A number of subprime and prime borrowers were given mortgages regardless of income. Lenders tried to justify this by assuming real estate prices always go up.

But this where income inequality comes in:

Real median wage in the United States has been stagnant for twenty five years, despite an almost doubling of GDP per capita. About one-half of all real income gains between 1976 and 2006 accrued to the richest 5 percent of households. The new “gilded age” was understandably not very popular among the middle classes that saw their purchasing power not budge for years. Middle class income stagnation became a recurrent theme in the American political life, and an insoluble political problem for both Democrats and Republicans. Politicians obviously had an interest to make their constituents happy for otherwise they may not vote for them. Yet they could not just raise their wages. A way to make it seem that the middle class was earning more than it did was to increase its purchasing power through broader and more accessible credit. People began to live by accumulating ever rising debts on their credit cards, taking on more car debts or higher mortgages. President George W. Bush famously promised that every American family, implicitly regardless of its income, will be able to own a home. Thus was born the great American consumption binge which saw the household debt increase from 48 percent of GDP in the early 1980s to 100 percent of GDP before the crisis.

Increased credit and debt filled the gap left by stagnant wages. In order to maintain the living standard of their middle class parents and grandparents people had to assume more debt and financial oligarchy was willing and able to supply it.

That story was really broken by the blogs, so it's kind of interesting the New York Times investigated and expanded.

Yeah, I mean while hey, great, at least they are paying back TARP funds but since when is investing supposed to be about software and tricks vs. a reflection of the value of an investment...

it's like the ultimate fictional economy.

If expanding the money supply was the solution then we should already have arrived at it.

I remember some politicians saying this about a decade ago, but no one seemed to care. Now the politicians don't care either.
We've been selling out the long-term for short-term solution, pandering, and graft, and pretend like there are no consequences.

That's not to say the rest of the world's governments are much better. They too failed to see this coming despite it being obvious. Everyone in power has gotten rich on the status quo, so they were in no rush to change things.

Now the paradigm has changed and everyone is trying to get back to 2006, except that there is no bridge to get back there.
We are going to waste massive amounts of resources trying to return to the past, and fail. If I was smarter I could profit from this folly. A really smart guy would be able to see how this plays out and profit from its collapse.

why do you seem unable to do it in order to deal with what they really say and which has been amplified by their own quarterly earnings reports for years as well as multiple major studies in analyzing costs?

I'm sorry but writing realms of nonsense is getting really ridiculous.

Now you are cherry picking one HMO and finding out some wacked out quote by one guy.

At this point you need to read the EP FAQ. You cannot cherry pick an exception of one HMO or one MD to deny the massive reports and statistics from major studies, done by credible organizations, including the GAO, to try to spin stats to what you wish to believe.

I mean this is really a waste of time, last time you tried to claim a HSA is somehow health insurance!

The SEC reports are fairly simple to read, clear concise and meant for the novice to read. That is why they are there. I think I proved that the "financial news" people do always report well. There is no way to turn it, they misrepresented the quarter to quarter compairson. IF they would have given a long term compairson, I would have no problem. It would be like when I has my investment business. I starved for many years, then one year was a great year. So how wrong it would have been for the editor to say..."see his profits tripled compared to last year." Sadly that big, big year never continued and everything turned back into making a regular living. At least the starving years were over. :)

Now, there is no doubt in my mind that there are some bad, bad actors out there that are raking in profits. It also varies by State. In my State of PA there were many years that HMO's were losing money. "The study also indicated that 1997 was the third straight year of decreasing profits for HMOs in Pennsylvania. Weiss Ratings' study also found out that HMOs spent 90.1 cents on every premium dollar on medical expenses in 1997 as well as another 12.8 cents on administrative costs. HMOs are currently enhancing their investments in the stock market to compensate their operating losses."

If I were going to start another business health insurance would be the very last. My friend is a sales rep for a subsidiary of Genuine Parts. They work on a constant 25% profit margin. Look up and see how much they make around the world. Now that is where the money is and there isn't any surplus/reserve requirements or tort lawyers after you.

