Americans Pay More for Health Care Than Anyone Else — and Private Equity May Explain Why

As shocking as the bills might be, most Americans aren’t surprised by astronomical health care costs anymore. But for many, the reasons behind those mind-boggling numbers remain opaque. What could possibly cause the U.S. to spend more than double the amount on per-capita health care as comparably industrialized countries like Canada, France and the U.K.?

While the full explanation is a complex and multifaceted one, there is an often-unmentioned culprit worth pointing a finger at: private equity — and the consolidation it encourages.

How consolidation has shifted the landscape of U.S. health care

According to The Wall Street Journal, over time, private equity firms have gobbled up competition in specific health care industries, resulting in higher prices for patients.

Take, for instance, the 2023 lawsuit brought by the Federal Trade Commission against the private equity firm Welsh, Carson, Anderson & Stowe — and the Texas-based anesthesia company it created in 2012, U.S. Anesthesia Partners, Inc. (USAP).

Back then, the FTC press report says, "anesthesiology in Texas was made up of small practices competing against one another, which allowed insurers to negotiate lower prices for themselves, for their clients, and ultimately for patients." Observing this, the private equity firm began to buy up existing practices, creating a single, wide-spread anesthesia provider that had the leverage to set prices higher. USAP also engaged in price-setting agreements with remaining third-party providers that ratcheted costs higher across the board, the FTC alleges, and made a further deal that "sidelined a significant competitor."

This is just one instance of a broader trend made possible by the privatization of health care. And because some individual practices keep their names after private equity purchases — and because so many Americans don’t have the opportunity to shop around for health care, and are instead directed to specific providers by their insurer — it’s easy to overlook this trend as a patient.

Furthermore, health care stands apart as a service that’s routinely offered before the end consumer has any idea of the final cost. In many cases, someone about to go under the knife — and anesthesia — may not have the luxury of price-shopping their services. Even if they do, they might not get an accurate quote.

The result: Ever-increasing prices, which means more profit for the private equity firms who can afford to keep "rolling up" the competition — and even higher medical bills for patients.

How to get more affordable health care — even in the face of consolidation

Of course, to some extent, the price of health care is out of patients’ hands. People need life-saving or -extending medical services, no matter where the chips fall.

Fortunately, though, regulators are aware of and looking more deeply into this uniquely American problem. Just last month, the Department of Justice announced that it’ll create a new task force, which will focus on health care industry monopolies and instances of collusion.

Laws are also in the works to help reduce the price of prescription medications — like the package of bills passed by the New York Senate earlier this year and the Medicare drug price negotiation program. (That’s especially good news, since 31% of Americans who take prescription medicines say that paying for them is a financial strain.)

In the short term, though, the best way for most Americans to save on health care costs is to get good, affordable health care coverage — which can be done by comparing plans. (You may also be able to save some money by bundling your medical and dental insurance.) Cost-assistance programs and maintaining good health habits can also help, as can saving up money specifically for health care related costs.

However, time will tell if legislators will be able to effectively begin the process of unraveling this tangled yarn — which has, after all, been decades in the making.