Like everyone else, I am thankful the election end is in sight and a degree of “normalcy” might return. By next week, we should know who will sit in the White House, the 119th Congress and 11 new occupants of Governors’ offices. But a return to pre-election normalcy in politics is a mixed blessing.
“Normalcy” in our political system means willful acceptance that our society is hopelessly divided by income, education, ethnic and political views. It’s benign acceptance of a 2-party system, 3-branches of government (Executive, Legislative, Judicial) and federalism that imposes limits on federal power vis a vis the Constitution.
Our political system’ normalcy counts success by tribal warfare and election wins. Normalcy is about issues de jour prioritized by each tribe, not longer-term concern for the greater good in our country. Normalcy in our political system is near-sightedness—winning the next election and controlling public funds.
Comparatively, “normalcy” in U.S. healthcare is also tribal:
while the majority of U.S. adults believe the status quo is not working well but recognize its importance, each tribe has a different take on its future. The majority of the public think price transparency, limits on consolidation, attention to affordability and equitable access are needed but the major tribes—hospitals, insurers, drug companies, insurers, device-makers—disagree on how changes should be made. And each is focused on short-term issues of interest to their members with rare attention to longer-term issues impacting all.
Near-sightedness in healthcare is manifest in how executives are compensated, how partnerships are formed and how Boards are composed.
Organizational success is defined by 1-access to private capital (debt, private equity, strategic investors), 2-sustainnable revenue-growth, 4- scalable costs, 4-opportunities for consolidation (the exit strategy of choice for most) and 5-quarterly earnings. A long-term view of the system’s future is rarely deliberated by boards save attention to AI or the emergence of Big Tech. A vision for an organization’s future based on long-term macro-trends and outside-in methodologies is rare: long-term preparedness is “appreciated” but near-term performance is where attention is vested.
It pays to be near-sighted in healthcare: our complex regulatory processes keep unwelcome change at bay and our archaic workforce rules assure change resistance. …until it doesn’t. Industries like higher education, banking and retailing have experienced transformational changes that take advantage of new technologies and consumer appetite for alternatives that are new and better. The organizations winning in this environment balance near-sightedness with market attentiveness and vision.
Looking ahead, I have no idea who the winners and losers will be in this election cycle. I know, for sure, that…
The final result will not be known tomorrow and losers will challenge the results.
Short-term threats to the healthcare status quo will be settled quickly. First up: Congress will set aside Medicare pay cuts to physicians (2.8%) scheduled to take effect in January for the 5th consecutive year. And “temporary” solutions to extend marketplace insurance subsidies, facilitate state supervision of medication abortion services and telehealth access will follow quickly.
Think tanks will be busy producing white papers on policy changes supported by their funding sponsors.
And trade associations will produce their playbooks prioritizing legislative priorities and relationship opportunities with state and federal officials for their lobbyists.
Near-term issues for each tribe will get attention: the same is true in healthcare. Discussion about and preparation for healthcare’s longer-term future is a rarity in most healthcare C suites and Boardrooms. Consider these possibilities:
Medicare Advantage will be the primary payer for senior health: federal regulators will tighten coverage, network adequacy, premiums and cost sharing with enrollees to private insurers reducing enrollee choices and insurer profits.
To address social determinants of health, equitable access and comprehensive population health needs, regional primary care, preventive and public health programs will be fully integrated.
Large, organized groups/networks of physicians will be the preferred “hubs” for health services in most markets.
Interoperability will be fully implemented.
Physicians will unionize to assert their clinical autonomy and advance their economic interests.
The federal government (and some states) will limit tax exemptions for profitable not-for-profit health systems.
The prescription drug patent system will be modernized to expedite time-to-market innovations and price-value determinations.
The health insurance market will focus on individual (not group) coverage.
Congress/states will impose price controls on prescription drugs and hospital services.
Employers will significantly alter their employee benefits programs to reduce their costs and shift accountability to their employees. Many will exit altogether.
Regional integrated health systems that provide retail, hospital, physician, public health and health insurance services will be the dominant source of services.
Alternative-payment models used by Medicare to contract with providers will be completely overhauled.
Consumers will own and control their own medical records.
Consolidation premised on community benefits, consumer choices and lower costs will be challenged aggressively and reparation pursued in court actions.
Voters will pass Medicare for All legislation.
And many others.
