Physician’s Weekly
By Wayne Winegarden, PhD
Making healthcare more affordable requires reforms that strengthen competitive markets, as I outlined in a recent Pacific Research Institute1 paper. Unfortunately, as we’re seeing in California and elsewhere, the trend in government is away from competition and toward fewer choices, hurting patients and increasing costs.
When applied to other industries, promoting more competition is uncontroversial. It is widely accepted that economic competition fosters innovation, which drives quality higher and costs lower.
After all, who would argue that limiting the number of banks or car dealerships would reduce bank fees or new car prices? Yet, somehow, we have convinced ourselves that healthcare is different.
According to a national Gallup2 poll, 46% of Americans now support a government-run healthcare system, which, while down from 2017, is up from the 34% who supported a nationalized system in 2010.
This support is ironic because healthcare has become more unaffordable and less accessible as competition has declined. Consider that, as of 2023, the government directly paid nearly 43 percent of all healthcare expenditures, compared with covering less than 29 percent of the total costs in 2000. Competition is further undermined by government policies that reduce choice and incentivize the consolidation of private hospitals, providers, and insurers.
There is a strong connection between robust competition and healthcare costs – prices are lower when competition is stronger. This is true whether the health services provided are hospital care, physician services, or health insurance.
In 2019 testimony3 to Congress, Carnegie Mellon University Professor Martin Gaynor noted that reduced hospital competition has increased prices “on the order of 20 or 30 percent,” “with some increases as high as 65 percent.” A JAMA Health Forum analysis concluded that the costs of office visits were 11 percent higher at primary care physician offices affiliated with hospital systems compared with independent doctor practices.
Competition also improves the services patients receive from health insurers. A 2022 Rand study4 found that reduced health insurance competition led to lower compensation for providers and higher premiums for beneficiaries.
Advocates also argue that a government healthcare monopoly would reduce the large amount of administrative waste plaguing the US healthcare system. A nationalized healthcare system, they argue, eliminates profits and duplicative administrative costs, thereby saving money and reducing waste. In practice, these savings rarely materialize.
Innovation, not bureaucracy, is the most efficient way to lower administrative costs. This requires regulatory reforms that strengthen competition by lessening provider burdens and encouraging technological advancements that are readily available and widely used in other competitive markets.
For instance, electronic clearinghouses manage transactions in other industries at a fraction of the cost borne by the US healthcare system. Clearinghouses in the banking industry have led to trivial costs (roughly $300 million annually) for administering banking transfers of more than $50 trillion annually. Applied to the Universal Product Codes (UPC) used on most consumer goods, a system that serves over 1 million businesses in more than 100 countries can be run by a nonprofit with a budget of $35 million.
Its use in healthcare could significantly reduce administrative costs while also improving the quality of care. Other administrative changes can also generate significant savings, including simplifying the prior authorization process and promoting greater data interoperability.
Problematically, the notion that less competition can improve outcomes is encouraging harmful policies. California’s recent actions exemplify what’s at stake. California’s Department of Health Care Services (DHCS) is limiting competition for plans tailored to the dual-eligible population—patients who are eligible for both Medicare and Medicaid (called Medi-Cal in California). These plans are called Medi-Medi plans, a type of Medicare Advantage plan exclusively available to dual-eligibles.
This new rule harms competition by limiting the number of insurers in each county that new patients can use. It actively obstructs organizations currently serving dual-eligible beneficiaries from expanding into new regions or increasing the number of beneficiaries they serve.
It makes no sense for California to prohibit services from health plans that are successfully serving this vulnerable population, thereby denying beneficiaries widely preferred options. The reduction in insurance competition will likely drive-up costs, either increasing total state expenditures or reducing the services available to the dual-eligible population. Either way, patients will be harmed because DHCS is limiting competition.
Rather than thwarting competition, federal and state policymakers should focus on repealing the rules and regulations that harm competition and encourage consolidation.
Markets work best when policies incentivize transparency and competition. Healthcare is no different. By empowering competition, policymakers can incentivize innovations and efficiencies that will improve quality and promote greater healthcare affordability.
Wayne Winegarden, PhD, is a Sr. Fellow in Business and Economics and Director of the Center for Medical Economics and Innovation at the Pacific Research Institute. Any views and opinions expressed are those of the author(s) and/or participants and do not necessarily reflect the views, policy, or position of Physician’s Weekly, their employees, and affiliates.
References
- Pacific Research Paper. Accessed Online December 8, 2025. https://www.pacificresearch.org/wp-content/uploads/2025/09/CMEI_PromotingHealthCare_Oct25_F.pdf
- Accessed Online December 8, 2025. https://news.gallup.com/poll/654101/health-coverage-government-responsibility.aspx#:~:text=Public%20opinion%20shifted%20back%20to,and%202007%2C%20expressed%20that%20opinion.
- US House of Representatives. Accessed Online December 8, 2025. https://www.congress.gov/116/meeting/house/109024/witnesses/HHRG-116-JU05-Bio-GaynorM-20190307.pdf
- Accessed Online December 8, 2025. https://www.rand.org/pubs/research_reports/RRA1820-1.html