If you’re wondering why insurance companies deny necessary care and get away with it, it’s not only that the insurers are pulling all the strings and have become too big to fail. It’s that different doctors often have different opinions about what is medically necessary. A new report from the Center for Improving Value in Health Care focuses on the health care that people get that the Center says is not medically necessary, driving up health care spending, reports Markian Hawryluk for KFF Health News.
The amount spent on unnecessary care or “low value” care in Colorado, as reported–$134 million in 2022–seems relatively small. The Center says it is the tip of the iceberg. But who is to judge what is low-value care? The health insurance companies should not be the judge when they profit from denying care.
There is tremendous risk in turning authority over treatment decisions from physicians to insurance companies, as Medicare has done through the Medicare Advantage program. Where is the value in handing buckets of money to health insurance corporations who can deny coverage for low, medium and high value care without justification, in secret, largely with impunity, in order to maximize profits?
Of course, there is no perfect payment system. The Center for Improving Value in Health Care appears to like the idea of giving insurers buckets of money to cover care. But, rather than giving insurers the discretion over these treatments, isn’t the fix to have national policies, publicly vetted, about what is covered and not covered? If opiates, antipsychotics and screenings for Vitamin D deficiency are really unnecessary in most cases, why are insurers covering them?
A capitated payment system–one in which the insurers are handed money upfront to “manage” care–simply changes the incentives, disregarding physician opinions, working against patients, and rewarding insurance companies for giving less care or for denying care inappropriately. And, corporate health insurers operate in a proprietary or secret system. Researchers can’t even learn whether what insurers are doing when they deny care is endangering people’s lives or helping them. How does that add value?
What’s crystal clear is that if we are going to improve the health care system, we need to collect and review patient data. We need to know what is working and not working. We need to know in real-time what’s happening to protect people from insurance companies that put their profits first. And, we need to be doing what other wealthy nations do: Dictating all the terms of coverage, removing discretion over coverage decisions from insurance companies, so that people can count on getting the care they need without delay and are not forced to gamble with their health.
A new report from the Center for Economic and Policy Research, “Profiting at the Expense of Seniors: The Financialization of Home Health Care,” finds that new policies at the Centers for Medicare and Medicaid Services (CMS), which administers Medicare, let private equity and other corporate players profit wildly from owning home health care agencies. At the same time, these corporate players shortchange people with Medicare, keeping them from getting medically necessary home care that Medicare covers.
Unlike in days of yore when home care agencies were often mom and pop shops and nonprofit agencies, today private equity firms and health insurance companies often own home health care agencies. And, their incentive is to stint on care. The less care they cover, the more they profit. So, they override your treating physician regarding the care you need. They tend to think you don’t need care or need less care.
CMS says it wants to crack down on fraud. But, in many ways, it is encourage it, allowing health insurance companies and private equity firms to direct care and not overseeing these profit-maximizing entities or holding them accountable for their bad acts.
The fraud and bad acts go beyond home health care; it is pervasive in Medicare Advantage. The CMS Medicare Advantage payment system is defective, allowing corporate insurers who run Medicare Advantage plans to charge the government way more for their services than is appropriate. By CEPR’s calculations, based on various Medicare Payment Advisory Commission (MedPac) studies, Medicare Advantage plans receive about 19 percent more for each enrollee than CMS spends on people in traditional Medicare.
Corporate insurance company overcharges drive up Medicare Part B premiums for everyone with Medicare. As a result, people in Original Medicare are helping to subsidize the corporate health insurers running Medicare Advantage. Everyone, including taxpayers, are paying more for Medicare than they should be paying.
“Medicare services are almost entirely funded by the payroll taxes of working people. They deserve a health care system in their older years that is patient-centered, not profit-driven,” said Eileen Appelbaum, one of the authors of the report. “The goal of CMS is to change Medicare as we know it by 2030, and Congress must rise to the occasion to protect patients and taxpayers.”
Among other things, the report’s authors recommend that Congress strengthen Traditional Medicare. CMS also must oversee the insurance companies and private equity firms operating home health agencies and hold them accountable for their bad acts.
The big for-profit insurers made more than $40 billion in profits during the first six months of this year but Wall Street doesn’t consider that nearly enough. Investors have been shifting money away from those companies, which, I can assure you, has set off alarm bells in the C-Suite.
Because top executives’ compensation is tied to meeting specific financial metrics, including shareholders’ return on investment, the CEOs are especially motivated to right the ship and reduce the percentage of revenues their companies pay out in claims to provider groups and facilities the companies don’t own. You can be certain they’ll be pulling all the levers they can think of.
