Universal American Corp. (UAM)

UAM 
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Universal American Corp (UAM)

Barclays Healthcare Conference

March 13, 2013 10:15 ET

Executives

Richard Barasch - Chief Executive Officer

Presentation

Unidentified Analyst

We are very pleased to introduce Universal America and CEO, Richard Barasch. The company has jointly undergone a lot of change with the sale of the Part D business and the acquisition of APS and it’s always great to hear Richard’s thoughts. So, without further ado, I’ll turn it over to him.

Richard Barasch - Chief Executive Officer

Thank you. We do have a little action now in our world. I am going to talk about that a little bit, but again just starting off, and I think none of these changes. The one thing I have been saying pretty consistently to investors and other web servers over the past couple of weeks relative to the 45-day notices, yes, this is a problem. It will royal the MA market, if it doesn’t get modified. I think there is some reason to think that we will get some relief on this, but the real issue is we still got to deal with these issues.

Medicare and Medicaid are still enormous. They are not going away. In fact, they are getting even. So, what’s so interesting is there is sort of the conspiracy view that the administration is finally getting its way with Medicare Advantage. I don’t subscribe to that view. I think this was just a series of circumstances that got us to a point of a rate adjustment that kind of everybody realizes too much and there needs to be some sort of stability brought to the market, because there will in fact be a lot of changes in the market if this stays, but this is one year on the way toward a movement that I think is going to happen anyway, which is fundamentally the privatization of the government programs in this country, you could see it happening at the state level, blue states like New York and California. This is interesting. I don’t know if you have heard this statistic, but the largest procurement in history is the California dualist procurement that just in process of being put into place. So, in the shift of money from the public sectors spending directly to the public sectors spending it through private companies is happening, it’s happening fast, it’s not going to stop.

So, what I would just, I know everybody is invest in a different way whether it’s short-term thinking or a little bit longer term thinking, but this whatever happens with this MA issue is temporary in my view, and it still doesn’t change the fact that we are moving toward the privatization of most health insurance in this country. I always chuckle when people talk about Obamacare and the exchanges as socialized medicine. It couldn’t be any further from socialized medicine. It’s regulated. There is a lot of rules around it, but it’s basically saying to the private companies, hey, we are giving you a set of rules, you bid to these rules and kind of the market is going to determine who the winners and who the losers are. So, I think this notion of socialized medicine is kind of crazy.

And the other thing that I find very interesting and this is when there are so many interesting parts about healthcare, the fact that President Obama was called the Ryan plan a voucher plan in a derogatory way talking about how that will be bad for seniors. Well, in fact the exchanges are the same thing what Ryan is talking about. It’s not a perfect analogy, but what Ryan is talking about is a program that gives people choice and gives people subsidy to pay for that choice.

Fundamentally, the exchanges are the same thing. If you can afford it on the exchanges to paid out of your own pocket, if you can’t you get a subsidy. So, it’s actually pretty interesting and I would – let’s say if I were a betting man, I would bet on this. I am actually a betting man, because I run a company in this business. I think we are heading toward some sort of defined contribution in Medicare one way or the other. So, having said that, ‘14, there is a lot of different ranges of results for companies like ours in ‘14. Obviously, we are looking at markets, we are looking at margins, we are looking at benefits, we are looking at the whole mix, and we will see sort of how this all will shake through on a temporary basis, but those of you who get a little bit nervous about being invested in this sector should just every once in a while pull this chart out and realize two things. This is happening and the government is the process of outsourcing almost all of this to the private sector. So, the opportunities just are enormous. And if you’ve got sort of the steel to kind of move from point-to-point on this without getting too crazy about what happens year-to-year, I think you will be rewarded appropriately over time.

This is our company in ‘12 we had a good year. We are a company in transition. Basically as you know, we have the second largest Part D program, we sold it. One thing that I think is incontrovertible by Universal American is when we act for the benefit of our shareholders, when it’s time to sell a company we do, when it’s time to give money back to shareholders we do, when it’s time to invest in our opinion we do that as well. I think the fact that most of our company is owned – most of our Board is owners, people with a lot of stock changes the dynamic of that conversation quite substantially. And we really think about creating shareholder value, not just in a sort of an amorphous sense, but in a tangible sense. Also we have given back $17 of money to our shareholders in the past two and a half, three years.

Read the rest of this transcript for free on seekingalpha.com