Category Archives: High Drug Prices

Are Employers Ready to Move from the Back Bench in U.S. Healthcare?

Posted on by • Posted in Cost Management, Cost Transparency, Employee Benefits, Employer-Based Health Insurance, Employer-Sponsored Commercial Health Insurance, Employers, Health Insurance Self Funded, Healthcare Reform, High Drug Prices, High Premiums, High Prices, High Risk Employees, Medicaid, Medicare, Medicare Advantage, Out of Pocket Expenses • Leave a comment
Are Employers Ready to Move from the Back Bench in U.S. Healthcare?

This year, 316 million Americans (92.3% of the population) have health insurance: 61 million are covered by Medicare, 79 million by Medicaid/CHIP and 164 million through employment-based coverage. By 2032, the Congressional Budget Office predicts Medicare coverage will increase 18%, Medicaid and CHIP by 0% and employer-based coverage will increase 3.0% to 169 million. For some in the industry, that justifies seating Medicare on the front row for attention. And, for many, it justifies leaving employers on the back bench since the working age population use hospitals, physicians and prescription meds less than seniors.  

Last week, the Business Group on Health released its 2025 forecast for employer health costs based on responses from 125 primarily large employers surveyed in June: Highlights:

  • “Since 2022, the projected increase in health care trend, before plan design changes, rose from 6% in 2022, 7.2% in 2024 to almost 8% for 2025. Even after plan design changes, actual health care costs continued to grow at a rate exceeding pre-pandemic increases. These increases point toward a more than 50% increase in health care cost since 2017. Moreover, this health care inflation is expected to persist and, in light of the already high burden of medical costs on the plan and employees, employers are preparing to absorb much of the increase as they have done in recent years.”.
  • Per BGH, the estimated total cost of care per employee in 2024 is $18,639, up $1,438 from 2023. The estimated out-of-pocket cost for employees in 2024 is $1,825 (9.8%), compared to $1,831 (10.6%) in 2023.

The prior week, global benefits firm Aon released its 2025 assessment based on data from 950 employers:

  • “The average cost of employer-sponsored health care coverage in the U.S. is expected to increase 9.0% surpassing $16,000 per employee in 2025–higher than the 6.4% increase to health care budgets that employers experienced from 2023 to 2024 after cost savings strategies. “
  • On average, the total health-plan cost for employers increased 5.8% to $14,823 per employee from 2023 to 2024: employer costs increased 6.4% to 80.7% of total while employee premiums increased 3.4% increase–both higher than averages from the prior five years, when employer budgets grew an average of 4.4% per year and employees averaged 1.2% per year.
  • Employee contributions in 2024 were $4,858 for health care coverage, of which $2,867 is paid in the form of premiums from pay checks and $1,991 is paid through plan design features such as deductibles, co-pays and co-insurance.
  • The rate of health care cost increases varies by industry: technology and communications industry have the highest average employer cost increase at 7.4%, while the public sector has the highest average employee cost increase at 6.7%. The health care industry has the lowest average change in employee contributions, with no material change from 2023: +5.8%

And in July, PWC’s Health Research Institute released its forecast based on interviews with 20 health plan actuaries. Highlights:

  • “PwC’s Health Research Institute (HRI) is projecting an 8% year-on-year medical cost trend in 2025 for the Group market and 7.5% for the Individual market. This near-record trend is driven by inflationary pressure, prescription drug spending and behavioral health utilization. The same inflationary pressure the healthcare industry has felt since 2022 is expected to persist into 2025, as providers look for margin growth and work to recoup rising operating expenses through health plan contracts. The costs of GLP-1 drugs are on a rising trajectory that impacts overall medical costs. Innovation in prescription drugs for chronic conditions and increasing use of behavioral health services are reaching a tipping point that will likely drive further cost inflation.”

Despite different methodologies, all three analyses conclude that employer health costs next year will increase 8-9%– well-above the Congressional Budget Office’ 2025 projected inflation rate (2.2%), GDP growth (2.4% and wage growth (2.0%).  And it’s the largest one-year increase since 2017 coming at a delicate time for employers worried already about interest rates, workforce availability and the political landscape.

For employers, the playbook has been relatively straightforward: control health costs through benefits designs that drive smarter purchases and eliminate unnecessary services. Narrow networks, price transparency, on-site/near-site primary care, restrictive formularies, value-based design, risk-sharing contracts with insurers and more have become staples for employers. 

But this playbook is not working for employers: the intrinsic economics of supply-driven demand and its regulated protections mitigate otherwise effective ways to lower their costs while improving care for their employees and families.

My take:

Last week, I reviewed the healthcare advocacy platforms for the leading trade groups that represent employers in DC and statehouses to see what they’re saying about their take on the healthcare industry and how they’re leaning on employee health benefits. My review included the U.S. Chamber of Commerce, National Federal of Independent Businesses, Business Roundtable, National Alliance of Purchaser Coalitions, Purchaser Business Group on Health, American Benefits Council, Self-Insurance Institute of America and the National Association of Manufacturers.

What I found was amazing unanimity around 6 themes:

  • Providing health benefits to employees is important to employers. Protecting their tax exemptions, opposing government mandates, and advocating against disruptive regulations that constrain employer-employee relationships are key.
  • Healthcare affordability is an issue to employers and to their employees, All see increasing insurance premiums, benefits design changes, surprise bills, opaque pricing, and employee out-of-pocket cost obligations as problems.
  • All believe their members unwillingly subsidize the system paying 1.6-2.5 times more than what Medicare pays for the same services. They think the majority of profits made by drug companies, hospitals, physicians, device makers and insurers are the direct result of their overpayments and price gauging.
  • All think the system is wasteful, inefficient and self-serving. Profits in healthcare are protected by regulatory protections that disable competition and consumer choices.
  • All think fee-for-service incentives should be replaced by value-based purchasing.
  • And all are worried about the obesity epidemic (123 million Americans) and its costs-especially the high-priced drugs used in its treatment. It’s the near and present danger on every employer’s list of concerns.

This consensus among employers and their advocates is a force to be reckoned. It is not the same voice as health insurers: their complicity in the system’s issues of affordability and accountability is recognized by employers. Nor is it a voice of revolution: transformational changes employers seek are fixes to a private system involving incentives, price transparency, competition, consumerism and more.

Employers have been seated on healthcare’s back bench since the birth of the Medicare and Medicaid programs in 1965. Congress argues about Medicare and Medicaid funding and its use. Hospitals complain about Medicare underpayments while marking up what’s charged employers to make up the difference. Drug companies use a complicated scheme of patents, approvals and distribution schemes to price their products at will presuming employers will go along. Employers watched but from the back row.

