The Wild West of Managed Health Care

Sep 29, 2008 No Comments by

One of the key indicators of a highly competitive marketplace is when clients are being offered one-sided contracts in trade for signing long term agreements.  And it is this very situation that is occuring in the managed health care industry right now.  Companies are constantly looking to cutback on unnecessary expenditures and being able to lock in medical costs can be seen as an efficient method of maintaining cost control.

There is a definite point of risk that these managed health care providers are taking, since they are essentially ‘betting’ that medical cost rates will not exceed a certain price point.  Why are these companies willing to take the risk of lowering their profitability or even potentially losing money on a contract?  Dinah Wisenberg Brin, from Dow Jones, had this to say,

“Health insurers have seen their stocks decline precipitously in 2008 – the Standard & Poor’s 500 managed-care subindex is down 46% – as companies have dealt with declining commercial enrollment, rising medical costs, lower margins, errors in pricing health plans, lower investment returns, a soft economy and the belief by some on Wall Street that the industry is in a down cycle.  Securing multiyear deals and selling extra services could help managed-care companies as they scrap for a limited pool of commercial members and aim to stanch enrollment declines.”

Managed health care corporations are not the only companies that are being affected by the rising medical costs.  Medicare is seeing premium rates increasing dramatically, and with over 16.1 million Americans relying on Medicare, Bloomberg‘s Avram Goldstein said, “Premiums for Medicare drug coverage will rise an average 24 percent for elderly and disabled Americans who stay in their current plans next year, according to a health-care research firm.  The increase follows a 21 percent rise this year, said Avalere Health LLC, a Washington firm that analyzed data released today by Medicare. The 10 largest drug plans raised premiums from 8 percent for UnitedHealth Group Inc.’s AARP MedicareRx Saver to 64 percent for Humana Inc.’s PDP Enhanced plan, Avalere said.”

So what does this mean for you?  Every expert I’ve talked with in the industry is saying that each Medicare participant has to review the wide variety of plans available in order to select the best plan to fit their needs.  Robert Hayes, President of the Medicare Rights Organization, said, “It is a Wild West marketplace, and older Americans are ripe for exploitation, even people who feel satisfied with their plans this year must carefully review the coverage they will receive in 2009 to see if they need to change plans before the deadline.”

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