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.

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.

Congress can also bolster enforcement. For instance, Sen. John Kennedy (R-LA) is sponsoring the Hospital Transparency Compliance Enforcement Act (S.3749), which would require hospitals to display their charges in a consumer-friendly fashion and double the existing federal penalties for noncompliance.

Second, enact site neutrality in Medicare payment. The $982 billion Medicare program is the nation’s largest healthcare payer. As such, it exerts tremendous influence on commercial insurance and private care delivery.

Medicare typically pays more if a medical service or procedure is delivered in a hospital setting. By paying the same for a medical treatment, whether in a hospital or non-hospital setting (such as a clinic or a doctor’s office), Medicare would help level the playing field of competition between hospital systems and alternative care delivery centers, especially private medical practices.

Such a payment change would intensify provider competition, lowering costs for patients and taxpayers alike. According to a study conducted for the Blue Cross Blue Shield Association, over 10 years, it would produce savings of $471 billion in out-of-pocket expenses, private insurance costs, and Medicare expenditures.

Third, repeal the ACA restrictions on physician-owned hospitals. Section 6001 of the Affordable Care Act of 2010 restricts Medicare and Medicaid payment for physician-owned hospitals, including specialty hospitals focused on cardiac, cancer, and orthopedic care. Ignoring the stellar performance of these hospitals in delivering high-quality, cost-effective care, Congress blocked a possibly powerful force to intensify competition in the nation’s overly consolidated and uncompetitive hospital markets. Congress should junk this misguided, costly policy .

Policies that stimulate competition can reduce healthcare costs and improve the quality of care for millions of individuals and families. Writing in Inquiry, a professional journal, University of Minnesota professor Stephen Parente reports that a comprehensive price transparency policy could secure a total savings of $80.7 billion by 2025 (an “upper bound” estimate), with lower-income citizens benefiting the most.

Patients would also secure better care at lower costs from greater competition between big hospital corporations and private medical practices and physicians’ specialty hospitals.

It’s past time for Congress to do its part.

Robert E. Moffit, Ph.D., is a senior research fellow in the Heritage Foundation’s Center for Health and Welfare Policy.