Robert Town Douglas Wholey Roger Feldman Lawton R. Burns
Abstract
In the 1990s the US hospital industry consolidated. This paper estimates the impact of the wave of hospital mergers on welfare focusing on the impact on consumer surplus for the under-65 population. For the purposes of quantifying the price impact of consolidations, hospitals are modeled as an input to the production of health insurance for the under-65 population. The estimates indicate that the aggregate magnitude of the impact of hospital mergers is modest but not trivial. In 2001, average HMO premiums are estimated to be 3.2% higher than they would have been absent any hospital merger activity during the 1990s. In 2003, we estimate that because of hospital mergers private insurance rolls declined by approximately .3 percentage points or approximately 695,000 lives with the vast majority of those who lost private insurance joining the ranks of the uninsured. Our estimates imply that hospital mergers resulted in a cumulative consumer surplus loss of over $42.2 billion between 1990 and 2001. It is estimated that all but a modest $95.4 million of the loss in consumer surplus is transferred from consumers to providers.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12244.
Length: Date of creation: May 2006 Date of revision: Handle: RePEc:nbr:nberwo:12244
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Find related papers by JEL classification: I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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