As a new administration is seated in the White House next year regardless of the winner, what’s certain is healthcare will get more attention, and alongside the role played by employers. Inequities based on income, age and location in the current employer-sponsored system will be exposed. The epidemic of obesity and un-attended demand for mental health will be addressed early on. Concepts of competition, consumer choice, value and price transparency will be re-defined and refreshed. And employers will be on the front row to make sure they are.

For employers, it’s crunch time: managing through the pandemic presented unusual challenges but the biggest is ahead. Of the 18 benefits accounted as part of total compensation, employee health insurance coverage is one of the 3 most expensive (along with paid leave and Social Security) and is the fastest growing cost for employers.  Little wonder, employers are moving from the back bench to the front row.

CMS: Negotiated drug prices would have saved Medicare $6B last year

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https://www.fiercehealthcare.com/regulatory/cms-negotiated-drug-prices-would-have-saved-medicare-6b-last-year?utm_medium=email&utm_source=nl&utm_campaign=HC-NL-FierceHealthPayer&oly_enc_id=8564C4000334E5C

The Centers for Medicare & Medicaid Services offered the first look at the potential savings generated by the first crop of Medicare drug price negotiations.

On Thursday morning, the agency released data that show if the negotiated prices for the first 10 drugs in the program had been available last year, it would have generated an estimated $6 billion in savings for Medicare. That’s savings of about 22% on those 10 products.

CMS will offer additional details on negotiations down the line, officials said on a call with reporters on Thursday, but they said the program led to price reductions of between 38% and 79% on the initial list of drugs.

On the highest end, negotiations led to a price decrease for Merck’s Januvia, a diabetes drug, from $527 for a 30-day supply to $113, down 79%. CMS said 843,000 Medicare beneficiaries took Januvia in 2023, with the drug accounting for nearly $4.1 billion in spending.

“Americans pay too much for their prescription drugs. That makes today’s announcement historic. For the first time ever, Medicare negotiated directly with drug companies and the American people are better off for it,” said U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra.

Here’s a look at savings for other drugs included in the program:

  • Fiasp and NovoLog insulins (Novo Nordisk): Reduced the cost of a 30-day supply from $495 to $119, a decrease of 76%.
  • Farxiga (AstraZeneca): List price for a 30-day supply decreased from $556 to $178.50, or 68%.
  • Enbrel (Immunex Corporation): Cut the list price for a 30-day supply by 67% from $7,106 to $2,355.
  • Jardiance (Boehringer Ingelheim): Reduced the cost of a 30-day supply by 66%, or from $573 to $197.
  • Stelara (Janssen): The list price for a 30-day supply dropped from $13,836 to $4,695 or by 66%.
  • Xarelto (Janssen): Lowered the cost for a 30-day supply by 62%, or from $517 to $197.
  • Eliquis (Bristol Myers Squibb): The cost for a 30-day supply decreased from $521 to $231, or by 56%.
  • Entresto (Novartis): Reduced the list price for a 30-day supply by 53%, or from $628 to $295.
  • Imbruvica (Pharmacyclics): Decreased the cost for a 30-day supply from $14,934 to $9,319, or by 28%.

CMS sent the initial offers for the 10 drugs to the manufacturers on Feb. 1, and the companies had until March 2 to respond with a counteroffer. Then throughout the summer, the agency held meetings with the drugmakers to continue negotiations, before sending final offers on July 15.

The negotiation period ended on Aug. 1 with a deal in place for all 10 drugs, CMS said.

The new prices will go into effect on Jan. 1, 2026. CMS estimates that Medicare beneficiaries will see aggregate savings of $1.5 billion in their personal out-of-pocket costs in 2026.

Final cost savings can vary based on the enrollee’s specific plan, the agency said.

CMS said it will select up to 15 additional drugs for negotiation in 2027, and the list will be announced by Feb. 1, 2025.

Reaction rolls in

Multiple lawmakers praised CMS and the efforts to reduce drug prices in statements Thursday.

Sen. Ron Wyden, D-Ore., who chairs the Finance Committee, said that Medicare used “the bargaining power of tens of millions of American seniors to fight Big Pharma for lower drug prices.”

“These new, lower prices for prescription drugs in Medicare means seniors save money at the pharmacy counter and marks the first step in a seismic shift in the relationship between Big Pharma, taxpayers, and seniors who need affordable prescription drugs,” Wyden said.

Rep. Frank Pallone, D-N.J., who is the ranking Democrat on the House Energy & Commerce Committee, said that the negotiations will lead to $101 million in savings for seniors living in the Garden State.

Pallone also helped to co-write the Inflation Reduction Act, which gave Medicare the power to negotiate with drug companies.

“This is a historic day for New Jersey and the nation. After more than two decades of fighting, we have finally empowered Medicare to negotiate lower prescription drug prices for our seniors,” said Pallone. “This milestone is especially meaningful for New Jersey, where many seniors rely on Medicare for their life-saving medications.”

Reactions, however, were not universally positive. Pharmaceutical Research and Manufacturers of America (PhRMA) CEO Steve Ubl said in a statement Wednesday that regulators won’t be able to achieve their ultimate goal as the negotiation program does not take aim at pharmacy benefit managers.

Ubl also said that the IRA “fundamentally alters” the incentives drugmakers have in researching and developing new products and therapies. He said companies are already making changes to their R&D programs in response.

“The administration is using the IRA’s price-setting scheme to drive political headlines, but patients will be disappointed when they find out what it means for them,” Ubl said. “There are no assurances patients will see lower out-of-pocket costs because the law did nothing to rein in abuses by insurance companies and PBMs who ultimately decide what medicines are covered and what patients pay at the pharmacy.”

“As a result of the IRA, there are fewer Part D plans to choose from and premiums are going up,” he continued.” Meanwhile, insurers and PBMs are covering fewer medicines and say they intend to impose further coverage restrictions as the price-setting scheme is implemented.”

The Pharmaceutical Care Management Association, which represents PBMs, meanwhile, said that its analyses show that PBM negotiations have driven more significant discounts on six of the 10 drugs included in the program.

“While we share the Administration’s goal to reduce prescription drug costs for America’s seniors and to push back against the high prices set by drug manufacturers, the Administration has missed the mark by choosing several prescription drugs for which PBMs are already actively negotiating steep discounts that significantly lower costs for beneficiaries and taxpayers,” PCMA said.

“The key to reducing drug costs is to increase competition among manufacturers,” the organization said. “We encourage the Administration to focus on those drugs where a lack of competition is driving higher prices and higher costs, and to allow PBM negotiations to continue to deliver value and savings for Medicare.”

