Wall Street 'overjoyed' as Biden lets Medicare Advantage insurers off easy

Jake Johnson, Common Dreams
April 10, 2023

UnitedHealth Group, a dominant force in the lucrative Medicare Advantage market, has seen its stock jump over the past week as Wall Street analysts and investors embrace the Biden administration's decision to delay reforms aimed at tackling abuse in the privately run, government-funded health program.

STAT reported late last week that "Wall Street was overjoyed" by the announcement from the Centers for Medicare and Medicaid Services (CMS), which said it would phase in changes to the model that dictates how much government funding Medicare Advantage insurers receive to cover patient care.

Instead of implementing the changes all at once, the Biden administration will roll out the reforms over a three-year period, allowing Medicare Advantage insurers to continue overbilling the federal government in the meantime.

Recent federal audits and investigative reports have detailed how Medicare Advantage plans overcharge the government to the tune of billions of dollars a year by making patients appear sicker than they are, piling on diagnoses with little to no supporting documentation. Medicare Advantage plans also frequently deny necessary care and use algorithms to prematurely end coverage.

In addition to delaying full implementation of its reforms, CMS—which has faced aggressive lobbying from UnitedHealth and other major Medicare Advantage players in recent weeks—announced it would boost payment rates for Medicare Advantage plans by 3.3% in 2024—a larger-than-expected increase.

CMS said Medicare Advantage payments would rise by nearly $14 billion next year under the new plan.

As STAT's Bob Herman noted, "health insurance companies that participate in Medicare Advantage will retain billions of extra taxpayer dollars next year" thanks to the Biden administration's changes, which drew criticism from progressive lawmakers and some policy experts.

"The phased-in approach will continue to reward those insurers with the most abusive practices over the next two years," warned Mark Miller, executive vice president of healthcare for the philanthropy Arnold Ventures.

Herman reported that following the CMS announcement, "investors raced to buy stocks of the largest Medicare Advantage insurers, including UnitedHealth, Humana, CVS Health, Elevance Health, and Centene." STAT cited one analyst estimate suggesting that UnitedHealth Group could see $900 million in additional profit next year thanks to the CMS policy revisions.


"It was 'a sigh of relief' for the industry, according to Jailendra Singh, a healthcare stock analyst at Truist Securities," Herman wrote. "Chris Meekins, a health policy analyst at Raymond James, called the White House's move 'a clearing event for the space.'"UnitedHealth, Cigna, Humana, CVS/Aetna, Elevance Health, Centene, and Molina have seen their combined revenues from taxpayer-funded programs like Medicare Advantage soar from $116.3 billion in 2012 to $577 billion in 2022, according to a recent analysis

by Wendell Potter, a former Cigna executive who now heads the Center for Health and Democracy.

Those companies have been at the forefront of what The New York Times recently described as a "lobbying frenzy" on Capitol Hill, a blitz that appears to have influenced the Biden administration's decision to go easy on Medicare Advantage despite promising bold reforms.

The Times noted that the administration's earlier proposals to revise the Medicare Advantage risk-adjustment model "unleashed an extensive and noisy opposition front, with lobbyists and insurance executives flooding Capitol Hill to engage in their fiercest fight in years."

"The largest insurers, including UnitedHealth Group and Humana, are among the most vocal, according to congressional staff, with UnitedHealth's chief executive pressing his company's case in person," the newspaper reported. "Since the proposal was tucked deep in a routine document and published with little fanfare in early February, Medicare officials have been inundated with more than 15,000 comment letters for and against the policies, and roughly two-thirds included identical phrases from form letters."

The Better Medicare Alliance, a lobbying organization backed by top Medicare Advantage insurers, purchased a Super Bowl ad decrying the Biden administration's earlier reform proposals as an effort to "cut" Medicare Advantage.

Rep. Pramila Jayapal (D-Wash.), chair of the Congressional Progressive Caucus, said in a statement late last week that she was disappointed by the Biden administration's decision to weaken its reforms in the face of industry pressure.

