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The Future of Medicare Advantage—Assessing Current Debates and the Likelihood of Near-Term Reforms

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https://jamanetwork.com/journals/jama-health-forum/fullarticle/2837518

Privately administered Medicare Advantage (MA) has long been the subject of policy debate. To some, the once-nascent source of Medicare coverage is an important mechanism for injecting competition and innovation into the government-sponsored insurance program. To others, it represents an expensive and unnecessary alternative to directly administered traditional Medicare (TM).

After years of rapid growth, MA accounted for most program enrollments (33.6 million) and federal spending ($494 billion) in 2024.1 This has intensified some existing debates but also spurned increasing bipartisan agreements and interest in reforms. Politicians and policy experts who have historically supported MA, including some Republicans, have articulated greater openness to reforming the now-entrenched program.2 In effect, the debate has shifted from whether the MA program should be reformed to how it should be reformed and, critically, what the government should do with any savings. This Viewpoint discusses notable areas of consensus (and lack thereof) and the prospect of reforms from the Trump administration.

Areas of Growing Consensus

Several observations about MA are generally agreed upon. First, MA plans can use utilization management tools, like prior authorization, to constrain costs in ways that TM generally cannot. This reduces MA plans’ costs of covering Part A (hospital) and B (physician) benefits compared with a scenario where they imposed few constraints on utilization, like in TM. Policymakers also increasingly recognize the administrative burdens imposed on clinicians and restraints on patient access due to these tools, which have generated growing interest in reforms.

Second, and perhaps paradoxically, the federal government would spend less if all MA enrollees instead chose TM. This reflects several factors. MA plans are paid benchmark rates that are set above the fee-for-service spending in many counties. Plan payments can increase further due to the quality-bonus program. MA plans also have higher coding intensity, meaning the same beneficiary has more diagnoses recorded if they are enrolled in MA rather than TM. This increases risk scores and payments from the government (whether this reflects more accurate coding vs fraudulent behavior remains a source of debate). In addition, MA plans experience advantageous selection, meaning they attract enrollees who are relatively cheaper to cover conditional on their observable characteristics.3 All told, the Medicare Payment Advisory Commission estimates that the federal government spends 20% more (or an estimated $84 billion in 2025) than if all enrollees chose TM.1 While the exact magnitude of difference is subject to debate, the basic conclusion is not.

Third, MA plans offer more generous benefits to enrollees, including lower out-of-pocket costs and coverage of additional benefits such as vision and dental services. This occurs because plans keep a portion of the difference between their bid and the benchmark rate. These rebates average $2255 annually per enrollee, which represents 17% of all spending on MA.1

Where Disagreements Remain

While there is growing acknowledgment of the fiscal costs of the MA program, there is disagreement or uncertainty about several questions that inform an appropriate policy response. First, there is debate about how valuable some supplemental benefits are to enrollees. While it is relatively straightforward to value reductions in premiums or cost sharing in MA plans, there is limited information about how often enrollees use many of the supplemental benefits. Some research suggests that use of certain extra benefits may not be much higher in MA plans.4

Partly because of this, it is uncertain how much payment reductions to MA plans will reduce benefits and, in turn, how much that reduces enrollee welfare. Some research suggests the last dollar spent on MA plans results in much less than a dollar’s worth of additional benefits, particularly in markets with limited competition between plans.5 This suggests that reducing payments would initially lower plan profits but result in minimal welfare loss for enrollees. Even if true, it is not obvious when this tradeoff becomes more pronounced. Other research indicates the aggregate value of reduced cost sharing represents a large share of excess payments, suggesting reducing spending may quickly trigger benefit reductions.6 These effects may further depend on how policymakers chose to alter payments.

Finally, there remains significant disagreement about how to use any savings generated by program reforms. Democratic lawmakers often argue that savings should be used to increase TM benefits (eg, by adding dental benefits or imposing an out-of-pocket cap). Republicans are much more likely to pair spending reduction with policies that boost MA (eg, allowing MA plans to keep more of the savings if they bid below benchmarks). This predominantly reflects different preferences over the optimal structure of Medicare rather than empirical uncertainty.

