As Donald Trump begins his second term, America’s healthcare system is in crisis: medical costs are skyrocketing, life expectancy has stagnated, and burnout runs rampant among healthcare workers.
These problems are likely to become worse now that Trump has handed the federal budget over to Elon Musk. The world’s richest man now co-heads the Department of Government Efficiency (DOGE), a non-government entity tasked with slashing $500 billion in “wasteful” spending.
The harsh reality is that Musk’s mission can’t succeed without gutting healthcare access and coverage for millions of Americans.
Deleting dollars from American healthcare
Since Trump’s first term, the country’s economic outlook has worsened significantly. In 2016, the national debt was $19 trillion, with $430 billion allocated to annual interest payments. By 2024, the debt had nearly doubled to $36 trillion, requiring $882 billion in debt service—12% of federal spending that is legally untouchable.
Add to that another 50% of government expenditures that Trump has deemed politically off-limits: Social Security ($1.35 trillion), Medicare ($848 billion) and Defense ($1.13 trillion). That leaves just $2.6 trillion—less than 40% of the $6.75 trillion federal budget—available for cuts.
In a recent op-ed, Musk and DOGE co-chair Vivek Ramaswamy proposed eliminating expired or misused funds for programs like Public Broadcasting and Planned Parenthood, but these examples account for less than $3 billion total—not even 1% of their target.
This shortfall will require Musk to cut billions in government healthcare spending. But where will he find it?
With Medicare off limits to DOGE, the options for major reductions are extremely limited. Big-ticket healthcare items like the $300 billion in tax-deductibility for employer-sponsored health insurance and $120 billion in expired health programs for veterans will prove politically untouchable. One will raise taxes for 160 million working families and the latter will leave veterans without essential medical care.
This means DOGE will have to attack Medicaid and the ACA health exchanges. Here’s how 20 million people will likely lose coverage as a result.
1. Reduced ACA exchange funding
Since its enactment in 2010, the Affordable Care Act (ACA) has provided premium subsidies to Americans earning 100% to 400% of the federal poverty level. For lower-income families, the ACA also offers Cost Sharing Reductions, which help offset deductibles and co-payments that fund 30% of total medical costs per enrollee. Without CSRs, a family of four earning $40,000 could face deductibles as high as $5,000 before their insurance benefits apply.
If Congress allows CSR payments to expire in 2026, federal spending would decrease by approximately $35 billion annually. If that happens, the Congressional Budget Office expects 7 million individuals to drop out of the exchanges. Worse, without affordable coverage alternatives, 4 million families would lose their health insurance altogether.
2. Slashing Medicaid coverage and tightening eligibility
Medicaid currently provides healthcare for over 90 million low-income Americans, including children, seniors and individuals with disabilities. To meet DOGE’s $500 billion goal, several cost-cutting strategies appear likely:
Reversing Medicaid expansion: The ACA expanded Medicaid eligibility to those earning up to 138% of the federal poverty level, reducing the uninsured rate from 16% to 8%. Undoing this expansion would strip coverage from millions in the 40 states that adopted the program.
Imposing work requirements: Proponents argue this could encourage employment, but most Medicaid recipients already work for employers that don’t provide insurance. In reality, work requirements primarily create bureaucratic barriers that disqualify millions of eligible individuals, reducing program costs at the expense of coverage.
Switching to block grants: Unlike the current Medicaid system, which adjusts funding based on need, less-expensive block grants would provide states with fixed allocations. This will, however, force them to cut services and reduce enrollment.
Medicaid currently costs $800 billion annually, with the federal government covering 70%. Reducing enrollment by 10% (9 million people) could save over $50 billion annually, while a 20% reduction (18 million people) could save $100 billion.
Either outcome would devastate families by eliminating access to vital services including prenatal care, vaccinations, chronic disease management and nursing home care. As states are forced to absorb the financial burden, they’ll likely cut education budgets and reduce infrastructure investments.
The first 100 days
The numbers don’t lie: Musk and DOGE could slash Medicaid funding and ACA subsidies to achieve much of their $500 billion target. But the human cost of this approach would be staggering.
Fortunately, there are alternative solutions that would reduce spending without sacrificing quality. Shifting provider payments in ways that reward better outcomes rather than higher volumes, capping drug prices at levels comparable to peer nations, and leveraging generative AI to improve chronic disease management could all drive down costs while preserving access to care.
