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Where Does Medicare Go From Here: Profit-Driven Chaos or Patient-Centered Community?
After covering the Medicare privatization crisis for over two years, an investigative reporter takes a step back and examines what’s at stake.
Medicare, the country’s largest and arguably most successful health care program, is under duress, weakened by decades of relentless efforts by insurance companies to privatize it.
A rapidly growing Medicare Advantage market — now 52% of Medicare beneficiaries, up from 37% in 2018 — controlled by some of the largest and most powerful corporations in the world, threatens to both drain the trust fund and eliminate Medicare’s most important and controversial component: its ability to set prices.
It is not an overstatement to call it a heist of historic proportions, endangering the health not only of the more than 65 million seniors and people with disabilities who depend on Medicare but all Americans who benefit from the powerful role that Medicare has historically played in reining in health care costs.
The giant corporations that dominate Medicare Advantage have rigged the system to maximize payments from our government to the point that they are now being overpaid between $88 billion and $140 billion a year. The overpayments could soar to new heights if the insurers get their way and eliminate traditional Medicare.
All of America’s seniors and disabled people who depend on Medicare could soon be moved to a managed care model of ever-tightening networks, relentless prior authorization requirements and limited drug formularies. The promise of a humane health care system for all would be sacrificed at the altar of the almighty insurer dollar.
The Medicare Payments Advisory Commission (MedPAC), the independent congressional agency tasked with overseeing Medicare, last month released a searing report which found that Medicare spends 22% more per beneficiary in Medicare Advantage plans than if those beneficiaries had been enrolled in traditional fee-for-service Medicare. That’s up from a 6% estimate in the prior year.
A similar cost trend exists for diagnosis coding.
Medicare Advantage plans and their affiliated providers increasingly upcoded diagnoses to get higher reimbursements. In 2024, overpayments due to upcoding could total $50 billion, according to MedPAC, up from $23 billion in 2023. These enormous overpayments drive up the cost of premiums — MedPAC’s conservative estimate is that the premiums paid to Medicare out of seniors’ Social Security checks will be $13 billion higher in 2024 because of those overpayments.
There is evidence that Americans and lawmakers are starting to wake up.
Medicare Advantage enrollment growth slowed considerably in 2023. Support within the Democratic Party for Medicare Advantage is cratering. In 2022, 147 House Democrats signed an industry-backed letter supporting Medicare Advantage. This year, just 24 House Democrats signed the letter. Earlier this month, the Biden administration cut Medicare Advantage base payments for the second year in a row (while still increasing payments overall), over the fierce opposition of the insurance lobby. The investment bank Stephens called Biden’s decision a “highly adverse” outcome for insurers. Wall Street has taken note, punishing the stock price of the largest Medicare Advantage insurers, with Barron’s noting that Wall Street’s “love affair” with Humana is “ending in tears.” The cargo ship is turning. It is up to us to determine if that will be enough.
We can’t attack a problem if we don’t know how to diagnose it. I spoke with some of the most knowledgeable critics of Medicare Advantage about the danger the rapid expansion of Medicare privatization presents to the American public.
Rick Gilfillan is a medical doctor who in 2010 became the first director of the Center for Medicare and Medicaid Innovation (CMMI). He would go on to serve as CEO of Trinity Health from 2013 to 2019. In 2021 he launched an effort to halt the involuntary privatization of Medicare benefits.
“Right now, all investigations are finding tremendous overpayments,” Gilfillan said. “The overpayments are based on medical diagnoses that may or may not be meaningful from a patient care standpoint. Insurers are using chart reviews, nurse home visits and AI software to find as many diagnoses as possible and thereby inflate the health risks of the patients and the premium they get from Medicare. The overpayments are just outrageous,” he said.
The problem could get worse if the Supreme Court curtails the powers of regulatory agencies, as it may do this year. “It would make a huge difference in what CMS would be able to do,” Gilfillan said.
The logic behind Medicare privatization is that seniors and people with disabilities use too much care, egged on by their doctors. If true, a solution could have been to enforce the Stark Law, which bans physicians from having financial relationships with providers they refer to, or other anti-kickback statutes. States could also enforce laws 33 of them have enacted that prohibit the “corporate practice of medicine.”
Instead, health insurers were invited and incentivized by previous administrations to compete with the original Medicare program and “manage” beneficiaries’ care. Under this model— set in its modern form in 2003 — Medicare Advantage insurers are paid a rate based on a complex risk modeling process and estimated costs.
But Medicare Advantage plans have never been cheaper than traditional Medicare, as MedPAC has repeatedly pointed out.
This is a far more complex approach than the fee-for-service model in which CMS sets prices in health care in a public and transparent manner, Gilfillan notes. The prices negotiated by Medicare Advantage companies, by contrast, are not disclosed.
“With fee-for-service, a patient is provided a service, treatment or medication. The physician who provides the service charges a specific amount for that service,” Gilfillan said. “And then Medicare pays whatever it decided it was worth for that service. The benefit is you pay for what you get.”
Some Medicare Advantage plans use a “capitated” approach in paying primary care physicians. The amount is based on the premium they receive for the patient. The more codes submitted, the higher the capitation, the greater the profit. That approach is having far-reaching economic impacts on health care, said Hayden Rooke-Ley, an Oregon-based lawyer and health care consultant who co-authored a recent New England Journal of Medicine article on the corporatization of primary care. It is the capitation model, he says, that drives the rampant upcoding among Medicare Advantage plans.
From Horizontal to Vertical
“An undercovered aspect of Medicare Advantage is the way it is fueling vertical consolidation” in the insurance business, Rooke-Ley added, noting that until recent years, insurers bulked up by buying smaller competitors (known as horizontal integration). “With so much government money, we’re seeing insurance companies restructuring themselves as vertically integrated conglomerates [through the acquisition of physician practices, clinics and pharmacy operations] to become even more profitable, especially in Medicare Advantage.”
“A key part of this strategy is to own primary care practices,” he said, citing Humana’s partnership with the private-equity firm Welsh Carson to become the largest owner of Medicare-based primary care, CVS/Aetna’s acquisition of Oak Street, and UnitedHealth’s roll up of doctors practices across the country.
As Rooke-Ley explained, control of primary care allows insurance companies to more easily manipulate “risk scores” to increase payments from the government by claiming patients are in worse health than they really are.
“The easiest way to increase risk scores, short of simply fabricating diagnosis codes, is to control the behavior of physicians and other clinicians,” he said.
“When an insurance company owns the physician practice, it can configure workflows, technology, and incentives to drive risk coding.
UnitedHealth, for example, can preferentially schedule Medicare Advantage patients – and it can choose to reach out to health plan enrollees it identifies with its data as having high ‘coding opportunities.’ It can require its doctors to go to risk-code training, and it can prohibit doctors from closing their notes before they address all the ‘suggested’ diagnosis codes.”
“While Medicare Advantage insurance companies tout all their provider acquisitions as investments in value-based care, the concern is that it’s really just looking like a game of financialization,” Rooke-Ley said. “MA was supposed to save Medicare money, but the exact opposite has happened.
According to MedPAC, the government will over-subsidize MA to the tune of $88 billion this year, with $54 billion of that due to excess risk coding relative to what we see in traditional Medicare. That’s a staggering amount of money that could go directly to patients and clinicians by strengthening traditional Medicare.”
Two Possible Futures
There are two options for the future of Medicare, said Dr. Ed Weisbart, former chief medical officer of the pharmacy benefit manager Express Scripts, which Cigna bought in 2018, who now leads the Missouri chapter of Physicians for a National Health Program.
In one future, he said, “We will change the trajectory and get rid of the profiteers, and manage to divert the funds that are being profiteered to patient care.”
