Latest / Becker’s Healthcare Podcast / Medicare Advantage Litigation and the AI Battle Between Payers and Providers with Jakob Emerson

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Medicare Advantage Litigation and the AI Battle Between Payers and Providers with Jakob Emerson · Becker’s Healthcare Podcast

• 0:02
  - There's a version of AI in health care
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  - This is Scott Becker with the Beckers Health
• 1:02
  - Care podcast.
• 1:04
  - Thrilled today to visit with Jacob Emerson.
• 1:07
  - Jacob covers at Becker's Health Care the payer
• 1:10
  - arena
• 1:11
  - and does so
• 1:12
  - better than anybody else in the country, and
• 1:15
  - so many interesting things going on in the
• 1:16
  - payer area.
• 1:18
  - Jacob, let me tee it up and ask
• 1:19
  - you to take it away.
• 1:21
  - What are a couple of stories that you're
• 1:23
  - watching closely in the payer,
• 1:25
  - industry currently?
• 1:27
  - I'll ask you to take it away.
• 1:29
  - Yeah. Hey, Scott. Good to talk with you.
• 1:31
  - So I got two stories we could touch
• 1:34
  - on today that kind of
• 1:36
  - encompass
• 1:37
  - broader trends the team has been covering,
• 1:40
  - honestly, for for a few years now here
• 1:42
  - at Becker's.
• 1:43
  - One is is a
• 1:45
  - a commentary from UnitedHealthcare
• 1:47
  - CEO on this AI billing war that we've
• 1:50
  - been seeing going on for, I'd say, the
• 1:52
  - better part of at least two years now
• 1:54
  - between
• 1:54
  - well, in terms of what we cover, large
• 1:56
  - health systems
• 1:57
  - and insurance companies
• 1:59
  - both using, you know, their AI tools to
• 2:02
  - either code heavier, code better, however you wanna
• 2:05
  - define it depending on who you're talking to,
• 2:07
  - and the payers responding with their own AI
• 2:09
  - tools,
• 2:10
  - to better analyze,
• 2:12
  - claims and and then what they reimburse.
• 2:14
  - And so just this kind of,
• 2:16
  - entrenchment of the normal sides
• 2:19
  - with AI,
• 2:20
  - and some new commentary about that. And then
• 2:22
  - kind of this this debacle that just keeps
• 2:24
  - happening year after year, and it seems to
• 2:26
  - keep getting worse with Medicare Advantage Star ratings
• 2:30
  - and and the bonuses that insurers get for
• 2:32
  - having high quality Medicare Advantage plans.
• 2:34
  - There's so much litigation
• 2:36
  - now against CMS over these bonuses and and
• 2:38
  - how they're calculated, how the ratings are calculated,
• 2:41
  - and there's so much money tied to these,
• 2:43
  - that it seems to just be,
• 2:46
  - for for lack of a better term, a
• 2:47
  - hot mess in terms of what CMS and
• 2:49
  - then what the private industry is having to
• 2:51
  - having to
• 2:52
  - sort through.
• 2:53
  - So I can detail some of what that
• 2:55
  - has been entailing lately as well.
• 2:58
  - Thank you so much. Plea please do go
• 3:00
  - ahead and detail some of that. I I
• 3:02
  - also noted just yesterday
• 3:04
  - in looking at some other stuff,
• 3:06
  - that UnitedHealthcare and CVS Health are up about
• 3:09
  - 30% this year,
• 3:11
  - which seems, you know, so different than the
• 3:13
  - last couple years. And I found that fascinating
• 3:15
  - too, but but that's more just their stock
• 3:17
  - prices versus what's going on. Let me turn
• 3:20
  - it back to you to what's really going
• 3:21
  - on and and some of the issues you're
• 3:23
  - seeing between payers and health systems. Yeah. And
• 3:25
  - I would just quickly off of what you
• 3:26
  - just said, Scott. I mean, we haven't seen
• 3:28
  - the latest, quarterly earnings reports. And so, you
• 3:31
  - know, we'll see what happens as the year
• 3:32
  - goes on. Usually, in the you know, things
• 3:35
  - can sometimes be better in the beginning of
• 3:37
  - the year than in the than in the
• 3:39
  - second half, but,
• 3:40
  - you know, we haven't seen q two, so
• 3:41
  - we'll see. But I would also just know,
• 3:43
  - you know, it's it's not just the insurance
• 3:45
  - businesses that that these companies entail anymore. It's
• 3:48
  - CBS encompasses the the PBM and the pharmacy,
• 3:50
  - United as Optum. So they've they're diversified and
• 3:53
  - a lot of parts of their businesses are
• 3:54
  - doing much better than maybe what the insurance
• 3:57
  - pieces were doing even last year and and
• 3:59
  - help, you know, having them trail,
• 4:01
  - stock stock wise. But in terms of,
• 4:05
  - the Medicare Advantage
• 4:06
  - litigation
• 4:07
  - stuff, you know, basically, to the the background
• 4:10
  - context is that,
• 4:12
  - CMS awards billions of dollars in, monetary bonuses
• 4:17
  - to Medicare advantage plans who basically have really
• 4:19
  - high quality scoring, Medicare advantage plans,
• 4:23
  - and it's a one through five star rating
• 4:26
  - system. It's a very, very calculated
• 4:28
  - algorithm and,
• 4:30
  - methodology process that the government employs to to
• 4:33
  - rate the hundreds of plans that are out
• 4:35
  - there and really only a very small subset
• 4:37
  - ever reached that high five star rating.
