The welfare impact of HMO mergers.
This paper estimates the welfare consequences of HMO mergers using data from California's small-group market. The analysis estimates the parameters from a differentiated products demand system. The parameters are then used to simulate the effects of several HMO mergers by solving for the Nash equilibrium in prices under different ownership structures. Even small mergers in moderately concentrated markets can result in significant consumer surplus reductions. However, these welfare losses can be offset by large efficiency gains. The welfare consequences of HMO mergers turn less upon demand-side considerations than on the health plan's ability to realize efficiencies.
Town
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R
Graduate School of Management, University of California, Irvine 92697-3125, USA. rjtown@uci.edu
D002140:California; D003627:Data Interpretation, Statistical; D004465:Economic Competition; D017598:Efficiency, Organizational / Q000191:economics / Q000706:statistics & numerical data; D005249:Fees and Charges / Q000639:trends*; D019981:Health Care Sector; D006273:Health Facility Merger / Q000191:economics*; D006279:Health Maintenance Organizations / Q000191:economics* / Q000458:organization & administration; D006301:Health Services Needs and Demand; D006302:Health Services Research; D006801:Humans; D017059:Models, Econometric; D010067:Ownership / Q000191:economics; D011357:Product Line Management / Q000191:economics* / Q000706:statistics & numerical data; D017062:Small-Area Analysis; D012946:Social Welfare / Q000191:economics*