A busy year in healthcare with insurer woes and a presidential election that brought changing political winds
As is my tradition at year’s end, I reflect back on all that occurred in healthcare in the year. It was a big year in healthcare and the election portends another massive one next year. I will have my 2025 predictions blog on Thursday.
So, here are the major healthcare happenings from 2024. You can go to various blogs at the blog tab to learn more. In a few instances, I call out good blogs to go back to as well.
NHED shows robust healthcare growth
National healthcare expenditure data (NHED) was published for 2023. Costs rose 7.6% from 2022 to 2023 and reached almost $4.9 trillion. This made spending on healthcare expeditures hit 17.6% of the gross domestic product (GDP). Healthcare expenditure will consume almost one-fifth of the economy by 2032.
Insurer struggles and crash of big healthcare
The year was dominated by the travails of some big healthcare companies. Generally, most companies’ insurance arms struggled with a return of utilization post COVID pandemic and rate issues in Medicare and Medicaid. CVS Health ousted its CEO due to the major financial problems at insurer Aetna and its pharmacy retail chains. Humana also faced major financial problems due to its focus on MA. Centene struggled in both of its MA and Medicaid lines. United Healthcare and Cigna fared better.
Some regional insurers appeared to struggle as well with the trends, with some exiting the MA line of business in whole or part.
The so-called Insurtech companies were one of the few bright spots for financial performance and growth in 2024.
MA woes
Capitol Hill, regulators, and critics continued to point the finger at MA in many ways. Lawmakers, researchers, and regulators criticized MA overpayments, plan risk adjustment practices (including the use of health risk assessments and manual chart reviews), supplemental benefit utilization, and marketing practices that lead to steering of enrollees to plans based on broker compensation arrangements. MA plans will see a second year of negative rate hikes in 2025 due to a new risk model that was adopted. Higher utilization also hit MA plans hard as did poor Star results. As such, plans cut back benefits to some degree in 2024 and in a major way for 2025. As many as 2 million had to change plan choices going into 2025 due to plan terminations.
The Centers for Medicare and Medicaid Services (CMS) put in place some reforms, including a new risk adjustment payment model, supplemental benefit transparency, and proposed marketing changes. An earlier broker compensation reform put in force by CMS was struck down in court. A new prior authorization (PA) rule began driving up costs because CMS is now requiring MA plans to follow the traditional fee-for-service (FFS) rules – essentially taking managed care out of managed care.
Star results and changes
MA plans saw the third year of poor Star results when the 2025 Star ratings were announced in October. This impacts revenue and compounds financial issues. In 2024, TukeyGate forced CMS to recalculate 2024 Star ratings after several plans won lawsuits against the agency’s calculations. CMS has already lost in court on 2025 ratings, triggering changes for UnitedHealthcare and Centene.
MA growth
Notwithstanding the financial woes, 2024 saw rapid growth in MA because of the clear value compared with traditional fee-for-service (FFS) Medicare. However, initial 2025 growth appeared to have slowed somewhat with benefit reductions, cost-sharing and premium hikes, and geographic contractions.
Special Needs Plan (SNP) growth was major in 2024 and plans appear to be investing heavily in the product for 2025.
The standalone Part D (PDP) program also saw premium increases, benefit reductions, cost-sharing spikes, and coverage impacts, largely due to the IRA Part D changes mentioned below. CMS had to put in place a special (extra-legal in my view) premium stabilization program to control premium hikes. The Part D changes in the IRA could jeopardize the long-term health of PDPs.
In good news, a major study showed that the growth of MA appears to save the entire Medicare system money by positively impacting provider behavior in the FFS program and lower costs. This counters the MA critics’ cries of overpayment in MA.
IRA Part D changes
The Inflation Reduction Act (IRA) of 2022 created the first drug negotiations in 2024. The drugs were announced early in the year and prices set in the fall. The prices go into effect on January 1, 2026.
Results were mixed, with net prices on the ten drugs coming in under other government programs but still well above other developed nations. Brand drug makers continue to challenge the law but by and large have lost in court. Because of the slow pace of the drug negotiations roll out and the fact that it applies only to Medicare Part D, many states have passed laws creating drug affordability boards. About a dozen exist today, with another dozen states looking at it. Many of these boards will leverage the Part D prices, thereby extending the lower prices to certain commercial products.