I would be surprised if some of them haven’t already called in McKinsey & Co. or another big consulting firm to look under the hood. (When I worked in the industry, the chief financial officer of one of my employers had McKinsey on a $50,000-a-month retainer.) But with the stock price falling at all of the companies while the Dow and other Wall Street indices are humming along, the consultants will be called in for a special assignment beyond any retainer. They’ll do a deep dive into the companies’ operating and staff divisions and develop recommendations to “streamline” operations, cut expenses and reallocate resources.
Here are some things to expect in the coming weeks and months at these companies:
Increased hardball with hospital systems: As I’ve reported, Elevance/Anthem, which owns several for-profit Blue Cross plans around the country, is in a protracted dispute with Bon Secours Mercy Health, a hospital system in Ohio and Virginia, over Medicaid and Medicare Advantage reimbursements. Earlier this month, BSMH sued Elevance/Anthem for $93 million in unpaid and disputed claims. The suit claims that Elevance/Anthem’s audits are a “bad faith attempt to bludgeon BSMH Virginia into submission in the contract negotiations, as opposed to a good faith exercise of Anthem’s discretion.”
Take it or leave it pay cuts to doctors: Just as the pandemic was reaching the United States in early 2020, UnitedHealth Group sent letters to numerous physician groups demanding pay cuts of up to 60%. If the doctors — many of whom were on the front lines trying to keep Covid patients alive — refused, they’d be kicked out of UnitedHealth’s provider network. UnitedHealth rescinded or postponed some of those planned cuts temporarily, but physicians should expect to see those demands again from big insurers.
Layoffs: I know from personal experience that when McKinsey shows up, layoffs are almost always inevitable. Job security for many employees goes out the window. I had to lay off members of my own staff over the years because of the “restructurings” and downsizing McKinsey recommended.
Sure enough, late last month, CVS/Aetna told regulators in eight states that it would eliminate about 5,000 position — even as the company made additional acquisitions, including paying $8 billion for Signify Health, a nationwide network of 10,000 clinicians, and $10 billion for Oak Street Health, a primary care company.
Divestitures: Speaking of CVS/Aetna, I’ve seen reports that investors are questioning the company’s “transformation” efforts, especially in light of the fact that the company’s shares have been down more than 25% since the first of the year. When Wall Street financial analysts signal dissatisfaction with the performance of a company’s operating divisions, the CEO and other executives will assess which operations have become a drain on earnings or are not working synergistically with other and more profitable divisions.
Big insurers are like chameleons, constantly recasting themselves based on Wall Street’s whims. When I joined Cigna in 1993, the company was a large multi-line insurer with a property and casualty division, an individual insurance business, a reinsurance division and a financial services company. Aetna had similar lines of business back then. Both companies shed those operations at the behest of investors and analysts to focus exclusively on health care.
Exiting some Obamacare markets: When the Affordable Care Act marketplaces became active in 2014, most insurers rushed in, and many, the big ones in particular, quickly rushed out. They couldn’t make enough money fast enough to satisfy Wall Street. Since then, the government has increased subsidies (at least temporarily) to help people afford their premiums and out-of-pocket obligations, and many insurers, smelling higher profits, have returned. However, this marketplace can be volatile. Cigna announced last month it is exiting some of the Obamacare markets it had recently entered.
Redoubled efforts to enroll more seniors into Medicare Advantage: Insurers have learned that the federal government is a much more generous customer than the nation’s employers, who once were the primary source of insurers’ revenues and profits. When looking at 2021 data, Kaiser Family Foundation researchers found that “Medicare Advantage insurers reported gross margins averaging $1,730 per enrollee, at least double the margins reported by insurers in the individual/non-group market ($745), the fully insured group/employer market ($689), and the Medicaid managed care market ($768).
Purging customers: The Affordable Care Act makes it illegal for insurers to refuse to sell coverage to people with pre-existing conditions or to charge them more based on their health, but it doesn’t stop them from making premiums unaffordable. Insurers learned long ago that a way to drive away unprofitable individual and small-business customers is to jack up the rates so high those customers will leave. This is known as purging in the health-insurance business. Cigna and other insurers are planning double-digit premium increases for many of those customers in 2024 to boost profits. Cigna’s chief financial officer told investors last month that, “We are likely to have fewer customers in the individual exchange business in 2024 relative to where we are in 2023.” Getting rid of some of those people, he said, should increase the company’s profit margin.
