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SINKING STOCKS: UNITEDHEALTH'S MEDICAID WARNING

Analysis  |  By Marie DeFreitas  
|   May 30, 2024


TOPICS

business
CMS
earnings
expenses
financial
healthcare access
healthcare disparity
health insurance
health plans
insurance
investment
Medicaid
Medicare Advantage
payers


UNITEDHEALTH IS WARNING INVESTORS AND OTHER PAYERS OF A DISTURBANCE TO THE
MEDICAID MARKET.

--------------------------------------------------------------------------------


KEY TAKEAWAYS

The ongoing Medicaid unwinding process has affected payers stocks

UnitedHealth stock took a fall this past week, alarming investors

High utilization is still the culprit for soaring medical costs

The Medicaid business is under watch, according to UnitedHealth CEO Andrew
Witty. At a conference on May 29, Witty told investors that Medicaid
managed-care payers are getting hit with low state reimbursements, and it may go
on for some time. Shortly after this, UnitedHealth’s stock dipped, also bringing
down the Medical-Managed Care group.

"We've come through this prolonged redetermination cycle in Medicaid," Witty
said. "Making sure the utilization, and the rate and everything else stay in
perfect synchronicity during a multi quarter cycle — there's probably going to
be some disturbance around that."







--------------------------------------------------------------------------------


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MEDICAID UNWINDING

In April 2023, states began disenrolling ineligible Medicaid members— ‘Medicaid
unwinding’—for the first time since the beginning of the pandemic. The rules
preventing states from removing members from their Medicaid plans were peeled
back, but surveys found that many were wrongfully disenrolled while payers
continued to profit.

One study showed that Medicaid fee-for-service physician payments are about 30%
lower than Medicare payments, and commercial payments are even lower.

CMS extended Medicaid waivers into 2025, protectingthose who would otherwise be
left without coverage. In some states, like Texas and Florida, Medicaid
unwinding has left millions without coverage.



A year after Medicaid unwinding began, 22.4 million people have been disenrolled
from Medicaid through the redetermination process, according to KFF.


UNITEDHEALTH

Medicaid reimbursements are coming as states continue to determine
member eligibility,; drastically cutting beneficiary rolls over the past year.



Witty’s comments indicate the state reimbursements will need to reflect Medicaid
per-patient costs, but this could take some time to figure out. Speaking to
investors at the conference, Witty also said that this may mean a “multi-quarter
cycle” for states to begin paying Medicaid premium rates that are adequate
enough to meet the cost of coverage for Medicaid patients, Bloomberg reported.

Utilization is the top concern, as it's currently the primary driver of medical
costs. This uptick in costs has accelerated spending on benefits and also hurt
Medicare Advantage plan profits. Just this week, UnitedHealth’s stock dropped
about 4%, leaving it at $484.72, making it the worst performing stock in the Dow
Jones Industrial Average.

The stock of other insurers, like Molina Healthcare and Cetene, also fell this
week. UnitedHealth’s stock dropped to a six-week low, despite the insurer’s
favorable first quarter earnings, which pacified investor apprehension
toward Medicare Advantage and unease after the Change Healthcare cyberattack.

 



Marie DeFreitas is an associate content specialist at HealthLeaders.








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TAGGED UNDER:

business
CMS
earnings
expenses
financial
healthcare access
healthcare disparity
health insurance
health plans
insurance
investment
Medicaid
Medicare Advantage
payers

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