Many critics of the Affordable Care Act have asserted that the complex law will actually increase the costs of care. Instead of a comprehensive system of government oversight, they argue, American society should rely on the mechanisms of free market capitalism to manage the cost (and availability) of health care services.
These critics may have a point; after all, our federal and state governments have poured immense resources into the development and implementation of health exchanges. Nevertheless, health care finances have also become unstable in markets that have not yet adopted the regulatory system of Obama Care.
Consider the situation involving Rural / Metro Corporation, for instance. The nation’s largest rural market ambulance provider has just filed for bankruptcy protection. The firm attributes its fiscal decline to “reduced revenue and delayed cash collections,” but industry observers have noted that the private equity firm Warburg Pincus purchased Rural / Metro two years ago while saddling the ambulance company with $525 million of new debt.
It is easy to understand why rural health care markets are attractive to private equity firms. Serving regions with relatively small populations and thus limited levels of demand, the owners of medically necessary services (such as ambulance units) can enjoy the benefits of natural monopolies while avoiding the moderating forces of competition.
But there is no reason to believe that natural monopolists will manage their business operations in more cost efficient ways than government entities. Thus, neither the Obama Care model of health finance nor the private equity alternative may alone provide the solution to America’s medical cost challenge.