Wall Street is speaking loudly to Medicare Advantage insurers: If you want us to stick with you, keep dumping seniors who are pinching your profit margins.
Investors continue to punish UnitedHealth Group since the company downgraded its 2025 profit expectations on April 17. On Friday, UnitedHealth’s stock price hit not only a 52-week low—$393.11—but its lowest point in years. The last time UnitedHealth’s stock price went below $400 a share was on October 14, 2021.
The company’s shares lost nearly 4.5% of their value during the past week, contributing to a decline that started soon after the company set an all-time high of $630.73 last November. UnitedHealth’s shares have lost more than 33% of their value since then.
Wall Street Sends a Message
Meanwhile, investors have once again embraced UnitedHealth’s top two rivals in the Medicare Advantage business–Humana and CVS/Aetna. Those companies told investors last year, when both were in the Wall Street dog house for spending more than investors expected on patients’ medical care, that they would dump hundreds of thousands of their costliest Medicare Advantage enrollees to improve their profits. They made good on that promise, shedding almost 650,000 seniors and people with disabilities by the end of the year.
Many of those people enrolled in a UnitedHealth Medicare Advantage plan. The company reported 400,000 more Medicare Advantage enrollees in the first quarter of 2025 than in the fourth quarter of 2024. That used to be a good thing, but UnitedHealth’s executives told investors on April 17 that it wouldn’t make as much money for them as the company had assured them just three months earlier because it likely will have to spend more than they expected on those new MA enrollees’ medical care. Investors responded by immediately dispatching the company’s shares to the cellar. Those shares lost about 23% of their value in a single day.
The Street had also punished Humana and CVS last year when they said they were paying more for seniors’ medical care than they’d expected. Shares of both companies cratered, losing around half their value. So, executives at both Humana and CVS started identifying Medicare markets to get out of entirely. The culling was ruthless. CVS shed 227,000 MA enrollees. Humana got rid of 419,000.
Locked Out of Traditional Medicare
Those seniors and disabled people had to scramble to find a new Medicare Advantage insurer because it is difficult for most people to go back to traditional Medicare and find an affordable Medicare supplement policy. Medicare supplement insurers must waive underwriting during the first six months of applicants’ eligibility for Medicare, but people who enroll in a Medicare Advantage plan and want or need to make a change months later find out that insurers will charge them more unless their health is nearly perfect.
Of the seven big for-profit health insurers, four (Cigna, CVS/Aetna, Humana and Centene) collectively cut 1.3 million of their Medicare Advantage enrollees adrift at the end of 2024 in an effort to stay in Wall Street’s good graces. Cigna dumped all 600,000 of its MA enrollees, selling them to the Blue Cross corporation HCSC. For-profit Blue Cross insurer Elevance picked up 227,000; Molina added 18,000, and, as noted, UnitedHealth signed up 400,000 new MA enrollees.
While UnitedHealth’s shares have lost a third of their value, CVS’s shares have increased more than 50% since the first of this year. They even set a 52-week high of $72.51 on Thursday. Humana’s shares closed Friday at $258.48, up 1.88% since January 1. They are out of the Wall Street dog house – for now, anyway.
Profits, Lobbying Soar
I trust you are not feeling sorry for UnitedHealth because of its misfortune on Wall Street. It is still a hugely profitable company–just not profitable enough lately to please investors. This huge corporation, the fourth largest in America, reported $9.1 billion in profits in just the first quarter of this year. If the company makes it more difficult for its health plan enrollees to get the care they need this year, it could make even more than the $34.4 billion in profits it made last year.
And as a group, the seven big for-profits, including those that spent more than Wall Street felt was necessary on patients’ medical care, made $70 billion in profits last year. (UnitedHealth made nearly as much as the other six combined.)
And collectively, those giant corporations took in a record $1.5 trillion in revenue from us as customers and taxpayers last year. They are doing quite well. But that won’t stop them from trying to keep lawmakers and Trump administration officials from cracking down this year on the widespread waste, fraud and abuse in the Medicare Advantage program. You can expect them to spend a record amount of our money on lobbying expenses in Washington this year to keep their Medicare Advantage cash cow well fed.
Last week, I made my once a decade trek to a dealership to buy a new car. I did my research in advance (and even negotiated the price) so I was hoping for a stress-free experience.
It was – up until the point where I got locked in the finance manager’s office for “the talk”. You know, the one where you are made to feel like a neglectful parent unless you pony up for all the fixin’s – everything from nitrogen filled tires to paint protection (just in case I encounter a flock of migratory geese on the drive home). I shook my head no about ten times before we got to the pre-paid maintenance plan options. I decided to be polite and listen (plus I was curious since I was purchasing a car from a manufacturer notorious for costly repairs). As compelling as it was to pay nearly $5,000 to what ultimately would amount to a few tire rotations for my electric vehicle, I held firm. The finance manager angrily handed me my signed documents and whisked me out of his office.
I guess I can’t blame car dealers for applying massive mark-ups for services that are inexpensive to provide. Except similar financial chicanery is currently playing out in our health insurance system. If you swap out the finance manager for a health insurer and replace me with the average everyday consumer, the dealer’s tactics are analogous to how insurers game medical loss ratio (MLR) requirements (except as a health care consumer, you can’t say “no”).
A bit of background is in order to understand why I thought about health insurance and car dealers in the same breath.
Insurance companies are required to spend a certain percentage of money they get from premiums on medical costs and quality improvement (QI); this is known as the medical loss ratio (MLR). If companies do not meet this ratio (usually 80-85%, depending on the product), they must refund the difference in the form of a rebate, or reduction in future premiums, to consumers.
Like any for-profit corporation in America today, a health insurer wants to avoid giving money back to consumers. Therefore, insurers have become adept at manipulating their MLRs through various accounting and financial engineering techniques. This manipulation optimizes their ability to meet MLR thresholds and avoid paying rebates, which runs afoul of its intended purpose: to ensure that patients receive the appropriate level of care.