While the negotiation program takes more direct aim at drugmakers, PBMs are also under the microscope on the Hill. Lawmakers are mulling a slew of potential reforms to the industry, which critics argue is too concentrated, too opaque and too profit-driven at the expense of patients.

Analysts shrug

Posted on by • Posted in Big Pharma, High Drug Prices, Medicare Prescription Drug Price Negotiation Act, Out of Pocket Expenses, Pharmaceutical Industry • Leave a comment
https://www.axios.com/newsletters/axios-future-of-health-care-64c81420-5a67-11ef-a473-a5472d28e357.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosfutureofhealthcare&stream=top

Unless you were under a rock, you saw yesterday’s news that Medicare negotiated a better deal than the private market for some of the program’s top-selling drugs.

Why it matters: 

So what? How meaningful is that difference, and what will the longer-term effects be?

  • Some seniors will likely pay less out of pocket for drugs (that’s a whole topic that we’re not going to get into right now), and that obviously matters to patients. But how pharma interprets the negotiated prices and reacts to them will have a huge impact on future drug development.

Our thought bubble: 

Democrats are thrilled, Republicans are appalled. The drug industry is complaining publicly but telling investors everything is fine.

  • For all of the uproar this law caused when it was passed, the financial world’s reaction to today’s rollout made everything seem pretty good — for now (more on that below).

Between the lines: 

The announced prices — an overall 22% reduction in net spending but no details on individual drugs’ net price reductions — are less drastic than some feared.

  • “There are strong price reductions, but it also shows there is plenty of room for the industry to continue to make some profits on these drugs,” Vanderbilt’s Stacie Dusetzina said.

Analysts are reacting much more neutrally than the politicians.

  • In a note titled “CMS Spins, Pharma Wins (Relatively),” Raymond James analyst Chris Meekins wrote that “the impact is far less than politicians proclaimed and the industry as a whole seems to be managing this fine so far.”
  • And in a note titled “Sigh of Relief,” Leerink analysts concluded that “22% is not as bad as anticipated earlier this year,” though recent earnings calls had assuaged fears somewhat.

Where it stands: 

No one knows for sure the net prices of Part D drugs, much less what they would have otherwise been in 2026. But there are some estimates, and Medicare’s negotiated rate is generally lower than those estimates.

The big picture: 

If there’s anything everyone agrees on, it’s that America’s high drug prices make up a grossly disproportionate bulk of pharma’s revenue compared with the rest of the world’s.

  • Critics — which include many politicians from both parties! — say all that means is that America is getting ripped off.
  • Pharmaceutical companies and some experts say that this subsidization allows drug companies to keep searching for and investing in new therapies despite too-low prices in other countries.

Regardless, that tasked the administration with figuring out how much of a revenue haircut — or a subsidy reduction — drug companies could take without sacrificing the new drugs we want them to continue bringing to market.

  • So far, that haircut seems to be pretty manageable.
  • “We’ve shown that it can be done successfully and the sky doesn’t fall,” said Harvard’s Aaron Kesselheim. “It’s not surprising to me that the markets haven’t come crashing down, because I think this process was not set up to bankrupt the pharmaceutical industry.”

There are several reasons why the outcome of negotiations over this particular group of drugs may not say much about future outcomes.

  • Many of them were already about to get generic competition, which may not be the case for drugs selected down the road. Most of them are already highly rebated.
  • And the number of drugs any given company is receiving a negotiated price for will likely go up over time, as more drugs enter the program each year.
  • “The financial impact will be a lot worse when companies have many drugs negotiated rather than just one or two in ’26 that are going off patent anyway,” said Leerink’s David Risinger.

Plus, positive earnings calls may not reflect the full picture.

  • “Over time, will they adjust and make money? Big pharma — of course. It’s small pharma … that’s getting severely impacted,” said Joe Grogan, the former director of the United States Domestic Policy Council in the Trump administration.
  • “They’re figuring out how to continue to make money, but it doesn’t alter the fact that it upset their R&D expenditures and their R&D plans, and it’s going to leave fewer therapies and fewer treatments down the road,” he added.
  • “Medicine development is a long and complex process, and the negative implications of these changes will not be fully realized for decades to come,” said PhRMA CEO Steve Ubl in a statement before the rates were released.

And perhaps the biggest wild card of all: Different administrations could take different approaches — and nothing requires any given administration to be consistent.

  • “They have flexibility to negotiate harder in coming years, and maybe they didn’t want to poke pharma in the eye too hard in the first year,” Risinger said.
  • “The problem is it’s unpredictable so it’s hard to forecast,” former FDA commissioner Scott Gottlieb told me. “These will ultimately be political decisions, and as much as CMS says there’s a process and a formula, there isn’t.”

The bottom line: 

For now, it looks like the Biden administration found a way to save the government some money — it helped me to consider how I’d think about a 22% sale in my personal life — without really upsetting the drug market.

  • That balance may not be reproduced going forward.

What to watch when Medicare releases first negotiated drug prices

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https://www.axios.com/2024/08/14/medicare-releases-first-negotiated-drug-prices?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

The confidential nature of the Biden administration’s drug price negotiations has made the process and outcome of the long-sought Democratic policy goal something of a mystery.

Why it matters: 

The administration is expected to announce the results of those negotiations this week, and there’s plenty of speculation about the actual savings that will be realized starting in 2026 — and how aggressive the Biden administration got on pharma in an election year.

Where it stands: 

Drugmakers have indicated that the negotiated prices for this first 10 drugs won’t have much impact on their projected bottom lines.

  • But the results could hint at what’s to come in subsequent rounds, as the number of drugs up for negotiation expands, possibly to include blockbuster GLP-1 weight-loss drugs.

Context: 

The Centers for Medicare and Medicaid Services last summer chose 10 drugs that account for some of the highest total costs for Medicare, including Bristol Myers Squibb and Pfizer’s blood-thinner Eliquis and Boehringer Ingelheim’s diabetes drug Jardiance.

  • CMS and drugmakers have been going back and forth since February on how to price the drugs. Meanwhile, the pharmaceutical industry and its allies have mounted a series of so far unsuccessful legal challenges to stop the talks.

Here are some key unanswered questions ahead of the announcement, expected Thursday morning:

What information will CMS release about the final drug prices? Analysts, policy experts and industry groups told Axios they’re watching for whether Medicare officials announce specific levels of savings they achieved on each drug.

  • If Medicare does announce levels of savings, it’ll matter whether they measure those against drugs’ current list prices, which are typically higher than what patients actually pay, or another figure that takes into account existing rebates and discounts, said TD Cowen analyst Rick Weissenstein.
  • Statutorily, Medicare officials have to release the final prices for the selected drugs by Sept. 1 and justify those prices by March 1.
  • “What data CMS chooses to release is a big question mark,” said Chris Meekins, an analyst at Raymond James.

