Administration Cuts Medicare Plans; Stock Prices Plunge

Sarah Kliff on the stock market response:

Aetna, Humana, Cigna and WellPoint all saw a big drop off between Friday and this morning.

So, what happened? In a nutshell: Late Friday afternoon, right after the market closed, the federal government cut Medicare Advantage reimbursement rates way more than anyone expected.

The change amounts, according to Wall Street analysts, to a pay cut of about 7 to 8 percent in 2014.

Avik Roy on the impact:

Because the typical for-profit managed care plan targets profit margins of only 5 percent, and non-profits even less, the net consequence would “turn almost every plan in the industry unprofitable,” according to [Citi managed care analyst Carl] McDonald…

Richard Foster, the recently-retired chief actuary of the Medicare program, has projected that Obamacare’s cuts to Medicare Advantage would force half of its current enrollees to switch back to the old, 1965-vintage Medicare program. Robert Book and James Capretta estimate that this will cost enrollees an average of $3,714 in 2017 alone.

Comments (5)

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  1. Bruce says:

    Did you expect stock prices to rise??

  2. Studebaker says:

    The fortunes of companies that depend on government payments will always be at the mercy of government. The same phenomenon is likely to occur as other regulations are published for the PPACA.

  3. Andrew O says:

    I cannot even pathom the plethora of problems this country is going to continue to have on the health care front if this area is not seriously reformed without politicized influence on legislation.

  4. Jordan says:

    Amazing how they keep lowering medicare reimbursement rates.

  5. Gabriel Odom says:

    So, we are cutting funding to the only popular part of Medicare? Great.