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Subject:
Unbiased reporting the the health care industry
Nanheyangrouchuan
10/16/2009 9:49:43 PM
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Relentlessly punish the health insurance industry.
"http://www.msnbc.msn.com/id/33343181/ns/business-motley_fool/"
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Disable Fly-outWhat are flyouts?
The Daily Walk of Shame: "Unbiased" Health Insurance Industry Report
A recent PwC report on health-care reform seems factually flawed and politically timed.
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By Jordan DiPietro
updated 3:17 a.m. MT, Fri., Oct . 16, 2009
This new Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled today. If something's bugging you, too -- and we suspect it is -- go ahead and unload in the comments section below.
Today's subject: One day before a critical vote was to occur in the Senate committee on health-care insurance reform legislation, PricewaterhouseCoopers released a report warning of increased family premiums and an overall increase in health care costs if comprehensive health-care legislation was passed. The report, paid for by the industry trade group America's Health Insurance Plans (AHIP), is intended for circulation on Capitol Hill and will also be promoted in new advertisements. Karen Ignagni, AHIP's President and CEO, said "between 2010 and 2019 the cumulative increases in the cost of a typical family policy under this reform proposal will be approximately $20,700 more than it would be under the current system".
This all comes out despite a report released last week by the nonpartisan Congressional Budget Office (CBO) stating that the legislation in question would reduce the federal deficit by $81 million by 2019 and would probably extend coverage to about 29 million Americans who currently lack insurance.
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Why you should be indignant: Where to begin? There are at least three very good reasons to be apprehensive of PwC's report.
1. Because the report is commissioned by AHIP, a group that represents health policies from companies like Aetna (NYSE:AET), Aflac (NYSE:AFL), and Humana (NYSE:HUM), PwC should have been extra careful to dispel any apparent conflict of interests. However, instead of performing tremendous due diligence, PwC seemed to have produced a report with too many holes to poke through and too much room left to be guessing about the legitimacy of their work.
2. It is possible that PwC was not aware when AHIP was going to release their report. However, the fact that it was unveiled one day before a critical Senate committee vote seems to be suspicious at best, and politically motivated at worst. Officials of the Obama administration questioned the timing and authorship of the report.
3. John Gruber, a health care economist at the Massachusetts Institute of Technology, said he evaluated the report the day after its release and found it deeply flawed. Among the problems with PwC's analysis, Gruber highlighted:
a. The report fails to take into account administrative overhead costs that he said will "fall enormously" once insurance policies are sold through new government-regulated exchanges.
b. It also failed to consider government subsidies that would be provided to help moderate-income American's purchase insurance.
c. It reaches the opposite conclusion as Gruber, who says that premiums would actually decline for individuals purchasing and families purchasing insurance, with or without government subsidies.
The bottom line: Gruber says "If you literally take the data from the CBO, you can see that individuals will be saving money in a nongroup market."
What now? Well, you can choose to believe PwC's report or you can choose not to. Before you reach any conclusion, consider this: In the early 1990's PwC performed similar studies for the tobacco industry, which included bigwigs like Phillip Morris International (NYSE:PM) (then part of Altria) and Reynolds American (NYSE:RAI). They provided supposedly hard data that showed how a new excise tax on tobacco would destroy hundreds of thousands of jobs.
The report was apparently so lopsided that another consulting firm, Arthur Andersen, reviewed PwC's work. They found "serious methodological problems and errors of omission (one-sided analyses likely to lead to misinterpretation) in both the PW Report and the [tobacco industry's Tobacco Institute] Estimates." Ultimately, the string of blunders made by PwC led Andersen to report that "these and other serious flaws in the Price Waterhouse Report and the Tobacco Institute Estimates build upon one another in a cumulative fashion to present grossly exaggerated and misleading estimates of job loss from an increase in the federal excise tax on tobacco products."
There are some eerie similarities here considering that one of the methods considered for funding health-care reform is a tax on some very expensive "Cadillac" health-care plans. Looks to me like another case of lobbyists hiring consulting groups to find data that supports their claims instead of performing a comprehensive, objective analysis.
This report has conflict of interest written all over it. Ill-timed. Factually debatable. Contrary to reports by the CBO. I'm not buying one word of it.
Put aside the crazy town hall meeting thoughts on health-care reform for one moment and let me know -- what do you think about the PwC health insurance industry report?
Fool contributorJordan DiPietrodoes not own shares of any companies mentioned. Aflac is aMotley Fool Stock Advisorpick. Phillip Morris is aGlobal Gainsselection. The Fool has adisclosure policywith no conflict of interests and which releases information in a timely manner.
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