Have A Nice Hot Cup Of Schadenfreude!

Have A Nice Hot Cup Of Schadenfreude!
(It doesn't f'n get any better than this!)
=========================================

HMO's and friends were stabbed and beaten on
Wall Street today and then found out they aren't
covered for malfeasance. Or prescription
drugs. Heheh. (Ever wonder about the high
cost of healthcare and health insurance?
It's becuz you bin gettin ripped off, son...)

Note that this is an outgrowth of Spitzer's
inquiry into AIG and MMC's (alleged) malfeasance,
which is now rippling through all aspects
of the insurance industry. It also follows
the reaming of Merck and Pfizer, among
other Big Drug companies -- which means
that as of now, the entire US corporate
health industry is undergoing Enronization
on Wall Street. [Blood in the water! look
out below! Don't try to catch the falling
knife! Is Elliot Spitzer's hand in his
pocket or is he just glad to see us? Heh.]

You can look at the Healthcare Industry
as a group using stock symbols XLV and
IYH. Those represent today's Enrons,
though I suspect most of them have real
businesses underneath the shenanigans...
however much they appear to be nothing
but a barrel of monkeys, deep down they
are seriously compassionate caregivers
and Good Doers!:)

So now we have autos, insurance, health,
airlines, Fannie Mae/Freddie Mac, and
the Democratic Party, Inc. on the ropes,
and investors rushing for the exits!
Did I miss anyone? Who is next for the
Hall of Shame?

* * *
<pre>
The Day of "Long Knives" for the
HMO/Health Insurance Industry: 10/19/2004
=====================================
AET Down 11.57 -11.84% Aetna Inc
CI Down 6.85 -10.29% Cigna
WLP Down 11.30 -11.50% Wellpoint Health Network
UNH Down 6.85 -9.34% UnitedHealth Group
HUM Down 1.18 -6.15% Humana INC
PUK Down 1.40 -8.41% Prudential, PLC
CMX Down 2.73 -8.71% Caremark RX
UCI Down 7.00 -22.58% UICI
ATH Down 7.30 -9.01% Anthem Inc
SIE Down 8.33 -16.78% Sierra Health

Other Insurance Company "Victims"
(Previously eviscerated)
=====================================
MMC Down 1.47 -5.75% Marsh & McLennan
AIG Down 1.98 -3.32% American International Group
UNM Down 1.33 -9.84% Unumprovident
AZ Down 0.10 -0.99% Allianz AG
AXA Down 0.04 -0.19% AXA
ING Up 0.02 +0.08% Ing

Corporate Hospital Operators
(Previously eviscerated)
=====================================
HCA Down 0.44 -1.24% HCA Inc
THC Down 0.26 -2.52% Tenet Healthcare
PHS Down 2.11 -5.79% Pacificare Health Systems
HMA Down 0.83 -4.17% Health Management Associates
<pre>

QUOTE LINK
http://finance.yahoo.com/q/cq?s=CI,PUK,CMX,UCI,UNH,ATH,WLP,SIE,AET,MMC,AIG,UNM,az,axa,ing&d=v1

NEWS LINKS:
http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh61841_2004-10-19_22-35-28_n19303971_newsml

HMO shares plunge on worries over Spitzer probe
Tue Oct 19, 2004 06:35 PM ET
(Updates with Aetna confirmation, closes shares,
adds analyst comment, byline)

By Kim Dixon

CHICAGO, Oct 19 (Reuters) - U.S. health maintenance
organizations shares fell sharply on Tuesday as the
New York attorney general's investigation into the
insurance industry broadened to include health
insurers.

Cigna Corp. (CI.N: Quote, Profile, Research) , and
Aetna Inc. (AET.N: Quote, Profile, Research) , two
of the biggest U.S. health insurers, said on Tuesday
they received new subpoenas in a broadening investigation
by Attorney General Eliot Spitzer into conflicts
between insurers and brokers.

Aetna and Cigna, which disclosed a first set of
subpoenas from Spitzer in June, said they are being
questioned about dealings with brokers, which act as
intermediaries between HMOs and employers.

At issue are the fees paid by HMOs to brokers for new
business. Spitzer is probing the payments, called
contingent commissions, and also potentially fictitious
bids made at the expense of corporate and public
clients.

News of the requests came a week after Spitzer said
he was suing the world's largest insurance broker,
Marsh & McLennan Cos Inc. (MMC.N: Quote, Profile,
Research) , on charges of bid rigging in an inquiry
that has implicated several big insurers.

Marsh's Mercer Human Resources division is one of the
biggest consultants to big companies on employee
benefits including health care.

"Connecting the dots, if Mr. Spitzer has already
investigated at least two other MMC units, it stands
to reason that the next logical place to look for
possible misdeeds is Mercer," said Sheryl Skolnick,
a Fulcrum Global Partners analyst. The risk to the
health insurers "is much more tangible than the Street
has previously thought."

New York Attorney General spokesman Marc Violette
declined to comment on whether Spitzer issued new
subpoenas. He did say Spitzer said the corrupt business
practices likely are not limited to property and
casualty insurers.