"It is now clear that Medicare Advantage is simply a profiteering venture that hurts patient care," said Jayapal. "Without a complete overhaul, it will be impossible to stop bad actors. These plans have spent years scamming seniors and overcharging the government to pad their own profits. We were on the cusp of immediate reform when the Biden administration proposed fixes to stop price gouging by insurance companies."

"Sadly," she added, "health insurance companies used taxpayer dollars meant for medical care to instead buy Super Bowl commercials and desperately lobby to stop these changes that would cut down on their profiteering."

Return of the Socreds

Presto Manning is contemplating a run for the leadership of the Party of Calgary. Somethings never change. Preston Manning Expresses Interest In Replacing Klein

That would mean 35 years of Socred power that ended with his father, Ernest, being replaced with a lame duck Premier, then 33 years of PC power starting with Peter Lougheed and ending with a lame duck Premier, and then the possibility of that strange beast the Reformed PC Socreds under Presto.....noooooooo.

Preston Manning, who was once the second-most-powerful leader in Canada as leader of the opposition, is apparently now considering his chances of becoming the second-most-powerful leader in Canada as premier of Alberta.

King Ralph is dead
The Alberta Tories' regicide of Ralph Klein was big news for 12 hours. Then Preston Manning trumped it, telling reporters he was considering running for Klein's job.

Daddy Ernest Manning gave up party power to Peter Lougheed, thus assuring a Liberal Conservative Socred Alliance that was Seventies PC's. That alliance was shattered as neo-cons took over under Klein, the fiscal right was far less powerful than the social conservatives. The social conservatives align behind Oberg, the Reform types around Morton, and the liberal wing under Dinning. Alberta Tories in disarray

Dining did the dirty deed of balancing the budget on the backs of the working class, with wage and benefit cuts to the public sector. Then with victory in his back pocket he left the government.

The neo-cons in the party then went on to shape the Ralph Revolution, using the the debt and deficit hysteria of the ninties to impose their Republican Lite vision on Alberta, while promoting it for the rest of Canada with Prestos Reform Party.

Government that governs least is best — or not

When Mr. Klein became premier, the province had a $3.4-billion deficit and a $23-billion debt. He argued these burdens arose, in part, from governments having involved themselves too much in the economy. There were bad investments. The government taxed too much. Government regulations were too onerous. The free market, he asserted, would be encouraged if the government got out of the way.

This contrasted with the approach of Peter Lougheed, who led the Conservatives to power in 1971. Mr. Lougheed was no socialist, but he did believe the government should try to direct, cajole and even force the market in directions he believed Alberta needed. Only that way, he reasoned, could Alberta's economy be diversified and energy revenues used not just for today's needs, but for the future.

Mr. Lougheed's dirigiste preferences evaporated under Mr. Klein, but now some Albertans want that kind of guiding hand back, at least in a modified form. In a free-enterprise province, the critics are now demanding a “plan” for using the revenues that would be more than driving up spending on ongoing programs.

Presto would be an interesting add to the mix but his chances of winning are less than none. Unless he has something up his sleeve, oh like say Medicare Reform. If anyone could enunciate and promote the Third Way in Medicare it would be Presto.

“Where I think we're headed is a system of universal care, where everybody is covered ... with two tracks for delivery, and two tracks for payment. It's not a question of private versus public, but what mix of the two is appropriate.”

Mr. Manning left what he likes to call "active partisan politics" in 2002 to become more involved in the public-policy debate. He quickly got on board with the Fraser Institute and the Canada West Foundation, and he set up the Manning Centre for Building Democracy.

He and Mike Harris authored the Fraser Institute Report on exactly the musings that King Ralph has been tossing about for the past decade. And perhaps that would be the reason for him to run, otherwise Third Way Medicare Reform is dead in the water.

