For the past several days, Democrats have acted in a state of self-righteous indignation excessive even by their standards. Following Donald Trump’s recent statement that he was considering alternatives to Obamacare, the left has resorted to high dudgeon over the supposed threat to “terminate” Americans’ health coverage should Trump win the White House next year.
Let us stipulate that the imprecise nature of the former president’s statements amounted to giving his opponents a bludgeon with which to beat him over the head ad nauseam. That said, news that broke a few days later, about a(nother) proposed merger between two of the nation’s largest health insurers, provides further evidence that, as Trump claimed in a follow-up social media post, “Obamacare sucks.”
Law Fueled Mergers and Consolidation
Trump made his original comments over the Thanksgiving weekend in response to a Wall Street Journal editorial discussing how the law has helped raise health care costs. The Journal editorial cited a letter that Sens. Elizabeth Warren, D-Mass., and Mike Braun, R-Ind., sent to the Department of Health and Human Services’ inspector general just before the holiday.
The letter cited previous reporting that exposed how some insurers have charged patients inflated prices for generic drugs that should have cheap price tags. Even when insurance covers these drugs, higher prices mean that patients pay more — first, because (for instance) 10 percent co-insurance on a $200 drug is more than 10 percent co-insurance on a $20 drug, and second, because higher costs to insurers ultimately mean higher premiums for patients.
The Warren-Braun letter noted that large insurers that also own pharmaceutical benefit managers (PBMs) have a financial incentive to charge higher prices for cheap generic drugs. By so doing, they can shift profits from their insurance business to their pharmacy business, and circumvent federal medical loss ratio (MLR) requirements that mandate insurers spend a certain percentage of every premium dollar on medical claims, as opposed to administrative overhead and profit.
Warren wrote that “insurance companies are exploiting loopholes in the law” through this practice, and then noted that “just a year after the MLR requirement was put in place,” UnitedHealth Group, the nation’s largest insurer, started buying up physician practices and a PBM to boot. But she didn’t mention the name of the law that created the medical loss ratio requirement and those supposed “loopholes” she denounced.
The law is called Obamacare. And Warren’s letter admits that the law has been driving consolidation within the health care sector that is raising prices for consumers. In fact, the letter even cites a (progressive) Substack post whose title says the quiet part out loud: “How Obamacare Created Big Medicine.”
‘Big Medicine’ Wants to Get Even Bigger
Into that equation came news that major insurers Cigna and Humana are engaged in talks about a possible merger. Here’s how The Wall Street Journal, which broke the news, described the potential combination:
Joining forces would give the pair scale to rival that of UnitedHealth Group and CVS Health and vault the combined company into the top tier of integrated healthcare firms. Cigna, which had revenue of about $181 billion last year, would be able to marry its huge pharmacy-benefit unit, which manages drug plans, and its strength in commercial insurance with Humana’s big position in the fast-growing Medicare segment, something Cigna has long sought.
In other words, it’s about one company with a “huge” PBM combining with another company with a “big position in the fast-growing Medicare segment.”
The Journal article also chronicles some of the other mergers and consolidations, both proposed and actual, that have taken place in health care since Obamacare’s passage, including each company’s expanding home health and primary care businesses.
“Cigna and Humana previously explored merging in 2015, but Humana instead struck a deal with another rival, Aetna, that was blocked by a judge on antitrust grounds, leaving Aetna to be scooped up by CVS in 2018,” WSJ wrote, adding that another potential deal that died to antitrust concerns was the merger of Cigna and Anthem, now called Elevance Health.
All of these examples constitute instances of “Big Medicine” trying to get even bigger, buying up competitors to gain market share, and ultimately command higher prices. Except for a few antitrust rulings cited above, the strategy has by and large worked, leading to a series of oligopolies across the sector that rarely compete in the true sense of the word.
Conservatives Need to Engage
By sending her letter a few weeks ago, even Warren admitted that, as Trump put it, “Obamacare sucks,” and is raising prices for consumers. But it will require more than sloganeering in social media posts to 1) outline the problems with the law and 2) make the positive case for better alternatives than the expensive health care oligopolies patients currently get stuck with.
Notwithstanding the fact that the big-government Obamacare law helped cause our current mess, Warren has her solution ready — yet more government. The real question is, can conservatives muster an argument and an alternative?
