UnitedHealth mounts full defense of its business in wake of Thompson’s killing

In UnitedHealth Group’s first public appearance since the killing of a top executive, leaders acknowledged the public’s discontent with the health care system, but quickly piled blame on drug companies and hospitals.

The killing of UnitedHealthcare CEO Brian Thompson led to a wave of vitriol and frustration toward health insurance companies, of which UnitedHealthcare is the largest. The company’s stock has lost nearly 14% of its value since the Dec. 4 killing. 

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UnitedHealth CEO Andrew Witty said the health care system “needs to be less confusing, less complex, and less costly” — before mounting a full defense of his company, which has increasingly dominated the system, from insurance to drug benefits to medical care. 

“Fundamentally, health care costs more in the U.S. because the price of a single procedure, visit, or prescription is higher here than it is in other countries,” Witty said on the earnings call, where the company touted more than $400 billion of revenue and $14.4 billion of net profit last year. “The core fact is that price, more than utilization, drives system costs higher.” 

Thompson, who led the company’s health insurance unit, was a regular voice on earnings calls. During Thursday’s call, Witty offered brief remarks in remembrance of Thompson.

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“He devoted his time to help him make the health system work better for all of the people we’re privileged to serve,” Witty said. “He would dive in with passion and caring to find solutions to improve experiences, whether for an individual consumer, an employer, or a public health agency.”

UnitedHealth has not yet announced his replacement.

UnitedHealth is facing intense scrutiny not just from angered members, but also from regulators and lawmakers who believe the company has gotten too big and powerful and has used its networks of physicians as a way to skim more money from Medicare’s trust fund.

Witty took an indirect shot at hospitals, saying there are “participants in the system who benefit” from higher prices even as others work to fix the problem. He said patients would benefit from visiting cheaper sites of care, but that threatens revenue streams for “organizations that depend on charging more for care.” That’s a reference to longstanding efforts in Congress, fiercely opposed by hospitals, to equalize Medicare payments for certain services provided at hospital outpatient departments with those provided in physician offices. 

Witty, who used to be the CEO of pharmaceutical giant GSK, also specifically called out his former industry for their pricing practices. He used GLP-1 drugs as an example, saying the list prices in Europe can be one-tenth of what they are in the U.S. 

U.S. health care prices are indeed higher than anywhere else in the world and the major reason why the country spends $5 trillion annually on health care. But a core function of insurers and pharmacy benefit managers, owned by companies like UnitedHealth, is to negotiate prices.

By Witty’s own logic, that means UnitedHealth and its rivals haven’t done a very good job. 

This is especially the case in commercial coverage offered by America’s workplaces, where hospitals, drug companies, physician practices, and others who sell products and services are able to charge insurers several times more than government programs like Medicare and Medicaid. 

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In fact, reporting by STAT found UnitedHealth’s medical groups often get paid higher commercial prices by UnitedHealth’s own insurance companies, compared to other practices in the same areas. That can be a way for the parent company to retain higher profits, which leads to higher costs for patients and employers and raises competitive barriers for other doctors. 

Witty defended pharmacy benefit managers, an industry that’s under intense scrutiny from antitrust regulators and members of Congress. PBMs like UnitedHealth’s Optum Rx are supposed to negotiate lower drug prices from pharmaceutical firms on behalf of customers such as health insurers and employers, and in exchange put those drugs on approved lists for coverage. Lawmakers and regulators have accused them of shirking this responsibility to enrich themselves instead.

Optum Rx will pass through 100% of drug rebates back to consumers and employers by 2028, Witty said. “This will help make it more transparent who is really responsible for drug pricing in this country: The drug companies themselves,” he said.

However, that change could potentially amount to nothing for those who pay for prescription drugs. It’s unclear how Optum Rx defines what a drug rebate is — and whether it retains things like “bona fide service fees,” “manufacturer administrative fees,” and other money that acts like a rebate but is kept by the PBM. The announcement also could serve as a lobbying point to stave off potential PBM reforms from Congress.

On the financial front, the fourth quarter was a rare stumble for the health care behemoth, with revenue falling short of Wall Street’s expectations, even as earnings exceeded them. UnitedHealth’s stock declined 4.7% by midday Thursday.

UnitedHealth’s insurance arm is struggling with the same trends that continue to dog all insurers who offer government plans. In Medicare Advantage, changes the Biden administration rolled out are cutting into profitability. And people on Medicaid tend to need more care after states culled their programs of people who were no longer eligible starting in 2023. 

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UnitedHealth’s medical loss ratio, a closely watched metric that shows how much of premiums it spent on medical care, came out to 85.5% in 2024. That’s higher than the 83.2% the company reported in 2023 and higher than both Wall Street analysts and UnitedHealth itself had projected for 2024. 

Federal law requires insurers to spend 80% or 85% of premiums on medical care, depending on the type of plan, but insurers aim to keep their medical loss ratios as low as possible. 

John Rex, UnitedHealth’s chief financial officer, explained on the call that 70% of the miss was because of issues with Medicare Advantage and Medicaid. With respect to the former, he said UnitedHealth’s Medicare Advantage enrollees needed more care, and the company didn’t grow its membership as expected because of benefit design changes in the 2024 marketplace. In Medicaid, he said state payment rates aren’t keeping up with members’ health needs. 

The remaining 30% was evenly split between covering more high-cost drugs and an “aggressive upshift” in hospital coding, Rex said. 

Rex also said UnitedHealth, which is already the largest Medicare Advantage insurer, plans to grow membership in that program by up to 800,000 people this year. In 2024, 54% of Medicare beneficiaries had opted for Medicare Advantage plans instead of traditional Medicare. 

Witty and Rex also repeated the claim that Medicare Advantage saves money for consumers and taxpayers — a line they’ve used several times in the past — but it’s inaccurate.

Experts from the Medicare Payment Advisory Commission found the government paid Medicare Advantage plans about 108% of traditional Medicare payments in 2024 on average. And when accounting for Medicare Advantage insurers’ coding practices and the ability to attract healthier people, that figure goes up to 132%.

UnitedHealth’s $14.4 billion net profit figure was 36% lower than 2023, due to the higher medical costs as well as costs from the Change Healthcare cyberattack.

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