Health insurance company stocks tanked
this week last week on the news that President Obama wants to slash their Medicare payments. Except that doesn't even remotely qualify as "news."
There's a lot more to Obama's budget and his plans for health reform than this but he wants to cut $177.5 billion from the subsidies the government pays to private insurers over the next ten years and to subject the plans to a new bidding process to win the right to service beneficiaries in the Medicare Advantage program.
That's no small amount of money and the market reacted accordingly. The folks at the Wall Street Journal took a snapshot after the budget came out Thursday:
Here's the damage as of mid afternoon. Humana: down 20% UnitedHealth Group: down 14%. Coventry Health Care: down 14%. Aetna: down 13%. WellPoint: down 10%. Cigna: down 9%
Far be it from me to criticize but how on earth could this have caught anyone by surprise? Now's comes the part where I concede that I come at this from a Washington perspective not a Wall Street one. But still. (And I'm not the only one who's incredulous over this. Check out Matthew Holt and Robert Laszewski, too.)
And it's not just that investors had the months between Obama's election and inauguration to prepare themselves. Details about the budget started appearing in the Journal, the New York Times, the Washington Post and other outlets in the few days leading up to the budget. Obama's address to a joint session of Congress Tuesday also highlighted that the president intended to tackle health reform, a costly agenda.
The Democratic House passed a $50 billion, ten-year cut in Medicare Advantage back in 2007, too. (That was the dog licking its chops.) Though it never became law, that legislation sent an unmistakable signal of where Democrats' heads are. Heck, even John McCain was looking to take a pound of flesh from the insurance industry, indicating that even having a Republican in the White House wasn't going to fully protect them this year.
Jeffrey Young is a staff writer at The Hill.