An analysis also concluded that brand drug makers spend more on stock buybacks and marketing than research and development.
Quarterly rebates to the government and in reduced cost-sharing continued with the IRA Medicare retail drug requirement that drug makers limit inflationary increases or pay additional rebates or penalties.
The 340B discount program remained controversial, with brand drug makers arguing hospitals and other providers are abusing the intent of the low-income drug availability program. To drive more accountability, drug companies sought to move to retrospective rebates rather than upfront discounts on drugs. The Biden administration stopped the conversion and now three drug companies are suing the government.
The rise of GLP-1s
2024 also saw the rise and proliferation of GLP-1 weight-loss drugs. The drugs got approved for additional disease states and the Biden administration proposed to make the $1,000-plus per month drugs available for obesity alone in Medicare Part D. Employers have traditionally had more GLP-1 coverage for obesity. Medicaid, Medicare, and commercial plans saw retail drugs costs surge due to GLP-1 adoption and costs. Some employer groups have pulled back on coverage for weight loss alone due to spending spikes.
No Medicare doc fix
Medicare physicians again got left at the altar. By year’s end, there was no permanent fix to compensate docs for decades of under-reimbursement. To add insult to injury, a 2.8% rate decrease will go into effect on January 1.
Medicaid redeterminations and shrinking enrollment
Medicaid redeterminations continued in 2024 post COVID, which meant enrollment losses to plans. Still, the uninsured rate remained steady.
Rates also troubled plans due to the dry up of extraordinary Medicaid monies at the state level.
Exchange enrollment
Exchange enrollment continued its leap upward, reaching its highest level yet in 2024. This was driven by Medicaid enrollment conversions as well as enhanced premium subsidies. No movement occurred in extending premium enhancements past 2025.
Preventive services in the Affordable Care Act (ACA) suffered a blow when a federal court called into question the administration’s ability to dictate some preventive services at no cost. The decision is on appeal.
Employer and commercial coverage
Employer and commercial coverage saw huge price surges in 2024 and the same projected for 2025. Major utilization and drug spending increases are to blame. Reports are that retiree coverage is eroding as well as more and more employers have been moving to Medicare Advantage (MA) employer group waiver plan (EGWP) wrap coverage.
Large employers also are facing lawsuits from employees regarding allegations that self-insurance funds are being mismanaged and driving up medical costs. Employees argue their employers are violating their fiduciary duties under the Employee Retirement Income Security Act (ERISA).
Scrutiny of big healthcare
Compounding its financial woes, big healthcare also saw major policy scrutiny from regulators and Congress. Congress opened up investigations of big healthcare and their pharmacy benefit managers (PBMs). The Federal Trade Commission (FTC) released a scathing report on the Big 3 PBMs and sued them over insulin pricing.
While the major PBMs sought to change their pricing models, 2024 also saw greater traction of transparent PBMs, with major insurers and employer groups migrating away from traditional PBMs to transparent upstarts. Mark Cuban’s pharmacy venture also gained greater traction and the entrepreneur promised to displace the old regime.
The negative press continued with a blockbuster report, which said that PBMs received payments from brand drug makers to not place safety controls on opioids and related drugs.
Insurers were heavily criticized for agreements with data analytics entity MultiPlan. Insurers and MultiPlan were collectively accused of under-reimbursing out-of-network care, transferring major costs to consumers, and urging huge sums to administer the program. Insurers were also heavily investigated for the use of aritfical intelligence in prior authorization (PA) and claims denials.
The Biden administration’s antitrust program went beyond just PBMs to heightened scrutiny of other provider mergers. While a study indicated that antitrust review has been meager, there was some oversight and pushback. This included scrutiny of private equity firm investment in healthcare and the impact on quality.
Some notable mergers were called off in the provider world. The Cigna Group announced it was selling its MA business to Health Care Service Corporation (HCSC). A rumored merger of Cigna and Humana did not materialize.
Hospitals, too, were heavily criticized for the size of charitable contributions against tax exemptions as well as lack of compliance with price transparency.