In another future, the business practices of Medicare Advantage plans “will be unfettered and more damaging and harmful than they are today,” he said. “If we continue on this course we’ll find an increasingly polarized health care system that caters increasingly to the wealthy and privileged. The barriers to care will be worse.”
BIG INSURANCE 2023: Revenues reached $1.39 trillion thanks to taxpayer-funded Medicaid and Medicare Advantage businesses
The Affordable Care Act turned 14 on March 23. It has done a lot of good for a lot of people, but big changes in the law are urgently needed to address some very big misses and consequences I don’t believe most proponents of the law intended or expected.
At the top of the list of needed reforms: restraining the power and influence of the rapidly growing corporations that are siphoning more and more money from federal and state governments – and our personal bank accounts – to enrich their executives and shareholders.
I was among many advocates who supported the ACA’s passage, despite the law’s ultimate shortcomings. It broadened access to health insurance, both through government subsidies to help people pay their premiums and by banning prevalent industry practices that had made it impossible for millions of American families to buy coverage at any price. It’s important to remember that before the ACA, insurers routinely refused to sell policies to a third or more applicants because of a long list of “preexisting conditions” – from acne and heart disease to simply being overweight – and frequently rescinded coverage when policyholders were diagnosed with cancer and other diseases.
While insurance company executives were publicly critical of the law, they quickly took advantage of loopholes (many of which their lobbyists created) that would allow them to reap windfall profits in the years ahead – and they have, as you’ll see below.
Among other things, the ACA made it unlawful for most of us to remain uninsured (although Congress later repealed the penalty for doing so). But, notably, it did not create a “public option” to compete with private insurers, which many advocates and public policy experts contended would be essential to rein in the cost of health insurance. Many other reform advocates insisted – and still do – that improving and expanding the traditional Medicare program to cover all Americans would be more cost-effective and fair.
I wrote and spoke frequently as an industry whistleblower about what I thought Congress should know and do, perhaps most memorably in an interview with Bill Moyers. During my Congressional testimony in the months leading up to the final passage of the bill in 2010, I told lawmakers that if they passed it without a public option and acquiesced to industry demands, they might as well call it “The Health Insurance Industry Profit Protection and Enhancement Act.”
A health plan similar to Medicare that could have been a more affordable option for many of us almost happened, but at the last minute, the Senate was forced to strip the public option out of the bill at the insistence of Sen. Joe Lieberman (I-Connecticut), who died on March 27, 2024. The Senate did not have a single vote to spare as the final debate on the bill was approaching, and insurance industry lobbyists knew they could kill the public option if they could get just one of the bill’s supporters to oppose it. So they turned to Lieberman, a former Democrat who was Vice President Al Gore’s running mate in 2000 and who continued to caucus with Democrats. It worked. Lieberman wouldn’t even allow a vote on the bill if it created a public option. Among Lieberman’s constituents and campaign funders were insurance company executives who lived in or around Hartford, the insurance capital of the world. Lieberman would go on to be the founding chair of a political group called No Labels, which is trying to find someone to run as a third-party presidential candidate this year.
The work of Big Insurance and its army of lobbyists paid off as insurers had hoped. The demise of the public option was a driving force behind the record profits – and CEO pay – that we see in the industry today.
The good effects of the ACA:
Nearly 49 million U.S. residents (or 16%) were uninsured in 2010. The law has helped bring that down to 25.4 million, or 8.3% (although a large and growing number of Americans are now “functionally uninsured” because of unaffordable out-of-pocket requirements, which President Biden pledged to address in his recent State of the Union speech).
The ACA also made it illegal for insurers to refuse to sell coverage to people with preexisting conditions, which even included birth defects, or charge anyone more for their coverage based on their health status; it expanded Medicaid (in all but 10 states that still refuse to cover more low-income individuals and families); it allowed young people to stay on their families’ policies until they turn 26; and it required insurers to spend at least 80% of our premiums on the health care goods and services our doctors say we need (a well-intended provision of the law that insurers have figured out how to game).
The not-so-good effects of the ACA:
As taxpayers and health care consumers, we have paid a high price in many ways as health insurance companies have transformed themselves into massive money-making machines with tentacles reaching deep into health care delivery and taxpayers’ pockets.
To make policies affordable in the individual market, for example, the government agreed to subsidize premiums for the vast majority of people seeking coverage there, meaning billions of new dollars started flowing to private insurance companies. (It also allowed insurers to charge older Americans three times as much as they charge younger people for the same coverage.) Even more tax dollars have been sent to insurers as part of the Medicaid expansion. That’s because private insurers over the years have persuaded most states to turn their Medicaid programs over to them to administer.
Insurers have bulked up incredibly quickly since the ACA was enacted through consolidation, vertical integration, and aggressive expansion into publicly financed programs – Medicare and Medicaid in particular – and the pharmacy benefit space. Premiums and out-of-pocket requirements, meanwhile, have soared.
We invite you to take a look at how the ascendency of health insurers over the past several years has made a few shareholders and executives much richer while the rest of us struggle despite – and in some cases because of – the Affordable Care Act.
BY THE NUMBERS
In 2010, we as a nation spent $2.6 trillion on health care. This year we will spend almost twice as much – an estimated $4.9 trillion, much of it out of our own pockets even with insurance.
In 2010, the average cost of a family health insurance policy through an employer was $13,710. Last year, the average was nearly $24,000, a 75% increase.
The ACA, to its credit, set an annual maximum on how much those of us with insurance have to pay before our coverage kicks in, but, at the insurance industry’s insistence, it goes up every year. When that limit went into effect in 2014, it was $12,700 for a family. This year, it has increased by 48%, to $18,900. That means insurers can get away with paying fewer claims than they once did, and many families have to empty their bank accounts when a family member gets sick or injured. Most people don’t reach that limit, but even a few hundred dollars is more than many families have on hand to cover deductibles and other out-of-pocket requirements.
Now 100 million Americans – nearly one of every three of us – are mired in medical debt, even though almost 92% of us are presumably “covered.” The coverage just isn’t as adequate as it used to be or needs to be.
Meanwhile, insurance companies had a gangbuster 2023. The seven big for-profit U.S. health insurers’ revenues reached $1.39 trillion, and profits totaled a whopping $70.7 billion last year.
SWEEPING CHANGE, CONSOLIDATION–AND HUGE PROFITS FOR INVESTORS
Insurance company shareholders and executives have become much wealthier as the stock prices of the seven big for-profit corporations that control the health insurance market have skyrocketed.
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.
By contrast, enrollment in the government-financed Medicaid and Medicare Advantage programs has increased 197% and 167%, respectively, over the past 10 years.
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.”
It is worth noting that although four companies saw growth in their Medicare Supplement enrollment over the decade, enrollment in Medicare Supplement policies has been declining in more recent years as insurers have attracted more seniors and disabled people into their Medicare Advantage plans.
OTHER FEDERAL PROGRAMS
In addition to the above categories, Humana and Centene have significant enrollment in Tricare, the government-financed program for the military. Humana reported 6 million military enrollees in 2023, up from 3.1 million in 2013. Centene reported 2.8 million in 2023. It did not report any military enrollment in 2013.
Elevance reported having 1.6 million enrollees in the Federal Employees Health Benefits Program in 2023, up from 1.5 million in 2013. That total is included in the commercial enrollment category above.
PBMs
As with Medicare Advantage, three of the big seven insurers control the lion’s share of the pharmacy benefit market (and two of them, UnitedHealth and CVS/Aetna, are also among the top three in signing up new Medicare Advantage enrollees, as noted above). CVS/Aetna’s Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx PBMs now control 80% of the market.
At Cigna, Express Scripts’ pharmacy operations now contribute more than 70% to the company’s total revenues. Caremark’s pharmacy operations contribute 33% to CVS/Aetna’s total revenues, and Optum Rx contributes 31% to UnitedHealth’s total revenues.
