Tag Archives: Health Insurance

How Drug Prices Got So Bloated

Posted on by • Posted in Health Policy, Healthcare Reform, Hidden Fees, High Drug Prices, Optum Rx, Pharmaceutical Industry, Pharmacy Benefits Management, Profit, Profit Margin, Profit Model, Profit Motive, Shareholder Expectations, UnitedHealthcare, Wall Street • Tagged , , , , • Leave a comment
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It’s no secret the brand name prescription drug costs are high. The rising costs have been blamed by health care analysts on kickbacks within the drug supply chain demanded by the federal government, drug distributors (wholesalers), health insurance companies and pharmacy benefit managers (PBMs).

This month we got a look at just how bloated brand-name drug prices have become in the United States thanks to an analysis from the Drug Channels Institute (DCI).

How about $356 billion worth of pure glut in the prescription drug supply chain, according to the analysis by DCI. Simply put, the market price established for these drugs by manufacturers has $356 billion worth of markups that mainly accommodate the financial demands (i.e. kickbacks or rebates) of groups that profit off the prescription drug system in the United States, health insurers and their PBMs in particular.

 And that’s an all-time record.

Why?

Get ready to choke on your popcorn.

In the 1990s the federal government mandated in the Medicaid program that drug manufacturers offer a minimum rebate of 23% off the purchase price of brand name drugs. The feds also mandated that if drug manufacturers offer a better rebate on those drugs to someone else, the government also gets that same rebate.

The thought was no one gets a better deal than the federal government.

Medicaid then began to expand in the 2000s and the rebates and the demands increased.

Rebates expanded again as PBMs continued to gain more control over the drug supply chain. The PBMs now force drug manufacturers to offer significant concessions in order to get on the list of approved medications – known as a formulary – available to patients with health insurance.  

To account for these demands, drug manufacturers set the list price for their brand name drugs with these price concessions baked into the number.

DCI’s analysis found that baking is $356 billion of goodies for health care companies paid for by the government and you.

It’s the same kind of concept as a U.S. popular clothing retailer that displays inflated retail costs on the tags of goods and then right below displaying a lower “sale” price to make the consumer think they got a deal.

Here’s another way of thinking of it: Just like Congress has a lot of “pork” in its spending bills, there’s also a lot of pork in prescription drug costs that have very little to do with anything, other than increase profits for the health care industry.

Though the federal government intended to create a better system for taxpayers back in the 1990s when it demanded rebates in the Medicaid system, it instead created a feeding frenzy for companies in the drug supply chain.

In the year 2000 just a handful of companies in the drug supply chain dotted the Fortune 100 list of most financially successful companies. Today there are four such companies in the top 10.

The Minnesota-based health care conglomerate UnitedHealth leads that pack. The company’s profits have soared in the last two decades largely due to increasing medical costs and prescription drug costs paid by Americans. It has leaped over companies like Exxon Mobile and Apple to become the third largest company in America. Only Walmart and Amazon take in more revenue.

The company employs more than 400,000, including doctors and clinicians and has its own pharmacy benefits manager called Optum Rx.

We reported last month that Americans spent $464 billion last year on prescription drugs. That was also an all-time record, which will likely be set again and again and again until reforms are enacted.

How Health Insurance Monopolies Affect Your Care

Posted on by • Posted in Competition, Competition on Price, Competitive Bidding, Health Insurance Denial, Health Insurance Industry, Health Insurance Pre Authorization, Market Consolidation, Market Failure, Market Power, Market Share, Monopoly, Monopoly Behavior, Profit, Profit Margin, Profit Model, Profit Motive • Tagged , , , , • Leave a comment
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Not long ago, Dr. Richard Menger, a neurosurgeon, was ready to operate on a 16-year-old with complex scoliosis. A team of doctors had spent months preparing for the surgery, consulting orthopedists and cardiologists, even printing a 3D model of the teen’s spine.

The surgery was scheduled for a Friday when Menger got the news: the teen’s insurer, Blue Cross Blue Shield of Alabama, had denied coverage of the surgery. 

It wasn’t particularly surprising to Menger, who has been practicing in Alabama since 2019. Alabama essentially has one private insurer, Blue Cross Blue Shield of Alabama, which has a whopping 94% of the market of large-group insurance plans, according to the health policy nonprofit KFF. That dominance allows the insurer to consistently deny claims, many doctors say, charge people more for coverage, and pay lower rates to doctors and hospitals than they would in other states.

“It makes the natural problems for insurance that much more magnified because there’s no market competition or choice,” says Menger, who in 2023 wrote an op-ed in 1819 News, a local news site, arguing that ending Blue Cross Blue Shield of Alabama’s health insurance monopoly would make people in the state healthier.

Blue Cross Blue Shield of Alabama also has the largest share of individual insurance plans in the state, according to data from the Centers for Medicaid & Medicare Services. Perhaps not coincidentally, Alabama also had the highest denial rates for in-network claims by insurers on the individual marketplace in 2023, according to a KFF analysis: 34%. Neighboring Mississippi, where the majority insurer has less of the market share at 81%, has an average denial rate of 15%.

Alabama is an extreme case, but people in many other states face health insurance monopolies, too. One insurer, Premera Blue Cross Group, has a 94% share of the large-group market in Alaska, and Blue Cross Blue Shield of Wyoming has a 91% market share in that state. In 18 states, one insurer has 75% or more of the large-group health insurance marketplace, according to KFF data.

These monopolies drive up costs, says Leemore Dafny, a professor at Harvard Business School and Harvard Kennedy School who has long studied competition among health insurance companies and providers.

“More competitors tend to drive lower premiums and more generous benefits for consumers,” she says. “There’s a lot of concern from analysts like myself about concentration in a range of sectors, including health insurance.”

Bruce A. Scott, the immediate past president of the American Medical Association, has said that when the dominant insurer in his state of Kentucky was renegotiating its contract with his medical group, it offered lower rates than it had paid six years before. “This same type of financial squeeze play is found nationwide, and its frequency has been exacerbated by health insurance industry consolidation,” he wrote in The Hill in 2023.

