Monopsony as an Agency and Regulatory Problem in Health Care

Abstract

The article is organized as follows. Part I returns to the source, explaining the controversy in Kartell, examining Breyer\u27s opinion, and summarizing its impact on other courts. Part II looks at Kartell through the lens of classic monopsony theory involving suppliers, producers, and consumers, and focuses on the opinion\u27s oversimplification of the relationship between health insurers and insured individuals. It further considers whether lower input prices result in lower consumer prices in the endproduct market, and, therefore, whether monopsony power can be welfare-enhancing. Part III evaluates Kartell\u27s disregard of other important principal-agent problems in health care that arguably influence the welfare analysis of insurer conduct. It explores the degree to which group insurers stand in the shoes of individual consumers and the implications of non-insurer agency relationships, such as between physicians and patients. Part IV seeks to explain Kartell\u27s blind spots in regulatory terms and evaluates the implications of major changes in the structure and regulation of health insurance since 1980. The article contends that the reach and substantive content of antitrust law depend upon the regulatory environment in which alleged monopsony power is exercised, and asserts an important role for antitrust courts in the future