Medicare Advantage has been in the news lately. I’ve been trying to understand why the last three national private insurance companies were making a solid play to increase their Medicare Advantage membership. I thought Medicare was a low-profit product shunned by most corporations. 

Yet, in 2023, Humana made headlines announcing the end of their corporate and individual health insurance to concentrate on Medicare Advantage.  By the end of 2023, Humana had increased their Medicare Advantage Dual Eligible Plans. United Healthcare was hot on their heels announcing plans to expand into Medicare Advantage Dual Eligible Special Needs Plans.

KFF research found Medicare Advantage programs profitability was almost double regular health insurances. Profitability is the total premium paid by the member and government minus the medical costs. Medicare Advantage was far more profitable than regular insurance.

The “Dual Eligible Special Needs Plans” are 3x times more profitable than the Medicare Advantage plans.

The question is, how were Medicare Advantage plans so much more profitable? I attempt to define Medicare Advantage, some of the public policy decisions that may have a hand in our current situations, and the various policies Medicare Advantage has implemented that would increase profitability. 

What is Medicare Advantage?

There are two different Medicare programs. One is run by the federal government and is called Medicare. If you sign up for Medicare, you can buy a supplemental plan run by a private insurer to cover your deductible and co-insurance amounts. The second program is run by private insurers and is called Medicare Advantage. 

Medicare Advantage has benefits similar to those of the federally run Medicare program. The Medicare Advantage plans can modify or adjust some policies and benefits. Private insurers package their Medicare Advantage plans and sell them to seniors, usually at a slight discount on the federal Medicare program.

Both are funded identically. Both Medicare and Medicare Advantage plans are funded by member premiums and transfer payments from the government. To learn more about how this works, check out my article “Medicare Advantage Gets Thrown a Curve Ball to get a Homerun for Seniors“.

Who are the Private Insurers?

Just ten years ago, we had many different private insurers. Today, public policy has assisted in reducing the field to three private national insurers. United Healthcare, Humana, and CVS are the three remaining national players. They actively participate in every aspect of healthcare policy decisions, helping to establish public policy in favor of insurance companies. 

We always want to believe we are in a free market, but with only three big players remaining in the Medicare Advantage program, this is no longer a free market system. 

Public Policy: Critical Legislation Enables Corporate Actions

2010 was a landmark year in legislation for insurance companies. In January, the Supreme Court passed Citizens United, overruling an earlier decision, Austin v. Michigan State Chamber of Commerce. 

In Austin v. Michigan State Chamber of Commerce, the Supreme Court thought it was important for the government to stop companies from having too much say in politics. The Court was worried that when big companies have a lot of money and use it to talk politics, it can mess things up and make it unfair. The Supreme Court believed money from big companies supports the company’s desires and not the desires or needs of the public. 

In the 2010 decision, Citizen’s United, the Supreme Court modified its stance. The Court identified a difference between contributions and expenditures. A contribution went directly to the politician. As long as the money wasn’t going directly to the politician’s campaign, it was an expenditure. 

In Citizens United, the Supreme Court made a unique ruling on expenditures. The Court didn’t believe it necessary to limit how much money companies could spend on political speech. They argued that just because companies spent money, they didn’t always get something back from the politicians they supported.

The Supreme Court was correct, Citizen’s United made politicians obsolete for corporations by changing the balance of power. Allowing corporations unlimited expenditures on political speech enabled them to bypass politicians altogether and create massive marketing campaigns directly to the public. It was the birth of #fakenews.

The change in the balance of power also increased the money needed to run a successful campaign. It made it mandatory for politicians to have these very wealthy corporations as friends. These entities would run campaign marketing for them. Politicians were no longer independent from corporate interests, as being independent could also mean losing massive financial support. 

The Affordable Care Act, a revision of our insurance industry that was unfavorable to private insurers, was passed in 2010. Citizen’s United provided private insurance companies with the means and leverage to position themselves in critical policy areas and push new regulations supporting the private insurance industry. These changes have drastically impacted members, providers, employees, and free markets. 

The most significant change private insurers supported was in 2013. Behind the scenes, they supported the refusal to make the transfer payments to private insurers who had insured Affordable Care members. When these transfer payments were refused, many of the small insurance companies went under.

By 2023, private insurers had expanded out of insurance, gaining a foothold in controlling total healthcare. These large insurance companies were vertically integrating – buying the providers, facilities, prescription services, and software that controls claims processing. Similar to how Citizens United conferred benefits on corporations while harming the public, the concentration and control of healthcare into a few massive health systems has led to higher healthcare costs, without improving quality of care.

Medicare Advantage may be a great opportunity to examine how the concentration of healthcare to a few players can be harmful.

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