By Rebecca Pifer
Healthcare Dive, April 8, 2025

---

Dive Brief:

• The Trump administration handed Medicare Advantage plans a massive gift on Monday, finalizing payment rates for 2026 significantly higher than what regulators in the Biden administration sketched out.
• The 5.1% benchmark increase should accelerate margin recovery for the privatized Medicare plans following years of rates they said were insufficient — especially as those rates coincided with rising costs for seniors’ care. Insurer stocks soared after the payment notice was announced.
• The Trump administration also completed phasing in changes to insurers’ coding practices meant to make it harder to for them to inflate members’ sicknesses to garner higher reimbursement. The changes are unpopular with MA plans, which lobbied heavily to reverse them.

---

Dive Insight:

The 5.1% rate increase for MA plans is the largest rate increase in the past decade, and is up significantly from the 2.2% increase proposed by the Biden administration in January.

Overall, it should result in more than $25 billion in additional payments going to MA plans next year, according to the CMS.

However, the real sum will be higher, given the CMS’ estimate doesn’t include the impact of plans’ coding practices. The expected change in revenue for MA plans jumps from 5.1% to 7.2% including the impact of risk scoring.

It’s difficult to say how much this will inflate reimbursement in MA next year, a program that’s expected to cost taxpayers almost $600 billion overall in 2025.

But “CMS’ estimate of risk score trend would certainly increase the payments going to MA plans next year even beyond the estimate given in the rate notice,” said Lynn Nonnemaker, a senior director with healthcare consultancy McDermott+.

---

---

Final rates are generally higher than proposed ones, but the jump between the two was larger than some analysts had expected.

The CMS said the final rate is more generous because it was calculated using more recent data that reflects even higher spending in Medicare, as reimbursement attempts to catch up to the cost growth that’s hit payer’s profits over the past year.

Regulators increased the effective growth rate, a metric that tracks cost growth in Medicare, by more than 3 percentage points to upwards of 9% in the final notice. That “may be the largest increase we have seen,” Whit Mayo, an analyst with Leerink Partners, wrote in a Monday note.

“This reads very positive” for insurers, Mayo said.

It’s not surprising that the growth rate increased substantially, given the inclusion of data from the third and fourth quarters and plans’ prior concerns that previous estimates were too low, Nonnemaker noted. But “I can’t say that I expected 9%,” she said.

The rate notice reinforces that “MA rates are influenceable,” given the CMS gave “generous upward revisions” to multiple metrics that factor into cost growth, wrote Jefferies analyst David Windley in a Monday note.

“We maintain the Trump admin had its finger on the scale,” he said.

Trump’s CMS, under newly confirmed Administrator Dr. Mehmet Oz, the physician and television personality, was expected to be friendlier to MA plans as Oz has expressed support for the privatized Medicare program in the past.

However, during his confirmation process Oz walked a fine line between supporting MA and pledging to curb profiteering in the plans that’s brought them under congressional scrutiny and sparked discontent among the American public.

Early MA rules from Trump administration suggest regulators are committed to balancing on that tightrope. The CMS also recently finalized a rule putting some guardrails around MA plans’ coverage denials, but declined to take more radical steps proposed by its predecessors.

Regulators in the Biden administration were worried that the Trump administration would halt changes to how MA plans adjust for beneficiary risk, calling the reform “crucial” to ensure payment accuracy in a fact sheet on their proposed rule in January.

The adjustments are meant to prevent upcoding, when insurers exaggerate their members’ health needs to get higher reimbursement from the government. They do so by making plans’ coding processes more accurate, including removing frequently gamed medical codes from the risk adjustment model.

The CMS first instituted the changes in 2023, but have rolled them out over three years to lessen the shock on insurers. In 2026, 100% of beneficiary risk scores are set to be calculated using the new model.

That remains the plan. Finalizing the model will “improve payment accuracy and reduce burden,” the CMS wrote in the final rule, adding that MA plans have had ample time to assess the impact of its implementation.

“Given this experience, we do not think it is necessary to further delay,” the CMS said.

The Trump administration also finalized other payment policies that could cut into MA plans’ earnings, including changes to how normalization factors, which adjust risk scores for enrollees, are calculated for prescription drug plans — a proposal the CMS received considerable pushback on in comments on the rate, according to Nonnemaker.

Still, the Better Medicare Alliance, a lobby for the MA industry, thanked the Trump administration for “fully funding” MA in a statement Monday.

