“Our aim is not to do away with corporations; on the contrary, these big aggregations are an inevitable development of modern industrialism. We are not hostile to them; we are merely determined that they shall be so handled as to subserve the public good. We draw the line against misconduct, not against wealth.”
—President Theodore Roosevelt, 1902 State of the Union

The consolidation of healthcare insurance and providers harkens back to the Teddy Roosevelt era
The essence of capitalism is our endeavor for individual prosperity. Corporate freedoms guaranteed by our country permit the acquisition of significant wealth, incentivizing its citizens to work harder to achieve the freedoms that this wealth provides. The proper functioning of American capitalism requires price negotiation and the freedom to operate.

Few would criticize these assertions, which are as intrinsic to our society as the Constitution. Further, few would disagree with the logic that mergers between companies, increasing their size and production value yet maintaining market share competition, may be as fruitful to those institutions as to their consumers. However, when the size of such companies and the scale of these mergers becomes so large and so dominant as to provide clear price and resource control to the dominant business, we have advanced away from capitalism and transcended to demi-mercantilism.

President Theodore Roosevelt was known as the original trust buster not because of some anti-business zeal, but due to his belief that business practices were either economically right or wrong. There was no such thing as a transactional gray area. With preexisting laws providing no help, Mr. Roosevelt arrived at his judgement through his own personal moral compass. It is important to note that the McCarren-Ferguson Act was not passed until 1945 and the Sherman Antitrust Act, subject to the disposition of the administration, was never enforced.

In his opinion, good companies utilized resources to pass on both quality and pricepoint benefits to consumers. Bad companies used their economic advantages to price gouge and stagnate; their incentive to develop new thoughts and technologies was irrelevant to their economic advantage.

In our age, where moral compass appears to be as irrelevant to political standing as good business practices, perhaps it behooves all of us to ask: Would Mr. Roosevelt agree with what is going on? Would he approve of the current options for health care in America? The Affordable Care Act (ACA), a law meant to benefit consumers through “healthcare marketplaces” and by banning of exclusionary criteria, has been so obviously harried by the current administration that 51.3 percent of this nation’s counties have only a single choice for individual health insurance through the ACA. Would Mr. Roosevelt agree with health insurance providers’ purchases of hospital systems, pharmaceutical companies, and private practices large and small? Would he agree that this rapid reduction in competition, price negotiation, and collective leverage is good for the consumer?

A motivation for the original passage of the McCarran-Ferguson Act in 1945 was to formalize what up until then was an exploited loophole—insurance was an in-state matter, and therefore antitrust matters under state purview were not subject to federal legislation—in the Sherman Act’s antitrust protections. McCarran-Ferguson simply restated the reality—the right to regulate insurance on the state level.

However, the acquisition of pharmaceutical distributors and hospital systems by insurance companies has in my eyes changed the continued applicability of this law. Insurance companies are no longer simply insurance providers, but rather “healthcare permitters.” It is a visible and obvious vertical integration of multiple levels of healthcare provision, thereby bestowing upon insurance companies the right to control not just where the insured must be treated, but what drugs may be offered, what services may be covered, and what each level of care will cost. While we may hope that Mr. Roosevelt might view insurance companies as good corporations, their rising profits, accompanied by even faster policy rate hikes through the ACA, suggest these actions are not for the public good.

Perhaps what I find most startling is our government’s apathy toward the development of trusts the likes of which the robber barons at the turn of the 20th century could never dream. If we as a nation are content to treat health care as a right, then we must accept that insurance companies that do “badly” are manipulating a right and a public good, which is consummately illegal. Yet we see no reassertion of market competition, no independent state regulation, and minimal public outcry. The HR 372 bill, which revokes the freedom of insurance companies from federal antitrust legislation, was passed in the U.S. House of Representatives in a rare near-unanimous vote this past March. It is now mired, with no updates, at the Senate Judiciary Committee level.

Nearly every administration since Mr. Roosevelt’s has had an opportunity to reassert or work against the ideals of antitrust legislation and competition, including President John F. Kennedy with the steel industry and President Ronald Reagan with AT&T. My hope is that the current administration puts its stamp on economic competition with the same zeal as its predecessors. As it stands now, if health care is indeed a right, the current economic climate is disenfranchising this nation of its sacred enforcement.

Mitchell S. Fourman, MD, M.Phil, is an at-large member of the AAOS Resident Assembly Executive Committee and a member of the AAOS Resident Assembly Health Policy Committee.

References:

1. Zingales. “Towards a Political Theory of the Firm” The Journal of Economic Perspectives 2017;31(3):113-30)
2. O’Donnell, USA Today, 7/2/2017, viewed 2/4/2018
3. “HR 372- Competitive Health Insurance Reform Act of 2017” Congress.gov, accessed 2/4/2018 https://www.congress.gov/bill/115th-congress/house-bill/372
4. Rill and Turner, “Presidents Practicing AntiTrust: Where to Draw the Line?”. Antitrust Law Journal 2014;79)2:577-99