Aggressive use of prior authorization: Federal investigators found in July that some of the big insurers make much more aggressive use of prior authorization in Medicare Advantage and Medicaid than in their commercial health plans, meaning they are refusing to cover the cost of care for many seniors and low-income Americans to boost profits. Doctors have complained for years that insurers are increasingly refusing to pay for care their patients need, regardless of plan type. In the face of congressional scrutiny, Cigna, UnitedHealth and some other companies recently announced they will reduce the number of treatments requiring advanced approval, but don’t be surprised if that applies to a small percentage of patients — and primarily patients receiving care from doctors they employ or who work in clinics and other facilities the insurers own.
Benefit buydowns: An age-old trick insurers have used for decades to improve profit margins is to reduce the value of their health benefit plans while they also increase premiums. Behind closed doors, this is called “benefit buydown.” It manifests in many ways, including making health-plan enrollees pay more out of their own pockets before the coverage kicks in, removing doctors and hospitals from their provider networks, increasing prior-authorization requirements, and refusing to pay claims after medical care has been provided. Cigna reportedly used a software program to reject more than 300,000 requests for payment over two months in 2022. Lawyers in California have filed a class-action lawsuit against the company, claiming it uses an algorithm to deny claims en masse and without human review.
Increase in inter-company eliminations: The ACA requires insurers to pay 80-85% of revenues on patient care. If they spend less than that, they have to send rebate checks to their customers. But the big companies that have moved swiftly into health care delivery have found they can circumvent that requirement — and congressional intent — by paying themselves. The ACA requirement doesn’t apply to health care providers, so UnitedHealth, Cigna and CVS/Aetna in particular are steering their health-plan enrollees to care delivery entities they own. UnitedHealth, which employs more than 70,000 doctors, is clearly the pack leader. During the first half of this year, UnitedHealth categorized $66 billion as “eliminations.” That amounted to 25% of total revenues.
Bottom line: Expect to pay more for your health insurance AND your health care next year — if you can get it at all — to make Wall Street financial analysts and investors (including those in the C-Suite) a little happier and richer.
Robins Fields reports for Pro Publica on the serious challenge facing anyone, including people with Medicare, trying to choose health insurance. There is no way for them to know which corporate health plans deny care frequently; some of these health plans have super high denial rates that can put the health and well-being of their enrollees at risk. So, if you’re choosing among Medicare Advantage plans, the corporate health plan alternative to the government-administered traditional Medicare option–which has a very low denial rate– beware.
As Fields explains in her story, people need to know about health plan denial rates in order to make an informed choice. After all, you’re buying insurance to ensure that when you need care, you can get it and, when you need care urgently, you can get it swiftly, without worry about the cost. But, even though reports show that some health plans deny as many as one in three requests for coverage, jeopardizing access to care for people in those plans, you can’t know which ones those are.
The problem of not knowing about Medicare Advantage plan denial rates is most acute when you are diagnosed with a complex and costly condition and need a lot of care. Will you get to the oncologist before your cancer spreads? Will your health plan even cover the tests you need to see whether you have cancer?
Fields tried to get the information on health plan denial rates without any success. What’s so troubling is that this information should be easily accessible but neither the federal government nor state governments have tried to correct it. Pro Publica has already exposed how top insurers deny claims speedily and even in bulk in some cases. So, it’s clear that people need protection from these insurers.
Of note, the Affordable Care Act legislation gives federal regulators authority to force insurers to turn over health plan denial information. But, more than ten years later the federal government has not collected helpful information.
Fields reports that only two states collect some health insurer denial rates for public scrutiny. Unfortunately, they don’t collect data on most health plans.
As Karen Pollitz, a researcher at Kaiser Family Foundation reports, “This is life and death for people: If your insurance won’t cover the care you need, you could die.” “It’s all knowable. It’s known to the insurers, but it is not known to us.. . . The insurers are not wanting to disclose this information and push back when asked for it. They claim it imposes burdens that “outweigh the benefits for consumers.”
In an op-ed for Forbes, Robert Pearl, MD, former longtime CEO of California-based Permanente Medical Group–the part of Kaiser Permanente responsible for health care delivery–shares his views on Kaiser Permanente’s recent purchase of Geisinger, a Pennsylvania-based health care system. What are the implications for patients, their doctors and the health insurers? Both Kaiser and Geisinger are non-profit corporations, which once meant that they likely provided better care than the for-profits. Does it still?
Pearl notes that Kaiser Foundation Health Plan and Hospitals, the insurance side of Kaiser Permanente, acquired Geisinger. Kaiser Permanente is calling its new acquisition, Risant Health. And, Kaiser claims it bought Geisinger because it is focused on growing larger through acquisitions of other nonprofit health systems that have been prized for their good health care. Interestingly, Kaiser paid more than $1 billion for Geisinger, even though Geisinger lost more than $200 million in 2022.