Stocks in major MA payers, including UnitedHealth and Humana, jumped aftermarket Monday following the rule’s release. Humana, which is particularly exposed to MA, quickly climbed 16% after the rates were announced.

The payment hike should help insulate insurers from the worst of rising costs, which flattened margins last year as seniors in the privatized Medicare plans used more medical care than expected. National payers have already cut benefits and exited underperforming markets for 2025 in a bid to resuscitate margins.

Plans will likely funnel the higher reimbursement in 2026 into improving profits, but could also increase their benefits, analysts said. That could result in even more Medicare-eligible seniors electing to join MA.

“Overall, we view the [2026] Final notice as a best-case scenario,” Ryan Langston, analyst with TD Cowen, wrote in a Monday note.

https://healthcaredive.com…

By Alexander Zaitchik
Drop Site News, March 24, 2025

Presently tied up in Senate confirmation hearings, Mehmet Cengiz Oz, the Oprah-certified wellness advocate known as “Dr. Oz,” might soon become director of the Centers for Medicare and Medicaid Services (CMS). If confirmed, the daytime TV doctor has agreed to sell his roughly $600,000 in UnitedHealthcare stock, along with an array of medical industry holdings in devices, supplements, and pharmaceuticals.

Yet the mortal threat Oz poses to American healthcare goes deeper than his six-figure stake in the country’s biggest and most notorious private insurer. For years, Oz has worked as a pitchman for Medicare Advantage (MA) plans. This managed care alternative allows corporations to bill the federal government for administering Medicare benefits on its behalf, and is a boon for private insurers. As a UnitedHealth shareholder and licensed insurance broker, Oz has long been financially and ideologically committed to the takeover of traditional Medicare by private insurers. Led by UnitedHealth, the insurance industry has made a hugely profitable algorithmic science out of denying and delaying care to maximize profits.

Private insurers already receive more than half of Medicare’s $840 billion budget. With Oz’s confirmation in sight, they are now eyeing the rest. The first step, announced in the conservative policy blueprint Project 2025, is to make Medicare Advantage “the default enrollment” for newly eligible seniors. The long-term plan is the ruination and displacement of traditional Medicare entirely—and ultimately to a system, controlled by big insurers, that Oz calls “Medicare Advantage for All.”

There are two ways Republicans could orchestrate a frontal attack on traditional Medicare, with Oz’s boosterism for Medicare Advantage leading the way. The first and most difficult would involve an act of Congress that transfers current Medicare enrollees into Medicare Advantage plans. This would almost certainly trigger pushback in the courts, led by the 30 million Americans happily enrolled in Medicare.

The second gambit is slower, stealthier, and more likely to succeed. Operating beyond the reach of Congress, the Center for Medicare and Medicaid Innovation (CMMI) is a policy hub created within CMS by the Affordable Care Act. CMMI’s charter grants considerable powers to implement pilot projects to test different payment and delivery methods, waiving any troublesome provisions or statutes that may stand in the way. If these pilots are determined successful—defined as reducing costs without impacting quality, or improving quality without increasing costs—then CMS can ramp them up nationwide without Congressional oversight.

A source on the Hill and another within CMMI confirm that multiple pilots are being prepared to advance Medicare Advantage enrollment at the expense of Medicare. As called for in Project 2025, the first would make Medicare Advantage the “default enrollment” for newly eligible seniors. The second approach would move an as-yet unknown percentage of those currently in traditional Medicare into a Medicare Advantage plan.

The third would automatically assign all existing Medicare enrollees within certain counties to something very similar to a Medicare Advantage plan. This third project is likely to use a variation of the “geographic direct contracting model,” developed during the first Trump administration, but halted by the Biden administration.

All that’s required to implement these pilot projects across all of Medicare is for Oz, if confirmed, to deem them “successful.” Observers expect that thumbs will be placed on the scale during any assessment of the merits.

“They are likely to ignore comparative data from last twenty years, because all of that data shows Medicare Advantage and similar programs drive up the cost of health care while harming millions of Americans,” said Ed Weisbart, a retired family physician and national secretary of the Physicians for a National Health Program, a non-partisan organization representing more than 25,000 physicians and health care advocates. “Instead, they’ll fabricate their own measurements of success and use these pilots to turn our beloved Medicare program over to the investment community, indifferent to the untold harm it would cause.”

