By Danyaal Raza, M.D., M.P.H. and Karen S. Palmer
Toronto Star, April 9, 2024

Private equity investment firms exist to make money for their investors. It’s their job. Over the past decade, private equity firms around the world have increasingly invested in the health care industry, including Canada’s long-term care sector and a growing number of private for-profit surgical centres.

Private equity firms are investment management companies. They buy other private companies with the intent to improve their performance, often selling them again a few years later at considerable profit to their shareholders.

In Canada, a single private equity firm already owns the largest national network of independent surgical centres — 53 operating rooms spread across 14 centres — in Quebec, Ontario, Manitoba, Saskatchewan, Alberta, and B.C.

Surgeries performed in these surgical centres are funded through a mix of public and private payments. Approximately 90 per cent are publicly funded through partnerships with provincial health systems. The remaining 10 per cent are private pay, including through private insurance or out-of-pocket for those who can afford it.

Some of that money is used to pay for patient care, but some — our public dollars — is extracted to enrich shareholders who expect a return on their investment.

Should profit-driven investors own health care facilities? Does it even matter, so long as patients get care?

Yes, it does.

Studies show that private equity ownership is associated with worse quality of care — such as a substantial increase in infections, falls, and other adverse events — and higher costs of health services around the world, including in the U.S., U.K., Sweden, Netherlands, and Germany.

Private equity ownership turns health care from a social good into a financial asset, extracting wealth for investors. There is no evidence that private equity ownership leads to systematic improvements in care. The primary focus is on financial gain for shareholders.

It’s not just surgical centres that are owned by these firms. Private equity has also scooped up nursing homes in Ontario, raising alarms about cost and quality of care. Tragically, these care homes had the highest mortality rates during the emergency phase of the COVID-19 pandemic and those with the highest profit margins suffered the lowest quality of care.

Although private equity ownership of Canada’s health care system is relatively new, it has become a mainstream and troubling phenomenon in the U.S. So much so that 25 per cent of U.S. hospital emergency departments are now staffed by private equity-owned staffing firms. Many worry that the growing financialization of health care inserts corporate values into treatment, raising concerns about the corporate practice of medicine.

Even the U.S. Federal Trade Commission has taken notice. For the first time ever, it is suing both a medical group and its private equity backers, alleging anti-competitive practices that drive up the cost of health care. Their concern is that this can exert pressure on health care professionals to “subordinate their own medical judgment to corporate decision-makers’ profit motives at the expense of patient health.”

Private equity firms are opaque and secretive. They don’t have to publicly disclose information about their finances, operations, business risks, or legal liabilities. Canadians are asking: What mechanisms are in place—like anti-trust and anti-competition legislation, regulation, and enforcement mechanisms — to guard against consolidation and the harms from monopoly corporate ownership and control of our health care delivery system?

Private equity ownership of the places where we seek care risks undermining cost, quality, access, efficiency, and equity. If we aspire to building a health care system that meets the demands of 21st century medicine, we must put in safeguards to ensure that corporate ownership, including by private equity firms, does not undermine all that we value in our health care system.

Dr. Danyaal Raza is a family physician at St. Michael’s Hospital, Unity Health Toronto and past chair of Canadian Doctors for Medicare. Karen S. Palmer is an adjunct professor at Simon Fraser University and University of Toronto and policy advisor to Canadian Doctors for Medicare.

https://www.thestar.com…

By Elizabeth O’Brien
MSN, March 20, 2024

Marcia Mantell won’t be eligible for Medicare for a few years yet. But she’s sure of one thing: Pitchmen like William Shatner won’t be luring her into a Medicare Advantage plan.

“You are nickel-and-dimed to death,” says Mantell, 62, a retirement consultant in Plymouth, Mass. Out-of-pocket costs can add up quickly in the plans, she says. And once you’re in, it’s tough to go back to traditional Medicare. “It sounds on TV like you can switch whenever you want. You can’t. It’s a 30-year decision.”

No one has a crystal ball to see how their health will hold up through retirement. But concerns are mounting about Medicare Advantage, also known as Part C—the insurance plans that manage Medicare coverage for more than 30 million people. Some big players in Advantage —notably Humana—are reporting sharply higher costs and lower profits, causing their stocks to fall. If the trends continue, it could translate to ancillary benefit cuts and more denials of services.

