Wednesday, April 23, 2008

Wall Street Continues to Be Disappointed in Managed Care--Just Where Did They Think It Was Headed in the First Place?

United Health's earnings and revenue grew by 7% this quarter year over year and the stock fell by almost 10% yesterday.

I'd hate to see them really screw up.

United is the first to admit that they have some service and persistency issues but the fundamentals of their business continue on track.

Wellpoint followed with another disappointing report today.

Wall Street finally seems to be figuring out that the health insurance business is, and has been for years, on a long walk off a short pier. What's sustainable about a business whose costs have continually exploded at 2-3 times the growth rate of the rest of the economy or the wage rate? Just where did Wall Street think this business was headed all those years the sector has been the darling of Wall Street?

Perhaps most telling was the recent comment by one analyst in the Wall Street Journal, "What we're seeing is a market that's gotten so mature and beyond its customer that people can literally no longer afford to buy the product," said Sheryl Skolnick, an analyst with CRT Capital Group. "The number of uninsured is growing faster than any player in the game, and it's getting bigger at the expense of the Uniteds, the WellPoints."

Ya, and it was five years ago.

Allow me to let you in on another gem Ms. Skolnick--and the other health care analysts out there: Pet Stark is getting ready to slash those fat private Medicare payments and either a Democratic president or one of the only Republican Senators to vote against the whole thing in the first place isn't going to veto it the next time around (that would be any nano second past noon on January 20, 2009). And, that's after the growth in these private Medicare products has already started to level off.

We are way past the time the really smart people on Wall Street (that would be all of you) needed to start asking just what the future of this business is. If the answer you get is that the future of managed care is just to ride an unsustainable health care cost trend rate many more years into the future you might just want to dig a little deeper this time.

Related posts:
Health Plan Stock Prices Hard Hit Recently--Then There is John McCain

Today's HMO Carnage on Wall Street


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