WHAT TO DO AND WHERE TO START
The official name of the ACA is the Patient Protection and Affordable Care Act. The law did indeed implement many important patient protections, and it made coverage more affordable for many Americans. But there is much more Congress and regulators must do to close the loopholes and dismantle the barriers erected by big insurers that enable them to pad their bottom lines and reward shareholders while making health care increasingly unaffordable and inaccessible for many of us.
Several bipartisan bills have been introduced in Congress to change how big insurers do business.
They include curbing insurers’ use of prior authorization, which often leads to denials and delays of care; requiring PBMs to be more “transparent” in how they do business and banning practices many PBMs use to boost profits, including spread pricing, which contributes to windfall profits; and overhauling the Medicare Advantage program by instituting a broad array of consumer and patient protections and eliminating the massive overpayments to insurers.
And as noted above, President Biden has asked Congress to broaden the recently enacted $2,000-a-year cap on prescription drugs to apply to people with private insurance, not just Medicare beneficiaries. That one policy change could save an untold number of lives and help keep millions of families out of medical debt. (A coalition of more than 70 organizations and businesses, which I lead, supports that, although we’re also calling on Congress to reduce the current overall annual out-of-pocket maximum to no more than $5,000.)
I encourage you to tell your members of Congress and the Biden administration that you support these reforms as well as improving, strengthening and expanding traditional Medicare. You can be certain the insurance industry and its allies are trying to keep any reforms that might shrink profit margins from becoming law.
The Heritage Foundation’s Medicare and Social Security Blueprint
If Congress in the next year or two succeeds in transforming Medicare into something that looks like a run-of-the mill Medicare Advantage plan for everyone – not just for those who now have the plans – it will mark the culmination of a 30-year project funded by the Heritage Foundation.
A conservative think tank, the Heritage Foundation grew to prominence in the 1970s and ’80s with a well-funded mission to remake or eliminate progressive governmental programs Americans had come to rely on, like Medicare, Social Security and Workers’ Compensation.
Some 30 million people already have been lured into private Medicare Advantage plans, eager to grab such sales enticements as groceries, gym memberships and a sprinkling of dental coverage while apparently oblivious to the restrictions on care they may encounter when they get seriously ill and need expensive treatment. That’s the time when you really need good insurance to pay the bills.
Congress may soon pass legislation that authorizes a study commission pushed by Heritage and some Republican members aimed at placing recommendations on the legislative table that would end Medicare and Social Security, replacing those programs with new ones offering lesser benefits for fewer people.
In other words, they would no longer be available to everyone in a particular group. Instead they would morph into something like welfare, where only the neediest could receive benefits.
How did these popular programs, now affecting 67.4 million Americans on Social Security and nearly 67 million on Medicare, become imperiled?
As I wrote in my book, Slanting the Story: The Forces That Shape the News, Heritage had embarked on a campaign to turn Medicare into a totally privatized arrangement. It’s instructive to look at the 30-year campaign by right-wing think tanks, particularly the Heritage Foundation, to turn these programs into something more akin to health insurance sold by profit-making companies like Aetna and UnitedHealthcare than social insurance, where everyone who pays into the system is entitled to a benefit when they become eligible.
The proverbial handwriting was on the wall as early as 1997 when a group of American and Japanese health journalists gathered at an apartment in Manhattan to hear a program about services for the elderly. The featured speaker was Dr. Robyn Stone who had just left her position as assistant secretary for the Department of Health and Human Services in the Clinton administration.
Stone chastised the American reporters in the audience, telling them: “What is amazing to me is that you have not picked up on probably the most significant story in aging since the 1960s, and that is passage of the Balanced Budget Act of 1997, which creates Medicare Plus Choice” – a forerunner of today’s Advantage plans.
“This is the beginning of the end of entitlements for the Medicare program,” Stone said, explaining that the changes signaled a move toward a “defined contribution” program rather than a “defined benefit” plan with a predetermined set of benefits for everyone. “The legislation was so gently passed that nobody looked at the details.”
Robert Rosenblatt, who covered the aging beat for the Los Angeles Times, immediately challenged her. “It’s not the beginning of the end of Medicare as we know it,” he shot back. “It expands consumer choice.”
Consumer choice had become the watchword of the so-called “consumer movement,” ostensibly empowering shoppers – but without always identifying the conditions under which their choices must be made.
When consumers lured by TV pitchmen sign up for Medicare Advantage, how many of the sellers disclose that once those consumers leave traditional Medicare for an Advantage plan, they may be trapped. In most states, they will not be able to buy a Medicare supplement policy if they don’t like their new plan unless they are in super-good health.
In other words, most seniors are stuck. That can leave beneficiaries medically stranded when they have a serious, costly illness at a time in life when many are using up or have already exhausted their resources. I once asked a Medicare counselor what beneficiaries with little income would do if they became seriously ill and their Advantage plan refused to pay many of the bills, an increasingly common predicament. The cavalier answer I got was: “They could just go on Medicaid.”
The push to privatize Medicare began in February 1995 when Heritage issued a six-page committee brief titled “A Special Report to the House Ways and Means Committee”, which was sent to members of Congress, editorial writers, columnists, talk show hosts and other media. Heritage then spent months promoting its slant on the story. Along with other right-wing groups dedicated to transforming Medicare from social insurance to a private arrangement like car insurance, Heritage clobbered reporters who produced stories that didn’t fit the conservative narrative.
The right-wing Media Research Center singled out journalists who didn’t use the prescribed vocabulary to describe Heritage plans. Its newsletter criticized CBS reporter Linda Douglas when she reported that the senior citizens lobby had warned that the Republican budget would gut Medicare. The group reprimanded another CBS reporter, Connie Chung, for reporting that the House and Senate GOP plans “call for deep cuts in Medicare and other programs.” Haley Barbour, then Republican National Committee chairman, vowed to raise “unshirted hell” with the news media whenever they used the word “cut.” He wined and dined reporters, “educating” them on the “difference” between cuts and slowing Medicare’s growth. Former Republican U.S. Rep. John Kasich of Ohio, who chaired the House budget committee, called reporters warning them not to use the word “cut,” later admitting he “worked them over.”
As I wrote at the time, by fall of that year reporters had fallen in line. Douglas, who had been criticized all summer, got the words right and reported that the Republican bill contained a number of provisions “all adding up to a savings of $270 billion in the growth of Medicare spending.”
Fast forward to now. The Heritage Foundation’s Budget Blueprint for fiscal year 2023 offered ominous recommendations for Medicare, some of which might be enacted in a Republican administration. The think tank yet again called for a “premium support system” for Medicare, claiming that if its implementation was assumed in 2025, it “would reduce outlays by $1 trillion during the FY 2023-2032 period.” Heritage argues that the controversial approach would foster “intense competition among health plans and providers,” “expand beneficiaries’ choices,” “control costs,” “slow the growth of Medicare spending,” and “stimulate innovation.”
The potential beneficiaries would be given a sum of money, often called a premium support, to shop in the new marketplace, which could resemble today’s sales bazaar for Medicare Advantage plans, setting up the possibility for more hype and more sellers hoping to cash in on the revamped Medicare program. Many experts fear that such a program ultimately could destroy what is left of traditional Medicare, which about half of the Medicare population still prefers.
In other words, most seniors are stuck.
That can leave beneficiaries medically stranded when they have a serious, costly illness at a time in life when many are using up or have already exhausted their resources. I once asked a Medicare counselor what beneficiaries with little income would do if they became seriously ill and their Advantage plan refused to pay many of the bills, an increasingly common predicament. The cavalier answer I got was: “They could just go on Medicaid.”
