Medicare Advantage Payers tell CMS they need more money
Episode 79 Podcast Recap
Matthew and Ron start the conversation in this episode with a discussion about the United Health Care (UHC) contract dispute with the University of North Carolina Health (UNC-Health). Fulcrum Strategies is based in N.C. and the threat of termination from UHC could have a wide-ranging impact on patients in N.C. and could affect some Fulcrum clients in the Old North State.
The conversation between the two parties is a familiar one, with UNC-Health saying they need more money to cover costs, and UHC saying that they are asking for too much reimbursement. Matthew asks Ron why is it when negotiations with a payer come down to the 11th hour, it seems like UHC is frequently the payer on the other side of the equation from the provider.
Ron sees a couple of factors likely behind why UHC seems to run the negotiation process down to the wire. The first he said, is that UHC is big, it generally is the second largest payer in any given state in the U.S. Blue Cross Blue Shield operations are usually larger, but he said, they don’t generally play the termination card. According to Ron, it’s not their style. The second reason Ron pointed out was that in his opinion, UHC takes its mission of being a for-profit entity seriously. It aggressively seeks to maximize its profits for the benefit of its shareholders. Which means they will often get into these types of disputes.
Ron also reminded us that UNC-Health is trying to get the most they can, or at least enough to cover cost increases. All that said, he pointed out that if this negotiation terminates, there will be some patients that get hurt. Ron and Matthew discuss what happens to patients when someone is undergoing treatment and their provider is terminated by a payer.
Discussing the UHC talking points, Ron reminded us that this is a “large business contract and in some ways UHC is correct that if they increase their reimbursements to hospitals, premiums go up, costs go up to their self-funded employers and UNC is correct is to say we have these massive increases in our costs, somebody has to pay for them.” He said they both are at fault, and neither are at fault.
Ron agreed with Matthew that the payers tend to better leverage public relations to their advantage and explained that this negotiation is not that different than what we saw with the U.S. auto manufacturers and the United Auto Workers Union. Where each side was arguing their need for either increasing reimbursement or reigning in costs. The difference here is that this is about healthcare and its personal. Fully acknowledging Fulcrum’s role as provider advocates, Ron said it is hard for him to shed too many tears for UHC when he looks at the billions of dollars of profit that they made last year. “No one at UHC is worried about not getting a bonus” he said.
Matthew shifted gears and brought up a press release from the “Better Medicare Alliance” (BMA) an insurer-backed advocacy group. The release points to increased utilization rates of Medicare Advantage subscribers and that CMS should take into consideration this data in their calculations for the calendar year 2025 Final Rate Notice. Matthew explained that the rising utilization rates translate to more expenditures for the payers that offer Medicare Advantage (MA) plans. The press release goes on to discuss recent policy changes and Matthew asked Ron to break this down.
Ron explained that obviously, MA subscribers are using more services since COVID and some of the policy issues BMA is talking about is also the increase in approved drugs and procedures for MA patients. The increase in these utilizations translates into increased costs that the insurers pay and in short, they are saying to CMS, that they need to make more money.
Matthew shared a recent conversation with a very satisfied MA customer, who liked not having to pay a monthly premium or co-pay, and asked Ron if the reason for utilization is higher because there is no out-of-pocket expense when they want to see a physician. Ron said the potential is there for increased utilization due to limited out-of-pocket costs and there is a strong correlation between lowering out-of-pocket expenses and increased utilization. He said the question that is often asked is that good or bad. He explained that some wonder if people delay seeking care because of an initial out-of-pocket expense, which results in higher overall costs later when they come in for something more severe that could have been prevented with an earlier visit. Ron surmised that it was probably a little of both.
He pointed out that MA has been extremely helpful to seniors, especially those on a fixed income. Regardless, MA on a per-enrollee basis is still the most profitable line of insurance the payers sell. According to Ron, it’s about twice as profitable as managed Medicaid and about 45% more profitable than employer or commercial risks. Ron agreed that since COVID the payers’ margins have come down, but it’s still the most profitable product they sell. He explained that their problem is that Wall Street wants the profits to continue like it did during COVID. Ron said that the hypocrisy of the payers wanting more money is that there are not any physicians who see Medicare patients for the potential profit. He said doctors see Medicare patients as a social mission because taking on Medicare patients is frequently a financial loss.
Matthew brought up that the payers often point to how they are saving the taxpayers money with MA because they are more efficient in handling the claims for Medicare patients. Ron agreed there are likely some efficiencies the insurers bring with their medical management. But he also pointed out that regarding Medicare reimbursement, the drug companies do well with their rates, hospitals recently received an increase in reimbursements, but physicians are losing money, and here you have insurers asking for more money on their most profitable product.
Ron said that this arrangement is the problem he has with the current state of things. He pointed out that without the doctor, none of this works. Without a physician, the insurance card is as good as a Blockbuster video rental card, a hospital without doctors is a hotel with bad food and no one gets a drug without a physician writing a prescription. Ron said he is most frustrated with the fact that no one seems to care and notice that the most important part of this equation is the doctor.
Matthew reminded Ron of what he said at the outset, that UHC made $23-24 billion of profit last year. Ron also brought up that UHC employs 1 of 10 physicians in the U.S., they own and operate 200 Ambulatory Surgery Centers, and they own a huge Pharmacy Benefit Management company. Ron said, “They are starting to become this massively integrated healthcare driving force and I am sure there are a lot of people that think that is not necessarily a great thing.” Matthew said that he recently saw UHC was listed as one of the top ten largest companies in the world.
Matthew finished up the discussion with a story out of New Hampshire where the state’s MA program with Anthem Blue Cross Blue Shield has fallen short in the mail-order pharmacy component for the state employee’s retirement plan. Anthem was not meeting shipping deadlines and the state of N.H. stated they would be levying fines against them. This plan includes about 11 thousand retirees. Ron said that states and municipalities frequently will have MA plans for retirees. Matthew asked Ron if there could be any federal repercussions. Ron said there could be and reminded us how the feds pulled Cigna’s ability to sell MA plans after they mishandled the program. He said that it is a good thing when regulators ensure that payers do what they are supposed to do. But, he pointed out, that a fine from the state or federal government may get their attention, but until the payers are held medically responsible for bad outcomes due to a decision by an insurance company, it likely won’t change the payer’s behavior. That connection, between an individual’s medical outcome and insurance company decision making, is what Ron said he hopes will be made and then will see insurance companies doing the right thing from the beginning.
You can listen to the entire podcast here.
Next week the FLATLINING podcast will feature Dr. Damian McHugh with Curi, a physician advisory company about physician burnout.