{"id":21,"date":"2016-08-29T21:28:37","date_gmt":"2016-08-29T21:28:37","guid":{"rendered":"http:\/\/blogs.harvard.edu\/shailin\/?p=21"},"modified":"2017-09-17T21:30:13","modified_gmt":"2017-09-17T21:30:13","slug":"ambulances-are-monopolies-and-they-should-be-regulated-accordingly","status":"publish","type":"post","link":"https:\/\/archive.blogs.harvard.edu\/shailin\/2016\/08\/29\/ambulances-are-monopolies-and-they-should-be-regulated-accordingly\/","title":{"rendered":"Ambulances are Monopolies \u2014 and They Should Be Regulated Accordingly"},"content":{"rendered":"

Originally published on August 29, 2016, on the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics\u00a0Bill of Health<\/a>\u00a0blog.<\/i><\/p>\n

You go to your local urgent care with a headache and a fever, and the doctor suggests a trip to the hospital for further evaluation \u2014 just to make sure there isn\u2019t anything serious causing your symptoms. She offers an ambulance, and you accept. You could probably walk or Uber, but you\u2019re not feeling well, and the doctor has offered to arrange the ride. Why not?<\/p>\n

This was the\u00a0story<\/a>\u00a0of Joanne Freedman. She didn\u2019t think too much about it, until she received a $900 bill for the two-block ambulance ride she took to the hospital. While Joanne\u2019s experience was particularly egregious, it is not wholly uncommon. Ambulance pricing is one of the\u00a0most variable and least transparent<\/a>components of health care costs, with rides ranging from tens to thousands of dollars. This is in part because there are many ambulance providers, and they all have different relationships with different insurance companies. It\u2019s also in part because ambulance rates are generally set according to the services the ambulance is\u00a0equipped to provide<\/a>, not necessarily the services actually provided. Some ambulance companies have\u00a0contracts with municipalities<\/a>\u00a0that make them the only game in town, while others are in more diverse markets with multiple providers competing for patients. All this combines to create an incredibly complex industry with\u00a0very little consistency<\/a>\u00a0from ambulance to ambulance.<\/p>\n

But is this disjointed, free-market system the best way to structure emergency transportation? The arguments underlying the justification of a free, unregulated market hinge on the ability of consumers to police the industry through choice. If the seller of a good sets the price too high, consumers will buy from a different seller\u00a0until she brings the price down to what consumers are willing to pay. \u00a0This is, in theory, what allows markets to find the right prices for goods and services more efficiently than any government agency or regulator ever could.<\/span><\/p>\n

These arguments may hold up in certain markets \u2014 if a company sells a stick of gum for $500, chances are it\u2019ll find its gum sales drop precipitously. However, when applied to the emergency transportation industry, they just don\u2019t pan out. This is in large part because,\u00a0to any one individual consumer,\u00a0ambulances are essentially monopolies. Not only do consumers have no means of price comparison on the spot \u2014 as they usually require ambulances in high-stress, time-sensitive situations \u2014 they often have no control over their ambulance service provider. When a patient calls 911 or when a physician orders an ambulance, the patient have no agency in determining which ambulance comes to get him or her. As a result, the patient faces a market with\u00a0exactly one option. While the ambulance industry\u00a0is actually quite diverse, with many providers ranging from small municipal divisions to large private companies, to any one consumer, the market is functionally a monopoly.<\/p>\n

Not only are consumers faced with a single ambulance provider, they are often in no position to make a rational cost-benefit analysis for accepting or rejecting these services. Consumers have\u00a0little to no information<\/a>\u00a0about the cost of ambulance services at the time they are required to accept them, and they may not even know whether their situations constitute emergencies \u2014 which impacts how much their insurance companies will pay for rides. Can we really expect patients in this position to make rational decisions about whether or not to get in the ambulance?<\/p>\n

All of this suggests that the ambulance market is in need of more robust regulation. \u00a0While it\u2019s something of an economic boogeyman, we actually have a pretty good way of regulating industries where monopoly power is part of an efficient market: price control.<\/p>\n

The most prominent examples of price-controlled monopoly markets are those for utilities. \u00a0As electric grids were built up across the country to bring power to people\u2019s homes, it became clear that the most efficient means of purveying electricity was to have a single provider wire houses. This avoided the\u00a0redundant investment<\/a>\u00a0of multiple companies trying to build their own wiring networks to every residence. This posed municipalities with a dilemma. Do they try to encourage the inefficiency of redundant wiring to enable competition between power providers, or do they allow a monopolist to control the market for electricity in a given area? \u00a0The \u201cGoldilocks\u201d solution on which\u00a0many municipalities settled was\u00a0price-regulated, government-sanctioned monopolies<\/a>. A single provider got the entire market, but was largely unable to exploit that dominance to squeeze money out of consumers.<\/p>\n

While the market for ambulance services isn\u2019t exactly like that for utilities, the two share an important attribute: a monopoly is the optimal market structure. We want the ambulance market to be a monopoly on an individual level. We don\u2019t want 911 calls to trigger ambulance races to the most lucrative patients, and we don\u2019t want patients to have to weigh the costs and benefits of various providers while reeling from a car crash or having a heart attack. The market actually works best \u2014 in terms of getting patients to the hospital as quickly as possible with as little red tape as possible \u2014 when patients only have one option. The market has evolved to capture this kind of efficiency, but the regulation hasn\u2019t kept pace. This is why stories of patients like Joanne Freedman being blindsided by bills for ambulances they had no hand in selecting are now commonplace. It\u2019s time the regulation caught up, and started treating ambulances like the situational monopolies they are (and should be).<\/p>\n

Price controls for the ambulance market would have to be nuanced. Different ambulances are more expensive to operate than others based on the services they are equipped to provide, and the set prices should reflect that. There should also be analogous requirements on how much insurance companies must pay for both emergency and non-emergency ambulance rides, and those should balance out so insured patients aren\u2019t unwittingly\u00a0on the hook for the difference between the cost of a ride to the hospital and what insurers are willing to pay.<\/p>\n

Regulating prices isn\u2019t the only possible solution for the wild west of ambulance pricing. Municipalities could go back to operating ambulances as a public service, as they did in the\u00a0mid-20th<\/sup>\u00a0century<\/a>. But however we choose to rein in the market, one thing is for sure: the status quo is not acceptable. Even the staunchest libertarians concede that there is occasionally a role for government regulation in instances of true market failure. For patients calling 911 for\u00a0an ambulance, traditional market forces are powerless to\u00a0save them from unknowingly incurring\u00a0substantial\u00a0costs. The government has both the means and responsibility to intervene, and price controls are a tried and true method of protecting consumers from monopolists \u2014 be they ambulances or utilities. Going to the hospital in an ambulance is scary enough. Patients shouldn\u2019t have to worry about going bankrupt on the way.<\/p>\n","protected":false},"excerpt":{"rendered":"

Originally published on August 29, 2016, on the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics\u00a0Bill of Health\u00a0blog. You go to your local urgent care with a headache and a fever, and the doctor suggests a trip to the hospital for further evaluation \u2014 just to make sure there isn\u2019t anything serious causing your […]<\/p>\n","protected":false},"author":8887,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-21","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/posts\/21","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/users\/8887"}],"replies":[{"embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/comments?post=21"}],"version-history":[{"count":1,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/posts\/21\/revisions"}],"predecessor-version":[{"id":22,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/posts\/21\/revisions\/22"}],"wp:attachment":[{"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/media?parent=21"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/categories?post=21"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/archive.blogs.harvard.edu\/shailin\/wp-json\/wp\/v2\/tags?post=21"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}