The push to privatize Medicare began in February 1995 when Heritage issued a six-page committee brief titled “A Special Report to the House Ways and Means Committee”, which was sent to members of Congress, editorial writers, columnists, talk show hosts and other media. Heritage then spent months promoting its slant on the story. Along with other right-wing groups dedicated to transforming Medicare from social insurance to a private arrangement like car insurance, Heritage clobbered reporters who produced stories that didn’t fit the conservative narrative.
The right-wing Media Research Center singled out journalists who didn’t use the prescribed vocabulary to describe Heritage plans. Its newsletter criticized CBS reporter Linda Douglas when she reported that the senior citizens lobby had warned that the Republican budget would gut Medicare. The group reprimanded another CBS reporter, Connie Chung, for reporting that the House and Senate GOP plans “call for deep cuts in Medicare and other programs.” Haley Barbour, then Republican National Committee chairman, vowed to raise “unshirted hell” with the news media whenever they used the word “cut.” He wined and dined reporters, “educating” them on the “difference” between cuts and slowing Medicare’s growth. Former Republican U.S. Rep. John Kasich of Ohio, who chaired the House budget committee, called reporters warning them not to use the word “cut,” later admitting he “worked them over.”
As I wrote at the time, by fall of that year reporters had fallen in line. Douglas, who had been criticized all summer, got the words right and reported that the Republican bill contained a number of provisions “all adding up to a savings of $270 billion in the growth of Medicare spending.”
Fast forward to now. The Heritage Foundation’s Budget Blueprint for fiscal year 2023 offered ominous recommendations for Medicare, some of which might be enacted in a Republican administration. The think tank yet again called for a “premium support system” for Medicare, claiming that if its implementation was assumed in 2025, it “would reduce outlays by $1 trillion during the FY 2023-2032 period.” Heritage argues that the controversial approach would foster “intense competition among health plans and providers,” “expand beneficiaries’ choices,” “control costs,” “slow the growth of Medicare spending,” and “stimulate innovation.”
The potential beneficiaries would be given a sum of money, often called a premium support, to shop in the new marketplace, which could resemble today’s sales bazaar for Medicare Advantage plans, setting up the possibility for more hype and more sellers hoping to cash in on the revamped Medicare program. Many experts fear that such a program ultimately could destroy what is left of traditional Medicare, which about half of the Medicare population still prefers.
In a Republican administration with a GOP Congress, some of the recommendations, or parts of them, might well become law. The last 30 years have shown that the Heritage Foundation and other organizations driven by ideological or financial reasons want to transform Medicare, and they are committed for the long haul. They have the resources to promote their cause year after year, resulting in the continual erosion of traditional Medicare by Advantage Plans, many of which are of questionable value when serious illness strikes.
The seeds of Medicare’s destruction are in the air.
The program as it was set out in 1965 has kept millions of older Americans out of medical poverty for over 50 years, but it may well become something else – a privatized health care system for the oldest citizens whose medical care will depend on the profit goals of a handful of private insurers. It’s a future that STAT’s Bob Herman, whose reporting has explored the inevitable clash between health care and an insurer’s profit goals, has shown us.
In the long term, the gym memberships, the groceries, the bit of dental and vision care so alluring today may well disappear, and millions of seniors will be left once again to the vagaries of America’s private insurance marketplace.
Nightmare on Wall Street for Medicare Advantage Companies
Wall Street has fallen out of love with big insurers that depend heavily on the federal government’s overpayments to the private Medicare replacement plans they market, deceptively, under the name, “Medicare Advantage.”
I’ll explain below. But first, thank you if you reached out to your members of Congress and the Biden administration last week as I suggested to demand an end to the ongoing looting by those companies of the Medicare Trust Fund.
As I wrote on March 26, the Center for Medicare and Medicaid Services was scheduled to announce this week how much more taxpayer dollars it would send to Medicare Advantage companies next year. On January 31, CMS said it planned to increase the amount slightly to account for the increased cost of health care, based on how much more the government likely would spend to cover people enrolled in the traditional Medicare program. It uses traditional Medicare as a benchmark.
Big insurers like UnitedHealthcare, Humana and Aetna, owned by CVS, howled when CMS released its preliminary 2025 rate notice that day. They claimed they wouldn’t be getting enough of taxpayers’ dollars. So they launched a high-pressure campaign to get CMS to give them more money. They demanded extra billions because, they said, their Medicare Advantage enrollees had used more prescription drugs and went to the doctor more often in 2023 and January of this year than the companies had expected.
The industry’s pressure campaign has been going on for years, and CMS usually caves to insurers’ demands. But this time, tens of thousands of taxpayers and Medicare enrollees sent letters and signed petitions demanding that CMS hold the line. And CMS did, to Wall Street’s shock.
CMS announced after the market closed Monday that it was sticking to its plan to increase payments to Medicare Advantage plans by 3.7% – more than $16 billion –from 2024 to 2025. That would mean that it would pay companies that operate MA plans between $500 and $600 billion next year, considerably less than insurers wanted.
Shocked investors began running for the exits right away. When the New York Stock Exchange closed at 4 p.m. ET on Tuesday, more than 52 million shares of the companies’ stock had been traded–many millions more than average–driving the share prices of all of them way down. And the carnage has continued throughout this week.
By the end of trading yesterday, UnitedHealth, Humana and CVS/Aetna had lost nearly $95 billion in market capitalization. To put that in perspective, that’s more than the entire market cap of CVS, which fell to $93 billion yesterday.
All seven of the big for-profit companies with Medicare Advantage enrollment had a bad week, although Cigna, where I used to work and which announced recently it is getting out of the Medicare Advantage business next year, suffered the least. Its shares were down a little more than 1% as of yesterday afternoon.
Humana, the second largest MA company, which last year said it was getting out of the commercial insurance business to focus more fully on Medicare Advantage, by contrast, was the biggest loser of the bunch–and one of the biggest losers on the NYSE. Its shares fell more than 13% on Tuesday. As of yesterday, they were still down nearly 12%.
The headline of Josh Nathan-Kazis’s story in Barrons was an apt summary of what happened: Humana Stock is Down. Wall Street’s Love Affair Is Ending in Tears.
Noting that Humana’s stock has fallen 40% this year, he wrote:
Last fall, the insurer Humana was on top of the world. The stock was trading above $520 per share, as the company’s major bet on Medicare Advantage—the privately-run, publicly-funded insurance program for U.S. seniors—seemed to be paying off.
Long a darling of Wall Street’s analyst class, the stock had returned nearly 290% since the start of 2015, handily outperforming the S&P 500 over the same period.
Over the past five months, that position has crumbled. Humana shares were down to $308 Tuesday morning, as the outlook for Medicare Advantage and, by extension, for Humana’s business, has grown dimmer and dimmer.
Humana shares dived 12.3% early Tuesday, after the latest blow to the future prospects for the profitability of the Medicare Advantage business. Late Monday, the Centers for Medicare and Medicaid Services announced Medicare Advantage payment rates for 2025 that fell short of investor expectations.
The other companies also had a disastrous week. Shares of UnitedHealth, the biggest of the group in terms of Medicare Advantage enrollment (and overall revenues and profits), had fallen by 7% by the end of the day yesterday. CVS/Aetna’s shares were down 7.1%; Elevance’s were down 3.37%; Molina’s were down 7.15%; and Centene’s were down 7.33%.
When I was at Cigna, one of my responsibilities was to handle media questions when the company announced quarterly earnings, mergers and acquisitions, and whenever there was a major event like the CMS rate notice. The worst days of my 20-year career in the industry were when some kind of news triggered a stock selloff. I had to try to put the best spin possible on the situation. But my job was relatively easy compared to what the CEO, CFO and the company’s investor relations team had to do.
You can be certain they have been on the phone and in Zooms all week with Wall Street financial analysts, big institutional investors and even the company’s big employer customers in attempts to persuade them that the sky has not fallen.
