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The Unaccountable and Enormously Profitable Bureaucracy Behind Medicare Advantage
"They work to deny your care to make a profit."
By Eric Gardner, More Perfect Union
When Gary Bent passed away at his home earlier this year, it came at the end of a struggle with recurring melanoma — and for his family, a persistent battle with Bent’s Medicare Advantage provider, UnitedHealthcare, to cover the skilled nursing care he required following brain surgery.
“There was enormous stress in just having to fight for what he needed at the same time that we were watching his health fail drastically,” his wife, Gloria Bent, told More Perfect Union. Added his daughter, Megan Bent: “I just can’t understand how when someone is…in the sunset of their life, that they’re having to go through all of this extra burden and hurdles that are unnecessary.”
Medicare Advantage providers have engineered a formidable bureaucratic apparatus with the primary objective of maximizing revenue from taxpayers while, in some cases, imposing constraints and delays on legally mandated medical treatment.
The result is potentially worse health outcomes for patients and taxpayers, coupled with exploding profitability for the industry.
The bureaucratic processes have helped propel health insurance from a fairly static industry to one of the most valuable in the world. The five biggest publicly held Advantage providers are now worth around three-quarters of a trillion dollars—up 88 percent since 2018. The top health insurers are now more valuable than the top five airlines. The most powerful, UnitedHealth Group, is now worth more than Exxon Mobile.
Numerous reports, from Bloomberg to industry whistleblower Wendall Potter, have identified Advantage as the growth engine, with often disastrous results for patients.
“My understanding of [Medicare Advantage]...is that they work to deny your care to make a profit,” Megan Bent told More Perfect Union.
Read on for more or watch our latest at the link below:
How Medicare Advantage Works
For most of its existence after its passage in 1965, Medicare’s operating model was pretty basic. Patients received whatever treatment their healthcare providers prescribed, and providers were paid a pre-negotiated rate for their services. To be clear, the program wasn’t perfect. There’s no dental coverage and there are significant gaps around co-pays, but Medicare patients weren’t subjected to the needless bureaucratic nonsense that plagues most private American insurance plans. Provider networks? Prior authorization? Not a thing. If providers accepted Medicare, they were in-network, and whatever care was prescribed was covered.
Since Medicare’s inception, there has been a fair amount of pushback from industry groups and free-market ideologues, including Ronald Reagan, against this model. At the root of their argument is, well, money; Medicare uses its massive buying power (all of American seniors) to negotiate prices, ultimately driving down provider profits.
This coalition argued that the solution to America’s health woes wasn’t through a universal government program, but a free market. In the early 2000s, they got their chance—the Republican-led government opened Medicare up to private corporations, arguing that market competition could provide better outcomes at lower costs
To do this, they needed to find a way to cap costs while delivering better patient health outcomes. The answer was found in “managed care.” This model has been around Medicare since its inception in the late 1960s—but mostly administered through local non-profits. Under the new plan, profit-motivated health insurers are given a lump sum payment per patient. By not tying payment to services, providers will take a cheaper and more cost-efficient approach to healthcare; think physical therapy over surgery.
The stated benefits haven’t materialized, but it hasn’t stopped the program from spreading. When Advantage plans were fully rolled out to the public in 2007, they constituted 19 percent of all Medicare. Today they make up over 50 percent.
By law, Advantage providers must spend 85 percent of the money on treatment. The rest they can pocket, which in turn creates an interesting dilemma. The firms can really only increase profits by boosting patient payments or limiting expenses, leading to the development of a bureaucracy designed to optimize both.
How They Boost Revenue: Falsifying Illnesses
The amount Advantage plans are paid to cover a patient corresponds to the patient's overall health condition. An 80-year-old cancer survivor will receive a higher payment than a 67-year-old marathoner because the cancer survivor will presumably require more costly care.
Initially, insurers enacted cartoonish schemes to recruit healthier patients—going so far as to locate sign-up offices in second-floor offices. But eventually, this evolved into a sophisticated administration to maximize revenue.
Over the past 10 years, eight out of the 10 largest Advantage providers have been credibly accused of falsifying patients' records to increase what the government pays for care. All have disputed the allegations.
Four of the five largest providers have faced federal lawsuits over fraud. There are allegations that Kaiser urged doctors to add false illnesses to patients' medical records, and Elevance tied doctor bonuses to diagnosing illnesses. “But the diagnoses had a lucrative side effect,” the New York Times wrote in an expose. “They let the insurers collect more money from the federal government’s Medicare Advantage program.”
How They Lower Costs: Prior Authorization
With prior authorization, an insurance company—not the patient’s care providers—ultimately determines treatment. If a doctor orders a procedure or rehab for a patient, it must be approved by the insurance company before the care is given. This doesn’t exist in traditional Medicare, but 80 percent of Advantage plans feature it.
Theoretically, this bureaucratic step helps control medical costs by ensuring proper diagnosis. But there’s growing evidence that Advantage providers use it to boost profits.
Under the rules, Advantage providers must offer the same coverage as traditional Medicare. But if the insurer is paid $100 to cover the patient, the company can keep up to $15 as profit—giving the company a perverse incentive to deny care. Reporting by industry publication STAT has found that insiders at the companies believe profit is driving care decisions.
Advantage providers are increasingly outsourcing these care decisions to third-party reviewers. Here, these hybrid technology-health companies use proprietary algorithms and massive data sets to “inform” care decisions. Patients are translated into numbers and measured against thousands of data points to develop a care strategy.
There’s nothing inherently wrong with using data to drive decisions or using an algorithm to analyze it. But there’s no insight into how these algorithms work because their functionality is considered a business secret. We do know that Advantage plans are using this information to override the decisions of on-the-ground doctors.
In Gary Bent’s case, he was denied specialty rehab and discharged from a short-term rehab facility weeks after brain surgery—against the orders of his brain surgeon and his rehab facility. He experienced complications almost immediately after returning home.
Patients can appeal these denials, but here’s where the specialized bureaucracy comes into play. It’s a refined three-step process equal parts taxing and frustrating, favoring the insurance providers over patients at nearly every turn. Patients need to prove they need the care, creating a situation where people recovering from brain surgery are expected to gather thousands of pages of documents and call into administrative hearings.
If the patients can overcome the stress and trauma of fighting a system aligned against them, they win three-quarters of their appeals.
“We felt like this process was designed to wear us out,” Megan Bent told us. “And I would say it did wear us out.”
A Patient’s Burden
There’s a two-sided bureaucracy at play here. On one side, Advantage providers developed sophisticated processes, allegedly including even fraud, to increase the amount they were paid per patient. On the other is a byzantine and sophisticated denial network that leaves patients scrambling and appealing for coverage.
Left in the middle are the patients and their families.
“One thing that has made a lasting impression on me,” Megan said in an interview, “is they're making these decisions and bringing money in hand over fist, and they robbed our family of things that you cannot put a price on.”