MEDICARE POLITICS: Heard On The Street
June 18th, 2007
by
Rob Cunningham
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While presidential candidates are expected to sound firm and decisive on the big issues, a more appropriate posture in the case of health care might be to admit that the current environment is too unsettled to predict what the best policies might be 18 months from now.
The candidates might take a hint from the glaring uncertainties that are evident in Wall Street’s current outlook. For example, investors have been bidding up the price of stock in companies like Humana that are heavily dependent on insurer subsidies in the Medicare Advantage program for their current profitability – subsidies that are now on the chopping block as Congress seeks pay-fors to sustain SCHIP and physician reimbursement. The farther out on a limb these plans go, as market analyst Bob Laszewski puts it, the higher their stock climbs. Advice to investors: Don’t look down. Advice to candidates: Be clear about the public-private balance you want for Medicare, but be prepared for blowback from minority and rural communities whom insurers have cut in on this ephemeral largesse.
The Center for Studying Health System Change has built its annual Wall Street forum into an indispensible event, and this year’s session was no exception. For example, anyone might have noticed Vanessa Fuhrmans’ June 12 report on health savings accounts in the Wall Street Journal (and a lot of people did). But HSC’s Wall Street panel, meeting in a noisy basement room of the Grand Hyatt in downtown Washington, elevated Fuhrmans’ report (based on a Kaiser Family Foundation study published last year in Health Affairs) to oracular status. Laszewski and others on the panel said the article may represent a turning point for how far HSAs are going to go. There is a limit to how much high-deductible plans can constrain spending, the analysts said, past which there is more sizzle than substance to the claim that “consumer-directed care” can transform the system. “Everything says it’s stalling out,” said Morgan Stanley’s Christine Arnold.
Insurers continue to refine some of their care-management tools. The current target is diagnostics, as it was emergency care a few years and specialty pharmaceuticals more recently. But on the whole, plans continue to play a losing game of whack-a-mole with spiking cost-trend components, according to Josh Raskin of Lehman Brothers. Consolidation in the insurance industry confers some benefits in terms of improving information systems and other economies of scale, but the underlying fragmentation of the delivery system trumps the pursuit of industrial-strength efficiency.
So a lot of conventional wisdom about what’s supposed to work to control costs is taking a serious beating in the marketplace. Meanwhile, Laszewski noted, Democrats are looking to Massachusetts as an example of government-led reform, while Republicans continue to gravitate toward consumer-driven care as a market solution. In another year, we’ll know more about the viability of the individual mandate in Massachusetts. And another year of data will tell us if HSAs are really flat-lining. Then perhaps the voters can decide which of their aspiring leaders know what they’re talking about.
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