Medicare, health plans - WSJ Health Blog, HMO Stocks Take A Dive

Posted by Sarah Rubenstein

Company Medicare Advantage Share of Revenue
Aetna 18%
Cigna 3%
Coventry 31%
Humana 51%
UnitedHealth 23%
WellPoint 6%

HMO stocks took a beating today as investors digest the Obama budget proposal’s push to cut federal payments to insurers that run private Medicare Advantage plans.

Here’s the damage as of mid afternoon.

Humana: down 20%

UnitedHealth Group: down 14%.

Coventry Health Care: down 14%.

Aetna: down 13%.

WellPoint: down 10%.

Cigna: down 9%.

The market may be shocked, but the writing’s been on the wall for a while. Back in December, Obama said Medicare Advantage isn’t “necessarily giving good bang for the buck.”

Humana, United and Coventry are among the biggest players in Medicare Advantage, which helps explain why their stocks are taking the biggest hits. See the chart at right for Goldman Sachs analyst Matthew Borsch’s breakdown on how much of each company’s total revenue comes from Medicare Advantage. (His count of Aetna’s and Cigna’s total revenue doesn’t include certain relatively small non-health businesses such as life insurance.)

America’s Health Insurance Plans, insurance trade group, put out a statement that praised Obama’s push toward broad health reform. But the group also worked to defend Medicare Advantage, saying that cuts the size Obama is proposing would “jeopardize the health security of more than ten million seniors enrolled in Medicare Advantage and would turn back the clock on innovative payment incentives to improve the quality of care that patients receive.”

AHIP said the plans provide programs such as disease management and care coordination. Democrats, meanwhile, tend to see them as tax-subsidized profit centers for insurers.

Comment

By cutting out Medicare Advantage HMOs, Obama no doubt felt he was doing good.

Indeed, he may have thought of himself as a modern senior health care Robin Hood,

But taken as a whole, HMOs are a huge national employer,

And slashing HMO revenues is a potent profit and job destroyer.

This is something Wall Street understood.

Comment by Richard L. Reece, MD, medinnovationblog.blogspot.com