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Medicare and the economics of health care

One method commonly used by both governments and private health insurers to control the growth in private health insurers to control the growth in health care spending are limits to reimbursement to providers. How can these limits to reimbursement be viewed as the exercise of monopsony power? To prevent health care providers form prescribing more services it is often common to limit approval of services to health care recipients. How is this practice affecting recipients of Medicaid and Medicare?

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Monopsony refers to situations in which there is only one buyer, as opposed to monopoly in which there is only one seller. In Monopsony, the sellers are obligated to accept the price offered by the buyer, or they cannot sell their goods. In the case of reimbursements, monopsony is exercised if all buyers (private ...

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Limiting reimbursements to providers and the effect on health care spending

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