So how do insurers game the system, and what evidence exists for this activity?
The current MLR formula is:
Health insurers do not control taxes and fees, but they can easily engineer the other variables. Below, I’ll explain how.
Step 1: Quality Improvement (QI) Expenses
The definition of allowable QI expenses is broad and includes activities to improve outcomes, patient safety, and reduce mortality (mom and apple pie stuff). Insurers played a big role in writing the MLR regulations after Congress enacted legislation and made sure they’d have wide latitude in what expenses are classified as QI (akin to the car dealer “option” list) and what product segments they assign them to.
Looking at reported QI expenses sheds light on this practice. QI expenses vary between insurers. But they also vary widely for the same insurer from year to year (even after controlling for geography and product segment). In large part, this is attributable to financial engineering. QI costs can be effectively “transferred” on the income statement from one product segment to another, by adjusting the pro rata weightings). This enables them to optimize MLR performance across their insurance portfolio (i.e. by taking from a bucket with excess medical costs and putting it in another with insufficient costs) in a way that maximizes benefit to the insurer and is camouflaged from regulators and consumers. This is language from a recent UnitedHealth Group filing with the Securities and Exchange Commission: “Assets and liabilities jointly used are assigned to each reportable segment using estimates of pro-rata usage.”
Annual QI expenses across four insurers in Florida in the small group market.
Although these QI percentages are small, the associated dollar amounts are large. In 2022, UnitedHealth, Humana, and Aetna reported $494 million, $550 million, and $395 million respectively in allowable QI expenses for their national plans. While there is some legitimate QI activity at insurers (e.g., pharmacists who identify high risk medications in the elderly), the reality is that much of the QI work is already heavily resourced within provider organizations, where it is more effective. Insurers also can (and do) count “wellness and health promotion activities” despite limited evidence these programs improve health outcomes and are more often used by insurers as marketing tools.
Step 2. Health Care Claims
The other variable that insurers can manipulate is claims costs. The more an insurer is vertically integrated, the easier it is. The prime example is UnitedHealth, which has an insurance arm (UnitedHealthcare) and a big division that encompasses medical services, among many other things (Optum), as well as various other subsidiaries. Optum Health and Optum Rx receive a significant portion of their revenue from UnitedHealthcare for providing services like care and pharmacy benefit management to people enrolled in its health plans. In fact, the amount of UnitedHealth’s corporate “eliminations,” (meaning inter-company revenue that is reported on their consolidated financial statement) has more than doubled over the past five years (from $58.5 billion to $136.4 billion). The proportion of revenue Optum derives from UnitedHealthcare versus unaffiliated entities has increased by nearly 50% over the same period. A similar trend is playing out at every major insurer.
Take the example of the insurance company Aetna, the PBM CVS Caremark, and CVS Pharmacy, which are all vertically integrated and owned by CVS Health. If a patient goes to a CVS store to fill a prescription for Imatinib, a generic chemotherapy drug, the total cost the patient and insurance company pay is $17,710.21 for a 30-day supply. The same drug is sold by Cost Plus Drugs for $72.20 (the cost is calculated by adding the wholesale price and a 15% fee). When the patient fills the prescription at a CVS retail pharmacy, CVS Health can record that the patient paid a medical claim cost of $17,710.21 (even though the cost to acquire the drug is $70) and the remaining $17,640 can be retained as profits disguised as medical costs.
Insurers’ extensive acquisition of physician practices also facilitates gamification of the MLR via its ability to pay capitation (a set amount per person) to a risk-bearing provider organization (RBO) it owns, such as a medical group. This enables the insurer to lock in a set amount of premium as “medical expense” (usually around 85%) with the downstream provider group “managing” those costs. There’s a loophole, however. While the insurer has technically met its MLR requirement, the downstream RBO is subject to far fewer regulations on how it spends the money, which makes it easier to generate profits by skimping on care.
The regulations on RBOs vary by state. In many cases, while RBOs need to meet minimum capital requirements, they are not subject to the same MLR provisions as insurers. For a vertically integrated insurer that gets a huge amount of revenue from taxpayer-supported programs like Medicare Advantage and Medicaid, this essentially means that (1) the Center for Medicare and Medicaid Services puts the money into the insurer’s right pocket, (2) the insurer moves it to the left pocket, and (3) CMS checks the right pocket – and just the right pocket – at the end of the year to make sure it’s mostly empty (without regard to the fact that the left one may be busting at the seams).
The good news is there are ways to address these issues, both through updating the MLR provisions in the Affordable Care Act (which are long in the tooth) and more rigorous and comprehensive reporting requirements and regulation of vertically integrated insurers.
Just like I don’t want car dealers pushing unnecessary add-ons to increase their profit margins, consumers deserve that the required portion of their hard spent premium dollar actually goes toward their health care instead of further enriching huge corporations, executives, and Wall Street shareholders.
Health systems are rightly concerned about Republican plans to cut Medicaid spending, end ACA subsidies and enact site neutral payments, says consultant Michael Abrams, managing partner of Numerof, a consulting firm.
“Health systems have reason to worry,” Abrams said shortly after President Donald Trump was inaugurated on Monday.
While Trump mentioned little about healthcare in his inauguration speech, the GOP trifecta means spending cuts outlined in a one-page document released by Politico and another 50-pager could get a majority vote for passage.
Of the insurers, pharmaceutical manufacturers and health systems that Abrams consults with, healthcare systems are the ones that are most concerned, Abrams said.
At the top of the Republican list targeting $4 trillion in healthcare spending is eliminating an estimated $2.5 billion from Medicaid.
“There’s no question Republicans will find savings in Medicaid,” Abrams said.
Medicaid has doubled its enrollment in the last couple of years due to extended benefits made possible by the Affordable Care Act, despite disenrolling 25 million people during the redetermination process at the end of the public health emergency, according to Abrams.
Upward of 44 million people, or 16.4% of the non-elderly U.S. population are covered by an Affordable Care Act initiative, including a record high of 24 million people in ACA health plans and another 21.3 million in Medicaid expansion enrollment, according to a KFF report.Medicaid expansion enrollment is 41% higher than in 2020.