The brokers are commonly used among companies with
500 or fewer employees, according to Ed Kaplan, a
health policy expert at the Segal Co., which consults
on benefits issues for employers.

COST CONCERNS

Cigna and Aetna, as two of the biggest U.S. health
plans, are less likely to do business for these smaller
clients. These big HMOs are more likely to use employee
benefits firms as consultants, which get paid directly
by employers. That would eliminate the issue of fees
paid by HMOs to the brokers in question.

Still, amid a public outcry over double-digit health-care
increases, they are a ripe target for Spitzer, analysts
said.

"We fear that their size could make them of the most
interest to Spitzer nonetheless," Ellen Wilson, a Sanford
Bernstein analyst, told investors in a research note.

"Broker commission payments can be tied to volume, which
tells us there is a gray area that could leave the sector
open to at least a look by Spitzer."

A call into the biggest U.S. health plan, UnitedHealth
Group Inc. (UNH.N: Quote, Profile, Research) was not
returned. The second-biggest managed health-care company,
WellPoint Health Networks Inc. (WLP.N: Quote, Profile,
Research) said it had not received any subpoena from
Spitzer, but also noted it does not do business in New
York.

Aetna shares ended down over 11 percent, at $86.17. The
shares of UnitedHealth Group fell nearly 10 percent to
$66.50. Humana Inc. (HUM.N: Quote, Profile, Research)
fell 6 percent to $18.02. WellPoint fell 11 percent to
$87 and Cigna ended down 10 percent, at $59.73, all on
the New York Stock Exchange.

<pre>
Companies mentioned in this article
Data as of 19 Oct 2004 19:06 ET. Delayed at least 15 to 20 minutes.
Symb Company Last Chg Chg %
AET.N AETNA INC 86.17 -11.57 -11.84%
CI.N CIGNA CORP 59.73 -6.85 -10.29%
HUM.N HUMANA INC 18.02 -1.18 -6.15%
MMC.N MARSH&MCLENNAN 24.10 -1.47 -5.75%
UNH.N UNITEDHEALTH GP 66.50 -6.85 -9.34%
WLP.N WELLPNT HLTH NET 87.00 -11.30 -11.50%
</pre>

=============================================
Appendix: Price Gouging

Tenet:
http://www.uow.edu.au/arts/sts/bmartin/dissent/documents/health/Tenet_Gouging.html

Kaiser:
http://www.consumerwatchdog.org/healthcare/nw/nw002408.php3

Various HMO's:

http://www.wsws.org/articles/2001/jan2001/hmo-j23.shtml

US health plans drop coverage for nearly one million
elderly and disabled members
By Elisa Brehm
23 January 2001

Use this version to print

On January 1, nearly 120 HMOs (health maintenance
organizations) pulled out of Medicare—the federal
health care program for senior citizens and the
disabled—officially dropping close to 1 million
people from coverage. Another 53 HMOs reduced
their service areas. The most important health
care service these private plans offered was
low-cost coverage for prescription drugs, which
has never been included in the regular Medicare
program.

For those people with no other HMO in their city
or county, there will no longer be any coverage
or protection from the skyrocketing cost of
prescriptions. A staggering number of people are
affected. According to Alan Mittermaier, president
of HealthMetrix Research Inc., a company that
tracks the Medicare HMO market, “Our best guess
is that up to 50 percent of the 934,000 disrupted
beneficiaries will not have another Medicare HMO
option to shift into.”

Urban areas have been hard hit. The eastern part
of Indianapolis does not have an HMO in which the
elderly can enroll, nor do the Baltimore or
Washington, DC metropolitan areas. The situation
in rural areas is worse; 94 percent of those
dropped as of January 1 have no other HMO to join.

About 16 percent of the nation's 39 million
Medicare beneficiaries are enrolled in HMOs.
Medicare insures 36 million elderly as well as
3 million permanently disabled beneficiaries under
the age of 65. Medicare HMOs began their operations
in 1985, but enrollment increased in 1997. The
government at this time began to promote the
programs, claiming the profit-making HMOs would
create a competitive environment and thus lower
the overall cost of health care.

Seniors were enticed to enroll primarily due to
the prescription drug benefit, because the regular
fee-for-service Medicare program does not pay for
drugs, dental care or vision care. But after the
initial influx of seniors into the program the
number of people enrolled has steadily declined
as more and more HMOs have dumped their Medicare
patients.

The number of people affected by the new
terminations far exceeds the number dropped in
either of the last two years. In those years,
HMOs pulled out of more than 400 counties in at
least 33 states, directly affecting 734,000
Medicare beneficiaries—407,000 in 1999 and
327,000 in 2000. Nearly a third of all
beneficiaries enrolled in managed care have
been affected.

Numerous reports indicate that the cuts are
affecting an extremely vulnerable section of
the population—those who require ongoing
medication in order to live. A survey conducted
by the Kaiser/Commonwealth Fund three years
ago noted, “Medicare by definition covers
beneficiaries who are at high risk for acute,
chronic and disabling health conditions.
Although the media often portray a relatively
affluent and healthy older generation, in
reality one of three Medicare beneficiaries
fits this image.”

