This is such a compelling idea that both Democrat and Republican health policy makers envision relying on such a restructuring of the industry to lower the cost and improve the quality of care under Medicare and Medicaid. It is the rare example of bipartisan policy consensus.
These ACOs are just now beginning to emerge, as hospitals scramble to buy up medical practices, put doctors on salary, automate their records and coordinate care delivery. But they also will need the services of insurance companies, which uniquely have the actuarial data and expertise to calculate a capitation rate for a given group of customers, one that is low enough to compete but high enough not to lose a lot of money.
Steven Pearlstein is a Pulitzer Prize-winning business and economics columnist at The Washington Post.
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Some insurers are getting into the business by offering these services under contract to hospitals and clinics, as Aetna has done with Inova in Northern Virginia and Carilion Clinic in Roanoke. Sooner or later, some of these regional collaborations are likely to lead to outright mergers between insurers and provider groups. When that happens, it will be important that the provider groups have a wider range of partners. Although there are 1,300 health insurers in the nation, Coventry and Amerigroup are two of only a handful of midsize insurers that have the size and capital to become the basis for an ACO that can compete on a national scale.
That’s another reason why Justice should block these two deals. Under the static and somewhat cramped analysis that is often used by antitrust officials, these mergers would appear unlikely to reduce competition in today’s markets. But the antitrust law requires consideration of the impact of a merger not only on current competition but potential competition as well. In a fast-changing world, antitrust analysis should be forward looking, dynamic, even speculative. By that criteria, allowing giants such as Aetna and Wellpoint to foreclose potential competition would harm consumers and taxpayers.
If Aetna and Wellpoint want to increase their share in the Medicare and Medicaid markets, great! They have the capital, expertise, reputation and technology to do it the old-fashioned way, competing head-to-head with Coventry and Amerigroup. That would truly be pro-competitive.
Instead, these proposed acquisitions are nothing more than an end-run around competition by allowing these giants to pay a premium price for existing contracts, customers and market share. They will add little or no efficiency to our inefficient health system while allowing the shareholders and executives of Coventry and Amerigroup to withdraw billions of dollars in needed capital from the sector. If Justice fails to draw the line here, then it will be merely giving the green light to another round in the consolidation arms race that has already helped to produce the most expensive health-care system on the planet.