The enhanced subsidies that expanded eligibility for Medicaid and doubled the number of enrollees are set to expire at the end of 2025 and Republicans are likely to let that happen, Abrams said. Eliminating enhanced federal payments to states that expanded Medicaid under the ACA are estimated to cut the program by $561 billion.
If enhanced subsidies end, the Congressional Budget Office has estimated that the number of people who will become uninsured will increase by 3.8 million each year between 2026 and 2034.
The enhanced tax subsidies for the ACA are set to expire at the end of 2025. This could result in another 2.2 million people losing coverage in 2026, and 3.7 million in 2027, according to the CBO.
WHY THIS MATTERS
For hospitals, loss of health insurance coverage means an increase in sicker, uninsured patients visiting the emergency department and more uncompensated care.
“Health systems are nervous about people coming to them who are uninsured,” Abrams said. “There will be people disenrolled.”
The federal government allowed more people to be added to the Medicaid rolls during the public health emergency to help those who lost their jobs during the COVID-19 pandemic, Numerof said. Medicaid became an open-ended liability which the government wants to end now that the unemployment rate is around 4.2% and jobs are available.
An idea floating around Congress is the idea of converting Medicaid to a per capita cap and providing these funds to the states as a block grant, Abrams said. The cost of those programs would be borne 70% by the federal government and 30% by states.
This fixed amount based on a per person amount would save money over the current system of letting states report what they spent.
Another potential change under the new administration includes site neutral Medicare payments to hospitals for outpatient services.
The HFMA reported the site neutral policy as a concern in a list it published Monday of preliminary federal program cuts totaling more than $5 trillion over 10 years. The 50-page federal list is essentially a menu of options, the HFMA said, not an indication that programs will actually be targeted leading up to the March 14 deadline to pass legislation before federal funding expires.
Other financial concerns for hospitals based on that list include: the elimination of the tax exemption for nonprofit hospitals, bringing in up to $260 billion in estimated 10-year savings; and phasing out Medicare payments for bad debt, resulting in savings of up to $42 billion over a decade.
Healthcare systems are the ones most concerned over GOP spending cuts, according to Abrams. Pharmacy benefit managers and pharmaceutical manufacturers also remain on edge as to what might be coming at them next.
THE LARGER TREND
President Donald Trump mentioned little about healthcare during his inauguration speech on Monday.
Trump said the public health system does not deliver in times of disaster, referring to the hurricanes in North Carolina and other areas and to the fires in Los Angeles.
Trump also mentioned giving back pay to service members who objected to getting the COVID-19 vaccine.
He also talked about ending the chronic disease epidemic, without giving specifics.
“He didn’t really talk about healthcare even in the campaign,” Abrams said.
However, in his consulting work, Abrams said, “The common thread is the environment is changing quickly,” and that healthcare organizations need to do the same “in order to survive.”
To understand the fatal attack on UnitedHealthcare CEO Brian Thompson and the unexpected reaction on social media, you have to go back to the 1990s when managed care was in its infancy. As a consumer representative, I attended meetings of a group associated with the health care system–doctors, academics, hospital executives, business leaders who bought insurance, and a few consumer representatives like me.
It was the dawn of the age of managed care with its promise to lower the cost and improve the quality of care, at least for those who were insured.
New perils came with that new age of health coverage.
In the quest to save money while ostensibly improving quality, there was always a chance that the managed care entities and the doctors they employed or contracted with – by then called managed care providers – could clamp down too hard and refuse to pay for treatments, leaving some people to suffer medically. Groups associated with the health care industry tried to set standards to guard against that, but as the industry consolidated and competition among the big players in the new managed care system consolidated, such worries grew.
Over the years the squeeze on care got tighter and tighter as the giants like UnitedHealthcare–which grew initially by buying other insurance companies such as Travelers and Golden Rule–and Elevance, which gobbled up previously nonprofit Blue Cross plans in the 1990s, starting with Blue Cross of California, needed to please the gods of the bottom line. Shareholders became all important. Paying less for care meant more profits and return to investors, so it is no wonder that the alleged killer of the UnitedHealthcare chief executive reportedly left the chilling message:
‘‘DENY. DEFEND. DEPOSE,” words associated with insurance company strategies for denying claims.
The American health care system was far from perfect even in the days when more employers offered good coverage for their workers and often paid much or all of the cost to attract workers. Not-for-profit Blue Cross Blue Shield plans in many states provided most of the coverage, and by all accounts, they paid claims promptly. In my now very long career of covering insurance, I cannot recall anyone in the old days complaining that their local Blue Cross Blue Shield organization was withholding payment for care.
Today Americans, even those who thought they had “good” coverage, are now finding themselves underinsured, as a 2024 Commonwealth Fund study so clearly shows. Nearly one-quarter of adults in the U.S. are underinsured meaning that although they have health insurance, high deductibles, copayments and coinsurance make it difficult or impossible for them to pay for needed care. As many as one-third of people with chronic conditions such as diabetes said they don’t take their medications or even fill prescriptions because they cost too much.
Before he passed away last year, one of our colleagues, Marshall Allen, had made recommendations to his followers on how to deal with medical bills they could not pay. KFF reporters also investigated the problems families face with super-high bills. In 2022 KFF reporters offered readers a thorough look at medical debt in the U.S. and reported alarming findings.
In 2019, U.S. medical debt totaled $195 billion, a sum larger than the economy of Greece. Half of adults don’t have enough cash to cover an unexpected medical bill while 50 million adults – one in five in the entire country – are paying off bills on an installment plan for their or a family member’s care.
One would think that such grim statistics might prompt political action to help ease the debt burden on American families. But a look at the health proposals from the Republican Study Committee suggest that likely won’t happen. The committee’s proposed budget would cut $4.5 trillion dollars from the Affordable Care Act, Medicaid, and the Children’s Health Insurance Program leaving millions of Americans without health care.
