The New England Journal of MedicineMedicare Advantage and Consolidation’s New Frontier — The Danger of UnitedHealthcare for All

Vertical Consolidation in Healthcare: Insurance Giants Reshape Care Delivery

The landscape of healthcare delivery in the United States is undergoing significant changes as major insurance companies expand their reach through vertical consolidation. This trend, driven by the shift towards capitation-based financing in public programs, particularly Medicare Advantage, has far-reaching implications for patient care, physician autonomy, and market competition. The article examines the potential benefits and risks of this consolidation, highlighting concerns about market abuses, cost inflation, and the erosion of care quality.

Key Points:

• UnitedHealth Group, the largest insurance company in the US, now owns Change Healthcare, employs the most physicians, and is the third-largest pharmacy benefits manager (PBM).
• Other major insurers like Humana, CVS (Aetna), Cigna, Centene, and Elevance are pursuing similar vertical growth strategies.
• The shift from fee-for-service to capitation-based financing in public programs is driving this consolidation.
• Medicare Advantage enrollment has more than doubled since 2010, now exceeding 50% of Medicare beneficiaries.
• In 2024, the government will pay about $500 billion to insurance companies for Medicare Advantage, 23% more per beneficiary than traditional Medicare.
• Insurance companies are acquiring physician practices and care-delivery companies to maximize capitated payments and reduce costs.
• Vertical integration promises efficiencies but raises concerns about market abuses and quality of care.
• Risks include inflated risk-adjusted payments, gaming of medical loss ratio requirements, patient steering, and anticompetitive behavior.
• Corporatization of healthcare may conflict with physicians’ ethical obligations to prioritize patient interests.
• Policymakers have various tools to address consolidation, including antitrust scrutiny and reinforcing bans on corporate practice of medicine.
• Congress could prohibit insurers and PBMs from owning medical practices and other provider entities.
• Revamped legislation could limit corporate control of physician practices and protect physician autonomy.

A 2023 report from the OIG concluded that CMMI, the agency created to administer a range of value-based payment models, cost Medicare $10 billion in its first decade of operation.

More on Medicare