Can health care legislation that insurance and pharmaceutical companies like still be a good bill?
I’ve had a number of comments in the past few days pointing to the upward trending of health insurance company stocks as proof positive that the Senate health care reform bill is little more than a gift to the nation’s health care industries. After all, if the legislation does so much to benefit the nation’s health care consumers, why are the healthcare suppliers and their investors so darned happy about it?
It’s certainly not an unreasonable question. But to arrive at an answer, we should put a few things into perspective.
There is no question that the health insurance companies have gone on a stellar run since the day Joe Lieberman first announced that he would filibuster any bill containing a public option. Since Lieberman voiced his opposition, on October 27, 2009, the large public health insurance companies have risen, on average, about 25% – outpacing the Dow Jones by a significant margin.
Not bad.
It would be naïve to expect that the market would not react in this way upon learning that the government was not going to become a competitor to the private health industry. It is also not surprising that the market expressed its relief over the failure of a Medicare buy-in program by further driving up share prices.
But if we take a longer view of health insurance industry share prices, the picture is quite a bit different.
Going back 10 years, we find that while share prices of the largest health insurance companies are nicely off the ten year lows reached earlier this year, they remain well short of their ten year highs experienced in 2005.
Accordingly, while the market reaction to the failure of a public health option is what we would expect, we should be careful not to make too much of the rising share prices. Wall Street knows that health insurance companies are working on ever smaller profit margins (the average is now about 3.5%) and, given that the new regulations negatively affecting the industry will kick in over the next five years, the future cannot be as rosy for these companies as in the past.
It is also important to keep in mind that market investors rarely play for the long-term. It didn’t take a financial genius to realize that the doom of the public option would boost these stocks. Accordingly, investors reacted to the situation by storming into the market to buy up these securities, knowing they will be long gone when things get tougher in the coming years. I know I would have been snapping up these babies were it not for my policy of not buying shares in companies I write about.
Nevertheless, it must be acknowledged that something good happened for the health insurance companies and other private industry stakeholders– and that can’t be good for the health care consumers, right?
Not necessarily. While those who support an increase of government involvement in the health care system, whether via single-payer, public option or Medicare expansion, clearly see the bill as providing far less reform than they would like, that doesn’t mean that the legislation does not offer significant reform.
To illustrate the point, we can turn to the legislation offered in 2001, by Senator Ted Kennedy, entitle the “Patient’s Bill of Rights”. While bills purporting to offer increased protection to patients made it through both houses of Congress, the legislation ultimately failed when the Conference Committee could not reach agreement on how much compensation patients could claim in legal disputes over healthcare provision. In other words, the House was not prepared to back up the Patient’s Bill of Rights with the legal teeth it required.
The legislation, which was widely popular with liberals at the time, included the following provisions –
• Applies comprehensive protections to all Americans in health plans. Under the Act, states can not enact weaker standards; they may only adopt standards that are stronger or are substantially equivalent to those called for by S. 1052.
• Allows for timely, independent appeals processes for patients who have had claims denied. In addition, when patients have emergencies, claim review can be expedited.
• Adheres to the standard set out in the landmark Supreme Court case Pigram v. Herdrich. Under Pigram, cases concerning medical judgment can be heard in state court, but cases involving plan administration must be heard in federal court, so as to ensure that insurers can administrate their plans uniformly.
• Requires plans to allow patients access to specialists, even if they have to go out of the plan’s provider network. If the plan has failed to meet the patient’s needs, they must provide patients this access at no greater cost than if the benefit were obtained from the plan’s in-network providers.
• Applies the “prudent layperson” standard to review of ER visits, meaning that if a patient reasonably believes that she needs emergency care, she can go to any emergency room, regardless of whether it is in network, without prior plan authorization.
• Allows women to list their OB/GYNs as their primary care providers, and members to make pediatricians the primary care providers for their children.
• Protects continuity of care for patients who are in the middle of a course of treatment for a chronic or disabling illness by requiring a transitional period during which patients can continue working with their providers if they are forced to change plans or their providers leave the network.
• Assures that plans will not prevent doctors and nurses from discussing all treatment options with their patients. It also prohibits incentive arrangements that make doctors limit care in order to avoid financial pressure.