From the Democrats, there appear to be no earth-shaking proposals in their immediate future, either. Late last summer STAT News reported, “With the notable exception of calling to erase medical debt by working with the states, Democrats are largely eyeing marginal extensions or reinstatements of their prior policy achievements.” Goals of the Democratic National Committee were shoring up the Affordable Care Act, reproductive rights, and addressing ambulance surprise bills.
A few years ago when I was traveling in Berlin, our guide paused by a statue of Otto von Bismarck, Germany’s chancellor in the late 1800s, who is credited with establishing the German health system. The guide explained to his American travelers how and why Bismarck founded the German system, pointing out that Germany got its national health system more than a hundred years before Obamacare. Whether the Americans got the point he was making, I could not tell for no one in the group appeared interested in Germany’s health care system. Today, though, they might pay more attention.
In the coming months, I will write about health systems in Germany and other developed countries that, as The Commonwealth Fund’s research over many years has shown, do a much better job than ours at delivering high quality care – for all of their citizens – and at much lower costs.
A few weeks ago The Commonwealth Fund, a philanthropic organization in New York City, which keeps tabs on health care trends, released an ominous study signaling that the bedrock of the U.S. health system is in trouble.
The study found that the employer insurance market, where millions of Americans have received good, affordable coverage since the end of World War II, could be in jeopardy. The continuing rise in the costs of medical care, and the insurance premiums to pay for it, may well cause employers to make cutbacks, leaving millions of workers uninsured or underinsured, often with no way to pay for their care and the prospect of debt for the rest of their lives.
Indeed the Fund revealed that 23% of adults in the U.S. are underinsured, meaning that though they were covered by health insurance, high deductibles and coinsurance made it difficult or impossible to pay for the care they needed.
“They have health plans that don’t provide affordable access to care,” said Sara Collins, senior adviser and vice president at the Fund. “They have out-of-pocket costs and deductibles that are high relative to their income.”
This predicament has forced many to assume medical debt or skip needed care. The Fund found that as many as one-third of people with chronic conditions like heart failure and diabetes reported they don’t take their medication or fill prescriptions because they cost too much.
Others did not go to a doctor when they were sick, skipping a recommended follow-up visit or test, and did not see a specialist when one was recommended. Nearly half of the respondents reported they did not get care for an ongoing condition because of the cost. Two out of five working-age adults who reported a delay or skipped care told researchers their health problem had gotten worse. Those findings belie the narrative, deployed when changes to the system are discussed, that America has the best health care in the world, and we dare not change it.
The seeds of today’s underinsurance predicament were planted in the 1990s when the system’s players decided remedies were needed to curb Americans’ appetite for medical interventions.
They devised managed care, with its HMOs, PPOs, insurance company approvals, and other restrictions that are with us today. But health care is far more expensive than it was in the ’90s, leaving patients to struggle to pay the higher prices, or, as the study shows, go without needed care.
Perhaps one of the study’s most striking findings is that a vast majority of underinsured workers had employer insurance plans, which over the decades had provided good coverage. Researchers concluded that recent cost containment measures were simply shifting more costs to workers through higher deductibles and coinsurance.
I checked in with Richard Master, the CEO of MCS Industries in Easton, Pennsylvania. We’ve talked over the years about the rising cost of health insurance for his 91 workers who make picture frames and wall decorations. This year, he was expecting a 5 to 6% increase in insurance rates.
A family plan now costs more than $39,000, he said, adding that “29% of people with employee plans are underinsured and have high out-of-pocket costs.”
To help reduce his own costs, he told me he has put in place a high-deductible plan and was setting up health saving accounts that allow him to give a sum of money to each worker to use for their medical expenses.
As health insurance premiums continue to rise, more employers will likely heap more of those rising costs onto workers, many of whom will inevitably have a tough time paying for them.
Every time there has been a hint in the air that maybe, just maybe, America might embrace a universal system like peer nations across the globe that offer health care to all their citizens, the special interests—doctors, hospitals, insurers, employers, and others that benefit financially from the current system have snuffed out any possibility that might happen, worried that such a system could affect their profits.
For as long as I can remember, the public has been told America has the best health care system in the world. Major holes in our system exposed by The Commonwealth Fund belie that assumption.
An investigative piece in the Wall Street Journal, written by Mark Maremont, Danny Dougherty, and Anna Wilde Mathews, gives an eye-popping look at how UnitedHealth Group is turning diagnosis-driven billing into a high-stakes game in the conglomerate’s Medicare Advantage business.
As The Journal reported, UnitedHealth has taken a unique approach to Medicare Advantage:
directly employing thousands of doctors and arming them with software that generates diagnosis checklists before they even see patients. Former UnitedHealth physicians described how these suggested diagnoses — often obscure or irrelevant — weren’t optional. To move on to their next patient, doctors were forced to confirm, deny, or defer each proposed diagnosis.
One Oregon physician, Dr. Nicholas Jones, said UnitedHealth frequently pushed conditions so rare – like secondary hyperaldosteronism – he had to Google them. And this wasn’t limited to minor conditions.
Sickness scores for UnitedHealth’s Medicare Advantage patients jumped an average of 55% in their first year of enrollment in one of the company’s health plans compared to a mere 7% rise for patients who stayed in traditional Medicare. As the Journal noted, that’s the kind of jump you’d expect if everyone suddenly developed HIV and breast cancer.
The implications? More diagnoses mean higher “sickness scores,” which translate to billions in extra payments from Medicare. The Journal found that UnitedHealth’s practices generated an additional $4.6 billion from 2019 to 2022 compared to what it would have received if those scores had matched industry averages.
Citing fewer hospitalizations, UnitedHealth insists these practices improve patient outcomes and disease management, but the incentives to inflate diagnoses raise serious questions.
In the piece, you’ll meet Chris Henretta, a UnitedHealth Medicare Advantage “member” who lives in Florida. His doctor diagnosed him as morbidly obese, even though he’s a lifelong weightlifter and doesn’t meet the BMI threshold. “I began to suspect my doctor may have a financial incentive to portray people as higher risk,” Henretta said. The article pointed out that such a diagnosis can trigger an extra $2,400 in Medicare payments annually.