How will pharmacy benefit middlemen and prescription drug insurance plans react to the new prices? 

Medicare Part D insurers must cover all 10 selected drugs, but the Inflation Reduction Act doesn’t specify where they need to place the drugs on their formularies.

  • That could potentially lead to drug middlemen and insurers giving competing products more favorable placement on their formularies, said Lindsay Bealor Greenleaf, who leads federal and state policy at ADVI Health, which consults for pharmaceutical and biotech manufacturers.
  • CMS will require plans to justify their decision if they move the drugs to different tiers or add more restrictive utilization management tools, per KFF.

How will investors and drugmakers react? 

The release of the maximum fair drug prices could clarify how risk-averse large pharmaceutical companies need to be in future acquisitions of smaller biotech companies, said John Stanford, executive director of Incubate, the life sciences investor lobbying group.

How will Medicare-negotiated prices compare with international drug prices? 

Branded drugs typically come with higher price tags in the United States than elsewhere in the world.

  • “I think it’s going to be very instructive to see how much the purchasing power of CMS gets us in terms of reduction,” said Anna Kaltenboeck, who leads the prescription drug reimbursement work at consulting firm ATI Advisory.

What’s next: 

Negotiated prices will go into effect Jan 1., 2026. CMS will announce as many as 15 additional drugs for the second round of negotiation by Feb. 1, 2025.

While Cigna Saddles Patients with Increasing Out-of-Pocket Requirements, the Company Bought Back $5 Billion of Its Own Stock

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https://healthcareuncovered.substack.com/p/while-cigna-saddles-patients-with?utm_source=post-email-title&publication_id=255152&post_id=147247562&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

Cigna, my former employer, disclosed this morning that during the first seven months of this year, it spent $5 billion of the money it took from its health plan and pharmacy benefit customers to buy back shares of its own stock, a gimmick that rewards shareholders at the expense of those customers. 

Cigna also disclosed that its revenues increased a stunning 25% – to $60.5 billion – during the second quarter of this year compared to the same period in 2023. Profits also grew, from $1.8 billion to $1.9 billion. 

One of the ways Cigna made so much money was by purging health plan enrollees it decided were not profitable enough to meet Wall Street’s profit expectations.

Enrollment in its U.S. health plans fell by nearly half a million people – from 17.9 million to 17.4 million – over the past year. The company signaled to investors that it was more than OK with that decline, noting that it ran off those customers through “targeted pricing actions in certain geographies.” What that means is that Cigna increased premiums so much for those folks that they either found other insurers or joined the ranks of the uninsured. 

It was an entirely different story in Cigna’s pharmacy benefit (PBM) business, which saw a 24% increase in total pharmacy customers. The vast majority of Cigna’s revenues now come from its role as one of the country’s largest middlemen in the pharmacy supply chain. Revenue from Cigna’s pharmacy operations totaled nearly $50 billion in the second quarter of this year, up from $38.2 billion last year. By contrast, revenue from its health plan business increased modestly, from $12.7 billion to $13.1 billion.

But by purging 478,000 men, women and children from its rolls, Cigna reported a profit margin of 9.2% for its health plan operations. That, folks, is exceedingly high in the health insurance business.  

One way Cigna and the other industry giants can reward their shareholders so handsomely is by making their health plan and pharmacy customers pay more and more out of their own pockets before the insurers pay a dime.

The Affordable Care Act made it illegal for insurers to refuse to sell coverage to people with preexisting conditions or to set premiums based on someone’s health status.

But that law kept open a big back door that enables insurers like Cigna to make people with health problems pay huge sums of money for their care through deductibles and copayments. As a consequence, millions of Americans are walking away from the pharmacy counter without their medications, and many others who simply cannot live without their meds often wind up buried under a mountain of medical debt.  

Aware of this, President Biden in his State of the Union address called on Congress to limit out-of-pocket requirements for prescription drugs to $2,000 a year. Such a limit will go into effect next year for people enrolled in Medicare’s prescription drug program. Biden said that limit should apply to all Americans enrolled in private health care plans, like Cigna’s. 

A growing number of bills have been or soon will be introduced by members of Congress to fulfill Biden’s pledge, but you can expect Cigna and other big insurers to insist that doing so will mean premiums will have to go up.

That’s bullshit.

It might mean that Cigna and the other giants might have to curtail their stock buyback programs and accept slimmer profit margins, but it does not mean premiums will have to go up.

Wall Street will howl if one of the tools insurers use to gouge their customers is taken away – just as investors are punishing Cigna today for the sin of not predicting even higher profits for the rest of the year –

but reducing out-of-pocket requirements would put a significant dent in the enormous and ongoing transfer of wealth by middlemen like Cigna from middle-class Americans, especially those struggling with health issues, to fat cat investors and corporate executives.

Campaign 2024 and US Healthcare: 7 Things we Know for Sure

Posted on by • Posted in 2024 Election Issues, Abortion, Abortion Pill, Abortion Rights, ACA, Health Insurance Coverage Adequacy, Health Insurance Industry, Health Policy, Health System, Healthcare Reform, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Hospital, Hospital Industry, Medicaid, Medicaid Eligibility, Medicaid Expansion, Medicaid Funding, Medical Debt, Medicare, Medicare Advantage, Roe v. Wade • Leave a comment
Campaign 2024 and US Healthcare: 7 Things we Know for Sure

Over the weekend, President Biden called it quits and Democrats seemingly coalesced around Vice President Harris as the Party’s candidate for the White House. While speculation about her running mate swirls, the stakes for healthcare just got higher. Here’s why:

A GOP View of U.S. Healthcare

Republicans were mute on their plans for healthcare during last week’s nominating convention in Milwaukee. The RNC healthcare platform boils down to two aims: ‘protecting Medicare’ and ‘granting states oversight of abortion services.  Promises to repeal and replace the Affordable Care Act, once the staple of GOP health policy, are long-gone as polls show the majority (even in Red states (like Texas and Florida) favor keeping it. The addition of Ohio Senator JD Vance to the ticket reinforces the party’s pro-capitalism, pro-competition, pro-states’ rights pitch.

To core Trump voters and right leaning Republicans, the healthcare industry is a juggernaut that’s over-regulated, wasteful and in need of discipline. Excesses in spending for illegal immigrant medical services ($8 billion in 2023), high priced drugs, lack of price transparency, increased out-of-pocket costs and insurer red tape stoke voter resentment. Healthcare, after all, is an industry that benefits from capitalism and market forces: its abuses and weaknesses should be corrected through private-sector innovation and pro-competition, pro-consumer policies.

