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GAO Eyes Health Competition

By Allison Bell

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Studies suggest that intensity of health maintenance organization competition may have some effect on HMO coverage prices and provider reimbursement rates, according to officials at the U.S. Government Accountability Office.

GAO researchers come to that conclusion in a review of 41 peer-reviewed scholarly articles concerning the effects of the level of HMO competition. The researchers prepared the review for Sen. Herbert Kohl, D-Wis., chairman of the Senate Judiciary Committee’s antitrust subcommittee.

The researchers wanted to include data on preferred provider organization plans and other types of plans, but “reliable, longitudinal data to measure concentration, that is, the number of competitors and their relative market share,” are available mainly for HMOs, and not for other types of plans, John Dicken, a GAO director, writes in a summary of the GAO researchers’ findings.

Only 6 of the 41 articles reviewed provided data on non-HMO health coverage products, Dicken writes.

In the studies that cover the effects of HMO market concentration on pricing, the authors “generally found that more competitive markets were associated with lower premium rates, but that mergers have not led to sustained premium increases,” Dicken writes.

One “study examined a sample of 40 HMO mergers that occurred between 1988 and 1994 and found that the mergers did not result in increased pricing,” Dicken writes.

In the studies that examined the effects of HMO market concentration on provider reimbursement rates, the conclusions varied, Dicken reports.

The authors of one study, for example, found that market concentration appeared to have no noticeable effect on California rates for services such as radiology and pathology. But the authors of another study, who analyzed levels of HMO market concentration from 1985 to 1997, found that higher market concentration correlated with a reduction in hospital reimbursement rates, Dicken writes.

Authors of some studies tried to measure the effects of health plan competition on quality of care.

“There was little consensus among the studies that examined the relationship between competition in private health insurance markets, predominately HMO competition, and quality of care,” Dicken writes. “Some found that greater competition was associated with lower quality of care, others found an association with higher quality of care, and others found no relationship.”

A copy of the report is available here.