Download eBook for Free

FormatFile SizeNotes
PDF file 0.5 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.

Over 150 million Americans receive health insurance benefits from an employer as a form of compensation. In recent years, health care costs have grown rapidly, raising concerns that increased health care spending crowds-out wage increases. We leverage geographic variation in health care price growth caused by changes in hospital market structure, and in particular, mergers, to test the impact of health care prices on wages and benefit design. We find that hospital mergers lead to a $521 increase in hospital prices, a $579 increase in hospital spending among the privately insured population and a similar, $638 reduction in wages. Both the hospital price and spending increases and the reduction in wages are driven by mergers that occur within hospital markets, rather than cross-market hospital mergers. Our results imply that consumers bear the price effects of hospital mergers in the form of reduced wages. We also find evidence of changes in benefit design structure and adoption of high-deductible health plans. Overall, our results show how rising health care costs caused by provider concentration are passed to workers in the form of lower wages and less generous benefits.

Research conducted by

This research was funded by Arnold Ventures, the National Institute for Health Care Management, and NIA K01AG061274 and conducted by RAND Health Care.

This report is part of the RAND Corporation Working paper series. RAND working papers are intended to share researchers' latest findings and to solicit informal peer review. They have been approved for circulation by RAND but may not have been formally edited or peer reviewed.

Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.