What happened to competition? There used to be a lot more regional health insurers, Dafny says. But as costs started to rise, they didn’t have enough leverage to negotiate prices down with providers and stay profitable. As a result, many were happy to be acquired by larger companies. Then hospitals and doctor’s offices merged to get more leverage against the bigger insurers. Now, there’s a lot of concentration among both provider groups and insurers.

“None of this had anything to do with taking better care of patients,” she says. “It had to do with trying to get the upper hand.” 

In a statement to TIME, Blue Cross Blue Shield of Alabama said that it was working to make the prior authorization process more transparent and reverse the requirement of prior authorization for certain in-network medical services. It will attempt to answer at least 80% of requests for prior authorization in near real-time by 2027, it says. (A coalition of major health insurers recently vowed to fix their prior authorization processes under pressure from the federal government.)

The insurer also says it welcomes competition. “We know Alabamians have a choice when it comes to choosing their health insurance carrier and we don’t take that for granted,” a spokesperson said in the statement. In the commercial and underwritten market—which represents the bulk of its business—Blue Cross Blue Shield Alabama competes with four other companies that sell individual, family, and group plans, the company says, and it competes with 68 companies who sell Medicare plans in Alabama. Its success in the state is partly because it sells policies in every county in Alabama, the insurer says, while others do not. 

Other casualties of such a concentrated health-insurance marketplace are rural hospitals and providers. Small rural hospitals are often independent and have not merged with other systems like many of their large urban counterparts, so they have an even harder time negotiating with the one big insurer in the state, says Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, a national policy center that studies health-care costs. That means big insurers will often refuse to cover procedures or pay lower prices for services.

“I’ve had rural hospitals tell me they can’t even get the health plan on the phone,” Miller says.

In the past decade, the Department of Justice has stopped some mergers, but has not been very aggressive at stopping consolidation in the health-care industry, Dafny says. That may be in part because the courts require a high standard of evidence to block a transaction, and the government might have been worried it would have lost whatever cases it brought.

A few factors prevent insurers with a monopoly from driving costs too high, says Benjamin Handel, an economics professor at the University of California, Berkeley who studies health care. One is a regulation called minimum loss ratio that essentially requires insurers to spend a certain share of what they earn from premiums on medical care. Another is that an insurer with a monopoly that angers consumers might attract attention from regulators, he says.

Of course, there’s not a whole lot regulators can do to make a marketplace more competitive. A state could try to incentivize more insurers to enter their states with tax breaks or other sweeteners, but it’s very hard to enter a market and offer low rates right away. The establishment of the health-care marketplaces in the Affordable Care Act allowed new entrants, Dafny says, but many of them did not survive.

Menger, the Alabama doctor, says that he and his colleagues—and therefore their patients—are basically stuck. His staff has to spend 10-15 hours a week negotiating with the insurer to get prior authorizations that sometimes don’t come, even while patients pay higher premiums. 

The teenage boy eventually got approved for the scoliosis surgery, but not after the family went through a lot of stress with postponements and uncertainty. “I think it’s pretty clear that the more competition, the better things are,” Menger says. “This prior authorization nonsense is really hurting patients.”

From Nonprofit Blues to Wall Street Blues: Elevance’s Stock Points Down

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Elevance, which owns Blue Cross plans, is now reeling from Wall Street losses thanks to its Medicare Advantage business.

The company now known as Elevance, which owns Blue Cross plans in 14 states, took a drubbing on Wall Street yesterday after executives told shareholders that it had to pay out way more in medical claims during the second quarter than expected, especially in its Medicare Advantage business. As a reminder, Wall Street hates to hear such news, so much so that investors rushed to sell their shares in the company, sending the stock price to $296.39 – a 52-week low – before closing at $302.45 yesterday afternoon. That’s down 47% from the all-time high of $567.36 it reached last September.

The news was so distressing for people who still have investments in for-profit health insurers that many of them finally bailed, getting the message that the entire sector is likely not the best place to make money these days. All seven of the companies (Centene, Cigna, CVS/Aetna, Elevance, Humana, Molina and UnitedHealth) saw big drops in their stock price with two others (Centene and Molina) also falling to 52-week lows. The companies’ stock is continuing to tank today as I write this.

When Denial Becomes a Liability

UnitedHealth has historically been the first of the companies to release quarterly earnings, but it stepped back as leader of the pack this quarter after that giant’s recent troubles on Wall Street. UnitedHealth missed financial analysts’ profit expectations last quarter and withdrew its profit guidance for the year, an unprecedented move for that company, which terrified its shareholders. UnitedHealth’s stock price has lost nearly 55% of its value since reaching a high of $630.73 last November.

Like UnitedHealth, Elevance had been a Wall Street darling until a business practice common in the health insurance game – refusing to pay for patients’ medically necessary care – finally caught up with it.

I’m talking about prior authorization, the benign sounding term that covers a number of ways a health insurer banks money by saying no to a doctor’s plea to cover a patient’s treatment or medications. The fundamental problem is that by refusing to pay for care a patient needs, that patient likely will get sicker and wind up needing even more expensive care down the road. Insurance company beancounters know that can happen, but they also know there is a decent chance that that potentially high-cost patients will not even be enrolled in one of the company’s health plans when the day finally arrives that they have to go to the hospital, which, of course, might have been avoided if the initial treatment had been approved in the first place.

We’re not just talking about a stay in the hospital. One permutation of prior auth is called step therapy in which an insurer demands that a patient try other medications on the insurer’s list of preferred drugs (its “formulary”) before approving the drug a doctor believes will work best. Sometimes it’s called “fail first.” In other words, a patient must endure pain and suffering for weeks or months taking an ineffective drug on an insurer’s formulary – the price of which the insurer has negotiated to its financial advantage with a drug maker – before the insurer will agree to cover the medication the doctor believes will be more effective. The doctor will then have to persuade the insurer that the insurer’s preferred drug failed. We’ll dive deeper into that insurer-induced nightmare in a future post, but know for now that it is a big and expensive time-suck that doctors have to endure while insurers can keep unused premium dollars in their investment accounts.