Reform Possibilities From the Trump Administration

Many observers expect that the current administration will be relatively generous toward MA, as is typical of a Republican administration. This is particularly true given that the Centers for Medicare & Medicaid Services (CMS) administrator, Mehmet Oz, MD, has historically expressed support for MA plans. While major spending reductions may remain unlikely, early actions suggest the administration supports targeted reforms and is likely to test changes to the program’s design.

In his Senate confirmation, Oz was explicitly critical of strategic upcoding by insurers. Early policy decisions have been consistent with this view. The 2026 final payment notice for MA continues implementation of several policies that reduce MA payments. Notably, the Trump administration finalized implementation of an updated risk adjustment model that is designed to partly address coding intensity. For example, it eliminates approximately 2000 diagnosis codes that were judged to be most prone to upcoding. In conjunction with related changes, this is expected to decrease plan payment by 3.01%.7 CMS also announced the expansion of audits aimed at verifying the accuracy of diagnoses recorded by MA plans.8 This suggests the administration is willing to address strategic behavior by insurers, which they characterize as addressing waste, fraud, and abuse.8

However, the final payment notice also included higher payment increases for MA plans than was initially proposed by the Biden administration (5.06% vs 2.23%). After accounting for coding trends, realized payments are expected to increase by 7.16%. While consistent with an effort to boost MA enrollment, CMS noted that this change predominantly reflected the effects of higher-than-expected growth in per capita costs in TM, which mechanically increased payment updates. While CMS has some flexibility in payment updates, observers should use caution when using these upward revisions to infer the administration’s level of support for MA.

If the current administration is open to more novel and consequential reforms, they are likely to emerge from the Centers for Medicare & Medicaid Innovation (CMMI). While CMMI demonstration projects have historically focused on TM, the office can test changes to key features of MA that would significantly alter spending and incentives. Notably, Abe Sutton, JD, the director of the CMMI, recently highlighted the possibility of testing changes to risk scores, benchmarks, and quality measures, suggesting they are interested in taking advantage of this authority.9

With its place in the Medicare program now firmly established, MA has begun to attract more consistent interest in reform, even among Republican policymakers. This may reflect political considerations, as an unwillingness to act may provide an opportunity (and a source of budgetary savings) for future lawmakers to pursue alternative policy goals. Early signals from the Trump administration suggest they support program reforms, especially those targeting strategic behavior by insurers. Given the slim margins in Congress, it will be interesting to see if and how the administration uses CMMI’s authority to pursue substantive program changes.

Cigna’s $3.5 Billion Bet Tightens Its Grip on Specialty Drugs

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https://healthcareuncovered.substack.com/p/cignas-35-billion-bet-tightens-its?utm_source=post-email-title&publication_id=255152&post_id=172880641&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

Evernorth’s new latest investment in Shields Health Solutions ties its parent company, Cigna, even closer to hospitals and the fast-growing specialty drug market.

Regular readers will know that we’ve harped on UnitedHealth Group’s vertical integration into care delivery, pharmacy benefits and nearly every other corner of the health care landscape. But UnitedHealth isn’t the only company guilty of vertical integration: Cigna is playing the same game.

This week, Cigna’s health services arm, Evernorth, announced a $3.5 billion investment into Shields Health Solutions, a fast-growing specialty pharmacy company.

Shields partners with more than 80 health systems and over 1,000 hospitals and clinics across nearly all 50 states. That reach gives Cigna another way to weave itself into the daily operations of hospitals – and the lives of millions of patients.

From insurer to health services conglomerate

When I was an executive at Cigna, the company was primarily what’s known as a third-party administrator. We sold some health and group life policies as an insurer, but our bread-and-butter was administering health benefits for large employers. Our “value proposition” back then was keeping costs under control — at least as we defined them. Evernorth didn’t exist. At the time, to me, the idea that Cigna would one day be pouring billions into specialty pharmacies and drug distributors would have seemed far-fetched.    