These strategies address the root causes of high medical spending, including chronic diseases that, if better managed, could prevent 30-50% of heart attacks, strokes, cancers, and kidney failures according to CDC estimates.
Yet, in their pursuit of immediate budgetary cuts, Musk and DOGE have omitted these kinds of reform options. As a result, the health of millions of Americans is at major risk.
With the onset of the pandemic in March 2020, states were required to provide continuous enrollment for Medicaid and Children’s Health Insurance Program (CHIP) beneficiaries in exchange for enhanced federal funding. This led to immense growth in Medicaid rolls that states could not begin to unwind until April 2023.
This week’s graphic illustrates the outcomes of Medicaid redeterminations—a process which most states completed by August 2024—and provides a comprehensive coverage update.
As this undertaking nears completion, most beneficiaries have had their Medicaid coverage renewed during redeterminations. Around 30% of recipients, or about 25M beneficiaries, lost Medicaid coverage. Nearly 70% of these cuts were made for procedural reasons, such as state agencies not processing beneficiaries’ documents before their cases closed or beneficiaries never receiving the renewal notices.
Despite significant nationwide reductions, 8M more people were enrolled in Medicaid and CHIP in August 2024 than just before continuous enrollment began in February 2020.
Throughout continuous enrollment, an elevated share in Medicaid and a lower uninsured rate were the most notable differences to a coverage landscape that has otherwise remained largely stable.
Somewhat surprisingly, initial evidence suggests that the net effect of continuous enrollment and subsequent Medicaid redeterminations equaled out, and many former recipients have gained coverage elsewhere.
While the national uninsured rate increased to 8.2% in Q1 2024 following a record low in 2023, the uninsured rate remains lower than it was in 2019.
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?
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?
Big Insurance revenues and profits have increased by 300% and 287% respectively since 2012 due to explosive growth in the companies’ pharmacy benefit management (PBM) businesses and the Medicare replacement plans they call Medicare Advantage.
The for-profits now control more than 80% of the national PBM market and more than 70% of the Medicare Advantage market.
In 2022, Big Insurance revenues reached $1.25 trillion and profits soared to $69.3 billion.
That’s a 300% increase in revenue and a 287% increase in profits from 2012, when revenue was $412.9 billion and profits were $24 billion.
Big insurers’ revenues have grown dramatically over the past decade, the result of consolidation in the PBM business and taxpayer-supported Medicare and Medicaid programs.
Sucking billions out of the pharmacy supply chain – and taxpayers’ pockets
What has changed dramatically over the decade is that the big insurers are now getting far more of their revenues from the pharmaceutical supply chain and from taxpayers as they have moved aggressively into government programs. This is especially true of Humana, Centene, and Molina, which now get, respectively, 85%, 88%, and 94% of their health-plan revenues from government programs.
The two biggest drivers are their fast-growing pharmacy benefit managers (PBMs), the relatively new and little-known middleman between patients and pharmaceutical drug manufacturers, and the privately owned and operated Medicare replacement plans they market as Medicare Advantage.
With the exception of Humana, Centene, and Molina, most of the companies that constitute Big Insurance continue to make substantial amounts of money selling policies and services in what they refer to as their commercial businesses – to individuals, families, and employers – but the seven companies’ commercial revenue grew just 260%, or $176 billion, over 10 years (from $110.4 billion to $287.1 billion). While that’s significant, profitable growth in the commercial sector has become a major challenge for big insurers – so much so that Humana just last week announced it is exiting the employer-sponsored health-insurance marketplace entirely.
The percentage of U.S. employers providing some level of health benefits to their workers dropped from 69% to 51% between 1999 and 2022 – including a dramatic 8% decrease last year alone. Growth in this category is largely the result of insurers “stealing market share” from each other or from smaller competitors.
As a consequence of this segment’s relative stagnation, PBMs and government programs have become the new cash cows for Big Insurance.
Spectacular PBM Growth
PBM HIGHLIGHTS
Cigna now gets far more revenue from its PBM than from its health plans. CVS gets more revenue from its PBM than from either Aetna’s health plans or its nearly 10,000 retail stores.
