Warren Warns of Anti-Competitive Behavior by Massive Insurance Companies in Medicare Advantage That Raise Health Care Costs and Allow Insurers to Evade Key Regulatory Protections
Senator Warren Urges CMS to Improve Data Collection on Intercompany Transfers to Allow for Greater Scrutiny of These Profit-Shifting Strategies
Washington, D.C. — U.S. Senator Elizabeth Warren (D-Mass.) sent a letter to Chiquita Brooks-LaSure, the Administrator of the Centers for Medicare and Medicaid Services (CMS), responding to the agency’s request for information (RFI) on Medicare Advantage (MA) data and raising concerns that CMS does not collect adequate data to determine when vertically-integrated insurance companies in MA may be using anti-competitive tactics to raise health care costs and pocket extra profits. In particular, the Senator raised concerns that these giant conglomerates could be evading the Medical Loss Ratio (MLR), the statutory requirement for health insurers in MA to spend at least 85 percent of health care premium dollars on medical claims.
Over a decade ago, Congress instituted the MLR to cap the amount of premium dollars that insurers in MA could spend on profits and administrative costs at 15 percent, requiring insurers to spend the remaining 85 percent paying out medical claims. However, by acquiring subsidiaries that are eligible for those medical claims payments, including pharmacies, physician practices, and other health care providers, giant insurance companies – such as UnitedHealth Group (UnitedHealth) and CVS/Aetna – may be skirting these requirements.
“Under this arrangement, health care conglomerates operate as both the providers of health care services and the entities responsible for paying, or reimbursing, for those services, allowing the parent companies to engage in profit-shifting strategies to undermine MLR requirements,” wrote Senator Warren.
This is not merely speculation. Reporting by the Wall Street Journal (WSJ) revealed significant markups of generic drugs at specialty pharmacies owned by CVS, Cigna, and UnitedHealth, all of which also own the three largest pharmacy benefit managers in the country. The WSJ found that the three companies leveraged their subsidiaries to pay themselves. According to the WSJ investigation, “PBMs try to pay as little as possible for drugs distributed through independent retail pharmacies. But when their own pharmacies dispense prescriptions, PBMs profit from the higher prices.”
“While I’m encouraged that regulators and independent experts are scrutinizing anti-competitive tactics in Medicare Part D, I’m concerned that similar analyses involving insurers that own their own provider practices cannot be completed due to insufficient data collection, which is alarming given recent trends in insurer-provider consolidation,” wrote Senator Warren. “To better track transfer payments from insurers to their affiliated providers, which would help determine whether insurers are engaging in unlawful profit-shifting schemes, I urge CMS to collect better ownership data of MA plans and providers.”
Specifically, Senator Warren called for CMS to collect the Taxpayer Identification Number (TIN) for each parent company; the corresponding TIN for each health care provider that the parent company owns or controls; and the parent company’s ownership share of each health care provider. In addition, Senator Warren urged CMS to collect better financial data from insurers in public programs, such as MA, including requiring insurers to identify payments to related parties and the profit margins those entities realize.
Senator Warren is a leading voice on reining in abuses in Medicare Advantage and protecting patients:
- In May 2024, at a hearing of the U.S. Senate Committee on Finance, Senator Warren called out private insurers in Medicare Advantage for accelerating the rural hospital crisis.
- In March 2024, Senators Warren and Brown led their colleagues in a letter to HHS and CMS that urged the agencies to protect seniors by holding insurance companies accountable for abuses in Medicare Advantage.
- In January 2024, Senator Warren and Representative Pramila Jayapal (D-Wash.) sent a letter to CMS, urging the agency to take administrative action to curb billions in overpayments to MA insurers.
- In December 2023, Senators Warren, Catherine Cortez Masto (D-Nev.), Bill Cassidy (R-La.), and Marsha Blackburn (R-Tenn.) sent a letter to the CMS Administrator Chiquita Brooks-LaSure, raising concerns about shortfalls in CMS’s data collection and reporting practices for MA plans, and urging CMS to close data gaps to strengthen oversight of MA plans and improve care for Medicare beneficiaries.
- In November 2023, Senators Warren, Cortez Masto, Cassidy, and Blackburn introduced bipartisan legislation to improve transparency of MA plans and ensure these plans are best serving the health care needs of America’s seniors. The Encounter Data Enhancement Act would require Medicare Advantage plans to report important information about how much they are actually paying for patient services and how much patients are responsible for paying out-of-pocket.
- In November 2023, Senators Warren and Braun urged the Department of Health and Human Services (HHS) Inspector General to determine if vertically-integrated health care companies are hiking prescription drug costs, evading federal regulations.
- In November 2023, at a Senate Finance Committee markup of the Better Mental Health Care, Lower-Cost Drugs, and Extenders Act, Senator Warren highlighted the need to do more to prioritize hearing health for seniors and strengthen transparency in Medicare Advantage, and secured commitments from Senate Finance Committee leadership to prioritize these proposals in future packages.
- In October 2023, at a hearing of the Senate Finance Committee, Senator Warren called out giant MA insurers for using deceptive marketing tactics to lure seniors into the wrong plans and drown out competition from smaller insurers that may offer better coverage. Senator Warren called on CMS to act within the fullest extent of its authority to crack down on MA insurers that game the system to overcharge the government and to ensure insurers publish accurate data on patient care and out-of-pocket costs.
- In May 2023, at a hearing of the Senate Finance Committee, Senator Warren highlighted the prevalence of ghost networks in Medicare Advantage plans and called for stronger oversight of the program.
- In March 2023, Senator Warren sounded the alarm on a new analysis by policy experts showing that all Medicare beneficiaries – including those enrolled in Traditional Medicare – are paying higher premiums due to overpayments in MA. She sent a letter to CMS and called on the agency to finalize its proposed rule to ensure payments to MA plans accurately reflect the cost of care.
- In March 2023, U.S. Senators Warren and Jeff Merkley (D-Ore.) sent letters to the top seven MA insurers – Humana, Centene, UnitedHealthcare, CVS/Aetna, Molina, Elevance Health, and Cigna – regarding their questionable claims that CMS’s 2024 proposed Medicare Advantage payment rules would hurt beneficiaries.
- In March 2023, at a hearing of the Senate Finance Committee, Senator Warren defended CMS’s proposed adjustments to the Calendar Year 2024 MA payment rates, pushing back against giant insurance companies and their lobbyists who are peddling misinformation to protect their billions in profits and scare beneficiaries into opposing the rule.
- In April 2022, Senator Warren and Representatives Katie Porter (D-Calif.), Rosa DeLauro (D-Conn.), and Jan Schakowsky (D-Ill.) led their colleagues in sending a letter to CMS Administrator Chiquita Brooks-LaSure highlighting concerns about overpayments to Medicare Advantage plans that line the pockets of big insurance companies.
- In February 2022, chairing a hearing of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth, Senator Warren delivered remarks about strengthening Medicare and cracking down on pharmaceutical and insurance companies’ corporate greed to pay for expanded coverage.
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