In their first public appearance since the killing of UnitedHealth Group’s top executive, leaders acknowledged the public’s dissatisfaction with the health care system, but were quick to shift blame to pharmaceutical companies and hospitals.
The killing of UnitedHealthcare CEO Brian Thompson sparked a wave of criticism and complaints against the health insurance company, of which UnitedHealthcare is the largest. The company’s stock has lost nearly 14% of its value since the Dec. 4 killing.
Before launching an all-out defense of his company, which has increasingly dominated the system, from insurance to drug benefits to health care, UnitedHealth CEO Andrew Whitty said the health system “We need to reduce confusion, reduce complexity and lower costs.”
“Fundamentally, health care costs are high in the U.S. because the price of a procedure, visit, prescription is higher than in other countries,” Whitty said on an earnings call, adding that the company has more than $400 billion in revenue. flaunted. Last year’s net income was $14.4 billion. “The key fact is that price increases the cost of the system more than utilization.”
Thompson, who headed the company’s health insurance division, regularly spoke at financial results conferences. In a telephone conversation Thursday, Mr. Whitty offered a few short words in memory of Mr. Thompson.
“He dedicated his time to helping our health care system work better for all the people we have the privilege of serving,” Witty said. “He worked with passion and interest in finding solutions to improve the experience, whether for individual consumers, employers or public health agencies.”
UnitedHealth has not yet announced his replacement.
How UnitedHealth uses its physician empire to squeeze profits out of patients
UnitedHealth is facing not only outraged members but also regulators who believe the company has grown too big and too powerful and is using its network of doctors as a way to skim more money from Medicare trust funds. They are also under intense scrutiny from authorities and lawmakers.
Whitty indirectly criticized hospitals, saying there are “system participants” who are “benefiting” from rising prices even as others are working to fix the problem. He said patients would benefit from visiting cheaper treatment facilities, but it would threaten the revenue streams of “organizations that rely on high billing for treatment.” This is a reference to a long-standing effort in Congress, which met with fierce opposition from hospitals, to equalize Medicare payments for certain services provided in hospital outpatient departments with those provided in physician offices. .
Mr Whitty, the former CEO of pharmaceutical giant GSK, also specifically criticized the industry’s previous pricing practices. Citing GLP-1 drugs as an example, he said list prices in Europe could be one-tenth of what they are in the United States.
Health care costs in the United States are certainly higher than anywhere else in the world, which is the main reason the country spends $5 trillion a year on health care. But a central role of insurance companies and pharmacy benefit managers, owned by companies like UnitedHealth, is price negotiation.
By Witty’s own logic, that means UnitedHealth and its rivals aren’t doing a very good job.
This is especially true for commercial insurance provided by American workplaces, where hospitals, pharmaceutical companies, medical practitioners, and other businesses that sell products and services can charge insurers several times the amount charged by government programs such as Medicare and Medicaid. You can.
In fact, STAT reports that UnitedHealth’s medical group is often paid higher commercial prices by UnitedHealth’s own insurers compared to other medical organizations in the same field. This could be a way for the parent company to secure higher profits, leading to higher costs for patients and employers and raising barriers to competition for other doctors.
Behind the consensus at JPMorgan meeting, discussion and sympathy for Americans’ anger towards health care
Mr. Whitty defended pharmacy benefit managers, an industry that has come under intense scrutiny from antitrust regulators and members of Congress. PBMs like UnitedHealth’s Optum Rx negotiate lower drug prices with drug companies on behalf of their customers, such as health insurance companies and employers, in exchange for placing those drugs on the approved list for insurance coverage. are. Lawmakers and regulators have accused them of shirking this responsibility to line their own pockets.
OptumRx plans to pass 100% of its drug rebates back to consumers and employers by 2028, Whitty said. “This will make it more transparent about who is actually responsible for setting drug prices in this country: the drug companies themselves,” he said.
But the changes could be meaningless to people who pay for prescription drugs. How does Optum Rx define what a drug rebate is, and how “regular service fees,” “manufacturer management fees,” and other money that functions like a rebate is kept by a PBM? It is unknown whether there are any. The announcement could also serve as a lobbying platform to block potential PBM reforms from Congress.
On the financial front, the fourth quarter was a rare stumbling block for the healthcare giant, with revenue falling short even as revenue beat Wall Street expectations. UnitedHealth stock was down 4.7% by midday Thursday.
UnitedHealth’s insurance division struggles with the same trends that continue to plague all insurance companies that offer government plans. In Medicare Advantage, changes introduced by the Biden administration are hurting profitability. Medicaid users also tend to need more care after states eliminated the program for those who became ineligible starting in 2023.
UnitedHealth’s medical loss rate, a closely watched indicator of how much of insurance premiums are spent on medical care, was 85.5% in 2024. This is higher than the 83.2% the company reported for 2023, and higher than Wall Street analysts and UnitedHealth itself. He predicted 2024.
Killing of United Healthcare CEO brings anger towards the healthcare system to the surface
Federal law requires insurance companies to spend 80% or 85% of their premiums on health care, depending on the type of plan, but they aim to keep their medical loss rates as low as possible. .
John Rex, UnitedHealth’s chief financial officer, said on a conference call that 70% of the mistakes were due to Medicare Advantage and Medicaid issues. Regarding the former, he said UnitedHealth’s Medicare Advantage enrollees require additional care, and the company did not see membership growth as expected due to changes in benefit design in the 2024 market. . When it comes to Medicaid, he said state payment rates have not kept up with enrollees’ health needs.
The remaining 30% was split evenly between more expensive drug coverage and an “aggressive shift” in hospital coding, Rex said.
Rex also said UnitedHealth, already the largest Medicare Advantage insurer, plans to add up to 800,000 members to the program this year. In 2024, 54% of Medicare beneficiaries chose a Medicare Advantage plan over traditional Medicare.
Whitty and Rex also reiterated the claim that Medicare Advantage saves consumers and taxpayers money, which is inaccurate.
Experts from the Medicare Payment Advisory Commission found that the government paid, on average, about 108% of traditional Medicare payments to Medicare Advantage plans in 2024. And when you factor in Medicare Advantage insurers’ coding practices and ability to attract healthier people, that number reaches 132%.
UnitedHealth’s $14.4 billion in net income was down 36% from 2023 due to higher medical costs and the cost of the Change Healthcare cyberattack.
