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Above the Fold
OFF-TOPIC: It’s spring, so paragliding season is back on
Two cool articles about paragliding. This one, Paragliding: It’s the Alone Way to Fly, in the NY Times has a picture of exactly the same wing that I fly. The other one in the Boston Globe is about tandemming in Europe—which is how I first did it.
HEALTH PLANS: Is this the top?
Here’s my FierceHealthcare editorial today. You’ll notice I’m a little more fair and balanced in this one than some of you might expect!
Life has been good–very good–for the stockholders and executives of the nation’s health insurers in the last few years. Many, if not most, health insurers ended the 1990s with red ink all over their income statements after they "bought" market share and fought providers over price. The early 2000s were a period when insurers got back to basics. They assessed risk, mended their fences with providers, and put up prices to their customers. More than that, the industry reduced its medical loss ratio–the share of premium that it passes onto providers–from an average in the 80 percentage points range down to the low 70s. In other words they put up their prices to customers faster than they increased their payments to providers. Then on top of all that they got a large bonus in the 2003 Medicare Modernization Act which increased payments for their Medicare enrollees and gave them a whole group of new customers in Medicare Part D plans.
But of course Wall Street cares little for past glories. This week Aetna reported that medical loss ratios were heading up. Its stock plummeted 20 per cent, dragging the sector as a whole down with it. Meanwhile compensation controversies dog UnitedHealth Group, and WellPoint stands accused of cancelling members contracts illegally. And of course employers are in general very unhappy with what they’re paying for health care. Private health insurers need to concentrate on proving where they add value to the system, or their future environment may be less friendly than that which they’ve been enjoying recently.
POLICY: Email from Baghdad
By JOHN IRVINE
“Iraqi troops injured in the fighting must pay their own way at civilian hospitals as the Iraqi military has no military hospitals of its own …” Marketplace reports this morning.
I’ve seen plenty of TV footage of Iraqi troops being treated by U.S.forces, but this certainly raises a question about what the official policy is. If it’s true, it’s outrageous.
The audio is here.
I emailed Iraqi blogger Zeyad about this story earlier this morning. Zeyads runs the excellent Healing Iraq blog. (As it happens, Zeyad is the author of an good piece on official corruption in the Iraqi healthcare system which ran on the Guardian’s web site recently.)
Here was his response to my email:
Indeed, Iraq’s only military hospital (the Rasheed hospital south of Baghdad) was destroyed in the war and was never rebuilt. As far as I know, there is a temporary facility set up to treat Iraqi soldiers at the Taji military base north of Baghdad. Most of the time, though, Iraqi soldiers are treated for emergencies at civilian hospitals all over the country, except during joint operations with Americans. This is what I know and I may be wrong.
You should read Zeyad’s take on working at an Iraqi clinic. It’s really good.
POLITICS/POLICY: Social mobilty, and its impact on health care politics
This is taken direct from Ezra Klein’s piece on “Brave New Economy, With Such Immobility In It” and it goes to the heart of why insecurity over health benefits will be the political issue of the next ten years.
The Center for American Progress just released a comprehensive study of economic mobility and income volatility. And, according to its data, Andy’s right about the American lack of fatalism, the belief in opportunity and mobility. When asked if people get rewarded for their effort, 61 percent of Americans agreed, versus 49 percent of Canadians, 33 percent of the British, and 23 percent of the French (weirdly, the Philippines win this one, with 63 percent agreeing). But of all these societies (save the Philippines), America is one of the least mobile, which is to say the least dependent on hard work rather than social station. In Denmark, the relationship between your parent’s income and yours is 15% percent or so. In Canada, it’s 19% percent. In France, it’s 41 percent. And in America, it’s 47 percent. The only country more hidebound and hierarchal is Andy’s native England (50 percent), also the country most closely approximating the American economic model.As it is, if you’re born in the lowest income quintile, you have a 1 percent chance of reaching the top 5 percent. If you’re born rich, you’ve a 22 percent shot at remaining there. For the middle class, hard work and productivity have begun to count far less. In 2003 and 2004, years when the GDP saw strong growth, the median household was no more upwardly mobile than in 1990-91, during a deep recession. Think about that for a second: inequality has reached such a height that the average household is actually worse off during today’s expansion than yesterday’s recession.There’s been a serious increase in downward mobility, too, with only 13 percent of families seeing $20,000 (in real terms) loss during the 1990-91 recession, while nearly 17 percent experienced such a drop during the 2003-04 expansion. Households in the top 10 percent have, by contrast, seen a reduction in downward mobility during the same period. And while it used to be the case that you could combat stagnation through hard work, even that’s dying out. Households where the adults worked more than 40 hours a week were able, during 1990-91 and 1997-98 able to translate their labor into upward mobility. Now, the correlation has disappeared.
Now overlay over that the findings from Commonwealth (which I wrote about over at Spot-on yesterday) that health insurance from employers is declining fastest amongst those in the third and fourth lowest income quintiles, and that those earning between $20K and $40K—who are probably pretty much the same people—have seen their likelihood of being uninsured at some point in the last year go from 28% to 41%. Add to that picture the fact that the top 10% of Americans have seen their share of national income increase in the past twenty years, while everyone else has suffered a relative (and in many cases a real) decline in income.
