If you are enrolled in an Aetna Medicare Advantage plan, now might be a good time to get more nervous than usual.
Wall Street is not happy with Aetna’s parent, CVS Health. In response to that unhappiness, triggered by the company’s admission that it has been paying more claims than usual, CVS execs have promised to do whatever it takes to get profit margins back to a level investors deem suitable.
That means the odds have increased that Aetna will refuse to cover the treatments and medications your doctor says you need. It also means CVS/Aetna likely will increase your premiums next year and might dump you altogether. The company has a long history of doing just that, as you’ll see below.
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Medicare Advantage companies in general are facing what Wall Street financial analysts call headwinds, and those winds are now coming from several sources: increased Congressional scrutiny of insurers’ business practices, Biden administration efforts to end years of overpayments that have cost taxpayers hundreds of billions of dollars, enrollee discontent, and a gathering storm of negative press.
To understand the pressures CVS CEO Karen Lynch and her C-Suite team are under to satisfy the company’s remaining shareholders (many have fled), you need to know and understand what they told them in recent weeks–and what she undoubtedly will have to say again, with conviction, this coming Thursday when CVS holds its annual meeting of shareholders. You can be certain Lynch’s staff has prepared a binder chock full of the rudest questions she could face from rich folks (mostly institutional investors) who’ve become a little less rich in recent months as the golden calf called Medicare Advantage has lost some of its luster. (My former colleagues and I used to put together such a CEO-briefing binder during my Cigna days, which coincided with Lynch’s years at Cigna.)
To help with that understanding, we’re introducing the HEALTH CARE un-covered Magic Translation Box (MTB). We’ll fire it up occasionally to decipher the coded language executives use when they have to deal with analysts and investors in a public setting. We’ll start with what Lynch and her team told analysts on May 1 when CVS announced first-quarter 2024 results that caused a stampede at the New York Stock Exchange.
Lynch: We recently received the final 2025 (Medicare Advantage) rate notice (from the Center for Medicare and Medicaid Services), and when combined with the Part D changes prescribed by the Inflation Reduction Act, we believe the rate is insufficient. This update will result in significant added disruption to benefit levels and choice for seniors across the country. While we strive to deliver benefit stability to seniors, we will be adjusting plan-level benefits and exiting counties as we construct our bid for 2025. We are committed to improving margins.
Magic Translation Box: Can you believe it? CMS did not bend to industry pressure to pay MA plans what we demanded for next year. We only got a modest increase, not enough, in our opinion, to protect our profit margins. To make matters worse, starting next year we won’t be able to make people enrolled in Medicare prescription drug plans (Part D) pay more than $2,000 out of their own pockets, thanks to the Inflation Reduction Act President Biden signed in 2022. So, to make sure you, our most important stakeholder, once again have a good return on your investment, we will notify CMS next month that we will slash the value of Medicare Advantage plans by reducing or eliminating some benefits, like dental, hearing and vision, that attract people to MA plans in the first place. And, for good measure, we’ll be dumping Medicare Advantage enrollees who live in zip codes where we can’t make as much money as we’d like. For them: too bad, so sad. For you: more money in your bank account. And for extra good measure, to keep seniors from blaming greedy us for what we have in store for them, our industry will be bankrolling dark money ads to persuade voters that Biden and the Democrats are the bad guys cutting Medicare.
Later during CVS’s earnings call, CFO Thomas Cowhey reiterated Lynch’s remarks about reducing benefits.
Cowhey:So, we’ve given you all the pieces to kind of understand why we think it (Medicare Advantage) will lose a significant amount of money this year. But as you think about improvement there, obviously there’s a lot of work that we still need to do to understand what benefits we’re going to adjust and what ones we can and can’t…To the extent that we don’t believe we can credibly recapture margin in a reasonable period of time, we will exit those counties…(And) as we’ve all mentioned we’re going to be taking significant pricing actions and really it’s going to depend on what our competitors do.
Magic Translation Box: We’re under the gun to figure this out because we have to notify CMS by June 3 how much we will increase Medicare Advantage premiums and cut benefits next year and which counties we’ll abandon altogether. We’ll also be watching what our competitors do, but we know from what they’ve been telling you guys that they, too, will be dumping enrollees, hiking premiums and slashing benefits.