You can also be certain that the companies will now shift their focus to the political arena. To keep this from happening again, they will begin pouring enormous sums of your premium dollars into campaigns to help elect industry-friendly candidates for Congress and the presidency this November. We provided a glimpse of where they’re already sending those donations in a story last November. We will continue to monitor this in the months ahead.
As Medicare Advantage’s shortcomings echo in the press, key legislators still push to privatize traditional Medicare
A story in Rolling Stone last month offered an ominous prediction about our nation’s health care. “The right-wing policy agenda written for a new Donald Trump presidency would ‘greatly accelerate’ efforts to privatize Medicare,” Andrew Perez wrote.
That story should be seen by the millions of seniors who might not read Rolling Stone but who have traditional Medicare coverage with a supplemental policy that pays for virtually every medical bill when they get sick. Those are the people who have not yet been enticed into Medicare Advantage plans with promises of groceries and gym memberships but with little or no notice about the delays in care and the up-front, out-of-pocket costs common in many plans.
As I pointed out in an earlier story, there are roadblocks to care that have been reported by hospitals that were no longer accepting Medicare Advantage plans from some companies.
The CEO of the Brookings Hospital System in Brookings, South Dakota, was candid: MA plans “pay less, don’t follow medical policy, coverage, billing, and payment rules and procedures, and they are always trying to figure out how to deny payment for services,” he said.
Yet, in his piece titled “Republicans Are Planning to Totally Privatize Medicare – And Fast,” Perez warns that privatizing Medicare is a goal conservative and right-wing interests have promoted since the 1990s, when former House Speaker Newt Gingrich, no fan of Medicare, predicted that the program would “wither on the vine because we think people are voluntarily going to leave it.”
Indeed, tens of millions of seniors have enrolled in or been forced by their former employers into Medicare Advantage plans, and even the 30 million or so seniors who still prefer to be in traditional Medicare, with its no-strings-attached coverage, may one day be forced to join the ranks of the MA crowd.
It’s time to once again sound the alarm, as Perez has done, that the government program that has brought millions of beneficiaries health insurance and security for more than five decades could eventually disappear.
Perez points out that one item buried in the 887-page Heritage Foundation blueprint written to inform a potential new Trump administration has attracted little attention so far. It is a scheme to “make Medicare Advantage the default enrollment option” for people who are newly eligible for Medicare, he wrote.
David Lipschutz, associate director of the Center for Medicare Advocacy, says the Heritage plan would hasten privatization. “Upon becoming eligible for Medicare now everyone starts with traditional Medicare as the default but can opt out of that program and later choose an Advantage plan,” Lipschutz says. The Heritage proposal, however, would have people start with Medicare Advantage plans, apparently with the opportunity to opt-out. With this arrangement, you can see how easy it would be for Medicare, as we know it, to ‘wither on the vine’ since many people new to Medicare are not well versed in the difference between the two options and instead are swayed by the TV advertising beckoning them to Medicare Advantage plans.
Making those privately operated plans the default “would hasten the end of the traditional Medicare program as well as its foundational premise: that seniors can go to any doctor or provider they choose,” Perez writes, noting that such a change also “would be a boon for private health insurers that generate massive profits and growing portions of their revenues from Medicare Advantage plans.”
Lipschutz agreed the plan would “greatly accelerate” Medicare privatization, noting that the Heritage Foundation’s selling points are “internally inconsistent.” The proposal says a Republican-led federal government would “give beneficiaries direct control of how they spend Medicare dollars,”
but Lipschutz pointed out that with a Medicare Advantage plan, a private insurer tells beneficiaries what procedures they can or cannot have by deciding which ones they will approve for payment. “That is the opposite of putting beneficiaries in control of how they spend their dollars,” Lipschutz says.
Stories in Stat by Bob Herman and Casey Ross have carefully dissected what patients with Medicare Advantage plans have had to endure to get needed care. As I pointed out in a post about their work, patients often struggle to get the care they need.
In one story about UnitedHealthcare, the largest Medicare Advantage company, the reporters noted that the insurer’s stunning financial success was driven by “brazen behavior,” such as cutting off payments for seriously ill patients and “denying rehabilitation care for older and disabled Americans as profits soared.”
UnitedHealth is far from alone in using such tactics to boost profits. Herman and Ross told of the struggle of a sick, 80-year-old North Carolina woman whose plan with Humana, the second largest Medicare Advantage company, would pay only for cheaper care in a nursing home instead of in a long-term acute-care facility.
The insurance industry’s mighty public relations machine makes it hard for ordinary Americans to understand their options when they turn 65. When a TV pitchman or woman is urging viewers to call right away and sign up for free groceries, the deck is stacked against traditional Medicare and supplemental coverage.
Meet the insurance industry’s “Better Medicare Alliance”
How many would-be beneficiaries know about the Better Medicare Alliance, an advocacy group promoting Medicare Advantage plans that swings into action at the slightest hint that lawmakers and regulators might curb the lucrative Medicare Advantage program? The organization’s website offered a sample letter for beneficiaries to send to their Congressional representatives urging them to “protect Medicare Advantage.”
Sixty-one members of Congress also made their preferences clear in a letter to Chiquita Brooks-LaSure, who heads the Center for Medicare and Medicaid Services, writing, “We are committed to our more than 32 million constituents across the United States who choose Medicare Advantage.” The letter was signed by prominent Democrats including Chuck Schumer, Senate Majority leader from New York; Sen. Amy Klobuchar of Minnesota; and Bob Casey of Pennsylvania, who chairs the Senate aging committee. With such high-powered supporters of Medicare Advantage, it’s easy to see why it’s difficult to put the program on an even playing field with traditional Medicare and supplemental insurance coverage.
Not long ago I received an email from David Marans, an 81-year-old Floridian who wanted to tell me about his experiences with Medicare and the supplemental Medigap insurance he had purchased at age 65. It covers Parts A and B deductibles, excess charges that doctors can impose if their state allows them to collect more than what Medicare has agreed to pay, and emergency room care that he told me “ has saved considerable medical expenses, avoided delays, allayed worries, and allowed peace of mind regarding medical treatment.” He said he just shows his card at any hospital or doctor’s office, no questions asked, and the “Medigap provider then handles all the rest.”
The older you get, Marans said, the harder it is to recover from illness; the added stress of finding the means of paying the medical bills and the stresses of Medicare Advantage restrictions and denials can prolong illness. Marans said a Medigap plan alleviates that stress. “In a subtle way, in part, Medigap helps pay for itself.”
Marans’ advice? “Force yourself to get a Medigap plan on your 65th birthday when you enroll in Medicare, and don’t lose it…
Seniors have to understand car insurance is for what might happen. Health insurance is for what very probably will happen.”
Company behind Joe Namath Medicare Advantage ads has long rap sheet of misconduct
https://wendellpotter.substack.com/p/company-behind-namath-ads-has-long
Former New York Jets superstar Joe Namath can be seen every year during Medicare open enrollment hocking plans that tell seniors how great their life would be if only they signed up for a Medicare Advantage plan. From October 15 to December 7 last year alone, Joe Namath ads ran 3,670 times, according to iSpot, which tracks TV advertising.
But the company behind those ads, now called Blue Lantern Health, and their products, HealthInsurance.com and the Medicare Coverage Helpline, have an expansive rap sheet of misconduct, including prosecutions by the Securities and Exchange Commission and the Federal Trade Commission, and a recent bankruptcy filing that critics say is designed to jettison the substantial legal liabilities the firm has incurred. In September 2023, the company became Blue Lantern; before that, it was called Benefytt; and before that, Health Insurance Innovations. Forty-three state attorneys general had settled with the company in 2018, with it paying a $3.4 million fine. A close associate of the company, Steven Dorfman, has also been prosecuted by the FTC, in addition to the Department of Justice.