While there is no good data confirming which health plans offer the highest quality care, it has long been assumed that Kaiser is one of them. The National Committee for Quality Assurance (NCQA), Leapfrog Group JD Power and Medicare all claim that Kaiser gets high patient satisfaction ratings.
Now, Kaiser wants to be known nationally. Kaiser operates in eight states and has 13 million enrollees. But, Kaiser has never been able to spread its wings beyond California and the mid-Atlantic to all parts of the US in a major way, as has UnitedHealth and Humana, for example.
By growing larger, says Pearl, Kaiser will have greater influence with lawmakers. Moreover, it has a far better chance of survival if it’s larger. The biggest insurers continue to grow larger.
With the purchase of Geisinger, Kaiser will have 600,000 more patients, as well as ten more hospitals and 100 additional health clinics. In Pearl’s words, when it comes to healthcare “size matters.”
What will become of Geisinger? Kaiser says it plans to put $5 billion into the Geisinger health systems, which will help Geisinger’s financial health. But, can Kaiser improve Geisinger’s value-proposition? Kaiser talks the talk of improving care. And, Kaiser focuses on the delivery of “value-based” care, an Orwellian term that has no clear relationship to cost or quality, the two components of value.
Here’s where the explanation gets technical and questionable. The Permanente Medical Group, which is responsible for care delivery had no involvement in the acquisition. Unless that group is brought in, Pearl does not see how health outcomes improve. But, even if they are brought in, why are they better than the clinical team at Geisinger?
It’s the insurance arm of Kaiser that bought Geisinger, and insurers are not known for their strength in care coordination or quality improvement. The Kaiser acquisition does not involve the Kaiser doctors. Pearl argues that physician leadership is needed to create better health outcomes, for example, getting doctors to adopt better ways of practicing medicine.
So, what’s the odds that Kaiser will do better for its patients with this acquisition of Geisinger? Pearl argues, along with many others, that the fee-for-service model for paying physicians and other health care providers leads to overtreatment, in many instances, with no better clinical outcomes. But, Pearl fails to acknowledge the inherent flaw in the capitated payment model. Paying health care providers and insurers a fixed rate too often leads to undertreatment, with worse health outcomes. The less care they deliver the more money they earn.
In theory, if provider groups manage care well, they bring down costs. But, in practice, it often doesn’t work that way. Rather, the provider groups steer away from people with costly and complex conditions in order to spend less on care and profit more. And, since patients can change health plans from year to year, they have little incentive to manage care for the long-term.
Pearl acknowledges that insurers that are paid a fixed fee upfront to cover care for their enrollees have an incentive to reduce volume of care rather than improve value. He believes that providers do not have that same incentive, that providers do not face financial pressures to delay and deny needed care.
The most important issue to resolve is whether these shifts will ultimately help or harm patients.Pearl is optimistic that, in the long-run, the system will help patients. He foolishly believes that the big behemoth insurers will want to provide great care and the losers will die out. Their IT will make the difference.
Yes, the big insurers will want to keep their members who are relatively healthy and cost little to treat happy. They represent the majority of enrollees at any given time. But, that’s the easy piece. What Pearl fails to acknowledge is the 10 percent of people who are responsible for about 70 percent of costs and for whom the system is designed to fail. And, when people fall into that 10 percent cohort, which we all will do at some point, we are likely to lose big time.
Elisabeth Rosenthal writes for The Washington Post on the rising rate of health insurance denials. High denial rates are not surprising given that health insurers generate greater revenues on each claim they deny. Consequently, they often use proprietary computer algorithms to deny claims in a systematic fashion, with no regard for people’s medical needs.
Since the Affordable Care Act, health insurers can no longer refuse to cover people with pre-existing conditions in many instances. Instead, to maximize profits, they find ways to deny care. Rosenthal highlights how one insurance company literally has as a job title “denial nurse.”
Although the US Department of Health and Human Services is charged with overseeing insurance company denials, it has not undertaken its oversight responsibilities in a meaningful way. Rather, too often, patients are faced with care denials and the obligation to pay for their care themselves or skip getting care altogether.
The Kaiser Family Foundation (KFF) recently reported that, in 2021, one in six claims for in-network care in the state health insurance exchanges were denied, 17 percent. In one case, the insurer denied half of all claims, 49 percent! Worse still, another insurer denied four in five claims, 80 percent. And, while insurers reverse the majority of denials when people appeal, patient appeal rates are extremely low–one in 500.