A process for defining of the future of the U.S. health system and a bipartisan commitment by hospitals, physicians, drug companies, insurers and employers to its implementation are needed–that’s the point.
Near-sightedness in our political system and in our health, system is harmful to the greater good of our society and to the voters, citizens, patients, and beneficiaries all pledge to serve.
As respected healthcare marketer David Jarrard wrote in his blog post yesterday “As the aggravated disunity of this political season rises and falls, healthcare can be a unique convener that embraces people across the political divides, real or imagined. Invite good-minded people to the common ground of healthcare to work together for the common good that healthcare must be.”
Thinking and planning for healthcare’s long-term future is not a luxury: it’s an urgent necessity. It’s also not “normal” in our political and healthcare systems.
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.
Today, we celebrate the 59th birthday of Medicare, a cornerstone of American health care that has provided critical services to millions of seniors since its inception in 1965.
This historic program was a watershed moment in our nation’s history, transforming the landscape of health care and ensuring that older Americans and the disabled could access necessary medical services without facing financial ruin. Medicare’s legacy is one of promise and protection, grounded in the belief that no American should go without the health care they need.
However, as we celebrate this milestone, it is crucial to reflect on the current state of Medicare and the growing threat posed by big health insurers’ Medicare Advantage plans. These plans, most of which are operated by private, for-profit insurance companies, have been aggressively marketed as a superior alternative to traditional Medicare.
But the reality is starkly different. Medicare Advantage plans are siphoning off vital resources, wasting taxpayer dollars and ultimately leading to poorer health outcomes and often untimely death of many senior enrollees.
The original intent of Medicare was to provide a straightforward, government-managed health care solution for seniors, but over the years Medicare Advantage plans have deviated from this mission.
These plans often prioritize profit over patient care, leading to higher costs and more restrictive networks. In many cases, seniors enrolled in Medicare Advantage plans face significant hurdles in accessing the care they need, such as dwindling provider choices and burdensome prior authorization requirements.
These overpayments, often justified by health insurers through dubious risk adjustment practices, divert funds away from traditional Medicare. This not only threatens the sustainability of Medicare but also undermines the quality and availability of care for all beneficiaries.
As a former insurance executive, I have seen firsthand how corporate interests can aggressively game public programs. And they’ve gotten really good at the Medicare game.
The good news: A growing number of regulators are focused on the encroaching influence of Medicare Advantage plans and health insurers’ business practices. Which is great, because reducing overpayments to private insurers and ensuring that Medicare dollars are used efficiently is the only way lawmakers and regulators can protect this vital program for future generations.
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.
Medicare Advantage provides health coverage to more than half of the nation’s seniors, but some hospitals and health systems are opting to end their contracts with MA plans over administrative challenges.
Among the most commonly cited reasons are excessive prior authorization denial rates and slow payments from insurers.
In 2023, Becker’s began reporting on hospitals and health systems nationwide that dropped some or all of their Medicare Advantage contracts.
In January, the Healthcare Financial Management Association released a survey of 135 health system CFOs, which found that 16% of systems are planning to stop accepting one or more MA plans in the next two years. Another 45% said they are considering the same but have not made a final decision. The report also found that 62% of CFOs believe collecting from MA is “significantly more difficult” than it was two years ago.
Fifteen health systems dropping Medicare Advantage plans in 2024:
1. Canton, Ohio-based Aultman Health System‘s hospitals will no longer be in network with Humana Medicare Advantage after July 1, and its physicians will no longer be in network after Aug. 1.
3. Munster, Ind.-based Powers Health (formerly Community Healthcare System) went out of network with Humana and Aetna’s Medicare Advantage plans on June 1.
6. York, Pa.-based WellSpan Health stopped accepting Humana Medicare Advantage and UnitedHealthcare Medicare Advantage plans on Jan. 1. UnitedHealthcare D-SNP plans in some locations are still accepted.
7. Newark, Del.-based ChristianaCare is out of network with Humana’s Medicare Advantage plans as of Jan. 1, with the exception of home health services.
8. Greenville, N.C.-based ECU Health stopped accepting Humana’s Medicare Advantage plans in January.
9. Zanesville, Ohio-based Genesis Healthcare System dropped Anthem BCBS and Humana Medicare Advantage plans in January.
10. Corvallis, Ore.-based Samaritan Health Services’ hospitals went out of network with UnitedHealthcare’s Medicare Advantage plans on Jan. 9. Samaritan’s physicians and provider services will be out of network on Nov. 1.