UnitedHealth has the biggest share of both the PBM and Medicare markets and, through numerous acquisitions of physician practices, is now the largest U.S. employer of doctors.
PBMs are middlemen companies that manage prescription drug benefits for health insurers, Medicare Part D drug plans, employers, and, in some cases, unions. As the Commonwealth Fund has noted:
PBMs have a significant behind-the-scenes impact in determining total drug costs for insurers, shaping patients’ access to medications, and determining how much pharmacies are paid.
The Commonwealth Fund went on to say that PBMs have faced growing scrutiny about their role in rising prescription drug costs and spending. A big reason for the scrutiny – by Congress, state lawmakers and now also by the FTC – is that the biggest PBMs are now owned by Big Insurance.
Through mergers and acquisitions in recent years, three of the seven for-profit insurers – Cigna, CVS/Aetna, and UnitedHealth – now control 80% of the U.S. pharmacy benefits market.
They determine which drugs will be listed in each of their formularies (lists of drugs they will “cover” based on secret deals they negotiate with pharmaceutical companies) and how much patients will have to pay out of their own pockets at the pharmacy counter – in many cases hundreds or thousands of dollars – before their coverage kicks in. The PBMs also “steer” health-plan enrollees to their preferred or owned pharmacies (and, increasingly, away from independent pharmacists), thereby capturing even more of what we spend on our prescription medications.
Cigna, CVS/Aetna, and UnitedHealth now control 80% of the U.S. PBM market. Correction: this graph was initially published with inaccurate numbers. The source for this information can be found here.
Ten years ago, PBMs contributed relatively little to the three companies’ revenues and profits. But since then, the rapid growth of PBMs has transformed all of the companies. The combined revenues from their PBM business units increased 250% between 2012 and 2022, from $196.7 billion to $492.4 billion.
Changes in PBM revenues between 2012 and 2022 for UnitedHealth Group, Cigna, and CVS/Aetna (Editor’s note: Cigna acquired PBM Express Scripts in 2018. To reflect revenue growth, Express Scripts’ pre-acquisition 2012 revenues are included in the Cigna total for that year.)
PBM Profit Generation
The PBM profit growth at the three companies over the past decade was even more dramatic than revenue growth. Collectively, their PBM profits increased 438%, from $6.3 billion in 2012 to $27.6 billion in 2022.
As a result of this fast growth, more than half (52%) of three companies’ profits in 2022 came from their PBM business units: Cigna’s Evernorth, CVS/Aetna’s Caremark, and UnitedHealth’s Optum. Cigna now gets far more revenue and profits from its PBM than from its health plans. And CVS gets more revenue from its PBM than from either Aetna’s health plans or its nearly 10,000 retail stores. (The companies’ business units that include their PBMs have also moved aggressively in recent years into health-care delivery through acquisitions of physician practices, clinics, dialysis centers, and other facilities. Notably, UnitedHealth Group is now the largest U.S. employer of physicians.)
Huge strides in privatizing both Medicare and Medicaid
GOVERNMENT PROGRAMS HIGHLIGHTS
More than 90% of health-plan revenues at three of the companies come from government programs as they continue to privatize both Medicare and Medicaid, through Medicare Advantage in particular.
Enrollment in government-funded programs increased by 261% in 10 years; by contrast commercial enrollment increased by just 10% over the past decade.
Commercial enrollment actually declinedat both UnitedHealth and Humana.
85% of Humana’s health-plan members are in government-funded programs; at Centene, it is 88%, and at Molina, it is 94%.
The big insurers now manage most states’ Medicaid programs – and make billions of dollars for shareholders doing so – but most of the insurers have found that selling their privately operated Medicare replacement plans is even more financially rewarding for their shareholders.
Revenue growth from government programs has been dramatic over the past 10 years. (Note the numbers do not include revenue from the Medicare Part D program, federal subsidy payments for many ACA marketplace plan enrollees, or Medicare supplement policies.)
This is especially apparent when you see that the Big Seven’s combined revenues from taxpayer-supported programs grew 500%, from $116.3 billion in 2012 to $577 billion in 2022.
