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Report Shows Big Insurance Profiting Massively From Medicare Privatization 

Jake Johnson, March 17, 2023

The seven largest for-profit insurance companies in the U.S. have seen their combined revenues from taxpayer-backed programs grow 500% over the past decade.

A new analysis released Monday shows that insurance giants are benefiting hugely from the accelerating privatization of Medicare and Medicaid, which for-profit companies have infiltrated via government programs such as Medicare Advantage. 

According to the report from Wendell Potter, a former insurance executive who now advocates for systemic healthcare reform, government programs are now the source of roughly 90% of the health plan revenues of Humana, Centene, and Molina.

Over the past decade, Potter found, the seven top for-profit insurance companies in the U.S.—the three mentioned above plus UnitedHealth, Cigna, CVS/Aetna, and Elevance—have seen their combined revenues from taxpayer-backed programs soar by 500%, reaching $577 billion in 2022 compared to $116.3 billion in 2012. 

“The big insurers now manage most states’ Medicaid programs—and make billions of dollars for shareholders doing so—but most of the insurers have found that selling their privately operated Medicare replacement plans is even more financially rewarding for their shareholders,” Potter wrote. “In addition to their focus on Medicare and Medicaid, the companies also profit from the generous subsidies the government pays insurers to reduce the premiums they charge individuals and families who do not qualify for either Medicare or Medicaid or who work for an employer that does not offer subsidized coverage.” 

Potter noted that the top insurance giants, a group he dubbed the Big Seven, now control more than 70% of the Medicare Advantage market, which has grown rapidly in recent years. According to the Kaiser Family Foundation, more than 28 million people were enrolled in a privately run Medicare Advantage plan last year—nearly half of the Medicare-eligible population. 

An ardent critic of Medicare Advantage, Potter said in an interview with The American Prospect on Monday that the program “is a big contributor to the excessive spending” in Medicare. 

“It needs to be ended,” Potter, executive director of the Center for Health and Democracy, said of Medicare Advantage, whose major players frequently overbill the federal government and deny patients necessary care. The program is run by private insurers with government money.

“The premiums and taxes paid by Americans enabled the Big Seven to make those profits.” 

In his analysis, Potter observed that Medicare Advantage enrollment among the Big Seven increased 252% between 2012 and 2022.

Having deeply entrenched themselves in the Medicare program via Medicare Advantage, insurance giants are now looking to gain a foothold in traditional Medicare through a Biden administration pilot program known as ACO REACH, which has drawn mounting criticism from physicians and progressive lawmakers. 

“We must fight the privatization of Medicare with every tool we have,” Rep. Pramila Jayapal of Washington, chair of the Congressional Progressive Caucus, said in a statement last month. 

When counting both their commercial businesses and participation in government programs, the Big Seven brought in $1.25 trillion in revenue last year and their profits rose to $69.3 billion, according to Potter, who emphasized that a growing share of insurance giants’ revenues now comes from “the relatively new and little-known middleman between patients and pharmaceutical drug manufacturers” known as pharmacy benefit managers (PBMs). 

“Cigna now gets far more revenue from its PBM than from its health plans,” Potter noted. “CVS gets more revenue from its PBM than from either Aetna’s health plans or its nearly 10,000 retail stores.” 

Potter lamented that “policymakers, regulators, employers, and the media have so far shown scant interest” in closely examining the taxpayer-reliant business practices of large insurance companies, which wield substantial lobbying power that they deploy against any effort to transform the United States’ fragmented healthcare system. 

“They’ve essentially been bailed out by taxpayers,” Potter said of for-profit insurance giants. “And members of Congress, and various administrations, have been just standing on the sidelines, not paying attention to what’s been going on.” 

Meanwhile, tens of millions of people in the United States are either uninsured or inadequately insured, and more than 100 million are saddled with healthcare-related debt

A recent study by The Commonwealth Fund found that the United States spent close to twice as much as the average OECD nation on healthcare while achieving worse outcomes in critical areas such as life expectancy at birth and death rates for treatable conditions.