Google the name Andrew Carnegie, and you'll probably get a definition that heralds the Scottish-American as one of America's fathers of industry. Carnegie founded US Steel, but it wasn't his knowledge of how to make durable metal that led to his success — it was the idea of lateral integration.
Rather than outsource the transportation and reselling of his steel, Carnegie built new businesses that could do those jobs. Since then, the concept has been adopted by giants of industry in nearly every discipline, and most recently with the insurance industry’s push to begin offering health care services.
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In today’s system, your insurance company might provide you with a list of in-network doctors and let you decide where to go for care. After your visit, the insurer disburses payment and subsequently picks up the tab for any medication you might need that is covered by your plan.
But what if the insurer owned the hospital and the pharmacy? That is beginning to look like a likely scenario in the near future, after CVS pharmacy’s purchase of insurance giant Aetna and other deals like insurer Cigna’s purchase of Express Scripts, a company that oversees benefits distribution for upwards of 80 million Americans.
Conflict of Interest?
The thinking behind this lateral expansion is the same as with any — owning the business allows you to cut costs. Currently, hospitals and pharmacies negotiate drug prices with insurance companies.
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However, were a single company to own the insurance and treatment businesses, there would be no need for negotiation. That saves time and money, and the savings should hypothetically be expressed in the ultimate cost to patients.
Anytime that such major lateral integration occurs, the Justice Department must take notice. There has already been talk of potential anti-trust lawsuits swirling around the Cigna/Express scripts deal.
The question is: Can consumers trust insurers to provide them the best care?
Maximizing profits and caring for the ill are two very different prerogatives. Allowing insurers to become too large and powerful could eliminate options for patients, leaving them with no option but to accept the care available from a small number of super-providers.
This type of scenario is the reason a judge struck down the $37 million Aetna/Humana merger proposed in 2017.
Is Integration in the Future for American Health Care?
Many Americans believe that a single-payer system could provide a cure for the awkward, half-crippled form of Obamacare we’re currently living with. For a GOP hell-bent on smearing any and all remnants of the Obama legacy, removal of the individual mandate was only the first step.
Unfortunately for Americans, the outcome is that they have to live under a debilitated system while politicians make an example of them.
One train of thought suggests that yes, larger, more capable insurers could potentially offer health services to individuals at lower prices than are currently available. But that’s only if you believe that insurers can be trusted with the responsibility of forfeiting higher profits for the good of the people.
And if we’re being honest… who could believe that?