Third Way predicted to meet Klein's fate

Dead-end way Tories mull future of health-care reform if Ralph exits scene



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Prior authorization rules vary widely among major commercial insurers

American College of Physicians

          

Below please find summaries of new articles that will be published in the next issue of Annals of Internal Medicine. The summaries are not intended to substitute for the full articles as a source of information. This information is under strict embargo and by taking it into possession, media representatives are committing to the terms of the embargo not only on their own behalf, but also on behalf of the organization they represent.   
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1. Prior authorization rules vary widely among major commercial insurers

Abstract: https://www.acpjournals.org/doi/10.7326/ANNALS-25-05289

URL goes live when the embargo lifts             

A brief research report reviewed the prior authorization rules for Aetna, Humana, and UnitedHealthcare and found little consistency in their prior authorization rules. The findings highlight a fragmented system that may contribute to administrative burden for clinicians and confusion for patients. The report is published in Annals of Internal Medicine.

 

As part of a research program on the potential benefit of standardizing health care contracts, researchers from Stanford University and colleagues examined how prior authorization rules vary across commercial insurers and whether those rules could be organized into a single, searchable database like the ICD-10 system. They analyzed publicly available provider manuals from Aetna, Humana, and UnitedHealthcare, reviewing thousands of procedure and service codes to determine when prior authorization was required and what information clinicians had to submit to the insurer to obtain authorization for a particular test or treatment. Using a combination of automated review and manual checks, they built a searchable database and used it to compare insurer rules. They found that while all three insurers required prior authorization for some services, the majority of services required prior authorization from only one of the three insurers, and the criteria and documentation requirements differed widely. The authors conclude that assembling these rules into a shared database is feasible and could improve transparency for both patients and clinicians, but the unexplained differences across insurers warrant further research on the appropriateness of this administrative barrier to patient receipt of some interventions ordered by their clinician.

 

Media contacts: For an embargoed PDF, please contact Gabby Macrina at gmacrina@acponline.org. To contact corresponding author David Scheinker, PhD please email Errol Ozdalga at eozdalga@stanford.edu and Kara Clemins at kclemins@stanford.edu.

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2. ACP calls for reform of the Medicare Advantage Program to protect patient health

Abstract: https://www.acpjournals.org/doi/10.7326/ANNALS-25-04309

URL goes live when the embargo lifts             

The Centers for Medicare and Medicaid Services (CMS) should reform Medicare Advantage to protect patient health and realign the plan option with its original purpose, says the American College of Physicians (ACP). In a new paper, “Protecting the Integrity and Quality of the Medicare Advantage Program: A Position Paper from the American College of Physicians” published in Annals of Internal Medicine, ACP examines growth of the Medicare Advantage program and its implications for the delivery of fair, high-quality and fiscally responsible care to older adults and people with disabilities.

 

Medicare Advantage is the private option in Medicare that now enrolls more than half of all Medicare beneficiaries. The plans are offered by private insurers approved by the CMS and integrate Part A and Part B of traditional Medicare coverage into a single plan with additional coverage options, such as prescription drugs, dental, vision and even gym memberships. The additional coverage appeals to beneficiaries, but beneficiaries often face challenges in navigating plan choices, unexpected costs, prior authorization and access to clinicians and post-acute services. These barriers disproportionately affect those who are low-income, live in rural communities, or have several chronic conditions. Medicare Advantage risk adjustment policies have created payment vulnerabilities and favorable patient selection, whereas quality measurement of the plans remains fragmented and overly complex.

 

In the paper, ACP details several position statements and recommendations for policymakers to ensure that traditional fee-for-service Medicare remains a strong, sustainable option for beneficiaries and advises that Medicare Advantage plans should not be used to replace or privatize traditional Medicare. These plans also must provide transparent, standardized benefit designs, which would improve beneficiaries' decision making, enhance accountability and ensure that plan offerings prioritize meaningful health benefits rather than serving as an incentive to select a plan. The transparency should extend to the promotion of Medicare Advantage plans, as well. ACP strongly advises robust oversight and regulation of Medicare Advantage marketing practices to prevent misleading advertisements and says that plans engaging in deceptive marketing should face penalties. Medicare Advantage plans should also be required to provide clear, standardized cost disclosures to protect beneficiaries from unexpected financial strain, and CMS should ensure that Medicare Advantage plans prioritize affordability alongside access to care. ACP says the plans should enact balanced and transparent risk adjustment mechanisms to better reflect patient complexity and avoid excessive coding practices.

