This is not necessarily true, differant kinds of industries have differant kinds of competition. In some industries, is some industries you have the drive to cut prices in attempt to increase market share. When this happens you could have companies that cut their prices to match, or they could maintain their current price level. Companies could even raise their price levels, and thus have other companies match or stay the same. There are all kinds of price theories and behavior. I am just argueing that what we see in the health industry is a bunch of price followers. No company finds the desire to cut their prices. Prices remain similar across all industries with noone really striveing to better the other. Companies do not have to be in a formal collusion to maintain collusion like priceing strategies. This is a result of a inelasticity in price to demand ratio for health care. Raising or lowering the price will not change demand as greater than the effect of the price change. For example, say that we are both in the business of selling bread. Let's just assume that everyone needs bread and for our purposes here that customers are rather loyal to one company for convience. Cost of production equals .80 per loaf of bread. I set my price at say 1.00 a loaf and I get 100 customers. (total profit 20) You set your prices at .95 and you have say 150 customers. (total profit 22.5). Now, let's say that I drop my price to .90 and I pick up 40 of your cutomers plus 10 others who didn't get bread before. I know make .10 per loaf profit and have 150 customers. (total profit 15). You now keep your price and make 16.5. There is really no benefit to me dropping my price. We both lose. Now maybe you raise your price to 1.05 and lose same amount of customers to me, plus lose 10 who would not be able to afford bread. You know have 100 customers at .25 profit and make 25 total. I make .20 per 140 customer total - 28. We both win. Why would we cut costs? If anything we can let prices rise, we won't lose enough customers to lose profits. If anything we are gaining profits. I might just raise my prices too, and then we would both make a lot more than when prices were lower. When you have an industry that is part of a basic necessity (ie Oil) you can raise prices without losing too many customers.
This is the kind of industry we see in health care. You don't even have to be in cooperation with you to know that
if you raise your costs, we could both benefit. *note this is the best example I could think of off the top of my head, it is no means perfect
or takes account other factors. Purely a simple example.

Yes this is true. But sort of based on the example I provided before. There is no incentive to cut costs. People desire health care and are willing to pay high costs for it. Just because the price goes up a small increment, there will not be a big effect in how many customers will no longer pay that amount. Compare that to some of the manufacturing industries which are very touchy about prices to demand ratio. Think of how successful places like
Walmart have become just because the price of one good there may be a few cents cheaper than a place down the street. Local shops are virtually extinct because of it. In that industry there IS incentive to cut costs and make goods as cheap as possible. But you find that it is not the same environment in the healthcare industry.