UnitedHealth’s system isn’t just about inflating diagnoses — it’s about turning them into profit centers.
The Journal reported that internal documents revealed that doctors could earn bonuses of up to $30,000 annually for engaging with the diagnosis system. Nurses tasked with “finding” new diagnoses were paid $250 per patient visit.
UnitedHealth has countered by saying these practices reflect its commitment to diagnosing and treating diseases early. But the Journal said many doctors felt pressure to play along.
Dr. Emilie Scott, a former UnitedHealth physician, called the system a money machine: “It’s not about taking care of the patient. It’s about how you get the money to flow.”
For patients and taxpayers, this system poses tough questions. Traditional Medicare patients treated by UnitedHealth doctors didn’t see the same inflation in sickness scores, which underscores how Medicare Advantage’s payment system incentivizes diagnose gaming.
What’s clear is that Medicare Advantage — and UnitedHealth’s dominant role in it — needs much closer scrutiny.
As The Journal reporters wrote, the Centers for Medicare and Medicaid Services is studying these relationships. But real change will require policymakers and the public to confront the deeper flaws in how Medicare Advantage is structured.
Be sure to dive into the original Wall Street Journal article for the full story. The fantastic graphs and photography alone are worth your time, and the detailed reporting provides invaluable insights into how one company’s profit strategies impact us all.
You have three days left, if you got suckered in by those omnipresent ads for Medicare Advantage and left regular Medicare for the siren song of cheaper coverage, “free” vision, hearing, or dental, or even “free” money to buy groceries or rides to the doc.
The open enrollment period for real Medicare closes at the end of the day Saturday, December 7th; after that, you’re locked into the Medicare Advantage plan you may have bought until next year.
If you’ve had Medicare Advantage for a year or more, however, the open enrollment period is still “open” until December 7th, but you will want to make sure you can get a “Medigap” plan that fills in the 20% that real Medicare doesn’t cover.
Companies are required to write a Medigap policy for you at a reasonable price when you turn 65, no matter how sick you are or what preexisting conditions you may have, but if you’ve been “off Medicare” by being on Medicare Advantage for more than a year, they don’t have to write you a policy, so double-check that and sign up for a Medigap policy before making the switch back to real Medicare.
So, what’s this all about and why is it so complicated?
When George W. Bush and congressional Republicans (and a handful of bought-off Democrats) created Medicare Advantage in 2003, it was the fulfillment of half of Bush’s goal of privatizing Social Security and Medicare, dating all the way back to his unsuccessful run for Congress in 1978 and a main theme of his second term in office.
Medicare Advantage is not Medicare.
These plans are private health insurance provided by private corporations, who are then reimbursed at a fixed rate by the Medicare trust fund regardless of how much their customers use their insurance. Thus, the more they can screw their customers and us taxpayers by withholding healthcare payments, the more money they make.
With real Medicare,
if your doctor says you need a test, procedure, scan, or any other medical intervention you simply get it done and real Medicare pays the bill. No muss, no fuss, no permission needed. Real Medicare always pays, and if they think something’s not kosher, they follow up after the payment’s been made so as not to slow down the delivery of your healthcare.
With Medicare Advantage,
however, you’re subject to “pre-clearance,” meaning that the insurance company inserts itself between you and your doctor: You can’t get the medical help you need until or unless the insurance company pre-clears you for payment.
These companies thus make much of their billions in profit by routinely denying claims — 1.5 million, or 18 percent of all claims, were turned down in one year alone — leaving Advantage policy holders with the horrible choice of not getting the tests or procedures they need or paying for them out-of-pocket.
Given this, you’d think that most people would stay as far away from these private Medicare Advantage plans as they could. But Congress also authorized these plans to compete unfairly with real Medicare by offering things real Medicare can’t (yet). These include free or discounted dental, hearing, eyeglasses, gym memberships, groceries, rides to the doctor, and even cash rebates.
You and I pay for those freebies, but that’s only half of the horror story.
This year, as Matthew Cunningham-Cook pointed out in Wendell Potter’s brilliant Health Care un-covered Substack newsletter, we’re ponying up an additional $64 billion to give to these private insurance companies to “reimburse” them for the freebies they relentlessly advertise on television, online, and in print.
And here’s the most obscene part of the whole thing: the companies won’t tell the government (us!) how much of that $64 billion they’ve actually spent. They just take the money and say, “Thank you very much.” And then, presumably, throw a few extra million into the pockets of each of their already obscenely-well-paid senior executives.
For example, the former CEO of the nation’s largest Medicare Advantage provider, UnitedHealth, walked away with over a billion dollars in total compensation. With a “B.” One guy. His successor made off with over a half-billion dollars in pay and stock.
Good work if you can get it: all you need do is buy off a hundred or so members of Congress, courtesy of Clarence Thomas’ billionaire-funded tie-breaking vote on Citizens United, and threaten the rest of Congress with massive advertising campaigns for their opponents if they try to stop you.
And while the companies refuse to tell us how much of the $64 billion that we’re throwing at them this year to offer “free” dental, etc. is actually used, what we do know is that most of that money is not going to pay for the freebies they advertise. As Cunningham-Cook noted, in one study only 11 percent of Advantage policyholders who’d signed up with plans offering dental care used that benefit.
Another study showed over-the-counter-drug freebies were used only a third of the time, leaving $5 billion in the insurance companies money bins just for that “reimbursable” goodie. A later study found that at least a quarter of all Advantage policyholders failed to use any of the freebies they’d been offered when they signed up.
That’s an enormous amount of what the industry calls “breakage”; benefits offered and paid for by the government but not used. Billions of dollars left over every month. And, used or not, you and I sure paid for them.
And now it looks like things are about to get a whole lot worse.
