Category Archives: Medicare Advantage

The Medicare Advantage Trap

Posted on by • Posted in Health Insurance Denial, Health Insurance Industry, Medicare, Medicare Advantage, Medicare Advantage Denials, Medicare Supplement, Out of Network, Out of Pocket Expenses, Preexisting Conditions • Leave a comment
https://prospect.org/health/2023-11-29-medicare-advantage-trap/?utm_source=substack&utm_medium=email

In 46 states, once you choose Medicare Advantage at 65, you can almost never leave.

Medicare was founded in 1965 to end the crisis of medical care being denied to senior citizens in America, but private insurers have been able to progressively expand their presence in Medicare.

One of the biggest selling points of Obamacare was that it would finally end discrimination against patients on the basis of pre-existing conditions.

But for one vulnerable sector of the population, that discrimination never ended. Insurers are still able to deny coverage to some Americans with pre-existing conditions. And it’s all perfectly legal.

Sixty-five million seniors are in Medicare open enrollment from October 15 until December 7. Nearly 32 million of those patients are enrolled in Medicare Advantage, a set of privately run plans that have come under fire for denying treatment and overbilling the government.

Medicare Advantage patients theoretically have the option to return to traditional Medicare. But in 46 states, it is nearly impossible for those people to do so without exposing themselves to great financial risk.

Traditional Medicare has no out-of-pocket cap and covers 80 percent of medical expenses. Unlike Medicare Advantage plans, in traditional Medicare, seniors can choose whatever provider they want, and coverage limitations are far less stringent. Consequently, there’s a huge upside to going with traditional Medicare, and the downside is mitigated by the purchase of a Medigap plan, which covers the other 20 percent that Medicare doesn’t pay.

While this coverage is more expensive than most Medicare Advantage plans, nearly everybody in their old age would like to be able to choose their doctor and their hospitals, and everybody would want the security of knowing that they won’t be denied critical treatments. In 46 states, however, Medigap plans are allowed to engage in what’s called underwriting, or medical health screening, after seniors have already chosen a Medicare Advantage plan at age 65.

Only four states—New York, Connecticut, Maine, and Massachusetts—prevent Medigap underwriting for Medicare Advantage patients trying to switch back to traditional Medicare. The millions of Americans not living in those states are trapped in Medicare Advantage, because Medigap plans are legally able to deny them insurance coverage.

Medicare Advantage little resembles Medicare as it was traditionally intended, with tight networks and exorbitant costs that threaten to bankrupt the Medicare trust fund. (A recent estimate from Physicians for a National Health Program found that the program costs Medicare $140 billion annually.)

Jenn Coffey, a former EMT in New Hampshire who has been a vocal critic of her Medicare Advantage insurers’ attempts to deny her needed care, told the Prospect that she would jump back to traditional Medicare in a second. But because she became eligible prior to turning 65 due to a disability, she never had the option to pursue traditional Medicare with a Medigap plan. Instead, she pays premiums for a Medicare Advantage plan that nearly mirror what the cost of Medigap would be. But New Hampshire, like most other states, allows Medigap plans to reject her.

“I tried to find out if I could switch to traditional Medicare,” said Coffey. “When I talked to an insurance broker they said that I could. I made an appointment with an insurance agent, who then started looking at my pre-existing conditions, and they said, ‘We’re never going to get somebody to underwrite you.’”

Coffey was stunned by the agent’s words. “I honestly thought that we were completely done with pre-existing conditions” as a determinant for insurance coverage, she said. “Medigap plans are the only place where they are allowed to discriminate against us.”

Medicare Advantage now covers a majority of Medicare participants, thanks to extremely aggressive marketing and perks for healthier seniors like gym memberships.

In the 46 states that lack protections for people with pre-existing conditions, “lots of people don’t know that they may not be able to buy a Medigap plan if they go back to traditional Medicare from Medicare Advantage,” said Tricia Neuman, a senior vice president at KFF who has studied this particular issue.

Technically speaking, they can still go back to traditional Medicare if they don’t like their Medicare Advantage options, Neuman explained. But without access to a Medigap plan, they would be on the hook for 20 percent of their medical costs, which is unaffordable for most seniors.

Neuman told the Prospect about “cases where people have serious medical problems, and wanted to see a specialist,” but were blocked by their Medicare Advantage plan. Those same people had no ability to switch to traditional Medicare with a Medigap plan at precisely the time they need it the most, in nearly every state in the U.S.

“Medigap wasn’t a part of the ACA discussion on pre-existing conditions,” Neuman added. “A lot of people have no idea about this restriction on Medicare coverage, until they find themselves in a position that they want to go back and then it could be too late.”

Academic research shows that seniors often seek to return to traditional Medicare when they become sick.

The critical component that both Medigap and Medicare Advantage plans offer, which traditional Medicare does not, is out-of-pocket caps, said Cristina Boccuti, a director at the West Health Policy Center. “People who want to leave their Medicare Advantage plan, maybe because they are experiencing problems in their plan’s network, decide to disenroll and can’t obtain an out-of-pocket limit which they had previously had in Medicare Advantage,” Boccuti said.

That’s exactly the problem facing Rick Timmins, a retired veterinarian in Washington state. When Timmins was continually delayed care for melanoma, he explored getting out of his Medicare Advantage plan. “I wanted out of Medicare Advantage big-time,” said Timmins. But when he began to look at Medigap plans, he was told that he wouldn’t be guaranteed to get a plan, and that the insurance company could raise premiums based on a pre-existing condition.

“I doubt that I’ll be able to switch over to traditional Medicare, as I can’t afford high premiums,” Timmins said. “I’m still paying off some old medical debt, so it adds to my medical expenses.”

Medicare was founded in 1965 to end the crisis of medical care being denied to senior citizens in America. “No longer will older Americans be denied the healing miracle of modern medicine,” Lyndon Johnson said at the time. “No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents, and to their uncles, and their aunts.”

But slowly, private insurers were able to progressively expand their presence in Medicare, with a colossal advance made through George W. Bush’s Medicare prescription drug program in 2003. Now, Medicare Advantage covers a majority of Medicare participants, thanks to extremely aggressive marketing and perks for healthier seniors like gym memberships.

Numerous recent studies have shown Medicare Advantage plans to deny care while boosting the profits of private insurance companies. Defenders of Medicare Advantage argue that managed care—which practically speaking means insurance employees denying care to seniors—improves our health care system.

Denial-of-care issues,

combined with the aforementioned $140 billion drain on the trust fund, have attracted far more scrutiny of the program than in years past. Community organizations like People’s Action, along with other groups like Be A Hero, have stepped up their criticism of the program. The Biden administration proposed new rules this year to curb overbilling through the use of medical codes, but a furious multimillion-dollar lobbying campaign from the health insurance industry led to the rules being implemented gradually.

