Lehman Brothers cut its rating on health insurers Friday, saying the federal government could ultimately choke the managed care sector's most profitable opportunity: privately administered Medicare plans. Lehman Brothers analyst Joshua R. Raskin downgraded health insurers to "Neutral" from "Positive," though he still projects industrywide profit growth of 14 percent in 2007, which is slower than 2006 but ahead of the rest of the stock market.
Much of Raskin's revision focuses on Medicare Advantage. Under Medicare Advantage, the federal government reimburses private insurers for covering seniors. The program has come under scrutiny because the government pays more to reimburse insurers than it would cost to cover patients through public Medicare plans. In a note to clients, Raskin said Medicare Advantage plans are anywhere from 5 percent to 40 percent more expensive than government-sponsored Medicare plans, depending on the product and the market.
With the Democrats' takeover of Congress, the government may take steps in 2007 to cut reimbursement rates, Raskin said. President Bush would probably veto legislation slowing privatization of Medicare, but Raskin said legislators could initiate investigations and inquiries marking the beginning of a move to adjust reimbursement rates.
"Without the stimulus of extraordinary Medicare growth, the managed care sector will revert back to growth closer to broader market averages," Raskin said.
http://www.chron.com/disp/story.mpl/ap/fn/4450092.htmlSo overall health care drug prices are grossly inflated because of the Medicare drug bill, money which has gone directly to the bottom line and into shareholders' pockets. The Democratic plan of throwing out the 'non-negotiation' clause has caused Wall Street to put out notices that the party may be ending.
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