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Zarek Brot-Goldberg Publications

Publish Date
Working Paper

We analyze the economic consequences of rising health care prices in the US. Using exposure to price increases caused by horizontal hospital mergers as an instrument, we show that rising prices raise the cost of labor by increasing employer-sponsored health insurance premiums. A 1% increase in health care prices lowers both payroll and employment at firms outside the health sector by approximately 0.4%. At the county level, a 1% increase in health care prices reduces per capita labor income by 0.27%, increases flows into unemployment by approximately 0.1 percentage points (1%), lowers federal income tax receipts by 0.4%, and increases unemployment insurance payments by 2.5%. The increases in unemployment we observe are concentrated among workers earning between $20,000 and $100,000 annually. Finally, we estimate that a 1% increase in health care prices leads to a 1 per 100,000 population (2.7%) increase in deaths from suicides and overdoses. This implies that approximately 1 in 140 of the individuals who become fully separated from the labor market after health care prices increase die from a suicide or drug overdose.

American Economic Review: Insights

From 2002 to 2020, there were over 1,000 mergers of US hospitals. During this period, the Federal Trade Commission (FTC) took enforcement actions against 13 transactions. However, using the FTC’s standard screening tools, we find that 20% of these mergers could have been predicted to meaningfully lessen competition. We then show that, from 2010 to 2015, predictably anticompetitive mergers resulted in price increases over 5%. We estimate that approximately half of predictably anticompetitive mergers had to be reported to the FTC per the Hart-Scott-Rodino Act. We conclude that there appears to be underenforcement of antitrust laws in the hospital sector.