Still, members of Congress have become more emboldened to speak out against abuses in Medicare Advantage. A recent Senate Finance Committee hearing featured bipartisan complaints about denying access to care. And House Democrats have urged the Centers for Medicare & Medicaid Services to crack down on increases in prior authorizations for certain medical procedures, as well as the use of artificial-intelligence programs to drive denials.

Megan Essaheb, People’s Action’s director of federal affairs, said that Medicare Advantage has become a drain on the federal trust fund. “These private companies are making tons of money,” Essaheb said. “The plans offer benefits on the front end without people understanding that they will not get the benefits of traditional Medicare, like being able to choose your doctor.”

Despite the growing scrutiny, the trapping of patients who want to get out of Medicare Advantage hasn’t gotten as much attention from either Congress or state legislatures that could end the practice.

Coffey, the retired EMT from New Hampshire, told the Prospect that she has paid $6,000 in out-of-pocket expenses this year under a Medicare Advantage program. “If I could go to Medigap, I would have better access to care, I wouldn’t be forced to give up Boston doctors,” she said.

“These insurance companies are allowed to reap as much profit as possible for as little service as they can get away with. They pocket all of our money and they don’t pay for anything, they sit there and deny and delay.”

Preparing for Medicare Advantage’s Make-or-Break Moment

Posted on by • Posted in Health Insurance Industry, Health System, Hospital, Hospital Industry, Medicare Advantage, Medicare Advantage Denials, Out of Network, Value-Based Contracting, Value-Based Healthcare • Leave a comment

https://www.kaufmanhall.com/insights/article/preparing-medicare-advantages-make-or-break-moment

In recent years, the Medicare Advantage (MA) program enjoyed both rapid membership growth and positive attention from healthcare organizations and advocates. As of the beginning of 2024, 33.4 million Americans were enrolled in MA, up 7% from 2023.

More than half of all Medicare-eligible individuals are now enrolled in MA.

Interest and growth in MA has been buoyed by a number of factors: a growing eligible population as Baby Boomers continue to age into Medicare eligibility; affordable benefit packages with low or zero monthly premiums; regulatory changes providing for more flexibility in plan and member design; consumer-centric programs and care models tailored to the needs of beneficiaries; increased marketing and sales efforts through direct mailings, telemarketing, and online advertising.

The program has also delivered meaningful value to members, who are more likely than traditional Medicare beneficiaries to have an annual income less than $40,000. In addition, the average monthly premium for Medicare beneficiaries enrolled in an MA plan has dropped by almost one-third in the last four years, reaching $18 per month in 2023.

Ideally, success in MA can take the form of a virtuous cycle: an improved margin on MA for a plan enables reinvestment in related products to grow membership and better manage health outcomes, which leads to further reinvestment (Figure 1). Sustained success is contingent on meaningful collaboration between payers and providers.

FIGURE 1: The Virtuous Cycle of MA Success

MA Hits Headwinds

However, after several high-growth years, payers and providers are currently confronting multiple MA-related challenges. Many providers have recently posted losses as their contractual yields decrease and authorizations for care have become more restrictive. The bar for risk adjustment and Star Ratings is also rising. Only 6% of plans received a 5-star rating from the Center for Medicare & Medicaid Services (CMS) for 2024, down from 22% in 2023. CMS also recently confirmed plans for rate cuts in 2025, with critics arguing that benefits for beneficiaries may become more limited. Providers are also reeling from related bureaucratic headaches.

As a result of these concerns, some providers are going out of network from MA plans, while some have asked CMS to investigate administrative denials. Nineteen percent of health system chief financial officers stopped accepting one or more MA plans in 2023—and 61% either plan to do so in 2024 or are considering doing so—according to a recent survey by the Healthcare Financial Management Association and Eliciting Insights.

Current MA members also have expressed concerns with the program’s trajectory. While roughly two-thirds of MA and traditional Medicare beneficiaries recently surveyed by the Commonwealth Fund said their coverage has met their expectations, MA members were more likely to report delays in care while awaiting prior approval (22% vs. 13%) or difficulty affording care due to copayments or deductibles (12% vs. 7%).

Some industry experts are warning senior citizens about the costs associated with switching back to traditional Medicare after enrolling in MA plans. Their concerns are creating political and regulatory scrutiny.

Collaborating for Value

Despite current challenges, many providers and health plans believe they need to continue to participate in and/or prioritize MA, given the program’s scale and overall benefits to their organizations and the communities they serve.

For instance, the success of MA risk contracts predicated on collaborating around delivering healthcare value suggests a possible path forward.

According to a JAMA study of more than 300,000 Medicare Advantage beneficiaries, members in value-based care MA arrangements with risk for both payers and providers had lower rates of inpatient admission, emergency department visits, and readmissions. In addition, CMS’s robust risk scoring model ensures that providers are paid fairly for the true cost of providing care to the populations they serve.

Percent of premium contracts, where payers delegate a share of the premium to providers to manage, are predictable, align payer and provider interests, easy to understand, and increasingly common.

In addition, the high cost of caring for Medicare enrollees makes the population health focus on VBC arrangements economical. Medicare members have the highest utilization of any insurance class, so intensive services like care management, disease management, and care coordination are more likely to have a positive return on investment.

Successful VBC arrangements share several core tenets, grounded in the need for close collaboration between participating parties (Figure 2).

FIGURE 2: Core Tenets of Successful Payer-Provider Value-Based Care Models

However, VBC arrangements are not the only option. Value-centric collaborations can take on a wide range of forms, depending on the amount of risk providers are willing to assume and the partnerships’ risk-related capabilities. The full continuum of value-centric collaborations runs the gamut from shared savings contracts with no downside risk for providers to full vertical integration into a single organization (Figure 3).

FIGURE 3: Understanding the Continuum of Value-Based Care Arrangements

Looking Into the Crystal Ball: Three Future State Scenarios

As the MA market confronts new headwinds after years of growth and favorable attention, we anticipate three possible future state scenarios. These possibilities can be applied to both the outlook nationally, as well as the actions of payers and providers within specific markets.

Scenario 1: A renewal of growth

In this scenario, better sense prevails, and plans and providers collaborate to address the core issues facing the program. A pause/adjustment in the market is followed by a period of renewed growth. From a national standpoint, this scenario is contingent on neutral to favorable regulatory treatment.

Scenario 2: Uneasy stabilization

In this scenario, contention is partially resolved through some degree of collaboration between payers and providers. This scenario is also dependent on neutral to favorable regulatory treatment.

Scenario 3: Implosion

In this scenario, high levels of contention continue, and more providers go out of network. Middle-income Medicare members opt out of MA and go back to traditional Medicare when feasible. This scenario accounts for heightened regulatory pressure on risk adjustment and utilization management practices, which further pressures margins.

