By Ben Chartock & Kosali Simon
Highlights from Professor Leemore Dafny’s presidential address at the 2026 ASHEcon Meetings

In her presidential address at the 2026 ASHEcon Meetings in Minneapolis, Professor Leemore Dafny set aside the often-debated question of whether business should have a place in health care and asked a more practical question: how to make that business serve patients and payers better, and how our research can help get there. She organized her answer around three reinforcing ideas: 1.) more competition, 2.) activated demand, and 3.) shifted rents, arguing that progress on the first two could move rents downstream to patients and payers without the need for heavy regulation. Along the way she gave health economists credit for shaping merger enforcement, while pushing the field to keep up with an industry that has moved well beyond the horizontal mergers most often studied. As she put it, the challenge is not whether to study health care markets but that “it is very difficult to study the kinds of deals and behaviors” the industry now pursues, even as “our data access is shrinking.”

1. The setup: three reinforcing ideas

Professor Dafny framed the talk around three levers that work together rather than in isolation. If the field can activate demand, raising the elasticity of demand with respect to the value of health services, then that pressure produces more competition, and competition together with engaged demand shifts rents toward patients and payers without requiring extensive regulation. She was candid that making all of this happen takes a great deal, but emphasized that the pieces reinforce one another, which is why she treated them as a single agenda rather than separate wish lists. To quote former FTC commissioner Jon Leibowitz, himself quoting economist Joe Farrell, “competition is sharper and better aimed when consumers are making well informed decisions and free choices, and consumer protection works best, of course, when consumers have real alternatives.”

Above: Professor Leemore Dafny delivers the presidential address at the 2026 ASHEcon Meetings, Minneapolis.

 

2. More competition, and the credit economists have earned

The first and longest section she presented made the case that provider and insurance markets are highly concentrated and growing more so, judged against the thresholds federal antitrust agencies use. She summarized a large body of research showing that consolidation raises prices across hospitals, physicians, and insurers, often without quality gains and sometimes with quality harm, citing examples such as higher cardiac mortality after cardiology practice mergers, more opioid prescribing in concentrated primary care markets, and less generous benefit designs where insurers face less competition. She credited the field for translating this work into enforcement, pointing to the two-stage bargaining framework that explains why a merger’s competitive effects cannot be judged by patient choice alone, and noted that economists’ research, opinion pieces, and informal counsel have shaped how boards and executives evaluate deals.

3. Why the work is getting harder

Professor Dafny was frank that the industry has moved on to cross-market mergers, vertical combinations, and exclusionary contracting practices that are far harder to study than classic horizontal deals. She described her own roughly fifteen years working on cross-market hospital mergers, where a merger of dominant systems in different cities can raise prices because insurers serve employers with workers in both places, and pointed to recent Department of Justice complaints alleging anti-tiering and anti-steering restrictions by large systems. The obstacles she named were familiar to many in the room: shrinking access to proprietary claims data, heavy data-use agreements and compliance burdens, small samples that resist generalization, and structural models that are powerful but slow and hard to explain. Her message was not to retreat but to persist, with newer data, newer tools, and a focus on the mechanisms by which patients and purchasers are harmed.

4. Activate demand: the employer-sponsored insurance problem

The reason consolidation persists, she argued, is that we keep paying rising prices. Recent data show the growth is about price rather than utilization, with the commercial-to-Medicare hospital payment ratio widening from roughly 15 percent in 2000 to over 58 percent more recently. She named three culprits behind weak demand-side discipline: 1) the tax subsidy for employer-sponsored insurance, which dampens elasticity and induces over-insurance; 2) limited insurance competition, which leaves dissatisfied employers with few alternatives; and 3) limited employer capacity, with firms offering broad, expensive networks and little variety. She suggested the field has largely given up on making the employer-sponsored market work better, and floated whether it might be appropriate to require employers to offer a meaningfully cheaper option, such as a risk-adjusted narrow-network plan with the savings passed through to employees, so that at least some enrollees walk away from the high-priced option.

5. Shift rents: tools we have, and one we do not

On the third idea, Professor Dafny noted that because many health care rents stem from market failures and public subsidies, there is more room to shift them to purchasers without dampening supply than in ordinary markets. For providers, she discussed price caps benchmarked to Medicare, price-growth caps of the kind Massachusetts has pursued, and global budgets that guard against billing around a price cap. For pharmaceuticals, she pointed to the Inflation Reduction Act framework as a model that could extend earlier in a drug’s life, while expressing skepticism about most-favored-nation pricing. The category she flagged as unsolved was insurers: the minimum medical loss ratio is gameable, especially for vertically integrated insurers that can route profits to affiliated providers, which is why she views more competition, and the downward pressure it puts on margins, as the more durable fix.

6. The opportunity cost she worries about most

Professor Dafny argued that the real cost of an insufficiently competitive insurance sector is not the share of revenue that insurers retain, which she sees as modest relative to overall price and cost growth, but the opportunity cost of foregone effort. If insurers competed to design better care, negotiate lower prices, steer patients to lower-cost sites, and reduce unnecessary care, she suggested, they could do more for health. That foregone innovation, which all have strong potential to generate consumer surplus, is a real loss. She ended on a note of perseverance, invoking the teaching that it is not incumbent on us to finish the work, but neither are we free to desist from it.

What this means for ASHEcon researchers:

1. The frontier has moved beyond horizontal merger analysis, although it remains valuable (as decision-makers ask for recent studies to guide them), but the higher-impact questions now involve cross-market and vertical combinations, exclusionary contracting, and the conduct of integrated insurers, all of which call for newer theories, data and methods and a clear account of how patients or purchasers are harmed.
2. Data access is a collective constraint. Shrinking access to proprietary claims data, heavy compliance burdens, lack of real-time access, and small samples are slowing the field even as industry moves quickly, which raises the value of structural and simulation approaches and of investments that make rigorous analysis feasible.
3. The demand side is understudied. Research on why the employer-sponsored insurance market underperforms, and on policies that could give employers and employees stronger incentives to choose efficient options, is an open and consequential area where the field has, in Professor Dafny’s view, largely disengaged.