Medicare Advantage’s 33 million club

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The sky didn’t fall for MA

Last year, after the Biden administration made some tweaks to Medicare Advantage, the health insurance industry screamed to the heavens. Lobbying groups warned that seniors’ benefits would get slashed, premiums would rise, and the $500 billion program would come crashing down.

That … didn’t pan out.

Roughly 33.4 million people were enrolled in a Medicare Advantage plan at the start of 2024, according to new federal data that we analyzed last week. It’s an increase of 7.1% from the same time last year, although it appears the true annual growth rate is closer to 6% after factoring in some errors within Medicare’s 2023 data, according to Gary Taylor, a managing director and health care analyst at TD Cowen.

Wall Street was banking on more growth, intoxicated by a recent stretch when the profitable MA program was growing by 9-10% annually. But “seniors are still flocking to Medicare Advantage even if some insurers fell short in meeting their own growth targets,” said Tricia Neuman, a senior vice president and top Medicare policy director at KFF, a health policy and research organization. Read more to understand how Medicare’s enrollment season went down.

The costly, clogged-up arbitration process

The Biden administration put out a new report on the arbitration process that governs surprise out-of-network medical bills, and it doesn’t look great if lower costs were the goal, my colleague Tara Bannow reports.

The good news: Patients are being spared from big bills when they get treated in an emergency room, air ambulances, and other scenarios. But now the back-door deal-making between providers and health insurance companies appears to be raising costs for everyone: During the first six months of 2023, in more than 80% of disputes, the arbiter settled on an amount that was more than the median in-network rate for that service. In other words, Tara writes, insurers were ordered to pay more to an out-of-network provider than they’d pay to a contracted one.

“It raises concerns for folks that envisioned the arbitration process as helping to moderate costs rather than be a tool these [providers] can leverage to obtain even higher payments,” Zachary Baron, the director of Georgetown University’s Health Policy and Law Initiative, told Tara. Read the government’s full report, which is full of data and included within Tara’s story.

Insurers waving the white flag

Two different health insurance deals hit the scrap heap last week, showing that horizontal mergers are not guaranteed to get finalized in today’s antitrust environment, my colleague Brittany Trang reports.

SCAN Group and CareOregon called off their combination, while Elevance Health and Blue Cross Blue Shield of Louisiana “paused” their deal for the second time. Make sure to read Brittany’s story. She outlines the unique instances and details surrounding both failed deals — like how a former Oregon governor stepped in to oppose the SCAN-CareOregon deal.

Hospital lightning round

A million nonprofit hospital systems released financial statements last week, showing how they fared in the last three months of 2023. The gist: Most hospitals made a healthy amount of money on both patient care and, especially, their investments, as we’ve observed previously. Many also benefited from federal lump-sum payouts as part of a ruling to repay hospitals for 340B drug payment cuts.

• Allina Health: The $5 billion system is struggling a lot more than most, posting a -6.8% operating margin in 2023. Allina laid off employees and outsourced its billing operations to Optum.
• Ballad Health: The last quarter of 2023 was good for Ballad, but the system said it has been having problems with Medicare Advantage plans using proprietary criteria to push patients to lower-paying codes or outpatient observation status, “even if the admission was prior-authorized by the payer.”
• Baylor Scott & White Health: Everything’s bigger in Texas, including the hospital profits.
• CommonSpirit Health: Patient volumes are up so much across the country that even CommonSpirit is in the black. The hospital giant also disclosed it received $234 million last year from the extra 340B drug payments.
• Johns Hopkins Health System: A 12% net margin was fueled by massive investment gains. If patient care doesn’t work out, Johns Hopkins has a future as a hedge fund.
• Mass General Brigham: Holy investment income, Batman. It also banked an extra $98 million from 340B drug underpayments.
• RWJBarnabas Health: Nurses went on strike for roughly four months at one of the New Jersey system’s main hospitals, and it cost RWJBarnabas $184 million, pushing it into the red. However, if the hospital would have paid its own nurses and avoided a strike, instead of having to hire expensive temporary nurses, it would have turned a profit.
• Sanford Health: It turns out that not all rural hospitals are dying! Sanford is one of the largest rural health systems in the country, and yet it was profitable across the board in 2023, surpassing several years of pre-pandemic operations.