When he was president last time, Donald Trump substantially expanded Medicare Advantage, calling real Medicare “socialism.” Project 2025 and candidate Trump both promised to end real Medicare “immediately” if Trump was re-elected; at the very least, they’ll make Medicare Advantage the “default” program people are steered into when they turn 65 and sign up for Medicare.
These giant insurance companies ripped off us taxpayers last year to the tune of an estimated $140 billion over and above what it would’ve cost us if people had simply been on real Medicare, according to a report from Physicians for a National Health Program (PNHP).
If there was no Medicare Advantage scam bleeding off all that cash to pay for executives’ private jets, real Medicare could be expanded to cover dental, vision, and hearing and even end the need for Medigap plans.
But for now, the privatization gravy train continues to roll along. The insurance giants use some of that money to buy legislators, and some of it for expensive advertising to dupe seniors into joining their programs. The company (Benefytt) that hired Joe Namath to pitch Medicare Advantage, for example, was recently hit with huge fines by the Federal Trade Commission for deceptive advertising.
“Benefytt pocketed millions selling sham insurance to seniors and other consumers looking for health coverage,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The company is being ordered to pay $100 million, and we’re holding its executives accountable for this fraud.”
And what was it that the Federal Trade Commission called “sham insurance”? Medicare Advantage. Nonetheless, the Centers for Medicare Services continues to let Benefytt and Namath market these products: welcome to the power of organized money.
And it’s huge organized money. Medicare Advantage plans are massive cash cows for the companies that run them. As Cigna prepares for a merger, for example, they’re being forced to sell off their Medicare Advantage division: it’s scheduled to go for $3.7 billion. Nobody pays that kind of money unless they expect enormous returns.
And how do they make those billions?
Most Medicare Advantage companies regularly do everything they can to intimidate you into paying yourself out-of-pocket. Often, they simply refuse payment and wait for you to file a complaint against them; for people seriously ill the cumbersome “appeals” process is often more than they can handle so they just write a check, pull out a credit card, or end up deeply in debt in their golden years.
As a result, hospitals and doctor groups across the nation are beginning to refuse to take Medicare Advantage patients. And in rural areas many hospitals are simply going out of business because Medicare advantage providers refuse to pay their bills.
California-based Scripps Health, for example, cares for around 30,000 people on Medicare Advantage and recently notified all of them that Scripps will no longer offer medical services to them unless they pay out-of-pocket or revert back to real Medicare.
They made this decision because over $75 million worth of services and procedures their physicians had recommended to their patients were turned down by Medicare Advantage insurance companies. In many cases, Scripps had already provided the care and is now stuck with the bills that the Advantage companies refuse to pay.
“We are a patient care organization and not a patient denial organization and, in many ways, the model of managed care has always been about denying or delaying care – at least economically. That is why denials, [prior] authorizations and administrative processes have become a very big issue for physicians and hospitals…”
Similarly, the Mayo Clinic has warned its customers in Florida and Arizona that they won’t accept Medicare Advantage any more, either. Increasing numbers of physician groups and hospitals are simply over being ripped off by Advantage insurance companies.
Traditional Medicare has been serving Americans well since 1965: it’s one of the most efficient single-payer systems to fund healthcare that’s ever been devised. But nobody was making a buck off it, so nobody could share those profits with greedy politicians. Enter Medicare Advantage, courtesy of George W. Bush and the GOP.
While several bills have been offered in Congress to do something about this — including Mark Pocan’s and Ro Khanna’s Save Medicare Act that would end these companies’ ability to use the word “Medicare” in their policy names and advertising — the amounts of money sloshing around DC in the healthcare space now are almost unfathomable.
So far this year, according to opensecrets.org, the insurance industry has spent $117,305,895 showering gifts and persuasion on our federal lawmakers to keep their obscene profits flowing.
It’s all one more example of how five corrupt Republicans on the US Supreme Court legalizing political bribery with Citizens Unitedhave screwed average Americans and made a handful of industry executives and investors fabulously rich.
They get away with it because when people choose to sign up for Medicare Advantage at 65 (or convert to these plans in their 60s or early 70s) they’re typically not sick — and thus cost the insurance companies little.
Tragically, the people signing up for these plans have no idea all the hassles, hoops, and troubles they might have to jump through when they do get sick, have an accident, or otherwise need medical assistance.
And since the last three years of life are typically the most expensive years for healthcare, the insurance denials are more likely to happen then — long after the person’s signed up with the Advantage company and it’s too late to go back to real Medicare.
This is why it typically takes a few years for people to figure out how badly they got screwed by not going with regular Medicare but instead putting themselves in the hands of private insurance companies.
“In spite of recommendations from Mr. Pauker’s doctors, his family said, Humana has repeatedly denied authorization for inpatient rehabilitation after hospitalization, saying at times he was too healthy and at times too ill to benefit.”
“Tens of millions of denials are issued each year for both authorization and reimbursements, and audits of the private insurers show evidence of ‘widespread and persistent problems related to inappropriate denials of services and payment,’ the investigators found.”
If you have “real” Medicare with a heavily regulated Medigap policy to cover the 20% Medicare doesn’t, you never have to worry.
Your bills get paid, you can use any doctor or hospital in the country who takes Medicare, and neither Medicare nor your Medigap provider will ever try to collect from you or force you to pay for what you thought was covered.
Neither you or your doctor will ever have to do the “pre-authorization” dance with real Medicare: those terrible experiences dealing with for-profit insurance companies are part of the past.
But if you have Medicare Advantage — which is not Medicare, but private health insurance — you’re on your own.
As the Times laid out:
“About 18 percent of [Advantage] payments were denied despite meeting Medicare coverage rules, an estimated 1.5 million payments for all of 2019. In some cases, plans ignored prior authorizations or other documentation necessary to support the payment. These denials may delay or even prevent a Medicare Advantage beneficiary from getting needed care…”
Buying a Medicare Advantage policy is a leap in the dark, and the federal government is not there to catch you. And it’s all perfectly legal, thanks to Bush’s 2003 law, so your state insurance commissioner usually can’t or won’t help.