Namath himself has a bit of a checkered past when it comes to his business associates—in the early 1970s, he co-owned a bar frequented by members of the Colombo and Lucchese crime families, according to reporting at the time cited in a 2004 biography. Due to the controversy surrounding the bar, Namath was forced by the NFL Commissioner to sell his interest in it. Last year, it was revealed that Namath had employed a prolific pedophile coach at his football camp, also in the 1970s, and the 80-year-old ex-quarterback is now being sued by one of the coach’s victims.
The Namath ads are the main illustration of the behemoth Medicare Advantage marketing industry, which is designed to herd seniors into Medicare Advantage plans that restrict the doctors and hospitals that seniors can go to and the procedures they can access through the onerous “prior authorization” process, and it costs the federal government as much as $140 billion annually compared to traditional Medicare. Over half of seniors—nearly 31 million people—are now in Medicare Advantage, and there is little understanding of the drawbacks of the program. Seniors are aware that they may receive modest gym or food benefits but typically do not realize that they may be giving up their doctors, their specialists, their outpatient clinics, and their hospitals in favor of an in-network alternative that may be lower quality and farther away.
How so many seniors are lured into Medicare Advantage
Blue Lantern—with its powerful private equity owner Madison Dearborn—may be the key to understanding how so many people have been ushered into Medicare Advantage—and the pitfalls that private equity’s rapid entrance into health care can create for ordinary Americans.
While Blue Lantern is just one company, it is a Rosetta Stone for everything that is wrong with American health care today—fraud, profiteering, lawbreaking, no regard for patient care—where only the public comes out the loser.
Blue Lantern uses TV ads and, at least until regulators began poking around, a widespread telemarketing operation, being one of the main firms charged with generating “leads” that are then sold to brokers and insurers, as Medicare Advantage plans are banned from cold-calling. Court filings reviewed by HEALTH CARE Un-Covered allege that after legal discovery, Blue Lantern (then known as Benefytt) at minimum dialed seniors over 17 million times, potentially in violation of federal law that requires telemarketers to properly identify themselves and who they are working for—ultimately, in this case, insurers that generate huge profits from Medicare Advantage.
The Namath ads have been running since 2018 when the company was named Health Insurance Innovations—the same year the FTC began prosecuting Simple Health Plans, along with its then-CEO Steven Dorfman. The Fort Lauderdale Sun-Sentinel identified Health Insurance Innovations as a “successor” to Simple Health Plans. After five years of likely exceptionally costly litigation, for which Dorfman is represented by jet-set law firm DLA Piper, on February 9, the FTC won a $195 million judgment against Simple Health Plans and Dorfman. The FTC alleged in 2019 that Dorfman had lied to the court when he said that he did not control any offshore accounts. The FTC found $20 million, but the real number is probably higher.
Friends in high places
In February 2020, Trump’s Secretary of Health and Human Services, Alex Azar, said that the Namath ads might not “look or sound like the future of health care,” but that they represented “real savings, real options” for older Americans.
In March 2020, Health Insurance Innovations (HII) changed its name to Benefytt, and in August 2020, it was acquired by Madison Dearborn Partners. Madison Dearborn has close ties to the Illinois Democratic elite, pumping over $916,000 into U.S. Ambassador to Japan Rahm Emanuel’s campaigns for Congress and mayor of Chicago.
In September 2021, HII settled a $27.5 million class action lawsuit. The 230,000 victims received an average payout of just $80.
In July 2022, the SEC charged HII/Benefytt and its then-CEO Gavin Southwell with making fraudulent representations to investors about the quality of the health plans it was marketing. “HII and Southwell…told investors in earnings calls and investor presentations that HII’s consumer satisfaction was 99.99 percent and state insurance regulators received very few consumer complaints regarding HII. In reality, HII tracked tens of thousands of dissatisfied consumers who complained that HII’s distributors made misrepresentations to sell the health insurance products, charged consumers for products they did not authorize and failed to cancel plans upon consumers’ requests,” the SEC found, with HII/Benefytt and Southwell ultimately paying a $12 million settlement in November 2022.
By August 2022, Benefytt had paid $100 million to settle allegations that it had fraudulently directed people into “sham” health care plans. “Benefytt pocketed millions selling sham insurance to seniors and other consumers looking for health coverage,” the FTC’s Director of Consumer Protection, Samuel Levine, said at the time.
Bankruptcy and another name change
In May 2023, Benefytt declared Chapter 11 bankruptcy—where the company seeks to continue to exist as a going concern, as opposed to Chapter 9, when the company is stripped apart for creditors—in the Southern District of Texas. The plan of bankruptcy was approved in August. The Southern Texas Bankruptcy Court has been mired in controversy in recent months as one of the two judges was revealed to be in a romantic relationship with a woman employed by a firm, Jackson Walker, that worked in concert with the major Chicago law firm Kirkland and Ellis to move bankruptcy cases to Southern Texas and monopolize them under a friendly court. While the other judge on the two-judge panel handled the Benefytt case, Jackson Walker and Kirkland and Ellis were retained by Benefytt, and the fees paid to Jackson Walker by Benefytt were delayed by the court as a result of the controversy.
In September 2023, Benefytt exited bankruptcy and became Blue Lantern.
The August approval of the bankruptcy plan was vocally opposed by a group of creditors who had sued Benefytt over violations of the Telephone Consumer Privacy Act (TCPA). The creditors asserted that Benefytt had substantial liabilities, with millions of calls made where Benefytt did not identify the ultimate seller—Medicare Advantage plans run by UnitedHealth, Humana, and other firms prohibited from directly contacting people they have no relationship with—and violations fined at $1,500 per willful violation.
Attorneys for those creditors stated in a filing reviewed by HEALTH CARE Un-Covered that Madison Dearborn always planned “to steer Benefytt into bankruptcy,” if they were unable to resolve the substantial liabilities they owed under the TCPA.
Madison Dearborn “knew that Benefytt’s TCPA liabilities exceeded its value, but purchased Benefytt anyway, for the purpose of trying to quickly extract as much money and value as they could before those liabilities became due,”
the August 25, 2023, filing stated on behalf of Wes Newman, Mary Bilek, George Moore, and Robert Hossfeld, all plaintiffs in proposed TCPA class action suits. The filing went on to say that the bankruptcy was inevitable “if—after siphoning off any benefit from the illegal telemarketing alleged herein—[Madison Dearborn] could not obtain favorable settlements or dismissals for the telemarketing-related lawsuits against Benefytt.”
Under the bankruptcy plan, Blue Lantern/Benefytt is released from the TCPA claims, but individuals harmed can affirmatively opt-out of the release, which is why the bankruptcy court justified its approval. Over 7 million people—the total numbers in Benefytt’s database, according to the plaintiffs—opting out of the third-party release is an enormous administrative hurdle for plaintiffs’ lawyers to pass, massively limiting the likelihood of success of any class-action litigation against Blue Lantern going forward.
Their attorney, Alex Burke, stated in court that “[t]his bankruptcy is an intentional and preplanned continuation of a fraud.” His statement was before 3,670 more Namath ads ran during 2023 open enrollment.
In response to requests for comment from HEALTH CARE un-covered, the Centers for Medicare and Medicaid Services did not answer questions about Benefytt and why the company was simply not barred from the Medicare Advantage market altogether.
Corporations have used the bankruptcy process in recent years to free themselves from criminal and civil liability, with opioid marketer Purdue Pharma being the most prominent recent example. The Supreme Court is reviewing the legality of Purdue’s third-party releases currently, with a decision expected in late spring.
The role that private equity plays in keeping Benefytt going cannot be overstated.