In 2018, though, Cigna bought the huge pharmacy benefit manager Express Scripts. And soon after that, it created Evernorth to oversee its non-insurance health services operations, not only its PBM but also specialty pharmacies, and now investments like Shields. Cigna is no longer just deciding what care to cover, but it’s increasingly involved in how drugs are dispensed and priced. In fact, the company now gets the great majority of its revenues from the pharmacy business. Of the $195 billion in revenues Cigna took in last year, $154 billion came from Evernorth. 

The same old consolidation story

According to Reuters, Evernorth’s investment in Shields was structured as preferred stock and, according to the company, won’t affect its 2025 profit forecast. But make no mistake: This is part of the same playbook we’ve seen before from companies Americans have been led to believe are primarily insurers.

UnitedHealth buys physician practices, rehab centers, and home health companies. CVS Health owns Aetna, the PBM Caremark, and a sprawling pharmacy business. Cigna, for its part, is also planting stakes across the drug supply chain. In addition to Express Scripts, it also owns Accredo, one of the nation’s largest specialty pharmacies, and now Shields.

Cigna CEO David Cordani, who I once worked with during my time at Cigna, framed the deal as a way to “deliver exceptional care across healthcare settings – from home to physician’s office or clinic, to hospital”. In a statement on Evernoth’s website, Cordani said: 

“Demand for specialty medications continues to grow at an accelerated pace, and Evernorth is uniquely positioned to serve the rapidly expanding number of individuals living with complex and chronic conditions and the doctors who care for them.”

Specialty medications, as Cordani mentioned, are among the fastest-growing and most expensive parts of the pharmaceutical market and include medications for cancer, multiple sclerosis, rheumatoid arthritis and other complex and chronic conditions. Research indicates that spending on specialty drugs will make up more than half of all U.S. drug spending in the coming years.

That’s why Evernorth already owns Accredo. Now, by getting into bed with Shields, Evernorth is tying itself even closer to the hospitals and health systems that rely on specialty pharmacies to serve patients.

What can be done about it?

When insurers buy into the businesses that are supposed to compete for contracts (like pharmacies and physician practices) it gives the insurer almost all the cards because they are able to both set the rules of the game and profit from it. Competition suffers, and costs for patients and employers can rise.

Fortunately, Washington is starting to wise up to these tactics. The Patients Over Profits Act, soon to be introduced by Sen. Jeff Merkley (D-Oregon) and Rep. Val Hoyle (D-Oregon), would prevent insurers from owning most doctors offices and medical providers. In addition, The Patients Before Monopolies Act, introduced by Sens. Elizabeth Warren (D-Massachusetts) and Josh Hawley (R-Missouri), prevents pharmacy benefit managers and/or health insurers from owning pharmacies. Given a divided Congress, these bills wont be easy to pass, but seeing strange bedfellows like Warren and Hawley taking the lead brings me great hope. 

I saw firsthand during my years inside Cigna how Wall Street’s pressure for constant growth drives these decisions. Insurers and their shareholders aren’t satisfied with premiums alone. They want to control the entire pipeline — from the doctor’s prescription pad to patients’ wallets.

So the next time you hear about vertical integration in health care, don’t just think about UnitedHealth Group. Remember that Cigna is moving just as aggressively. With this latest $3.5 billion bet, it’s clear that the insurer I once worked for has transformed into something much larger — and far concerning — than the insurance company most folks believe it to be.

ACA premiums set to spike 

Posted on by • Posted in 2026 Mid Term Election Issues, 2028 Election Issues, ACA, ACA Premiums, Deferred Healthcare, Health Insurance Coverage Adequacy, Health Policy, Healthcare Reform, High Premiums, High Prices, Medicaid, Uncompensated Care, Underinsured, Uninsured • Tagged , , , , • Leave a comment

https://nxslink.thehill.com/view/6230d94bc22ca34bdd8447c8ofavw.mnb/3a085f61

People who buy health insurance through the Affordable Care Act (ACA) are set to see a median premium increase of 18 percent, more than double last year’s 7 percent median proposed increase, according to an analysis of preliminary filings by KFF. 

The proposed rates are preliminary and could change before being finalized in late summer. The analysis includes proposed rate changes from 312 insurers in all 50 states and DC. 