Other pressures on Advantage are mounting. Some large hospital chains and medical providers have dropped Advantage plans, citing low payments and administrative hassles. The federal government is scrutinizing Advantage plans over insurance industry practices that are driving up costs. The Biden administration has also taken aim at Advantage marketing—featuring the likes of Shatner and football legend Joe Namath in TV ads—saying it may be misleading consumers.

How this will play out isn’t clear. What’s certain is that consumers are getting caught in a growing battle among the government, healthcare providers, and insurers. With cost pressures rising in the Medicare market, consumers face increasingly complex decisions over which plan to choose, with long-term consequences for their finances and, potentially, their health.

“Everyone involved is feeling cost pressures,” says Ron Mastrogiovanni, CEO of HealthView Services, a retirement healthcare data company. “By next year, they’re going to have to make some changes.”

Just over half of the eligible Medicare population is now enrolled in Advantage, which provides Part A hospital coverage, Part B outpatient coverage, and extras that aren’t offered by traditional Medicare, which is run by the federal government. The plans continue to rake in consumers: From 2023 to 2024, Advantage enrollment is projected to rise by 7%, according to the Biden administration.

For insurers, Advantage has been highly lucrative—but the economics are shifting. Rising healthcare costs are straining the ecosystem of patients, the government, insurers, and medical providers. Labor and other medical costs have risen sharply in the wake of the pandemic, fanning healthcare inflation.

Humana, one of the biggest players in Medicare Advantage plans, has sounded alarms. CEO Bruce Broussard told analysts in January that the whole industry will “possibly reprice” next year, saying the Advantage sector is navigating “unprecedented increases in medical cost trends.” A recent McKinsey & Company report said Advantage was undergoing its biggest shifts in more than two decades.

Current beneficiaries need not worry for now, as any changes to Advantage plans won’t go into effect until 2025, at the earliest. But today’s 65-year-olds weighing Advantage against traditional Medicare don’t have the luxury of time. While the decision isn’t irreversible, switching from Advantage back to traditional Medicare may not be possible if consumers want to add Medigap insurance for uncovered medical expenses, which provides both peace of mind and some assurance that medical costs won’t bankrupt you in retirement.

Advantage plans do look inexpensive. More than 70% of people in plans with prescription drug coverage pay $0 in monthly premiums; the average is just $18.50 a month. Premiums for traditional Medicare are usually costlier, since people typically add Part D drug coverage and often buy Medigap to limit out-of-pocket costs.

Yet, as for-profit entities, Advantage insurers can’t offer the same level of coverage as traditional Medicare plus Medigap. And the cheapest Advantage plans may have to be the most aggressive with care denials, says Louis Imbrogno, chief financial officer of Bariatric Centers of America and an industry consultant. Beneficiaries should ask themselves, “Why can they charge a lot less?”

Enrollees in Advantage still pay the Medicare Part B premium for outpatient services, which is $174.70 a month, or more for high-income beneficiaries. Most people have enough work history to qualify for $0 Part A premiums. Drug benefits are usually included in Advantage, so enrollees don’t need to buy a stand-alone drug plan. Other sweeteners often include free gym memberships and limited dental and vision coverage—none of which is covered under traditional Medicare.

Some studies find that there’s long-term savings for consumers in Advantage plans. According to the Employee Benefit Research Institute, a nonprofit partly funded by the healthcare industry, a couple enrolled in traditional Medicare plus a Medigap plan will need $351,000 to have a 90% chance of covering their medical expenses in retirement. A couple enrolled in Medicare Advantage would need $189,000.

Other analysts see a smaller payoff under Advantage. According to HealthView Services, a 65-year-old male with diabetes would need roughly $109,000 under Advantage versus $120,000 under traditional Medicare plus Medigap for lifetime medical expenses. For a 65-year-old female with cardiovascular disease, Advantage would cost $263,000 versus $315,000 under Medicare/Medigap.

In this analysis, traditional Medicare is so much costlier largely because of Medigap, which can add thousands of dollars a year in premiums. Medicare alone only pays 80% of covered services; patients must pay the rest with no annual caps on out-of-pocket costs. That’s why 41% of beneficiaries add Medigap—which, at its most comprehensive, typically helps cover 100% for tests, doctors visits, and other services after a $240 annual deductible.

Advantage plans also cap out-of-pocket costs—but there are limits. The maximum out-of-pocket allowed for 2024 is $13,300 for combined in- and out-of-network services. Many plans set lower limits, averaging from about $4,800 a year for in-network to $8,600 for combined, according to KFF. Consumers in Advantage plans can’t add Medigap.

