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Thursday, December 16, 2010

My Predictions for the Health Care Industry in 2011

It's the holiday season which means it's time for holiday parties, left over money in the company budget is blown on work parties, lots of food, plenty of excuses to drink alcohol, and lots of nostalgia. For bloggers, this means guaranteed blog topics either in a form of 1) a review of the year that was or 2) predictions for the next year. I have a tradition of making conservative predictions. Last year there was a trend for bloggers to dismiss predictions as so last year and boldly proclaim that no one can predict the future. Really? Is that the best that you can do? Are you going to tell me that bears poop in the woods (and wipe their butts on the the rabbits) and "refudiate" isn't really a word?

With that introductions, my non-refudiable 2011 health industry predictions are:

1. Hospital Executives will be the next set of CEO's to be hauled in front of Congress: and struggle to take their inquisitors seriously. I mean it's probably tough not to laugh at the histrionics of some of the members of Congress, let alone not stare at Henry Waxman since he's so funny-looking. Or want to ask Dennis Kucinich if he wants to sit on your lap and tell you what he wants for Christmas.

However, hospital executives will have to practice refraining their giggles as recent articles have pointed out how some hospitals are so dominant that they can paid above market rates by insurance companies. Another article pointed out that California inpatients hospital costs have increased 150% (or 11% annually) since 2000. The best defense that hospital executives could muster in response to these articles was "the data must be flawed." That's not much better than a response of "So's your face." Hospital costs (and accompanying specialists) make up at least half the health care dollar and are growing too fast not to be identified as key driver of runaway health care costs. While the insurance companies have received the most public scrutiny this year, next year it will be on like Donkey Kong for hospitals.

2. Despite state budget woes, Medicaid will continue to grows: I wanted to pick a word that rhymed with woes and couldn't figure out how to use toes. Since 2007, the number of Medicaid recipients has grown 16% nation-wide to 50 million. In Oregon, it's grown 25% in the last year. This growth doesn't even include the projected 16 million new Medicaid enrollees in 2014. This isn't going to change in 2011 since the states are getting larger matching funds from the federal government. Every $1 the state spends brings $1.60 from the federal government. Medicaid is still one of the best ways to arouse, er no, stimulate a state economy.

3. Everyone gets more comfortable with Medicare Advantage: Despite becoming the ginger-headed step child of government programs, a lot of reform provisions are borrowed from Medicare Advantage. Risk adjustment based on health conditions in the Exchanges is from Medicare Advantage. Open Enrollment periods are being used for individual insurance for those under 19 years of age. Currently, seniors are in the middle of the November 15th-December 31st Annual Election Period for Medicare Advantage. One of the crankier bloggers who doesn't like health reform (or much of anything) sees open enrollments as good replacement for an individual mandate that will likely be challenged in the Supreme Court. The senior citizen model for health insurance is quickly becoming the market norm under health reform only with slightly better shoes and a mobile phone app.

4. Health Care Costs will actually decline: Earlier in the year, there was discussion of reduction in the Pentagon budget. What they really mean was not an actual budget cut but the budget just wouldn't increase as much as it typically did. Rather than an increase of 3% in the budget, the increase would only be 1%. Until Robert Gates took a dump in the punch bowl and announced that there would be an actual budget cut complete with negative numbers.

This situation was pretty similar to health care costs where the holy grail was an increase that merely matched inflation. This may be the year that we see an actual cut. The money that insurance companies are inhaling from businesses like a frat guy sucks on a bong is about to get bogarted. The canary in the West Virginia coal mine was the Connecticut's Insurance division rejection of Anthem's 20% rate increase for individual plans and a counter offer of 0%. The rejection of rate increases is likely to become more common. Providers are likely to get similar treatment if the "budget" or health insurance revenues are frozen like a Siberian winter.

For the record, Senator Lieberman expressed disappointment at the Connecticut Insurance Division's decision because he saw a great opportunity to be a dick wad.

5. There will be more consolidation in the health care industry. This prediction is to absolutely guarantee that I get one of these right. Predicting consolidation is as safe as predicting that your human resource department will do something aggravating. There has been annual consolidation in every industry from health insurance to Thai food carts since the 12 tribes of ancient Israel were consolidated in 10. Even ancient Hebrews understood economies of scale and market power.

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