Thus, here we are, handing billions of dollars a month to insurance industry executives so they can buy new Swiss chalets, private jets, and luxury yachts. And so they can compete — unfairly — with Medicare itself, driving LBJ’s most proud achievement into debt and crisis.
Enough is enough. Let your members of Congress know it’s beyond time to fix the Court and Medicare, so scams like Medicare Advantage can no longer rip off America’s seniors while making industry executives richer than Midas.
And if you got hooked into switching out of real Medicare and now find yourself in a Medicare Advantage plan, you have three days to back out and return to real Medicare. For more information, you can also contact the nonprofit and real-Medicare-supporting Medicare Rights Center at 800-333-4114.
There’s only one person in this photograph/video of a recent G7 meeting who represents a country where an illness can destroy an entire family, leaving them bankrupt and homeless, with the repercussions of that sudden fall into poverty echoing down through generations.
Most Americans have no idea that the United States is quite literally the only country in the developed world that doesn’t define healthcare as an absolute right for all of its citizens. That’s it. We’re the only one left.
The United States spends more on “healthcare” than any other country in the world: about 17% of GDP.
Switzerland, Germany, France, Sweden and Japan all average around 11%, and Canada, Denmark, Belgium, Austria, Norway, Netherlands, United Kingdom, New Zealand and Australia all come in between 9.3% and 10.5%.
We are literally the only developed country in the world with an entire multi-billion-dollar for-profit industry devoted to parasitically extracting money from us to then turn over to healthcare providers on our behalf. The for-profit health insurance industry has attached itself to us like a giant, bloodsucking tick.
They all failed, and when I did a deep dive into the topic two years ago for my book The Hidden History of American Healthcare I found two major barriers to our removing that tick from our backs.
The early opposition, more than 100 years ago, to a national healthcare system came from southern white congressmen (they were all men) and senators who didn’t want even the possibility that Black people could benefit, health-wise, from white people’s tax dollars. (This thinking apparently still motivates many white Southern politicians.)
The leader of that healthcare-opposition movement in the late 19th and early 20th centuries was a German immigrant named Frederick Hoffman, as I mentioned in a recent newsletter. Hoffman was a senior executive for the Prudential Insurance Company, and wrote several books about the racial inferiority of Black people, a topic he traveled the country lecturing about.
His most well-known book was titled Race Traits and Tendencies of the American Negro. It became a major best-seller across America when it was first published for the American Economic Association by the Macmillan Company in 1896, the same year the Supreme Court’s Plessy v. Ferguson decision legally turned the entire US into an apartheid state.
Hoffman taught that Black people, in the absence of slavery, were so physically and intellectually inferior to whites that if they were simply deprived of healthcare the entire race would die out in a few generations. Denying healthcare to Black people, he said, would solve the “race problem” in America.
Southern politicians quoted Hoffman at length, he was invited to speak before Congress, and was hailed as a pioneer in the field of “scientific racism.” Race Traits was one of the most influential books of its era.
By the 1920s, the insurance company he was a vice president of was moving from life insurance into the health insurance field, which brought an added incentive to lobby hard against any sort of a national healthcare plan.
Which brings us to the second reason America has no national healthcare system: profits.
And that’s just one of multiple giant insurance companies feeding at the trough of your healthcare needs.
Much of that money, and the pay for the multiple senior executives at that and other insurance companies who make over $1 million a year, came from saying “No!” to people who file claims for payment of their healthcare costs.
Companies offering such “primary” health insurance simply don’t exist (or are tiny) in almost every other developed country in the world. Mostly, where they do exist, they serve wealthier people looking for “extras” beyond the national system, like luxury hospital suites or air ambulances when overseas. (Switzerland is the outlier with exclusively private insurance, but it’s subsidized, mandatory, and non-profit.)
If Americans don’t know this, they intuit it.
In the 2020 election there were quite a few issues on statewide ballots around the country. Only three of them outpolled Joe Biden’s win, and expanding Medicaid to cover everybody was at the top of that list. (The other two were raising the minimum wage and legalizing pot.)
The last successful effort to provide government funded, single-payer healthcare insurance was when Lyndon Johnson passed Medicare and Medicaid (both single-payer systems) in the 1960s. It was a hell of an effort, but the health insurance industry was then a tiny fraction of its current size.
In 1978, when conservatives on the Supreme Court legalized corporations owning politicians with their Buckley v Belotti decision (written by Justice Louis Powell of “Powell Memo” fame), they made the entire process of replacing a profitable industry with government-funded programs like single-payer vastly more difficult, regardless of how much good they may do for the citizens of the nation.
The Court then doubled-down on that decision in 2010, when the all-conservative vote on Citizens Unitedcemented the power of billionaires and giant corporations to own politicians and even write and influence legislation and the legislative process.
Medicare For All, like Canada has, would save American families thousands every year immediately and do away with the 500,000+ annual bankruptcies in this country that happen only because somebody in the family got sick. But it would kill the billions every week in profits of the half-dozen corporate giants that dominate the health insurance industry.
This won’t be happening with a billionaire in the White House, but if we want to bring America into the 21st century with the next administration, we need to begin working, planning, and waking up voters now.
In late 2025, two events reset the U.S. health system’s future at least through 2026 and possibly beyond:
November 5, 2024: The Election: Its post-mortem by pollsters and pundits reflects a country divided and unsettled: 22 Red States, 7 Swing States and 21 Blue States. But a solid majority who thought the country was heading in the wrong direction and their financial insecurity driving voters to return the 45th President to the White House. With slim majorities in the House and Senate, and a short-leash before mid-term elections November 3, 2026, the Trump team has thrown out ‘convention’ in their setting policies and priorities for their second term. That includes healthcare.
December 4, 2024: The Murder of a Health Executive : The murder of Brian Thompson, United Healthcare CEO, sparked hostility toward health insurers and a widespread backlash against the corporatization of the U.S. health system. While UHG took the most direct hit for its aggressiveness in managing access and coverage disputes, social media and mainstream journalists exposed what pollsters affirmed—the majority of American’s distrust the health system, believing it puts its profits above their needs. And their polls indicate animosity is highest among young adults, in lower income households and among members of its own workforce.