Without Madison Dearborn or another private equity firm eager to take on such a risky business with such a long history of legal imbroglios, it is almost certain that Benefytt would no longer exist—and the Joe Namath ads would disappear from our televisions. Instead, Madison Dearborn keeps them going, suckering seniors into Medicare Advantage plans.
This is part and parcel of the ongoing colonization by private equity into America’s health care system. Private equity is making a major play into Medicare Advantage.
It has pumped billions of dollars into purchasing hospitals. It has invested in hospice care. It is gobbling up doctors’ groups. It is acquiring ambulance companies. It is hoovering up nurse staffing firms. It is making huge investments into health tech. It is in nursing homes. And it is in health insurance. Nothing about America’s health care system is untouched by private equity.
That’s a problem, experts say.
“I’ve been screaming at the TV every time Joe Namath gets on—it is not an official Medicare website,” said Laura Katz Olson, a professor of political science at Lehigh University who has written on private equity’s role in the health care system.
“Private equity has so much money to deploy, which is far more than they have opportunities to buy. As such, they are desperately looking for opportunities to invest. There’s a lot of money in Medicare Advantage—it’s guaranteed money from the federal government, which makes it perfect for the private equity playbook.”
Eileen Appelbaum, the co-director at the Center for Economic and Policy Research, who has also studied private equity’s role in health care, concurred that private equity was a perfect fit for Medicare marketing organizations.
“I think basically the whole privatized Medicare situation is ready for all kinds of exploitation and misrepresentations and denying people the coverage that they need,” she said. “My email is inundated with these totally misleading ads. Private equity took a look at this and said, “look at that, it’s possible to do something that’s misleading and make a lot of money.”
Madison Dearborn receives a large portion of its capital from public pension funds like the California Public Employees Retirement System (CalPERS) and the Washington State Investment Fund—people who are dependent on Medicare. Appelbaum said that the pension funds exercise little oversight over their investments in private equity. “Pension funds may have the name of the company that they are invested in, they’re told that it’s ‘part of our health care investment portfolio,’ but they don’t find out what they really do until there’s a scandal.
It is amazing that pension funds give so much money to private equity with so little information about how their money is being spent.”
Five Medicare Advantage fixes we can all get behind (except the health insurance industry, of course)
It’s no secret I feel strongly that “Medicare Advantage for All” is not a healthy end goal for universal health care coverage in our country. But I also recognize there are many folks, across the political spectrum, who see the program as one that has some merit. And it’s not going away anytime soon. To say the insurance industry has clout in Washington is an understatement.
As politicians in both parties increase their scrutiny of Medicare Advantage, and the Biden administration reviews proposed reforms to the program, I think it’s important to highlight common-sense, achievable changes with broad appeal that would address the many problems with MA and begin leveling the playing field with the traditional Medicare program.
1. Align prior authorization MA standards with traditional Medicare
Since my mother entered into an MA plan more than a decade ago, I’ve watched how health insurers have applied practices from traditional employer-based plans to MA beneficiaries. For many years, insurers have made doctors submit a proposed course of treatment for a patient to the insurance company for payment pre-approval — widely known as “prior authorization.”
While most prior authorization requests are approved, and most of those denied are approved if they are appealed, prior authorization accomplishes two things that increase insurers’ margins.
The practice adds a hurdle between diagnosis and treatment and increases the likelihood that a patient or doctor won’t follow through, which decreases the odds that the insurer will ultimately have to pay a claim. In addition, prior authorization increases the length of time insurers can hold on to premium dollars, which they invest to drive higher earnings. (A considerable percentage of insurers’ profits come from the investments they make using the premiums you pay.)
Last year, the Kaiser Family Foundation found the level of prior authorization requests in MA plans increased significantly in recent years, which is partially the result of the share of services subject to prior authorization increasing dramatically. While most requests were ultimately approved (as they were with employer-based insurance plans), the process delayed care and kept dollars in insurers’ coffers longer.
The outrage generated by older Americans in MA plans waiting for prior authorization approvals has moved the Biden administration to action.
Beginning in 2024, MA plans may be no more restrictive with prior authorization requirements than traditional Medicare.
That’s a significant change and one for which Health and Human Services Secretary Xavier Becerra should be lauded.
But as large provider groups like the American Hospital Association have pointed out, the federal government must remain vigilant in its enforcement of this rule. As I wrote about recently with the implementation of the No Surprises Act, well-intentioned legislation and implementation rules put in place by regulators can have little real-world impact if insurers are not held accountable. It’s important to note, though, that federal regulatory agencies must be adequately staffed and resourced to be able to police the industry and address insurers’ relentless efforts to find loopholes in federal policy to maximize profits. Congress needs to provide the Department of Health and Human Services with additional funding for enforcement activities, for HHS to require transparency and reporting by insurers on their practices, and for stakeholders, especially providers and patients, to have an avenue to raise concerns with insurers’ practices as they become apparent.
2. Protect seniors from marketing scams
If it’s fall, it’s football season. And that means it’s time for former NFL quarterback Joe Namath’s annual call to action on the airwaves for MA enrollment.
As Congresswoman Jan Schakowsky and I wrote about more than a year ago, these innocent-appearing advertisements are misleading at their best and fraudulent at their worst. Thankfully, this is another area the Biden administration has also been watching over the past year.
CMS now prohibits the use of ads that do not mention a specific plan name or that use the Medicare name and logos in a misleading way, the marketing of benefits in a service area where they are not available, and the use of superlatives (e.g., “best” or “most”) in marketing when not substantiated by data from the current or prior year.
As part of its efforts to enforce the new marketing restrictions, the Center for Medicare and Medicaid Services for the first time evaluated more than 3,000 MA ads before they ran in advance of 2024 open enrollment. It rejected more than 1,000 for being misleading, confusing, or otherwise non-compliant with the new requirements. These types of reviews will, I hope, continue.
CMS has proposed a fixed payment to brokers of MA plans that, if implemented, would significantly improve the problem of steering seniors to the highest-paying plan — with the highest compensation for the insurance broker. I think we can all agree brokers should be required to direct their clients to the best product, not the one that pays the broker the most. (That has been established practice for financial advisors for many years.) CMS should see this rule through, and send MA brokers profiteering off seniors packing.
A bonus regulation in this space to consider: banning MA plan brokers from selling the contact information of MA beneficiaries. Ever wonder why grandma and grandpa get so many spam calls targeting their health conditions? This practice has a lot to do with it. And there’s bipartisan support in Congress for banning sales of beneficiary contact information.
In addition, just as drug companies have to mention the potential side effects of their medications, MA plans should also be required to be forthcoming about their restrictions, including prior authorization requirements, limited networks, and potentially high out-of-pocket costs, in their ads and marketing materials.
3. Be real about supplemental benefits
Tell me if this one sounds familiar. The federal government introduced flexibility to MA plans to offer seniors benefits beyond what they can receive in traditional Medicare funded primarily through taxpayer dollars.
Those “supplemental” benefits were intended to keep seniors active and healthy. Instead, insurers have manipulated the program to offer benefits seniors are less likely to use, so more of the dollars CMS doles out to pay for those benefits stay with payers.
Many seniors in MA plans will see options to enroll in wellness plans, access gym memberships, acquire food vouchers, pick out new sneakers, and even help pay for pet care, believe it or not — all included under their MA plan. Those benefits are paid for by a pot of “rebate” dollars that CMS passes through to plans, with the presumed goal of improving health outcomes through innovative uses.
There is a growing sense, though, that insurers have figured out how to game this system. While some of these offerings seem appealing and are certainly a focus of marketing by insurers, how heavily are they being used? How heavily do insurers communicate to seniors that they have these benefits, once seniors have signed up for them? Are insurers offering things people are actually using? Or are insurers strategically offering benefits that are rarely used?
