Antitrust Laws Could Undermine Efforts By Industry To Cut Costs

Hospitals, doctors, insurers and drug makers would be "running huge legal risks" by agreeing among themselves to cut up to $2 trillion in health care spending over the next decade, the New York Times reports. Antitrust laws prevent competitors from setting even maximum prices in their industry.

A group of health industry leaders met at the White House May 11 to discuss voluntary cost-containment efforts. After the gathering, President Obama announced that the companies had agreed to shave 1.5% of spending growth a year, saving $2 trillion over the next decade. But, days later, the same leaders said that commitment was exaggerated.

Such voluntary cost-containment goals have been floated by industry groups before. "In 1978, hospitals also asked the Justice Department for an assurance they would not be charged with antitrust violations when they undertook a 'voluntary effort' to curb costs as an alternative to legislation proposed by President Jimmy Carter. The department would not provide such an assurance," according to the Times.

A pharmaceutical manufacturers group devised another cost-control plan when then-President Bill Clinton sought to reform health care, but the Justice Department said the plan would violate antitrust statutes. The Times reports, "In blocking the proposal, the department said the Supreme Court had made clear that agreements setting maximum prices were just as illegal as agreements that set minimum ones."

Now, efforts by industry groups to control costs "would require much closer cooperation by independent doctors and hospitals, taking them into a gray area of the law." Antitrust law "makes it difficult for a hospital and doctors to collaborate to improve care [and lowers costs]," the American Hospital Association, which has asked Congress to loosen the restrictions, told the Times (Pear, 5/27).