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News Release

Insurers Collected Full Premiums But Paid Less for Care During the Pandemic

June 2, 2022
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A recent opinion article published by MedPage Today points out that in 2020, private insurer profits––largely from Medicare Advantage and Medicaid managed care––jumped 20-30%. At the time, private insurers were collecting full premiums even as claims from health care providers fell due to decreases in elective care. Meanwhile, the government was bailing out providers by compensating them for revenue shortfalls. David Himmelstein and Steffie Woolhandler write that “taxpayers paid two-fold for the care dip” during that time. 

DAVID HIMMELSTEIN, MD and STEFFIE WOOLHANDLER, MD, MPH, himmelhandler@comcast.net
    Himmelstein and Woolhandler are both professors in the CUNY School of Public Health at Hunter College.

Himmelstein and Woolhandler describe how federal officials set 2020 payment rates to Medicare Advantage plans, boosting payments by nearly $49 billion, as they anticipated the usual annual increases in medical care use and costs. After decreases in doctor visits and cancellations of elective surgeries, Medicare Advantage plans simply pocketed the increases, leading to “insurers’ windfalls.” Simultaneously, the pandemic led to financial shortfalls for hospitals and doctors; private insurers’ payments to hospitals actually fell in 2020. But the Provider Relief Fund and the Paycheck Protection Program then helped bailed out hospitals and health professionals with around $165 billion. 

“In essence,” write Himmelstein and Woolhandler, “government paid twice for care: once through premiums paid to private insurers for Medicare Advantage and Medicaid managed care, and a second time to fill the hole in hospitals’ and doctors’ budgets caused by falling reimbursements from private insurers.”

This dynamic shows no signs of slowing down soon. For Health Justice Monitor, Himmelstein and Woolhandler commented that “while insurers’ profiteering from taxpayers in 2020 was extreme, Medicare Advantage plans have been fleecing the taxpayers for years, and look set to continue doing so. Indeed, the Biden Administration recently granted them a huge payment increase for 2023.”