These numbers should be of interest to the Biden administration and members of Congress, many of whom are calling for much greater scrutiny of the Medicare Advantage program. Numerous media and government reports have shown that the federal government is overpaying private insurers billions of dollars a year, largely because of loopholes in laws and regulations that enable them to get more taxpayer dollars by claiming their enrollees are sicker than they really are. The companies also make aggressive use of prior authorization, largely unknown in traditional Medicare, to avoid paying for doctor-ordered care and medications.
In addition to their focus on Medicare and Medicaid, the companies also profit from the generous subsidies the government pays insurers to reduce the premiums they charge individuals and families who do not qualify for either Medicare or Medicaid or who work for an employer that does not offer subsidized coverage. But many people enrolled in those types of plans – primarily through the health insurance “marketplaces” established by the Affordable Care Act – cannot afford the deductibles and other out-of-pocket requirements they must pay before their insurers will begin paying their medical claims.
Dramatic Enrollment Shifts
Changes in health-plan enrollment over the past decade show how dramatic this shift has been. Between 2012 and 2022, enrollment in the companies’ private commercial plans increased by 10%, from 85.1 million in 2012 to 93.8 million in 2022.
By comparison, growth in enrollment in taxpayer-supported government programs increased 261%, from 27 million in 2012 to 70.4 million in 2022.
For-profit insurers dominate the Medicare Advantage market. Note that Anthem mentioned above is now known as Elevance. It owns 14 of the country’s Blue Cross Blue Shield plans.
Within that category, Medicare Advantage enrollment among the Big Seven increased 252%, from 7.8 million in 2012 to 19.7 million in 2022.
Nationwide, enrollment in Medicare Advantage plans increased to 28.4 million in 2022 (and to 30 million this year). That means that the Big Seven for-profit companies control more than 70% of the Medicare Advantage market.
UnitedHealth, Humana, Elevance, and CVS/Aetna have captured most of the Medicare Advantage market since the Affordable Care Act was passed in 2010.
The remaining growth in the government segment occurred in the Medicaid programs that a subset of the Big Seven (UnitedHealth, Elevance, Centene, and Molina in particular) manages for several states.
A few other facts and figures to keep in mind as Big Insurance thrives:
100 million of us – almost one of every three people in this country – now have medical debt.
In 2023, U.S. families can be on the hook for up to $18,200 in out-of-pocket requirements before their coverage kicks in, up 43% since 2014 when it was $12,700.The Affordable Care Act allows the out-of-pocket maximum to increase annually – 43% since the maximum limit went into effect in 2014.
44% of people in the United States who purchased coverage through the individual market and (ACA) marketplaces were underinsured or functionally uninsured.
42% said they hadproblems paying medical bills or were paying off medical debt.
Half (49%) said they would be unable to pay an unexpected medical bill within 30 days, including 68% of adults with low income, 69% of Black adults, and 63% of Latino/Hispanic adults.
In 2021, about $650 million, or about one-third of all funds raised by GoFundMe, went to medical campaigns. That’s not surprising when you realize that in the United States, even people with insurance all too often feel they have no choice but to beg for money from strangers to get the care they or a loved one needs.
Even as we spend about $4.5 trillion on health care a year, Americans are now dying younger than people in other wealthy countries. Life expectancy in the United States actually decreased by 2.8 years between 2014 and 2021, erasing all gains since 1996, according to the Centers for Disease Control and Prevention.
BOTTOM LINE:
The companies that comprise Big Insurance are vastly different from what they were just 10 years ago, but policymakers, regulators, employers, and the media have so far shown scant interest in putting their business practices under the microscope.
Changes in federal law, including the Medicare Modernization Act of 2003, which created the lucrative Medicare Advantage market, and the Affordable Care Act of 2010, which gave insurers the green light to increase out-of-pocket requirements annually and restrict access to care in other ways, opened the Treasury and Medicare Trust Fund to Big Insurance. In addition, regulators have allowed almost all of their proposed acquisitions to go forward, which has created the behemoths they are today.
CVS/Health is now the 4th largest company on the Fortune 500 list of American companies. UnitedHealth Group is now No. 5 – and all the others are climbing toward the top 10.
Congressional Republicans are beginning to discuss overhauling Medicaid using a process that would allow the Senate to bypass the required 60-vote threshold to pass certain priorities, according to GOP lawmakers.