The Conversion That Changed Everything

But let’s go back to Elevance, which until recently was called Anthem and before that WellPoint. Many of its subsidiaries still use the term Anthem in its branding, like the biggest under its corporate umbrella, Anthem Blue Cross of California. All of those Blues plans operated on a nonprofit basis until a savvy executive named Leonard Schaeffer, who was CEO of Anthem of California back when it was still a nonprofit, pulled off a deal that would put him on the path to considerable fame and fortune, a first-of-its-kind “conversion” that would prove to be a major reason why the U.S. has the most complex, expensive and inefficient health care system on the planet.

According to his official bio on the website of the Leonard D. Schaffer Fellows in Government Service, which is affiliated with some of the country’s most prestigious universities, Schaeffer was recruited as CEO of Blue Cross of California in 1986 when, we are told, it was near bankruptcy. We’re also told that Schaeffer “managed the turnaround of Blue Cross of California and the IPO (initial public offering, i.e., converting it to for-profit status) creating WellPoint in 1993. During his tenure, WellPoint made 17 acquisitions and endowed four charitable foundations with assets of over $6 billion. Under Schaeffer’s leadership, WellPoint’s value grew from $11 million to over $49 billion.”

One might think from reading that last sentence that Schaeffer himself wrote big personal checks to endow those foundations, but establishing those nonprofit foundations (which includes the California Endowment, the California Health Care Foundation and the California Wellness Foundation) was demanded by California regulators as a condition of their approval of the IPO. The money was referred to as a conversion fund (converting from nonprofit to for-profit status), and it came from the proceeds of the IPO.

But Schaffer did indeed make a ton of money from the deal and WellPoint’s subsequent acquisition by a rival company that also owned recently converted Blues plans, Anthem, in 2004.

One of the organizations that opposed the WellPoint-Anthem deal, Consumer Watchdog, wrote at the time that:

Payments to WellPoint executives after the company’s buyout by Anthem Inc. could top $600 million if regulators and shareholders do not modify the acquisition terms, according to documents received from California regulators by the Foundation for Taxpayer and Consumer rights under a Public Records Act Request late Tuesday.

The documents detail potential payments in excess of those estimated by the company to shareholders at $200 million in a recent proxy. Executives will receive cash bonuses worth between $146 million and $365 million under the proposed terms of the company buyout by Anthem, in addition to over $251 million in stock options. WellPoint CEO Leonard Schaeffer has already begun exercising his stock options as of June 1st at sweetheart prices – earning him $16 million on that one day alone and increasing the size of his shares by hundreds of thousands.

When we look back at the history of health insurance in this country, we can thank this one man for the rapid shifting of Americans out of what historically had been nonprofit health insurance plans that initially were community-rated, meaning they charged everybody the same premium, regardless of gender, health status, occupation or address, and did not use gimmicks like prior authorization to boost profits. Being nonprofits, they couldn’t even book profits, although many of them did amass millions more in “reserves” than regulators required for solvency reasons.

I was working at Cigna when WellPoint joined the club of big for-profit insurers in 1993, along with Aetna, Humana (where I also previously worked), UnitedHealth, which was a relatively small player back then, and giant “multiline” insurers like MetLife, Prudential and Travelers. All of those last three decided to sell their health insurance operations to UnitedHealth and Aetna, putting those companies on the path to becoming the behemoths they are today.

And Schaeffer would wind up being one of America’s richest men, and, to his credit, he has been personally philanthropic. We know that because his name shows up all over the place in U.S. health care think-tank world. Indeed, his name is now associated far more with groups and institutions engaged in public policy than the “platinum parachute,” to use Consumer Watchdog’s term, he got when he and a few colleagues engineered the sale of WellPoint to Anthem. As his bio notes:

In 2009, Schaeffer established the Schaeffer Center for Health Policy and Economics at the University of Southern California, which emphasizes the interdisciplinary approach to research and analysis to support evidence-based health policy. In 2015, he established the Schaeffer Fellows in Government Service program which has supported 418 undergraduates to date in high-level, summer government internships. In 2004, he established the Schaeffer Institute for Public Policy & Government Service. He has also endowed chairs in health care financing and policy at the Brookings Institution, Harvard Medical School, the National Academy of Medicine, UC Berkeley and USC.

If Schaeffer still owns shares in Elevance, he is a bit poorer today than he was yesterday morning, but he’s probably still doing OK. Shares of Elevance’s stock have increased 1731% in value since they started trading on the New York Stock Exchange in October 2001, even with the company’s very bad Thursday on the Street.

Gut Punches for Healthcare and Hospitals

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Gut Punches for Healthcare and Hospitals: The One Big Beautiful Bill Act and the CMS Proposed Rule

The healthcare industry is still licking its wounds from $1 trillion in federal funding cuts included in the One Big Beautiful Bill Act (OBBBA) signed into law July 4.

Adding insult to injury, the Center for Medicare and Medicaid services issued a 913-page proposed rule last Tuesday that includes unwelcome changes especially troublesome for hospitals i.e. adoption of site neutral payments, expansion of hospital price transparency requirements, reduction of inpatient-only services, acceleration of hospital 340B discount repayment obligations and more.

The combination of the two is bad news for healthcare overall and hospitals especially: the timing is precarious:

  • Economic uncertainty: Economists believe a recession is less likely but uncertainty about tariffs, fear about rising inflation, labor market volatility a housing market slowdown and speculation about interest rates have capital markets anxious. Healthcare is capital intense: the impact of the two in tandem with economic uncertainty is unsettling.
  • Consumer spending fragility: Consumer spending is holding steady for the time being but housing equity values are dropping, rents are increasing, student loan obligations suspended during Covid are now re-activated, prices for hospital and physicians are increasing faster than other necessities and inflation ticked up slightly last month. Consumer out-of-pocket spending for healthcare products and services is directly impacted by purchases in every category.
  • Heightened payer pressures: Insurers and employers are expecting double-digit increases for premiums and health benefits next year blaming their higher costs on hospitals and drugs, OBBBA-induced insurance coverage lapses and systemic lack of cost-accountability. For insurers, already reeling from 2023-2024 financial reversals, forecasts are dire. Payers will heighten pressure on healthcare providers—especially hospitals and specialists—as a result.