Advantage has other drawbacks. A big one is that many plans are HMOs, with limited networks of participating doctors that are subject to change. If a specialist isn’t in-network, the visit generally won’t be covered at all in an HMO, and costs can mount, negating the savings from lower premiums. Plans also frequently require preapproval for certain procedures or tests. And if your care is denied—and/or your health deteriorates, requiring more care and specialists—Advantage can wind up being far costlier than Medicare plus Medigap. “Let’s say they’re not covering something,” Mastrogiovanni says. “You’re responsible.”

Whether the government is saving money with Advantage remains doubtful. Under Advantage, the government pays insurance companies a fixed amount per member based in part on each individual’s health status; under traditional Medicare, the government pays medical providers on a fee-for-service basis. The set payments in Advantage are supposed to serve as an incentive to avoid costly, unnecessary care and offer services that might not fit the Medicare billing system.

Yet some industry practices appear to be bloating costs. The Department of Justice has investigated insurers and charged some with gaming the system to extract higher payments by padding patients’ files with serious diagnoses, even if they aren’t being actively treated. The practice is called “upcoding” and the government is trying to rein it in: The Centers for Medicare and Medicaid Services has estimated that 9.5% of payments to Medicare Advantage organizations are improper, mostly due to upcoding.

The government is also paying more for healthcare overall under Advantage. In 2024, Advantage plans will receive an estimated $88 billion more than what would have been spent under fee-for-service Medicare, according to the Medicare Payment Advisory Commission, an independent Congressional agency that advises Congress on Medicare.

“This has been a highly attractive market for insurers for a long time,” says Gretchen Jacobson, vice president of Medicare at the Commonwealth Fund, a foundation advocating for affordable, quality healthcare.

Insurers, for their part, have long viewed Advantage as a big revenue and profit driver. Advantage has produced the strongest growth of any health-insurance segment, with the highest revenue and earnings per member, according to a recent report by Moody’s.

Covering more than 5.8 million people in Advantage, Humana has the highest exposure to the program, accounting for about 81% of its total premium and services revenue, worth $85.7 billion in revenue last year. The company has built almost its entire business around Advantage, including about 3,500 telemarketing and sales representatives to sell the plans. It also markets Medicare prescription-drug benefits with Walmart.

A Humana spokesperson declined to comment and directed Barron’s to the company’s fourth-quarter earnings call and the website of the Better Medicare Alliance, an advocacy group for Advantage. An industry trade group, AHIP, referred Barron’s to a blog post by Mike Tuffin, CEO of AHIP, who defended Medicare Advantage, saying it has grown in popularity by providing “better care at lower costs.”

Yet insurers are starting to feel squeezed by cost pressures in the Medicare market and other factors, a point noted by Moody’s. Doctor visits have soared since a lull during the pandemic, pushing up insurers’ loss ratios, the portion of premium dollars spent on medical care. Demand trends are also pushing up utilization as the population ages, with some 11,200 baby boomers turning 65 each day.

Access to doctors and hospitals under Advantage may be a casualty, as insurers try to protect profits with skimpier payments to medical providers while providers push back.

Cameron Regional Medical Center, in rural Cameron, Mo., receives 20% less in reimbursements under most of its Advantage plans than it does under traditional Medicare, says Joe Abrutz, the hospital’s administrator. This has been financially devastating, he says, especially as the system’s Advantage population grows relative to patients on traditional Medicare.

Cameron Regional canceled its contracts with Humana and Cigna last year and plans to cancel its contract with Aetna around June or July, Abrutz says. Contracts with UnitedHealthcare and Blue Cross Blue Shield remain intact, he says. Falling revenue means the system has had to shutter two primary-care clinics that serve elderly and low-income patients. “If we can’t be funded properly, you don’t have a choice but to close specialty services you can’t underwrite,” Abrutz says.

Alongside lower payments, hospitals must shoulder higher administrative burdens under Advantage. Plans typically require prior authorization for many procedures outside of primary care, which means more paperwork and potential denials of services. “You’ve got the double whammy of getting paid less by Medicare plans, plus all the demands,” Imbrogno says.

There’s also evidence that Advantage plans are denying coverage for services that traditional Medicare would provide. Among prior-authorization requests that Advantage plans denied, 13% met Medicare coverage rules, according to a 2022 report from the U.S. Department of Health and Human Services Office of Inspector General. One example in the report is an Advantage plan requiring an X-ray before approving more-advanced imaging, which isn’t a criteria under traditional Medicare.