At times, denials are not only medically incomprehensible but nonsensical. For example, one patient with arrhythmia had his insurer’s approval for a heart procedure, but he was denied coverage “for injections into nerves in your spine,” which he had not received. The insurer had not paid the claim many months later, notwithstanding endless attempts to fix the error.
In another instance, the insurer wrote a newborn to let the baby know that his neonatal care was denied because the baby could drink from a bottle and breathe on his own. Of course, the baby could not read the denial! And, an insurer denied coverage for epinephrine and steroids received in the emergency room to treat a young man with a deadly anaphylactic allergic reaction, which the insurers claimed was medically unnecessary. Though the patient’s mother has appealed, she still has not gotten the insurance to cover the services.
Increases in insurer denial rates are likely a product of a computer system, PXDX, which I wrote about here, that allows insurers’ medical claims-review staff to deny 50 claims in ten seconds. This system saves insurers billions of dollars a year, at the expense of the health and well-being of their enrollees.
To add insult to injury, claims can be denied because an insurer does not have a contract with a particular drug or device manufacturer. It doesn’t matter that the patient needs the treatment.
Of course, these denials are also happening in Medicare Advantage plans. And, the Centers for Medicare and Medicaid Services (CMS) is not reporting plan denial rates to enable people to avoid plans with high denial rates. In fact, most likely, those plans are getting four and five-star ratings, because the rating system is such a farce! (You can read about why the Medicare Advantage star-ratings are a farce here.)
The Affordable Care Act gives health insurer oversight responsibilities to HHS and requires HHS to collect and publicly report denial rates among corporate health insurers in the state health exchanges. But, HHS has not undertaken this data collection and reporting, as required. So, after more than a decade of failed government oversight, the insurers continue to deny claims with impunity.
Becker’s Payer Issues reports that Medicare Advantage Special Needs Plans–health plans for people with Medicare and Medicaid–are the fastest growing segment of the Medicare Advantage market. They offer coverage in 45 states. But, at least one study of Special Needs Plans suggest that they might not offer better care management than standard Medicare Advantage plans, even though they cost more.
Nearly half of dual-eligibles–people with Medicare and Medicaid–are enrolled in a Special Needs Plan, about 5.5 million out of 12.5 million. The vast majority of them (87 percent) have incomes under $20,000 a year. Four in ten of them have incomes under $10,000.
One in eight dual-eligibiles (13 percent) are living in a long-term care facility. Only one in 100 people with Medicare live in a long-term care facility. And, about half of dual-eligibles are people of color. One in five people in the Medicare population are people of color.
In Traditional Medicare, dual-eligibles represent 17 percent of the population and 33 percent of spending. Inexplicably, spending information for the dual-eligibles in Medicare Advantage is not available. More than four in ten of the dual-eligible population (44 percent) is in fair or poor health; overall, 17 percent of people with Medicare are in fair or poor health.
The government offers people three different types of Special Needs Plans. With 4.9 million enrollees, D-SNPs for dual-eligibles have the largest population. C-SNPs provide care to 450,000 people with chronic or disabling conditions, particularly people with disabilities and cardiovascular disease. And, !-SNPs serve 107,000 people getting institutional care.
Clearly, the health insurance industry sees big dollar signs with Special Needs Plans. They get paid more for dual-eligibles and, as it is, they get paid handsomely for treating the general Medicare population through Medicare Advantage. Enrollment in Special Needs Plans is up more than 17 percent in four years. Enrollment in Medicare Advantagage is up 8.3 percent.
And, you guessed it, UnitedHealthcare covers 39.9 percent of people enrolled in Special Needs Plans. Humana covers 15 percent of people enrolled in Special Needs Plans.
Big Insurance revenues and profits have increased by 300% and 287% respectively since 2012 due to explosive growth in the companies’ pharmacy benefit management (PBM) businesses and the Medicare replacement plans they call Medicare Advantage.
The for-profits now control more than 80% of the national [Pharmaceutical Benefits Manager] PBM market and more than 70% of the Medicare Advantage market.
In 2022, Big Insurance revenues reached $1.25 trillion and profits soared to $69.3 billion.
That’s a 300% increase in revenue and a 287% increase in profits from 2012, when revenue was $412.9 billion and profits were $24 billion.
Big insurers’ revenues have grown dramatically over the past decade, the result of consolidation in the PBM business and taxpayer-supported Medicare and Medicaid programs.
Sucking billions out of the pharmacy supply chain – and taxpayers’ pockets
What has changed dramatically over the decade is that the big insurers are now getting far more of their revenues from taxpayers and the pharmaceutical supply chain as they have moved aggressively into government programs. This is especially true of Humana, Centene, and Molina, which now get, respectively, 85%, 88%, and 94% of their health-plan revenues from government programs.
