A new report from Wendell Potter at the Center for Health and Democracy examines just how the private insurance market makes its money—and how American health care is worse off for it.
Health care reform has always been one of the least attainable objectives for American progressives. Reverence for private industry has allowed the health care industry to remain at the center of the medical system, and reforms have made modest gains at best. Today, the private health care industry is enormous, notoriously difficult to navigate, and shrouded in secrecy. A new analysis from Wendell Potter, executive director of the Center for Health and Democracy, published on his Health Care un-covered Substack, sheds light on how the industry has grown to such a state, and what can be done to rein in an industry that costs the American people trillions and still leaves millions under- and uninsured.
The report analyzes the health insurance market by looking at the financial statements of the top seven insurance providers in the country, information that is typically aimed at financial investors and market analysts. The companies are Centene, Cigna, CVS/Aetna, Elevance, Humana, Molina, and UnitedHealth Group, also referred to as the Big Seven. The report compares growth from 2012 and 2022. It found an industry enjoying massive profits, often by undermining public programs, and whose ruthless pursuit of money has often life-threatening consequences.
When the data is examined, “you see just how dramatically these companies have grown [and] how they’ve been determined to privatize the Medicare program in particular,” Potter said. “And they’ve done a pretty darn good job.”
The mechanism for Medicare privatization is Medicare Advantage (MA), in which private companies administer Medicare benefits. This comes from the Medicare Modernization Act, a Medicare overhaul that was introduced by the GOP and passed in 2003.
As Potter points out, the Republican Party constantly bemoans the exorbitant spending of Medicare, yet allows these programs to function unimpeded. “The Medicare Advantage program is a big contributor to the excessive spending in the Medicare program,” he said, “and it needs to be ended.”
The numbers are astounding. Big Seven revenue increased 300 percent in the ten-year period studied, while profit increased 287 percent. Potter notes that, at three of these companies, over 90 percent of health plan revenues come from government programs.
This ruthless profiteering poses a threat to the stability of Medicare’s financing. It (along with Medicaid) is funded through a payroll tax that is split between an employer and an employee, the surplus of which goes into the Hospital Insurance Trust Fund. That fund is expected to run out in 2028, according to The New York Times.
Another issue Potter has identified is the prominence of pharmacy benefit managers (PBMs), an industry that amassed over a trillion dollars over the past ten years. PBMs are companies that serve as middlemen between drug and insurance companies. They negotiate prices for drugs and generate tiers based on those prices, indicating how much they will pay for the drug, which determines how much a person pays out of pocket—if the prescription is on the list at all. These companies are increasingly owned by private insurers; as of 2022, 80 percent of the pharmacy benefit market is controlled by three companies (Cigna, CVS/Aetna, and UnitedHealth).
This ruthless profiteering poses a threat to the stability of Medicare’s financing.
As my colleague David Dayen has written, PBMs, with their opaque pricing practices, high fees, and enormous market power, are a major factor behind skyrocketing drug prices. It’s gotten so bad that some drugs can be cheaper if one is uninsured. Some policyholders pay premiums just in case they need major care, but then pay for their drugs out of pocket.
The industry is setting its own prices, which is a particularly offensive practice when plenty have been convinced that private insurers provide the best prices possible, and can manage the health care industry better than the government can. But this report shows plainly they intentionally increase prices, push costs onto individuals, and do all they can to avoid paying for treatment.
“They make money by restricting access to care,” Potter said.
What to do? One solution Potter suggests is beefing up traditional Medicare to make it competitive with Advantage. But the lack of transparency and regulation around these issues means that these companies are gobbling up more and more of the market, while Congress squabbles over whether Medicare is even worth funding at all.
“They’ve essentially been bailed out by taxpayers,” Potter said. “And members of Congress, and various administrations, have been just standing on the sidelines, not paying attention to what’s been going on.”
It also means that people are often signing up for Advantage plans without knowing the potential benefits they could lose, drawn in by the promise of more benefits, Potter says. He points to the issue of prior authorization, as well as in-network providers often rotating on a regular basis, not to mention the limits on location that leave some people uninsured even on vacation.
This state of things leaves millions of people uninsured or underinsured, despite the tremendous government spending. Over 100 million Americans have medical debt, according to Kaiser Health News. Potter points out that provisions in the Affordable Care Act allow companies to charge more every year, which allowed the out-of-pocket maximum to increase 43 percent since 2014—up to $18,200 in 2023.
Health care reform is a steep political lift. Aside from the deep pockets of private industry, there is the GOP’s fanatical crusade against health care—witness their dozens of attempts to repeal or defund the Affordable Care Act.
But it simply must be done. “People are not getting the care that they need. Or if they do, they’re winding up all too often in bankruptcy or losing their homes. And that’s what policymakers really, really need to understand,” Potter said. “These companies are making billions of dollars in profits and they’re doing it in ways that are denying needed care.”
Reporter: Ramenda Cyrus