Aetna trial has an elephant in the room

December 5, 2016

Politics could enter the courtroom again tomorrow as the U.S. District Court takes up the merger case of United States v. Aetna and Humana, just as it did with the ongoing Anthem case that began on November 21. While the political allusion in Anthem centered around the fate of the Affordable Care Act, a minor part of the case, the main subject of the Aetna trial will be tightly bound to current politics. And based on what we know about how Aetna is approaching its case, there could be a sense of dramatic irony in the courtroom.

 

Medicare, the relevant market, has been in the news non-stop since Donald Trump named Tom Price as his choice for HHS Secretary and tapped Seema Verma to head CMS. Both Price and Verma want to roll back Medicare benefits and make seniors pay more, overall restricting access to affordable health care for our seniors. 

 

The market in question in the merger of Aetna and Humana is Medicare, and more specifically Medicare Advantage. Medicare Advantage (“MA”) is a streamlined type of health plan that includes more features and is often cheaper than Original Medicare. MA is purchased from private insurance companies like Aetna and Humana. The recent political appointments in this policy area are concerning because they could cause Original Medicare to become either much less affordable or to disappear entirely. Instead, seniors would receive a voucher to spend with a company like Aetna that would cover some of the cost of care.

 

There is a long and clear history about what happens when big companies merge in already-crowded markets. Prices go up, quality goes down, and for health care, access is restricted. Aetna has made it a key part of their case that Medicare Advantage is not a distinct market, but rather, part of a market that includes Original Medicare. That distinction means that the market is less concentrated and consumers have a reasonable alternative, thus constraining Aetna's ability to raise prices. Current political will could present an existential threat to this argument. One thing to watch for tomorrow is whether the DOJ attorney mentions the uncertain fate of Medicare in presenting their case.

 

The way the case will be argued by both sides is pretty much already set due to evidence guidelines, however, there will certainly be an elephant in the room (pardon the GOP pun). Aetna will try to show over and again that Original Medicare is a suitable substitute for Medicare Advantage. Since merger trials are a fight over who has the best approximation of the future, it will be interesting watching Aetna try to continue with this line of argument in the current political climate.

 

Medicare is one of the signature achievements of the 20th Century. It’s upsetting to know that it could be deeply undermined in the near future. But one way to mitigate the damage is by making sure that if seniors have to turn to the market, that it is a healthy marketplace with robust competition and fair prices. Aetna and Humana have proposed divestitures that are simply unacceptable for our nation’s seniors. The only way to keep our seniors’ health care safe in this situation is to block the merger of Aetna and Humana.

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