It’s the largest rate change insurers have requested since 2018, the last time that policy uncertainty contributed to sharp premium increases. On average, ACA marketplace insurers are raising premiums by about 20 percent in 2026, KFF found. 

Insurers said they wanted higher premiums to cover rising health care costs, like hospitalizations and physician care, as well as prescription drug costs. Tariffs on imported goods could play a role in rising medical costs, but insurers said there was a lot of uncertainty around implementation, and not many insurers were citing tariffs as a reason for higher rates. 

But they are adding in higher increases due to changes being made by the Trump administration and Republicans in Congress. For instance, the majority of insurers said they are taking into account the potential expiration of enhanced premium tax credits. 

Those subsidies, put in place during the COVID-19 pandemic, are set to expire at the end of the year, and there are few signs that Republicans are interested in tackling the issue at all.    

If Congress takes no action, premiums for subsidized enrollees are projected to increase by over 75 percent starting in January 2026, according to KFF. 

But some states are pushing back.  

Arkansas Gov. Sarah Huckabee Sanders (R) on Wednesday called on the state’s insurance commissioner to disapprove the proposed increases from Centene and Blue Cross Blue Shield. The companies filed increases of up to 54 percent and 25.5 percent, respectively, she said.  

“Arkansas’ Insurance Commissioner is required to disapprove of proposed rate increases if they are excessive or discriminatory, and these are both,” Huckabee Sanders said in a statement.

“I’m calling on my Commissioner to follow the law, reject these insane rate increases, and protect Arkansans.”  

Expect More Hunger in America with Big New Rips to the Safety Net

Posted on by • Posted in 2026 Mid Term Election Issues, 2028 Election Issues, Health Policy, Healthcare Cuts, Healthcare Reform, Hunger, Medicaid, Medicaid Cuts, Medicaid Eligibility, Medicaid Funding, Medicaid Work Requirements, Public Good, Public Health, Public Interest, Public Welfare, Safety Net, Supplemental Nutrition Assistance Program (SNAP) • Tagged , , , , • Leave a comment

https://healthcareuncovered.substack.com/p/expect-more-hunger-in-america-with

The recently passed One Big Beautiful Bill Act, which makes deep cuts to the Medicaid program, also puts the food assistance that 41 million low-income Americans rely on in jeopardy. Many of the families currently getting food provided by  the Supplemental Nutrition Assistance Program (SNAP) stand to lose that support.  

SNAP may well disappear for some families as the federal government moves to trim it. “The cuts are massive and extremely cruel when families need more support, not less,” says Signe Anderson, senior director of nutrition advocacy, at the Tennessee Justice Center in Nashville. 

Government food assistance was established during the Great Depression, but it wasn’t until 1977 that the program became more accessible when the requirement that recipients had to pay for a portion of their food stamps was ended. Throughout its history, foes of the program have tried to dismantle it and may have succeeded as a result of provisions in the bill President Trump signed on July 4. 

The new legislation calls for cutting spending for food stamps by $186 billion through 2034. “Everyone on food stamps will be affected in some way, and many will lose benefits,” Anderson says. “I don’t think the Congress understands the level of necessity in the community for food, health care and mental health treatment, some for the rest of their lives.” 

One major change is being made to work requirements that have historically been part of the Medicaid program, which is administered and partially funded by the states. Anderson points out that under the new arrangements, participants may find the task of enrolling and staying enrolled more onerous. “We see a lot of people cut off already because too many life circumstances make it difficult for them to meet work requirements.”  

Indeed when you look at the changes to SNAP, the first word that might come to mind is ‘draconian.’

To receive benefits those new to the program, and those already on it who are between 55 and 64 and do not have dependent children or who have children 14 and older, will have to prove they work. Or they will have to volunteer at least 20 hours a week or enroll in training programs. Parents of school-aged children will now be required to work.

Some five million people, including about 800,000 children and about a half million adults who are 65 and older, could lose their food benefits.  

The programs the new law targets have been a lifeline for some. Nikole Ralls, a 43-year-old woman in Nashville, who was once a drug addict but now counsels others who need help, says, “I got my life turned around because of Medicaid and SNAP.”  

