More vigorous competition in the healthcare market leads to reduced costs, less wait and travel time, and better care. In the ongoing effort to boost this competition, fifteen states maintain healthcare transaction laws, which restrict mergers of healthcare businesses. Unfortunately, this practice is gaining popularity.
Concern about acquisitions has merit. The 1,887 hospital mergers between 1998 and 2021 left only 6,093 standing (compared to the roughly 8,000 hospitals ProPublica estimates would exist had the mergers not occurred), and patients are suffering the effects due to less healthcare access.
But does government interference actually provide relief? Before embracing another state “solution,” we need to contemplate the drawbacks inherent in government regulations.
Invisible Consequences
Understandably, many voters welcome consolidation restraints. They see the immediate and obvious benefits of more facility and provider options. They see struggling hospitals kept afloat. They see healthcare workers employed. Even some people who normally favor business rights believe health care to be an exception, with government involvement being necessary.
But they fail to see the catastrophic secondary consequences of which economist Henry Hazlitt warned. They do not see the costs—ultimately passed on to patients—of subsidies, red tape, and corruption.
Because the negative secondary effects of government programs tend to come later and in less obvious forms than the benefits, voters and legislators alike often never recognize them. Either people do not see the balance sheet plummeting into the red (and the overall quality of the healthcare system falling with it), or they fail to attribute the collapse to the policies they supported.
Unfortunately, unfavorable outcomes of buyouts are so evident that convincing anyone to allow more business freedom is difficult. And unfortunately, the only moral remedy is a bitter pill to a population hooked on quick government “fixes.” Returning to the free market results in slower, less immediately visible improvements, but voters must face this reality if they want fair and permanent change.
The Real Free Market
Contrary to common belief, predatory financial moves and skyrocketing healthcare costs
are not primarily a consequence of market freedom. Rather, they proliferate in the endless cycle of misguided government measures aimed at improving immediate appearance.
Tax-funded insurance and care, well-intended as they may be, give businesses and patients blank checks. The natural consequence of this practice, as repeatedly proven across numerous industries, is that companies charge larger amounts, and customers (patients) overuse more expensive services.
These government agreements also provide a breeding ground for corruption. Although fraud occurs in the free market, government involvement gives power and anonymity to the criminals that lone wolves could never hope to gain.
Finally, government planning can never react to market cues as quickly as individuals. Cumbersome bureaucracy prevents central planners from seeing market conditions in real time, and a protected government employee lacks the incentive of a business owner to keep updated. And by the time an idea becomes a proposal, a bill, and a law, it is obsolete.
Healthcare transaction laws are not an anomaly. They do not circumvent the inevitable price increases of market manipulation. They do not avoid the ills of tax-funded subsidies. They do not discourage dishonesty. They do not speed up the reaction to healthcare crises. Although full reversal of government healthcare may be an unrealistic expectation, the least we can do is refuse to embrace yet another law that we may never be able to overturn.