Any momentum in Washington to blunt the expansion of Medicare Advantage will face the headwinds of the industry’s immense lobbying power. The big six health insurers have quintupled their lobbying budgets since George W. Bush swung open the door to Medicare Advantage plans in 2003. Together, the big private insurers now spend more than $50 million on general lobbying, with many millions more going to individual political campaigns, including many of the Senate Finance members tasked with grilling Dr. Oz. The committee chair, Mike Crapo of Idaho, has alone received $446,000 in direct donations from the insurance industry since 2019.

This lobbying machine has grown apace with Medicare Advantage, the ascendance of which has only fed the insurance industry’s desire to complete the privatization of Medicare once and for all.

Disadvantaging Medicare

The project of privatizing Medicare began in the 1980s. For two decades after its 1965 inception, the Great Society program operated as designed, its success at once dull and spectacular: Doctors and hospitals cared for seniors then billed the government. Defined by clear rules and predictable reimbursements, Medicare provided security and quality care for tens of millions of Americans. The program had its imperfections, vulnerabilities, and unscrupulous actors, but insurers hyped small-time corruption into the program’s defining feature. This charge aligned with the Reagan administration’s operating assumption that the private sector could deliver the same care at lower cost and with more efficiency. The companies’ access window to Medicare was expanded by the Balanced Budget Act of 1997. With the 2003 Medicare Modernization Act, it was flown wide open.

Medicare Advantage plans have since eaten steadily into traditional Medicare, expanding its share from 13 to 54% of Medicare enrollment. MA now covers 32 million seniors. Spurred by this growth, the big six insurers have all entered the Fortune 500 for the first time. In 2003, UnitedHealthcare, the biggest of the big six, generated just over $1 billion in profit. By 2023, having captured 20 percent of the Medicare Advantage market, that number was $33 billion.

By imposing a private insurance template onto Medicare, MA plans subject seniors to the systematic depredations of managed care. Enticed through deceptive marketing, people trade in their traditional Medicare coverage only to find themselves at the mercy of a rigged and increasingly automated care approval process known as pre-authorization. Pre-authorization is a profound inversion of the payment system in traditional Medicare. Whereas Medicare overwhelmingly reimburses hospitals post-care, pre-authorization requires approval before care is provided—based on analyses most often performed by computers. In recent years, led by UnitedHealthcare, the companies have begun using AI to tighten the noose around an ever-broadening range of procedures and services.

Last year, pre-authorization denials forced three and half million seniors to pay out of pocket or forgo their doctor’s recommended treatment altogether. According to a 2022 report by the Office of Inspector General, denials are increasingly blocking care that doctors deem medically necessary. “Medicare Advantage insurers are intentionally using prior authorization to boost profits,” the U.S. Senate Committee on Governmental Affairs concluded in a report from last year, specifically by “targeting costly yet critical stays in post-acute care facilities.”

The surge in denials is no accident. Companies have been developing artificial intelligence programs that excise the human element from the pre-authorization review process. The algorithms are programmed to “deny, delay, depose”—the now infamous phrase etched on the bullet casings found at the scene of the assassination of Brian Thompson, a former UnitedHealthcare CEO. In 2020, UnitedHealthcare bought a tech firm, NaviHealth, because its proprietary algorithm was shown to “increase adverse determinations” in approving post-acute care. Known internally as Machine-Assisted Prior Authorization, UnitedHealthcare publicized the program as an efficiency tool that reduced by a handful of minutes—the time needed to conduct prior-authorization reviews.

An investigation by STAT News, however, uncovered internal documents that show the company mostly valued the technology for producing “an increase in adverse determination rate,” i.e., more overall denials of coverage. In its first year using NaviHealth, UnitedHealthcare’s denial rate for post-acute care doubled to 22 percent, and its denial rate for admission to skilled nursing facilities spiked from under 2 to 12 percent. The company’s remaining human case reviewers, meanwhile, were told to respect the new algorithmic recommendations, while those who were let go by the company had trouble finding similar work with competitors. As part of its AI pivot, UnitedHealthcare runs a profitable side business subcontracting NaviHealth to other Medicare Advantage providers, which have seen similar spikes in denial rates. Denial rates for long-term acute care, for example, is up 54 percent at Humana, where a company medical director has described the new technology as “important for denial purposes” and the ability “to uphold a denial on appeal.”

