September 30, 2009
Wachovia analyst Matt Perry had this to say after the Senate Finance Committee rejected the controversial public health insurance option:
On Tuesday the Senate Finance Committee voted down two separate amendments that would have created a government run public insurance option. The first amendment, introduced by Senator Rockefeller, was defeated on a 15-8 vote – with 5 Democrats joining all 10 Republicans in opposition. Rockefeller’s amendment would have been the ”strong public plan”, paying Medicare rates and forcing providers to accept it. The second amendment, introduced by Senator Schumer, was defeated 13-10. Schumer’s version was a ”weak public plan”. The defeat of these two amendments means that the Senate Finance bill will not include a public option (although it could include co-ops). This development is not surprising, but the fact that neither vote was close deals a blow to supporters of the public plan and is a positive sign for health insurers, in our view.
Note that five Democrats voted against the Rockefeller amendment and three voted against the Schumer amendment — meaning that these Democrats were the swing votes. So much for Republicans being the only ones obstructing real reform.
September 28, 2009
I spoke last week with Collins Stewart analyst Brian Wright, who has initiated coverage on the managed care sector with a “market weight” rating. In this video interview, he notes that pricing and cost pressures are affecting industry margins. From the Nasdaq Market Site in New York, Sept. 25, 2009.
September 23, 2009
Here’s a depressing thought. Vince Ventimiglia of B&D Consulting thinks we’re still in the early stages of the healthcare reform debate. Ventimiglia, who spoke on a conference call Sept. 18 hosted by Wells Fargo Securities, noted:
I think we’re still on the first wave, and that wave is the wave of intense committee effort to develop something that gets pretty close to universal coverage–a universal access bill to ensure that the uninsured are covered and that the health system is improved….I do have a belief that this first wave is not going to be successful — that it’ll be difficult to get consensus around a broad universal coverage bill, and that the Democrats will look at two other options.
The second is reconciliation, a wave that will start being considered, I think, in the next few weeks. And if it is pulled, if they decide to act on that wave, [then it] would happen middle/end of October.
Ultimately, I believe there will be a third wave (I don’t believe they’ll go with reconciliation…) late in the year –sometime in December — that will essentially be a Medicare package with some incremental insurance provisions in it that will be driven by the need to ultimately have a doc fix…so that docs can avoid their 21% cut.
FYI, he’s referring to the 21% cut to physician Medicare payments scheduled for 2010….See you at the next Town Hall meeting.
September 23, 2009
Our research into the impact of healthcare reform on managed Medicaid suggests that membership growth is virtually certain. Less certain is the level of profits this business would generate.
Most Medicaid plans we interviewed pointed to net profit margins in the 1% to 2% range — with 2% being a good year. That’s backed up by hard numbers crunched by Oppenheimer, which tallied statutory filings on 182 Medicaid plans (serving 15 million members) and found that net EBITDA margin was about 1.5% on premiums of $41 billion.
Oppenheimer’s analysis goes further, suggesting that publicly traded Medicaid plans enjoy higher-than-average margins at 3-5%; however, Oppenheimer notes, a few strong markets account for most of the difference, with others struggling to make money. Notes Oppenheimer:
This has a couple of implications. The positive is that it means there are regions the Medicaid plans could exit as an easy way to boost margins in the short term, as WellPoint has done in a number of states, and several plans threatened to do in Florida last year before a higher rate was granted. The negative is that the Medicaid plans generally have little earnings diversification, with profitability heavily tied to a couple of markets.
Here’s something else to consider. One big issue with newly enrolled Medicaid members is that quite often little is known about their medical histories. That’s another way of saying that little is known about the impact these new lives will have on medical costs at Medicaid plans.
You get the picture. Following reform, Medicaid plans with razor-thin margins will be adding millions of people without a clear understanding of their medical histories or their likely impact on medical cost ratios — all at a time when state budgets are hamstrung. Should be fun.
September 21, 2009
President Obama was on five Sunday morning news shows pitching his healthcare reform package, and the question is whether this unprecedented media blitz will win public support for reform.
If past Gallup poll data are any indication, the answer is no.
Take, for example, the President’s recent speech to a joint session of Congress. That impassioned defense of reform appears to have had little to no effect on public opinion. Notes Gallup (from a poll released Sept. 16):
Americans — who were divided on healthcare reform legislation before President Obama addressed Congress last week — remain so after the speech. Part of this stems from deep partisan divisions, with the vast majority of Republicans opposed to reform and the vast majority of Democrats in favor.
Another example: Remember all those heated Town Hall meetings over the summer – that whole ugly spectacle? It had little to no impact on Americans’ views about reform. Writes Gallup (from a poll released Sept. 8):
A month of town-hall meetings across the country during Congress’ August recess has hardly budged Americans’ views about passing a healthcare reform bill, or helped many more Americans form an opinion. The public is as divided over healthcare reform today as at the beginning of August (37% in favor and 39% opposed), with a large segment still undecided.
In other words, Americans weren’t moved by the shouters at Town Halls, and they weren’t moved by Obama’s cool, reasoned debate. More broadly, Gallup notes:
It is unclear how much success the president and other healthcare reform proponents will have in changing Americans’ philosophical views about healthcare, which are probably more fundamental to their worldviews and therefore resistant to change.
My conclusion is that we’re going to get the Baucus reform plan – i.e., a fairly watered down version of Obama’s original vision (which itself was a compromise aimed at avoiding serious consideration of single-payer healthcare).
All of which means we’re going to have to go through this all over again in the not-too-distant future.
September 18, 2009
I agree with most of what Rep. Dennis Kucinich (D-OH) says in this video interview on Tech Ticker about health reform, i.e., the public option is dead; healthcare is a right; and “the people of the United States deserve a lot better” than the Baucus bill. Notes Kucinich:
Unless you have a public option, there is no way that you can drive down the cost of healthcare because insurance companies won’t have any competition.
Kucinich also argues that the U.S. should work toward a long-term goal of establishing a single-payer system:
It’s a longer term effort, but at least we’re not pretending that we’re bringing about wide-scale reform by forcing people to choose between private insurance companies.
As I’ve noted before, I have no problem with going to single-payer; however, I also think a properly regulated public-private insurance market could work.
I’m not sure what Kucinich is referring to in the video when he says that a single-payer system would convert all healthcare assets in the U.S. to not-for-profit — or that by going to single-payer we could use the $800 billion a year that goes to private insurance companies to pay for coverage for everyone.
(I called — and emailed — Kucinich’s office but hadn’t received a reply before presstime).
On the later point, he would be correct in noting that about 13% of the $800 billion in annual health plan premiums go toward administrative costs and profits. That’s $100 billion annually or $1 trillion over 10 years.
Add in the additional administrative savings on the provider side from not having to deal with multiple insurers, and yes that should be more than enough to cover everyone.
Btw, kudos to Tech Ticker for giving a single-payer guy some airtime.