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HEALTH PLANS: Is medical cost trend headed down again?

Aetna seems to think so. Last week Aetna shares rose after comments on medical costs. Of course this could be a blip given that last quarter the stock fell on a higher than expected medical loss ratio. But assuming that it’s not, given that overall premium increases are a little lower this year, this means either that Aetna has gotten a-hold of its spending a little better than expected, or that it’s done a better job underwriting and getting rid of its poorer risks. Given its history in this regard, I wonder which?

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Randall AstolfiFlowers UKjdBarry CarolMel Hawkins Recent comment authors
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Randall Astolfi
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Randall Astolfi

Health care has been insulated from free market forces.A huge increase in supply and international open markets for drugs will reduse costs. The AMA by chance or design has restrained trade. By setting sensible testing that would facilitate foreign doctors entry into the US and by providing full federal scholarships for any person qualified for medical school would boost supply. Present medical school tactics which seek to fail rather than encourage succes need to be reexaminded.
The self serving implication that any foreign drug is de-facto suspicious or dangerous is resposible for many millons in over priced drugs.

Flowers UK
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Maybe they reconsidered their strategy and the second one applies, then.

jd
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jd

I think Barry hit the two key points:
1. medical cost trends are moderating, leveling out at around 7.5%.
2. This is about twice as high as the general rate of inflation.
To which I would add:
3. This is more than twice as high as the growth in median wages.
Matthew, Businessweek has a big story on how all the job growth that the Bush administration can take credit for is in the healthcare industry (1.7 million vs. a net 0 for the rest of the economy). That sounds like an excellent topic for you to riff on.

Barry Carol
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Barry Carol

The concensus among large insurers is that medical cost growth seems to be stabilizing, at least for now. At the start of the year, most expected medical cost increases for 2006 of 7.5% give or take 50 basis points. It appears to be tracking toward the lower end of that range with prescription drug cost growth below that level, in part, because of the spike in the availability of new generics. The bottom line, however, is that costs are still growing significantly faster than general inflation which is not sustainable over the long term.

Mel Hawkins
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When asked whether they believe that all Americans should have access to health care, most people in the audiences to whom I have spoken would raise their hand. That same audience, however, when asked whether they would be willing to rely on their government to take care of us, will not move a muscle. Some might even snarl at the presenter, so strong is the sentiment. The problems seems to be that people think the only way to find a solution to the American health care dilemma is to rely on government for some form of socialized medicine and for… Read more »