Conclusion

Despite MA’s recent, publicly documented challenges, the program now accounts for more than half of all Medicare beneficiaries—a patient population that every healthcare organization must engage in some form or fashion.

As providers and payers decide how to approach the program—and each other—amid uncertainty and contention, the path forward can appear unclear. However, healthcare leaders seeking to emerge from the current environment of MA contention have an opportunity to shape the future of MA and will play a major role determining which of the three scenarios outlined in this article comes to fruition.

Ultimately, organizations must be able to develop a business model that both delivers quality care and manageable per capita costs—and critically, find ways to work through today’s pressing concerns with other MA stakeholders and partners.

Medicaid and Medicare Claims Managed by Insurers Are Rising. Why Aren’t They Worried About Their Profits?

Posted on by • Posted in Health Insurance Industry, Medicare Advantage, Medicare Advantage Contract Terms, Medicare Advantage Denials, Medicare Advantage Supplemental Benefits, Out of Pocket Expenses, Prior Authorization, Underinsured, Wall Street • Leave a comment
https://healthcareuncovered.substack.com/p/medicaid-and-medicare-claims-managed?utm_source=post-email-title&publication_id=255152&post_id=145514702&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

One of the things I’ve always found most fascinating about news coverage and policymaker attention to health insurers is how little focus is placed on what these companies say to their investors.

It’s no secret that each quarter, all public companies update their shareholders and provide guidance for the future. When I was at Cigna, preparing the CEO to speak with reporters and investor analysts was arguably considered the most important role I had every three months.

Mining insights from those earnings reports has been a focus of mine since I became an insurance industry whistleblower. Recently, for example, we’ve highlighted how CVS/Aetna, in particular, has taken a beating on its stock price for reporting increased spending on medical care by seniors in Medicare Advantage plans.

Now, though, CEOs have become even more public and open, beyond their quarterly earnings calls, about the challenges they are having extracting further profit from the Medicaid and Medicare programs. This should be noted, particularly by the bipartisan group of lawmakers in Washington increasingly eyeing regulatory reform on insurer practices like prior authorization, as evidence that insurers are going to become even more aggressive in limiting care to preserve their 2024 profits.

Centene’s CEO said a few days ago that medical claims are increasing in the company’s managed Medicaid business. UnitedHealth and Elevance, which owns several Blue Cross Blue Shield companies that have converted to for-profit status, also recently reported they’re seeing similar results. Combined with increased medical spending on Medicare Advantage claims, one might guess this would begin to worry investors that insurers would lower their profit forecasts.

But none of these companies have so far expressed concern about not meeting their 2024 profit expectations.

So, medical claims in Medicaid and Medicare Advantage plans – now the majority of the business for many of the largest insurers – are rising, but these companies aren’t expecting to disappoint Wall Street with a drop in profits. How is that possible?

Because insurers can deploy the tools to prevent patients from accessing care. And their playbook isn’t secret, or complicated.

By further increasing prior authorization in Medicaid and Medicare Advantage plans, insurers can limit how many seniors and low-income Americans follow through with legitimate care and procedures. (Here’s a recent congressional report on increased hurdles insurers have put in place to prevent children from receiving preventive care in Medicaid plans. And insurers’ increasing use of prior authorization in Medicare Advantage is something we’ve regularly covered.)

Unlike their marketplace and employer-based plans, insurers can’t negotiate reimbursement rates for Medicaid and Medicare Advantage plans that they manage.

But beyond prior authorization, they can put other layers of bureaucracy in place that increase how long it takes a provider to be reimbursed for providing care – and to make it more complicated for doctors to ensure they’re reimbursed fully for the care they provide.

In effect, these tactics can amount to decreasing the already industry-low rate of reimbursement for doctors from the Medicaid and Medicare Advantage programs. Physicians, you should expect to see more hurdles to reimbursement in these programs throughout the balance of 2024 as insurers look to hoard as much cash as they can.

In Medicare Advantage plans, insurers can pursue the industry jargon of a “benefit buydown” to further shift costs onto plan enrollees and off insurers themselves. Because the federal government pays insurers a flat amount per Medicare Advantage enrollee, regardless of how much health care spending each patient has, it is in the insurers’ financial interest to claim that seniors and disabled people enrolled in their plans are sicker than they really are.

Rising out-of-pocket costs that seniors and disabled people in Medicare Advantage plans are facing is a consequence of insurers wanting to squeeze further profits out of the program, and is a way to maintain direct government payments per enrollee within the insurers’ coffers.

Medicare Advantage Insurers Hurt You Because Their Profits Depend On It

Posted on by • Posted in Health Insurance Coverage Adequacy, Health Insurance Denial, Medicare Advantage, Medicare Advantage Denials, Medicare Advantage Ghost Networks, Medicare Advantage Prior Authorization, Medicare Supplement, Narrow Network, Underinsured • Leave a comment
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Physicians for a National Health Program estimate nearly 12 million seniors are in a Medicare Advantage plan that excludes more than 70% of doctors in their county.

Negative stories about Medicare Advantage (MA) insurers are finally making it to mainstream media after percolating below the surface for years. More and more patients, physicians, and even health care executives are speaking up about the disastrous expansion of this program. Shockingly, some of these stories have come from the insurance companies themselves.

With no hint of shame or irony, executives like CFO Thomas Cowhey of CVS Health have delivered lines such as “The goal next year is margin over membership,” making explicit that more money is their mantra. With all these reports of limited networks, care denials, delayed payments, and corporate greed, you may feel like the story of MA can’t get any worse.

Impossibly, it does. Physicians for a National Health Program (PNHP) has just recently released a bombshell report exposing the sheer breadth of harm that MA insurers have done to patients and health care workers across the country. The report combines policy analysis of dozens of academic studies, news reports, and government investigations with personal stories from people hurt by the insurance companies running these plans. We want to take some time to explore the report’s findings, and highly encourage you to read it in full as well.

Patients in MA experience difficulties from the moment they begin to seek care. By PNHP’s estimate, 11.7 million beneficiaries are in a plan that excludes more than 70% of doctors in their county. These narrow networks mean that patients often have to travel hours for an appointment, and can’t see their preferred family physician or the right specialist for their condition. This can have dire consequences. 

One study found that cancer patients in MA are less likely to be treated at teaching hospitals, Commission on Cancer-accredited hospitals, or National Cancer Institute-designated centers. As a result, these patients suffer higher mortality rates following surgery for a number of kinds of cancer, with some cancer patients in MA plans being twice as likely to die as those in traditional Medicare.

Put simply, narrow networks designed to reap profits in MA are killing patients.

Even if they’re able to find the right doctor, getting care doesn’t become any easier. MA insurers almost always require prior authorization for standard, evidence-based tests, procedures, and treatments, making patients wait weeks or even months to get the life-saving care they need now.

