search

There’s More To Plan Mergers

posted by Joe Miller

on September 1, 2015

A lot has been said about health care consolidation, and it’s time to sort through a central misperception about health plan mergers. Let’s start with Medicare Advantage.

Medicare Advantage is designed to bring private sector competition to Medicare to deliver better value and greater choice for beneficiaries. That is why last week’s report from the Commonwealth Fund painted a misleading picture of competition in this market. The report was based on a deeply flawed premise – that competition in Medicare Advantage can be measured by concentration statistics.

This static view of competition is inaccurate and unrealistic – it simply fails to capture how competition actually works in this market. It ignores the dynamics of competitive bidding, including how new entry or expansion year to year can make last year’s market shares meaningless.  The report also overlooked the government’s ability to alter terms of bidding and competition directly, a huge factor that impacts plan’s ability to offer coverage in certain areas.

That’s why concentration statistics alone don’t justify the debate on whether sufficient competition exists in the health insurance space. In fact, if understanding competition in Medicare Advantage markets could be understood through concentration levels alone, the agencies could replicate the study and be done in a few hours.  There’s more to it than that.

Federal anti-trust review will consider how a transaction may benefit consumers, including the potential for enhanced care coordination and improved customer service. Take it from health economist Victor Fuchs and Covered California Executive Director Peter Lee, who touted the many advantages of health plan mergers on care delivery in their Wall Street Journal op-ed. They noted that “large insurance companies can make a major contribution to health-care costs by fostering changes in how health care is paid for and delivered. Many insurers are organizing or contracting with Accountable Care Organizations that provide care for a defined population for a fixed annual fee, or with penalties and rewards linked to the quality and cost of care provided.”

Health plans operate in a highly competitive regulatory environment – at the state and federal level – where they need to demonstrate their value every day to consumers in their local communities. Health plans are in the business of delivering high-quality, affordable care to patients, and that will continue to be the goal moving forward.