Court

This morning, California Attorney General Xavier Becerra and Petris Center Director Dr. Richard Scheffler held a press conference to release a new report by the Petris Center. The report, entitled “Consolidation in California’s Health Care Market 2010-2016: Impact on Prices and ACA Premiums,” shows the rapid and considerable consolidation of hospital, physician, and health care insurance markets across the state. It provides evidence that these highly concentrated markets are associated with higher healthcare costs for consumers – including that healthcare prices can cost up to 30% more in Northern California than in Southern California, even after adjusting for the Bay Area’s higher cost of living and wages. During the press conference, Attorney General Becerra announced his office’s intentions to review the report closely and work with Dr. Scheffler and the Petris Center to probe deeper into the issue of healthcare market concentration in CA.

You can read the full Petris Center report here.

You can listen to the full audio of the press conference with Attorney General Becerra and Dr. Scheffler here.

This week, thirty-three of the most prominent economists in America with expertise in the subjects of antitrust, competition, and health economics, including Dr. Scheffler, filed an amicus brief with the Seventh Circuit of the US Court of Appeals regarding the case Federal Trade Commission v. Advocate Health Network. This case is an effort by the FTC to block the merger of Advocate Health Care Network and NorthShore University HealthSystem, two leading providers of general acute care inpatient hospital services in the North Shore area of Chicago, and is one of the FTC’s latest efforts in regulating hospital mergers. These efforts were blocked by a district court in June, with the FTC now appealing.

In the brief, the thirty-three economists state that the analysis and conclusions the district court used in this case was based upon faulty economic reasoning, particularly as it relates to geographic market definition. In the brief, they explain that the district court “relied upon outdated economic methodologies that have been thoroughly studied and discredited by academic economists as well as the courts over the past 10 to 15 years. Thus, the district court erred by using a repudiated economic approach and by failing to evaluate the FTC’s proposed relevant geographic market by an appropriate economic standard.” Therefore, the economists submit that the ruling should be reversed and the matter remanded so that the evidence can be evaluated under a proper economic standard.

The full brief can be read here.

The background of the case can be found here and here.

Twenty economists with expertise in the subjects of antitrust, competition policy, and health economics, including Dr. Scheffler, submitted a public letter to Florida Attorney General Pam Bondi on July 8th. The letter addressed the economists’ concern that the Florida Office of Insurance Regulation (OIR)’s recent decision to approve the Aetna-Humana merger is based on an erroneous belief that Medicare Advantage (MA) is in the same relevant product market as traditional fee-for-service Medicare (TM). Based on the commercial realities of the market and on scientific evidence from economic research, the twenty economists believe that the MA is not in the same relevant market as TM and, therefore, that the merger will cause a serious increase in concentration that raises a competitive concern.

You can read the full letter here.

Announced on June 16th, California Insurance Commissioner Dave Jones has urged the U.S. Department of Justice to block the merger deal between Anthem, Inc., and Cigna Corporation. After an extensive review of the Anthem and Cigna merger, including expert testimony from Dr. Scheffler and Dr. Fulton, Commissioner Jones issued detailed findings that the merger of the second and fourth largest national health insurers is anti-competitive and will harm California consumers, businesses, and the California health insurance market. This marks the first instance of an insurance regulator opposing the merger of Anthem and Cigna.

Full details of the California Department of Insurance’s decision can be read here. The full letter from the California Department of Insurance to the DOJ, which cites the research done by Drs. Scheffler and Fulton, can be read here.

On March 29th, Dr. Fulton provided testimony to the California Department of Insurance on the proposed Anthem Inc. – Cigna Corp. merger, discussing the potential impact of a merger on the market, including on health insurance premiums.

Dr. Fulton’s testimony was covered by California HealthLine, who wrote:

Brent Fulton, a professor of health economics and policy at UC Berkeley, presented an analysis on the Anthem and Cigna merger at the request of the Department of Insurance.

Theoretically, Fulton said, consolidation could lead to stronger negotiating leverage with hospitals, physician organizations and other providers of health care services that now hold market power, resulting in lower costs for health insurance customers.

“However, we are not aware of any peer-reviewed studies that have found that higher insurer market concentration has led to lower health insurance premiums,” Fulton said.

The full California HealthLine article can be read here.

The full video of the hearing can be found here, with Dr. Fulton’s testimony beginning at 1 hours and 56 minutes.

In January, Dr. Scheffler and Dr. Fulton testified in Sacremento in front of the California Department of Insurance at the hearing on the proposed Health Net-Centene merger. Drs. Scheffler and Fulton discussed the potential impact of the merger on market competition.

The full video of the testimony can be viewed here.