influences price, quality, and treatment decisions for health‑care providers and insurers.

Abstract

The U.S. health-care sector is large and growing—health-care spending in 2011 amounted to $2.7 trillion and 18 percent of GDP. Approximately half of health-care output is allocated via markets. In this paper, we analyze the industrial organization literature on health-care markets, focusing on the impact of competition on price, quality, and treatment decisions for health-care providers and health insurers. We conclude with a discussion of research opportunities for industrial organization economists, including opportunities created by the U.S. Patient Protection and Affordable Care Act. (JEL J15, J24, J71, J81, K31)