Posted on April 2, 1996

Statement of Dr. Susan Steigerwalt on the Merger of AETNA and U.S. Health Care


April, 1996

"The proposed merger of insurance giants Aetna Life and U.S. Healthcare will create an entity that controls access to health care for one in every 12 Americans. This merger provides further evidence of a race towards oligopoly in our health care system, by firms organized to value shareholder profits over patient care.

"Aetna knows that U.S. Healthcare has the proven formula for recouping their purchase price of $8.9 billion, nearly $3,200 per patient. U.S. Healthcare rewards doctors for giving skimpy care and penalizes them for referring patients to specialists, emergency rooms or hospitals. They've generated higher profits in 1995 than nearly any other for-profit HMO. What Aetna is getting for this immense sum is not hospitals, clinics, or other tangible facilities, but the exclusive right to control and profit from the relationship between patients and the health system.

"The track record of these giant for-profit firms bodes ill for patient care. In 1994, U.S. Healthcare took 25% out of every premium dollar for its outrageous CEO salaries, profits, and bureaucracy. U.S. Healthcare CEO Leonard Abramson made $20 million in cash and stock options in a single year. Meanwhile, until a public scandal recently forced U.S. Healthcare to change their policy, they forbade any criticism of their plans by physicians (the so-called "gag clauses"). But even without gag clauses, U.S. Healthcare retains the right to fire any physician without cause.

"As revealed in an editorial in the New England Journal of Medicine by PNHP co founders, Drs. David Himmelstein and Steffie Woolhandler (Extreme Risk: The New Corporate Proposition for Physicians, December 12, 1995), U.S.Healthcare places almost all of the financial risk for patient care on its physicians. Pitting patient interests against the doctors, U.S. Healthcare pays a primary care physician with 1500 patients a net income as low as $0 or as high as $150,000 depending on how willing he or she is to meet their rock bottom standards on use of hospitals, emergency rooms, and specialty visits. Meanwhile, "gag clauses" keep hapless patients in the dark.

"Aetna also has shown its willingness to lower costs by lowering quality of care. Aetna once fired their own "primary care physician of the month" when he exceeded Aetna's cost per patient guidelines a few months later.

"We call the Aetna-U.S. Healthcare way of paying physicians `fee-for-non-service,' but paying physicians to withold care is not simply the opposite of Aetna's old fee-for-service system; it's the mirror image of illegal kickback schemes that reward doctors for referring patients to health services in which they have a financial interest. Unbeknownst to their patients, Aetna and U.S. Healthcare doctors get a kickback from the HMO for denying care.

"Under the guise of letting the marketplace work and increasing competition in the health industry, we are galloping towards an oligopoly in which a handful of companies will control everyone's access to health care. If this merger-mania continues, Americans will soon have their health care options limited to a choice between McDonalds and Burger King. With the Republican Congress planning to open up the Medicare program to corporate raiding by for-profit HMOs, giant HMOs such as Aetna will reap a windfall.

"U.S. Healthcare's founder and Chairman, Leonard Abramson and his family will make nearly $1 billion in profit from the merger, money that could and should be going into direct patient care, including care for the uninsured.

"Corporate consolidation is undermining our nation's health status. We propose an alternative that restores patient care as our highest priority: a not-for-profit system of single payer national health insurance."