Aetna trial day 11: what you need to know
The two witnesses today were Rajiv Gokhale (Executive Vice President of Compass Lexicon LLC) and Jonathan Orszag (Senior Managing Director at Compass Lexicon LLC).Gokhale focused on the efficiencies that would result from the merger, and Orszag stressed that the merger would not harm competition. Gokhale was not very convincing; Orszag seemed much more competent.
Gokhale, in response to defense questioning, claimed that substantial efficiencies would result from the Aetna-Humana merger. PSG savings would include $421 million for Medicare and $137 million for commercial insurance, and about $500 million in medical cost efficiencies would be merger specific.
Judge Bates interjected a couple of times to ask questions, and pointed out that he was assuming that the information given to him by Aetna and Humana lawyers (on which he based his analysis) was correct. Gokhale said yes, but said he thought the information was reliable because it would be used in other contexts.
Gokhale also claimed that Aetna had learned from previous mergers (like Coventry) and it would take its knowledge, apply it to Humana, and help reduce costs. DOJ responded by pointing out that Gokhale hadn't check the raw data, prices, contracts, or actual documents in many cases. They did an effective job of damaging his credibility, and Judge Bates remarked that Gokhale was speculating.
The next witness, Jonathan Orszag, asserted that the merger would not harm competition on public exchanges or in MA. He said that Aetna has already exited the exchanges, and that Humana has raised its prices so much on the exchanges that it won't be a significant competitor come 2017. The exchanges were unprofitable, risky, and unstable.
He also testified that MA competition would not be harmed because MA and traditional Medicare were the same product market. The government is a regulator, competitor, and subsidizer, documents say that Medicare and MA compete, and in his analysis, MA did not pass the hypothetical monopolist test.