Comments on Brown Victory in Massachusetts

January 20, 2010

Here’s some early reaction from healthcare industry observers on Masachusetts’ stunning special election of Republican Scott Brown to the U.S. Senate.  

We’ve spent so much time discussing the life of healthcare reform, it seems only fitting to talk about its death. The resounding election of Republican Scott Brown as the next Massachusetts Senator leaves the Democrats with no good alternatives. The only hope is that the House accepts the Senate version of the health care legislation, but this isn’t going to happen….It’s hard to see how any potentially vulnerable Democratic member of Congress with a desire to win another term will want anything more to do with this health care reform bill. And since Brown was virtually unknown (even in Massachusetts) just over two weeks ago, the list of vulnerable seats is now a lot longer.  — Carl McDonald, Oppenheimer 

His upset win reflects voters’ suspicion of Big Government solutions and their frustration with either party when it is in power.  What it does not do, sadly, is suggest a new answer to the country’s medical mess.  In a bit of an oddity, voters in the one state that already has near-universal healthcare stymied the Democrats’ plan to give it to everyone else.  USA Today

Scott Brown was not elected primarily because he said: I will be the 41st vote to stop healthcare, but this statement will be the one weighing on the 52 House Blue Dog Democrats and many House liberals who are stopping dead in their tracks…Brown won because this is an anti-incumbent, anti-Washington big spending, anti-Washington closed-door, anti-bloom off the rose/Obama electorate.  — Steven Valiquette, UBS

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Healthcare Reform Isn’t Dead

January 20, 2010

Healthcare reform isn’t dead, despite last night’s stunning special election of Republican Scott Brown as the junior U.S. Senator from Massachusetts to fill the late Ted Kennedy’s seat.

Maybe it’s wishful thinking (or the liberal in me), but you have to remember what happened after the health insurance industry — with the help of Harry and Louise — killed Hillarycare 15 years ago.  The ranks of the uninsured rose steadily from about 37 million then to 50 million now. 

We still face an eroding employer-sponsored insurance market, a broken individual insurance market, inadequate Medicaid eligibility levels, and rising insecurity, vulnerability and out-of-pocket expenses for the lucky ones among us who have healthcare coverage.

Obstruction won’t alter these trends — and in fairness that’s all Brown’s victory offers.  As USA Today notes, what the victory “does not do, sadly, is suggest a new answer to the country’s medical mess.”

At what point does healthcare insecurity touch so many of us something has to be done: 75 million uninsured?  100 million?  Do we have to wait until 75% of personal bankruptcies are from healthcare bills versus 50% today. 

These aren’t rhetorical questions.  The reason reform came so far this time around was that the numbers were getting too big for people to find comfort in platitudes like “it won’t happen to me.”  “It” being sickness and financial ruin.

Remember, the only reason Republicans can block reform is filibuster power, not an actual majority.  And that’s why I think the House will ultimately pass the Senate bill — with all its flaws — and get reform done.  We’re too far along — and too many people would benefit — not to make reform happen.


Lessons from Massachusetts

January 19, 2010

I’m up in the Boston area today watching with great interest the coverage of the special election to fill the late Ted Kennedy’s U.S. Senate seat — the outcome of which holds important implications for healthcare reform.  But whatever the result, Massachusetts already offers lots of lessons about healthcare reform.  Notes Credit Suisse:

Up to this point Massachusetts healthcare reforms have focused entirely on expansion and not on costs, leading to a growing source of budgetary pressure for the state….According to the state, the monthly premiums for both the lowest and highest cost Commonwealth Choice Bronze plan have increased by 15% during 2009. Greater than expected enrollment in the subsidized Commonwealth Care program was the primary reason the state’s healthcare expenses exceeded budget by 20% in 2008….

In response, the state is undertaking numerous reviews and studies in order to develop cost containment strategies….The two basic approaches to reduce health care spending are (1) lowering unit costs through regulation of prices paid (rate setting, bundling payments) and/or substituting to less expensive services (limited service clinics, increase use of nurse practitioners), and (2) lowering utilization or volumes by providing incentives for more efficient care (pay for performance, increased adoption of health IT) and/or using regulatory mechanisms to reduce volume (decrease end-of-life care service intensity). 

Tough choices.  Now shift to national reform.  The emphasis is also on expanding coverage, rather than controlling costs.  So I wouldn’t be surprised to see the nation struggle with similar tough choices down the road. 

The only thing worse would be no reform, which could conceivably happen if  Republican Scott Brown wins the tight Massachusetts race over Democrat Martha Coakley.  Hard to imagine all this was for nothing.