A Dem View of Healthcare

By contrast, healthcare is more prominent in the Democrat’s platform as the party convenes for its convention in Chicago August 19. Women’s health and access to abortion, excess profitability by “corporate” drug manufacturers, hospitals and insurers, inadequate price transparency, uneven access and household affordability will be core themes in speeches and ads, with a promise to reverse the Dobb’s ruling by the Supreme Court punctuating every voter outreach.

Healthcare, to the Democratic-leaning voters is a right, not a privilege.

Its majority think it should be universally accessible, affordable, and comprehensive akin to Medicare. They believe the status quo isn’t working: the federal government should steward something better.

Here’s what we know for sure:

  1. Foreign policy will be a secondary focus. The campaigns will credential their teams as world-savvy diplomats who seek peace and avoid conflicts. Nationalism vs. globalism will be key differentiator for the White House aspirants but domestic policies will be more important to most voters.
  2. Healthcare reform will be a more significant theme in Campaign 2024 in races for the White House, U.S. Senate, U.S. House of Representatives and Governors. Dissatisfaction with the status quo and disappointment with its performance will be accentuated.
  3. The White House campaigns will be hyper-negative and disinformation used widely (especially on healthcare issues). A prosecutorial tone is certain.
  4. Given the consequence of the SCOTUS’ Chevron ruling limiting the role and scope of agency authority (HHS, CMS, FDA, CDC, et al), campaigns will feature proposed federal & state policy changes and potential Cabinet appointments in positioning their teams. Media speculation will swirl around ideologues mentioned as appointees while outside influencers will push for fresh faces and new ideas.
  5. Consumer prices and inflation will be hot-button issues for pocketbook voters: the health industry, especially insurers, hospitals and drug companies, will be attacked for inattention to affordability.
  6. Substantive changes in health policies and funding will be suspended until 2025 or later. Court decisions, Executive Orders from the White House/Governors, and appointments to Cabinet and health agency roles will be the stimuli for changes. Major legislative and regulatory policy shifts will become reality in 2026 and beyond. Temporary adjustments to physician pay, ‘blame and shame’ litigation and Congressional inquiries targeting high profile bad actors, excess executive compensation et al and state level referenda or executive actions (i.e. abortion coverage, price-containment councils, CON revisions et al) will increase.
  7. Total healthcare spending, its role in the economy and a long-term vision for the entire system will not be discussed beneath platitudes and promises. Per the Congressional Budget Office, healthcare as a share of the U.S. GDP will increase from 17.6% today to 19.7% in 2032. Spending is forecast to increase 5.6% annually—higher than wages and overall inflation. But it’s too risky for most politicians to opine beyond acknowledgment that “they feel their pain.”

My take:

Regardless of the election outcome November 5, the U.S. healthcare industry will be under intense scrutiny in 2025 and beyond. It’s unavoidable.

Discontent is palpable. No sector in U.S. healthcare can afford complacency. And every stakeholder in the system faces threats that require new solutions and fresh voices.

Stay tuned.

The Healthcare Economy: Three Key Takeaways that Frame Public and Private Sector Response

Posted on by • Posted in American Hospital Association (AHA), Congressional Budget Office (CBO), Consumer Price Index (CPI), Cost Management, Cost Reduction, Forecast, Health Policy, Health System, Healthcare Industry, Healthcare Market, Healthcare Price Index, Healthcare Reform, High Cost Therapies, High Deductible Health Plans, High Drug Prices, High Premiums, Highly Specialized Drugs, Hospital, Hospital Industry, Market Outlook, Market Trends, Out of Network, Out of Pocket Expenses, Prescription Drugs, Value-Based Contracting, Value-Based Healthcare • Leave a comment
The Healthcare Economy: Three Key Takeaways that Frame Public and Private Sector Response

Last week, 2 important economic reports were released that provide a retrospective and prospective assessment of the U.S. health economy:

The CBO National Health Expenditure Forecast to 2032: 

“Health care spending growth is expected to outpace that of the gross domestic product (GDP) during the coming decade, resulting in a health share of GDP that reaches 19.7% by 2032 (up from 17.3% in 2022). National health expenditures are projected to have grown 7.5% in 2023, when the COVID-19 public health emergency ended. This reflects broad increases in the use of health care, which is associated with an estimated 93.1% of the population being insured that year… During 2027–32, personal health care price inflation and growth in the use of health care services and goods contribute to projected health spending that grows at a faster rate than the rest of the economy.”

The Congressional Budget Office forecast that from 2024 to 2032:

  • National Health Expenditures will increase 52.6%: $5.048 trillion (17.6% of GDP) to $7,705 trillion (19.7% of GDP) based on average annual growth of: +5.2% in 2024 increasing to +5.6% in 2032
  • NHE/Capita will increase 45.6%: from $15,054 in 2024 to $21,927 in 2032
  • Physician services spending will increase 51.2%: from $1006.5 trillion (19.9% of NHE) to $1522.1 trillion (19.7% of total NHE)
  • Hospital spending will increase 51.6%: from $1559.6 trillion (30.9% of total NHE) in 2024 to $2366.3 trillion (30.7% of total NHE) in 2032.
  • Prescription drug spending will increase 57.1%: from 463.6 billion (9.2% of total NHE) to 728.5 billion (9.4% of total NHE)
  • The net cost of insurance will increase 62.9%: from 328.2 billion (6.5% of total NHE) to 534.7 billion (6.9% of total NHE).
  • The U.S. Population will increase 4.9%: from 334.9 million in 2024 to 351.4 million in 2032.

The Bureau of Labor Statistics CPI Report for May 2024 and Last 12 Months (May 2023-May2024): 

“The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis, after rising 0.3% in April… Over the last 12 months, the all-items index increased 3.3% before seasonal adjustment. More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4% for the fourth consecutive month. The index for food increased 0.1% in May. … The index for all items less food and energy rose 0.2% in May, after rising 0.3 % the preceding month… The all-items index rose 3.3% for the 12 months ending May, a smaller increase than the 3.4% increase for the 12 months ending April. The all items less food and energy index rose 3.4 % over the last 12 months. The energy index increased 3.7%for the 12 months ending May. The food index increased 2.1%over the last year.

Medical care services, which represents 6.5% of the overall CPI, increased 3.1%–lower than the overall CPI. Key elements included in this category reflect wide variance: hospital and OTC prices exceeded the overall CPI while insurance, prescription drugs and physician services were lower.

  • Physicians’ services CPI (1.8% of total impact): LTM: +1.4%
  • Hospital services CPI (1.0% of total impact): LTM: +7.3%
  • Prescription drugs (.9% of total impact) LTM +2.4%
  • Over the Counter Products (.4% of total impact) LTM 5.9%
  • Health insurance (.6% of total) LTM -7.7%

Other categories of greater impact on the overall CPI than medical services are Shelter (36.1%), Commodities (18.6%), Food (13.4%), Energy (7.0%) and Transportation (6.5%).

