Red and Blue and Keeping Corporations from Screwing You

The states stepping up to reign in the monopolists controlling our healthcare

Welcome to You’re Probably Getting Screwed, a weekly newsletter and video series from J.D. Scholten and Justin Stofferahn about the Second Gilded Age and the ways economic concentration is putting politics and profits over working people.

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While Congress is poised to kick millions off of Medicaid, states are taking on some of the toughest fights in healthcare. Just this year two very different states have enacted groundbreaking laws to reign in monopolists like CVS Health and UnitedHealth Group (UHG) that are a key reason healthcare system is so dysfunctional and expensive. It is a reminder of the power states have to tackle some of our biggest challenges from healthcare conglomerates to agribusiness to Big Tech.

Lets start in Arkansas, a ruby red state where Republicans control 110 of 135 legislative seats and President Trump’s former press secretary Sarah Huckabee Sanders is the governor. Earlier this year Arkansas took a major step to reign in the abuses of pharmacy benefit managers (PBMs), which are middlemen in the healthcare system that manage pharmacy benefits.

Originally created as a way to negotiate lower drug prices for patients, just three PBMs (CVS Caremark, Express Scripts and OptumRx) now fulfill about 80% of prescriptions in the US and the six largest control nearly 95% of the market. In addition to that immense market power, PBMs have become vertically integrated behemoths (see below) with their own affiliated pharmacies and parent companies that manage insurance firms and healthcare clinics.

CVS Caremark is one such example. The PBM is owned by CVS Health which also owns the nation’s largest retail pharmacy chain and the health insurance giant Aetna which covers 22 million Americans. This means that while Caremark is determining what drugs get covered and the amount your community pharmacy gets reimbursed for filling a prescription, it simultaneously owns a massive network of competing pharmacies.

In addition to low reimbursement rates, Caremark steers patients to its chain locations and forces unfair take-it-or-leave-it contracts onto pharmacies that include excessive and unnecessary fees. Arkansas legislators identified this obvious conflict and took an important step to end it by passing legislation that prohibits a PBM from owning pharmacies in Arkansas. Predictably, CVS is now making threats as well as litigating the new law as well, but in an interview with the Daily Wire Governor Sanders called their bluff.

“We have a number of other pharmacies that I know will be happy to step up and take CVS’s place if they decide to take their ball and go home.”

Now lets turn to Oregon, a blue state where Democrats control 54 of 90 legislative seats and Democrat Governor Tina Kotek just signed into law the nation’s strictest regulations on private and corporate control of medical practices. Private equity investors and corporate conglomerates such as UHG, have been exploiting loopholes in Oregon’s current laws meant to prevent undue corporate influence in healthcare. Optum, which is owned by UnitedHealth Group, has been the face of this behavior. In 2020 Optum (a different part of UHG than OptumRx their PBM) took over the Oregon Medical Group in Eugene, which lead to pay cuts and understaffing, ultimately resulting in physicians leaving the company. This exodus was exacerbated by the non-compete clauses Optum had required doctors to sign, which has left patients with significantly less access to the care they need.

Source: Physicians Advocacy Institute

It’s just a snapshot of a nationwide trend that is decimating the ranks of independent physicians, particular in rural areas (see map below). More broadly, from nursing homes to hospitals to physician practices, rollups of providers by private equity have been accelerating and studies find they lead to higher costs and lower quality of care. Oregon’s “corporate practice of medicine” law technically is meant to prohibit this kind of situation by requiring that doctors hold at least a 51% stake in most medical practices, but firms have started to employ their own doctors that become the owner on paper while using a management company to actually run the provider.

Oregon’s new law extends physician-ownership requirements to a broader set of business structures such as LLCs. It also addresses those management companies by requiring that physicians maintain control over clinical and business decisions such as staffing levels and patient volume. The law also prohibits noncompete agreements for doctors looking to take a job at a different practice.

Two states. One red. The other blue. Both taking on some of the most powerful actors in our healthcare system. While Congress debates ways to make healthcare worse, states can help build a system that puts patients over profits and there is no reason it cannot happen everywhere.

Call your legislator today!

YOU’RE PROBABLY (ALSO) GETTING SCREWED BY:

Surveillance Pricing

Trump’s Tariffs

Groundwork Collaborative has a published a summary of the various impacts of the Trump Administration’s trade wars titled “Economy Slips, Americans Pay: Fallout from Trump’s Tariffs Deepens.”

The FTC

While the Federal Trade Commission is dropping lawsuits against corporate monopolies, they have now officially lost one of its best commissioners. Alvaro Bedoya, who was one of the two Democrats President Trump fired, has officially resigned. His statement is worth a read.

Sweetheart Deals

We recently covered the Trump Administration’s lax approach to prosecuting corporate crime, including a settlement with Boeing. The American Economic Liberties Project released a statement on that settlement you should check out.

Billionaire Wealth

Americans for Tax Fairness came out with this:

One Big, Beautiful Bill

Justification for slashing the social safety net are built on falsehoods about low-income families according to Brigid Schulte and Haley Swenson of the Better Life Lab. In an op-ed in The Guardian they write:

Here’s the reality check: a majority of those receiving this aid who can work are already working. More than 70% of working-age people who receive nutrition benefits or Medicaid, the health insurance program for low-income children and adults that covers one in five Americans, are already working, according to the Government Accountability Office. Those who aren’t working, research shows, are mostly ill, disabled, caring for a family member, or in school.

DOGE Fraud

In an interview with NPR, former DOGE employee Sahil Lavingia says that the waste, fraud and abuse he was tasked with uncovering at the Department of Veterans Affairs was “relatively nonexistent.”

SOME GOOD NEWS

John Deere Must Face Trial

Federal Judge Iain Johnston ruled against a motion by agricultural equipment giant John Deere to dismiss the antitrust case the Federal Trade Commission and several states brought in January. That case alleges that Deere has monopolized the market for repair of its tractors and combines. Johnston, who is also overseeing a private class action lawsuit against Deere had quite an entertaining summary of his decision.

Speaking of right to repair, former Iowa farmer Sean Dengler has written about his experiences here and here.

Minnesota Defends Noncompete Ban

In 2023 Minnesota became the fourth state with a broad ban on noncompetes. As Pat Garofalo recently wrote about, the state’s largest corporations made rolling back that ban a top priority this session. With the conclusion this week of a one-day special session to complete passage of a state budget, Democrats were able to kill the effort for this year. State Representative Emma Greenman’s comments several weeks ago on the importance of the ban to protecting worker freedom are worth a listen.

BEFORE YOU GO

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Break ‘Em Up,

Justin Stofferahn