To make sure investors couldn’t miss what they were saying, Lynch jumped back into the conversation to make clear they knew they were #1 in her book:
Lynch: I’m just going to reiterate what I said in my prepared remarks. (You can bet what follows were prepared, too.) We are committed to improving margin in Medicare Advantage [emphasis added] and we will do so by pricing for the expected trends. We will do so by adjusting benefits and exiting service counties. And we are committed to doing that.
Magic Translation Box: Have I made myself clear? We will do whatever it takes to deliver the profits you expect. We will keep a closer eye on how much care people are trying to get and we’ll swing into action faster next time if we see evidence of an uptick. There will be carnage, but you guys rule. You mean a lot more to us than those old and disabled people who don’t have nearly as much money as you do in their bank accounts.
This will not be the first time Aetna has dumped health plan enrollees who were a drain on profits. In 2000, when Medicare Advantage was called Medicare+Choice, Aetna notified the Clinton administration it would stop offering Medicare plans in 14 states, affecting 355,000 people, more than half of Aetna’s total Medicare enrollment at the time. Other companies, including Cigna, did the same thing. My team and I wrote a press release to announce that Cigna would be bailing from almost all the markets where we sold private Medicare plans. We of course blamed the federal government (i.e., the Democrats) for being the skinflints that made it necessary to bail. Our CEO at the time, Ed Hanway, said the government just couldn’t be relied upon to be a reliable “partner.”
Back then, just a relatively small percentage of Medicare beneficiaries were in private plans. Today, more than half of Medicare-eligible Americans are enrolled in a Medicare Advantage plan, which means the disruption could be much worse this time. Some people in counties where Aetna and other companies stop offering plans likely will not find a replacement plan with the same provider network, premiums and benefits. But in most places, those who get dumped will be stuck in the volatile, often nightmarish Medicare Advantage world, unable to return to traditional Medicare and buy a Medicare supplement policy to cover their out-of-pocket obligations. That’s because in all but a handful of states, seniors and disabled people will not be able to buy a Medicare supplement policy as cheaply as they could within six months of becoming eligible for Medicare benefits. After that, Medicare supplement insurers, including Aetna, get their underwriters involved. If your health isn’t excellent, expect to pay a king’s ransom for a Medigap policy.
More of the same bull manure from Medicare (dis)Advantage Insurers. This is out of control. There is no necessity to raise rates annually, when the fact is that MDA has significantly cut services for maintenance type surgery to keep individuals ambulatory, denying care, delaying care and over-charging the Medicare Trust Fun. It is high time that we go to the World Court to sue both Insurance companies and CMS for not following directives to bring these profiteering and greedy insurance companies to the exact same level as Traditional Medicare. If they are unwilling to do due diligence to meet CMS directives or to compromise without intimidating our Government officials, then they would serve the National Interest best by bowing out of supporting Medicare (dis)Advantage and transfer at NO ADDITIONAL customer cost all MDA policy holders over to Traditional Medicare. Enough of the strong arm tactics pretending to be competitive. It is clear to any normal American, that what these Private Insurance Companies say and threaten the US Government, have lost any sense of reality, and maybe these insurance firms should have their licenses terminated in perpetuity. Stop the propaganda. We need health care that is meaningful; not a load of malarkey that MDA has proven itself to be.
I've been preaching for years to my fellow seniors to get off Medicare Advantage plans ASAP. This is just more evidence supporting my views.
More of the same bull manure from Medicare (dis)Advantage Insurers. This is out of control. There is no necessity to raise rates annually, when the fact is that MDA has significantly cut services for maintenance type surgery to keep individuals ambulatory, denying care, delaying care and over-charging the Medicare Trust Fun. It is high time that we go to the World Court to sue both Insurance companies and CMS for not following directives to bring these profiteering and greedy insurance companies to the exact same level as Traditional Medicare. If they are unwilling to do due diligence to meet CMS directives or to compromise without intimidating our Government officials, then they would serve the National Interest best by bowing out of supporting Medicare (dis)Advantage and transfer at NO ADDITIONAL customer cost all MDA policy holders over to Traditional Medicare. Enough of the strong arm tactics pretending to be competitive. It is clear to any normal American, that what these Private Insurance Companies say and threaten the US Government, have lost any sense of reality, and maybe these insurance firms should have their licenses terminated in perpetuity. Stop the propaganda. We need health care that is meaningful; not a load of malarkey that MDA has proven itself to be.