The Avaricious Ascent of UnitedHealth Group

August 28, 2023

Summary: This summer The American Prospect ran 8 terrific health policy articles, which HJM covers starting today. First up: a blow-by-blow account of the rise of the enormous, enormously diversified, and enormously profitable UnitedHealth Group (and on the origins of corporate managed care).

Health Care’s Intertwined Colossus
How decades of policy failures led to the ever-powerful UnitedHealth Group
The American Prospect
August 2, 2023
By Krista Brown, Sara Sirota

Today, United is the fifth-largest public company in the U.S., bigger than JPMorgan Chase. Its insurance products serve 50 million members, more than the population of Spain, and its $186 billion health services division, Optum, has 103 million patients, more than Vietnam’s population. Earnings came to $28.4 billion last year, putting it in the top 30 of companies worldwide.

We think of United as an insurance company, but it has never really been exactly that. It began as a health management company, and it is now also the largest employer of physicians in the country, with 70,000 doctors across 2,200 locations. Underneath its corporate umbrella are pharmacies, primary care clinics, surgical centers, urgent care centers, home health agencies, hospice agencies, mental health agencies, a pharmacy benefit manager, an IT division, and plenty more. United has so many subsidiaries that 25 percent of its total revenues come from itself. …

[Founder Richard] Burke epitomized “the shift in the HMO movement away from its modest origins as a fledgling alternative to conventional insurance, and into an era of big-budget marketing, Wall Street financing and hefty rewards for professional managers in a field once dominated by doctors.” …

In 2003, Congress established what today is known as Medicare Advantage, reversing the lower payments from 1997 and creating a strong foothold for managed-care plans in Medicare. Today, UnitedHealth is the largest supplier of Medicare Advantage plans in the country, with 26 percent market share as of 2020, when the government spent $317 billion on the program.

In the same law, McGuire saw another opportunity. Congress green-lit tax-advantaged “health savings accounts” (HSAs), so patients could use pre-tax money to pay medical expenses in high-deductible health plans. United created an internal bank to offer HSAs. The idea was that patients would be incentivized to shop around for the cheapest care, if not avoid doctors altogether. But United and other insurers also used managed-care techniques like limited physician networks in these plans to keep their own costs down once deductibles were hit. Today, United’s bank is the second-biggest provider of health savings accounts, with $20 billion under management and millions of users. …

By the time Obamacare passed, a wave of mergers proliferated among providers. They were trying to get leverage over negotiations with insurers, using the new rules to maximize billing for services. But United’s simultaneous motivation to game the MLR by scooping up physician practices was facilitated by this provider consolidation, giving the company easy targets to choose from. …

Doctors may find kinship with independent pharmacists, who are being forced out of business thanks to the practices of United and other insurers that have copied it. PBMs like United’s OptumRx consistently under-reimburse stand-alone drugstores and dictate which medications their patients can take. ….

[During COVID, the US] Health and Human Services Department enlisted Optum Bank to distribute $150 billion to hospitals and doctors to help cover expenses. This massive role in delivering money to providers likely helped pave the way for Optum Pay Advance, the company’s payday loan “service” for doctors. The initial offer came with a 35 percent interest rate attached. … Payday lenders are viewed as immoral because of the high interest and fees they take from vulnerable customers. In United’s case, they’re not only doing that, but they’re generating the need among physician practices in the first place. …

Along the way, United has internalized a critical fact about health care: If you sit on every side of the transaction, from doctors to insurers, drug payers to drug prescribers, lifesavers to end-of-life carers, you not only grow as the system grows, but you have the ability to steer the entire system inside your gaping maw. Conflict of interest is really the business model.

Comment by: Jim Kahn

UnitedHealth Group is the leading example of an industry run amok. Profits over patients (and doctors and pharmacists). This is a sad story, well told.

The excerpts above focus on UHG’s aggressive if legal business strategies. Most notable are wide-ranging acquisitions that facilitate gaming of regulations, e.g., starting PBMs and hiring doctors to circumvent limits on medical loss ratios by shifting profits to subsidiaries. And providing high interest “payday loans” while being the cause of delayed and denied payments.

Also described in the article are equally aggressive and often illegal non-business strategies. These include fraudulent behaviors incurring hundreds of millions in fines, e.g., backdated executive stock options, grossly understated physician payment benchmarks to suppress out-of-network provider reimbursements, and diagnostic code manipulation. Add to that hardline control of the political environment: purchase of The Lewin Group (policy analysts) to fight off a public option in the ACA, and massive Congressional lobbying.

The article is wrong in saying that “United is essentially running a private single-payer system” that can be regulated like a public utility. Because that’s not what single payer is.

Here’s a reminder: single payer is a public funder of health care, covering everybody (not just UHG members) with the same comprehensive insurance for all necessary medical care, with little or no cost-sharing, and paying all providers the same fairly negotiated amount for that care. With public accountability. And without shareholders.

The contrast with UnitedHealth Group couldn’t be clearer. With for-profit insurers, it’s impossible to regulate your way to single payer. Remove them. Unify the system under public leadership.