In a recent memo to state agencies administering the SNAP program, Agriculture Secretary Brooke Rollins said she was concerned about what was described as abuse of the waiver system by states, noting that the new approach for the SNAP program would prioritize work, education and volunteering over what the department characterized as “idleness and excessive spending.” 

Anderson said, “The public doesn’t understand what hunger looks like and are misinformed about how well-run and streamlined the SNAP program is.”   

“Most of the people who can, do work.  We have parents working two and three jobs,” Anderson said. For families in this predicament food banks, which have become default grocery stores, may be of little help.  They, too, are stretched thin. The Wall Street Journal reported food banks across the country are already straining under rising demand, and some worry there won’t be enough food to meet demand.

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
https://healthcareuncovered.substack.com/p/how-drug-prices-got-so-bloated?utm_source=post-email-title&publication_id=255152&post_id=169171522&utm_campaign=email-post-title&isFreemail=true&token=eyJ1c2VyX2lkIjo4ODU1Nzg5LCJwb3N0X2lkIjoxNjkxNzE1MjIsImlhdCI6MTc1MzQ0OTUxNiwiZXhwIjoxNzU2MDQxNTE2LCJpc3MiOiJwdWItMjU1MTUyIiwic3ViIjoicG9zdC1yZWFjdGlvbiJ9.duxGPDH1QMjULHWG9_pg6FQdsvj19UocpbArG67oe7Q&r=59t65&triedRedirect=true&utm_medium=email

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.

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

Posted on by • Posted in Health Insurance Denial, Health Insurance Industry, Prior Authorization, Profit, Profit Margin, Profit Model, Profit Motive, Shareholder Expectations, Wall Street • Tagged , , , , • Leave a comment
https://healthcareuncovered.substack.com/p/from-nonprofit-blues-to-wall-street?utm_source=post-email-title&publication_id=255152&post_id=168648259&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

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.

DOJ Questions UnitedHealth Doctors Re: Medicare Advantage Upcoding

Posted on by • Posted in Dept of Justice (DOJ), Health Insurance Industry, Medicare Advantage, Medicare Advantage Overpayments, Physician, Physician Diagnosis, Profit, Profit Margin, Profit Model, Profit Motive, UnitedHealthcare, Upcoding • Tagged , , , , • Leave a comment
https://healthcareuncovered.substack.com/p/doj-questions-unitedhealth-doctors?utm_source=post-email-title&publication_id=255152&post_id=167915638&utm_campaign=email-post-title&isFreemail=true&r=59t65&triedRedirect=true&utm_medium=email

I’ve been at this for so long and have seen so much. And it’s hard to overstate how significant the latest revelations from The Wall Street Journal are. According to its reporting, the U.S. Department of Justice’s criminal health care-fraud unit is questioning former UnitedHealth Group employees about the company’s Medicare billing practices regarding how the company records diagnoses that trigger higher payments from taxpayers.

For years, independent policy experts and *some* regulators have warned that the private Medicare Advantage program has become a breeding ground for upcoding and tax dollar waste. The tactic being scrutinized by the DOJ is called “upcoding.” Essentially, Medicare Advantage companies have an incentive to “find” new illnesses — even among patients who might not need additional treatment because the more serious the diagnoses, the bigger the government payouts to the company.

According to the Journal, prosecutors, FBI agents, and the Health and Human Services Inspector General have been asking ex-employees about special training for doctors, software that flags profitable conditions, and even bonuses for physicians who recode patient files. One former UnitedHealth doctor told the Journal that prosecutors inquired about pressure to use certain diagnosis codes and bonus pay for certain health care decisions that financially favored UnitedHealth. 

The Journal’s data shows that UnitedHealth’s members received certain lucrative diagnoses at higher rates than patients in other Medicare Advantage plans — billions of extra dollars that ultimately come from taxpayers. In one example, they reportedly pulled in about $2,700 more taxpayer dollars per patient visit when nurses went into seniors’ homes to hunt for additional conditions.

In a statement, UnitedHealth insists they “remain focused on what matters most: delivering better outcomes, more benefits, and lower costs for the people we serve.”