Why healthcare appears to have borne the brunt of the funding cuts in the OBBBA is speculative: 

Might a case have been made for cuts in other departments? Might healthcare programs other than Medicaid have been ripe for “waste, fraud and abuse” driven cuts? Might technology-driven administrative costs reductions across the expanse of federal and state government been more effective than DOGE- blunt experimentation?

Healthcare is 18% of the GDP and 28% of total federal spending: that leaves room for cuts in other industries.

Why hospitals, along with nursing homes and public health programs, are likely to bear the lion’s share of OBBBA’ cut fallout and CMS’ proposed rule disruptions is equally vexing.  Might the high-profile successes of some not-for-profit hospital operators have drawn attention? Might Congress have been attentive to IRS Form 990 filings for NFP operators and quarterly earnings of investor-owned systems and assume hospital finances are OK? Might advocacy efforts to maintain the status quo with facility fees, 340B drug discounts, executive compensation et al been overshadowed by concerns about consolidation-induced cost increases and disregard for affordability? Hospital emergency rooms in rural and urban communities, nursing homes, public health programs and many physicians will be adversely impacted by the OBBBA cuts: the impact will vary by state. What’s not clear is how much.

My take:

Having read both the OBBBA and CMS proposed rules and observed reactions from industry, two things are clear to me:

The antipathy toward the healthcare industry among the public  and in Congress played a key role in passage of the OBBBA and regulatory changes likely to follow. 

Polls show three-fourths of likely voters want to see transformational change to healthcare and two-thirds think the industry is more concerned with its profit over their care: these views lend to hostile regulatory changes. The public and the majority of elected officials think the industry prioritizes protection of the status quo over obligations to serve communities and the greater good.

The result: winners and losers in each sector, lack of continuity and interoperability, runaway costs and poor outcomes.

No sector in healthcare stands as the surrogate for the health and wellbeing of the population. There are well-intended players in each sector who seek the moral high ground for healthcare, but their boards and leaders put short-term sustainability above long-term systemness and purpose. That void needs to be filled.

The timing of these changes is predictably political. 

Most of the lower-cost initiatives in both the OBBBA changes and CMS proposals carry obligations to commence in 2026—in time for the November 2026 mid-term campaigns. Most of the results, including costs and savings, will not be known before 2028 or after. They’re geared toward voters inclined to think healthcare is systemically fraudulent, wasteful and self-serving.

And they’re just the start: officials across the Departments of Health and Human Services, Justice, Commerce, Labor and Veterans Affairs will add to the lists.

Buckle up.

The Fundamental Problem at the Heart of American Health Insurance

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Administrative waste, denials, and deadly incentives — the U.S. model shows what happens when profit rules.

The United States is the only country where a health insurance executive has been gunned down in the street. But that’s not the only thing that’s unique about American health insurance.

Almost all of our peer countries – advanced, free-market democracies — have health insurance companies. In some cases (Germany, Switzerland, Japan), private health insurance is the chief way to pay for medical care. In others (such as Great Britain), private insurance works as a supplement to government-run health care systems. But there’s a fundamental difference between health insurance elsewhere and the U.S. system. 

In all the other advanced democracies, basic health insurance is not for profit; the insurers are essentially charities. They exist not to pay large sums to executives and investors, but rather to keep the population healthy by assuring that everyone can get medical care when it’s needed. 

America’s health insurance giants are profit-making businesses. Indeed, in the insurers’ quarterly earnings reports to investors, the standard industry term for any sums spent paying people’s medical bills is “medical loss.” They view paying your doctor bill as a loss that subtracts from the dividends they owe their stockholders. 

When I studied health care systems around the world, I asked economists and doctors and health ministers why they want health insurance to be a nonprofit endeavor. Everyone gave essentially the same answer:

There’s a fundamental contradiction between insuring a nation’s health and making a profit on health insurance.

Health insurance exists to help people get the preventive care and treatment they need by paying their medical bills. But the way to make a profit on health insurance is to avoid paying medical bills. Accordingly, the U.S. insurance giants have devised ingenious methods for evading payment — schemes like high deductibles, narrow networks of approved doctors, limited lists of permitted drugs, and pre-authorization requirements, so that the insurance adjuster, not your doctor, determines what treatment you get. 

Other countries don’t allow those gimmicks. In America, the patient pays twice — first the insurance premium, and then the bill that the insurer declines to pay. That’s why Americans hate health insurance companies — as reflected in the tasteless barrage of angry social media commentary aimed at the victim, not the perpetrator, of the sidewalk shooting in 2024  of UnitedHealthcare’s CEO Brian Thompson in New York City. 

Another unique aspect of U.S.-style health insurance is the huge amount of money our big insurers waste on administrative costs. Any insurance plan has administrative expenses; you’ve got to collect the premiums, review the patients’ claims, and get the payments out to doctors and hospitals.

In other countries, the administrative costs are limited to about 5% of premium income; that is, insurers use 95% of all the money they take in to pay medical bills. But the U.S. insurance giants routinely report administrative costs in the range of 15% to 20%.

When the first drafts of the Affordable Care Act (“Obamacare”) were floated on Capitol Hill in 2009, the statutory language called for limiting insurers’ admin costs to 12% of premium income. Then the insurance lobby went to work. The final text of that law allows them to spend up to 20% of their income on salaries, marketing, dividends, and other stuff that doesn’t pay anybody’s hospital bill. 

There is one American insurance system, however, that is as thrifty as foreign health insurance plans. Medicare, the federal government’s insurance program for seniors and the disabled, reports administrative costs in the range of 3% — about one-fifth as much as the big private insurers fritter away. And Medicare’s administrators — federal bureaucrats — are paid less than a tenth as much as the executives running the far less efficient private insurance firms. 

Americans generally believe that the profit-driven private sector is more efficient and innovative than government. In many cases, that’s true. I wouldn’t want some government agency designing my cell phone or my hiking boots.