The two biggest drivers are their fast-growing pharmacy benefit managers (PBMs), the relatively new and little-known middleman between patients and pharmaceutical drug manufacturers, and the privately owned and operated Medicare replacement plans they market as Medicare Advantage.
With the exception of Humana, Centene, and Molina, most of the companies that constitute Big Insurance continue to make substantial amounts of money selling policies and services in what they refer to as their commercial businesses – to individuals, families, and employers – but the seven companies’ commercial revenue grew just 260%, or $176 billion, over 10 years (from $110.4 billion to $287.1 billion). While that’s significant, profitable growth in the commercial sector has become a major challenge for big insurers – so much so that Humana just last week announced it is exiting the employer-sponsored health-insurance marketplace entirely.
The insurers’ commercial businesses have stagnated because small businesses – which employ nearly half of the nation’s workers – are increasingly being priced out of the health insurance market. Most small businesses can no longer afford the premiums. The average premium for an employer-sponsored family plan – not including out-of-pocket requirements – was $22,463 in 2022, up 43% since 2012, which has contributed to the decades-long decline in the percentage of U.S. employers offering coverage to their workers. The percentage of U.S. employers providing some level of health benefits to their workers dropped from 69% to 51% between 1999 and 2022 – including a dramatic 8% decrease last year alone. Growth in this category is largely the result of insurers “stealing market share” from each other or from smaller competitors. As a consequence of this segment’s relative stagnation, PBMs and government programs have become the new cash cows for Big Insurance.
Spectacular PBM Growth
PBM HIGHLIGHTS
Cigna now gets far more revenue from its PBM than from its health plans. CVS gets more revenue from its PBM than from either Aetna’s health plans or its nearly 10,000 retail stores.
UnitedHealth has the biggest share of both the PBM and Medicare markets and, through numerous acquisitions of physician practices, is now the largest U.S. employer of doctors.
PBMs are middlemen companies that manage prescription drug benefitsfor health insurers, Medicare Part D drug plans, employers, and, in some cases, unions. As the Commonwealth Fund has noted:
PBMs have a significant behind-the-scenes impact in determining total drug costs for insurers, shaping patients’ access to medications, and determining how much pharmacies are paid.
The Commonwealth Fund went on to say that PBMs have faced growing scrutiny about their role in rising prescription drug costs and spending. A big reason for the scrutiny – by Congress, state lawmakers and now also by the FTC– is that the biggest PBMs are now owned by Big Insurance. Through mergers and acquisitions in recent years, three of the seven for-profit insurers – Cigna, CVS/Aetna, and UnitedHealth – now control 80% of the U.S. pharmacy benefits market. They determine which drugs will be listed in each of their formularies (lists of drugs they will “cover” based on secret deals they negotiate with pharmaceutical companies) and how much patients will have to pay out of their own pockets at the pharmacy counter – in many cases hundreds or thousands of dollars – before their coverage kicks in. The PBMs also “steer” health-plan enrollees to their preferred or owned pharmacies (and, increasingly, away from independent pharmacists), thereby capturing even more of what we spend on our prescription medications.
Cigna, CVS/Aetna, and UnitedHealth now control 80% of the U.S. PBM market.
Ten years ago, PBMs contributed relatively little to the three companies’ revenues and profits. But since then, the rapid growth of PBMs has transformed all of the companies. The combined revenues from their PBM business units increased 250% between 2012 and 2022, from $196.7 billion to $492.4 billion.
Changes in PBM revenues between 2012 and 2022 for UnitedHealth Group, Cigna, and CVS/Aetna (Editor’s note: Cigna acquired PBM Express Scripts in 2018. To reflect revenue growth, Express Scripts’ pre-acquisition 2012 revenues are included in the Cigna total for that year.)
PBM Profit Generation
The PBM profit growth at the three companies over the past decade was even more dramatic than revenue growth. Collectively, their PBM profits increased 438%, from $6.3 billion in 2012 to $27.6 billion in 2022.
As a result of this fast growth, more than half (52%) of three companies’ profits in 2022 came from their PBM business units: Cigna’s Evernorth, CVS/Aetna’s Caremark, and UnitedHealth’s Optum. Cigna now gets far more revenue and profits from its PBM than from its health plans. And CVS gets more revenue from its PBM than from either Aetna’s health plans or its nearly 10,000 retail stores. (The companies’ business units that include their PBMs have also moved aggressively in recent years into health-care delivery through acquisitions of physician practices, clinics, dialysis centers, and other facilities. Notably, UnitedHealth Group is now the largest U.S. employer of physicians.)
