JULY 13, 2005 -- Their tongues unbound by political considerations and sharpened by the fact that they have client's money on the line, Wall Street analysts often deliver refreshingly direct assessments of the business impact of health policy.
They didn't disappoint at a Washington forum Wednesday morning.
For example, Robert Laszewski, president of Health Policy and Strategy Associates, declared the Medicare Advantage program created by the Medicare overhaul law a short-term "gold mine" for managed care plans. Laszewski also likened the health insurance industry's prospects overall to a "long walk off a short pier."
The analysts at the "Wall Street Comes to Washington" forum sponsored by the Center on Studying Health System Change also offered insights into what Washington should expect from health care marketplace changes—perhaps not much cost control from consolidating the health insurance industry, for example.
Managed care plans are flocking to the Medicare Advantage program created by the Medicare overhaul law (PL 108-173) because the overall health insurance market isn't growing, Laszewski said. Overall industry enrollment is "flat as a board," which means companies are trying to grow either by buying each other or by adding new products, he said.
The need to add products is why insurers are so interested in offering plans in the new Part D prescription drug plan part of Medicare and in the Medicare Advantage managed care side of the program, he said. Payments to Medicare HMOs and PPOs have been beefed up and will stay high as long as Republicans control Congress because they want the private sector side of Medicare to succeed, Laszewski said. But he said if Democrats gain control of Congress, they will "screw it up" payment-wise for the plans.
Morgan Stanley analyst Christine Arnold called the Part D market a "near term opportunity" for insurers offering prescription drug plans. She predicted enrollment of about 19 million people in the plans in 2006, a figure that includes some 7 million who she said will have drug benefits through managed care plans.
But she predicted profits would taper off over time because people who are healthy and stay out now will sign up when they get sick. The penalties in the law for such delayed enrollment aren't stiff enough to keep that from happening, she said.
Other Wall Street predictions of up to 30 million people getting Medicare drug benefits are "incredibly aggressive," said Ted Shannon, a stock analyst with Janus Capital Management. The risks of entering the market are not well understood by insurers, and finding people to enroll could be difficult, he said.
Laszewski said he isn't keen on the Part D program as a market opportunity for plans because federal regulations will render ineffective in Medicare the cost control tactics used in the commercial market to keep to drug benefit prices in line.
The analysts' assessments also varied on the market impact of health savings accounts created under the new Medicare law. The accounts, which are owned by individual consumers and give them greater control over how and where their health care dollars are spent, are part of the new benefits trend in health care called "consumer-driven health care."
Shannon said health savings accounts will dominate the insurance market five to 10 years from now. Goodman said the shift toward trying to manage costs on "the demand side"—by making sure individual consumers have "skin in the game" by paying a bigger share of their health care bills—should be beneficial.
Health savings accounts are making a big splash in the individual market and are attractive to small employers, Goodman said, but their benefits are overstated. Laszewski agreed emphatically, mocking the excited chatter of health savings account advocates about the benefits of having "skin in the game—yada yada."
Consumer-driven health care "is a wonderful thing," said Laszewski, but individuals with health savings and similar accounts don't control the biggest outlays for health care—the ones insurers make when people get really sick. The idea that consumer-driven health care is the answer to rising costs won't last long, he predicted. In "about another year or two, we're going to get this out of our systems," he said.
Laszewski also said it's premature to think costs can be brought under control through data that identifies the most efficient doctors and hospitals. "We don't have the slightest flipping idea where the most efficient providers are," he said.
Analysts noted the health insurance industry is consolidating, but none called that the answer to rising costs. Shannon said there are still 500 health plans in the United States, but that can't last. Many existing plans lack the money to educate enrollees about which providers deliver the best value on health care, he said. Health care will consolidate the way banking did in the mid-1980s, he predicted.