Why it matters:
The changes could significantly reshape a safety net program that covers more than 70 million people, reducing federal spending and potentially leading to significant coverage losses.
Driving the news:
Perhaps the most likely Medicaid change would be imposing work requirements for recipients, according to GOP sources.
That idea was discussed as part of last year’s debt ceiling talks and is familiar to GOP lawmakers.
House Majority Leader Steve Scalise (R-La.) told Axios that Medicaid work requirements “potentially” could be included in a legislative package brought up under the fast-track budget procedure known as reconciliation.
Asked about other Medicaid spending changes, Scalise said members “have a lot of internal conversations to have about all the things that will be included.”
Yes, but:
It’s not clear how much, if any, health policy will be packed into a reconciliation bill, since the overriding focus of the package would be on extending major provisions of the Trump 2017 tax law.
There has been less recent enthusiasm for controversial health policy changes among Republicans, who’d prefer to focus on taxes, energy and immigration.
However, a health package could generate valuable savings to help pay for some of the tax cuts, and Medicaid is a large pot of money, costing over $800 billion per year.
Congressional scorekeepers previously estimated work requirements would save over $100 billion over 10 years — and 600,000 people would become uninsured.
What they’re saying:
Rep. Brett Guthrie (R-Ky.), one of two leading contenders to be chair of the House Energy and Commerce Committee in the next Congress, told Axios he is interested in capping Medicaid spending on each enrollee, known as a “per capita cap” or allotment.
This would be a revival of a proposal from the 2017 Affordable Care Act repeal-replace plan.
“We offered Medicaid reform in reconciliation in the repeal-and-replace package, and it was per capita allotments, which didn’t cut Medicaid but it does limit the growth,” Guthrie said.
“I do think it has to be discussed as part of the package” next year, he said, adding he hadn’t discussed the idea with leadership yet.
Between the lines:
Another potential change is reducing the federal share of spending on the Medicaid expansion population, currently at 90%, so that it matches the lower federal share for the traditional Medicaid population.
“It makes no sense for federal policy to pay states more for able-bodied enrollees than for disabled people, children and pregnant women on the program,” said Brian Blase, president of the Paragon Health Institute and a former Trump administration health official.
The flip side is that a cash crunch in the states could lead some to drop the Medicaid expansion altogether. Forty states have expanded their programs.
The big picture:
The first Trump administration approved Medicaid waivers for conservative-led states that imposed work and reporting requirements. But courts struck down many of the approvals.
Republicans could be wary of political blowback from efforts to reshape the entitlement program this time around.
Protests against Medicaid cuts, as well as possible resistance from some Republican governors, helped doom the repeal-replace effort in 2017.
Democrats also are sure to portray any Medicaid cuts as penalizing the poor to help lower taxes on the wealthy.
Rep. Morgan Griffith (R-Va.), an Energy and Commerce Committee member, acknowledged “people get scared” when Medicaid work requirements are discussed, but he noted the possibility of exemptions for people with disabilities or those in school.
There have been “some private conversations” though “nothing formal” in the committee about Medicaid changes, he said.
The bottom line:
“It’s hard to make adjustments to reduce federal spending without touching people who rely on the program,” said Robin Rudowitz, director of the Program on Medicaid and the Uninsured at KFF.
Health policy and politics are inextricably linked. Policy is about what the government can do to shift the financing, delivery, and quality of health care, so who controls the government has the power to shape those policies.
Elections, therefore, always have consequences for the direction of health policy – who is the president and in control of the executive branch, which party has the majority in the House and the Senate with the ability to steer legislation, and who has control in state houses. When political power in Washington is divided, legislating on health care often comes to a standstill, though the president still has significant discretion over health policy through administrative actions. And, stalemates at the federal level often spur greater action by states.
Health care issues often, but not always, play a dominant role in political campaigns. Health care is a personal issue, so it often resonates with voters. The affordability of health care, in particular, is typically a top concern for voters, along with other pocketbook issues, And, at 17% of the economy, health care has many industry stakeholders who seek influence through lobbying and campaign contributions. At the same time, individual policy issues are rarely decisive in elections.
Health “reform” – a somewhat squishy term generally understood to mean proposals that significantly transform the financing, coverage, and delivery of health care – has a long history of playing a major role in elections.
