The Wall Street Journal reports Walmart in Early-Stage Acquisition Talks With Humana.
Walmart Inc. is in preliminary talks to buy insurer Humana Inc., according to people familiar with the matter, a deal that would mark a dramatic shift for the retail behemoth and the latest in a recent flurry of big deals in health-care services.
It isn’t clear what terms the companies may be discussing, and there is no guarantee they will strike a deal. If they do, the deal would be big: Humana currently has a market value of about $37 billion.
Should there be a deal—and should regulators and shareholders bless it—it would transform Walmart overnight into one of the nation’s largest health insurers. It would immerse the company in a complicated industry, one that continues to evolve eight years after the Affordable Care Act was enacted and as Washington remains deeply divided over health-care policy.
The talks come as health-service providers are rapidly pairing off and retailers—particularly pharmacy chains—are looking to diversify and bulk up in the face of the competitive threat from e-commerce giantAmazon.com Inc.
In December, CVS Health Corp. agreed to buy Humana rival Aetna Inc.in a $69 billion deal aimed at allowing the drugstore-chain to capture more of what consumers spend on health care. In March, health insurer Cigna Corp. agreed to buyExpress Scripts Holding Co. , the biggest administrator of prescription-drug benefits in the U.S., for $54 billion.
Walmart has a vast pharmacy business, with locations in most of its roughly 4,700 U.S. stores and in many of its Sam’s Club warehouse locations. Humana is a Medicare-focused insurer that could deepen Walmart’s relationship with a key demographic—seniors—at a time when the retailer is being threatened by Amazon on several fronts.
Humana, which had $53.8 billion in revenue last year, is the second-biggest provider of the private Medicare plans known as Medicare Advantage. Humana has about 17% of the Medicare Advantage market, according to a tally by analysts at Wells Fargo, with about 3.5 million participants. Medicare is viewed as a growth engine in the insurance industry, as the baby boomers age into the program.
Many of the biggest health insurers are pairing up with others outside their industry to create behemoths with a far larger role in the health-care sector after two attempted health-insurance mergers were blocked in early 2017 by courts on antitrust grounds: Aetna-Humana and Anthem Inc. -Cigna.
Good Idea?
My simple question has many possible answers. It does not explain what I am after.
Good idea for whom? Shareholders, bondholders, Consumers?
I am concerned about the consumer. If a merger would lower costs for the consumer, I wholeheartedly endorse the merger.
I believe it will, but I am not positive it will.
Going one step further, I would like to see Walmart start competing directly with doctors and hospitals for all kinds of non-emergency medical services.
It would not bother me one iota if Walmart operated as a bank, again assuming it would lower fees. ATM costs could drop quickly if we were to see such a move.
Walmart the Godsend?
Unlike many, I cheer Walmart and Amazon for bringing lower prices.
For example Barry Ritholtz moans How McDonald’s and Wal-Mart Became Welfare Queens.
American fast food workers receive more than $7 billion dollars in public assistance, says Ritholtz.
He resents those workers being partially subsidized. If Ritholtz would bother to think, he would understand that Walmart and McDonalds provide hundreds of thousands of jobs that would not otherwise exist at all.
Ritholtz’s “simple solution” is to hike the minimum wage. Of course the price of food at fast food restaurants, already ridiculously overpriced would have to rise even more. Fewer stores would be build and fewer people would be employed.
Not once I have seen or heard Ritholtz address the fact that the Fed is hell-bent on forcing up prices in a technologically deflationary world.
One-Way Titanium
Ritholtz perpetually provides superficial non-solutions with total disdain for the real economic problem.
The problem is not the lack of a minimum wage, but how far the dollar goes. I have pointed this out many times before, but Ritholtz has a mind encased in one-way titanium. Bad ideas transmit freely, but sound economic ideas cannot enter or leave.
Mike “Mish” Shedlock
“I would like to see Walmart start competing directly with doctors and hospitals for all kinds of non-emergency medical services.” They already do where I live, as there is a walk-up health clinic. I can have my kids’ ears checked for infections in 15 minutes, and fill the prescription before I leave the building.
“Unlike many, I cheer Walmart and Amazon for bringing lower prices.”
Then you should be cheering the Fed as well. The Fed makes it possible, esp in case of Amazon, to keep operating at losses by guaranteeing that the market is flooded with money that is used by speculators to keep “investing” in companies like that.
Walmart brings low prices. But the low prices have a high cost. Apart from being dependent on welfare, it destroys local businesses and entire communities wherever it goes. And that is because of the so-called free trade policies that bring in goods made in China with slave labor, political prison labor etc. while devastating the environment in their country.
You are cheering all of that because you are anti-worker, anti-American, anti-labor, and anti-union. That’s hardly surprising. Tell us something new. We already know that you are pro-oligarchy and anti-American people.
Rather than wanking about over “who owns what,” the focus needs be on getting rid of all and any restriction preventing anyone, anywhere, for any reason and at any time, from entering any market and competing with any existing actor along any dimension he sees fit. Rather than needing licenses, permits, concerning himself with noncompete nonsense, idiotic lawsuits, usury payments to FIRE complex freeriders and regulations.
If some optimistic dude in Iran figures he can provide some “health service” in California for a buck cheaper that the prevailing rate, by paddling across a few oceans with some pills in one pocket and some homemade “surgical” knives in the other, have a crack at it. Find some space somewhere, erect a shack, hang out a sign and see if he finds enough takers to make it worth his while.
Ditto for any Walmart, CVS or pharmaceutical company employee who figures his current employer is inefficient and wasting resources in some area. Just set up shop across the street trying to do it better. If it works, good on him. Otherwise, better luck next time, and thanks for alerting the world to one more way of doing things that does not work. In either case, good on the rest of America.
We’ll never see costs reduced in any meaningful way, for any service, as long as the prime directive for everything done, is to protect the ability of a bunch of idle, privileged insiders from being undercut, bankrupted and left to starve unless they sharpen their game. Every.Single.Day. Which is all that the current obsession with using courts, regulations and the Fed to shield existing actors from utterly unlimited, cut throat competition achieves. Sclerotizing, impoverishing and irrelevancing the entire economy in the process. Just as Americans are better off if some Chinese “dumps” steel on our laps free of charge, ditto if Iranians, Indians or Somalians do the same to drugs and “medical services.”
No American should ever, under any circumstance, be forced, by his own government and courts, to endure the indignity of ever paying a single cent more for any good and service, than what the cheapest provider in the thus far known universe can provide it for. Focus on that, rather than on making up all manners of economically illiterate excuses for why thiiingzz aaaare diiiifrent thiiiz tiiiime like some retarded progressively indoctrinated drone, and costs will come down across the board. For anyone. Making American producers more competitive, Americans’ paychecks stretch further, and American consumers wealthier. Entirely without even a theoretically possible exception.
Anyone that doesn’t see that the minimum wage benefits big business and hurts low income workers is hard to take seriously. Raise the minimum wage far enough, McDonald’s will still be there, but with kiosks and robotic cooks, while their smaller competitors will be gone. That would makeMcDonald’s far more profitable than they are now, and significantly reduce employment opportunities for low income workers.
As for a Walmart-Humana combo? I have no idea, so my inclination is, let’s do it and see what happens.
My unambiguous uncertainty: “I believe it will, but I am not positive it will.”
I see this as ultimately less competition not more.
Probably a good move for consumers. Medicine needs competition just like any other for profit business does. Thanks for posting this Mish. Happy Easter.