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The seven largest for-profit insurance companies in the U.S. have seen their combined revenues from taxpayer-backed programs grow 500% over the past decade.
A new analysis released Monday shows that insurance giants are benefiting hugely from the accelerating privatization of Medicare and Medicaid, which for-profit companies have infiltrated via government programs such as Medicare Advantage.
According to the report from Wendell Potter, a former insurance executive who now advocates for systemic healthcare reform, government programs are now the source of roughly 90% of the health plan revenues of Humana, Centene, and Molina.
Over the past decade, Potter found, the seven top for-profit insurance companies in the U.S.—the three mentioned above plus UnitedHealth, Cigna, CVS/Aetna, and Elevance—have seen their combined revenues from taxpayer-backed programs soar by 500%, reaching $577 billion in 2022 compared to $116.3 billion in 2012.
"The big insurers now manage most states' Medicaid programs—and make billions of dollars for shareholders doing so—but most of the insurers have found that selling their privately operated Medicare replacement plans is even more financially rewarding for their shareholders," Potter wrote. "In addition to their focus on Medicare and Medicaid, the companies also profit from the generous subsidies the government pays insurers to reduce the premiums they charge individuals and families who do not qualify for either Medicare or Medicaid or who work for an employer that does not offer subsidized coverage."
Potter noted that the top insurance giants, a group he dubbed the Big Seven, now control more than 70% of the Medicare Advantage market, which has grown rapidly in recent years. According to the Kaiser Family Foundation, more than 28 million people were enrolled in a privately run Medicare Advantage plan last year—nearly half of the Medicare-eligible population.
An ardent critic of Medicare Advantage, Potter said in an interview with The American Prospect on Monday that the program "is a big contributor to the excessive spending" in Medicare.
"It needs to be ended," Potter, executive director of the Center for Health and Democracy, said of Medicare Advantage, whose major players frequently overbill the federal government and deny patients necessary care. The program is run by private insurers with government money.
"The premiums and taxes paid by Americans enabled the Big Seven to make those profits."
In his analysis, Potter observed that Medicare Advantage enrollment among the Big Seven increased 252% between 2012 and 2022.
Having deeply entrenched themselves in the Medicare program via Medicare Advantage, insurance giants are now looking to gain a foothold in traditional Medicare through a Biden administration pilot program known as ACO REACH, which has drawn mounting criticism from physicians and progressive lawmakers.
"We must fight the privatization of Medicare with every tool we have," Rep. Pramila Jayapal of Washington, chair of the Congressional Progressive Caucus, said in a statement last month.
When counting both their commercial businesses and participation in government programs, the Big Seven brought in $1.25 trillion in revenue last year and their profits rose to $69.3 billion, according to Potter, who emphasized that a growing share of insurance giants' revenues now comes from "the relatively new and little-known middleman between patients and pharmaceutical drug manufacturers" known as pharmacy benefit managers (PBMs).
"Cigna now gets far more revenue from its PBM than from its health plans," Potter noted. "CVS gets more revenue from its PBM than from either Aetna's health plans or its nearly 10,000 retail stores."
\u201cThe premiums & taxes paid by Americans enabled the Big 7 to make those profits last year on revenues that reached a stunning $1.25 trillion (+300% since '12)\n\nThe main sources of all that money:\n\n1. Pharmacy benefit management (PBM)\n\n2. Gov't programs like Medicare Advantage (MA)\u201d— Wendell Potter (@Wendell Potter) 1677524849
Potter lamented that "policymakers, regulators, employers, and the media have so far shown scant interest" in closely examining the taxpayer-reliant business practices of large insurance companies, which wield substantial lobbying power that they deploy against any effort to transform the United States' fragmented healthcare system.
"They've essentially been bailed out by taxpayers," Potter said of for-profit insurance giants. "And members of Congress, and various administrations, have been just standing on the sidelines, not paying attention to what's been going on."
Meanwhile, tens of millions of people in the United States are either uninsured or inadequately insured, and more than 100 million are saddled with healthcare-related debt.
A recent study by The Commonwealth Fund found that the United States spent close to twice as much as the average OECD nation on healthcare while achieving worse outcomes in critical areas such as life expectancy at birth and death rates for treatable conditions.
To listen to President Obama's speech on Wednesday night, or to just about
anyone else in the health care debate, you would think that the biggest
problem with health care in America is the system itself - perverse
incentives, inefficiencies, unnecessary tests and procedures, lack of
competition, and greed.
No one disputes that the $2.3 trillion we devote to the health care
industry is often spent unwisely, but the fact that the United States
spends twice as much per person as most European countries on health
care can be substantially explained, as a study
released last month says, by our being fatter. Even the most efficient
health care system that the administration could hope to devise would
still confront a rising tide of chronic disease linked to diet.
That's why our success in bringing health care costs under control
ultimately depends on whether Washington can summon the political will
to take on and reform a second, even more powerful industry: the food
industry.
According to the Centers for Disease Control and Prevention,
three-quarters of health care spending now goes to treat "preventable
chronic diseases." Not all of these diseases are linked to diet -
there's smoking, for instance - but many, if not most, of them are.