Harry Truman campaigned on universal health insurance in 1948, but his plan went nowhere in the face of opposition from the American Medical Association and other groups. While falling short of universal coverage, the creation of Medicare and Medicaid in 1965 under Lyndon Johnson dramatically reduced the number of uninsured people. President Johnson signed the Medicare and Medicaid legislation at the Truman Library in Missouri, with Truman himself looking on.
Later, Bill Clinton campaigned on health reform in 1992, and proposed the sweeping Health Security Act in the first year of his presidency. That plan went down to defeat in Congress amidst opposition from nearly all segments of the health care industry, and the controversy over it has been cited by many as a factor in Democrats losing control of both the House and the Senate in the 1994 midterm elections.
For many years after the defeat of the Clinton health plan, Democrats were hesitant to push major health reforms. Then, in the 2008 campaign, Barack Obama campaigned once again on health reform, and proposed a plan that eventually became the Affordable Care Act (ACA). The ACA ultimately passed Congress in 2010 with only Democratic votes, after many twists and turns in the legislative process. The major provisions of the ACA were not slated to take effect until 2014, and opposition quickly galvanized against the requirement to have insurance or pay a tax penalty (the “individual mandate”) and in response to criticism that the legislation contained so-called “death panels” (which it did not). Republicans took control of the House and gained a substantial number of seats in the Senate during the 2010 midterm elections, fueled partly by opposition to the ACA.
The ACA took full effect in 2014, with millions gaining coverage, but more people viewed the law unfavorably than favorably, and repeal became a rallying cry for Republicans in the 2016 campaign. Following the election of Donald Trump, there was a high profile effort to repeal the law, which was ultimately defeated following a public backlash. The ACA repeal debate was a good example of the trade-offs inherent in all health policies. Republicans sought to reduce federal spending and regulation, but the result would have been fewer people covered and weakened protections for people with pre-existing conditions. KFF polling showed that the ACA repeal effort led to increased public support for the law, which persists today.
The 2024 election presents the unusual occurrence of two candidates – current vice president Kamala Harris and former president Donald Trump – who have already served in the White House and have detailed records for comparison, as explained in this JAMA column. With President Joe Biden dropping out of the campaign, Harris inherits the record of the current administration, but has also begun to lay out an agenda of her own.
While Trump failed as president to repeal the ACA, his administration did make significant changes to it, including repealing the individual mandate penalty, reducing federal funding for consumer assistance (navigators) by 84% and outreach by 90%, and expanding short-term insurance plans that can exclude coverage of preexisting conditions.
In a strange policy twist, the Trump administration ended payments to ACA insurers to compensate them for a requirement to provide reduced cost sharing for low-income patients, with Trump saying it would cause Obamacare to be “dead” and “gone.” But, insurers responded by increasing premiums, which in turn increased federal premium subsidies and federal spending, likely strengthening the ACA.
In the 2024 campaign, Trump has vowed several times to try again to repeal and replace the ACA, though not necessarily using those words, saying instead he would create a plan with “much better health care.”
Although the Trump administration never issued a detailed plan to replace the ACA, Trump’s budget proposals as president included plans to convert the ACA into a block grant to states, cap federal funding for Medicaid, and allow states to relax the ACA’s rules protecting people with preexisting conditions. Those plans, if enacted, would have reduced federal funding for health care by about $1 trillion over a decade.
In contrast, the Biden-Harris administration has reinvigorated the ACA by restoring funding for consumer assistance and outreach and by increasing premium subsidies to make coverage more affordable, resulting in record enrollment in ACA Marketplace plans and historically low uninsured rates. The increased premium subsidies are currently slated to expire at the end of 2025, so the next president will be instrumental in determining whether they get extended. Harris has vowed to extend the subsidies, while Trump has been silent on the issue.
The health care issue most likely to figure prominently in the general election is abortion rights, with sharp contrasts between the presidential candidates and the potential to affect voter turnout. In all the states where voters have been asked to weigh in directly on abortion so far (California, Kansas, Kentucky, Michigan, Montana, Ohio, and Vermont), abortion rights have been upheld.
Trump paved the way for the US Supreme Court to overturn Roe v Wade by appointing judges and justices opposed to abortion rights. Trump recently said, “for 54 years they were trying to get Roe v Wade terminated, and I did it and I’m proud to have done it.” During the current campaign, Trump has said that abortion policy should now be left to the states.