Managed Care Mergers to Pick Up Steam in 2010

January 19, 2010

Given the uncertainty — and politics — of healthcare reform, it’s no surprise managed care merger and acquisition activity slowed in 2009.  But you can expect an upswing in activity once reform is finally behind us.  In this video interview, Carl McDonald of Oppenheimer comments on the reasons for the lull in 2009 and gives his outlook for M&A in 2010.  From the Nasdaq Market Site in New York, Jan. 15, 2010.


Healthcare Reform as Satire

January 13, 2010

Here’s a satirical video from Keep America Now, written by the husband-and-wife team of Rob Kutner (The Daily Show, The Tonight Show) and Sheryl Zohn (Penn & Teller: B.S.!). 


AHIP and the Effort to Kill Reform

January 13, 2010

I suppose that the October release of a flawed and biased study suggesting that healthcare reform would cause insurance premiums to soar (see prior post) was proof enough that America’s Health Insurance Plans had shifted gears and was now actively trying to kill reform.  I, however, clung to the belief that the association — long recognizing the writing on the wall — was still in favor of “reform” but was seeking concessions:

Why kill something that gives you most of what you want, i.e., no public option and no serious consideration of single-payer healthcare.  I do think the industry is still lobbying for a stronger insurance coverage mandate to address the likelihood that the young and healthy will simply pay a small fine rather than buy health insurance. 

After all, AHIP still supported guaranteed issue and some form of community rating….Right?

Then there was the report of an industry rift — with Blue Cross Blue Shield plans stepping up the anti-reform rhetoric, according to The Wall Street Journal, even as other big players like Aetna were seeking to mend fences after the October fallout.  O.K., but this could still be just another example of fighting for “the right kind of reform.”  After all, didn’t Blue Cross Blue Shield of North Carolina end up killing those planned Harry & Louise-esque commercials it had on the drawing board (see prior post)….Right?

Comes now a report that since September AHIP has been quietly soliciting funds from its members — some $10 million to $20 million from six major health plans — and funneling the money to the U.S. Chamber of Commerce to help subsidize “third-party television ads aimed at killing or significantly modifying the major health reform bills moving through Congress.”  The six plans named in the article are Aetna, Cigna, Humana, Kaiser, UnitedHealth Group and WellPoint.

Below are two examples of the types of commercials the Chamber has run through the Campaign for Responsible Health Reform and Employers for a Healthy Economy.  Let’s see, how can this be spun by someone like me who actually believed AHIP had seen the light — well to some extent at least?  I’ve got it!  As Matthew Holt noted in The Health Care Blog, insurers are the “poor suckers” in reform because the industry signed on for guaranteed issue and community rating but didn’t get a strong mandate to avoid adverse selection — a valid point.  So I guess you could argue that all AHIP is doing is fighting for justice…Right?….All of a sudden I’m not feeling so well.


Outlook for Managed Care, 2010

January 11, 2010

Given hefty rate increases, health plans should enjoy improved profits in 2010.  That’s the conclusion of our annual Outlook for Managed Care report (due out shortly).  It’s also generally the conclusion of Wall Street analysts.  But there are some dissenters and caveats.  Here’s the good and bad from four analysts.

“Commercial risk-based pricing appears to be strengthening for 2010 which could lead to improvement in Commercial MLRs….We enter 2010 with a more favorable near-term view although are cautious longer-term due to health reform earnings risks.” — Scott Fidel, Deutsche Bank Securities.  Buy: Aetna, Magellan, WellPoint.  Sell: None

 “In 2010, we expect the operating margin to improve as the price and medical cost trend environment has stabilized, and SG&A levels may improve as MCOs focus on what they can control. It seems unlikely that operating margins will deteriorate further into 2010.” — Thomas Carroll, Stifel Nicolaus.  Buy: UnitedHealth, WellPoint.  Sell: None.

“We think most of the larger, diversified managed care plans are pretty fairly valued at this point, as the group rose more than 50% last year…While we know that pricing is better this year, there is still economic related cost and enrollment pressures. Moreover, while reform certainly turned out to be a lot better than the worst case fears, it is still bad for the group and it will put pressure on margins and earnings in the future.”  — Carl McDonald, Oppenheimer.  Buy: Aetna, Amerigroup, Cigna, Health Net, Humana, Magellan, Triple-S, Universal American, WellPoint.  Sell: Centene, eHealth, UnitedHealth

“We Continue To Prefer Companies With Less Exposure To Health Care Reform Risks. This leads us to favor the Medicare and Medicaid businesses.” Matt Perry, Wachovia.  Buy: Amerigroup, CVS Caremark, HealthSpring, Humana, WellPoint.  Sell: None.


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