There were also notable bankruptcies tied to private equity (PE) investments. PE deals faltered.
Vertical integration of health plans was a hot topic on Capitol Hill.
In an attempt to curry favor with a nursing home union, the Biden administration finalized a rule on staffing ratios for nursing homes. The industry says the levels are infeasible, will increase costs dramatically, and lead to the takeover of smaller firms by big ones.
Data from the first year of the No Surprises Act (NSA) arbitration showed that providers win three-quarters of awards and payments are up from pre-NSA rules.
And while reforms were not passed, Congress on a bipartisan basis began to show important interest in instituting site neutral payments and greater price transparency.
Change Healthcare cyberattack
The Change Healthcare cyberattack caused much of healthcare to come to a standstill for months in 2024. Change Healthcare is a company of healthcare giant UnitedHealth Group. The Change system had vast reach over operations in health plans, provider offices, and pharmacies. United bought Change to extend its reach and increase profits. Since the attack, it became clear that Change had major security vulnerabilities and United did little to enhance security or integrate the company into its overall ecosystem.
In response, the Department of Health and Human Services (HHS) just issued a proposed cybersecurity modernization rule to protect consumer information. Much more will be needed in terms of expertise and funding.
Interoperability rules
CMS finalized a far-reaching interoperability rule that impacts MA, Medicaid, and the federal Exchanges. It requires electronic PA for medical service requests, lays out formats to facilitate information exchange, and speeds PA approval timeframes. Another rule established details of a trusted framework for interoperability.
UK developments
Both King Charles and Princess Kate were diagnosed with cancer in 2024. Both appear to be recovering. But the royals’ diagnoses and treatment called attention to the shortcomings in the U.K. socialized system, including under-investment in technology, long waits for specialty visits and diagnoses, and delays in cancer treatment. While America has major healthcare issues, the events shined a light on shortcomings in healthcare throughout the developed world.
Election and changing political winds
In a topsy turvy election, President Biden dropped out, Kamala Harris stepped in, and former President Trump came back from the political dead to be only the second president to serve non-consecutive terms. Trump won the popular vote and the electoral college in a big way. His coattails created what is known as the trifecta, where the GOP will control the White House, House and Senate next year.
Trump hit the ground running post election by naming who he wants in his Cabinet. At HHS, he wants Robert F. Kennedy, Jr. Over CMS, he wants Dr. Mehmet Oz. There are already discussions of a major regulation rollback in healthcare. Government healthcare programs may not see major restructuring due to tight vote counts in Congress, but they likely will see major cuts just the same due to the new (sort of as it is really a task force) Department of Government Efficiency (DOGE) and a commitment to extend the 2017 Trump tax cuts. The reductions likely will impact coverage overall.
In other news, the Supreme Court struck down its previous Chevron deference decision that gave executive agencies wide regulatory discretion in rulemaking.
My daughter’s brain surgery
Early in the year, I told you about my daughter Kitty’s courageous decision to have brain surgery to cure a debilitating malformation. The months-long process and surgery was an eye opener even for this healthcare expert. I cannot imagine a family going through such a journey with inadequate health insurance, without the means to pay out-of-pocket costs, or with lower health literacy. You can read those blogs and podcasts here:
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Open enrollment coverage stories
I also continued to help those who needed support during their open enrollment seasons for Medicare, Exchange, and commercial coverage. Like my daughter’s story, they too paint a picture of a system that is badly in need of reform. Read the blog and podcast here:
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Commonwealth Fund 2024 study and my healthcare reform series
In 2024, the Commonwealth Fund updated its stellar “Mirror, Mirror” analysis comparing the U.S. healthcare system to other developed nations’ systems. Again, the study finds that America spends the most on healthcare as a percentage of GDP. It spends anywhere from 30% to 100% more annually. At the same time, America continues to have health outcomes that are dead last. What’s worse: it is an outlier on health outcomes against even the lowest performing countries.
All of this led me to write a healthcare reform series. You can study the plan and the details via these blogs and podcasts. My proposal has far more details in my book, The Healthcare Labyrinth, available via this site.
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— Marc S. Ryan