But when it comes to health insurance, all the evidence shows that nonprofit and government-run plans provide better coverage at lower cost than the private plans from America’s health insurance giants.

If we were to make basic health insurance a nonprofit endeavor, as it is everywhere else, or put everybody on a public plan like Medicare, the U.S. would save billions and improve our access to life-saving care. Then Americans might stop celebrating on social media when an insurance executive is killed. 

The Perfect Storm has Hit U.S. Healthcare

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The Perfect Storm has Hit U.S. Healthcare

The perfect storm has hit U.S. healthcare:

  • The “Big Beautiful Budget Bill” appears headed for passage with cuts to Medicaid and potentially Medicare likely elements.
  • The economy is slowing, with a mild recession a possibility as consumer confidence drops, the housing market slows and uncertainty about tariffs mounts.
  • And partisan brinksmanship in state and federal politics has made political hostages of public and rural health safety net programs as demand increases for their services.

Last Wednesday, amidst mounting anxiety about the aftermath of U.S. bunker-bombing in Iran and escalating conflicts in Gaza and Ukraine, the Centers for Medicare and Medicaid Services (CMS) released its report on healthcare spending in 2024 and forecast for 2025-2033:

“National health expenditures are projected to have grown 8.2% in 2024 and to increase 7.1% in 2025, reflecting continued strong growth in the use of health care services and goods.

During the period 2026–27, health spending growth is expected to average 5.6%, partly because of a decrease in the share of the population with health insurance (related to the expiration of temporarily enhanced Marketplace premium tax credits in the Inflation Reduction Act of 2022) and partly because of an anticipated slowdown in utilization growth from recent highs. Each year for the full 2024–33 projection period, national health care expenditure growth (averaging 5.8%) is expected to outpace that for the gross domestic product (GDP; averaging 4.3%) and to result in a health share of GDP that reaches 20.3% by 2033 (up from 17.6% in 2023) …

Although the projections presented here reflect current law, future legislative and regulatory health policy changes could have a significant impact on the projections of health insurance coverage, health spending trends, and related cost-sharing requirements, and they thus could ultimately affect the health share of GDP by 2033.”

As has been the case for 20 years, spending for healthcare grew faster than the overall economy in 2024. And it is forecast to continue through 2033:

 2024Baseline2033Forecast% Nominal Chg.2024-2033
National Health Spending$5,263B$8,585B+63.1%
US Population337,2M354.8M+5.2%
Per capita personal health spending$13,227$20,559+55.7%
Per capita disposable personal income$21,626$31,486+45.6%
NHE as % of US GDP18.0%20.3%+12.8%

In its defense, industry insiders call attention to the uniqueness of the business of healthcare:

  • ‘Healthcare is a fundamental need: the health system serves everyone.’
  • ‘Our aging population, chronic disease prevalence and socioeconomic disparities are drive increased demand for the system’s products and services.’
  • ‘The public expects cutting edge technologies, modern facilities, effective medications and the best caregivers and they’re expensive.’
  • ‘Burdensome regulatory compliance costs contribute to unnecessary spending and costs.’

And they’re right.

Critics argue the U.S. health system is the world’s most expensive but its results (outcomes) don’t justify its costs.  They acknowledge the complexity of the industry but believe “waste, fraud and abuse” are pervasive flaws routinely ignored. And they remind lawmakers that the health economy is profitable to most of its corporate players (investor-owned and not-for-profits) and its executive handsomely compensated.

Healthcare has been hit by a perfect storm at a time when a majority of the public associates it more with corporatization and consolidation than caring. This coalition includes Gen Z adults who can’t afford housing, small employers who’ve cut employee coverage due to costs and large, self-insured employers who trying to navigate around the 10-20% employee health cost increase this year, state and local governments grappling with health costs for their public programs and many more. They’re tired of excuses and think the health system takes advantage of them.

As a percentage of the nation’s GDP and household discretionary spending, healthcare will continue to be disproportionately higher and increasingly concerning.  Spending will grow faster than other industries until lawmakers impose price controls and other mechanisms like at least 8 states have begun already.

Most insiders are taking cover and waiting ‘til the storm passes. Some are content to cry foul and blame others. Others will emerge with new vision and purpose centered on reality.

Storm damage is rarely predictable but always consequential. It cannot be ignored. The Perfect has Hit U.S. healthcare. Its impact is not yet known but is certain to be a game changer.

The Fox Guards the Hen House – Translating AHIP’s Commitments to Streamlining Prior Authorization

Posted on by • Posted in 2026 Mid Term Election Issues, 2028 Election Issues, America's Health Insurance Plans (AHIP), Electronic Pre Authorization, Health Insurance Industry, Health Insurance Pre Authorization, Lobbyist, Medicare Advantage, Medicare Advantage Denials, Prior Authorization, Unnecessary Pre Authorizations • Tagged , , , , • Leave a comment
https://healthcareuncovered.substack.com/p/the-fox-guards-the-hen-house-translating?utm_source=post-email-title&publication_id=255152&post_id=166732339&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

“We urge the Administration to consider the timing of these policies in the context of the broader scope of requirements and challenges facing the industry that require significant system changes.”

  • AHIP, March 13, 2023 (in a letter to CMS Administrator Chiquita Brooks-LaSure responding to CMS’s proposed rule on Advancing Interoperability and Improving Prior Authorization Processes, proposed Final Rule, CMS-0057-P)

“Health insurance plans today announced a series of commitments to streamline, simplify and reduce prior authorization – a critical safeguard to ensure their members’ care is safe, effective, evidence-based and affordable.”

  • AHIP, June 23, 2025 (press release announcing voluntary prior authorization reforms)

What a difference two years make.

After lobbying aggressively to delay implementation of the PA reforms proposed by the previous administration (successfully delayed one year and counting), AHIP, the big PR and lobbying group for health insurers, now claims the mantle of reformer, announcing a set of voluntary commitments to streamline prior authorization.

