Medical Costs

Although new treatments hold tremendous promise for addressing obesity and the myriad health issues associated with it, Medicare Part D is barred from covering them, and private insurers’ coverage is variable. And there are multiple barriers that will make fixing those coverage gaps challenging, health policy experts said during a recent panel discussion.

Perhaps the most headline-grabbing obesity treatment is semaglutide, which Novo Nordisk sells under the brands Ozempic (for Type II diabetes) and Wegovy (for weight loss). That drug has recently been the topic of a cascade of news articles discussing the drug’s ability to help patients shed stubborn pounds, side effects such as hair loss, and shortages faced by some diabetes patients due to semaglutide’s skyrocketing popularity.

Elevance Health, Inc. reported increased premium revenues in the first quarter of 2023 and strong results from its fast-growing PBM and services division, Carelon. While Wall Street analysts were mostly positive about the results, some expressed concerns that the firm’s medical loss ratio (MLR) and operating expenses were too high.

Elevance took in $41.9 billion during the first quarter of 2023, an increase of 10.6% year over year. Income rose 16.6% year-over-year to $2.8 billion, yielding adjusted earnings per share (EPS) of $9.46, which beat the Wall Street consensus of $9.23. Elevance’s MLR was 85.8%, which was in line with projections from the firm and the Street consensus. Days claims payable (DCP) was 46 days as of March 31, “a decrease of 1.5 days from December 31, 2022 and a decrease of 0.9 days compared to March 31, 2022,” per a press release announcing the results.

Although UnitedHealth Group’s executives touted “strong and well-balanced” growth in the first quarter of 2023, the company’s stock dropped following its April 14 earnings report. Equities analysts suggested that a decline in the days claims payable (DCP) metric led to the sell-off, as well as concerns about Medicare Advantage-related business risks — but their views differ about how concerned investors should be.

SVB Securities analyst Whit Mayo, for example, suggested in an April 17 research note that the risks to UnitedHealth’s valuation are overblown.

The company’s first-quarter results “brought forth continued themes of consistency, strong MA and self-funded growth, along with noticeable top-line strength within Optum Health,” Mayo wrote. “Noise around trend, lower DCP, 2024 MA risk balanced against the recent run-up, and a historically high relative valuation premium presumably pushed shares lower on Friday,” he suggested, but added that “1Q results generally and historically present few new details to reshape investors’ views on the full-year earnings curve for the sector.”

On March 30, 2023, Judge Reed O’Connor in the U.S. District Court in the Northern District of Texas issued a ruling in the case, Braidwood Management Inc. v. Becerra, striking down the Affordable Care Act’s coverage requirement for certain preventive services with zero cost sharing. O’Connor ruled that the federal government cannot require health plans to cover services recommended by the U.S. Preventive Services Task Force (USPSTF) on or after March 23, 2010 — such as preexposure prophylaxis for HIV and screenings for HIV, cancers, suicide risk and hepatitis C. The Biden administration has appealed this decision to the Fifth Circuit Court of Appeals.

Since the 2010 passage of the ACA, millions of enrollees have used preventive services. In 2018, six in 10 privately insured people received some preventive care that’s subject to the ACA’s no-cost coverage mandate, with women, children and elderly adults more likely to use such care, according to a study published by the Peterson-KFF Health System Tracker. Another analysis by HHS’s Office of the Assistant Secretary for Planning and Evaluation estimated that about 151.6 million people had access to preventive care without cost sharing in 2020.

Family caregivers have long been regarded as an important part of care teams for high-needs Medicare beneficiaries, especially those enrolled in Dual Eligible Special Needs Plans (D-SNPs). But there are strong cases for Medicare Advantage insurers to support caregivers as part of their broader care management strategy, as they can help improve outcomes, reduce costs and enhance member experience, according to speakers at a session of the AHIP 2023 Medicare, Medicaid, Duals & Commercial Markets Forum, held March 14-16 in Washington, D.C.

Although there is “concurrent public policy and private solution[s] and investment going on in the caregiver space,” multiple challenges exist with activating them, from identifying potential caregivers to supporting them with the training they need to identify issues such as a change in condition, observed John Mach, M.D., founder and general manager of Mach Health Care Strategies, LLC, during the panel discussion, “Achieving the Triple Aim for Medicare Members by Activating Family Caregivers.”

Since its inception as a technology-based “disruptor” in the Medicare Advantage space, Clover Health Investments Corp. has struggled to turn a profit. But after showing signs of momentum at the end of 2022, Clover leadership has declared 2023 as a year focused on profitability rather than growth. To speed that path, the insurtech this week unveiled two “business transformation initiatives”: (1) an agreement to transfer its core plan operations to UST HealthProof’s integrated technology platform, and (2) additional corporate restructuring actions that included a recent 10% workforce reduction.

While there are signs that ultra-high inflation rates are retreating, health care cost pressures are likely to stick around for some time and have a major impact on payers, industry experts say.

The Bureau of Labor Statistics (BLS) reported on April 12 that the consumer price index (CPI) rose by 5% in March from a year earlier, the smallest increase since May 2021 and the ninth consecutive month that annual inflation has declined. Meanwhile, the CPI for medical care services increased by just 1% year-over-year, including a 0.5% increase in physicians’ services and a 2.7% increase in hospital services.

Federal remote monitoring regulations tied to the COVID public health emergency (PHE) are expiring soon, and insurers and providers must make sure that remote monitoring is being used effectively and in compliance with permanent regulations. Health care experts say that payers and providers have an opportunity to improve clinical outcomes and increase value by applying pandemic-era lessons learned and best practices to ongoing remote monitoring-assisted care. 

Remote patient monitoring became a vital tool for practitioners during the COVID-19 pandemic’s darkest days. Hospitals were overwhelmed and, in many places, barred from providing elective services, creating an urgent need for “hospital-at-home” care. The Biden and Trump administrations facilitated expanded use of remote monitoring technologies through emergency regulations tied to the duration of the PHE, but it is set to end on May 11. In particular, hundreds of emergency use authorizations (EUAs) from the FDA will expire unless they have undergone a review process. Going forward, some reimbursement codes set up by CMS during the pandemic will be phased out, and others will carry on until the agency can set up permanent protocols.  

Prime Therapeutics LLC and Magellan Rx Management, a Prime company as of the end of last year, recently presented findings from a series of studies that used integrated medical and pharmacy claims to assess real-world drug use. Their findings show that different strategies can help identify potential member issues that could impact payer costs.

The studies were presented at the Academy of Managed Care Pharmacy (AMCP) Annual Meeting, held in San Antonio, Texas, March 21 to 24.

Many of the largest U.S. hospital systems reported negative net income from 2022, a list that includes Kaiser Permanente, Mass General Brigham, and the Cleveland Clinic, each of which lost at least $1 billion. Although some prominent hospital systems’ red ink is due to negative investment income, the latest available data suggest that inpatient volumes are down from their pre-pandemic baseline and are likely to stay that way. As a result, experts tell AIS Health, a division of MMIT, hospitals are likely to be even more aggressive with payers than they have been in recent rate negotiation rounds to replace some of that lost revenue and expired federal pandemic relief funds.

Consulting firm Kaufman Hall & Associates, which compiles monthly indices of hospital finances, found in a March 28 report that the median hospital operating margin was -1.1% in February, a slight decrease from January’s -0.8%. The report added that “due to external economic factors, relatively flat margins are likely to continue in the near term.”