The battle over federal health care data

Hell hath no fury like a health care researcher scorned.

The Centers for Medicare and Medicaid Services instigated a whirlwind of criticism last week when it proposed to 1.) limit how researchers can access Medicare and Medicaid data and 2.) add big new fees to access or store any data. In essence, CMS is pushing researchers to use its own cloud-based data warehouse, known as the Virtual Research Data Center, or VRDC.

Rachel Werner, executive director of the Leonard Davis Institute of Health Economics at the University of Pennsylvania, writes in a new STAT opinion piece how the agency’s sudden decision will make it more difficult to conduct research on the public insurance programs.

Werner explains how these changes could directly impact her own research: “To keep my current projects afloat, my costs for just storing and accessing data will rise from less than $20,000 per year to somewhere between $80,000 and $200,000 per year, depending on how many people on my team are able to continue their research.” Read her entire essay on why health care researchers are worried about what this means for public policy.

HCA’s blame game

News from Tara: If there were staffing shortages at Mission Health after HCA Healthcare took over in 2019, it’s because doctors quit, workers couldn’t make their shifts, and there’s a nationwide nursing shortage, according to HCA’s response that was filed last week to the North Carolina attorney general’s lawsuit.

HCA said the staff and supply shortages are outside of the company’s control. That’s not what doctors who quit told Tara in interviews.

Josh Stein’s lawsuit accuses HCA of breaching the terms of the agreement that allowed it to buy six-hospital Mission Health, specifically by failing to keep cancer and emergency services at the same levels as before the sale. But HCA argues in its 66-page response that it has expanded those services. While HCA’s response says it continues to provide high-quality patient care, it also points out that maintaining quality wasn’t part of the agreement that Stein signed off on.

As HCA’s lawyers put it: “This legal dispute is about a contract and whether it has been breached. The Hospital Service Commitments are simple and clear: They require that HCA continue certain service lines that existed in January 2019. HCA has absolutely done so. “

Industry odds and ends

• Congress is looking to partially offset Medicare cuts to physician payments, although it’s unclear how lawmakers would pay for those changes, my colleague Rachel Cohrs reports.
• The federal government is asking for advice on whether health plans sold on the Affordable Care Act’s individual marketplaces should be required to cover new obesity drugs, my colleague John Wilkerson reports.
• Medicare is going to create a demonstration project that “will assist in developing improved procedures for the identification, investigation, and prosecution of Medicare fraud occurring in ambulatory surgical centers,” the agency said in a notice last week.
• The state of Maryland has fired UnitedHealth’s Optum from its role as claims processor for behavioral health services and is rehiring Elevance Health, the Baltimore Banner reports. Optum “has just failed to deliver,” Maryland’s governor told the paper.
• A recently unsealed lawsuit from Adventist Health System, a 26-hospital system based on the West Coast, alleges pharmaceutical companies overcharged for drugs through the federal 340B drug discount program, my colleague Ed Silverman reports.
• Private equity has made fewer deals for companies involved in Medicare Advantage, but that doesn’t mean those firms have given up hope on making money in the program, Brittany reports.
• People who are eligible for Medicare and Medicaid — the elderly and poor — have quickly become profit centers for health insurers, Caitlin Owens of Axios reports.
• New blood tests and full-body MRIs promise to catch cancers and other diseases earlier, but the Tradeoffs podcast explores how the hype behind those tools is costly and could actually hurt people.
• Humana cut employees’ bonuses in response to its disastrous fourth-quarter financial results, Gale Scott of Health Payer Specialist reports.

The Meme Ward

The Meme Ward just got meta thanks to STAT’s newsletter strategist Alexa Lee and motion graphics designer Anna Yeo, who combined their talents on TikTok. IT’S ENOUGH SLICES.