Three key takeaways from these reports:

  • The health economy is big and getting bigger. But it’s less obvious to consumers in the prices they experience than to employers, state and federal government who fund the majority of its spending. Notably, OTC products are an exception: they’re a direct OOP expense for most consumers. To consumers, especially renters and young adults hoping to purchase homes, the escalating costs of housing have considerably more impact than health prices today but directly impact on their ability to afford coverage and services. Per Redfin, mortgage rates will hover at 6-7% through next year and rents will increase 10% or more.
  • Proportionate to National Health Expenditure growth, spending for hospitals and physician services will remain at current levels while spending for prescription drugs and health insurance will increase. That’s certain to increase attention to price controls and heighten tension between insurers and providers.
  • There’s scant evidence the value agenda aka value-based purchases, alternative payment models et al has lowered spending nor considered significant in forecasts.

The health economy is expanding above the overall rates of population growth, overall inflation and the U.S. economy. GDP.  Its long-term sustainability is in question unless monetary policies enable other industries to grow proportionately and/or taxpayers agree to pay more for its services. These data confirm its unit costs and prices are problematic.

As Campaign 2024 heats up with the economy as its key issue, promises to contain health spending, impose price controls, limit consolidation and increase competition will be prominent.

Public sector actions

will likely feature state initiatives to lower cost and spend taxpayer money more effectively.

Private sector actions

will center on employer and insurer initiatives to increase out of pocket payments for enrollees and reduce their choices of providers.

Thus, these reports paint a cautionary picture for the health economy going forward. Each sector will feel cost-containment pressure and each will claim it is responding appropriately. Some actually will.

PS: The issue of tax exemptions for not-for-profit hospitals reared itself again last week.

The Committee for a Responsible Federal Budget—a conservative leaning think tank—issued a report arguing the exemption needs to be ended or cut.  In response,

the American Hospital Association issued a testy reply claiming the report’s math misleading and motivation ill-conceived.

This issue is not going away: it requires objective analysis, fresh thinking and new voices.  For a recap, see the Hospital Section below.

Handicapping the Players in the Quest for Healthcare Affordability

Posted on by • Posted in 2024 Election Issues, Affordability, Health Insurance Industry, Health System, Healthcare Reform, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Medical Debt, Out of Pocket Expenses, Pharmaceutical Industry, Physician, Private Equity, Retail Healthcare • Leave a comment
Handicapping the Players in the Quest for Healthcare Affordability

As campaigns for November elections gear up for early voting and Congress considers bipartisan reforms to limit consolidation and enhance competition in U.S. healthcare, prospective voters are sending a cleat message to would-be office holders:

Healthcare Affordability must be addressed directly, transparently and now.

Polling by Gallup, Kaiser Family Foundation and Pew have consistently shown healthcare affordability among top concerns to voters alongside inflation, immigration and access to abortion. It is higher among Democratic-leaning voters but represents the majority in every socio-economic cohort–young and old, low and middle income and households with/without health insurance coverage., urban and rural and so on.  

It’s understandable: household economic security is declining: per the Federal Reserve’s latest household finances report:

  • 72% of US adults say they are doing well financially (down from 78% in 2021)
  • 54% say they have emergency savings to cover 3 months expenses ($400)—down from high of 59% in 2015.
  • 69% say their finances deteriorated in 2023. They’re paying more for groceries, fuel, insurance premiums and childcare.
  • Renters absorbed a 10% increase last year and mortgage interest spike has put home ownership beyond reach for 6 in 10 households

Thus, household financial security is the issue and healthcare expenses play a key role. Drug prices, hospital consolidation, price transparency and corporate greed will get frequent recognition in candidate rhetoric. “Reform” will be promised. And each sector in the industry will offer solutions that place the blame on others.

Granted, the U.S. health system lacks a uniform definition of healthcare affordability. It’s a flaw. In the Affordable Care Act, it was framed in the context of an individual’s eligibility for government-subsidized insurance coverage (8.39% adjusted gross income for households between 100% and 400% of the federal poverty level). But a broader application to the entire population was overlooked. Nonetheless, economists, regulators and consumers recognize the central role healthcare affordability plays in household financial security.

Handicapping the major players potential to win the hearts and minds of voters about healthcare affordability is tricky:

  • Each major sector has seen the ranks of its membership decrease and the influence (and visibility) of its bigger players increase. They’re easy targets for industry critics.
  • Each sector is seeing private equity and non-traditional players play bigger roles. The healthcare landscape is expanding beyond the traditional players.
  • Each sector is struggling to make their cases for incremental reforms while employers, legislators and consumers want more. Bipartisan support for anything is a rarity: an exception is antipathy toward healthcare consolidation and lack of price transparency.
  • All recognize that affordability is complicated. Unit cost and price increases for goods and services are the culprit: excess utilization is secondary.

Against this backdrop, here’s a scorecard on the current state of preparedness as each navigates affordability going into Campaign 2024:

SectorAdvantagesDisadvantagesHandicap Score1=Unprepared to5=Well Prepared
HospitalsCommunity presence (employer, safety net)
Economic impact
Influence in Congress
Scale: 30% of spending + direct employment of 52% of physicians
Access to capital		Lack of costs & price transparency Unit costs inflation due to wage, supply chain & admin
Shifting demand for core services.
Low entry barriers for key services
Regulator headwind (state, federal).
Operating, governing culture
Value proposition erosion with employers, pre-Medicare populations
Consumer orientation 		3
PhysiciansConsumer trust
Influence in Congress
Shared savings (Medicare)
Essentiality
Specialization
Access to technology 		Care continuity
Inadequacy of primary care
Disorganization (fragmentation)
Value of shared savings to general population (beyond Medicare)
Culture: change-averse (education, licensing performance measurement, et al)
Data: costs, outcomes 		2
Drug ManufacturersIncreasing product demand
Influence in Congress
Public trust in drug efficacy
Insurance structure that limits consumer price sensitivity to OOP
Potential for AI -enabled discovery, market access
Access to private capital
Congress’ constraint on PBMs		Unit cost escalation
Lack of price transparency
Growing disaffection for FDA
Long-term Basic Research Funding
State Price Control Momentum
Market access
Restrictive Formulary Growth
Transparency in Distributor-PBM business relationships
Public perception of corporate greed 		2
Health InsurersAvailability of claims, cost data
Employer tax exemptions
Growing government market
Plan design: OOP, provider access
Public association: coverage = financial security
Access to private capital  		Escalating premiums
Declining group market
Growing regulatory scrutiny (consolidation, data protection)
Tension with health systems
Value proposition erosion among government, employers, consumers   		4
Retail HealthNon-incumbrance of restrictive regulatory framework
Consumer acceptance
Breadth of product opportunities
Access to private capital
Opportunity for care management (i.e. CVS- Epic)
Operational orientation to consumers (convenience, pricing, et al)
Potential with employers,  		Lack of access, coordination with needed specialty care
Threat of regulatory restraint on growth
Risks associated with care management models   		3

The biggest, investor-owned health insurers own the advantage today. As in other sectors, they’re growing faster than their smaller peers and enjoy advantages of scale and private capital access to fund their growth. A handful of big players in the other sectors stand-out, but their affordability solutions are, to date, not readily active.