As president, Trump had also cut off family planning funding to Planned Parenthood and other clinics that provide or refer for abortion services, but this policy was reversed by the Biden-Harris administration.
Harris supports codifying into federal the abortion access protections in Roe v Wade.
Addressing the High Price of Prescription Drugs and Health Care Services
Trump has often spotlighted the high price of prescription drugs, criticizing both the pharmaceutical industry and pharmacy benefit managers. Although he kept the issue of drug prices on the political agenda as president, in the end, his administration accomplished little to contain them.
The Trump administration created a demonstration program, capping monthly co-pays for insulin for some Medicare beneficiaries at $35. Late in his presidency, his administration issued a rule to tie Medicare reimbursement of certain physician-administered drugs to the prices paid in other countries, but it was blocked by the courts and never implemented. The Trump administration also issued regulations paving the way for states to import lower-priced drugs from Canada. The Biden-Harris administration has followed through on that idea and recently approved Florida’s plan to buy drugs from Canada, though barriers still remain to making it work in practice.
With Harris casting the tie-breaking vote in the Senate, President Biden signed the Inflation Reduction Act, far-reaching legislation that requires the federal government to negotiate the prices of certain drugs in Medicare, which was previously banned. The law also guarantees a $35 co-pay cap for insulin for all Medicare beneficiaries, and caps out-of-pocket retail drug costs for the first time in Medicare. Harris supports accelerating drug price negotiation to apply to more drugs, as well as extending the $35 cap on insulin copays and the cap on out-of-pocket drug costs to everyone outside of Medicare.
How Trump would approach drug price negotiations if elected is unclear. Trump supported federal negotiation of drug prices during his 2016 campaign, but he did not pursue the idea as president and opposed a Democratic price negotiation plan. During the current campaign, Trump said he “will tell big pharma that we will only pay the best price they offer to foreign nations,” claiming that he was the “only president in modern times who ever took on big pharma.”
Beyond drug prices, the Trump administration issued regulations requiring hospitals and health insurers to be transparent about prices, a policy that is still in place and attracts bipartisan support.
Ultimately, irrespective of the issues that get debated during the campaign, the outcome of the 2024 election – who controls the White House and Congress – will have significant implications for the future direction of health care, as is almost always the case.
However, even with changes in party control of the federal government, only incremental movement to the left or the right is the norm. Sweeping changes in health policy, such as the creation of Medicare and Medicaid or passage of the ACA, are rare in the U.S. political system. Similarly, Medicare for All, which would even more fundamentally transform the financing and coverage of health care, faces long odds, particularly in the current political environment. This is the case even though most of the public favors Medicare for All, though attitudes shift significantly after hearing messages about its potential impacts.
Importantly, it’s politically difficult to take benefits away from people once they have them. That, and the fact that seniors are a strong voting bloc, has been why Social Security and Medicare have been considered political “third rails.” The ACA and Medicaid do not have quite the same sacrosanct status, but they may be close.
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.
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:
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.
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.
The White House campaigns will be hyper-negative and disinformation used widely (especially on healthcare issues). A prosecutorial tone is certain.
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.
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.
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.
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.
UnitedHealth Group, the largest health insurance conglomerate by far, continues to show how rewarding it is for shareholders when corporate lawyers find loopholes in well-intentioned legislation – and game the Medicare Advantage program in ways most lawmakers and regulators didn’t anticipate and certainly didn’t intend – to boost profits.
UnitedHealth announced this morning that it made $15.8 billion in operating profits between the first of January and the end of June this year. That compares to $4.6 billion it made during the same period in 2014. One way the company is able to reward its shareholders so richly these days is by steering millions of people enrolled in its health plans to the tens of thousands of doctors it now employs and to the clinics and pharmacy operations it now owns.
This is the result of the hundreds of acquisitions UnitedHealth has made over the past 10 years in health care delivery as part of its aggressive “vertical integration” strategy.