A review of the Senate reform bill reveals that much of what Kennedy failed to get through almost ten years ago is now included in the legislation that is expected to ultimately be signed into law by the president. And there is quite a bit more. Kennedy’s 2001 efforts did not provide subsidies to bring millions more into the health care system. Indeed, Kennedy’s Bill of Rights merely provided some protections to those who already had access to the health care system. Still, this narrow expansion of patient’s rights could not manage to pass through Congress not so many years ago.
So, is what we are getting progress?
It’s hard to conclude that we are not – the increase in Sen. Sanders’ community health care center program (originally created by Ted Kennedy) from $2 billion annually to $ 10 billion annually is, alone, a huge improvement when it comes to taking care of people who don’t have coverage or money. So, while the legislation may not be all the progress many were hoping for in the reform effort, there is no way it is not significant progress.
There will be one more ‘bite at the apple’ as the Conference Committee forms to merge the House and Senate bills into one, final piece of legislation. But we should not kid ourselves- the final bill will have to be virtually identical to the Senate version if it is to avoid a filibuster when introduced to the Senate.
But we should not forget that virtually every significant piece of social legislation passed into law in this country has given us far less than what was desired and required at its inception. In each instance, the legislation was constantly improved over time as incremental change resulted in getting closer to what had been sought by proponents at the outset. There is no reason to expect that it will be different in this case – unless the GOP manages to regain control of both branches of Congress and embarks on an effort to rescind this legislation before it really kicks in.
For those who are angry we didn’t get enough, keep this in mind – if you pick up your marbles and go home, you may never get you what you want. If you stick with it, history tells us you will.
Post Your Comment
You must be logged in to post a comment
T/S Members
Log in with your True/Slant account.
[...] This post was mentioned on Twitter by rickungar, Tweets Tube. Tweets Tube said: Can health care legislation that insurance and pharmaceutical companies like still be a good bill? http://bit.ly/6BV8Ym [...]
“There is no reason to expect that it will be different in this case – unless the GOP manages to regain control of both branches of Congress and embarks on an effort to rescind this legislation before it really kicks in.”
Isn’t it possible that not trying to get much more from the start of this effort, thus getting much less at the end, might make it easier for the GOP to run against this mess?
I’d like to put more here but I have to go. Please see this, Rick – http://trueslant.com/davidknowles/2009/12/22/what-the-healthcare-bill-does-do/#comments
Maybe…but I suppose we’ll never know. What we do know is that we were never going to get single-payer. I, personally, have never believed we were going to get a public option. Where it might have made a difference is if we had gone to the Medicare buy-in earlier.
In response to another comment. See in context »Hello Rick,
You wrote:”But we should not forget that virtually every significant piece of social legislation passed into law in this country has given us far less than what was desired and required at its inception.” I do not see that this is so. Some have and others have not, it changes from administration to administration and congress to congress. For example eligibility for Medicare is still the same as it was in 1965. The National Labor Relations Act still excludes agricultural labor as it did since its inception. However it is actually less comprehensive than it was after the passage of the Taft Hartly Act of 1948. On the other hand, Social Security does cover more people than when it was first conceived. OSHA has fluctuated back and forth but remains essentially the same, as does the EPA.
So I do not see how you can make a blanket statement that you did, the facts do not support it.
Maybe it is a matter of disagreeing on what the really important social legislation has been. First, Medicare eligibility has been expanded from the origins to include classes of disabled people not originally included. Further, the original Medicare program was composed of Part A (hospitalization) and Part B (physician care), each of which have been dramatically expanded since origin. Additionally we now have Parts C (medicare advantage) and, more importantly Part D (drug coverage.) So, it has changed and advanced quite a bit.
While I can’t argue with you that OSHA and EPA programs are not important pieces of legislation, I would have to research to see what changes and advances there have been, but I would be shocked if they have not advanced. I won’t, however, say you’re wrong until I look into it a bit more. I’ll come back to you.
In response to another comment. See in context »There was something troubling me about your point but I couldn’t put my finger on it. I didn’t want to suggest that OSHA and EPA were, somehow, less important because they are important.
I think I know what is bothering me.