 

Prior authorization requirements in Medicare Advantage plans are a common concern for physicians and patients due to administrative burden and potential delays in necessary care; ACP calls for streamlined prior authorization processes with faster response times and improved transparency. ACP also recommends that Medicare Advantage plans offer comprehensive and accessible telehealth options to benefit rural and underserved populations. The plans should also report to CMS and the public on the usage and outcomes of supplemental benefits, such as telehealth, dental, vision and hearing services to ensure accountability. Finally, ACP urges policymakers to prevent restrictive contractual clauses in Medicare Advantage models that interfere with physicians’ abilities to serve their patients. Regulatory frameworks should prioritize patient-centered care over administrative or financial considerations.

 

Media contacts: For an embargoed PDF, please contact Gabby Macrina at gmacrina@acponline.org. To speak with someone at ACP, please email Jacquelyn Blaser at jblaser@acponline.org.

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Also new this issue:

How Big Is the “Gray Area”? Navigating Health-Threatening Previability Pregnancy Complications in States With Abortion Restrictions

Alyssa Bilinski, PhD, et al.

Ideas and Opinions

Abstract: https://www.acpjournals.org/doi/10.7326/ANNALS-25-02397  

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Journal

Annals of Internal Medicine

DOI

10.7326/ANNALS-25-05289 

Method of Research

News article

Subject of Research

People

Article Title

Variation in Commercial Insurer Prior Authorization Rules

Article Publication Date

19-May-2026

 

PBM profits obscured by mergers and accounting practices, USC Schaeffer white paper shows

Requiring more financial transparency from PBMs would help policymakers understand how money flows through the large healthcare companies that now own them

University of Southern California

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Pharmacy benefit managers (PBMs) under the microscope for their role in high drug prices have often cited their reportedly slim profit margins as evidence that they do not drive up costs. The three leading PBMs, which control about 80% of the prescription drug market, have historically reported profit margins of 4% to 7%, among the lowest in the healthcare industry.

A new white paper from the USC Schaeffer Center for Health Policy & Economics demonstrates that these slim margins are dramatically influenced by the accounting practices PBMs elect to employ. The paper also shows how efforts to assess PBM profits have become more challenging after these companies merged with healthcare conglomerates that own other players in the pharmaceutical supply chain.

States in recent years have advanced or considered numerous measures seeking to increase PBM transparency, and Congress is currently pursuing legislation to reform PBM practices. The Federal Trade Commission, meanwhile, continues to scrutinize PBMs after accusing leading firms of inflating drug costs through strategies like rebates, markups and preferential treatment of affiliated pharmacies.

“Accounting practices make it difficult to judge the health and efficiency of the PBM market, particularly as dominant firms have become part of larger, more complex companies,” said lead author Karen Mulligan, a research scientist at the Schaeffer Center. “Greater financial disclosure requirements for PBMs are needed to develop a better picture of how PBMs make money and the extent to which these practices may raise costs for consumers.”

How accounting choices drive margins

PBMs sit at the center of the pharmaceutical supply chain, acting as intermediaries that pay pharmacies and negotiate rebates with drug manufacturers on behalf of insurers. PBMs retain transaction fees and a portion of manufacturer rebates while passing along payments between manufacturers, insurers and pharmacies.

Historically, PBMs have included these “pass-through payments” in financial reporting. This may also include the share of rebates sent directly to the insurer. While allowed under professional accounting guidelines, this practice may add hundreds of billions of dollars to PBMs’ reported revenue or expenses without affecting their actual earnings. This obscures key determinants of PBMs’ profitability, including the role of rebates, fees and other payments.

Using a simplified example with typical transaction fees and rebates, the white paper illustrates how accounting choices can produce vastly different profit margins for a hypothetical drug listed at $360. If pass-through payments were reported as revenues or expenses, the PBM’s margin would be 10% – or slightly higher at 13% if manufacturer rebates passed to the insurer were not reported. However, the margin jumps to 87% if pass-through payments were not reported at all. (See Figure 5 in the white paper.)

