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.