So adding it all up, despite a rise in the number of high income households, if you don’t start off that way you’re much less likely to trade up in class or income. You’re going to be making relatively less money than your parents were. And the rising cost of health care is going to manifest itself in your greater likelihood to lose insurance coverage.
This has to keep playing itself out for a while longer before it has any real political effects. But unless these underlying trends reverse, by definition, the politics of redistribution will come up. And because of its crucial and emotional nature, they’ll come up first in health care. Of course we have to get that pesky Iraq situation taken care of first.
OFF-TOPIC: Henry doesn’t deserve to be player of the year in England
Those of you who don’t like soccer can skip this!
Proving that English football writers know nothing, they’ve voted Thierry Henry FWA player of year for third time in a season when Arsenal have been rubbish and he’s been notable by his absence from most of their toughest games. Arsenal have ridden a very easy draw in the European Champions league final (avoiding Barcelona, Chelsea and AC Milan, the three best teams in Europe). In the knock-out phase they got Juventus in a real form rut and Real Madrid in a dreadful state, and only just scraped past them. They got kicked out of the FA cup at Bolton in a game in which Henry was totally absent while being on the pitch, and have struggled to come 5th in the league. While he’s a great player and deserved the award before, he did not this season.
Any one of John Terry, Joe Cole or William Gallas (Chelsea’s best players as they dominated the league again) is much more deserving. Wayne Rooney had a great season while his Man Utd teammates imitated doormats around him, and, and even Stevie Gerrard, inexplicably given the PFA award (the one the footballers vote for) had a better year than Henry.
I guess reputations count on; but the Premier league table doesn’t lie, and the luck of the draw in the Champions league will run out on the Gunners when Barcelona stuff them in Paris next month. Perhaps if Henry reproduces his best form in the World Cup Germany this summer, and the French team holds together behind him, then the World Player of the year award next December might be justified. But that’s based on the calendar year. Over the 2005–6 season, it’s not Henry’s year.
HEALTH PLANS: It’s blood on the streets today; but is the ride over?
Here’s the news from my FierceHealthcare newsletter on insurers’ stock prices today
Today’s earnings announcements from health plans and insurers don’t look too bad. WellPoint reported a 20 percent surge in profits yesterday, a gain that the company attributes to an increase in membership and decreased medical costs. Aetna also posted good earnings, with first quarter profits up 3.2 percent, but reported a first quarter medical cost ratio of 79.4 percent in its main commercial business. That was up from 77.9 percent a year earlier. Meanwhile, PBM Express Scripts had first quarter earnings of $104.7 million compared with $85.3 million for the same period a year ago.
Wall Street wasn’t having any of it. Aetna’s stock was down over 20 percent today as the company’s CEO Jack Rowe hands over the reins to Ron Williams and CFO Alan Bennett makes plans to retire in 2007. Express Scripts stock is down nearly 10 percent, and the rest of the health plan and PBM sector is down heavily too.
– read the article about WellPoint from the Los Angeles Times– see this Houston Chronicle article about Aetna’s stock slide – read this article from MarketWatch for more about Express Scripts
So is this finally it? Have the plans been found out? Will we see MLRs head back into the mid-80 percents? Should we all have shorted UNH and AET in January. Well I myself have believed that health plans have been overvalued forever….but if I’d gone short when I started saying that a few years back (like in this April 2004 column), I’d be living in a cardboard box under a freeway now. Look at what’s happened to their stock since then (the bottom orangel line is the S&P 500). Even with their recent declines they’re all up at least 50% since then and Humana is close to being up 200%:
POLICY: Fishing and Finding Beneficial Solutions?
I’m up over at Spot-On with an article called Fishing and Finding Beneficial Solutions? I’m trying to be clever and pull several strands into one theme. This reminded my editor of a medical TV show I’ve never heard of called “House”. So go over there, let me know if the medical TV metaphor works, and come back here to comment as ever.
TECH/BLOGS/OFF-TOPIC: Sorta happy ending?
Score one for the little guy/gal — Work widow’s blog fuels revolt and EA settles for what appears to be a decent amount. $15m more than they wanted to pay anyway!
The original posting that started it all is here. Don’t underestimate the power of an anonymous blogger.
HEALTH PLANS: Blue Cross of California looks like its hand was in cookie jar
There’s more from the LA Times about the Blue Cross of California case where benefits were retroactively denied. For some reason, although the case has been sealed, the Times was able to report on testimony of four BC employees.
A California Blue Cross employee testified in secret last year that the state’s largest health-plan company routinely canceled policies of sick members after looking for inconsistencies — not fraud — in their applications. Experts say, however, that state law allows only deliberate omissions or misstatements as grounds for canceling health coverage.
Given that the lawyers obviously combed through these cases, and found people like the woman denied coverage for obstetric care 2 years into her policy, this starts smelling worse and worse for Wellpoint. Health insurers are in a very vulnerable position right now. Their profits are sky-high, and far more of the premium is sticking with them than their cleints or the genreal public understands—medical loss ratios are down in the low 70s. Not to mention certain executives with their multi-million or billion dollar pay outs.
Wellpoint would be well advised to do what they can to make this case disappear very quickly. Otherwise they might start realizing that they’re in an election year and health insurers are only just above the oil and tobacco guys in the popularity stakes.