These events provide the backdrop for what to expect this year and next. Four directional shifts seem to underly actions to date and announced plans:
From elitism to populism: Key personnel and policy changes will draw less from Ivy League credentials, DC connections and recycled federal health agency notables and more from private sector experience, known disruptors and unconventional thought leaders. Notably, the new Chairs of the 7 Congressional Committees that control healthcare regulation, funding and policy changes in the 119th Congress represent LA, AL, WV, ID, VA, MO & KY constituents—hardly Ivy League territory.
From workforce disparities to workforce modernization: The Departments of Health & Human Services, Labor, Commerce and Treasury will attempt to suspend/modify regulatory mandates and entities they deem derived from woke ideology. The Trump team will replace them with policies that enable workforce de-regulation and modernization in the private sector. Hiring quotas, non-compete contracts, DEI et al will get a fresh look in the context of technology-enabled workplaces and supply-demand constraints. The HR function in every organization will become ground zero for Trump Healthcare 2.0 system transformation.
From western medicine to whole person wellbeing: HHS Secretary Nominee Robert F. Kennedy Jr. (RFK) Jr.’s “Make America Healthy Again” pledges war on ultra-processed foods. CMS’ designee Mehmet Oz advocates for vitamins, supplements and managed care. FDA nominee Marty Makary, a Hopkins surgeon, is a RFKJ ally in the “Health Freedom” movement promoting suspicion about ‘mainstream medicine’ and raising doubts about vaccination efficacy for children and low-risk adults. NIH nominee Jay Bhattacharya, director of Stanford’s Center for Demography and Economics of Health and Aging, opposed Covid-19 lockdowns and is critical of vaccine policies. Collectively, this four-some will challenge conventional western (allopathic) medicine and add wide-range of non-traditional interventions that are a safe and cost-effective to the treatment arsenal for providers and consumers. The food supply will be a major focus: HHS will work closely with the USDA (nominee Brooke Rollins, currently CEO of the America First Policy Institute, to reduce the food chain’s dependence on ultra-processed foods in public health.
From DC dominated health policies to states: The 2022 Supreme Court’ Dobbs decision opened the door for states to play the lead role in setting policies for access to abortion for their female citizens. It follows federalism’s Constitutional preference that Washington DC’s powers over states be enumerated and limited. Thus, state provisions about healthcare services for its citizens will expand beyond their already formidable scope. Likely actions in some states will include revised terms and conditions that facilitate consolidation, allowance for physician owned hospitals and site-neutral payments, approval of “skinny” individual insurance policies that do not conform to the Affordable Care Act’s qualified health plan spec’s, expanded scope of practice for nurse practitioners, drug price controls and many others. At least for the immediate future, state legislatures will be the epicenters for major policy changes impacting healthcare organizations; federal changes outside appropriations activity are unlikely.
Transforming the U.S. health system is a bodacious ambition for the incoming Trump team. Early wins will be key—like expanding price transparency in every healthcare sector, softening restrictions on private equity investments, targeted cuts in Medicaid and Medicare funding and annulment of the Inflation Reduction Act. In tandem, it has promised to cut Federal government spending by $2 trillion and lower prices on everything including housing and healthcare—the two spending categories of highest concern to the working class. Healthcare will figure prominently in Team Trump’s agenda for 2025 and posturing for its 2026 mid-term campaign. And equally important, healthcare costs also figure prominently in quarterly earnings reports for companies that provide employee health benefits forecast to be 8% higher this year following a 7% spike the year prior. Last year’s 23% S&P growth is not expected to repeat this year raising shareholder anxiety and the economy’s long-term resilience and the large roles housing and healthcare play in its performance.
My take:
The 2024 election has been called a change election. That’s unwelcome news to most organizations in healthcare, especially the hospitals, physicians, post-acute providers and others who provide care to patients and operate at the bottom of the healthcare pyramid.
Equipping a healthcare organization to thoughtfully prepare for changes amidst growing uncertainty requires extraordinary time and attention by management teams and their Boards. There are no shortcuts. Before handicapping future state scenario possibilities, contingencies and resource requirements, a helpful starting point is this: On the four most pressing issues facing every U.S. healthcare company/organization today, Boards and Management should discuss…
Trust: On what basis can statements about our performance be verified? Is the data upon which our trust is based readily accessible? Does the organization’s workforce have more or less trust than outside stakeholders? What actions are necessary to strengthen/restore trust?
Purpose: Which stakeholder group is our organization’s highest priority? What values & behaviors define exceptional leadership in our organization? How are they reflected in their compensation?
Affordability: How do we measure and monitor the affordability of our services to the consumers and households we ultimately depend? How directly is our organization’s alignment of reducing cost reduction and pass-through savings to consumers? Is affordability a serious concern in our organization (or just a slogan)?
Scale: How large must we be to operate at the highest efficiency? How big must we become to achieve our long-term business goals?
This week, thousands of healthcare’s operators will be in San Francisco (JPM Healthcare Conference), Naples (TGI Leadership Conference) and in Las Vegas (Consumer Electronics Show) as healthcare begins a new year. No one knows for sure what’s ahead or who the winners and losers will be. What’s for sure is that healthcare will be in the spotlight and its future will not be a cut and paste of its past.
PS: The parallels between radical changes facing the health system and other industries is uncanny. College athletics is no exception. As you enjoy the College Football Final Four this weekend, consider its immediate past—since 2021, the impact of Name, Image and Likeness (NIL) monies on college athletics, and its immediate future–pending regulation that will codify permanent revenue sharing arrangements (to be implemented 2026-2030) between college athletes, their institutions and sponsors. What happened to the notion of student athlete and value of higher education? Has the notion of “not-for-profit” healthcare met a similar fate? Or is it all just business?
HENRY KOTULA 