• 4:40
  - In terms of names that everybody would know,
• 4:42
  - Kaiser is really the only large system that
• 4:44
  - that, attains five stars regularly for their Medicare
• 4:47
  - Advantage Plans. But these these measures are tied
• 4:51
  - to billions of dollars for for the plan
• 4:53
  - so they can then use to reinvest
• 4:55
  - in benefits.
• 4:57
  - And it's kind of like an an upward
• 4:58
  - spiral in terms of if you have a
• 5:00
  - high quality plan, you get high more higher
• 5:03
  - ratings, you get higher bonuses,
• 5:05
  - and you get then you just keep getting
• 5:07
  - higher and higher money to to invest in
• 5:09
  - your plans. On the opposite end of the
• 5:11
  - spectrum, you know, if you don't get that
• 5:13
  - money, it's harder to invest,
• 5:15
  - in higher quality benefits, and so there can
• 5:17
  - often be a spiral
• 5:18
  - in, how much money you get from the
• 5:20
  - government. And so starting in 2024,
• 5:24
  - this CMS, I you know, for they just
• 5:27
  - did not go about it according to the
• 5:29
  - courts, in terms of how they implemented new
• 5:32
  - methodology,
• 5:33
  - in in terms of how they rate these
• 5:35
  - plans.
• 5:36
  - And so the courts have largely sided with
• 5:39
  - insurers in lawsuits
• 5:41
  - challenging these star ratings over very small things.
• 5:43
  - It meant it's,
• 5:44
  - a secret shopper phone call,
• 5:46
  - wasn't in the correct language and the plan
• 5:48
  - didn't respond quick enough and it's down to
• 5:50
  - milliseconds. And that those milliseconds end up costing
• 5:53
  - the plan hundreds of millions of dollars. It's
• 5:55
  - it's super small things. And because there's so
• 5:57
  - much money involved, the private insurance companies sue
• 5:59
  - CMS over the methodology they use to calculate
• 6:02
  - these ratings and and it just kinda spirals
• 6:06
  - from there. The rest of the industry catches
• 6:06
  - on. They file their own lawsuits, and eventually
• 6:08
  - it gets to a point where in 2024,
• 6:10
  - CMS,
• 6:11
  - voluntarily recalculated
• 6:12
  - all,
• 6:13
  - star ratings because of just this this, what
• 6:16
  - what the the logic behind some of these
• 6:18
  - court cases.
• 6:20
  - Now we're dealing with a similar thing,
• 6:22
  - this year in 2026,
• 6:24
  - and it's even bigger.
• 6:26
  - Largely a court there was a court case.
• 6:28
  - It was decided this past May with Clover
• 6:30
  - Health, which is a smaller Medicare Advantage Plan.
• 6:33
  - They won against CMS over,
• 6:35
  - how their how their star ratings for 2026
• 6:37
  - was calculated. And because of what the court
• 6:40
  - decided in terms of, what CMS
• 6:42
  - did wrong according to the court,
• 6:44
  - it basically cascaded,
• 6:46
  - and now the entire industry has its has
• 6:48
  - its teeth out and is suing the government,
• 6:52
  - for new ratings or
• 6:54
  - the government has said they're gonna voluntarily recalculate
• 6:56
  - star ratings for plans that might get might
• 6:58
  - have had a higher rating. It's pretty complicated,
• 7:01
  - but, basically,
• 7:02
  - this star rating system, it seems to be
• 7:05
  - falling apart. And, you know, I don't know
• 7:08
  - what's gonna happen to it next year, but
• 7:09
  - it seems like the government just cannot keep
• 7:11
  - up with the the litigation
• 7:13
  - on just,
• 7:15
  - onslaught that the private industry is throwing at
• 7:18
  - it. And I think the bottom line here,
• 7:20
  - Scott, is that, you know,
• 7:22
  - bonus spending for these ratings that hit over
• 7:24
  - $13,000,000,000
• 7:25
  - this year.
• 7:26
  - And and now there's,
• 7:28
  - there's evidence, there's studies saying that the star
• 7:30
  - ratings themselves don't actually correlate with the quality
• 7:33
  - of the plans, that it's just become this
• 7:35
  - big algorithmic
• 7:37
  - gaming system.
• 7:39
  - So,
• 7:40
  - you know, it's another pinpoint of we're spending
• 7:42
  - billions of dollars on the Medicare Advantage program
• 7:44
  - in just this very specific area, but is
• 7:46
  - it actually leading to better health outcomes?
