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Bird flu – the Katrina of the health insurance industry?

I’ve been avoiding posting on this because there are so many smart people who know a lot more than I about epidemiology, flu transmission, viral mutation, and public health. Thank goodness for that.
But, a post by Revere at EffectMeasure scared me silly.
If this disease mutates (and reports indicate it is only two mutations away from becoming transmissable from human to human) and travels to the US (which it is sure to do) we are going to face not only a public health crisis, but an insurance crisis as well.
Who’s paying for the tamiflu, intensive care, respirators, and hospital charges? Medicare, Medicaid (taxpayers), insurance companies and self-insured employers. The industry has done an excellent job of managing medical loss ratios by negotiating with providers and increasing prices. Many health plans pride themselves on this, and so they should.
What we haven’t done, nor do we have any experience in, is planning for a pandemic. Here’s a few numbers that may do to you what Revere did to me.
If the bird flu is similar to the relatively mild flu pandemic of 1968, the WHO prediction is for between 2-7 million deaths worldwide, and millions more infected. That may be optimistic.
If it is similar to the 1918 flu, projections are for 150 MILLION deaths, and hundreds of millions more infected. Not to mention a tremendous impact on the world economy, transportation, trade,
The US has about 5% of the world population. Extrapolating from the higher number, we could see 7.5 million deaths and tens of millions sickened. Let’s say that number is way too high, as we have an excellent health care infrastructure, lots of money, and lots of docs and pretty good public health. All those positives may reduce the impact by, say, 90%. So, we are left with 750,000 Americans dying and millions more sick.
What does this mean for you?
I don’t see how the US health insurance industry can pay for this.

3 thoughts on “Bird flu – the Katrina of the health insurance industry?”

  1. Joe,
    I really enjoy your newsletter and often forward your comments to my management staff. I am the CEO of a $20 million WC busines owned by a larger health system.
    My concern on the Bird Flu is that it could be another Y2K issue, essentially a non-issue. My concern is the media is picking this up as it makes wonderful copy e.g. 750,000 American deaths. Yes we should be prepared but forecasts of deaths are just media foder, and fillers.

  2. Tom – thanks.
    You’re absolutely right; it could be a false alarm. I’d point out that Y2K while a pain in the neck did not involve potentially millions of deaths and the accompanying damage to the world economy.
    If Homeland Security can’t handle a couple hurricanes, I have serious concerns about their competence when it comes to something truly catastrophic (not that the hurricanes were not, but this is a couple of orders of magnitude larger).
    Worst case – the Feds and local authorities get their act together, we improve the public health system’s monitoring and assessment capabilities, and no one dies.
    Actually, that might be the best case.

  3. One of the things that baffles me when people discuss the Y2K ‘scare’, is that many companies invested billions of dollars over several years to make sure that transition went smoothly. In hindsight it looks like much ado about nothing, but perhaps that’s because there was so much work put in to make sure it went that way.
    As a parallel, if our country was prepared to invest the billions of dollars to keep this flu from reaching pandemic proportions (assuming such steps are even possible), again we’d be faced with a “much ado about nothing” situation. No one would know that 750,000 deaths had been prevented, because they’d been prevented.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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