Don’t Forget the Patients
When an obscure group of economists and health consultants led by Paul Ellwood and Alain Enthoven pioneered managed care in the early 1970s, they warned that the free market would be able to hammer down health costs only if the government set basic ground rules to ensure vigorous competition. One of the key reasons healthcare costs are now soaring by an unsustainable 15% a year is that such rules -- including a prohibition on “cherry-picking” the healthiest customers -- remain nonexistent or unenforced in most states.
That’s why California Assembly Speaker Fabian Nunez (D-Los Angeles) deserves credit for forming a special committee to examine the proposed $15.5-billion acquisition of WellPoint Health Networks, which owns Blue Cross of California, by Indianapolis-based Anthem Inc. The merger would create a managed-care giant with 26 million customers in 13 states. Blue Cross alone has 7 million Californians. WellPoint’s takeover by Anthem, which federal prosecutors have accused of anti-competitive practices in Indiana, needs state oversight.
At a public hearing slated for next week, Assembly members should ask hard questions, such as:
* Will the stock options awarded to company executives after the merger (which the Indianapolis Star estimates could yield WellPoint CEO Leonard Schaeffer up to $194 million) hike premiums or even undermine the solvency of the company?
* How does Anthem plan to change Blue Cross’ network of doctors and hospitals and list of approved drugs, and will these changes comply with state law requiring insurers to make medically necessary services “readily accessible to all enrollees”?
* What is Anthem’s response to federal prosecutors’ recent allegation that in Indiana the company struck deals with hospitals that shut out competing insurers?
* Will Anthem continue to serve the Medi-Cal patients that Blue Cross now treats?
California’s 1975 Knox-Keene Act goes further than most state laws in laying out managed-care ground rules. Some of it may go too far -- one provision requires that medical decisions be “unhindered by fiscal and administrative management,” an example of 1970s-style overreaching. But it gives legislators like Nunez ample authority to scrutinize deals like the one between WellPoint and Anthem. Given healthcare consolidation (just 10 companies cover more than half of all Americans with health insurance), such scrutiny is more necessary than ever.
