Medicare Advantage: A Goldmine for Health Insurance Companies

Tuesday, July 21, 2015

Many health insurance companies used to thumb their nose at Medicare patients, the firms believing they were better off investing in the private market than the federal government. But with the creation of Medicare Advantage, which gave insurers a direct stake in the Medicare business, companies are jumping on a goldmine of opportunity.


Wendell Potter, a former CIGNA executive, calls Medicare Advantage a “pot of gold” for insurance companies, as it has become an “increasingly important revenue stream” for them, “especially the big for-profit corporations.”


Currently, the largest Medicare Advantage insurers are UnitedHealthcare, Humana, Kaiser Permanente and Aetna.


Writing for the Center for Public Integrity, Potter said a big reason why Aetna wants to buy up Humana (a $37-billion offer), and why Anthem seeks to merge with Cigna (a $54-billion bid), “is the desire of the acquiring companies to boost their presence in the privately-run Medicare business.”


As it currently stands, wrote Potter, “a big chunk of that federal money is now flowing through the insurance industry, so much so that many companies have become dependent on it to sustain their profits.”


“The efforts by some of those companies to recruit Medicare eligible Americans into their privately operated (but publicly financed) Medicare Advantage programs have been wildly successful. As many as one in three of the country’s senior (65 and older) and disabled citizens are now enrolled in a private plan,” he wrote.


Potter believes that the latest revolving door announcement—former chief administrator of the Centers for Medicare and Medicare Services Marilyn Tavenner being snatched up to become the new president of America’s Health Insurance Plans, the giant lobbying group for the health insurance giants—is further evidence of the industry’s unwavering aim for federal dollars.

-Noel Brinkerhoff


To Learn More:

Latest Swing Of Revolving Door Puts Former Medicare Czar In Charge Of Health Insurance Lobby (by Wendell Potter, Center for Public Integrity)

Head of Obama’s Health Care Rollout to Lobby for Insurers (by Robert Pear, New York Times)

Government Audits Reveal Health Insurance Companies Regularly Overcharge Medicare Advantage (by Steve Straehley, AllGov)

Fraudulent “Upcoding” Costs Medicare Advantage $2 Billion a Year (by Steve Straehley, AllGov)


anonamouse 9 years ago
Potter formerly was Cigna's head flack. He says he quit when he could no longer stomach his job as an apologist-propagandist for a business that valued profits over its customers' well-being. His book is a decent read: "Deadly spin : an insurance company insider speaks out on how corporate PR is killing health care and deceiving Americans."
Dennis Byron 9 years ago
The opening statement, “Many health insurance companies used to thumb their nose at Medicare patients...” is nonsense as is the rest of this post and everything I have ever read by Wendell Potter. Health insurance companies have been totally involved in Medicare since its creation in 1965. Per the Medicare law, the government had to use health insurance companies to run Medicare. At the time there were two Parts, A and B. At the time, about 35 healthcare insurance companies were involved in running Medicare and all of them also sold separate private insurance (now called Medigap). In addition, a large group of insurance companies administered and still administer group retiree insurance, the most popular form of supplementing Medicare (Original Parts A and B of Medicare have to be supplemented because they are such terrible insurance). Today there are only about a dozen healthcare insurance companies that administer Parts A and B (because a 1990s Congress legislated consolidation to save money) but many more still sell private Medigap and administer private retiree plans. All the same companies also have been administering public Part C health plans since the law was signed by President Clinton in 1997. In addition, plans similar to Part C plans – including but not limited to Medicare Advantage plans – have existed since the 1970s under Medicare demonstration status. According to government reports, for the work administering Medicare Parts A, B and C (and later D) the insurers make about a 5% margin now matter which public Medicare Parts they choose to be involved with. Likely the private Medigap and group retiree business is more lucrative and it still dominates the Medicare market. Medicare Advantage is an important revenue stream for all the insurance companies who service the Medicare market via its four public Parts and via private Medigap and retiree plans because in many – but not all – cases public Medicare Advantage is the best insurance choice cost wise and medically of the three main options to supplementing Original Medicare. Because of this, Part C health plans which began with a 2% share of the market in 1997 (it started above 0% because of its demonstration status) now have about a 33% share of the market, Medicare Advantage is an important revenue stream because that’s what Medicare beneficiaries want. But according to Wendell Potter it is because 17,000,000 people are stupid (kind of explains why he is a former insurance executive, don’t you think?)

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