Abstract
This year the Antitrust Division of the U.S. Department of Justice litigated an unprecedented number of cases. Two mergers, Anthem with Cigna and Aetna with Humana, threatened to dramatically alter the face of commercial health insurance. The Anthem case raised questions of how to evaluate a claim that competition costs billions annually in potential medical cost savings. The Aetna case raised questions of how commercial insurers compete against the public programs—specifically Medicare. The Division also litigated numerous other civil matters including a proposed merger of nuclear waste disposal facilities. In that case, economists had to explore the scope and bounds of competition within a variety of regulatory regimes. And, in a merger of two new technologies that improve the efficiency of planting seeds, the emerging nature of the market led to interesting variations in the analysis. This overview of the economic issues in these particular cases is intended to provide insights into the challenges of enforcing antitrust law and the way in which economic analysis in particular is used to address those challenges.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
See Wall Street Journal July 24, 12015, “Anthem Agrees to Buy Cigna for $48.4 Billion”.
See pp. 3–9 of the Complaint (available at https://www.justice.gov/atr/case/us-and-plaintiff-states-v-anthem-inc-and-cigna-corp) for a more detailed discussion of the commercial health insurance industry and the roles of Anthem and Cigna within it.
See U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (2010), section 10. Hereafter, Horizontal Merger Guidelines.
For these kinds of contracts, the insurance company is primarily providing access to the insurer’s contractual network of healthcare providers and to its administrative services and expertise.
See U.S. and Plaintiff States v. Anthem, Inc. and Cigna Corp. Memorandum Opinion (available at https://www.justice.gov/atr/case/us-and-plaintiff-states-v-anthem-inc-and-cigna-corp and hereafter Anthem Opinion) p. 114 for a discussion of this and other evidence on which the court relied in deciding that Anthem had failed to prove that its prediction of efficiencies was credible.
Anthem Opinion, p. 112.
The appellate opinion can be found at https://www.justice.gov/atr/case/us-and-plaintiff-states-v-anthem-inc-and-cigna-corp.
See pp. 4–5 of the Complaint in U.S. and Plaintiff States v. Aetna Inc., and Humana Inc. (the Complaint and other materials from the case are available at https://www.justice.gov/atr/case/us-and-plaintiff-states-v-aetna-inc-and-humana-inc) for a more detailed discussion of the two companies and their Medicare Advantage products.
U.S. and Plaintiff States v. Aetna, Inc. and Humana Inc. Memorandum Opinion (hereafter Aetna Opinion) p. 34.
Aetna Opinion p. 43.
More information on this case can be found at https://www.justice.gov/atr/case/us-v-energy-solutions-inc-et-al and https://www.justice.gov/opa/pr/us-district-court-blocks-energysolutions-acquisition-waste-control-specialists.
We should note that LLRW is the waste that is suitable for commercial disposal. It does not include the spent fuel from nuclear reactors or components of the cores of decommissioned nuclear reactors, for example. It does include a great deal of material that gets exposed to radiation—everything from filters that are integral to operating the plant to the soil around a decommissioned facility. As a result, nuclear facilities generate substantial amounts of LLRW and pay significant sums every year to ensure that the LLRW is disposed of safely.
U.S. v. Energy Solutions, Inc., et al. Memorandum Opinion, pp. 17–18. Available at https://www.justice.gov/atr/case-document/file/1007831/download. Hereafter Energy Solutions Opinion.
Energy Solutions Opinion, pp. 22–23.
Energy Solutions Opinion, p. 25.
Energy Solutions Opinion, pp. 35, 38.
Energy Solutions Opinion, p. 37.
Specifically, defendants did not show that—but for the sale to their competitor—the assets would exit the industry: that no other potential buyer would continue to operate them. While they had made some efforts to seek such a buyer, the court deemed those insufficient to support the conclusion (Energy Solutions Opinion, pp. 49–51).
Energy Solutions Opinion, pp. 34–38.
Energy Solutions Opinion, pp. 41–43.
Even if the market had somehow achieved equilibrium from its first sales, one might still wonder if the data from only one or two cycles of sales could accurately identify key parameters. The coincidence of depressed agricultural markets in these years would make the limited period of data particularly challenging.
References
Atherly, A., et al. (2004). The effect of benefits, premiums, and health risk on health plan choice in the medicare program. Health Services Research, 39(4), 847–864.
Curto, V. et al. (2015). Can health insurance competition work? Evidence from medicare advantage. Working paper, pp. 1–48.
Dafny, L., & Dranove, D. (2008). Do report cards tell consumers anything they don’t already know? The case of Medicare HMOs. RAND Journal of Economics, 39(3), 790–821.
Dunn, A. (2010). The value of coverage in the medicare advantage insurance market. Journal of Health Economics, 29(6), 839–855.
Hall, A. E. (2011). Measuring the return on government spending on the medicare managed care program. B.E. Journal of Economic Analysis and Policy, 11(2), 1–41.
Shapiro, C. (1996). Mergers with differentiated products. Antitrust, 10, 23–30.
Town, R., & Liu, S. (2003). The welfare impact of Medicare HMOs. RAND Journal of Economics, 34(4), 719–736.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Gerstle, A.D., Knudsen, H.C., Lee, J.K. et al. Economics at the Antitrust Division 2016–2017: Healthcare, Nuclear Waste, and Agriculture. Rev Ind Organ 51, 515–528 (2017). https://doi.org/10.1007/s11151-017-9599-3
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11151-017-9599-3