Antitrust Policy and Health Care Reform

• DOI: 10.1177/0003603X9403900103
• Author: John J. Flynn
• Date: 01 March 1994
• Published date: 01 March 1994
• Subject Matter: Article

The Antitrust Bulletin/Spring 1994

Antitrust po Hey and health

care reform

BY

JOHN

J. FLYNN*

I. Introduction

59

Among the economic and political challenges facing the United

States today, none is more

significant-yet

difficult to

resolve-

than the complex puzzle of how to reform the delivery of health

care services. Aconsensus appears to have been reached that

reform should extend health care coverage to all Americans, while

restraining the growth of costs, maintaining the quality of care and

continuing the high level of innovation in the industry. Although

the estimates vary, the American health care system is claimed to

cost in excess of $800 billion per year, over 14% of the gross

*Hugh B. Brown Professor of Law, University of Utah College of

Law.

AUTHOR'S NOTE: The author is grateful to

Arthur

M. Strong, a

Staff

Attorney with the Bureau

of

Competition

of

the Federal Trade Commis-

sion, who provided useful comments onpreliminary drafts

of

this article.

Neither Mr. Strong nor his employer is responsible for the analysis or

conclusions reached in this article. They are the sole responsibility

of

the

author.

eJ 1994 by Federal Legal Publications, Inc.

60 The antitrust bulletin

national product.' Between 35- and 37-million Americans are esti-

mated to be without health care insurance at one time or another

during a calendar year and employers and governments labor under

a growing burden to pay for the health care benefits they under-

write and their employees expect.> Inflation in health care costs

has been constant and excessive, while efforts to restrain inflation

have been sporadic and ad hoc rather than consistent and compre-

hensive. In view of these facts, it is surprising that it has taken so

long to arrive at a consensus for fundamental reform.

Many of the proposals for reform now being proposed would

sanction joint conduct and levels of cooperation between competi-

tors in health care that have often been questioned or condemned

under the antitrust laws in other contexts and levels

of

govern-

ment intervention and regulation that pose complex issues con-

cerning the relation of antitrust policy to the regulation imposed.

Other proposals contemplate arelaxation of antitrust standards for

health care activities without explaining how the public interest in

fair and efficient resource allocation at reasonable prices is to be

achieved absent antitrust enforcement or affirmative government

See Hilary Stout, Delicate Decisions,

WALL

ST. J., Apr. 22, 1993,

§A, at 1, col. 1. See also V. R. Fuchs, The Health Care System's Share

of

the Gross National Product, 247

SCIENCES

534-38 (1990).

2See

Paul

B.

Ginsburg,

Alternative Approaches to Health Care

Cost Containment, 30

JURIMETRICS

J. 447, 448 (1990) (reporting that in

1988, employer contributions to health insurance equaled almost 5% of

total compensation and that U.S. health care spending is 38% higher than

in Canada and 85% and 87% higher than in France and West Germany

respectively). 57

CONSUMER

REP.

435, 436 (July 1992) reported that in

1960 the United States spent 5.3% of

GNP

on health care. In 1992 it esti-

mated that the United States spent 14% of GNP on health care; that 16%

of state and local budgets are spent on health care; that three of four busi-

nesses with ten or fewer employees did

not

provide health

care

benefits

for employees; and the health care costs of businesses that must compete

on world markets far exceed those of their foreign competitors. Estimates

of the

number

of uninsured range

from

13%-15% and the

"woefully"

underinsured

at 13%

of

the total

population.

See

Robert

M.

Veatch,

Physicians and Cost Containment: The Ethical Conflict, 30

JURIMETRICS

J.

461,462 (1990).

Health care 61

rate and service regulation. Still other proposals contemplate a

single payor system without spelling out how rates for specific

services are to be established, what role competition policy should

play

in

such

asystem, and

how

limited

resources

are to be

rationed among competing demands while maintaining quality

and incentives for innovation. Little attention has been given the

question of the role of antitrust policy in the reform of health care

financing and the delivery of health care services in pending leg-

islative reform proposals.

As discussion of health care reform and distribution of health

care resources has escalated in the early 1990s, the status of

antitrust policy as a central premise of government economic and

regulatory enforcement appears to be reemerging from the liber-

tarian days of nonenforcement of the 1980s. Ever since the adop-

tion of the Sherman Act in 1890, explicit reliance upon antitrust

policy as the basic organizing principle for

our

economy has

waxed and waned. Eras of a laissez-faire enforcement policy are

usually-but

not

always-followed

by periods of activist antitrust

enforcement as a remedy for the excesses of markets and govern-

mental regulatory schemes

not

subject to meaningful antitrust

scrutiny." On occasion, economic crises like that which prevailed

during the Great Depression, cause government to flirt with econ-

omy-wide regulatory alternatives, such as cartelization

of

the

Louis B. Schwartz has aptly observed: "There is relatively little

useful predictive value in the cycle theory of antitrust. The regularities

we perceive are largely subjective projections. There is some synchronic-

ity with major politicoeconomic trends, but who can predict those with

any reliability? The waves of antitrust zeal are composites of many ideo-

logical oscillations: federalism vs. states' rights, business vs. political

leadership, judicial supremacy vs. executive and legislative powers, judi-

cial activism vs. deference to administrative decisions, respect for jury

trial etc. Moreover, there are no 'leading indicators' such as those some-

times relied on with notorious fallibility of financial forecasters. The

periods of the antitrust pendulum and the interrelated political pendulum

differ from each other and each is quite variable." Louis B. Schwartz,

Cycles

of

Antitrust Zeal: Predictability

Z,

35

ANTITRUST

BULL.

771, 799

(1990).