Competition in the Seattle health care market
Arbuckle, Franklin Lee
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Since the mid 1960's health care costs have consumed an ever larger share of GNP, prompting calls for cost containment. Most observers have advocated regulatory measures to control costs, but these measures have not proved effective and may have enhanced costs. Other observers have advocated market perfecting measures to establish a framework for competition among well-defined provider groups. The Seattle-Everett market provides an opportunity to examine a market where some competition has existed during most of this century. Most indices indicate that in comparison to other Standard Metropolitan Statistical Areas (SMSAs) the Seattle-Everett health care market provides cost-effective care. Since World War II the Seattle fee-for-service sector has faced competition from Group Health Cooperative of Puget Sound (GHC), a pre-paid group practice. Enrollment growth at GHC has averaged over eight percent annually since 1953, increasing GHC's market share by the end of 1978 to 14.5 percent of the Seattle-Everett SMSA population. Studies done in the early 1970's indicate that GHC's costs were approximately 30 percent below the fee-for-service sector, which in turn is very cost-effective in comparison to other SMSAs. More employers are offering GHC as a health care benefits option each year, extending competition and thereby consumer choice to more of the population. The organization of Northwest Health Care (NWHC) an innovative individual practice association (IPA) of primary care physicians, is a dynamic addition to the metropolitan Seattle health care market. NWHC is cost-effective, and has grown rapidly. The growth of GHC and NWHC may call forth other well-defined provider groups adding further to the competitive ferment. The prospect of more provider groups competing for consumers by giving cost-effective care could be limited by several factors. Among these factors would be anticompetitive legislative or regulatory restraints, loss of internal cost control by GHC, indifference of employers to the benefits of choice for employed consumers, and loss of nearly all incentives for consumer cost consciousness as in the case of the Boeing production workers who have nearly 100 percent employer paid benefits for themselves and dependents. The development of competition in Seattle-Everett will be important not only for cost-effective health care in that market, but as an example to health care providers, employers and policy makers in other parts of the U.S.