In one story from the report, a physician recounts how damaging this practice can be: 

I had a patient with several chronic diseases who was very sick and had just survived major abdominal surgery, almost miraculously. In the aftermath, she desperately needed to go to acute rehab, which is the most intensive rehab – we found a facility, she liked it, her family liked it, and then her MA plan looked at the place and said ‘No, she’s healthy enough to not go to acute rehab, we won’t authorize it.’ This was after our PM&R specialist, physical therapist, and 3 MDs on our team had told her she needed acute rehab, and that it was the only thing that would keep her out of the hospital again. And this insurer, without anyone ever looking at her, rejected that conclusion. And we knew that on traditional Medicare this never would’ve happened.

Prior authorization is also a gigantic waste of time and resources for doctors and health care workers who want to spend that time caring for patients. PNHP found that medical practices are forced to waste between 11.1 and 20.5 million hours per year filling out authorization forms and fighting with insurance companies to get necessary care approved. 

Much of this is done arbitrarily, wearing patients down with bureaucracy so the insurance company doesn’t have to pay for treatment. When challenged on appeal, somewhere around 80% of denials are reversed, proving there was no good medical reason for the denial in the first place.

Assuming you can find a doctor in your narrow network, and that your doctor makes it through the red-tape nightmare to get your necessary care approved, you may then find yourself dealing with severely limited coverage and thousands of dollars in medical bills. In fact, 7.3 million beneficiaries in MA are considered underinsured based on their reporting of high health care costs. Seniors and people with disabilities are often enticed into MA by advertisements or insurance brokers who tout low premiums and supplemental benefits as big perks of their plans, only to find that once they actually become sick, coverage dries up fast.

After experiencing all of these hardships, many beneficiaries find themselves wanting to get out of MA and go to traditional Medicare, and studies show that those who are seriously ill or who have high health care costs indeed switch out of the program at high rates. Unfortunately, if you stay in MA too long, you may be trapped in the program for good. 

For the first twelve months someone is in MA, they have a guarantee that no Medigap insurer can deny them a policy. However, once this period is up, this guarantee disappears in 46 of 50 states.

If you decide to switch back to traditional Medicare after a year, you are no longer guaranteed to receive this coverage, and you can be denied a policy on the basis of “pre-existing conditions,” a practice that most believe was fully outlawed following the passage of the Affordable Care Act.

Imagine you get sick while in MA, and rack up thousands of dollars in medical bills that you can’t pay. When you try to switch to traditional Medicare, you can be denied Medigap coverage because of the very illness that made you need to leave MA. Many people simply cannot afford Medicare without Medigap, meaning their only option is to stay in their MA plan.

If all of this seems crazy, that’s because it is. Medicare Advantage is a total rejection of the founding principles of Medicare and health care in general, and every harmful practice in this report is done in the name of profit. Restricting networks, denying care, refusing to cover costs–these are all ways that insurance companies in MA keep our taxpayer dollars while leaving patients and health care workers to deal with the consequences. We need to work together to get these greedy middlemen out of Medicare before they take it over entirely. Our hard-earned dollars should be going to traditional Medicare, the program that actually serves its constituents.

Medicare Advantage struggling under low payment, high utilization

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Medicare Advantage is in an awkward place.

On the one hand, the alternative to traditional Medicare is still popular among consumers, who have been lured by the promises of lower out-of-pocket costs and increased supplemental benefits. 

On the other hand, Medicare Advantage profitability is on the decline, as shown in recent quarterly reports from the large insurers. The headwinds, executives said during recent earnings calls, have been due to greater than expected utilization of benefits and lower than expected reimbursement from the government. 

Adding to MA’s margin challenges are providers who are making the decision to cut their ties with MA plans rather than deal with delays in prior authorization and claims payments.

Moody’s Investors Service said this year, and an HFMA survey from March indicates 19% of health systems have discontinued at least one Medicare Advantage plan, while 61% are planning to or considering dropping Medicare Advantage payers.

Until recently, the story of Medicare Advantage was one of ascendancy. Just last year it hit a milestone: More than half of eligible Medicare beneficiaries are now in MA plans. So why is business taking a step back?

WHY THIS MATTERS

There are many factors at play, but a big one is the 3.7% rate increase for 2025 that Medicare Advantage plans will receive from the Centers for Medicare and Medicaid Services. The federal government is projected to pay between $500 and $600 billion in Medicare Advantage payments to private health plans, according to the 2025 Advance Notice for the Medicare Advantage and Medicare Part D Prescription Drug Programs released in April. 

The payment rate was considered inadequate by insurers, who were also troubled over other key factors, including a 0.16% reduction in the Medicare Advantage benchmark rate for 2025, which represents a 0.2% decrease.

“AHIP has strong concerns that the estimated growth rate in the Advance Notice – an average of 2.44% – will lead to benchmark changes that are insufficient to cover the cost of caring for 33 million MA beneficiaries in 2025,” AHIP president and CEO Mike Tuffin said in April. “The estimate does not reflect higher utilization and cost trends in the healthcare market that are expected to continue into 2025.”

According to Karen Iapoce, vice president Government Programs at ZeOmega, the cost of running an MA business is increasing due to the burdens being placed on health plans.

“If you sit inside with a health plan, they’re asked to do a lot with not as much bandwidth as they had before,” said Iapoce. “For example, health equity requires plans to have new regulatory guidance they need to meet. There’s a host of measures around health equity. Our plans are not in the business of really understanding how to manage transportation, how to manage housing, so they’re working with other entities. This requires an expert to sit in with the health plan … and then track and report. On the business end, they want to show an ROI, but that could be six months or a year down the line.”

Because of that, she said, the benchmark rate is likely insufficient to cover the projected increase in administrative and other costs. Iapoce said the benchmark rates represent the maximum amount that will be paid to a person in a given county; this is used as a reference point for calculation. If a plan is higher than the benchmarks, the premiums end up going to the beneficiary. More commonly, the plans bid below the benchmark, and the difference represents the rebate plans will receive. But they also factor into risk adjustment.

“The plans are getting into these contract negotiations, so they have to know what goes into that benchmark,” said Iapoce. “I might not be a high utilizer, but you may be. If we’re bringing in a community of high utilizers, there’s no one offsetting that. There’s no balance.”

Richard Gundling, senior vice president, content and professional practice guidance at HFMA, said MA plans started running into these issues when the program crossed over the threshold of more than 50% of beneficiaries.

“When a Medicare Advantage plan comes in, then all the extra administrative burdens come into play,” said Gundling. “So you have prior authorizations, all the issues around lack of payment and denials. Patients get caught in the middle, and in particular elderly patients think they’re still on traditional Medicare.

“It used to be that healthier beneficiaries went into Medicare Advantage,” he added. “Sicker beneficiaries tended to stay in traditional Medicare. That’s not the case anymore, and so there’s a higher spend.”