Profits were more evenly distributed among the 456 HMOs reviewed by Weiss, with an increase in profits seen among the smaller HMOs. During the first three quarters of 2001, 28 of the largest HMOs were responsible for $534.7 million, or 61 percent of the industry's total profits, while 428 mostly smaller plans contributed $344.7 million, or 39 percent to the industry's total bottom line. For the same period in 2000, only 33 HMOs were responsible for an aggregate $1 billion in gains, while 495 companies suffered aggregate losses totaling $158.9 million. "Despite the modest profit decline, the industry actually looks healthier as a larger number of companies increase premiums and consolidate in -- or withdraw from -- unprofitable markets," said Martin D. Weiss, chairman of Weiss Ratings. "Unfortunately, this also means more consumers are being forced to bear the burden of the industry's recovery through rising health care costs and, in many cases, a reduction in coverage options."

Continuing a recent trend, Texas and Michigan HMOs reported the worst earnings. In Texas, 35 plans reported an aggregate loss of $412 million with 23 of the 35 HMOs, or 65.7 percent, reporting red ink. Michigan's 27 plans reported an aggregate loss of $28.2 million, with 12 of the plans, or 44.4 percent, losing money. 2001 "HMO failures are still near the highest level in recent history; and failures among insurers and banks are also on the rise. The best protection is accurate forewarnings." According to Weiss, what you have been seeing in HMO's is the offset of major loses in the 1990's and early 2000's. That doesn't play well in Peoria and I think the HMO's could find a more palatable way to trend their premiums. It will be different in the government plan. Need money to reset the down years, just tax someone or print the money. Easy and done.

Increased profits do not always mean increased premiums. "Humana attributed its profit gain to

1. better risk assessment of subscribers, resulting in a premium uptick,
2. pared administrative costs associated with consolidation of service centers, and
3. a slightly lower tax rate that year

said Regina Nethery, vice president of investor relations."

There was a lot of reporting like this in the late 1990's early 2000's: " Coventry Health Care of Kansas, Inc. (Wichita, Kan.) was downgraded to D (Weak) from C- (Fair) due to a progressive decline in earnings. The company reported losses of $1.8 million in 2000, $7.3 million in 2001, and $5.5 million during the first half of 2002. The downgrade also reflects the weak financial ratings of the company's affiliates within the Coventry Health Care, Inc. group. The Health Plan of the Upper Ohio Valley, Inc. (St. Clairsville, Ohio) was downgraded to C (Fair) from B- (Good) due to declines in profitability arising from an increase in health care expenditures. In 1998, the company spent 92.2 cents on medical costs for every dollar of premium received. In 2001, medical costs were eating away at 95 cents of each dollar. The company's risk-adjusted capital ratio remains strong with sufficient funds to cover an unexpected rise in claims."

2002 was the last year I was an RIA. This I am noticing today, the HMO health industry went from low or no profits to more profitable than when I was in the investment business.

Coming from a person that is a doctor, was once an HMO exec., this is an interesting read.

July 23, 2009

Healthcare Policy, Social Justice and Thugs

By John Dale Dunn MD JD

"There is plenty of talk today about the broken medical care system, inefficiency and waste and the prospects of government-planned better quality and how a more accomplished central planning effort and more rules will create better care at a lower price. All the yakking is a distraction. Even the providers, who know the truth, will join the government plan to save, short term, their economic status. Some hope to maneuver a place on the planning committee and receive favorable payment treatment. They also recognize political pressure and know it's a dance; planning doesn't control silly overuse and lack of economic incentives. They know the system will never be sensible until people start paying their own bills for service."

It reminds me of what I heard a professor say at a round table meeting about health care.  The moderator asked him, "what has driven us to this point?"  The Phd professor said, "people just need to look in the mirror."  The guy makes some financial sense but that isn't what people want to hear is it?

I'm sorry, you're trying to claim something that simply isn't true. ....to the point of trying to cherry pick 8-k and 10-k statements trying to find your belief when you cannot examine these statements like this, it's not valid.

I'm sorry but it's like you are desperate to claim the beyond belief profits don't exist and frankly it's not only been documented in earnings reports but also aggregate studied such as this study, which shows once again a massive increase.

there is no way I'm pouring over 10-k, 8-k statements trying to disprove a that same companies' quarterly and yearly earnings press release, or point out whatever your logic error is, or other studies showing they indeed have increased profits 428% since 2000.

but an easier to way to do this, although it appears we need JV here to write a tutorial on how to read 10-k and 8-k statements. but the easiest way is to just read the corporate press release and other financial news people who already are pouring over the statements. ;)

Look at the Consolidated Statement of Operations.

Second quarter profits (Three Months Ending June 30).