The High Cost of Medicare Advantage, Medicaid Market Trends, The Truth About Price Transparency, and More

In this update we answer the question of whether Medicare Advantage is more expensive than traditional Medicare. We review the shift in Medicaid membership and what that means for healthcare organizations. We share the latest data on price transparency and important moves in value-based care. Finally, if you’d like the latest in AI in healthcare or why JPMorgan employees have brought forward a lawsuit against their employer—then read on.

Joe Bastante

3/31/20257 min read

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In this month’s update:

  • Is Medicare Advantage costing taxpayers more than traditional Medicare?

  • Price transparency—more scrutiny coming but it may still miss the mark

  • How much did Medicaid membership drop and what are the implications for healthcare organizations?

  • What the JPMorgan employee class action suit may mean for companies everywhere

  • Aetna, Shield CA, and Centene collaborate on a shared value-based platform and model

  • Healthcare AI tech moves, Salesforce, Google, Oracle, and more


Is Medicare Advantage costing taxpayers more than traditional Medicare?

The Medicare Payment Advisory Commission (MedPAC) recently released a report estimating that Medicare Advantage (MA) costs 20% more per enrollee than traditional Medicare. Given that Medicare costs about $1 trillion, or 3.7% of the U.S. GDP, this finding is significant. Just over half of Medicare enrollees are in MA plans. The report predicts that $84 billion in overpayments will be made to MA plans in 2025 as a result of favorable selection (i.e., attracting less costly members) and coding intensity. Coding intensity refers to the practice where MA plans seek increased payment by uncovering missed conditions and diagnoses and adding the corresponding codes to the data submitted to the CMS. Many have accused plans of gaming the system to get higher payments (e.g., by doing in-home assessments to mine for new health conditions). MedPAC attributed $40 billion in overpayments to coding intensity. While some changes have been made to this risk adjustment payment model (e.g., CMS V28 model), it's highly likely that further changes will be made, which will impact insurers already losing money on MA. Within the past two weeks, Dr. Oz, head of the CMS, said that the MA system is upside down, and he pledged to go after upcoding. MA plans need to factor this risk into their financial models.

MA may cost more per enrollee than traditional Medicare, but that doesn't mean it's less efficient. MA plans often offer additional benefits not included in traditional Medicare (e.g., vision, dental, gym memberships) and MA members need not acquire additional Medicare Supplement insurance to limit out-of-pocket spend. Do MA members have better health outcomes? While not all agree, sufficient evidence suggests that they do. As an example, check out the findings from a Harvard Medical School and Inovalon study (link below), which found that MA members had fewer preventable hospitalizations and readmissions, lower utilization, etc.

Price transparency—more scrutiny coming but it may still miss the mark

On February 25th, President Trump issued an executive order directing departments (e.g., Treasury, Labor, HHS) to rapidly enforce healthcare price transparency regulations. To recap, the Hospital Price Transparency Rule and Transparency in Coverage Rule require that hospitals post machine readable files with payer-specific pricing, out-of-pocket cost estimates for 300 shoppable services, and good-faith estimates for the uninsured. Insurers must provide machine readable files with in-network negotiated rates and historical out-of-network allowed amounts. Insurers must also offer an online shopping tool providing cost estimates for all services. For brevity, we'll skip state-specific laws (e.g., my home state, NC, has the Health Care Transparency Law requiring additional reporting, see the link below for details).

Though penalties increased in 2022, i.e., fines up to $2,007,500 per hospital per year, the Trump administration has said enforcement is weak. Are they correct? Yes, especially for hospitals. According to a patient advocacy group, only 21.1% of hospitals were in full compliance in November of 2024, decreasing from 34.5% in 2023. I downloaded the CMS compliance dataset and here's what I found. Out of the 2,807 cases of noncompliance, the CMS issued a penalty for only 17 hospitals, and 10 appealed. 1,071 corrective action plans (CAPs) were issued to hospitals, some hospitals receiving more than one. Overall, penalties were few though non-compliance was high. Will transparency regulations empower shoppers? Somewhat, at least for discrete and easily understood services. McKinsey estimates that 73% of commercial claims were shoppable to a degree. Surveyed consumers say they're willing to shop, 17% say they would shop for at-home care, 57% for primary care. However, many consumers are ill-equipped to understand healthcare complexities, the shopping solutions are often non-intuitive, and when the insurer pays, consumers lack incentive. Case in point, I tried to use my insurer's shopping tool, which offered a cash payment of about $300 for selecting from recommended providers. I gave up because of provider data issues. Transparency may help, but less than many expect.

