The Quiet Revolution: How Private Insurers Rewrote the Rules of Medicare Advantage

Medicare Advantage has been in the news. Why were the last three national private insurance companies moving to increase their Medicare Advantage membership? I thought Medicare was a low-profit product that corporations avoided.

In 2023, Humana drew attention by redirecting its focus from corporate and individual health insurance to concentrate exclusively on Medicare Advantage. Meanwhile, UnitedHealthcare advanced its efforts by expanding into Medicare Advantage Dual Eligible Plans.

Sometime during the last 15 years, Medicare Advantage (the Medicare plans run by private insurance companies) had become very profitable. KFF research found Medicare Advantage programs profitability was almost double regular health insurances. The “Dual Eligible Special Needs Plans” are 3x times more profitable than the Medicare Advantage plans.

What factors transformed Medicare Advantage plans—funded by our tax dollars and managed by private corporations—into such lucrative ventures for large companies?

First, let’s define Medicare Advantage plans. Second, lets look at public policy decisions that have enhanced the profitability of these plans for corporations. Lastly, let’s look at the policy changes corporations have made in Medicare Advantage plans that have dramatically increased profits.

1. DEFINING MEDICARE ADVANTAGE

What is Medicare Advantage?

There are two different Medicare insurance programs: Medicare and Medicare Advantage.

Medicare or traditional Medicare is run by the federal government.
Medicare Advantage plans, unlike traditional Medicare, are operated by private insurers but funded by the government.

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. The corporations package their Medicare Advantage plans and sell them to seniors, usually at a slight discount on the federal Medicare program.

Both traditional 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. These three corporations 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.

2. PUBLIC POLICY

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 corporations supports the corporation’s desires – 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 and changed the balance of power. Public policy was no longer made by politicians and the people, it was made by corporations and the 1%. How? By allowing corporations unlimited expenditures on political speech they could bypass politicians altogether and go directly to the public. With their experience in marketing, they created 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. And we became pawns of their massive media campaigns.

A second piece of legislation was passed in 2010. The Affordable Care Act, a revision of our insurance industry that was unfavorable to private insurers. Citizen’s United provided private insurance companies the means to target messaging to the public. Through super pacs, lobbying, and direct messaging, Citizens United enabled corporations to leverage their financial power. We became pawns of their massive media campaigns and the corporations placed themselves in critical policy areas. They pushed new regulations supporting the private insurance industry.

The most significant change corporations 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 – eliminating their competition!

The Federal Trade Commission had been hobbled by years of corporate influence. Before 2021, there wasn’t a single anti-trust suit brought by the FTC. The lack of oversight by the FTC enabled private insurers to expand out of insurance, gaining a foothold in controlling total healthcare. These large insurance corporations were vertically integrating – buying the providers, facilities, prescription services, and software that controls claims processing. The concentration and control of healthcare into a few massive health systems has led to higher healthcare costs and reduced quality of care.

In 2021, the leadership of the FTC was replaced and anti-trust litigation made its first appearance in over 20 years. In November 2023, Cigna and Humana announced plans to merge. Due to the anti-trust suits brought by the FTC, Cigna and Humana abandoned their move to consolidate. Yet, with the 2024 elections in the air, Cigna and Humana are waiting patiently to see if there will be a change in administration that will allow them to consolidate.

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

Lack of Transparency for Members

For you, as a member, trying to purchase your policy in 2024 was pretty confusing. Part of the confusion is the need for more transparency in what was covered. Without clear and transparent comparisons, you might have found you didn’t make an informed decision.

In my article, “Unveiling the Medicare Advantage Game: Navigating the Controversial Landscape of Health Insurance,” I talk to several clients who felt misled by the information provided by Medicare Advantage insurers.

One of the first public policy changes happened sometime around 2019. The health insurance providers no longer had to provide accurate information. These corporations could provide a disclaimer when you called for benefit information. Basically, the disclaimer stated that the information provided may not be accurate and that the insurance company is not liable if it provides inaccurate details on the product it created, packaged, and sold into the market. If the insurance company or its representatives provided inaccurate information, it’s your problem.

This single adjustment has empowered private health insurance companies to target you with coverage that is riddled with misinformation or misleading claims. These policies, while beneficial for corporations in terms of savings, often end up costing you more and, sometimes, your life.

3.CORPORATIONS MAKE POLICY CHANGES

Medicare Advantage takes Advantage of Preauthorizations

With no one watching the hen house, the foxes came out to play. These corporations started implementing internal changes to their Medicare Advantage plans that have become so out-of-control and crushing to the public and the hospitals that without critical changes to the CDC and FTC in 2021, we would have lost all our healthcare to these three giants. Even with these changes, realize, these three corporations have had years to amass their strategy and power. They have found they are large enough to ignore most government policy and are not going lightly.

Here are some of the soul-crushing policies these large corporations have implemented.

According to AARP,

“Prior authorization is preapproval for medical services or prescription drugs that health insurance plans often require before they will cover the cost.”