In each sector above, there is consensus that a fundamental change in the structure, function and oversight of the U.S. health is eminent. In all, tribalism is an issue: publicly-owned, not for profits vs. investor-owned, independent vs. affiliated, big vs. small and so on.

Getting consensus to address affordability head on is hard, so not much is done by the sectors themselves. And none is approaching the solution in its necessary context—the financial security of a households facing unprecedented pressures to make ends meet. In all likelihood, the bigger, more prominent organizations in their ranks of these sectors will deliver affordability solutions well-above the lowest common denominators that are comfortable for most Thus, health care affordability will be associated with organizational brands and differentiated services, not the sectors from which their trace their origins. And it will be based on specified utilization, costs, outcome and spending guarantees to consumers and employers that are reasonable and transparent.

Cartoon – Problem with US Healthcare

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BIG INSURANCE 2023: Revenues reached $1.39 trillion thanks to taxpayer-funded Medicaid and Medicare Advantage businesses

Posted on by • Posted in 2024 Election Issues, ACA, Affordability, Health Insurance Coverage Adequacy, Health Insurance Denial, Health Insurance Industry, Health Policy, High Deductible Health Plans, High Drug Prices, High Premiums, Lobbyist, Market Consolidation, Market Power, Medicare Advantage, Medicare Advantage Denials, Medicare Advantage Insurance Brokers, Out of Network, Out of Pocket Expenses, Preexisting Conditions, Profit Motive, Underinsured • Leave a comment
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The Affordable Care Act turned 14 on March 23. It has done a lot of good for a lot of people, but big changes in the law are urgently needed to address some very big misses and consequences I don’t believe most proponents of the law intended or expected. 

At the top of the list of needed reforms: restraining the power and influence of the rapidly growing corporations that are siphoning more and more money from federal and state governments – and our personal bank accounts – to enrich their executives and shareholders.

I was among many advocates who supported the ACA’s passage, despite the law’s ultimate shortcomings. It broadened access to health insurance, both through government subsidies to help people pay their premiums and by banning prevalent industry practices that had made it impossible for millions of American families to buy coverage at any price. It’s important to remember that before the ACA, insurers routinely refused to sell policies to a third or more applicants because of a long list of “preexisting conditions” – from acne and heart disease to simply being overweight – and frequently rescinded coverage when policyholders were diagnosed with cancer and other diseases.

While insurance company executives were publicly critical of the law, they quickly took advantage of loopholes (many of which their lobbyists created) that would allow them to reap windfall profits in the years ahead – and they have, as you’ll see below. 

Among other things, the ACA made it unlawful for most of us to remain uninsured (although Congress later repealed the penalty for doing so). But, notably, it did not create a “public option” to compete with private insurers, which many advocates and public policy experts contended would be essential to rein in the cost of health insurance. Many other reform advocates insisted – and still do – that improving and expanding the traditional Medicare program to cover all Americans would be more cost-effective and fair. 

I wrote and spoke frequently as an industry whistleblower about what I thought Congress should know and do, perhaps most memorably in an interview with Bill Moyers. During my Congressional testimony in the months leading up to the final passage of the bill in 2010, I told lawmakers that if they passed it without a public option and acquiesced to industry demands, they might as well call it “The Health Insurance Industry Profit Protection and Enhancement Act.”

A health plan similar to Medicare that could have been a more affordable option for many of us almost happened, but at the last minute, the Senate was forced to strip the public option out of the bill at the insistence of Sen. Joe Lieberman (I-Connecticut), who died on March 27, 2024. The Senate did not have a single vote to spare as the final debate on the bill was approaching, and insurance industry lobbyists knew they could kill the public option if they could get just one of the bill’s supporters to oppose it. So they turned to Lieberman, a former Democrat who was Vice President Al Gore’s running mate in 2000 and who continued to caucus with Democrats. It worked. Lieberman wouldn’t even allow a vote on the bill if it created a public option. Among Lieberman’s constituents and campaign funders were insurance company executives who lived in or around Hartford, the insurance capital of the world. Lieberman would go on to be the founding chair of a political group called No Labels, which is trying to find someone to run as a third-party presidential candidate this year.

The work of Big Insurance and its army of lobbyists paid off as insurers had hoped. The demise of the public option was a driving force behind the record profits – and CEO pay – that we see in the industry today.

The good effects of the ACA:

Nearly 49 million U.S. residents (or 16%) were uninsured in 2010. The law has helped bring that down to 25.4 million, or 8.3% (although a large and growing number of Americans are now “functionally uninsured” because of unaffordable out-of-pocket requirements, which President Biden pledged to address in his recent State of the Union speech). 

The ACA also made it illegal for insurers to refuse to sell coverage to people with preexisting conditions, which even included birth defects, or charge anyone more for their coverage based on their health status; it expanded Medicaid (in all but 10 states that still refuse to cover more low-income individuals and families); it allowed young people to stay on their families’ policies until they turn 26; and it required insurers to spend at least 80% of our premiums on the health care goods and services our doctors say we need (a well-intended provision of the law that insurers have figured out how to game).

The not-so-good effects of the ACA: 

As taxpayers and health care consumers, we have paid a high price in many ways as health insurance companies have transformed themselves into massive money-making machines with tentacles reaching deep into health care delivery and taxpayers’ pockets. 

To make policies affordable in the individual market, for example, the government agreed to subsidize premiums for the vast majority of people seeking coverage there, meaning billions of new dollars started flowing to private insurance companies. (It also allowed insurers to charge older Americans three times as much as they charge younger people for the same coverage.) Even more tax dollars have been sent to insurers as part of the Medicaid expansion. That’s because private insurers over the years have persuaded most states to turn their Medicaid programs over to them to administer.

Insurers have bulked up incredibly quickly since the ACA was enacted through consolidation, vertical integration, and aggressive expansion into publicly financed programs – Medicare and Medicaid in particular – and the pharmacy benefit space. Premiums and out-of-pocket requirements, meanwhile, have soared.