Huge strides in privatizing both Medicare and Medicaid
GOVERNMENT PROGRAMS HIGHLIGHTS
More than 90% of health-plan revenues at three of the companies come from government programs as they continue to privatize both Medicare and Medicaid, through Medicare Advantage in particular.
Enrollment in government-funded programs increased by 261% in 10 years; by contrast commercial enrollment increased by just 10% over the past decade.
Commercial enrollment actually declined at both UnitedHealth and Humana.
85% of Humana’s health-plan members are in government-funded programs; at Centene, it is 88%, and at Molina, it is 94%.
The big insurers now manage most states’ Medicaid programs – and make billions of dollars for shareholders doing so – but most of the insurers have found that selling their privately operated Medicare replacement plans is even more financially rewarding for their shareholders.
Revenue growth from government programs has been dramatic over the past 10 years. (Note the numbers do not include revenue from the Medicare Part D program, federal subsidy payments for many ACA marketplace plan enrollees, or Medicare supplement policies.)
This is especially apparent when you see that the Big Seven’s combined revenues from taxpayer-supported programs grew 500%, from $116.3 billion in 2012 to $577 billion in 2022.
These numbers should be of interest to the Biden administration and members of Congress, many of whom are calling for much greater scrutiny of the Medicare Advantage program. Numerous media and government reports have shown that the federal government is overpaying private insurers billions of dollars a year, largely because of loopholes in laws and regulations that enable them to get more taxpayer dollars by claiming their enrollees are sicker than they really are. The companies also make aggressive use of prior authorization, largely unknown in traditional Medicare, to avoid paying for doctor-ordered care and medications.
In addition to their focus on Medicare and Medicaid, the companies also profit from the generous subsidies the government pays insurers to reduce the premiums they charge individuals and families who do not qualify for either Medicare or Medicaid or who work for an employer that does not offer subsidized coverage. But many people enrolled in those types of plans – primarily through the health insurance “marketplaces” established by the Affordable Care Act – cannot afford the deductibles and other out-of-pocket requirements they must pay before their insurers will begin paying their medical claims.
Dramatic Enrollment Shifts
Changes in health-plan enrollment over the past decade show how dramatic this shift has been. Between 2012 and 2022, enrollment in the companies’ private commercial plans increased by 10%, from 85.1 million in 2012 to 93.8 million in 2022.
By comparison, growth in enrollment in taxpayer-supported government programs increased 261%, from 27 million in 2012 to 70.4 million in 2022.
For-profit insurers dominate the Medicare Advantage market. Note that Anthem mentioned above is now known as Elevance. It owns 14 of the country’s Blue Cross Blue Shield plans.
Within that category, Medicare Advantage enrollment among the Big Seven increased 252%, from 7.8 million in 2012 to 19.7 million in 2022.
Nationwide, enrollment in Medicare Advantage plans increased to 28.4 million in 2022 (and to 30 million this year). That means that the Big Seven for-profit companies control more than 70% of the Medicare Advantage market.
UnitedHealth, Humana, Elevance, and CVS/Aetna have captured most of the Medicare Advantage market since the Affordable Care Act was passed in 2010.
The remaining growth in the government segment occurred in the Medicaid programs that a subset of the Big Seven (UnitedHealth, Elevance, Centene, and Molina in particular) manages for several states.
A few other facts and figures to keep in mind as Big Insurance thrives:
100 million of us – almost one of every three people in this country – now have medical debt.
In 2023, U.S. families can be on the hook for up to $18,200 in out-of-pocket requirements before their coverage kicks in, up 43% since 2014 when it was $12,700.
The Affordable Care Act allows the out-of-pocket maximum to increase annually – 43% since the maximum limit went into effect in 2014.
44% of people in the United States who purchased coverage through the individual market and (ACA) marketplaces were underinsured or functionally uninsured.
42% said they hadproblems paying medical bills or were paying off medical debt.
Half (49%) said they would be unable to pay an unexpected medical bill within 30 days, including 68% of adults with low income, 69% of Black adults, and 63% of Latino/Hispanic adults.
In 2021, about $650 million, or about one-third of all funds raised by GoFundMe, went to medical campaigns. That’s not surprising when you realize that in the United States, even people with insurance all too often feel they have no choice but to beg for money from strangers to get the care they or a loved one needs.