Those answers are important because MA plans do not have to pay unused rebate dollars back to the federal government.
CMS in 2024 is requiring insurers to submit detailed data for the first time on how seniors are using these benefits. The agency should lean into this effort and ensure plan compliance with the reporting. And as this year rolls on, CMS should be prepared to make the case to Congress that we expect the data to show that plans are pocketing many of these dollars, and they are not significantly improving health outcomes of older Americans.
4. Addressing coding intensity
If you’re a regular reader, you probably know one of my core views on traditional Medicare vs. Medicare Advantage plans. Traditional Medicare has straightforward, transparent payment, while Medicare Advantage presents more avenues for insurers to arbitrarily raise what they charge the government. A good example of this is in higher coding per patient found in MA plans relative to Traditional Medicare.
An older patient goes in to see their doctor. They are diagnosed, and prescribed a course of treatment. Under Traditional Medicare, that service performed by the doctor is coded and reimbursed. The payment is generally the same no matter what conditions or health history that patient brought into the exam room. Straightforward.
MA plans, however, pay more when more codes are added to a diagnosis.
Plans have advertised this to doctors, incentivizing the providers to add every possible code to a submission for reimbursement. So, if that same patient described above has diabetes, but they’re being treated for an unrelated flu diagnosis, the doctor is incentivized by MA to add a code for diabetes treatment. MA plans, in turn, get paid more by the government based on their enrollee’s health status, as determined based on the diagnoses associated with that individual.
Extrapolate that out across tens of millions of seniors with MA plans, and it’s clear MA plans are significantly overcharging the federal government because of over-coding.
One solution I find appealing: similar to fee-for-service, create a new baseline for payments in MA plans to remove the incentive to add more codes to submissions. Proposals I’ve seen would pay providers more than traditional Medicare but without creating the plan-driven incentive for doctors to over-code.
5. Focusing in on Medicare Advantage network cuts in rural areas
Rural America is older and unhealthier than the national average. This should be the area where MA plans should experience the highest utilization.
Instead, we’re seeing that the aggressive practices insurers use to maximize profits force many rural hospitals to cancel their contracts with MA plans. As we wrote about at length in December, MA is becoming a ghost benefit for seniors living in rural communities. The reimbursement rates these plans pay hospitals in rural communities are significantly lower than traditional Medicare. That has further stressed the low margins rural hospitals face.
As Congressional focus on MA grows, I predict more bipartisan recommendations to come forth that address the growing gap between MA plan payments and what hospitals need to be paid in rural areas.
If MA is not accepted by providers in older, rural America, then truly, what purpose does it serve?
UnitedHealth Group takes Wall Street hit because of investors’ fears about Medicare Advantage profitability, Department of Justice antitrust investigation
STAT News today published an op-ed I coauthored with Dr. Philip Verhoef, president of Physicians for a National Health Program, making the point that investors are among the growing number of stakeholders who are souring on big, for-profit insurance companies like the ones I used to work for (Cigna and Humana).
We focused specifically on investors’ concerns about the continued profitability of Medicare Advantage plans most of the big insurers own and operate.
Several companies have lost billions of dollars in market capitalization over the past several weeks as they have reported what they maintain is higher than usual utilization of health care goods and services by seniors enrolled in MA plans.
Today, the companies–especially UnitedHealth Group, the market leader with 7.6 million Medicare Advantage enrollees–are losing billions more in market cap on the news, broke yesterday by the Wall Street Journal, that the Department of Justice is investigating UnitedHealth’s many acquisitions over the years.
UnitedHealth and most of the other companies are no longer just insurance companies. They’ve moved rapidly into health care delivery by buying physician practices and clinics, and three of them, UnitedHealth, Cigna and CVS/Aetna, control 80% of the pharmacy benefit management business.
As Phil and I wrote in our op-ed:
Investors in MA insurance companies experienced a rude awakening in late January, with insurer stocks plummeting in the face of earnings reports showing profits falling far below expectations in the last quarter of 2023. Companies like CVS Health and UnitedHealth Group saw losses of 5.2% and 6.2% respectively, while Humana, whose business model relies heavily on the MA program, fell an astonishing 14.2%. These insurers cited higher than average health care utilization rates as the culprit and warned that 2024 would likely see more of the same. At the same time, private equity investment in MA has fallen, showing waning confidence in the program.
We went on to note that both Democrats and Republicans in Congress are increasingly concerned about MA insurers’ business practices and, among other things, have introduced bills to crack down on egregious overpayments to MA plans.
The WSJ reported yesterday that the Justice Department has launched an antitrust investigation into UnitedHealth, which has become not only the country’s biggest U.S. health insurer but also a leading manager of drug benefits “and a sprawling network of doctor groups.”
The Journal’s Anna Wilde Mathews and Dave Michaels wrote that:
The investigators have in recent weeks been interviewing healthcare-industry representatives in sectors where UnitedHealth competes, including doctor groups, according to people with knowledge of the meetings.
The DOJ’s investigation of UnitedHealth is wide-ranging. Among other things, according to the Journal, “investigators have asked whether and how the tie-up between UnitedHealthcare [the insurance division] and Optum’s medical groups might affect its compliance with federal rules that cap how much a health-insurance company retains from the premiums it collects. (Optum is the company’s division that encompasses the pharmacy benefit manager Optum Rx and the many clinics and physician practices it owns.)
HEALTH CARE un-covered explained last month how UnitedHealth essentially is paying itself billions of dollars every month and circumventing the intent of a federal law that requires insurers to spend at least 80% of premium dollars on their health plan enrollees’ health care.
I know from sources within the Justice Department that investigators saw that piece, as well as the comprehensive analysis we published earlier of the scores of acquisitions UnitedHealth has made in recent years that have enabled it to catapult to the top five of the Fortune 500 list of American companies.
Those sources told me that the DOJ is very concerned about the consolidation within both the health insurance business and the hospital industry. Many U.S. hospitals, in an ongoing effort to negotiate from an enhanced position of strength with UnitedHealth and the other vertically integrated insurers, have merged with each other in recent years and become part of huge health-care delivery systems.
At the close of trading on the New York Stock Exchange yesterday, shares of UnitedHealth Group’s share were down $11.90 or 2.27%. Investors are continuing to head for the exits today. As I write this, the company’s stock price has fallen another $20 (4%) to $494.00. That’s way down from the company’s 52-week high of $554.70.
Shares of most of the other big publicly traded insurers (Centene, Cigna, CVS/Aetna, Elevance, Humana and Molina) are also down, ranging from $.83 at CVS to $11.51 at Humana.
Cano Health files for bankruptcy
https://mailchi.mp/1e28b32fc32e/gist-weekly-february-9-2024?e=d1e747d2d8
On Sunday, Miami, FL-based Cano Health, a Medicare Advantage (MA)-focused primary care clinic operator, filed for bankruptcy protection to reorganize and convert around $1B of secured debt into new debt.
The company, which went public in 2020 via a SPAC deal worth over $4B, has now been delisted from the New York Stock Exchange. After posting a $270M loss in Q2 of 2023, Cano began laying off employees, divesting assets, and seeking a buyer. As of Q3 2023, it managed the care of over 300K members, including nearly 200K in Medicare capitation arrangements, at its 126 medical centers.
The Gist:
Like Babylon Health before it, another “tech-enabled” member of the early-COVID healthcare SPAC wave is facing hard times. While the low interest rate-fueled trend of splashy public offerings was not limited to healthcare, several prominent primary care innovators and “insurtechs” from this wave have struggled, adding further evidence to the adages that healthcare is both hard and difficult to disrupt.
Given that Cano sold its senior-focused clinics in Texas and Nevada to Humana’s CenterWell last fall, Cano may draw interest from other organizations looking to expand their MA footprints.
HENRY KOTULA 