UnitedHealth Group says Medicare Advantage saves money, but the data say otherwise

This past June, UnitedHealth Group’s top two executives, Andrew Witty and John Rex, told a crowd at an investor conference that Medicare Advantage — the booming government program that outsources Medicare coverage to health insurance companies — saves the federal government money.

But Witty’s and Rex’s claims don’t hold water.

Total federal payments to Medicare Advantage plans have been about 104% of traditional Medicare payments since 2018 and even higher in years prior, according to the Medicare Payment Advisory Commission, also known as MedPAC.

“Our review of private plan payments suggests that over a 37-year history, the many iterations of full-risk contracting with private plans have never yielded aggregate savings for the Medicare program,” MedPAC’s commissioners wrote in their March report to Congress.

The claims from UnitedHealth — the largest Medicare Advantage insurer in the country, with 8 million seniors and disabled people enrolled in its plans — highlight the industry’s concerted and sometimes misleading messaging campaign to extol Medicare Advantage. The end goals have been to win over investors and policymakers and prevent drastic changes to the $420 billion program. But those advocating for Medicare Advantage often leave out the program’s profitable business model, allegations of fraud, tradeoffs for patients, and murky fine print.

UnitedHealth directed questions about Witty’s and Rex’s comments to the Better Medicare Alliance, a lobbying group that supports Medicare Advantage and has financial ties to UnitedHealth and other large MA insurers. BMA then directed STAT toward a 2021 report from the prominent health insurance actuarial firm Milliman, which BMA funded. Milliman declined to comment.

The main finding from Milliman’s report is the government pays an average of $949 per month for every person enrolled in traditional Medicare and $943 per month for someone enrolled in a Medicare Advantage plan. That gives the impression Medicare Advantage is marginally cheaper for the government. But those are incomplete numbers, according to Medicare policy experts.

Milliman’s report does not fully factor in the primary cash cow within Medicare Advantage: risk adjustment, a process in which insurers document people’s diagnoses and conditions and get higher payments for covering those more costly members. Risk adjustment is considered necessary so insurers don’t avoid people who have chronic or expensive diseases. But in Medicare Advantage, risk adjustment is essentially an unlimited money cannon and has spawned a cottage industry that captures more medical codes and, in some cases, embellishes how sick people are.

Milliman’s authors attempted to account for this with “sensitivity testing” — essentially creating a margin of error — and were transparent about this caveat in their report: “Our analysis did not address uncorrected coding intensity because data to support a robust analysis was not available to us.”

Put another way, Milliman’s analysis only looked at the payments Medicare Advantage plans receive at the beginning of a year and didn’t fully include the government’s mid-year and end-of-year payment updates that lump in risk adjustment, “which can be huge,” said Richard Lieberman, an independent health insurance consultant and expert on risk adjustment. “And that’s where United is making all their money.”

The Milliman report was also featured in a recent months-long blog debate in Health Affairs between critics and supporters of Medicare Advantage. Rick Gilfillan and Don Berwick, both former top Medicare officials, most recently wrote the Milliman report actually “proves” Medicare Advantage costs the government more — not the other way around. And even though Milliman attempted to account for a portion of risk adjustment, some research suggests Milliman low-balled overpayments to insurers.

Medicare Advantage offers patients a lot of perks that regular Medicare doesn’t have — things like vision and dental coverage, gym memberships, meals, and capped out-of-pocket costs. Medicare Advantage enrollment and popularity have grown in part due to those benefits. But the program is far from being a bargain for taxpayers, especially after including the various complex financial structures that prop the program up.

“People like Medicare Advantage because it has extra benefits,” Lieberman said. “But the plans make very healthy profits off of MA. [The debate] is really a policy decision.”