TY - JOUR AU - Chown, Jillian AU - Dranove, David AU - Garthwaite, Craig AU - Keener, Jordan TI - The Opportunities and Limitations of Monopsony Power in Healthcare: Evidence from the United States and Canada JF - National Bureau of Economic Research Working Paper Series VL - No. 26122 PY - 2019 Y2 - July 2019 DO - 10.3386/w26122 UR - http://www.nber.org/papers/w26122 L1 - http://www.nber.org/papers/w26122.pdf N1 - Author contact info: Jillian Chown Kellogg School of Management Northwestern University 2211 Campus Dr Room 5165 Evanston, IL 60208-0898 Tel: 2247148277 E-Mail: jillian.chown@kellogg.northwestern.edu David Dranove Department of Strategy Kellogg School of Management Northwestern University 2001 Sheridan Road Evanston, IL 60208 E-Mail: d-dranove@kellogg.northwestern.edu Craig Garthwaite Kellogg School of Management Northwestern University 2211 Campus Drive Evanston, IL 60208 Tel: 847/491-2509 Fax: 847/467-1777 E-Mail: c-garthwaite@kellogg.northwestern.edu Jordan Keener University of Michigan Department of Economics E-Mail: jordkeen@umich.edu AB - 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 difference for prescription drugs are more directly the result of buyer power. We discuss theoretical reasons why a Canadian monopsonist may be more willing to exploit its buyer power over prescription drugs rather than provider wages and why a U.S. monopsonist might not be willing to do the same ER -