We're spending $147 billion to treat obesity, $116 billion
to treat diabetes, and hundreds of billions more to treat
cardiovascular disease and the many types of cancer that have been
linked to the so-called Western diet. One recent study
estimated that 30 percent of the increase in health care spending over
the past 20 years could be attributed to the soaring rate of obesity, a
condition that now accounts for nearly a tenth of all spending on
health care.
The American way of eating has become the elephant in the room in
the debate over health care. The president has made a few notable
allusions to it, and, by planting her vegetable garden on the South
Lawn, Michelle Obama has tried to focus our attention on it. Just last
month, Mr. Obama talked about putting a farmers' market in front of the
White House, and building new distribution networks to connect local
farmers to public schools so that student lunches might offer more
fresh produce and fewer Tater Tots. He's even floated the idea of
taxing soda.
But so far, food system reform has not figured in the national
conversation about health care reform. And so the government is poised
to go on encouraging America's fast-food diet with its farm policies
even as it takes on added responsibilities for covering the medical
costs of that diet. To put it more bluntly, the government is putting
itself in the uncomfortable position of subsidizing both the costs of
treating Type 2 diabetes and the consumption of high-fructose corn
syrup.
Why the disconnect? Probably because reforming the food system is
politically even more difficult than reforming the health care system.
At least in the health care battle, the administration can count some
powerful corporate interests on its side - like the large segment of
the Fortune 500 that has concluded the current system is unsustainable.
That is hardly the case when it comes to challenging agribusiness.
Cheap food is going to be popular as long as the social and
environmental costs of that food are charged to the future. There's
lots of money to be made selling fast food and then treating the
diseases that fast food causes. One of the leading products of the
American food industry has become patients for the American health care
industry.
The market for prescription drugs and medical devices to manage
Type 2 diabetes, which the Centers for Disease Control estimates will
afflict one in three Americans born after 2000, is one of the brighter
spots in the American economy. As things stand, the health care
industry finds it more profitable to treat chronic diseases than to
prevent them. There's more money in amputating the limbs of diabetics
than in counseling them on diet and exercise.
As for the insurers, you would think preventing chronic diseases
would be good business, but, at least under the current rules, it's
much better business simply to keep patients at risk for chronic
disease out of your pool of customers, whether through lifetime caps on
coverage or rules against pre-existing conditions or by figuring out
ways to toss patients overboard when they become ill.
But these rules may well be about to change - and, when it comes to
reforming the American diet and food system, that step alone could be a
game changer. Even under the weaker versions of health care reform now
on offer, health insurers would be required to take everyone at the
same rates, provide a standard level of coverage and keep people on
their rolls regardless of their health. Terms like "pre-existing
conditions" and "underwriting" would vanish from the health insurance
rulebook - and, when they do, the relationship between the health
insurance industry and the food industry will undergo a sea change.
The moment these new rules take effect, health insurance companies
will promptly discover they have a powerful interest in reducing rates
of obesity and chronic diseases linked to diet. A patient with Type 2
diabetes incurs additional health care costs of more than $6,600 a
year; over a lifetime, that can come to more than $400,000. Insurers
will quickly figure out that every case of Type 2 diabetes they can
prevent adds $400,000 to their bottom line. Suddenly, every can of soda
or Happy Meal or chicken nugget on a school lunch menu will look like a
threat to future profits.
When health insurers can no longer evade much of the cost of
treating the collateral damage of the American diet, the movement to
reform the food system - everything from farm policy to food marketing
and school lunches - will acquire a powerful and wealthy ally,
something it hasn't really ever had before.
AGRIBUSINESS dominates the agriculture committees of Congress, and
has swatted away most efforts at reform. But what happens when the
health insurance industry realizes that our system of farm subsidies
makes junk food cheap, and fresh produce dear, and thus contributes to
obesity and Type 2 diabetes? It will promptly get involved in the fight
over the farm bill - which is to say, the industry will begin buying
seats on those agriculture committees and demanding that the next bill
be written with the interests of the public health more firmly in mind.
In the same way much of the health insurance industry threw its
weight behind the campaign against smoking, we can expect it to
support, and perhaps even help pay for, public education efforts like
New York City's bold new ad campaign
against drinking soda. At the moment, a federal campaign to discourage
the consumption of sweetened soft drinks is a political nonstarter, but
few things could do more to slow the rise of Type 2 diabetes among
adolescents than to reduce their soda consumption, which represents 15
percent of their caloric intake.
That's why it's easy to imagine the industry throwing its weight
behind a soda tax. School lunch reform would become its cause, too, and
in time the industry would come to see that the development of regional
food systems, which make fresh produce more available and reduce
dependence on heavily processed food from far away, could help prevent
chronic disease and reduce their costs.
Recently a team of designers from M.I.T. and Columbia was asked by
the foundation of the insurer UnitedHealthcare to develop an innovative
systems approach to tackling childhood obesity in America. Their
conclusion surprised the designers as much as their sponsor: they
determined that promoting the concept of a "foodshed" - a diversified,
regional food economy - could be the key to improving the American diet.
All of which suggests that passing a health care reform bill, no
matter how ambitious, is only the first step in solving our health care
crisis. To keep from bankrupting ourselves, we will then have to get to
work on improving our health - which means going to work on the
American way of eating.
But even if we get a health care bill that does little more than
require insurers to cover everyone on the same basis, it could put us
on that course.
For it will force the industry, and the government, to take a good
hard look at the elephant in the room and galvanize a movement to slim
it down.