So naturally, the industry’s “commitments” deserve closer scrutiny. Let’s unpack them. As a former health insurance industry executive, I speak their language, so allow me to translate. AHIP, which has no enforcement power, by the way, claims that 48 large insurers will:

  1. Develop and implement standards for electronic prior authorization using Fast Healthcare Interoperability Resources Application Programming Interfaces (FHIR APIs).Translation: CMS is already requiring all insurers to do this by 2027. We might as well take credit preemptively.
  2. Reduce the volume of in-network medical authorizations. Translation: We already demand hundreds of millions of unnecessary prior authorizations for thousands of procedures and services, so cutting a few (who knows how many?) should be a layup and won’t cut into profits.
  3. Enhance continuity of care when patients change health plans by honoring a PA decision for a 90-day transition period starting in 2026.Translation: We’re already required to do this in Medicare Advantage. And since we delayed implementation of e-authorization until 2027, we’re in the clear until then anyway.
  4. Improve communications by providing members with clear explanations for authorization determinations and support for appeals. Translation: We’re already required by state and federal law to do this. We’ll double-check our materials.
  5. Ensure 80% of prior authorizations are processed in real time and expand new API standards to all lines of business. Translation: We had to promise to hold ourselves accountable to at least one measurable goal. We will set the denominator – we’ll decide which procedures and medications require PA – so we’ll hit this goal, no problem, and we might even use more non-human AI algorithms to do it.
  6. 6. Ensuring medical review of non-approved requests. Translation: People will be relieved we’re not using robots. And we’ll avoid having Congress insist that reviews must be done by a same-specialty physician, as proposed in the Reducing Medically Unnecessary Delays in Care Act of 2025 (H.R. 2433).

Of course, I wasn’t in the room when AHIP drafted these commitments, so take my translations with a grain of salt. But let’s be honest: These promises are thin on specifics, short on accountability, and devoid of measurable impact.

They also follow a familiar script, blaming physicians for cost escalation by “deviating from evidence-based care” and the “latest research”, while positioning PA as a necessary safeguard to protect patients from “unsafe or inappropriate care.” And largely ignoring how PA routinely delays necessary treatment and harms patients.

It’s also rich coming from an industry still reliant on something called the X12 transaction standard – technology that is now over 40 years old – to process prior authorization requests, while simultaneously pointing the finger at providers for outdated technology and being slow to adopt modern systems. Many insurers did not start accepting electronic submissions of prior authorization until roughly 2019, nearly 20 years after clinicians started using online portals such as MyChart in their regular practice. The claim that providers are the ones behind on technology is another ploy by insurers to dodge scrutiny for their schemes.

We shouldn’t settle for incremental fixes when the system itself is the problem. Nor should we allow the industry that created this problem – and perpetuates it in its own self-interest – to dictate the pace or terms of reforming it.

As we argued in our recent piece, Congress should act to significantly curtail the use of prior authorization, limiting it to a narrow, evidence-based set of high-risk use cases. Insurers should also be required to rapidly adopt smarter, lower-friction cost-control methods, like gold-carding trusted clinicians (if it can be implemented with integrity and fairness), without compromising patient access or clinical autonomy.

Letting the fox design the hen house’s security perimeter won’t protect the hens. It’s time for Congress to build a better fence.

Health Insurance Industry Promises Reforms After $476 Million PR and Lobbying Campaign

Posted on by • Posted in 2026 Mid Term Election Issues, 2028 Election Issues, Health Insurance Denial, Health Insurance Industry, Health Insurance Premiums, Health Policy, Healthcare Reform, Lobbyist, Pharmacy Benefits Management, Profit, Profit Margin, Profit Motive • Tagged , , , , • Leave a comment
https://healthcareuncovered.substack.com/p/health-insurance-industry-promises?utm_source=post-email-title&publication_id=255152&post_id=166816548&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

Health insurers and their lobbying arms have spent $476.5 million since 2020 to block reform, protect profits, and mislead the public — and it’s coming straight from our premiums and tax dollars.

AHIP, the big PR and lobbying outfit for most health insurers, undoubtedly believes the praise it got from Trump administration officials and some members of Congress this week – when it announced changes insurers presumably will make voluntarily to alleviate the burden of prior authorization demands on patients and health care providers – has taken the heat off insurers. AHIP’s message to Washington politicos: You don’t need to pass any new laws to make us do the right thing. You can trust us, despite our decades of engaging in untrustworthy behavior to maximize profits.

As former health insurance executive Seth Glickman, M.D., explained yesterday, nobody should believe this hen-house guarding fox.

After all, AHIP is nothing more than a PR and lobbying shop with millions of our dollars to play with. It has zero ability to force insurers to do what AHIP claims they will do. I know this because I worked closely with AHIP during my 20 years in the industry and represented Cigna on its strategic communications committee.

From Fox to “Fixer”?

AHIP pulled off its big show on Monday – and got plenty of generally fawning press coverage – because of all the money it and affiliated insurers throw around Washington every year to protect what has become an incredibly profitable status quo.

Collectively, the seven biggest for-profit insurers reported $70 billion in profits last year.

(Beleauered UnitedHealth alone reported $34.4 million in operating earnings.) And that’s just seven among dozens. One way they make that kind of dough, for their shareholders and top executives, is by using prior authorization to avoid paying for patients’ medically necessary care. Many people die as a result, while investors get richer. It’s that simple and that cold.

So just how much money does AHIP and the insurance industry spend to bamboozle members of Congress and the White House every year? We’re talking stupid money. And orders of magnitude more than nonprofits that advocate for reforms that would benefit patients instead of shareholders.

Nearly Half a Billion Ways They Tip the Scale

To find out just how much, I turned to OpenSecrets and did some math. OpenSecrets, as a reminder, is the well-named organization that keeps tabs on campaign contributions and lobbying expenses.

What I discovered is that AHIP has spent almost $65 million lobbying Congress and the Biden and Trump administrations since 2020. Its cousin, the Blue Cross Blue Shield Association, has spent even more. More than twice as much more.

And that, folks, is just the tip of the iceberg, and it doesn’t even include the tens of millions the industry spends on massive advertising campaigns inside the DC beltway that it’s not required to report. Or the dark money ads and advocacy the industry bankrolls.