Gundling said beneficiaries are likely flocking to MA with visions of lower costs and increased benefits such as eyeglasses and hearing aids, and many don’t realize the tradeoffs, such as prior authorizations and network restrictions.

MA remains popular with seniors, but studies show the plans cost the government more money than original Medicare.

A 2023 Milliman report showed annual estimated healthcare costs per beneficiary are $3,138, compared to $5,000 for traditional fee-for-service Medicare, and over $5,700 if a traditional Medicare beneficiary also buys a Medigap plan.

MA membership has grown nationally at an annual rate of 8% to approximately 32 million, while traditional Medicare has declined at an average annual rate of 1%. As that has happened the percentage of people choosing MA has grown to 49% from 28%, data shows.

Yet Medicare Advantage profitability is on the decline, Moody’s found in February. That’s largely because of a significant spike in utilization for most of the companies, which Moody’s expects will result in lower full-year MA earnings for insurers. Adding to that is lower reimbursement rates for the first time in years that are likely to remain weaker in 2025 and 2026, which is credit negative.

Moody’s analysts contend that MA may have “lost its luster,” citing as evidence Cigna’s efforts to sell its MA business, even after a failed merger with Humana. Cigna this past winter announced it had entered into a definitive agreement to sell its Medicare Advantage, Supplemental Benefits, Medicare Part D and CareAllies businesses to Health Care Service Corporation (HCSC) for about $3.7 billion.

Iapoce said Medicare Advantage may be a victim of its own success.

“Because of all this great promotion about what a Medicare Advantage plan can do for you, you’re seeing an increase in enrollment, or more people moving over, and the demographics are starting to change,” she said. 

For many consumers, the appeal of an MA plan is the same as that of an online retailer like Amazon, said Iapoce. Such retailers offer one-stop shopping for a variety of goods, and the perception is that MA essentially offers one-stop shopping for a variety of healthcare services and benefits.

But while this massive shift is happening, it puts providers in an awkward position, said Iapoce.

“Their reimbursement is almost being dictated, in essence, by a health plan,” she said. “It almost feels like the payer has the upper hand over the provider. Think: I’m a provider. It’s my job to get this female with this particular age and condition a mammogram, and the health plan has told me to get her a mammogram. But you, as the health plan, get the money for it. I, as the provider … what am I getting? What’s it doing for me? It becomes this very tense situation, and the provider is probably the entity that is running on the thinnest of staff.”

Gundling expects that despite some “growing pains,” MA will remain viable and continue to grow.

“Nobody’s going to stay still,” said Gundling. CMS has to consider, ‘Are we paying the health plans appropriately for the types of patients they have?’ And then health plans will need to look at their medical utilization rules – ‘Are we overdoing pre-authorization or denying things appropriately?’ And providers need to say, ‘This is a market we need to continue to grow.’

“There’s still going to be a role for it,” he said. “It’s just that we’ve introduced a larger population into it, and I think that’s where a lot of the surprises come in.”

THE LARGER TREND

CVS reported earlier this month that healthcare-benefits medical costs, primarily due to higher-than-expected Medicare Advantage utilization, came in approximately $900 million above expectations. 

Last month, Humana said it expected membership may take a hit from future Medicare Advantage pricing resulting from the CMS payment rate notice. Humana is actively evaluating plan level pricing decisions and the expected impact to membership, president and COO James Rechtin said on the call.

Elevance Health, formerly Anthem, reported a 12.2% earnings increase for Q1, but company margins have not been as affected as those insurers that are heavily invested in the MA market. Fewer of its members are in MA plans compared to other large insurers Humana, CVS Health or UnitedHealth Group, executives said.

A ‘disturbance’ in the force

Posted on by • Posted in Health Insurance Industry, Medical Loss Ratio (MLR), Medicare Advantage, Net Income, Shareholder Expectations, Stock Market, Wall Street • Leave a comment

Speaking of Andrew Witty, the UnitedHealth chief spurred a freakout last week on Wall Street after he said the company was beginning to see a “disturbance” in its Medicaid medical costs. More people on Medicaid are going to the doctor and hospital, which eats into the insurance company’s profits. 

The biggest insurers that run state Medicaid programs — UnitedHealth, Elevance Health, Centene, and Molina Healthcare — all saw their stocks take a dive after Witty’s disclosure. For the past year, the surge in medical services has mostly been confined to older adults in Medicare Advantage plans.

Wall Street largely did not account for that trend creeping into Medicaid, which covers low-income people.

This switch is largely a function of the government’s Medicaid “redeterminations” process, Centene CEO Sarah London said at a banking conference Friday. During the pandemic, states didn’t have to kick people off Medicaid if they no longer were eligible. But over the past year, states had to redetermine if someone still qualified for coverage, and to boot those that no longer did. As fewer people remain enrolled in Medicaid, the ones who have stayed are sicker and are getting more care. 

Looking ahead, London told investors not to worry. That’s because Centene and other insurers will get more money from state Medicaid programs (translation: taxpayers) over the next several months, through routine payment updates, to match how sick its enrollees are. The explanation worked: The stocks of all the Medicaid insurers rose on Friday.

“We know how to do this,” London said. “This dynamic of redeterminations is unprecedented right now because of the scale. But matching rates to acuity in Medicaid is normal course.”

Medicare Advantage’s $64 Billion Supplemental Benefits Slush Fund

Posted on by • Posted in Health Insurance Industry, Marketing Deceptive, Medicare Advantage, Medicare Advantage Denials, Medicare Advantage Overpayments, Medicare Advantage Supplemental Benefits, Medicare Payment Advisory Commission (MedPAC) • Leave a comment
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Medicare spends huge sums financing the dental, vision and other benefits offered by Medicare Advantage plans. A new government report sounds the alert about their potential misuse.

In mid-March, the Medicare Payments Advisory Commission (MedPAC), which advises Congress on Medicare policy, made a bombshell disclosure in its annual Medicare report. The rebates that Medicare offers Medicare Advantage plans for supplemental benefits like vision, dental, and gym membership were at “nearly record levels”, more than doubling from 2018 to nearly $64 billion in 2024, but the government “does not have reliable information about enrollees’ actual use of these benefits at this time.”

In other words: $64 billion is being spent to subsidize private Medicare Advantage plans to provide benefits that are not available to enrollees in traditional Medicare, and the government has no idea how they are being spent.

Not only is this an enormous potential misallocation of taxpayer resources from the Medicare trust fund, it is also a critical part of Medicare Advantage’s marketing scam. The additional benefits offered in Medicare Advantage plans are what entice people to give up traditional Medicare, where there is no prior authorization, closed networks, or care denials.

But, as MedPAC states in the report, even though the Centers for Medicare and Medicaid Services (CMS) does not collect the data on utilization of supplemental benefits, what little data there is does not paint a pretty picture, with MedPAC noting that, “Limited data suggest that use of non-Medicare-covered supplemental benefits is low.”