The government-run Medicare program has few requirements for prior authorizations. The large corporate private insurers reveled over the fact no one was watching over Medicare Advantage and implemented prior authorization requirements for many medical and pharmacy requests. This enabled Medicare Advantage plans to delay or deny payments and medical care.

According to a study by the American Medical Association on the impact of prior authorizations on patient health and care:

93% of physicians reported care delays while waiting for health insurers to authorize necessary care.
82% of physicians said patients abandon treatment due to authorization struggles with health insurers,
34% of physicians reported that prior authorization led to a serious adverse event such as hospitalization, disability, or death for a patient in their care.

The Department of Health and Human Services Office of the Inspector General found that Medicare Advantage plans wrongly denied 13% of prior authorization requests and 18% of payments.

Even after Medicare Advantage provided a prior authorization, the insurance company would deny payments. These corporations could require the member to reapply for the authorization. In some cases, denials occurred even with the prior authorizations or other documentation necessary to support the payment.

Slashing and Rejecting Payments: The Battle for Reimbursement

It’s more than not telling you what your benefits are or requiring you to try and navigate a prior authorization maze. The providers and facilities are also hurt.

“Hospitals have been sounding the alarm about an uptick in Medicare Advantage plans denying claims, paying less than what providers bill, and taking too long to review requests to authorize care (preauthorization), which they (hospitals) say is wreaking havoc on revenue streams.”

“[Private Insurers] are trying to spend as few funds on the patients as they can. This is a game they have decided to play, which minimizes their payment to hospitals and other providers,” said Chip Kahn, president of the Federation of American Hospitals.

Medicare Advantage Touts Their Products, Yet Keep Contents Under Wraps

Although I talked about corporations not having liability for providing the wrong information on their product, this change has caused much greater damage.

Without liability for inaccurate information for the product the insurance company creates and sells, there is no incentive to provide accurate information in their benefits systems or train workers on their plans.

Providers and members may have to call the private insurer multiple times to try and identify benefits. Phone calls have long wait times. Providers and members may spend months (for some providers including myself – years) trying to get paid if a payment is denied. Even with that effort, providers may only get an accurate answer to why their bills are denied once litigation is threatened. Yet, for small providers, like myself, the cost of litigation is prohibitive. So, you end up not getting paid.

Insurance companies can invest in fewer and less trained employees. Many of these corporations have moved their customer service centers overseas to lower-cost areas. Even though these corporations are taking monies from U.S. citizens, they are not supporting the economies of the U.S. Meanwhile, hospitals and private practitioners must invest in more highly trained insurance personnel.

This one change has changed the balance of power so much that large corporations now need incentives to share the information – usually legal or threats of public policy changes.

The Big Three Insurers Use Their Might to Ignore New Policies

One of the problems with an economic system limited to a few corporations is the corporations work together to implement new policy in ways that benefit them. With Medicare Advantage programs tied up in three insurance corporations, these insurers have become comfortable at making the rules. They have vertically integrated healthcare, giving them control over your total healthcare.

Our pharmaceutical industry is one example. United owns Optum Pharmacy. CVS started as a pharmacy. Humana owns Centerwell Pharmacy. When the current federal administration reduced reimbursements on certain pharmaceuticals, these insurers passed the costs of loss profits onto the members mainly in higher monthly premiums.

And when I mention that these three corporations have so much power they are not going to go down without a fight, this is a perfect example. It’s not just the corporations that have a stake in fleecing the American public and taxpayer, it’s private equity firms and those heavily invested in these three corporations…it’s the 1% that owns most of our corporations, our news agencies, and our politicians. I’ve been stunned at the narrative being pushed in 2024 concerning why costs to Medicare Advantage and Medicare Part D members are going up. The narrative is blaming the Inflation Reduction Act of 2022 instead of corporate and billionaire greed. It’s another one of those things that if you say if enough times, it must be true. This play worked really well against Affordable Care. I wonder if it will work again.

How Consolidation Can Create a Hostile Environment

Vertical integration is receiving attention. With so few players in the insurance market controlling your total healthcare experience, these corporations have found many more ways to cut costs and reduce services.

United Healthcare purchased Change Healthcare software. Doctors and hospitals send their bills through this special software program. Then, United Healthcare uses this program to look at the bills and pay the doctors and hospitals for the services they provided.

After United Healthcare purchased Change Healthcare software, they laid off information technology workers even though the federal government was sharing information that cyber attacks on healthcare systems had increased. Information Technology is your first line of defense against cyber-attacks.

Change Healthcare suffered a significant cyber attack in March 2024, bringing down its claims processing systems. United was able to restore its pharmaceutical systems in 2-3 weeks, allowing Optum pharmacy to continue business as usual. However, United Healthcare refused to bring the provider systems back online until the federal government threatened an investigation.