The appeals process—the “depose” in “delay, deny, depose”—has been made so intentionally long and arduous by Medicare Advantage insurers that only around 10 percent of seniors even try it. That number is far lower among policy holders struggling with serious illnesses, since they are often cautious about how they spend their remaining months of life. Last year, the Journal of Clinical Oncology published a study showing that cancer patients with Medicare Advantage plans waited significantly longer for treatment than those in traditional Medicare. Moreover, their requests to visit National Centers of Excellence in health care were almost always denied. Patients with cancer or those who are terminally ill often disenroll from Medicare Advantage at a disproportionate rate—that is, if they can find a Medigap insurance company willing to sell them an affordable policy.

“All the shenanigans that the Medicare Advantage corporations engage in are scary if you need treatment,” said Weisbart. “If you have cancer and you’re told to wait, that’s more than just expensive and terrifying—it’s deadly. It’s infuriating that they are killing people to maximize their returns to Wall Street. Especially when you couple it with the knowledge that traditional Medicare represents a more humane, less expensive way to organize health care.”

For Medicare’s enemies, the persistence of this cheaper, more humane alternative represents a standing double-threat—to the continued growth of Medicare Advantage, as well as to the myth that there is no better way. This is why the insurers and their pitch man Dr. Oz are so eager to get to work destroying what remains of it.

Intensified Rural Health Crisis

The effects of further displacing Medicare, even if only one county at a time, would be most immediate and acute in rural America, where hospitals are already buckling under the force of AI-powered exploitation by Medicare Advantage providers. Since 2003, nearly 200 rural hospitals have closed across the United States, with more than 700 of the remaining 2,000 medical centers nearing bankruptcy and closure. The situation is also bleak for many urban hospitals with a similarly high proportion of patients on Medicare and Medicaid. Connecticut’s Bristol Hospital announced last year that it was eliminating sixty positions due to delays in payment and coverage rejections by Medicare Advantage insurers.

Hospitals serving older and poorer communities face a number of problems, and a growing literature shows that Medicare Advantage compounds them all. According to a study by the American Hospital Association, the burdens that commercial insurer policies place on rural hospitals—growing denial rates, time-consuming appeals, and underpayments compared to Medicare—are the primary culprit behind the epidemic of closures. “Nearly 4 in 5 rural clinicians report higher administrative tasks, with 86% seeing negative impacts to patient outcomes,” the American Hospital Association concludes. More than a quarter of doctors say the denials handed down after the exhausting preauthorization process cause “serious adverse events,” including hospitalization, life-threatening illness, and death.

Mark Craig, an independent researcher with twenty years working in “revenue cycle management”— a growth field that mostly involves helping doctors get reimbursed by Medicare Advantage plans—reached similar conclusions after conducting a national survey of rural hospital administrators.

“Three-quarters say Medicare Advantage is their ‘most challenging’ insurance payer, responsible for the most denials and underpayments,” said Craig. “Since the pandemic, rural hospitals report supply costs are up 300 percent, labor is up 40 percent, while Medicare Advantage payments are coming in under costs and less than traditional Medicare payments. In some cases, over 50 percent of Medicare Advantage claims are denied. For institutions on thin margins, it’s a dagger. These corporations have transformed Medicare Advantage into the tale of Count Dracula, who lived in his well-appointed castle while devouring the nearby community.” To grasp the absurd situations imposed on doctors and hospitals by Medicare Advantage, he invokes the example of teachers repeatedly forced to sue school boards to get paid for teaching, or firefighters forced into long negotiations with corporations before attending to a five-alarm fire.

Doctors and administrators who live these absurdities have not missed the core irony of the situation: Medicare Advantage—sold as a way to reduce costs and reduce small-ball corruption—has resulted in higher costs and more systemic and destructive forms of corruption. “We thought the hospitals and doctors were driving everything so that we could line our pockets, right?” said Robin Rau, CEO of Miller County Hospital, a twenty-five-bed hospital in southwest Georgia. “We took all the control away from doctors and hospitals, and put it into Fortune 500 companies who are increasing their bottom line by denying critical care to patients.”

At the same time that they reject and underpay for care, Medicare Advantage plans have been caught overcharging the government for unnecessary tests and false diagnoses. According to the Medicare Payment Advisory Commission, the program’s watchdog agency, Medicare Advantage plans cost taxpayers 22% more than traditional Medicare, amounting to a projected $83 billion in 2024. Multiplying this number by ten gives you $830 billion—almost the exact amount that Republicans want to cut from to Medicaid over the same period. That number also equals what it would cost to add hearing, vision, and dental benefits to traditional Medicare.

