Medicaid Managed Care: 2020 Results for the “Big Five”

[View this blog for an update on Medicaid Managed Care earnings.]

Corporate earnings statements for 2020 are now out. It was a very good year for the five largest health care companies in the Medicaid managed care market: Aetna/CVS Health; Anthem; Centene; Molina; and UnitedHealthcare. Each company experienced an increase in Medicaid enrollment between December 2019 and December 2020; in total, their Medicaid enrollment grew by 32%. We’re confident that Medicaid revenues went up as well, but not all of the companies reported those numbers. We also can’t tell whether Medicaid earnings were up and, if so, by how much. But none of the companies told its investors that it has any plans to exit the Medicaid market any time soon. To the contrary: several expect further growth in Medicaid enrollment and revenues in 2021.

Why does this matter? Together, these five companies owned 112 of the 281 Medicaid managed care organizations (MCOs) with which states contracted as of September 2020. Each company had subsidiaries in over 12 different states. And as of the end of 2020, according to parent company data, these MCOs were responsible for the delivery of needed health services to over 35 million Medicaid beneficiaries. Company enrollment figures are not broken down by age, but assuming children are enrolled in proportion to their enrollment in Medicaid, these MCOs cover an estimated 14 million children or more. If Medicaid is to work for children and families, these companies—and the other MCOs with which they compete—have to perform.

There’s little question about their financial performance last year. Across all health insurance markets—commercial, Medicare Advantage, Medicare Part D, Marketplaces, and Medicaid—the companies posted “operating income”/“earnings” from “operations”/“operating gain” totaling $28.1 billion—with a “b.” Each is in the FORTUNE 500, and in 2020, four ranked in the top 100: CVS Health (5), UnitedHealth Group (7), Anthem (29), and Centene (42). What follows is a brief summary of each company’s results for 2020 drawn from its most recent earnings statement. Market capitalization figures are current as of February 22, 2021.

Aetna/CVSHealth  (Market Cap $ 91.8 billion) CVS Health has three segments; the Health Benefits Segment includes Aetna, which CVS Health acquired in 2018. Operating income for this segment in 2020 was $5.2 billion on total revenues of $75.5 billion. The company had 2.7 million Medicaid enrollees, who comprised 12% of its total enrollment of 23.4 million. Medicaid enrollment increased by 39%, or 767,000 beneficiaries, over the course of the year. The earnings statement does not provide any revenue or operating income information specific to Medicaid.

Anthem, Inc. (Market Cap $72.2 billion) Anthem reported an operating gain of $6.4 billion on total revenues of $121.9 billion. Its Medicaid enrollment was 8.8 million, or 21% of its total enrollment of 42.9 million. The company noted: “Government Business enrollment increased by 1.9 million lives compared to the prior year, attributable to Medicaid, reflecting organic growth as a result of the temporary suspension of eligibility recertification efforts in our markets as well as our acquisition of the Medicaid plans in Missouri and Nebraska and growth in Medicare Advantage.” (Medicaid enrollment accounted for 1.6 million of this increase).

Centene (Market Cap $33.8 billion). Centene reported earnings from operations of $3.1 billion on total revenues of $111.1 billion. Medicaid enrollment was 13.6 million, which represents a little over half of total enrollment of 25.5 million. Medicaid revenues were $74.8 billion, accounting for two thirds of Centene’s total revenues. Both Medicaid enrollment and revenues increased sharply in 2020; enrollment by 4.9 million or 56.7%; revenues by $22.9 billion, or 44%. The company attributed its overall revenue increase to “the acquisition of WellCare and growth in the Medicaid and Health Insurance Marketplace businesses, driven by expansions and new programs in many of our states. Additionally, the net effect of the pandemic increased our revenues due to the suspension of Medicaid eligibility redeterminations.”

Molina (Market Cap $12.9 billion) Molina reported operating income of $1.1 billion on total revenues of $19.4 billion. The company had 3.6 million Medicaid enrollees, who accounted for 89% of its total enrollment of 4.0 million. Medicaid revenues were $14.3 billion, over three quarters of total revenues. The company experienced growth in both Medicaid enrollment (up 22%) and revenues (up 14%) year-to-year. Molina also reported an MCR (medical costs as a percentage of premium revenue) of 87.4% for its Medicaid line of business; none of the other companies were equally forthcoming.

UnitedHealth Group (Market Cap $308.6 billion) UnitedHealth Group has two reportable  business segments: UnitedHealthcare and Optum. The following results are for the health care benefits segment, UnitedHealthcare. Its earnings from operations on revenues of $200.9 billion were $12.4 billion, or 6.2%. Medicaid enrollment was 6.6 million, or 14% of UnitedHealthcare’s total enrollment of 48.4 million. “Community and State” revenues, which presumably include Medicaid revenues, were $46.5 billion, an increase of $2.7 billion from 2019. It expects “Medicaid growth with new market entries in Kentucky, Indiana, and North Carolina along with a strong proposal pipeline for both existing and new states” in 2021.

The companies’ earnings statements offer only a limited window into their Medicaid lines of business. Some do not even provide Medicaid revenues. And none specifies Medicaid operating income, so it’s not possible to determine from these data how profitable (or not) their Medicaid products are. The table below sets forth what little information is available from the earnings statements, along with data from the Kaiser Family Foundation’s indispensable Medicaid Managed Care Market Tracker.

While the information available from the earnings statements is fragmentary, one trend comes through loud and clear. Despite the pandemic-driven recession—and in part because of it—each company saw a significant increase in its Medicaid enrollment during 2020. As several of the companies noted, a main contributing factor was the prohibition on termination of coverage for Medicaid beneficiaries during the coronavirus Public Health Emergency (PHE). By reducing eligibility “churn,” this prohibition, in combination with the increase in the number of Americans eligible for Medicaid due to the loss of employment, had the effect of increasing Medicaid enrollment in all states; in managed care states, this meant an increase in MCO enrollment.

The Biden Administration has already notified the Governors that the PHE will “likely remain in place for the entirety of 2021.” The Congressional Budget Office projected that the national unemployment rate this year would average 5.7% (last month’s unemployment rate was 6.3%). As a result, Medicaid enrollment will likely increase in many if not all of the states where these companies own MCOs. This, in turn, could translate into a further increase in revenues for these firms as well others competing in the Medicaid managed care market.

The Big Five demonstrably know how to make money. And they know how to increase their Medicaid market share.  But do their MCOs know how to deliver care to children and families?

That’s hard to say. Not only is there little transparency about the financial performance of the Medicaid business of these companies—see table above—but there’s also little transparency about the performance of their MCOs. This is a public policy failure, but it can be fixed.

At the state level, agencies should be monitoring the financial performance of all MCOs—not just the subsidiaries of the Big Five—and posting the results. They should also be standing up child health dashboards. At the federal level, CMS should make sure that states and MCOs meet existing transparency requirements. And at the corporate level, managements should accept that much is expected of those to whom large amounts of public funds and large numbers of program beneficiaries are entrusted, starting with transparency.

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