United Healthcare uses Vertical Integration to Reduce Competition

When the systems were down, United Healthcare didn’t pay providers. They told providers they could apply for loans from United Healthcare until they got the systems were fixed. If I understood correctly, United Healthcare owed a debt and offered a loan with a lot strings attached on the debt they owed – to the person they owed the debt to.

Then, stories started surfacing about this lending program. United Healthcare’s program was not as alturistic as United made it sound.

The program only offered the funding to a very small group of hospitals.
These loans included terms like the ability to call the loan with five days’ notice or the ability to change terms by just providing notice.
Optum (United Healthcare) could take the funds from your bank without notice.
The terms required the hospitals and facilities to give United Healthcare access to all their past payment data. Remember, United Healthcare was only offering these loans to only a few hospitals and facilities. United Healthcare was also on a buying spree, trying to suck up more of the providers. This requirement would allow United Healthcare access to key data necessary to cherry the best independent providers to target for purchase.
Lastly, the loans required broad waivers of liability and strict limits on damages (very similar to the COVID-19 mRNA vaccines).

More news stories started to surface that United was using its ability to financially squeeze providers, hospitals, and facilities as a shopping opportunity to expand United Healthcare’s ownership.

It is confusing that United Healthcare thought this was an ethical and fair business approach to the situation, but it may be based on their history.

Back in 2023, some of the few remaining independent facilities started talking about United Healthcare offering loans to independent facilities to cover their cash flow needs. The facilities had cash flow issues because they were waiting for payments from United Healthcare. These facilities voiced concerns that United Healthcare was slow in paying and offering loans with unfavorable terms to cover their slow payment. Was United Healthcare using its size and control of the healthcare market to force practitioners into taking out loans?

Insurance Giants: Crafting New Rules on the Fly and Dancing to Their Own Tune

But let’s go back to the Change Healthcare ransomware attack. I came out of technology and large systems like Oracle and SAP. It seemed unusual to me United Healthcare could get the part of Change Healthcare software up that solely benefited their Optum pharmacy and leave part of the Change Healthcare system down that paid independent providers (not affiliated or owned by United Healthcare).

I was looking at my credit card. Using United Healthcare’s logic, if my computer got a virus, I should be able to stop paying until I fix it and can see my statements again. Fixing my laptop should be at my discretion. Suppose the credit card company needs my monthly payment to continue operations. In that case, I should be able to offer the company a loan until I can fix my computer and see my statements.

The reality is it doesn’t work like that for me. The credit card company considers that I owe them a debt for services provided. I know the minimum payment I need to make. So, even without seeing the bill, I am expected to pay. If I don’t pay on time every month, I get late fees that are not small. They can change my interest rates. They can report me to the credit bureau. They can file leans against me. In my world, cyber-attacks are just one more thing that doesn’t change anything for me.

For United Healthcare, not bringing their system up just meant they were able to sit on cash longer. Hospitals and doctor’s offices not affiliated with United Healthcare felt the financial squeeze due to the lack of reimbursement. That squeeze was pushing them towards bankruptcy. Then news reporters began talking about United Healthcare going on a facilities-buying spree with the mountains of cash that should have been going to the providers and facilities.

What changed this? The Federal government stepped in and stated they were starting an investigation into the cyber-attack on Change Healthcare. Suddenly, United was able to fix Change Healthcare and start working again.

Consolidation Hurts Everyone

Yet, the consolidation hurts more than just the members and independent providers. Cost-cutting moves also hurt employees. At Change Healthcare, I mention the layoff of needed technical personnel even though the layoffs put the software at risk.

Kaiser is another example. Although Kaiser had settled their dispute with union nurses, the government has received numerous complaints of not staffing to appropriate levels based on the new contract.

Then, there is the latest news of doctors unionizing. Due to large corporations purchasing hospitals and clinics, doctors are faced with low wages, very long work weeks, and high education costs.

What Does All This Mean?

By 2023, large private insurers had implemented a complex and extensive set of policies. They were active in every aspect of legislative policy. Competition had been reduced to so few players it was no longer a free market system. The private insurers had become so large that they started creating their own rules. What surprised me was how much they had implemented without anyone hearing about it.

So, what did their 15 years of effort deliver? A lot. Each of these changes provides a financial benefit to the insurance company, making Medicare Advantage extremely profitable for the insurance industry.

They have laws stating they don’t have to provide accurate benefit information on the product they created. This has allowed them to provide marketing and benefit information that is not comprehensive. This allows them to increase membership.
They have implemented policies like preauthorizations to slow down, reduce, or eliminate healthcare.
They can deny or reduce payments to providers and facilities.
Through lobbying efforts, they implemented policies that reduced the insurance industry to only a few insurers, removing competition.
They have used their size, position, and financial capital to reduce competition in all areas of our healthcare.
They have enough power to push for legislation and ignore fair business practices.

And finally, after 15 years of taking it up the butt, things are beginning to change. Check out my article on “Medicare Advantage Gets Thrown a Curve Ball to get a Homerun for Seniors“.