But just the lobbying totals are mind-blowing. When you factor in the money spent by the big seven insurers and the other PR and lobbying groups that insurers funnel money to, the total grows to almost $500 million. You read that right: nearly half a billion dollars.

Most of that spending was during the Biden administration, but the industry is on track to break spending records during the first year of the current Trump administration. They are lobbying not only to beat back new laws and regulations that could constrain their prior authorization practices but also to protect their biggest cash cows: Medicare Advantage and their pharmacy benefit managers (PBMs).

Three PBMs – owned by Cigna, CVS/Aetna and UnitedHealth –control 80% of the pharmacy benefit market and determine which drugs we’ll have access to and how much we have to pay out of pocket even with insurance.

The Big Number

$476.5 million – That’s the amount of money health insurance corporations and four of their PR and lobbying groups – AHIP, BCBSA (which includes contributions from Elevance/Anthem as well as numerous other BCBS companies), the Pharmaceutical Care Management Association and the Better Medicare Alliance – have collectively spent on lobbying Congress and federal regulators between January 1, 2020, and March 31, 2025.

The Breakdown

Lobby dollars spent by AHIP; BCBSA; BMA; PCMA; Centene; Cigna; CVS/Aetna; Humana; Molina; and UnitedHealth between January 1, 2020, and March 31, 2025.

Keep in mind that that money is not coming out of executives’ paychecks. It’s coming out of our pockets. Insurers skim money from our premiums and taxes to finance their propaganda and lobbying efforts to keep the gravy train rolling. And it’s in addition to all the campaign cash they dole out every year, which I tabulated recently.

This is not to say that reform is impossible. Scrappy advocacy groups with a tiny fraction of that total have scored important victories over the years. But it is why progress is so slow and setbacks are so frequent.

But just imagine how all that money could be put to better use to ensure that all Americans, including those with insurance, are able to get the care they need when they need it. It’s clear that in addition to reforming our health care system, we need political reforms that make it more difficult for big corporations and their trade groups to influence elections and public policy.

What’s at stake from GOP megabill’s coverage losses

Posted on by • Posted in 2026 Mid Term Election Issues, 2028 Election Issues, ACA, Bankruptcy, Chronic Care Management, Chronic Condition Management, Chronic Conditions, Chronic Diseases, Deferred Healthcare, Health Insurance Coverage Adequacy, Health Policy, Healthcare Reform, High Deductible Health Plans, High Drug Prices, High Premiums, Medicaid, Medicaid Cuts, Medical Debt, Out of Pocket Expenses, Public Health, Underinsured, Uninsured • Tagged , , , , • Leave a comment

https://www.axios.com/2025/07/01/real-cost-health-coverage-losses

Nearly 12 million people would lose their health insurance under President Trump’s “big, beautiful bill,” an erosion of the social safety net that would lead to more unmanaged chronic illnesses, higher medical debt and overcrowding of hospital emergency departments.

Why it matters: 

The changes in the Senate version of the bill could wipe out most of the health coverage gains made under the Affordable Care Act and slash state support for Medicaid and SNAP.

  • “We are going back to a place of a lot of uncompensated care and a lot of patchwork systems for people to get care,” said Ellen Montz, a managing director at Manatt Health who oversaw the ACA federal marketplace during the Biden administration.

The big picture: 

The stakes are huge for low-income and working-class Americans who depend on Medicaid and subsidized ACA coverage.

  • Without health coverage, more people with diabetes, heart disease, asthma and other chronic conditions will likely go without checkups and medication to keep their ailments in check.
  • Those who try to keep up with care after losing insurance will pay more out of pocket, driving up medical debt and increasing the risk of eviction, food insecurity and depleted savings.
  • Uninsured patients have worse cancer survival outcomes and are less likely to get prenatal care. Medicaid also is a major payer of behavioral health counseling and crisis intervention.

Much of the coverage losses from the bill will come from new Medicaid work reporting requirements, congressional scorekeepers predict. Work rules generally will have to be implemented for coverage starting in 2027, but could be earlier or later depending on the state.

  • Past experiments with Medicaid work rules show that many eligible people fall through the cracks verifying they’ve met the requirements or navigating new state bureaucracies.
  • Often, people don’t find out they’ve lost coverage until they try to fill a prescription or see their doctor. States typically provide written notices, but contacts can be out of date.
  • Nearly 1 in 3 adults who were disenrolled from Medicaid after the COVID pandemic found out they no longer had health insurance only when they tried to access care, per a KFF survey.

Zoom out: 

The Medicaid and ACA changes will also affect people who keep their coverage.

  • The anticipated drop-off in preventive care means the uninsured will be more likely to go to the emergency room when they get sick. That could further crowd already bursting ERs, resulting in even longer wait times.
  • Changes to ACA markets in the bill, along with the impending expiration of enhanced premium subsidies, may drive healthier people to drop out, Montz said, skewing the risk pool and driving up premiums for remaining enrollees.
  • States will likely have to make further cuts to their safety-net programs if the bill passes in order to keep state budgets functioning with less federal Medicaid funding.

The other side: 

The White House and GOP proponents of the bill say the health care changes will fight fraud, waste and abuse, and argue that coverage loss projections are overblown.

Reality check: 

Not all insurance is created equally, and many people with health coverage still struggle to access care. But the bill’s impact would take the focus off ways to improve the health system, Montz said.

  • “This is taking us catastrophically backward, where we don’t get to think about the things that we should be thinking about how to best keep people healthy,” she said.

The bottom line: 

The changes will unfold against a backdrop of Health Secretary Robert F. Kennedy Jr.’s purported focus on preventive care and ending chronic illness in the U.S.

  • But American health care is an insurance-based system, said Manatt Health’s Patricia Boozang. Coverage is what unlocks access.
  • Scrapping millions of people’s health coverage “seems inconsistent with the goal of making America healthier,” she said.