We invite you to take a look at how the ascendency of health insurers over the past several years has made a few shareholders and executives much richer while the rest of us struggle despite – and in some cases because of – the Affordable Care Act.

BY THE NUMBERS

In 2010, we as a nation spent $2.6 trillion on health care. This year we will spend almost twice as much – an estimated $4.9 trillion, much of it out of our own pockets even with insurance. 

In 2010, the average cost of a family health insurance policy through an employer was $13,710. Last year, the average was nearly $24,000, a 75% increase.

The ACA, to its credit, set an annual maximum on how much those of us with insurance have to pay before our coverage kicks in, but, at the insurance industry’s insistence, it goes up every year. When that limit went into effect in 2014, it was $12,700 for a family. This year, it has increased by 48%, to $18,900. That means insurers can get away with paying fewer claims than they once did, and many families have to empty their bank accounts when a family member gets sick or injured. Most people don’t reach that limit, but even a few hundred dollars is more than many families have on hand to cover deductibles and other out-of-pocket requirements. 

Now 100 million Americans – nearly one of every three of us – are mired in medical debt, even though almost 92% of us are presumably “covered.” The coverage just isn’t as adequate as it used to be or needs to be.

Meanwhile, insurance companies had a gangbuster 2023. The seven big for-profit U.S. health insurers’ revenues reached $1.39 trillion, and profits totaled a whopping $70.7 billion last year.

SWEEPING CHANGE, CONSOLIDATION–AND HUGE PROFITS FOR INVESTORS

Insurance company shareholders and executives have become much wealthier as the stock prices of the seven big for-profit corporations that control the health insurance market have skyrocketed.

NOTE: The Dow Jones Industrial Average is listed on this chart as a reference because it is a leading stock market index that tracks 30 of the largest publicly traded companies in the United States.

REVENUES collected by those seven companies have more than tripled (up 346%), increasing by more than $1 trillion in just the past ten years.

PROFITS (earnings from operations) have more than doubled (up 211%), increasing by more than $48 billion.

The CEOs of these companies are among the highest paid in the country. In 2022, the most recent year the companies have reported executive compensation, they collectively made $136.5 million.

U.S. HEALTH PLAN ENROLLMENT

Enrollment in the companies’ health plans is a mix of “commercial” policies they sell to individuals and families and that they manage for “plan sponsors” – primarily employers and unions – and government/enrollee-financed plans (Medicare, Medicaid, Tricare for military personnel and their dependents and the Federal Employee Health Benefits program).

Enrollment in their commercial plans grew by just 7.65% over the 10 years and declined significantly at UnitedHealth, CVS/Aetna and Humana. Centene and Molina picked up commercial enrollees through their participation in several ACA (Obamacare) markets in which most enrollees qualify for federal premium subsidies paid directly to insurers.

While not growing substantially, commercial plans remain very profitable because insurers charge considerably more in premiums now than a decade ago.

(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2) Humana announced last year it is exiting the commercial health insurance business. (3) Enrollment in the ACA’s marketplace plans account for all of Molina’s commercial business.

By contrast, enrollment in the government-financed Medicaid and Medicare Advantage programs has increased 197% and 167%, respectively, over the past 10 years.

(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS.

Of the 65.9 million people eligible for Medicare at the beginning of 2024, 33 million, slightly more than half, enrolled in a private Medicare Advantage plan operated by either a nonprofit or for-profit health insurer, but, increasingly, three of the big for-profits grabbed most new enrollees. Of the 1.7 million new Medicare Advantage enrollees this year, 86% were captured by UnitedHealth, Humana and Aetna. Those three companies are the leaders in the Medicare Advantage business among the for-profit companies, and, according to the health care consulting firm Chartis, are taking over the program “at breakneck speed.”

(1) The 2013 total for CVS/Aetna was reported by Aetna before its 2018 acquisition by CVS. (2,3) Centene’s and Molina’s totals include Medicare Supplement; they do not break out enrollment in the two Medicare categories separately.

It is worth noting that although four companies saw growth in their Medicare Supplement enrollment over the decade, enrollment in Medicare Supplement policies has been declining in more recent years as insurers have attracted more seniors and disabled people into their Medicare Advantage plans.

OTHER FEDERAL PROGRAMS

In addition to the above categories, Humana and Centene have significant enrollment in Tricare, the government-financed program for the military. Humana reported 6 million military enrollees in 2023, up from 3.1 million in 2013. Centene reported 2.8 million in 2023. It did not report any military enrollment in 2013.

Elevance reported having 1.6 million enrollees in the Federal Employees Health Benefits Program in 2023, up from 1.5 million in 2013. That total is included in the commercial enrollment category above. 

PBMs

As with Medicare Advantage, three of the big seven insurers control the lion’s share of the pharmacy benefit market (and two of them, UnitedHealth and CVS/Aetna, are also among the top three in signing up new Medicare Advantage enrollees, as noted above). CVS/Aetna’s Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx PBMs now control 80% of the market.

At Cigna, Express Scripts’ pharmacy operations now contribute more than 70% to the company’s total revenues. Caremark’s pharmacy operations contribute 33% to CVS/Aetna’s total revenues, and Optum Rx contributes 31% to UnitedHealth’s total revenues. 

WHAT TO DO AND WHERE TO START

The official name of the ACA is the Patient Protection and Affordable Care Act. The law did indeed implement many important patient protections, and it made coverage more affordable for many Americans. But there is much more Congress and regulators must do to close the loopholes and dismantle the barriers erected by big insurers that enable them to pad their bottom lines and reward shareholders while making health care increasingly unaffordable and inaccessible for many of us.

Several bipartisan bills have been introduced in Congress to change how big insurers do business.

They include curbing insurers’ use of prior authorization, which often leads to denials and delays of care; requiring PBMs to be more “transparent” in how they do business and banning practices many PBMs use to boost profits, including spread pricing, which contributes to windfall profits; and overhauling the Medicare Advantage program by instituting a broad array of consumer and patient protections and eliminating the massive overpayments to insurers. 

And as noted above, President Biden has asked Congress to broaden the recently enacted $2,000-a-year cap on prescription drugs to apply to people with private insurance, not just Medicare beneficiaries. That one policy change could save an untold number of lives and help keep millions of families out of medical debt. (A coalition of more than 70 organizations and businesses, which I lead, supports that, although we’re also calling on Congress to reduce the current overall annual out-of-pocket maximum to no more than $5,000.) 

I encourage you to tell your members of Congress and the Biden administration that you support these reforms as well as improving, strengthening and expanding traditional Medicare. You can be certain the insurance industry and its allies are trying to keep any reforms that might shrink profit margins from becoming law.