Rising medical cost trends aren't going down, but they are stabilizing, UnitedHealth Group executives say.
CEO Andrew Witty told investors April 16 that pent-up demand and increased health system capacity following the COVID-19 pandemic drove rising costs through 2023, but the trend was a "one-off."
"We don't see anything like that. We see much more stabilization. We haven't seen a step-down from that trend, but we certainly see that kind of sustained activity without aggressive acceleration," Mr. Witty said.
Every major insurer reported rising costs in the Medicare Advantage population in the last months of 2023. While a few insurers, including Humana and CVS Health, cut their 2024 earnings guidance based on the trend, UnitedHealth Group maintained it can weather the storm.
The company reported its first-quarter earnings April 16. UnitedHealthcare's medical loss ratio was 84.3% in the first quarter, compared to 82.2% the year prior and down from 85% in the fourth quarter of 2023.
CFO John Rex told investors seasonal trends, including increased vaccination rates and respiratory illness costs, declined in the first quarter. UnitedHealth Group executives previously said increased RSV vaccination rates contributed to increasing costs in the Medicare Advantage population.
UnitedHealthcare removed some of its utilization management policies as providers suffered from the hack on Change Healthcare. The cutback on utilization management contributed to the company's medical costs in the first quarter, Mr. Rex said.
In addition to increased costs, insurers are facing a tougher reimbursement model from CMS. The agency is phasing in coding adjustment changes between 2024 and 2026. Insurers have said the changes amount to a cut in payments.
Mr. Witty told investors UnitedHealth Group is following a three-year plan to adapt to the changes from CMS. He previously called the changes "incredibly positive" for the organization, because it provided "stimulus to rechallenge ourselves on how we do things even more effectively going forward."
The company will prioritize long-term sustainability over short-term growth in Medicare Advantage given the rate environment, Mr. Witty said.
"What you're also not going to see from us is a knee-jerk reaction between growth and margin. We want to ensure we're a year-in, year-out, super reliable performer in this environment," he said.
CMS published its 2025 final Medicare Advantage rates earlier in April. Insurers decried the proposed rates, saying they did not account for rising medical costs in the market.
Mr. Witty said he views the 2025 rates as a continuation of the three-year phase-in the agency previously announced.
"Obviously, it's a little disappointing. We don't think CMS really reflected what we've seen over the past year in terms of actual in-market trend, but in reality it's just a little extra pressure for 2025 on top of what we've already seen previously," Mr. Witty said.