Consolidation has been in the news a lot lately. Kroger and Albertsons(opens in new tab) are merging. Rite Aid bought out local Seattle drugstore Bartell’s(opens in new tab). And CVS bought Aetna for $69 billion(opens in new tab) in 2018. These mergers may be in different industries, but they all share a common cause: There’s big money to be made for corporations.
That’s not what these corporations’ PR teams would like us to think, though: Mega chains assure us(opens in new tab) that by buying up and merging with other companies, they can improve access and keep prices low. Unfortunately, that’s not the reality. Over and over again, we’ve seen consolidations lead to higher prices, less access, and worse experiences for everyday people.
And we’re watching the consequences of big mergers here in Washington state – this time with dangerous implications for people’s health. As we write, health care industry giant Optum is threatening to drop 23,000 Medicaid patients(opens in new tab) here in Washington unless UnitedHealthCare agrees to pay their new rates by November 1st.
You might remember Optum from their notorious takeover of the Seattle Polyclinic in 2018 and the Everett Clinic in 2019. Following those acquisitions, Optum laid off more than 65 employees(opens in new tab) and got a legal green light to start charging 50% higher prices(opens in new tab), despite Optum’s assurances they’d prioritize doctor-owned practices and improve access to care.
And this bullying behavior for higher prices isn’t an empty threat. Optum has already terminated contracts(opens in new tab) with Regence and Aetna’s Medicare Advantage plans in 2023 after Optum demanded a 14.75% rate increase(opens in new tab) (and didn’t get it). But as much as Optum has been a bad actor, it’s not just them: Providence, another health care giant, is currently threatening to drop 35,000 Aetna patients(opens in new tab) if they can’t reach a new contract soon.
These companies would like you to believe that they have no choice but to raise prices. But that’s simply not the case. As of July, Optum led its parent company UnitedHealth Group to a nearly $6 billion revenue increase(opens in new tab) year over year, contributing to companywide earnings of $98.9 billion (billion with a “b”!) in just three months. At the end of the past fiscal year(opens in new tab), health care at Optum clinics worldwide brought in over $95 billion. In the second quarter of 2023, Optum saw its revenue per customer grew by 33%.
This is a prime example of vertical consolidation – when one company owns pieces all up and down the supply chain. Optum now owns its own primary care clinics, pharmacy benefit managers, and even its own bank! Vertical consolidation(opens in new tab) can lead to record profits for companies, decreased market competition, and increased prices for consumers. It’s certainly led to increased compensation for its CEO: Optum’s parent company UnitedHealth Group CEO Andrew Witty received $18.4 million in total compensation(opens in new tab) in 2021.
But it hasn’t led to a decrease in costs for patients. Health care prices in Washington have skyrocketed in past years. In a recent statewide survey of over 1,000 Washingtonians, a third of respondents had medical debt. More than half (57%) said they have avoided seeking medical care in the last year due to cost. 88% reported being worried about affording their health care in the future. And premiums(opens in new tab) and cost-sharing(opens in new tab) go up year after year.
The truth is, Optum and other mega giants are buying up our health care system – and patients are paying the price. So what can we do about it?
EOI has been at the forefront of holding health care industry giants accountable in Washington state. We championed the Keep Our Care Act, a bill to prevent harmful mergers and acquisitions, which very nearly passed last session. In 2023, we helped bring a bill to stop anti-competitive contracting practices (SB 5393(opens in new tab)). And we’ve been pushing for enforcement mechanisms(opens in new tab) to strengthen our Health Care Cost Transparency Board.
Slowly but surely, we are starting to turn the tables. We worked with labor partners last year to pass a bill(opens in new tab) requiring hospitals to keep their frontline health care workers safe. We helped pass the Balance Billing Protection Act(opens in new tab), added protections for patients needing ground ambulance services, and partnered with coalition members to create the Prescription Drug Affordability Board.
We’ve got more solutions up our sleeves for the 2025 legislative session – but we need your help! Join us.(opens in new tab) It’s time we stop treating health care as a cash cow.