Wall Street Journal reporter David Wainer articulated some elements of the current situation around Medicare Advantage in an August 5 analysis, through its headline and deck: “Insurance Companies’ Medicare Pullback Is Here: Insurers are planning to scale back benefits, trim plans, and exit markets. Investors are cheering.”
That headline and subhead spoke to the perilous moment that health plan leaders are facing right now, as the U.S. population ages, the explosion in chronic illness intensifies, and, as an inevitable result, utilization and medical costs rise. For some health insurers, the pressures are becoming too great, and they are indeed pulling back.
As Wainer noted in his analysis, “Many seniors enjoy the perks that come with Medicare Advantage. But those extras—like dental coverage and free gym memberships—are being scaled back. Insurers are cutting benefits and exiting from unprofitable markets, and Wall Street is cheering them on. Once rewarded by investors for rapid expansion in the lucrative privatized Medicare program, companies are now being applauded for showing restraint amid rising medical costs and lower government payments.”
Wainer noted that that Humana and CVS, which operates Aetna, “both beat earnings expectations in their most recent quarterly updates and saw their shares rise, bucking a broader downturn in health-insurance stocks. Notably, both moved to retrench their Medicare Advantage businesses this year, with Humana projecting a loss of as many as 500,000 members from its plans sold directly to seniors. In contrast,” he notes, “industry giant UnitedHealth Group grew more aggressively in Medicare this year—but that growth came with soaring costs and disappointing results. Its stock has lost nearly half its value, and the company is now planning a major pullback of its own for 2026.
Wainer’s analysis is amplified by a July 29 article by the Minnesota Star Tribune’s Christopher Snowbeck. Under the headline “UnitedHealthcare dropping some Medicare Advantage plans, affecting 600,000,” Snowbeck wrote that “UnitedHealth Group’s massive health insurance business will drop Medicare Advantage health plans covering more than 600,000 people as it tries to reverse its financial decline. It’s one of several strategies to shore up finances that executives detailed for investors Tuesday. The company’s insurance arm, UnitedHealthcare, is the nation’s largest provider of Medicare Advantage health plans, a privatized version of the original government health insurance program. The Eden Prairie-based health care giant next year may also exit portions of the ‘Obamacare’ market where individuals use Affordable Care Act (ACA) tax credits to buy coverage,” he wrote.
Snowbeck noted that “Healthcare costs are rising and UnitedHealth told investors Tuesday it’s sharpening efforts to restrain them following unprecedented financial woes this spring. The Medicare Advantage pullback will come primarily in health plans where seniors have a broad choice of providers. A UnitedHealth spokesman couldn’t predict the impact in Minnesota, where about 94,000 people carry Medicare Advantage coverage with the company,” he added, noting pointedly that “Medicare Advantage patients have received far more medical care than projected — including more testing, services by medical specialists and care in emergency rooms — said Tim Noel, chief executive at UnitedHealthcare, during a call with investors.”
There are complexities in all this. On May 27, Emma Freer, senior policy analyst for healthcare at the American Economic Liberties Project, a non-partisan organization advocating for consumers, wrote on MSBNC.com that, “In mid-May, UnitedHealth Group CEO Andrew Witty suddenly resigned for “personal reasons,” and the company withdrew its earnings guidance to Wall Street for 2025 after a disastrous first quarter, claiming it had underestimated its Medicare Advantage costs. Because UnitedHealth is vertically integrated,” she noted, “it simultaneously pays for care through UnitedHealthcare and provides care through its health care services arm Optum, which includes both physician practices and pharmacies. This setup gives the conglomerate enormous leverage to dictate which claims are covered, which physicians patients can see and which medications are prescribed to them. UnitedHealth’s Medicare Advantage strategy has proven very lucrative — until now,” she noted. “Moreover, UnitedHealth also reimburses its own physician practices and pharmacies much more than competitors. A recent Federal Trade Commission report found the average markup could be more than 7,700%. This systematic under-reimbursement leaves independent physician practices struggling to keep their doors open, and some then sell to Optum, reinforcing UnitedHealth Group’s monopoly power. Disparate payments likewise squeeze independent pharmacies out of business, stranding patients in care deserts.”
Even so, Freer wrote, “Ethics aside, UnitedHealth’s Medicare Advantage strategy has proven very lucrative — until now. Since 2003, its annual revenue has increased nearly 15 times over — to $372 billion last year — and its Fortune ranking has climbed 59 spots, to fourth. This strategy also inspired competitors — including CVS Health’s Aetna, Elevance Health’s Anthem, and Humana — to pursue a similarly vertically- business model and Medicare Advantage billing practices.”
And of course, all of these issues and questions are tremendously important now, as more than 50 percent of Medicare recipients have chosen to be enrolled in Medicare Advantage plans. So what’s happening inside Medicare Advantage—both on the plan side and on the provider side—is now tremendously important for the entire Medicare program—and for the policy leaders in Congress whose responsibility it is to try to manage all the issues at a high policy level.
Fundamentally, the issue is straightforward: our population is aging, and more and more Americans are living with chronic illnesses—one or multiple diseases. So the challenge will be how to move forward in some strategic, yet also realistic way, while keeping providers and plan members engaged.
Successful Medicare Advantage (MA) plans, like those offered by UnitedHealthcare and Humana, often prioritize comprehensive coverage, including vision, dental, and hearing benefits, along with additional perks like fitness memberships and allowances for health products. These plans frequently offer $0 monthly premiums and low or no co-pays for doctor visits, especially for primary care. They also tend to have high customer satisfaction ratings and extensive provider networks, making it easier for enrollees to access care.
And it might seem counterintuitive, but honestly, if health plan leaders want to be successful with Medicare Advantage going forward, they’ll have to resist the immediate instinctual urge to cut back on coverage, and instead, will need to tout comprehensive coverage and a full range of benefits, including vision, dental, and hearing care. It’s those very benefits that have attracted so many consumers to Medicare Advantage plans to begin with. Indeed, the most progressive Medicare Advantage plans have gone so far as to include such benefits as health club memberships, allowances for over-the-counter health products, and access to some telehealth services.
What’s more, there are many examples of health plans with excellent provider relationships. Some large medical groups have already cemented excellent relationships with the health plans with which they contract under MA; hospitals are just beginning to catch up. But collaboration around improving outcomes is a real thing, and there is great potential going forward.
It might indeed seem paradoxical for health plan leaders to think of “going big” during a time of potential and actual financial retrenchment. But this is also a time of testing for Medicare Advantage overall. And if health plan leaders can show real leadership here, they can actually move the healthcare system’s needle forward into an era of even more robust care management—which is precisely what our entire healthcare system will need to do anyway, as we move from our current $5.63 trillion-ish annual spending on healthcare in this country, to what the Medicare actuaries are predicting will be $8.58 trillion by 2033—in other words, an 54-percent increase in overall U.S. healthcare costs in the next eight years. The challenge is daunting—but cutting back on care management and benefits is simply not the way to fix the problem. And numerous senior health plan leaders know that.