Even as we spend about $4.5 trillion on health care a year, Americans are now dying younger than people in other wealthy countries. Life expectancy in the United States actually decreased by 2.8 years between 2014 and 2021, erasing all gains since 1996, according to the Centers for Disease Control and Prevention.
BOTTOM LINE: The companies that comprise Big Insurance are vastly different from what they were just 10 years ago, but policymakers, regulators, employers, and the media have so far shown scant interest in putting their business practices under the microscope. Changes in federal law, including the Medicare Modernization Act of 2003, which created the lucrative Medicare Advantage market, and the Affordable Care Act of 2010, which gave insurers the green light to increase out-of-pocket requirements annually and restrict access to care in other ways, opened the Treasury and Medicare Trust Fund to Big Insurance. In addition, regulators have allowed almost all of their proposed acquisitions to go forward, which has created the behemoths they are today. CVS/Health is now the 4th largest company on the Fortune 500 list of American companies. UnitedHealth Group is now No. 5 – and all the others are climbing toward the top 10.
Surprise medical bills are all too common, leaving millions of Americans with health care costs they did not expect to pay. A couple of years ago, Congress passed legislation to end surprise medical bills for some services, but the ambulance industry was able to keep Congress from protecting Americans from surprise ambulance bills. Fortunately, people with Medicare have protections and generally do not have to worry.
Congress was resistant to addressing surprise ambulance bills allegedly in deference to municipalities that generate substantial revenue from running ambulance services. Congress also claimed not to have a good handle on the appropriate cost of ambulance services.
A new report from US PIRG describes the toll that surprise medical bills takes on Americans needing ambulance services. Even in the 10 states that go farther than federal law to protect their insured residents from surprise ambulance bills, anyone working for a large employer with a self-funded ERISA health plan—a very large cohort—does not have protection from their state laws.
The problem of surprise ambulance bills needs addressing for multiple reasons. For one, we are talking about a large cohort of the population. Some three million Americans with private insurance use ambulance services each year. Who knows how many do not seek critical care for fear of the cost, endangering themselves.
Second, when people call 911, they have no control over whether the ambulance that comes for them is in their health care provider network. About half the time the ambulances are out of network. Every ambulance affiliated with 911 should be in the insurers’ networks.
Today, working Americans with health insurance are scared to call 911 in an emergency, for fear of an ambulance arriving that is out of network and receiving a surprise bill that they cannot afford to pay or do not want to add to their list of expenses. The typical out-of-pocket cost is $450, but in some states it is more than $1,000. Millions of Americans at risk.
What you can do: Talk to your members of Congress about the urgent need to end surprise ambulance bills. In the meantime, find out which ambulance services are in your health plan’s network, and put their numbers in your phone contact list and/or on a list of important contacts in your home. Share it with your loved ones and health care proxy.
Last week, I wrote about a hospital that incorrectly charged a patient for a costly service it did not render and only corrected the charge a year later, as a result of intensive efforts on the part of the patient’s wife. Now, Kaiser Health News reports on HCA, a for-profit hospital system that is charged with overtreating and overcharging patients and insurers. The government needs to hold hospitals accountable for inappropriate bills and other bad acts.
Kaiser Health News reports on a patient with Covid-19 who went to a hospital emergency room to get checked out at her PCP’s direction. Instead of sending her home after seeing her, the hospital admitted her as an inpatient for three days and charged her $40,000. Of that amount, her insurer charged her $6,000. In this case, the hospital was HCA, the largest hospital system in the country.
In this case, the patient’s PCP did not believe his patient should have been admitted to the hospital. But, hospitals control these decisions. To maximize their profits, some hospitals might provide incentives for their doctors to refer ER patients for an inpatient stay, even when not medically necessary, according to some experts.
Congressman Bill Pascrell of New Jersey is hoping for the government to investigate HCA to determine whether it is engaged in Medicare fraud. The claim is that HCA requires its doctors to meet hospital admission targets and admit patients even when patients don’t need to be admitted. The result is both financial harm and potential health risks for patients.
The Service Employees International Union (SEIU) released a report earlier this year documenting the issues particular to HCA. SEIU argues that overcharges to Medicare over the last ten years amount to nearly $2 billion. But, HCA is not the only culpable hospital according to SEIU. SEIU has made similar claims against Community Health Systems and Health Management Associations. Both hospitals systems settled, for $98 million and $262 million respectively.
It’s not easy to prove that a patient was overtreated and did not receive appropriate care. You need the doctor to speak out, as one doctor did against an HCA hospital in Miami. This doctor claims that HCA told him that he would lose his job if he did not move more ER patients into the inpatient unit of the hospital. The government refused to investigate and to speak to a reporter about why it refused.