Vertical integration in the healthcare industry has further blurred PBMs’ financial picture. In the past decade, the three dominant PBMs have become part of diverse healthcare corporations that also own insurers, specialty pharmacies and group purchasing organizations (GOPs) that negotiate discounts.

Under this structure, payments between the PBM, insurer and the specialty pharmacy become internal transfers invisible to the public. Using the same hypothetical $360 drug as the previous example, the white paper shows how the publicly reported profit margin can be half of what’s recorded internally, as dollars are shifted to other units within the PBM’s parent company. (See Figure 6.)

Transparency reforms should illuminate revenue streams

The researchers suggest that policymakers consider requiring PBMs to exclude pass-through payments from financial reporting, as regulators have done for intermediaries in other industries.

Policymakers should also consider reforming financial reporting requirements so that healthcare conglomerates provide separate reporting for each distinct business unit, rather than allowing PBM operations to be combined with other units like specialty pharmacy. Further, requiring disclosure of internal transfers and pass-through payments in these companies would provide clarity about what’s driving profits.

“True transparency requires greater visibility into profit flows hidden inside increasingly complex corporate structures,” said co-author Darius Lakdawalla, chief scientific officer at the Schaeffer Center and the Quintiles Chair of Pharmaceutical Development and Regulatory Innovation at the USC Mann School. “Building a more efficient and sustainable pharmaceutical supply chain starts with a better understanding of where dollars are flowing.”

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Article Publication Date

22-Jan-2026

COI Statement

This white paper was supported by the Schaeffer Center. A complete list of supporters of the Schaeffer Center can be found in our annual report online.

Missing Medicare data alters hospital penalties, study finds

Hospitals in areas with high Medicare Advantage enrollment face inflated financial penalties for readmissions, because government uses only traditional Medicare data

Michigan Medicine - University of Michigan

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For more than a decade, hospitals have worked to help older adults avoid repeated inpatient stays, incentivized by a federal program that cuts Medicare reimbursements if hospitals have higher-than-expected rates of readmissions for people with certain conditions.

The Hospital Readmissions Reduction Program has helped spur innovation, including initiatives to better prepare patients and their families to manage care after hospitalization, and to support them virtually at home.

But a new University of Michigan study finds that these financial penalties have hit some hospitals harder than they should, even if those hospitals have done a reasonable job at keeping people with heart failure, pneumonia and other serious conditions from ending up back in a hospital within a month of leaving one.

Such hospitals have been paying inflated readmission penalties for a seemingly unrelated reason: They happen to serve higher percentages of older adults who have chosen to enroll in Medicare Advantage plans run by private insurance companies.

So what’s the connection?

Currently, the federal government only grades hospitals on their readmission performance for older adults with traditional Medicare, which is run by the federal government. Data from Medicare Advantage are not currently included in the calculations that determine these penalties.

This is a problem, because Medicare Advantage enrollees tend to be healthier than traditional Medicare beneficiaries. But the readmission penalty program’s risk-adjustment is unable to capture these differences.

So, the researchers find, hospital performance looks worse for hospitals treating fewer traditional Medicare beneficiaries and more Medicare Advantage enrollees, even if those hospitals take the same actions to prevent readmissions as other hospitals.

The study, published in JAMA Network Open, suggests that not incorporating Medicare Advantage data results in an unwarranted redistribution of nearly $300 million a year in readmission penalties across hospitals nationwide. That’s more than half the total amount of readmissions penalties incurred each year across all hospitals.

Penalties are publicly reported every year and covered by the news media.

The Centers for Medicare and Medicaid Services has issued a rule to begin using Medicare Advantage data in the program. But even when it takes effect later this year, it will not affect hospital penalties for several years.

An unintended consequence with major consequences

The analysis shows an unintended consequence of the intersection between two major health policies of the last 15 years: the rapid rise in Medicare plan enrollment, and the HRRP, says senior author Geoffrey Hoffman, Ph.D., a professor at the U-M School of Nursing and member of the U-M Institute for Healthcare Policy and Innovation.