HEALTH CARE un-covered is among the first media outlet to report MedPAC’s findings.

A 2018 study by Milliman, an actuarial firm, found that just 11 percent of Medicare Advantage beneficiaries had claims for dental care in that year, and that “multiple studies using survey data have found that beneficiaries with dental coverage in MA are not more likely to receive dental services than other Medicare beneficiaries.” A study from the Consumer Healthcare Products Association found that just one-third of eligible participants in Medicare Advantage plans used an over-the-counter medication benefit at pharmacies, leaving $5 billion annually on the table for insurers to pocket. Elevance Health, formerly Anthem, has 42 supplemental benefits available to Medicare Advantage beneficiaries. They analyzed a subset of 860,000 beneficiaries. For six of the 42 benefits, the $124 billion insurer could not report utilization data. For the other 36 supplemental benefits, the bulk of those covered used fewer than four benefits, with a full quarter not using any benefits at all and a majority using one or less benefits.

Medpac added that it had “previously reported that while these benefits often include coverage for vision, hearing, or dental services, the non-Medicare supplemental benefits are not necessarily tailored toward populations that have the greatest social or medical needs. The lack of information about enrollees’ use of supplemental benefits makes it difficult to determine whether the benefits improve beneficiaries’ health.”

With studies already showing that Medicare Advantage is associated with increased racial disparities in seniors’ health care, the massive subsidies provided to supplemental benefits appears to be an inadvertent driver of this problem:

the $64 billion—at least the portion of it that is actually being spent as opposed to deposited into insurer coffers—is likely not going to the populations that actually need it.

Amber Christ is the managing director of health policy for Justice in Aging, which advocates for the rights of seniors. “Health plans are receiving a large amount of dollars to provide supplemental benefits through rebates to plans. Clearly the offering have expanded, but the extent that they are being used is a black box,” she said. What little we do know, she said, indicates a “real lack of utilization.”

Christ pointed out that the Biden administration has taken some significant steps forward. “We’ve seen some good things coming out of CMS that will bring some transparency—the plans are going to have to report spending and utilization data, and in 2026 they will have to start sending notices to enrollees at the six-month point, letting people know what benefits they have used and what’s available. Those are all good moves.”

What’s missing from the proposed rule-making, however, is how the colossal outlays to supplemental benefits impact the goal of health equity, Christ said. “What we would have wanted to see more is demographics around utilization. Are there disparities in access?”

Of particular concern to advocates is the way that Medicare Advantage plans use supplemental benefits to market to “dual eligibles,” people who are eligible for Medicaid and Medicare. Medicare Advantage plans have taken to offering what amounts to cash benefits to dual eligibles, which provides a very strong incentive for people to sign up for Medicare Advantage.

But it’s effectively a trap, as being in both Medicare Advantage and Medicaid can not only result in prior authorization, care denials, and losing access to one’s physician, but also making care endlessly complex.

“Medicaid offers a bunch of supplemental benefits, either fully or often more comprehensively than Medicare Advantage. Seniors get lured into these health plans for benefits that they already have access to. But because benefits between Medicare Advantage and Medicaid aren’t coordinated people experience disruptions to their access to care. If they are dually enrolled it should go above and beyond, not duplicate coverage or making it more difficult to access coverage,” Christ said. 

David Lipschutz, the associate director of the Center for Medicare Advocacy, related an experience he had with a state health official who counseled a senior against enrolling in Medicare Advantage. The official “was able to stop them and help them think through their choices. She wanted to enroll in a Medicare Advantage plan that offered a flex benefit,” which is basically restricted cash (Aetna, for example, restricts its recipients to spending the money at stores owned by CVS Health, its parent company). “None of her five doctors contracted with the Medicare Advantage plan. Had it not been with that interaction with the health counselor. She would have traded the flex card for no access to her current physicians. It’s an untenable situation.”

Lipschutz added that Medicare Advantage insurers contract with community organizations to administer supplemental benefits, which helps to insulate the industry from political pressure from advocates in Washington. “This whole new range of supplemental benefits has also at the same time pulled in a lot of community based organizations. They need the cash that the plans are offering. It creates a welcome dynamic for insurance companies trying to make community organizations dependent on their money. But it’s not a good situation to be in when you’re trying to reign in Medicare Advantage overpayments.”

Bid/Ask

The core of the financing of supplemental benefits is through a bid system, in which CMS sets a benchmark based on area fee-for-service Medicare spending, and then invites insurers to submit a bid, and then receives a rebate for supplemental benefits based on the benchmark. The essential problem is that the average person in traditional Medicare is sicker than someone in a Medicare Advantage plan—the research shows that when patients get sick, they leave Medicare Advantage for traditional Medicare if they can. And Medicare Advantage plans aggressively market to healthier patients—the oft-touted gym membership supplemental benefit only works for those who actually work out at the gym regularly. (Well under one-third of those 75 and over.)

And in counties with low traditional Medicare spending, the benchmark is at 115 or 107.5 percent—an unreasonable and massive subsidy written into the Affordable Care Act at the behest of the insurance lobby. The lowest benchmark is at 95 percent of FFS spending for areas with high costs.

“The way the payment is set up leads to this excessive amount of rebate dollars,” said Lipschutz. “It’s a fundamentally flawed payment system which is in dire need of reform.” Lipschutz’s position jives with the MedPAC report, which states that: “A major overhaul of MA policies is urgently needed.”

Supplements For Half

“You shouldn’t have to enroll in a private plan just to access these benefits,” said Lipschutz. But that’s exactly the choice millions of seniors are faced with. Forty-nine percent of seniors remain in traditional Medicare.

And for that group, Medicare offers no supplemental benefits, Christ said. “As a foundational principle spending all this money for Medicare Advantage to give supplemental benefits doesn’t make sense. This is the Medicare trust fund. Half of Medicare has “access,” and the other half, in traditional Medicare, doesn’t. Wouldn’t those dollars be better spent giving everyone access? Especially when we understand that Medicare Advantage has narrower providers and prior authorization.

There’s a recognition that these supplemental benefits have positive impacts on quality of life, but we’re not offering it in traditional Medicare—even though Medicare Advantage is not doing a better job than traditional Medicare.”

House of Cards?

A new lawsuit, filed in April, could substantially impact the incentives that plans have to offer supplemental benefits. To manage costs, many Medicare Advantage plans have value-based care arrangements with providers—meaning that they share some of their revenues with hospitals and other health providers to ensure access to networks and to smooth costs out in the long run.

But as part of this arrangement, providers bear some of the costs of the plans—including the cost of supplemental benefits. Bridges Health Partners, which is a clinically integrated network of doctors and hospitals, sued Aetna to block the allocation of supplemental benefits to the expenses that they bear the cost of, due to a 20-fold increase in their costs.

