You Might Feel a Slight Pinch

March 2nd, 2009 | Sources: Wall Street Journal

Medicare Advantage providers like Humana, Cigna and UnitedHealthGroup have been receiving payouts that are 14% higher than what the government pays for other Medicare beneficiaries, and throughout his campaign the Big O said his administration was going to stop that.

BigOattacksInsurersIt’s now become apparent that the Big O’s follow-through on campaign promises is just as pristine as that on his sweet lefty J.

In fact when Obama proposed a $634 billion down payment on universal health coverage last week, he accounted for $177 billion of the total by removing funds that had been designated in previous budgets to pay for those Medicare Advantage programs.

The private insurer’s fees had heretofore been established using secret sauce, but now the Big O’s proposing they’ll have to bid competitively beginning in 2012 for the contracts.

thisgoeswhere?It’s the mother of all Heimlich maneuvers for Big Insurance, which knew something bad was gonna’ happen but expected a smaller hit and a slower phase-in.

Several companies threatened that the moves will force them to pull out of certain markets altogether, but that sounds a bit hollow since Advantage plans have been their only source of growth now that employer plan membership numbers are dropping like a stone.

So for the moment they’ve held fire. “We will be a constructive participant in efforts to reform all parts of Medicare,” a simmering Robert Zirkelbach told the Wall Street Journal.

Then the spokesperson for Big Insurance hinted at a possible counterattack strategy. “This proposal asks seniors to pay a disproportionate share of the cost of health-care reform,” Zirkelbach said.

Enrollment in Medicare Advantage plans grew 14% last year. Seniors were attracted by low premiums and plentiful benefits compared with relatively spartan government plans.

Nearly 25% of all Medicare beneficiaries are enrolled in these plans.

Humana stock dropped nearly 20% on the day the story broke. Aetna slid 11% and Cigna lost 9%.


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