(MADISON, WI) Stuart Craig, assistant professor of risk and insurance at the Wisconsin School of Business, has co-authored an illuminating study revealing the profound consequences of rising health care prices due to hospital mergers, as recently featured in The Wall Street Journal.
“The majority of Americans get their health insurance through an employer-sponsored plan. This creates an important link between the costs of healthcare and how workers are employed. Most people focus on a small part of their insurance premiums, but the reality is that their employers contribute most of it. That changes how they set wages and who they decide to employ,” said Craig.
Namely, a 1% hike in healthcare prices:
- Reduces both payroll and employment at non-healthcare firms by approximately 0.4%.
- At the county level, a 1% hike slashes per capita labor income by 0.27%, drives up unemployment by 1%, decreases federal income tax receipts by 0.4%, and raises unemployment insurance payments by 2.5%.
The study, “Who Pays for Rising Health Care Prices? Evidence from Hospital Mergers,” conducted by Craig alongside Zarek Brot-Goldberg (University of Chicago), Zack Cooper (Yale University), Lev R. Klarnet (Harvard University), Ithai Lurie (US Department of Treasury), and Corbin L. Miller (US Department of Treasury), underscores how middle-income workers outside the health care sector bear the brunt of escalating healthcare costs.
Craig emphasized, “Rising health care costs represent tangible hardships for middle-income families, resulting in job losses. This also results in lost tax revenue and places strain on businesses that have to adjust their employment practices. We also know that losing your job can be very bad for your health, and tragically, we see that approximately one in 140 workers who lost their job because of these price increases dies from an opioid overdose or suicide within a year of separation.”
“Rising health care costs represent tangible hardships for middle-income families, resulting in job losses.”
– Stuart Craig
Moreover, these effects are borne unevenly across workers – concentrated among those making between $20,000 and $100,000 per year.
“The fact that these price increases hit the middle of the income distribution hardest suggests that health care costs contribute to rising inequality in a meaningful way,” said Craig.
Additional findings include:
– Escalating healthcare prices lead to job losses, diminished tax revenue, and heightened federal spending on unemployment insurance.
– A hospital merger raising prices by 5% results in significant economic losses: $32 million in wages, 203 job losses, a $6.8 million reduction in federal tax revenue, and one death from suicide or overdose among affected workers.
– Between 2000 and 2020, over 1,000 hospital mergers occurred in the US, with minimal regulatory intervention, potentially overlooking substantial negative economic impacts.
“We also know that losing your job can be very bad for your health, and tragically, we see that approximately one in 140 workers who lost their job because of these price increases dies from an opioid overdose or suicide within a year of separation.”
– Stuart Craig
In a complementary study, “Is There Too Little Antitrust Enforcement in the US Hospital Sector?“, published earlier this year in AER: Insights, Craig delves into the regulatory landscape. Despite a surge in hospital mergers, the Federal Trade Commission (FTC) has intervened minimally, blocking only 13 out of over 1,000 mergers from 2002 to 2020. This disparity raises urgent concerns about the effectiveness of current antitrust regulations.
Rigorous analysis of insurance claims data exposes how hospital consolidations lead to substantial post-merger price hikes, burdening consumers with an estimated annual increase of $204 million in hospital spending among privately insured individuals. These findings underscore the critical need to reassess antitrust enforcement practices, particularly in health care, where market consolidation can severely impact affordability and access to essential services.
“Our research underscores the need for more stringent antitrust enforcement to safeguard not only the economy but also the lives and livelihoods of American workers.”
– Stuart Craig
“Unchecked hospital mergers have profound implications that extend well beyond the health care sector,” said Craig. “Our research underscores the need for more stringent antitrust enforcement to safeguard not only the economy but also the lives and livelihoods of American workers.”
For more information on these studies and their implications, or to arrange an interview with Professor Stuart Craig, please contact:
Leiah Fundell
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