These are not social programs that were created by Congress and improved – or retracted from – over time. They are agency creations tasked with overseeing areas that, as you correctly point out, are indeed important. As such, changes occur as part of an administrative regulatory process within those agencies. In the case of OSHA, about half of the OSHA agencies are state run (this was option given in the original legislation.) In the case of EPA, once created, it is part of the executive branch.
I think this is a fair distinction. While programs like Social security, Medicare, Civil rights, etc. are also subject to agencies which oversee them, the key is that the Congress changed the laws or created programs that were to be overseen and administered by agencies. In the case of, say OSHA, congress didn’t legislate new rights or entitlements – they created an agency to protect workers from workplace injury. I think there is a real difference and, based on that, I think I stand behind my point.
I don’t say this to be contrary or argumentative as I do think you make a reasonable point.
In response to another comment. See in context »Rick, civil rights is a program?
In response to another comment. See in context »Where specifically does the Constitution prohibit
American citizens from going into THEIR Congress and arresting harry reid for treason? Is it in the section following the one that allows the government to force its citiznes to buy someting such as health care?
Too bad there isn’t legislation to stop you from spewing your drivel and lowering the intellectual tone on a site such as this. But that’s what makes America great I guess.
In response to another comment. See in context »You have found something intellectual in the health bill to discuss?
The traitor harry reid will not even allow voting on this in the light of day.
You’ve got yourself an abortion funding bill….and that is about it.
And it will take effect in 2014 after the three stooges, pelosi, obama, reid….are kicked out of office….
In response to another comment. See in context »an abortion funding bill? really?
http://blog.beliefnet.com/news/2009/12/abortion-looms-as-possible-blo.php
i am paying for wars with my tax money, even though i am against it, but i have no say in how my tax dollars are being spent.
and as a woman, i can pretty much assure you that no woman WANTS to have an abortion. health, age, economic issues play a big part in whether or not to abort or not.
In response to another comment. See in context »Okay I’m sold. You make a good case but this may be off topic but I am also paranoid about big business becoming too big in areas of public interest. Enron screwing of California is a case in point.
Rise in health care stock may not indicate that Congress has offered the industry a gift and it seems that insurers will not escape reforms. However it is interesting to note that the big four investment banks are terribly interested in the businesses that now control some 15% of the nation’s GNP and will capture a even larger bite of our economy: http://seekingalpha.com/article/172152-u-s-healthcare-legislation-investment-impact
While my fears of wall street meddling has be tempered it has come to my attention that health insurance can be sold on the futures market as a commodity dropping it in that exotic unregulated derivatives marketplace.
As for some improvemnts that don’t go to Medicare buy ins or public options we really need to get rid of the health insurance anti-trust exemption in reconciliation as well as stronger policing of their bookkeeping to make sure the money that is mandated for health delivery is in fact going to health care.
How do you mean health insurance can be sold on the futures market? Are you possibly thinking about re-insurance? If not, I’m curious what you mean.
In response to another comment. See in context »Rick, you got yourself a health bill passed early this morning…now it is time for domestic enemies obama, reid, pelosi to celebrate
Democrats everywhere will be celebrating the murder of health care in america
Well I do know something about re-insurance but this seems different and is related to risk management, that area that got the economy in a bit of trouble but I may be interpreting this completely incorrectly. This stuff is complicated. But I came across this: http://findarticles.com/p/articles/mi_m1094/is_n2_v28/ai_13834938/pg_2/?tag=content;col1
Now I have in my time been involved with some bookies and these derivatives resemble the way the mafia would lay off bets from one region against another.
Now you mentioned that there needs to be underlying value: http://www.questia.com/googleScholar.qst;jsessionid=LzydhgK0vKvBL3DWGhQYvvdJbWlN6pb2wLLW2nfHTv2Xxd1blp2N!1624433048!1122893772?docId=5000373229
Now this could all be great for business, risk management is the basic premise of insurance but this seems out of the box. I read one piece that did not think this new application was appropriate for health insurance. Then again maybe this is re-insurance.
Lets try that again:
http://www.questia.com/googleScholar.qst;jsessionid=LzydhgK0vKvBL3DWGhQYvvdJbWlN6pb2wLLW2nfHTv2Xxd1blp2N!1624433048!1122893772?docId=5000373229
Thanks for sharing. I learnt a lot from your site. I would also like to share some very useful information with you all about One Law Center . Make sure you check it out.