Washington Built Big Health Care. Now It Wants To Break It Up.

If you were to poll a group of American adults, most would agree that health care costs are too high. Sens. Elizabeth Warren (D–Mass.) and Josh Hawley (R–Mo.) think they have a fix to this issue: more government intervention in the health care industry.

On Tuesday, the pair introduced the Break Up Big Medicine Act, which bans a company from simultaneously owning hospitals as well as insurers and pharmacy benefit managers (PBMs), who serve as the middlemen in the pharmaceutical industry and help negotiate drug prices. The bill also prohibits drug companies from owning hospitals, and vice versa. 

“There’s no question that massive health care companies have created layers of complexity to jack up the price of everything from prescription drugs to a visit to the doctor,” Warren said in a statement. “The only way to make health care more affordable is to break up these health care conglomerates.” The bill, she says, “would be a monumental step towards ending the stranglehold that corporate giants have on our broken health care system.” 

While it’s certainly true that conglomerates dominate the health care industry, the senators ignore the fact that this is a result of government intervention.   

In 1974, Congress passed the National Health Planning and Resources Development Act, which “enabled the federal government to withhold federal funds from states that failed to adopt [certificate of need] CON regulations in healthcare,” explains the Mercatus Center at George Mason University. CON laws require health care providers to receive approval from health planning agencies before building and expanding health care facilities. While CON laws were intended to reduce costs, they unintentionally encouraged “smaller hospitals to merge with larger ones rather than undertake the…costly burden of securing their own CON approvals,” according to the Bipartisan Policy Center. 

Congress realized it had perversely incentivized consolidation via the law, which it repealed in 1986. However, this has done little to eliminate CON laws. As of April 2025, 35 states and the District of Columbia still had these laws on the books, according to the National Conference of State Legislatures. 

Given the history and continued prevalence of CON laws, the senators should not be surprised that “more than three-quarters of all American doctors are employed by corporate entities, with independent physicians comprising a small and shrinking share of America’s doctors,” according to the bill. (The most recent report on physician employment trends, published in April 2024, found that 77.6 percent of physicians were employed by hospitals or other corporate entities in 2023.) 

The American Medical Association (AMA) found that, from 2012 to 2024, the proportion of physicians in private practice fell from 60 percent to 42 percent. Over half of these “private” physicians worked for hospital-owned practices, for hospitals themselves, or for practices owned by private equity firms, according to the same AMA report. 

Again, the senators’ blame is inappropriately directed at Big Pharma and insurance companies’ “quest to put profits over people,” to borrow Hawley’s bromide. 

The pharmaceutical, insurance, and health care industries exist to make money. This has always been the case. Self-interest isn’t responsible for increased health care spending; government intervention is. 

While Warren insists “there’s no question that massive health care companies have created layers of complexity to jack up the price of everything from prescription drugs to a visit to the doctor,” one tricky little question does, in fact, remain: To what extent is the government responsible for the expensive layers of complexity? If you ask physicians, a great deal! 

The AMA found that one of the most frequently cited reasons for the sale of independent practices was to “better manage payers’ regulatory and administrative requirements.” The number one reason was to “better negotiate higher payment rates with payers,” the largest of which are Medicare and Medicaid, which are jointly responsible for 42 percent of health care expenditures. Private insurance makes up only 32 percent. 

The “high fixed costs [and] low marginal costs…of complying with government regulations…creates an artificial incentive for firms to consolidate,” explains Michael Cannon, director of health policy studies at the Cato Institute. Instead of focusing on the cause of consolidation, the trust-busting senators focus on some of its consequences. 

The senators point to three pharmacy benefit managers (PBMs) managing “80% of prescription drug claims” and three drug wholesalers controlling “98% of drug distribution.” While these three-firm concentration figures are alarming at first glance, they do not necessarily mean higher downstream prices for patients as these concentrated buyers and sellers exert their market power in opposite directions. 

The question is whether any surplus the PBM extracts translates to lower prices for consumers.

“That’s not automatic,” says Brian Albrecht, chief economist at the International Center for Law and Economics. Vertical integration often benefits consumers with lower prices by reducing costs through various mechanisms, but a paper published this January by the American Economic Journal found “premium increases for rival insurers post-merger [and]…no evidence of benefits to consumers of the merged firm from lower premiums.” 

Recent empirical findings suggest that vertical integration in the health care industry does raise prices for consumers. Unfortunately, Warren and Hawley fail to recognize that the forces driving integration are the same ones driving consolidation: costly regulations that foreclose the market to newcomers and drive small, independent firms to seek acquisition. 

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Source: https://reason.com/2026/02/12/washington-built-big-health-care-now-it-wants-to-break-it-up/