U.S. Healthcare: A Story of Rising Market Power, Barriers to Entry, and Supply Constraints

Li Lin, Mico Mrkaic and Anke Weber

No 2021/180, IMF Working Papers from International Monetary Fund

Abstract: Healthcare in the United States is the most expensive in the world, with real per capita spending growth averaging 4 percent since 1980. This paper examines the role of market power of U.S. healthcare providers and pharmaceutical companies. It finds that markups (the ability to charge prices above marginal costs) for publicly listed firms in the U.S. healthcare sector have almost doubled since the early 1980s and that they explain up to a quarter of average annual real per capita healthcare spending growth. The paper also finds evidence that the Affordable Care Act and Medicaid expansion were successful in raising coverage and expanding care, but may have had the undesirable side-effect of leading to labor cost increases: Hourly wages for healthcare practitioners are estimated to have increased by 2 to 3 percent more in Medicaid expansion states over a five-year period, which could be an indication that the supply of medical services is relatively inelastic, even over a long time horizon, to the boost to demand created by the Medicaid expansion. These findings suggest that promoting more competition in healthcare markets and reducing barriers to entry can help contain healthcare costs.

Keywords: Medicaid expansion; sector markup; healthcare cost; healthcare in the United States; healthcare provider; Wages; Employment; Insurance companies; Insurance; Labor costs; Global (search for similar items in EconPapers)
Pages: 51
Date: 2021-07-06
New Economics Papers: this item is included in nep-com, nep-hea and nep-ias
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=461355 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2021/180

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().