The other big way the company has become so profitable is by rigging the Medicare Advantage program in a way that enables it to get more money from the federal government in a scheme – detailed in a big investigative report by the Wall Street Journal a few days ago – in which it claims its Medicare Advantage enrollees are sicker than they really are. The WSJ calculated that Medicare Advantage insurers bilked the government out of more than $50 billion in the three years ending in 2021 by engaging in this scheme, and it said UnitedHealth has grabbed the lion’s share of those billions. In many if not most instances, those enrollees were not treated for the conditions and illnesses UnitedHealth and other insurers claimed they had. As the newspaper reported:
Insurer-driven diagnoses by UnitedHealth for diseases that no doctor treated generated $8.7 billion in 2021 payments to the company, the Journal’s analysis showed. UnitedHealth’s net income that year was about $17 billion.
By far, most of UnitedHealth’s health plan enrollment growth over the past 10 years has come from the Medicare Advantage program, and it now takes in nearly twice as much revenue from the 7.8 million people enrolled in that program as it does from the 29.6 million enrolled in its commercial insurance plans in the United States.
Since the second quarter of 2014, UnitedHealth’s commercial health plan enrollment has increased by 720,000 people. During that same time, enrollment in its Medicare Advantage plans has increased by 4.8 million.
UnitedHealth and other insurers that participate in the Medicare Advantage program know a cash cow when they see one.
As the Kaiser Family Foundation noted in a recent report, the highest gross margins among insurers come from Medicare Advantage, which, as Health Finance News reported, boasted gross margins per enrollee of $1,982 on average by the end of 2023, compared to $1,048 in the individual (commercial) market and $753 in the Medicaid managed care market.
UnitedHealth has significant enrollment in all of those areas. Enrollment in the Medicaid plans it administers in several states increased from 4.7 million at the end of the second quarter of 2014 to 7.4 million this past quarter.
In its disclosure today, UnitedHealth did not break out its health plan revenue as it has in past quarters, but you can see how public programs like Medicare Advantage and Medicaid have become so lucrative by comparing revenue reported by the company at the end of the second quarter of 2013 to the second quarter of 2023. Over that time, total revenues for commercial plans (employer and individual) increased by slightly more than $5.6 billion, from $11.1 billion in 2Q 2013 to $16.8 billion in 2Q 2023. Total revenues from Medicaid increased by $14.2 billion, from $4.5 billion to $18.7 billion, and total revenues from Medicare increased by $21.4 billion, from $11.1 billion to $32.4 billion.
Here’s another way of looking at this: At the end of 2Q 2013, UnitedHealth took in almost exactly the same revenue from its commercial business and its Medicare business ($11.053 from Medicare and $11.134 from its commercial plans.
At the end of 2Q 2023, the company took in nearly twice as much from its Medicare business ($32.4 billion from Medicare compared to $16.8 billion from its commercial plans.)
The change is even more stark when you add in Medicaid. At the end 2Q 2023, UnitedHealth’s Medicare and Medicaid (community and state) revenues totaled $51.1 billion; It’s commercial revenues, as noted, totaled $16.8 billion). It’s now getting three times as much revenue from taxpayer-supported programs as from its commercial business.
As impressive for shareholders as all of that is, growth in the company’s other big division, Optum, which encompasses its pharmacy benefit manager (Optum Rx) and the physician practices and clinics it owns) has been even more eye-popping. At the end of 2Q 2014, Optum contributed $11.7 billion to the company’s total revenues. At the end of 2Q 2024, it contributed $62.9 billion, an increase of $51.2 billion. At that rate of growth, it’s only a matter of a few quarters before Optum is both the biggest and most profitable division of the company.
And here’s the way the company benefits from that loophole in federal law I mentioned above. The Affordable Care Act requires insurers to spend 80%-85% of health plan revenue on patient care. UnitedHealth is consistently able to meet that threshold by paying itself, as HEALTH CARE un-coveredexplained in December. The billions UnitedHealthcare (the health plan division) pays Optum every quarter are categorized as “eliminations” in its quarterly reports. In 2Q 2024, 27.7% of the company’s revenues fell into that category.
The more it is able to steer its health plan enrollees into businesses it owns on the Optum side, the more it can defy Congressional intent – and profit greatly by it.
Wall Street loves how UnitedHealth has pulled all this off. It’s stock price jumped $33.50 to $548.87 a share during today’s trading at the New York Stock Exchange, an increase of 6.5% – in one day.
HENRY KOTULA 