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.
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.
Sometime around 2019, the health insurance industry started providing disclaimers 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’s challenging to use. These policies, while beneficial for corporations in terms of savings, often end up costing you more, especially when attempting to get medical care or switch from a Medicare Advantage policy once its limitations become apparent.
Medicare Advantage takes Advantage of Preauthorizations
According to AARP,
The government-run Medicare program has few requirements for prior authorizations. Private Insurance companies found no one was watching over Medicare Advantage and implemented prior authorization requirements for many of the medical and pharmacy requests. The evidence is that Medicare Advantage plans are delaying or even preventing Medicare beneficiaries from getting optimal care, harming the patient’s health.
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 and 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.
Medicare Advantage Touts Their Products, Yet Keep Contents Under Wraps
Denying or reducing payments has been going on for some time. It has been compounded by insurers who have lobbied to pass laws that make them not liable for providing incorrect or misleading information about the products they sell.
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 to try and identify benefits. Phone calls have long wait times. Providers and members may have to call multiple times over many months 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.
This setup has pushed the cost of doing business from the insurance companies to the providers and members. Insurance companies can invest in fewer and less trained employees, which allows them to move their customer service centers overseas to lower-cost areas. Meanwhile, hospitals and private practitioners must invest in more highly trained insurance personnel.
It’s not that the insurers don’t have the information. It’s that they need incentives to share the information.
The Big Three Insurers Use Their Might to Ignore New Policies
One of the problems with an economic system limited to a few players is the players can work together to implement new policy in ways that benefit them. With Medicare Advantage programs tied up in three insurance conglomerates, these insurers have become comfortable at making the rules. They have also vertically integrated into the healthcare space, giving them control over your total healthcare.
Our pharmaceutical industry is one example. United owns Optum Pharmacy, and CVS started as a pharmacy. Humana owns Centerwell Pharmacy. When the current administration reduced reimbursements on certain pharmaceuticals, these insurers passed the costs of loss profits onto the members.
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“.