Kellogg School of Management
2211 Campus Drive
Evanston, IL 60208-0898
Institutional Affiliation: Kellogg School of Management
NBER Working Papers and Publications
|July 2019||The Opportunities and Limitations of Monopsony Power in Healthcare: Evidence from the United States and Canada|
with Jillian Chown, David Dranove, Craig Garthwaite: w26122
Perhaps more than any other sector of the economy, healthcare depends on government resources. As a result, many healthcare systems rely on the use of government monopsony power to decrease spending. The United States is a notable exception, where prices in large portions of the healthcare sector are set without government involvement. In this paper we examine the economic implications of a greater use of monopsony power in the United States. We present a model of monopsony power and test its predictions using price differences between the United States and Canada – a country that represents an example of a “Medicare for All” style system. Overall, we find that wage differences for medical providers across the two countries are primarily driven by the broader labor market while price diffe...