Medicare Map Favors Aetna

Geography could play an important role in the new Medicare game.

In recent months, managed care companies from across the nation have rushed to capitalize on a major expansion of the government insurance program for senior citizens. However, national carriers like Aetna (AET Quote) and WellPoint (WLP Quote) may have already secured the best places in line. Meanwhile, regional players like Sierra Health Services (SIE Quote) could find themselves stuck behind, competing for less-profitable segments of the new Medicare Part D drug-coverage business.

That's the suggestion offered Wednesday by Credit Suisse First Boston analyst Patrick Hojlo, who recently discovered that the new senior business appears to be worth more in certain parts of the country than in others. Hojlo reached his conclusion after looking beyond national estimates for Medicare premiums to more specific -- and often widely varying -- state-by-state data.

"There has been a lot of discussion over the past week about the recently announced Part D premium benchmarks, most of which contained a positive spin," wrote Hojlo, who has an overweight rating on the managed care sector overall. But "we have reached some conclusions that are, at the margin, less positive than the consensus conclusions gleaned from last week's headlines."

In a recent parade of announcements, managed care companies marched forward to celebrate fresh news about the affordability of Medicare prescription drug coverage. After reviewing competitive bids from private insurers, the Centers for Medicare and Medicaid Services (CMS) determined that monthly premiums for the new drug coverage should cost about $15 less for the government -- and another $5 less for seniors -- than originally anticipated. In turn, many have assumed that those cheaper health plans will prove attractive to a larger group of seniors than expected.

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