Combined with the 2026 requirement from CMS that participants be informed as to what benefits they haven’t used, insurers’ ability to offer these supplemental benefits and still retain sky-high profit margins could be curtailed.

‘No silver bullets’ to improve margins, OSF CFO says

Posted on by • Posted in CFO, Contract Labor, Health System, Hospital, Hospital Industry, Medicare Advantage, Medicare Denials, No Silver Bullets, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Margin Drivers, Operating Metrics, Operating Model, Operating Performance, Operating Revenue, Payor Contracting, Recruiting, Retention, Turnaround, Turnaround Plan • Leave a comment
https://www.beckershospitalreview.com/finance/no-silver-bullets-to-improve-margins-osf-cfo-says.html?origin=CFOE&utm_source=CFOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Peoria, Ill.-based OSF HealthCare has seen drastic improvements to its financial performance over the last two years, a performance that has allowed the health system to see revenue growth and expand its M&A footprint.

OSF was able to turn around a $43.2 million operating loss (-4.5% margin) in the first quarter ended Dec. 31, 2022, to a $0.9 million gain over the same period in 2023.

But the health system didn’t stop there and, in the first six months ended March 31, 2023, transformed a $60.9 million operating loss to an $8.9 million gain for the same period in 2024.

OSF HealthCare CFO Michael Allen connected with Becker’s to discuss the strategies that helped OSF get to a more steady financial place and some of their plans for the future. 

Question: What strategies has OSF HealthCare implemented to help it turn the corner financially? 

Michael Allen: OSF Healthcare has improved operating results by more than $70 million compared to FY2023, after seeing an even larger improvement from FY2022 to FY2023. After a very difficult FY2022, from a financial perspective, the organization launched a series of initiatives to return to positive margins. 

There has been a focus on reducing the reliance on contract labor, nursing and other key clinical positions, with better recruiting and retaining initiatives. The organization is actively implementing automation for repeatable tasks in hard-to-recruit administrative functions and is actively managing supply and pharmaceutical costs against inflationary pressures.

OSF has also seen revenue growth from patient demand, expanding markets, capacity management and improved payment levels from government and commercial payers.

Q: KSB Hospital and OSF HealthCare recently entered into merger negotiations. How do you expect hospital consolidation to evolve in your market as many small, independent providers continue to face financial challenges and struggle to improve their bottom lines?

MA: The economics of the healthcare delivery system model is challenging in most markets, but particularly difficult for small and independent hospitals and clinics. Given the structure of the payment system and the rising operating costs, I don’t see this pressure easing any time soon.  

OSF is looking forward to our opportunity to extend our healthcare ministry to KSB and the greater Dixon area and continue their great legacy of patient care.

Q: What advice would you have for other health system financial leaders looking to get their margins up this year?

MA: There are no silver bullets to improving margins. It’s the daily work of using our costs wisely and executing on important strategies that will win the day. Automation, elimination of non-value-added costs and continuously looking for opportunities to get the best care, patient engagement and workforce engagement is where OSF and other health systems will continue to focus.

Q: An increasing number of hospitals and health systems across the U.S. are dropping some or all of their commercial Medicare Advantage contracts. Where do you see the biggest challenges and opportunities for health systems navigating MA?

MA: As more and more patients and payers are entering Medicare Advantage, we continue to watch our metrics on payment levels to ensure we are being paid fairly and within contract terms for our payer partners. 

There does appear to be a trend of increasing denials that often aren’t justified or are not within our contract terms, and we will continuously work to rectify those issues with our payers to ensure our patients receive the appropriate care and OSF is paid fairly for services provided. 

Medicare Advantage two-midnight rule contributing to higher outpatient revenues

Posted on by • Posted in Center for Medicare and Medicaid Services (CMS), Health System, Hospital, Hospital Industry, Medicare, Medicare Advantage, Medicare Two-Midnight Rule • Leave a comment
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More than 20% of Medicare Advantage patients could be affected by the rule, report finds.

The Centers for Medicare and Medicaid Services’ January expansion of the two-midnight rule to include Medicare Advantage plans has contributed to higher inpatient volumes and revenue growth in the first quarter of the year, according to a Strata Decision Technology report.

This is because inpatient services have higher reimbursement levels compared to outpatient services and the two-midnight rule concerns inpatient care.

CMS published the final rule in April 2023, which for the first time expanded the rule to include Medicare Advantage plans. The rule requires patients to be admitted as an inpatient if the treating clinician determines they require hospital care that extends beyond two midnights, rather than being held under observation status as an outpatient.

The expansion now includes more than 30 million people enrolled in Medicare Advantage managed care plans. Prior to the final rule, the two-midnight rule only explicitly applied to traditional Medicare.

More than 20% of Medicare Advantage patients could be affected by the rule, the report found. An analysis of Medicare Advantage encounters from 2023 – before the rule was expanded to those patients – found that 22.3% were held in observation status for two days or more. By comparison, 8.7% of Medicare patients and 11.3% of patients covered by commercial plans had observation lengths of stay of two days or more in 2023.

WHAT’S THE IMPACT?

Looking at trends in hospital gross revenues, year-over-year growth in inpatient revenue surpassed outpatient revenue in March for the first time in more than two years. Inpatient revenue rose 3.7% versus March 2023, while outpatient revenue was up 2.4% year-over-year.  Overall gross operating revenue increased 3.1% and 2.2% over the same periods, respectively.

March marked the 11th consecutive month of year-over-year increases for all three metrics, which contributed to stronger margins in recent months, data showed.

Revenue growth varied widely for hospitals in different regions. For example, hospitals in the Northeast and Mid-Atlantic areas saw inpatient revenue jump 5.4% year-over-year in March, while outpatient revenue was nearly flat, down just 0.1%.

Adjusted revenues increased year-over-year, but were down month-over-month. Net patient service revenue per adjusted discharge increased 2.5% year-over-year, and decreased 1.7% versus the previous month, while NPSR per adjusted patient day rose 4.9% from March 2023 to March 2024, and was down 0.5% from February to March 2024.

Hospital operating margins showed strong performance throughout the first quarter. The median year-to-date operating margin was 4.7% for the month, down slightly from a peak of 5.2% in January, but up significantly compared to margins of less than 1% in early 2023.

While actual operating margin increased overall, the median change in the metric was nearly flat both year-over-year and month-over-month when looking at the national data. The median change in operating margin decreased 0.1 percentage point from March 2023 to March 2024, and was down 0.3 percentage point compared to February 2024. The median change in operating earnings before interest, taxes, depreciation, and amortization (EBITDA) margin decreased 0.4% year-over-year and 0.5% versus the prior month.

THE LARGER TREND

CMS initially implemented the two-midnight Rule for Medicare in 2013 to help remove barriers to patients receiving medically necessary care.

Medicare’s two-midnight rule states that inpatient services are generally payable under Medicare Part A if a physician expects a patient to require medically necessary hospital care that spans at least two midnights.

