Flu Effects on 4Q14 Earnings

Richard

The 2014 – ’15 flu season is slightly worse than 2013 – ’14 overall; we estimate flu-related hospital spending will be up roughly 30%

Notably, most of the additional hospitalizations are occurring among the elderly (65+), in fact hospitalization rates for persons aged 18-64 are actually down versus last season. This implies that any negative earnings effects should be isolated to insurers with significant Medicare exposure

However despite the concentration of increased flu demand among the elderly; absolute growth in total Medicare claims should be modest. We estimate flu increased hospital spending for Medicare beneficiaries by roughly $972M in 4Q14 which, on the estimated ‘base’ spending of $63B in that period, represents an increase of only 1.5%

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