The once lucrative Medicare Advantage business, which has been a significant profit driver for health-insurance giants, is experiencing a decline in profitability due to policy changes and increased medical costs.
Key points:
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Medicare Advantage, a program where the government pays insurers to manage seniors’ care, has seen a drop in profitability due to policy changes and increased medical costs.
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CVS Health is one of the hardest hit, with its Aetna unit experiencing a $900 million increase in medical costs due to underestimating the cost of insuring new members.
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Medicare Advantage-focused insurers have underperformed the stock market this year, with shares of companies like CVS and Humana down significantly.
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The program is expected to continue growing, with annual spending projected to approach $1 trillion by the start of the next decade.
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Insurers are planning to exit some counties and cut back on benefits to boost margins.
Source:
www.msn.com/en-us/money/markets/ar-BB1myA8B
Potential implications and what could go wrong:
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The shift from growth to profits could lead to a reduction in benefits and services for seniors.
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The industry’s efforts to sway public and policymakers’ opinions through campaign donations and lobbying could result in policy changes that favor insurers over beneficiaries.
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The decline in profitability could lead to a decrease in competition, potentially leading to higher costs for seniors.
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The focus on profit over membership could result in a decrease in the quality of care for seniors.
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The decline in profitability could discourage further investment in the program, potentially limiting its growth and effectiveness.
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