A fact sheet released by Mathematica Policy
Research, Inc. found that most people forced
out of their HMOs had annual incomes of
$20,000 or less, and one-third did not even
have a high school education, and had poor
health. The current economic downturn will
undoubtedly exacerbate this situation for
people thrown out of the programs.

Although HMOs were required by law to notify
all of their terminated members of other
coverage options by October 1, only three out
of four people whose HMOs were leaving Medicare
received notification. Additionally, the report
showed that only a little more than half of
those surveyed were aware of their other health
care options.

Aetna U.S. Healthcare made the biggest cutback,
canceling coverage for more than 355,000 people
in 14 states. The company left seven Northern
California counties where 15,280 people were
enrolled in its Medicare HMO. In Ohio the
company dropped all 52,330 Medicare HMO
beneficiaries.

The case of Julie Langdon of Springfield, Ohio
was reported in the New York Times. Her plight
is a common one. One day after she had throat
surgery she was cutting her pain pills in half
to make them last. She is among the 3 million
Americans on Medicare because she is disabled.
Langdon has had numerous health problems,
including heart troubles and unsuccessful
surgery for a goiter that left her with a
damaged vocal chord. As a member of the Aetna
HMO Langdon was paying the health group a $91
a month premium, making her maximum co-payment f
or each prescription $20. When Aetna pulled out
she was left with no drug coverage. In Springfield,
the only remaining HMO that will accept Medicare
members, United Healthcare of Ohio, does not
cover prescription drugs.

Medicare was established in 1965 under Lyndon
Johnson, when health coverage for the elderly
was considered the first step towards a universal
health care system. The Medicare program was the
most important piece of social legislation to be
enacted since the passage of the Social Security
Act in 1935, but no major revisions in coverage
have been enacted since the program's inception.
More than a decade ago, Congress repealed a
Medicare expansion that would have included
prescription drug coverage.

The lack of prescription coverage under Medicare
is a national scandal. Some 35 percent of seniors
have no drug coverage at all and many of the rest
find their insurance covers very little. The result
is that many seniors do not fill their
prescriptions. Bruce Vladeck, who used to head the
federal agency that runs the Medicare and Medicaid
programs, calls drug coverage for retirees “a
disappearing phenomenon.”

When the present HMO cuts were first anticipated
last July, investors responded favorably to the
news that at least three-quarters of a million
people would be dropped. HMO stock prices went up
across the board. “By doing what they're doing,
the managements are showing financial discipline,”
commented Todd Richter, a health care analyst with
Banc of America Securities. “It's real nice
providing prescription drug coverage and vision
care coverage for grandma, but if you can't make
a fair return on it, there's no reason to do it.
They don't have an obligation to take care of
grandma at a loss.”

The gouging of seniors by the pharmaceutical
companies is a feature of everyday life. Drug
expenditures are now the fastest-growing component
of health care costs, increasing at a rate of about
15 percent per year. Prescription costs account for
about 8 percent of health care spending, and at
their current rate of increase they will soon
surpass spending for physicians' services and, for
many HMOs, the costs of hospitalization.

The June 2000 issue of the New England Journal of
Medicine reported that Americans regularly pay up
to twice as much as Europeans and Canadians for
the same drug. Prices also vary widely within the
United States, and are often highest for those with
the greatest need who are least able to pay.

The elderly are paying an increasingly larger share
of their income for medical care. People 65 and over
make up only 13 percent of the population, but they
account for 42 percent of total drug spending. A
study by Families USA, a nonprofit health-care
research group, said Americans 65 and older pay
an average of $1,205 a year for prescriptions—up
from $559 in 1992. By 2010, the cost are projected
to rise to $2,810.

Medicare recipients with no supplementary insurance
pay, on average, twice as much for the 10 most
commonly prescribed drugs than people in some of
the large HMOs and the Veterans Affairs system. For
example, a month's supply of the cholesterol-lowering
drug Zocar (simvastatin) was reported last year to
be priced at $103.87 for Medicare recipients, as
compared to $42.95 for favored customers. Many
chronically ill, older Americans are hit with annual
drug costs in the thousands of dollars—sums they
simply cannot pay. The stories are all too common
of the elderly not only taking reduced dosages, but
of sharing drugs with their spouses, or simply doing
without, choosing food and heat over prescription
drugs.

The top 10 drug companies are reported to have
profits averaging about 30 percent of revenues.
Over the past few years the pharmaceutical industry
has been by far the most profitable industry in the
US, more lucrative than commercial banking. According
to a recent issue of Fortune magazine, in 1999 the
pharmaceutical industry realized on average an 18.6
percent return on revenues.

Earlier this month the federal government issued
new payment increases for HMOs participating in
the Medicare program. In 2001 most HMOs participating
in the Medicare+Choice program will see their rates
rise by 3 percent over 2000 rates as a result of
legislation passed by Congress in December, which
will give the health plans an additional $9 billion
over five years.

See Also:
12 million young adults in the US lack health insurance
[14 June 2000]
Half of US bankruptcies caused by medical problems, new study finds
[28 April 2000]

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