As the situation reaches a breaking point, more hospitals are withdrawing from Medicare Advantage altogether. Nearly 20 percent of health systems have stopped accepting one or more Medicare Advantage plans, while another 60 percent are considering phasing out Medicare Advantage patients by 2026. A similar sea change is taking place among physicians fed up with the pre-authorization process. By some estimates, the pre-authorization process requires doctors to spend two hours on bureaucratic wrangling for every hour spent with patients. In a recent American Medical Association poll, 48% of physicians reported feeling burned out, a major driver of a projected national shortage of up to 124,000 physicians by 2034.

“We mostly hear about the patient perspective, but the moral injury to physicians is pushing them out of the profession,” said Craig. “Why go to med school if you can’t practice what you learned, and the insurance companies override you? These tugs of war are so exasperating, many doctors just leave. You should have easy communication, but the insurers are using tech to create obstacles. The Healthcare Financial Management Association continues to grow, with more and more resources going to think of ways to fight insurers instead of patient care. Soon it will be industry’s Terminator bots fighting the hospitals’ Terminator bots over the right to provide care. It’s gotten out of control.”

All of this has scrambled the political economy of health care. Once close allies in the fight against “nationalized healthcare,” the house of organized medicine is increasingly fed up with and willing to attack the insurance industry. Last June, when the American Medical Association (AMA) urged a series of measures to address the rural healthcare crisis, the list was topped by cracking down on Medicare Advantage underpayments and reducing prior authorizations.

Another item on the list suggests the group isn’t holding its breath. The AMA also recommended expanding a program associated with underdeveloped countries: importing international doctors to address the deepening crisis created by privatized health care. Seen in this light, the Trump administration’s new crackdown on Cuban medical missions might be a preemptive strike against the national humiliation of seeing doctors from Bayamo greeted with hugs of gratitude in Bridgeport.

Unlikely Allies for Traditional Medicare

In the nascent pushback to Medicare Advantage, hospitals and doctors are finding some unlikely allies in anger. Among them is Republican Sen. Chuck Grassley, a longtime Medicare Advantage champion who last month sent a stinging letter to UnitedHealthcare Group CEO, Andrew Witty, demanding internal documents related to the company’s billing practices. The letter was instigated by a Feb. 21 Wall Street Journal report that revealed one of the tactics Medicare Advantage insurers use to overcharge the government billions of dollars every year. In other words, the industry that inserted itself into Medicare on the basis of fraudulent billing has proceeded to drain Medicare on both ends—rejecting and underpaying for needed care, then defrauding the government for “ghost care.”

One actor that is notably absent in the nascent coalition: the AARP. Although the venerable advocacy group is at the forefront of the movement to rein in drug prices, it has been aligned with the Medicare Advantage industry for two decades and is a major vector for the aggressive and deceiving marketing campaigns that have always driven its growth. Income from UnitedHealthcare alone represents more than two-thirds of AARP’s marketing revenue, amounting to nearly $700 million, and its insurance business brings in twice as much as its annual membership dues. For the privilege of using the AARP name, UnitedHealthcare pays a large monthly fee, and describes the marketing partnership as a “strategic alliance.”

The rise of Medicare Advantage would not be possible without a continuous marketing blitz on American seniors—from AARP-branded robocalls to Dr. Oz informercials. Ads for the plans typically hype certain supplemental benefits not offered in traditional Medicare, such as dental, wellness programs, and sometimes meals or transport. But they are not required to mention the downsides, such as restricted provider networks, out-of-pocket costs, preauthorization, or the new industry-standard of AI-based denial machinery. Often the sales pitch is designed to trick seniors into thinking they are getting a supplemental plan to traditional Medicare. “Patients really have no idea what they’re getting,” said Mark Burket, CEO of Platte Health Center Avera, a seventeen-bed rural facility in rural South Dakota. “It’s the phone calls and TV commercials.”

One does not have to be Medicare-eligible or live in a rural community to have a stake in the future of Medicare. If the insurers and their frontman Dr. Oz destroy traditional Medicare with a series of detonations placed along the CMMI track, as they are currently preparing to do, it will remove the country’s sole bridge to a universal single-payer system.

“I always tell universal healthcare advocates they need to pay attention to what’s happening with Medicare,” said David Lipschutz, co-director of the Center for Medicare Advocacy. “Traditional Medicare is the pathway to a viable single-payer system. If it continues to erode, the only thing left will be Dr. Oz’s vision of ‘Medicare Advantage for All.’”

https://dropsitenews.com…