“Medicare Advantage has experienced extraordinary growth in the past decade, yet policymakers haven’t caught up with implications of this growth for Medicare payment policy that is based purely on traditional Medicare enrollment,” says Hoffman. “The omission of Medicare Advantage data highlights the continuing issue of inadequate measurement of patient risk in the Hospital Readmission Reduction Program, with important implications for the penalties that hospitals face.”

When the HRRP started calculating readmission rates in 2012, only 29% of older adults and people with disabilities chose Medicare Advantage plans.

Today, it’s 54%. But the distribution is not even across the country.

Hoffman and lead author Zoey Chopra, M.A., mapped that distribution and divided more than 3,200 hospitals into five groups based on the MA enrollment levels in 1,486 counties.

Chopra is working toward both a medical degree in the U-M Medical School and a Ph.D. in economics in the U-M College of Literature, Science and the Arts. He is a Medical Scientist Training Program fellow at the Medical School.

Differences in hospitals and populations

The hospitals in the areas with the highest Medicare Advantage enrollment were much more likely to be larger, nonprofit, teaching-oriented and in urban areas than hospitals in the areas with the lowest levels of Medicare Advantage enrollment.

Even when the researchers took into account an aspect of the readmission penalty program that only judges hospitals against groups of their peer hospitals, they still found that the Medicare Advantage enrollment rate mattered.

Past studies have shown that older adults who choose Medicare Advantage plans tend to be in the younger age range of eligibility, and to have fewer serious health conditions.

Hoffman has studied patterns of migration back to traditional Medicare by adults who had previously chosen Medicare Advantage plans, and factors that cause older adults to leave a Medicare Advantage plan for another Medicare Advantage plan or traditional Medicare.

Even though the readmission penalty program adjusts penalties based on the health risks of hospitals’ patients with the conditions that are included in the program, the lack of Medicare Advantage data could be a source of bias, he said.

Areas with more Medicare Advantage enrollees may end up with higher-risk traditional Medicare beneficiaries, because healthier enrollees migrate to Medicare Advantage. But those risk differences can’t be captured in the data models used by CMS. Therefore, by basing the program’s penalties only on traditional Medicare enrollees, hospitals with more Medicare Advantage patients are at greater, unwarranted risk of readmission penalties.

“Our study observes an inadvertent consequence of restricting the readmissions program to traditional Medicare participants,” said Chopra. “At the time of the HRRP’s rollout, this made sense, given lower enrollment and concerns about accuracy of the Medicare Advantage data. However, including Medicare Advantage data now appears imperative to avoid unnecessary penalties for hospitals treating relatively more private pay patients.”

Potential solutions

The new policy taking effect later this year rule will add Medicare Advantage data to HRRP calculations of readmissions, but Hoffman and Chopra have concerns about the completeness of what may be available. Risk-coding and policy differences across Medicare Advantage and traditional Medicare could also complicate comparisons of hospital performance.

It will also base penalties on the last two years’ worth of readmission data, instead of three. While the inclusion of Medicare Advantage data nearly doubles the amount of data used for comparisons, given concerns about data completeness and accuracy, this change may nonetheless make it harder statistically to see how hospitals have really done on keeping readmissions as low as possible, Hoffman said.

In addition to the rule, they suggest, CMS could consider factoring the percentage of Medicare Advantage enrollees in a hospital’s area or patient base into the calculations for its readmission rate and potential penalty.

The study was funded by the National Institute on Aging of the National Institutes of Health (RO1AG074944, T32AG000221). Chopra’s funding is through the Population Studies Center at the U-M Institute for Social Research. Andrew Ryan, Ph.D., of Brown University is a co-author of the study.

Hospital Readmission Reduction Program Penalties for Hospitals with High Medicare Advantage Penetration, JAMA Network Open, DOI:10.1001/jamanetworkopen.2025.54972

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Journal

JAMA Network Open

DOI

10.1001/jamanetworkopen.2025.54972 

Method of Research

Data/statistical analysis

Subject of Research

People

Article Title

Hospital Readmission Reduction Program Penalties for Hospitals with High Medicare Advantage Penetration

Article Publication Date

22-Jan-2026