Medicare Advantage plans received $50 billion in payments between 2018 and 2021 for diagnoses insurers added to medical records, a Wall Street Journal investigation published July 8 has found.
The Journal investigated billions of Medicare Advantage records and found that some conditions were diagnosed at a much higher rate among Medicare Advantage beneficiaries than among traditional Medicare beneficiaries. For example, diabetic cataracts were diagnosed much more often among Medicare Advantage beneficiaries than among traditional Medicare beneficiaries, the Journal found.
The federal government pays Medicare Advantage plans a rate per beneficiary based on their diagnoses.
CMS does not reimburse MA plans for beneficiaries with non-diabetic cataracts, a common condition among older adults, according to the Journal. The government does reimburse for diabetic cataracts. CMS paid Medicare Advantage plans more than $700 million for diabetic cataracts diagnoses between 2018 and 2021, the investigation found.
A spokesperson for UnitedHealth, the largest Medicare Advantage insurer, told the Journal its analysis was “inaccurate and biased.” Medicare Advantage plans code diagnoses more completely and ensure diseases are caught earlier, the spokesperson told the outlet.
The Journal’s investigation also found some Medicare Advantage beneficiaries were diagnosed with serious diseases in their medical records, but no evidence of treatment for the disease appeared in these patients’ records. Among beneficiaries who had a diagnosis of HIV added to their record by their insurer, just 17% received treatment for the disease, according to the investigation. Among beneficiaries who were diagnosed with HIV by their physician, 92% received treatment.
The Journal’s investigation is the latest examining upcoding by MA plans. A 2022 report in The New York Times alleged some insurers incentivized employees or physicians to add diagnoses to patients’ reports. Nearly every major payer has been accused of overbilling by a whistleblower, the federal government or an investigation by HHS’ Office of Inspector General.
MedPAC, which advises the government on Medicare issues, estimates the federal government will spend $83 billion more on Medicare Advantage beneficiaries than if they were enrolled in fee-for-service Medicare. Coding intensity in MA will be 20% higher than in fee-for-service in 2024, according to the commission.
A health system CEO recently reached out to me with a specific complaint that’s become a hot-button issue for an increasing number of systems:
“Medicare Advantage (MA) is no longer a good payer for us. When you factor in all the pre-auths and denials, we’re now getting four points less yield from our MA patients than from our traditional Medicare patients.
But our market is swinging hard toward MA, and I know the program’s not going anywhere…so how can we rethink our MA business model to make it more profitable?
After more than a decade of rapid growth, MA plans are now running into headwinds that are reducing their margins and creating an even more contentious negotiating environment with providers. However, these heightened competitive pressures could also be seen as an opportunity for provider organizations.
Rather than treating all of their MA payers as a monolith, a health system or other larger provider organization should be reassessing its MA book of business with the goal of identifying priority MA payers with which to pursue deeper, mutually beneficial partnerships.
The first step here is usually for a system to undergo a holistic tiering or ranking exercise for all of their MA payers according to factors like market share, contribution margin, value-based incentives, overall relationship dynamic, and projected market growth.
This exercise will identify not only which MA payers may not be high-priority, long-term partners, but also which MA payers are suitable for developing deeper relationships with (e.g., simplifying administrative burden, better rewards for value-based care, creating a joint insurance product).
If your system is facing challenges with MA and is interested in rethinking its MA portfolio strategy, please don’t hesitate to reach out.
With both Republicans and Democrats taking on these Goliaths individually, this could be a watershed moment for bi-partisan action.
The push and pull between providers and insurance companies is as old as our health payment system. Doctors have long argued insurers pay too little and that they too often interfere in patient care.
Dramatic increases in prior authorization, aggressive payment negotiations and less-generous reimbursement to doctors by Medicare Advantage plans show there’s little question the balance of power in this equation has swung toward payers.
These practices have led some doctors to look for outside investment, namely private equity, to keep their cash flow healthy and their operations functional. The trend of private equity acquisitions of physician practices is worthy of the federal scrutiny it has attracted. Insurers have noticed this trend, too, and appear ready to propose a profitable partnership.
Bloomberg recentlyreported that CVS/Aetna is looking for a private equity partner to invest in Oak Street Health, the primary care business CVS acquired for $9.5 billion last year. Oak Street is a significant player in primary care delivery, particularly for Americans on Medicare, with more than 100 clinics nationwide. CVS is said to be exploring a joint venture with a private equity firm to significantly expand Oak Street’s footprint and therefore also expand the parent corporation’s direct control over care for millions of seniors and disabled Americans across hundreds of communities.