This latest criminal investigation joins at least two other DOJ probes into UnitedHealth’s billing and potential antitrust violations. And it’s yet another reminder that the Medicare Advantage program — which, much to many advocates alarm, now covers more than half of all Medicare enrollees – is desperately in need of real oversight.

If there’s any silver lining, it’s that courageous former employees are speaking up. They know what I know: This “profit-maximizing” through “upcoding” and “favorable selection” drains billions that could be better spent on actual patient care and pad Wall Street profits.

Gut Punches for Healthcare and Hospitals

Posted on by • Posted in 2026 Mid Term Election Issues, 2028 Election Issues, Bankruptcy, Center for Medicare and Medicaid Services (CMS), Deferred Healthcare, Financially Distressed, Health Insurance Coverage Adequacy, Health Policy, Health System, Healthcare Industry, Hospital, Hospital Industry, Medicaid Cuts, Medical Debt, Out of Pocket Expenses, Politics, Profit, Profit Margin, Profit Model, Profit Motive, Public Opinion, Public Perception, Shareholder Expectations, Sign of the Times, Underinsured, Uninsured, Wall Street • Tagged , , , , • Leave a comment
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.

Health Insurance as a Share of Median Income by U.S. State

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https://www.visualcapitalist.com/mapped-health-insurance-as-a-share-of-median-income-by-u-s-state/

Health Insurance as a Share of Median Income by U.S. State

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

Key Takeaways

  • Vermont tops the list, with insurance costing 19.6% of median income.
  • New Hampshire residents spend just 4% of their income on health insurance, the lowest in the nation.

Americans pay wildly different amounts for health insurance depending on where they live. This map shows which states pay the most (and least) when health insurance costs are measured as a share of median income.

The data for this visualization comes from WalletHub. It analyzed silver-tier health plan premiums in all 50 states and compared them to local median incomes to determine cost burdens.

Vermont and West Virginia Lead in Cost Burden

In Vermont, residents spend 19.6% of their monthly income on health insurance, the highest share in the country. West Virginia follows closely at 18.8%.

The South and Mountain West Feel the Pinch

Many Southern and Mountain West states, like Mississippi, Wyoming, and Louisiana, also rank high in insurance cost burden. These regions tend to have poorer health outcomes and lower median incomes, exacerbating affordability issues. As Brookings notes, Medicaid expansion status and rural demographics heavily influence insurance markets in these areas.

New Hampshire and the Northeast Are Least Burdened

New Hampshire residents spend just 4% of their income on health insurance, the lowest in the nation.

Massachusetts, Maryland, and Minnesota also enjoy low cost burdens. These states often have robust state-run exchanges, higher incomes, and broader Medicaid expansion, all of which help reduce costs.

GOP faces ‘big, beautiful’ blowback risk on ObamaCare subsidy cuts

Posted on by • Posted in 2026 Mid Term Election Issues, 2028 Election Issues, ACA, Health Insurance Coverage Adequacy, Health Policy, Healthcare Reform, Out of Pocket Expenses, Uncompensated Care, Underinsured, Uninsured • Tagged , , , , • Leave a comment
GOP faces ‘big, beautiful’ blowback risk on ObamaCare subsidy cuts

Medicaid cuts have received the lion’s share of attention from critics of Republicans’ sweeping tax cuts legislation, but the GOP’s decision not to extend enhanced ObamaCare subsidies could have a much more immediate impact ahead of next year’s midterms. 

Extra subsidies put in place during the coronavirus pandemic are set to expire at the end of the year, and there are few signs Republicans are interested in tackling the issue at all. 

To date, only Sens. Lisa Murkowski (R-Alaska) and Thom Tillis (R-N.C.) have spoken publicly about wanting to extend them. 

The absence of an extension in the “big, beautiful bill” was especially notable given the sweeping changes the legislation makes to the health care system, and it gives Democrats an easy message: If Republicans in Congress let the subsidies expire at the end of the year, premiums will spike, and millions of people across the country could lose health insurance.  

