Medicare Payments Shock Sends Health Insurance Stocks Diving
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What is the main topic discussed in this episode?
It's the thick of earnings season. We'll bring you the latest updates from GM and other big U.S. companies. Plus, what's next for health insurers after the Trump administration's position on Medicare payments shocked the industry?
You'll likely see advertising campaigns. You'll likely see a lot of lobbying of members of Congress. The final rates tend to come out in early April. So we've got a window here when the industry can try to change the direction.
And for Amazon, Fresh and Go stores are out, but Whole Foods is in.
What recent changes did the Trump administration propose for Medicare payments?
It's Tuesday, January 27th. I'm Alex Ocelove for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Shares of Medicare insurers like UnitedHealth Group and Humana dove today. Why? The Trump administration's proposing that the rates the government pays to reimburse insurers for Medicare plans would stay roughly flat next year, rising by an estimated 0.09 percent on average. That's well short of the 4 to 6 percent that Wall Street expected and affects a business that's central to insurers' finances and hopes for growth. Ana Wildey-Matthews, who covers health insurance for the journal, is here to discuss. Ana, what is the administration's reasoning behind keeping this rate essentially flat?
Well, it's definitely a surprise for investors, as you can see with what's going on with the stocks today. The reasoning for the proposal being roughly flat, there are a lot of different things involved, but one of the main ones is just determinations made by actuaries at the Medicare agency who are estimating how much they think health costs are going to go up. But another reason is that the Trump administration is proposing a change in policy that could some industry billing practices and perhaps limit how much money they get. They say that the goal here is to make Medicare payment transparent, accurate, and also to sustain the program.
The insurance companies obviously don't like this development. And on the UnitedHealth earnings call today, an executive warned that its policyholders would be hurt.
We will continue to work with CMS to ensure an appropriate final growth rate calculation to avoid a profoundly negative impact on seniors' benefits and access to care.
Anna, what's the relationship between the rate insurers are getting and health care for people on Medicare?
What insurers are saying is that enrollees, seniors, Medicare beneficiaries will be squeezed down the line if insurers don't get payments that they consider adequate. Insurers want to make a margin. They have shareholders. So when the government pays them rates that they consider short of what they should be given the likely costs of the health care that these plans cover, they make other tweaks, maybe make things a little skinnier. One thing they tend to do when they're concerned about their margins is to reduce their offerings of extra benefits that beneficiaries often like, things like dental care. Another thing is they may not offer as many plans or plans in as many places, or they may offer plans that have more restrictions, like going to your primary care doctor to get a referral if you want to see a specialist.
these rates are still in the proposal phase. What happens next? Can we expect a big lobbying push from these insurers to try to change the rate that gets finalized?
Absolutely. And that is definitely already underway. Industry observers expect a huge lobbying push. And frankly, this tends to happen every year, but particularly when the industry feels like the rates are not as high as they expected. So you'll likely see Advertising campaigns, you'll likely see a lot of lobbying of members of Congress. The final rates tend to come out in early April. So we've got a window here when the industry can try to change the direction.
That was WSJ reporter Ana Wildey-Matthews. Thanks, Ana.
Thanks.
How are health insurers responding to the proposed Medicare payment rates?
Shares in Humana, UnitedHealth, and CVS led market losses today, sinking 14% or more. That dragged down the Dow, which fell 0.8%.
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