How much did Medicaid membership drop and what are the implications for healthcare organizations?

Under the continuous enrollment provision included in the Families First Coronavirus Response Act (FFCRA), states were granted additional Medicaid funding in exchange for not disenrolling most members during the pandemic. Under the program, Medicaid/CHIP enrollment increased from about 71 million in February 2020 to 95 million in April 2023. That 2023 peak coincided with the end of the continuous coverage provision. By October last year, enrollment dropped to 79 million, though still greater than pre-pandemic levels. Disenrollments varied greatly by state from 57% in Montana to 12% in North Carolina, which benefited from Medicaid expansion, as did NE, OK, MO, and SD. Did disenrollments lead to a greater number of uninsured? Slightly for Medicaid, but overall, the U.S. uninsured population in 2024 was still 1.5% lower than in 2020. No doubt extending the ACA subsidies is helping. Are there any concerns? Yes. Of those who were disenrolled from Medicare, 61% were disenrolled for procedural issues (e.g., paperwork issues, eligibility wasn't able to be confirmed). It's likely that many who were unable to respond to or appeal the determination lost coverage though they were still eligible. Of course, ACA subsidies are at risk in future years. According to the Congressional Budget Office, ending subsidies would result in 3.8 million more uninsured. Additionally, ACA premiums would likely rise as healthy individuals drop coverage. Check out the link below if you'd like to see projections on rate increases by state should ACA subsidies go away.

What the JPMorgan employee class action suit may mean for companies everywhere

In recent posts we've covered the PBM market size, profitability, and major players. PBMs have become a lightning rod for negative press. About two weeks ago, JPMorgan employees filed a lawsuit alleging that the company mismanaged its employee health and prescription benefits program. The lawsuit alleges, for example, that an employee purchased the multiple sclerosis drug teriflunomide for $6,229 when it was only about $30 at retail pharmacies. Johnson & Johnson, Wells Fargo, Kraft, and others face similar suits. Legal firms may be enticing employees to bring forward lawsuits. For example, Jerry Schlichter, founder of Schlichter Bogard LLP, pioneered fiduciary litigation challenging retirement plan fees. He has posted LinkedIn ads to attract potential plaintiffs in health plans for large employers. JPMorgan's case has an added wrinkle since their PBM (CVS) is a customer, so employees are claiming JPMorgan put profitability and their client ahead of employee interests. The J&J lawsuit was from a single employee and may have limited impact. The Wells Fargo lawsuit was just dismissed within a few hours of me writing this summary. However, if any lawsuits are successful, health insurance will become not just an employee benefit but a legal liability. If this were to happen, I wouldn't be surprised if companies move toward ICHRAs (individual coverage health reimbursement arrangements) where employers provide health insurance funding to employees, who independently select and acquire the health plan of their choice. Only time will tell.


Aetna, Shield CA, and Centene collaborate on a shared value-based platform and model

The California Quality Collaborative (CQC) and the Integrated Healthcare Association (IHA) have partnered with Aetna, Blue Shield of California, and Centene on a value-based care model and solution. This trial arrangement will provide direct technical assistance and a shared value-based model to independent primary care practices. This effort provides needed support to independent primary care practitioners and will align multiple insurers to the same set of value measures. Transitioning to value-based care is difficult enough for providers, and it's made worse by having to navigate different value measures and model structures for each insurer. I applaud the work being done in California and I hope it succeeds and spreads.

Healthcare tech moves, Salesforce, Google, Oracle, and more

Rather than go deep on a single tech issue, this month includes a roundup of healthcare moves by big tech firms. And of course, congratulations to Google, whose Gemini 2.5 model recently became the leading frontier model outperforming OpenAI, Anthropic, and DeepSeek. Google research fueled the GenAI revolution, and their free, open-source tools have been invaluable to many of us in building AI solutions. Glad to see their recognition.

As always, feedback, suggested topics, or questions are welcomed. I’m here to help. Contact me anytime.

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