“These Medicare Advantage plans don’t properly care for patients,” Abrutz says. “You have an insurance company on the stock market managing and coordinating the care of a senior citizen.”

The Biden administration has said it is providing plenty of funds to Advantage insurers while trying to curb some of the industry’s bad practices. The administration has proposed a 3.7% increase in payments to insurers from 2024 to 2025, amounting to more than $16 billion. The actual amount will be released by April 1. The administration also aims to rein in upcoding, crack down on “predatory” marketing, and curb excessive compensation to brokers and agents.

TV advertising for Advantage, meanwhile, shows few signs of slowing. A study last year by KFF found 9,500 Medicare Advantage ads aired each day in the fall of 2022 around Medicare’s annual open-enrollment period. “They can’t have all those TV commercials if they’re not making money,” Abrutz says.

The Medicare vs. Advantage Gamble

Will you be better off under Advantage of traditional Medicare? There’s no easy answer.

By law, Advantage plans must cover all Part A hospital and Part B outpatient Medicare services. A 2022 KFF review of studies found no definitive evidence that Advantage or traditional Medicare offered better health outcomes. Patients reported similar rates of satisfaction with each plan. Advantage outperformed on measures such as preventive services, whereas traditional Medicare outperformed on measures such as receiving care in the highest-rated hospitals for cancer care.

The financial trade-offs aren’t clear, either. While Advantage might look cheaper, costs can pile up in the plans, negating the premium savings. And it’s when older adults get sick that the differences may really emerge.

One complication: limited networks of participating doctors and hospitals. In an HMO, a cancer patient might not be able to visit the premier specialist in their region. They might find certain treatments questioned under prior authorization. And Advantage plans tend to charge more at the point of care, including things like a $50 copay for specialists—something typically 100% covered by Medicare plus a comprehensive Medigap plan. A 2020 analysis by KFF found that at least half of Advantage enrollees would pay more than those on traditional Medicare for a five-day hospital stay.

By the time you’re sick, it’s often too late to ditch Advantage and go into Medicare plus Medigap. The only time you are guaranteed the right to purchase Medigap—outside of limited exemptions and a few states with different rules—is when you first enroll in Medicare, commonly around your 65th birthday. Outside that window, Medigap plans may charge more based on your health status or deny coverage altogether for conditions like cancer and poorly controlled diabetes.

The rules keep many people stuck in Advantage. Only 2% of Advantage enrollees switched to traditional Medicare in 2019-20, according to a 2022 study in JAMA Health Forum. Someone in traditional Medicare has the option every fall of switching to Medicare Advantage and, in theory, could also move in the opposite direction. But in practice, “it’s not a two-way street,” says David Lipschutz, associate director of the Center for Medicare Advocacy.

Even some people who sell Advantage plans have said they wouldn’t use them personally. In a focus group conducted by the Commonwealth Fund, most brokers and agents who sold Medicare plans said they personally would choose traditional Medicare with Medigap, believing it offered better coverage and choices than Advantage.

For now, Advantage plans can’t do much to change benefits or impose higher costs, as plans are already set for 2024. But if insurers’ profits continue to be squeezed, they are likely to try to recoup profits by ramping up coverage denials, says Abrutz. They may also reduce reimbursements to doctors and hospitals, and increase monthly premiums.

Another option for insurers is to curtail ancillary benefits, such as free gym memberships. Humana is likely to cut back on some benefits, according to a recent UBS research note. And Humana’s Broussard has warned of ongoing cost pressures. “I don’t know how the industry can take this kind of increase in utilization along with regulatory changes that will continue to persist in 2025 and 2026,” he said in January, noting that “disciplined pricing” will probably result.

As these trends play out, consumers should seek help from a neutral third party when enrolling in Medicare. In the Commonwealth Fund focus group, most insurance brokers and agents reported earning higher commissions for enrolling people in Advantage plans versus Medigap plans. You can find unbiased help through your local State Health Insurance Assistance Program.

Mantell, the retirement consultant, figures it’s better to pay more for Medicare and Medigap than take chances with an Advantage plan that might turn out to be costlier and offer less access to the specialists she and her husband may need as they age. “We are not interested in any restrictions,” she says. “Do you want to be 85 and have to ask for a referral to see a cardiologist because you have chest pain?”

https://www.msn.com…