Bad healthcare policy raises costs and lowers quality for individuals and families. Yet too often, federal and state officials, driven by special interests, impose meticulously detailed laws, rules, and regulations that restrict competition in healthcare markets.

The situation varies from state to state. But generally speaking, highly concentrated healthcare markets, regions where a relatively small number of big insurers and giant hospital systems dominate, are now the norm. This lack of competition leaves patients with fewer choices for medical services, higher costs, and lower quality.

American hospital markets have been highly concentrated for many years, thanks to hospital mergers and acquisitions and corporate giants gobbling up independent medical practices. By 2016, fully 90 % of the nation’s metropolitan statistical areas, or MSAs, were considered as being highly concentrated healthcare markets. Throughout it all, medical pricing has remained mysterious, inhibiting comparative shopping.

Likewise, in health insurance markets, lower-cost options are suppressed, while innovations in benefit design or care delivery are discouraged or outlawed. A 2022 study conducted for the American Medical Association found that commercial markets were highly concentrated in 75% of the nation’s MSAs, and in more than 90% of these markets, a single health insurer had “at least” 50% of market share. A recent Heritage Foundation analysis concluded that individual health insurance markets are 24% less competitive since the enactment of the Affordable Care Act, or Obamacare.

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Many states shamelessly pursue anti-competitive policies, often via medical and hospital licensing legislation, while enforcing intrastate commerce regulations. For example, certificate-of-need laws governing hospitals and clinics in 35 states serve as barriers to market entry. These laws protect the financial interests of existing hospitals and medical facilities. Competition from newcomers would motivate these facilities to control costs and improve the quality of medical care.

While healthcare licensing and delivery rules are still mostly set by the states, healthcare financing is strongly influenced by federal policy—especially the enormous subsidies for Medicare, Medicaid, and Obamacare. Here, Congress can take three major steps to improve competition in healthcare markets.

First, promote price transparency by codifying and improving the 2019 federal Hospital Price Transparency rule. Under the Trump-era rule, hospitals are required to post their prices for the 300 most common hospital procedures and medical services publicly. But hospital compliance has been sluggish for the last two years. Enforcement must be improved.

Congress can also improve the rule by putting its confusing medical service definitions into plain English and replacing its numerous reporting formats with a standardized system. This will facilitate consumer cost comparisons.

Many states shamelessly pursue anti-competitive policies, often via medical and hospital licensing legislation, while enforcing intrastate commerce regulations. For example, certificate-of-need laws governing hospitals and clinics in 35 states serve as barriers to market entry. These laws protect the financial interests of existing hospitals and medical facilities. Competition from newcomers would motivate these facilities to control costs and improve the quality of medical care.

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While healthcare licensing and delivery rules are still mostly set by the states, healthcare financing is strongly influenced by federal policy—especially the enormous subsidies for Medicare, Medicaid, and Obamacare. Here, Congress can take three major steps to improve competition in healthcare markets.

First, promote price transparency by codifying and improving the 2019 federal Hospital Price Transparency rule. Under the Trump-era rule, hospitals are required to post their prices for the 300 most common hospital procedures and medical services publicly. But hospital compliance has been sluggish for the last two years. Enforcement must be improved.

Congress can also improve the rule by putting its confusing medical service definitions into plain English and replacing its numerous reporting formats with a standardized system. This will facilitate consumer cost comparisons.