Republicans have led scrutiny of pharmacy benefit managers on Capitol Hill. And Democratic attacks on private equity in health care have recently intensified. I hope, then, that both parties would find common ground in being watchful of a joint venture between private equity and one of the country’s largest PBMs, Caremark, also owned by CVS/Aetna.
The combination of health insurers and PBMs over the last decade – United Healthcare and Optum; CVS/Aetna and Caremark, and Cigna and Express Scripts – has increasingly handed a few large corporations the ability to approve or deny claims, set payment rates for care, choose what prescriptions to dispense, what prescriptions should cost, and how much patients must pay out-of-pocket for their medications before their coverage kicks in.
As enrollment in Medicare Advantage plans has grown to include a majority of the nation’s elderly and disabled people, we have seen insurers source record profits off the backs of the taxpayer-funded program. But in recent months, insurers have told investors they have had higher than expected Medicare Advantage claims – in particular CVS/Aetna, which took a hammering on Wall Street recently because its Medicare Advantage enrollees were using more health care services than company executives had expected.
It is natural, then, that one of the largest insurer-owned PBMs is looking to expand its hold on primary care for older Americans. Primary care is often the gateway to our health care system, driving referrals to specialists and procedures that lead to the largest claims insurers and their employer customers have to pay. By employing a growing number of primary care providers, CVS/Aetna can increasingly influence referrals to specialists and therefore the care or pharmacy benefit costs those patients may incur.
Control of primary care doctors holds another benefit for insurers: determination of what primary care doctor a patient sees.
People enrolled in an Aetna Medicare Advantage or employer-sponsored plan may find that care is easier to access at Oak Street clinics. Unfortunately, while that feels monopolistic and ethically alarming, this vertical integration has received relatively little scrutiny by lawmakers and regulators.
No law prevents an insurance company or PBM from kicking doctors it does not own out of network while creating preferential treatment for doctors directly employed by or closely affiliated with the corporate mothership.
In fact, the system largely incentivizes this. And shareholders expect insurers to keep up with their peers. As UnitedHealth Group has become increasingly aggressive in its acquisitions of physician practices – now employing or affiliated with about one in ten of the nation’s doctors – it has also become increasingly aggressive in its contract negotiations with physicians it does not control, particularly the specialists who depend on the referrals that come from primary care physicians.
That’s another area where looking to expand Oak Street Health makes smart business sense for CVS/Aetna. Specialist physicians are historically accustomed to higher compensation than primary care doctors and are used to striking hard-fought deals with insurers to stay in-network.
By controlling the flow of primary care referrals to specialists, CVS/Aetna can control what insurers have long-desired greater influence over: patient utilization. As a key driver of referrals to specialists in a specific market, CVS/Aetna will have even more power in contract negotiations with specialists.
As Oak Street’s clinics grow market share in the communities they serve, specialists in that market will feel even more pressured to stay in-network with Aetna and to refer prescriptions to CVS pharmacies. That has the dual benefit for CVS/Aetna of helping to predict what patients will be treated for once they go to a specialist and control over what the insurer will have to pay that specialist.
With different corporate owners, this sort of model could easily run afoul of the federal Anti-Kickback Statute and Stark Law.
No doctor or physician practice is allowed to receive anything of value for the referral of a patient. But that law only applies when there is separate ownership between the referring doctor and the specialist.
CVS/Aetna would clearly be securing value – in the form of lower patient utilization and effective reimbursement rates – under this model. But with Oak Street owned by CVS/Aetna and specialists forced to agree to lower reimbursement rates through negotiations with an insurer that appears separate from Oak Street, there’s no basis for a claim under the Stark Law. There may be antitrust implications, but those are more difficult and take longer to prove – and the fact the federal government cleared CVS/Aetna to acquire Oak Street Health last year wouldn’t help that argument.
This model is already of concern, which is why I continue to urge examination of increasing insurer control of physicians across the country. Their embrace of private equity to accelerate this model is truly alarming. And given Democrats’ recent focus on private equity in health care, they should work with their Republican colleagues who are rightly alarmed about the increasingly anti-competitive, monopolistic health insurance industry.
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.
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.
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.
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.
HENRY KOTULA 