As a Nightmare Brews on Wall Street for CVS, Executives Scramble to Quell Investors

Posted on by • Posted in CVS Health, Health Insurance Denial, Health Insurance Industry, Medical Loss Ratio (MLR), Medicare Advantage, Medicare Advantage Denials, Net Income, Prior Authorization, Profit Motive, Provider Network, Shareholder Expectations, Shareholder Primacy, Shareholder Value, Wall Street • Leave a comment
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I wrote Monday about how the additional Medicare claims CVS/Aetna paid during the first three months of this year prompted a massive selloff of the company’s shares, sending the stock price to a 15-year low.

During CVS’s May 1 call with investors, CEO Karen Lynch and CFO Thomas Cowhey assured them the company had already begun taking action to avoid paying more for care in the future than Wall Street found acceptable.

Among the solutions they mentioned: 

Ratcheting up the process called prior authorization that results in delays and denials of coverage requests from physicians and hospitals; kicking doctors and hospitals out of its provider networks; hiking premiums; slashing benefits; and abandoning neighborhoods where the company can’t make as much money as investors demand.

On Tuesday at the Bank of America Securities Healthcare Conference, Cowhey doubled down on that commitment to shareholders and provided a little more color about what those actions would look like and how many human beings would be affected. As Modern Healthcare reported:

Headed into next year, Aetna may adjust benefits, tighten its prior authorization policies, reassess its provider networks and exit markets, CVS Chief Financial Officer Tom Cowhey told investors. It will also reevaluate vision, dental, flexible spending cards, fitness and transportation benefits, he said. Aetna is also working with its employer Medicare Advantage customers on how to appropriately price their business, he said. 

Could we lose up to 10% of our existing Medicare members next year? That’s entirely possible, and that’s OK because we need to get this business back on track,” Cowhey said.

Insurers use the word “members” to refer to people enrolled in their health plans. You can apply for “membership” and pay your dues (premiums), but insurers ultimately decide whether you can stay in their clubs. If they think you’re making too many trips to the club’s buffet or selecting the most expensive items, your membership can–and will–be revoked.

That mention of “employer Medicare Advantage customers” stood out to me and should be of concern to people like New York Mayor Eric Adams, who was sold on the promise that the city could save millions by forcing municipal retirees out of traditional Medicare and into an Aetna Medicare Advantage plan. A significant percentage of Aetna’s Medicare Advantage “membership” includes people who retired from employers that cut a deal with Aetna and other insurers to provide retirees with access to care. Despite ongoing protests from thousands of city retirees, Adams has pressed ahead with the forced migration of retirees to Aetna’s club. He and the city’s taxpayers will find out soon that Aetna will insist on renegotiating the deal.

Back to that 10%. Aetna now has about 4.2 million Medicare Advantage “members,” but it has decided that around 420,000 of those human beings must be cut loose. Keep in mind that those humans are not among the most Internet-savvy and knowledgeable of the bewildering world of health insurance. Many of them have physical and mental impairments. They will be cast to the other wolves in the Medicare Advantage business.

Welcome to a world in which Wall Street increasingly calls the shots and decides which health insurance clubs you can apply to and whether those clubs will allow you to get the tests, treatments and medications you need to see another sunrise.

As Modern Healthcare noted, Aetna is not alone in tightening the screws on its Medicare Advantage members and setting many of them adrift. Humana, which has also greatly disappointed Wall Street because of higher-than-expected health care “utilization,” told investors it would be taking the same actions as Aetna.

But Aetna in particular has a history of ruthlessly cutting ties with humans who become a drain on profits. As I wrote in Deadly Spin in 2010:

Aetna was so aggressive in getting rid of accounts it no longer wanted after a string of acquisitions in the 1990s that it shed 8 million (yes, 8 million) enrollees over the course of a few years. The Wall Street Journal reported in 2004 that Aetna had spent more than $20 million to install new technology that enabled it “to identify and dump unprofitable corporate accounts.” Aetna’s investors rewarded the company by running up the stock price. 

I added this later in the book:

One of my responsibilities at Cigna was to handle the communication of financial updates to the media, so I knew just how important it was for insurers not to disappoint investors with a rising MLR [medical loss ratio, the ratio of paid claims to revenues]. Even very profitable insurers can see sharp declines in their stock prices after admitting that they had failed to trim medical expenses as much as investors expected. Aetna’s stock price once fell more than 20% in a single day after executives disclosed that the company had spent slightly more on medical claims during the most recent quarter than in a previous period. The “sell alarm” was sounded when the company’s first quarter MLR increased to 79.4% from 77.9% the previous year.

I could always tell how busy my day was going to be when Cigna announced earnings by looking at the MLR numbers. If shareholders were disappointed, the stock price would almost certainly drop, and my phone would ring constantly with financial reporters wanting to know what went wrong.

May 1 was a deja-vu-all-over-again day for Aetna. You can be certain the company’s flacks had a terrible day–but not as terrible as the day coming soon for Aetna’s members when they try to use their membership cards.

Speaking of Lynch, one of the people commenting on the piece I wrote Monday suggested I might have been a bit too tough on Lynch, who I know and liked as a human being when we both worked at Cigna. The commenter wrote that:

After finishing Karen S. Lynch’s book, “Taking Up Space,” I came to the conclusion that she indeed has a very strong conscience and sense of responsibility, not totally to shareholders, but more importantly to the insured people under Aetna and the customers of CVS.”

I don’t doubt Karen Lynch is a good person, and I know she is someone whose rise to become arguably the business world’s most powerful woman was anything but easy, as the magazine for alumni of Boston College, her alma mater, noted in a profile of her last year. Quoting from a speech she delivered to CVS employees a few years earlier, Daniel McGinn wrote: 

Lynch began with a story to illustrate why she was so passionate about health care. She described how she’d grown up on Cape Cod as the third of four children. Her parents’ relationship broke up when she was very young and her father disappeared, leaving her mom, Irene, a nurse who struggled with depression, as a single parent. In 1975, when Lynch was 12, Irene took her own life, leaving the four children effectively orphaned. 

During her speech, several thousand employees listened in stunned silence as Lynch explained how her mom’s life might have turned out differently if she’d had access to better medical treatment, or if there’d been less stigma and shame about getting help for depression. She then talked about how an insurance company like Aetna could play a role in reducing that stigma, increasing access to care, and helping people live with mental illness. 

I’m sure when she goes home at night these days, Lynch worries about what will happen to those 420,000 other humans who will soon be scrambling to get the care they need or to find another club that will take them. Their lives most definitely will turn out differently to appease the rich people who control her and the rest of us.

But she is stuck in a job whose real bosses–investors and Wall Street financial analysts–care far more about the MLR, earnings per share and profit margins than the fate of human beings less fortunate than they are.