Key Principles for Proactive Management of Patient Denials

Posted on by • Posted in Denial Management, Health Insurance Denial, Medical Denial Management, Medicare Advantage, Medicare Advantage Denials • Tagged , , , , • Leave a comment

https://www.kaufmanhall.com/insights/article/key-principles-proactive-management-patient-denials

The proliferation of claims denials, especially by Medicare Advantage payers, has become a pressing issue for health system operations. In 2023, Medicare Advantage insurers fully or partially denied 3.2 million prior authorization requests—or 6.4% of all requests, according to a Kaiser Family Foundation (KFF) report.

The growth in denials can be partially explained by the increasing popularity of managed Medicare and Medicaid plans, but evolving payer practices, including the adoption of AI for algorithmic denials, have also contributed. Claims denials have emerged as one of the key points of payer-provider tension, and an effective claims denials management and prevention program is a powerful way for health systems to rebalance their payer relationships.

Denied claims result in reduced reimbursement, added administrative burdens, and patient and provider frustrations. Even when denials are successfully appealed and reversed—the KFF report found that in 2023, 82% of Medicare Advantage denials were partially or fully overturned—the time and resources devoted to the appeals process add to the costs of providing healthcare services. Optimizing pre-billing activities to reduce avoidable denials and improve and streamline the patient experience of care is as essential for health systems as a robust appeals strategy. This article addresses critical success factors for both preventing and appealing denials.

Preventing Claims Denials During Pre-Bill Period

Successfully preventing denials requires a centralized program across the workforce, from frontline providers to clinical and revenue cycle staff, to manage pre-bill activities by focusing on identifying the correct patient insurance information, obtaining accurate authorizations, and preventing concurrent denials while the patient is still in the facility. Utilization review nurses, attending providers, and Physician Advisors should be attentive to documenting the full state of patient acuity, while collaborating with the revenue cycle team. This team should focus on the collection and reporting of medically necessary data and documentation, which serves as the evidence payers use to evaluate prior authorization requests. When information about a patient’s condition isn’t recorded, or acknowledged in an authorization request, unnecessary denials can result.

A successful denials prevention program expands beyond the utilization management (UM) team and includes revenue cycle, and provider collaboration. Revenue cycle pre-service procedures should focus on confirming insurance benefits and securing payer authorization for planned services while collaborating with UM and referral sources. A comprehensive and proactive denials prevention program helps conveys to payers the full extent of inpatient clinical work, thanks to a collaborative effort to improve documentation.

The following list can help organize denials prevention programs across all locations, clinics and practices:

  • Establish an enterprise-wide denials prevention strategy which includes a multi-disciplinary denials management committee focused on identifying denials trends, conducting root cause analyses, developing proactive denials mitigation plans, creating enhanced reporting, monitoring improvement, and communicating risk
  • Establish proactive revenue cycle, UM, pre-certification, and peer-to peer workflows procedures to confirm completion of payer requirements prior to scheduled services and discharge
  • Ensure patients are financially cleared through implementation of pre-service protocols, including enhanced medical necessity process for outpatient services, authorization defer and delay procedures to reduce rework and avoidable denials
  • Identify pre-bill edits to increase “clean claim” efficiency, reducing initial denials and expediting reimbursement
  • Deliver education to providers, care management, and nursing teams on key observation concepts, such as clinical documentation improvement, patient status documentation, medical necessity documentation and orders for the Two Midnights rule, and payer reimbursement methodologies

Pursuing Post-Bill Appeals, Reversals and Payer Escalation

A strong denials management and prevention program should include a robust post-bill appeals program with skilled coding, clinical and technical resources. A targeted and strategic appeal process can result in improved overturn rates and increased reimbursement. Appeal letters which are supported by clinical facts, payer policies, and a summary of key components relevant to each case and the associated denial increase the likelihood of success.

Components of the appeal program should include the following:

  • Guidelines for when to appeal based on potential success by payer and appeal level
  • Reviews of upheld appeals for second and third level appeals based on strategy by payer
  • Trends for all upheld appeals by reason and by payer
  • Dashboard for tracking denials activities
  • Appeal letter writing guidelines and tips to support
  • Evaluation process for existing payer escalation workflows, tools and payer communication strategies with consideration for payer
  • Process to measure and monitor overturn rates and improvement opportunities

The collaboration with managed care is vital to the success of the denials management/prevention program. A formal payer escalation process which facilitates transparency between the payer and provider can result in improved relations and a reduction in initial denials. Successful denials management/prevention payer escalation programs are strategic and focus on addressing unfair/incorrect denials and establishing clear bi-directional reporting and communications. These programs can result in improved contract negotiations and reduce incorrect denials.

Artificial Intelligence (AI) can support the post-bill appeals process and can be especially relevant when developing a strategy to combat denials. Not only are payers increasingly using AI to trigger denials, but health systems can also deploy AI to write appeal letters, analyze denial trends, and summarize medically necessary documentation. Although algorithmic denials have become a source of frustration for providers and patients, health systems can also deploy AI to their defense. While payers are often better positioned to devote AI resources to claims, a little bit of investment from health systems, deployed effectively, can go a long way toward evening the playing field.

Closing Thoughts and Seven Questions to Consider

A formal denials management and prevention program is essential to obtaining proper reimbursement for the care provided and reducing rework across the enterprise. A strong program should also improve the patient’s experience of care: ideally, a patient should not need to interact with or hear from their provider between scheduling an appointment and checking in.

Denials management and prevention programs should be led by multi-disciplinary committees and focus on reducing avoidable denials and rework. Reducing denials requires the implementation of a multi-disciplinary program and collaboration between UM, revenue cycle, clinical documentation improvement, managed care, clinical operation and providers. 

Health systems reassessing their claims denials program should consider these questions:

  1. Do you have a reactive or proactive denials management strategy in place?
  2. Does your denials strategy include multi-disciplinary team representation?
  3. What reporting/tools are currently being used to track and manage denials?
  4. What are your top five denial categories and what is being done to address the root cause of these denials?
  5. How are avoidable denial risks managed, communicated and monitored?
  6. Have you implemented a comprehensive denials management strategy with a multi-disciplinary committee?
  7. Are the system’s internal resources and expertise sufficient for addressing identified challenges, or should the system seek external partners to implement changes?