In a statement released last month as the House was debating its version of the bill, House and Senate Democratic health leaders pointed out what they said was GOP hypocrisy. 

“Their bill extends hundreds of tax policies that expire at the end of the year. The omission of this policy will cause millions of Americans to lose their health insurance and will raise premiums on 24 million Americans,” wrote Senate Finance Committee ranking member Ron Wyden (D-Ore.), House Ways and Means Committee ranking member Richard Neal (D-Mass.) and House Energy and Commerce Committee ranking member Frank Pallone (D-N.J.). 

“The Republican failure to stop this premium spike is a policy choice, and it needs to be recognized as such.” 

More than 24 million Americans are enrolled in the insurance marketplace this year, and about 90 percent — more than 22 million people — are receiving enhanced subsidies.

“All of those folks will experience quite large out-of-pocket premium increases,” said Ellen Montz, who helped run the federal ObamaCare exchanges under the Biden administration and is now a managing director with Manatt Health. 

“When premiums become less affordable, you have this kind of self-fulfilling prophecy where the youngest and the healthiest people drop out of the marketplace, and then premiums become even less affordable in the next year,” Montz said. 

The subsidies have been an extremely important driver of ObamaCare enrollment. Experts say if they were to expire, those gains would be erased.  

According to the Congressional Budget Office (CBO), 4.2 million people are projected to lose insurance by 2034 if the subsidies aren’t renewed.  

Combined with changes to Medicaid in the new tax cut law, at least 17 million Americans could be uninsured in the next decade. 

The enhanced subsidies increase financial help to make health insurance plans more affordable. Eligible applicants can use the credit to lower insurance premium costs upfront or claim the tax break when filing their return.  

Premiums are expected to increase by more than 75 percent on average, with people in some states seeing their payments more than double, according to health research group KFF. 

Devon Trolley, executive director of Pennie, the Affordable Care Act (ACA) exchange in Pennsylvania, said she expects at least a 30 percent drop in enrollment if the subsidies expire. 

The state starts ramping up its open enrollment infrastructure in mid-August, she said, so time is running short for Congress to act. 

“The only vehicle left for funding the tax credits, if they were to extend them, would be the government funding bill with a deadline of September 30, which we really see as the last possible chance for Congress to do anything,” Trolley said. 

Trolley said three-quarters of enrollees in the state’s exchange have never purchased coverage without the enhanced tax credits in place.  

“They don’t know sort of a prior life of when the coverage was 82 percent more expensive. And we are very concerned this is going to come as a huge sticker shock to people, and that is going to significantly erode enrollment,” Trolley said.  

The enhanced subsidies were first put into effect during the height of the coronavirus pandemic as part of former President Biden’s 2021 economic recovery law and then extended as part of the Inflation Reduction Act. 

The CBO said permanently extending the subsidies would cost $358 billion over the next 10 years. 

Republicans have balked at the cost. They argue the credits hide the true cost of the health law and subsidize Americans who don’t need the help. They also argue the subsidies have been a driver of fraudulent enrollment by unscrupulous brokers seeking high commissions. 

Sen. Bill Cassidy (R-La.), chair of the Senate Health, Education, Labor and Pensions Committee, last year said Congress should reject extending the subsidies. 

The Republican Study Committee’s 2025 fiscal budget said the subsidies “only perpetuate a never-ending cycle of rising premiums and federal bailouts — with taxpayers forced to foot the bill.” 

But since 2020, enrollment in the Affordable Care Act marketplace has grown faster in the states won by President Trump in 2024, primarily rural Southern red states that haven’t expanded Medicaid. Explaining to millions of Americans why their health insurance premiums are suddenly too expensive for them to afford could be politically unpopular for Republicans.

According to a recent KFF survey, 45 percent of Americans who buy their own health insurance through the ACA exchanges identify as Republican or lean Republican. Three in 10 said they identify as “Make America Great Again” supporters. 

“So much of that growth has just been a handful of Southern red states … Texas, Florida, Georgia, the Carolinas,” said Cynthia Cox, vice president at KFF and director of the firm’s ACA program. “That’s where I think we’re going to see a lot more people being uninsured.”