• 7:48
  - Seems to be a bit inclusive
• 7:50
  - at this point.
• 7:52
  - So what ends up happening? You know, who
• 7:54
  - can say? But it it's a huge debacle
• 7:56
  - within the industry right now, and it seems
• 7:57
  - like every day, there's a new court case
• 7:59
  - decision coming out where an insurance company has
• 8:01
  - basically beat the government,
• 8:03
  - for higher ratings and then, by extension, more
• 8:05
  - money.
• 8:07
  - And this is the the type of thing
• 8:09
  - that you see.
• 8:10
  - I mean,
• 8:12
  - without getting into different commentary on it, they
• 8:14
  - could be taken one way or the other.
• 8:15
  - Can the government get themselves out of this?
• 8:18
  - Can they get themselves out of this by
• 8:19
  - stopping doing star ratings, or do they keep
• 8:22
  - on doing it? I mean, this is like
• 8:23
  - the law of unintended consequences.
• 8:26
  - They try and do something that's intended to
• 8:28
  - be useful
• 8:29
  - to give people a better sense of what
• 8:30
  - better payers are. Everybody needs that data.
• 8:33
  - Of course, it leads them to a morass
• 8:36
  - of litigation.
• 8:37
  - The cost benefit's gotta be way out of
• 8:39
  - proportion in the wrong direction.
• 8:41
  - Can they get out of this? I mean,
• 8:43
  - can they get themselves out of this and
• 8:44
  - stop doing it, or does nobody have the
• 8:46
  - wherewithal anyways to force that to happen either?
• 8:48
  - Yeah. That that is a that's a million
• 8:50
  - dollar question. I I'd have to do more
• 8:52
  - research, Scott, but my my
• 8:54
  - educated guess is it's either tied to rule
• 8:56
  - making,
• 8:57
  - that the government would have to go through
• 8:58
  - that process,
• 9:00
  - or it's legally tied within the Medicare Advantage
• 9:03
  - program and and congress would have to change
• 9:05
  - it. It's probably one of those two things
• 9:06
  - or both. And regardless,
• 9:09
  - like I said, this this star ratings system
• 9:12
  - is worth billions of dollars
• 9:14
  - for individual insurers. I mean, UnitedHealth,
• 9:17
  - received billions themselves.
• 9:19
  - And so the industry lobby is very hard
• 9:21
  - to keep this program in place,
• 9:23
  - so probably not going anywhere.
• 9:27
  - Fascinating. Literally fascinating. I mean, this is like
• 9:29
  - the, and
• 9:31
  - again, people take this the wrong way if
• 9:33
  - you criticize the government, but this is, again,
• 9:35
  - unintended consequences. The government tries to do something
• 9:37
  - well, good good intentions,
• 9:39
  - and now it's caused just a debacle in
• 9:41
  - terms of cost and benefit and and and
• 9:44
  - everything about it. Anyways, let me turn it
• 9:46
  - back to you. Jacob, anything else you're following
• 9:48
  - closely that we should touch on today? Yeah.
• 9:50
  - And, you know, Scott, just for our listeners,
• 9:52
  - just so they do have the right information,
• 9:54
  - I just quickly looked it up. It is
• 9:55
  - it is written into law under the ACA,
• 9:57
  - in terms of this program. And I also
• 9:59
  - would mention, you know, Medicare Advantage is very
• 10:01
  - popular with seniors, and these bonuses for the
• 10:03
  - largest insurers means that they can reinvest in
• 10:05
  - better benefits. So, you know, that's that's why
• 10:08
  - it largely just exists along with the lobbying.
• 10:11
  - But, you know, at the start of our
• 10:13
  - conversation, I I mentioned this AI arms race,
• 10:15
  - this AI billing war that
• 10:18
  - I've been covering the finance team over on
• 10:20
  - the hospital CFO side here,
• 10:22
  - has been covering for around two years now.
• 10:24
  - And it it all really started because anecdotally,
• 10:27
  - we were hearing from executives, from from CFOs
• 10:29
  - at some of the largest health systems talking
• 10:31
  - about how
• 10:32
  - both sides,
• 10:34
  - have been using AI tools.
• 10:37
  - On the hospital side, it's it's you know,
• 10:39
  - when you go into the doctor's office, Scott,
• 10:40
  - in it, they're now asking you for your
• 10:42
  - permission for AI to record the conversation and
• 10:45
  - do the ambient listening. That's kind of what
• 10:46
  - that's a piece of what we're talking about
• 10:48
  - here. And
• 10:49
  - the hospitals essentially are being accused of using
• 10:53
  - these tools to,
• 10:56
  - code for conditions that maybe aren't there or
• 10:59
  - aren't as serious as maybe they they they
• 11:02
  - are or adding diagnoses
• 11:04
  - to medical reports that they can maybe get
• 11:06
  - away with but that aren't actually supported. It's
• 11:08
  - it's it's, you know, it's complicated system, medical
• 11:11
  - coding.
• 11:12
  - But basically, there's
• 11:14
  - the the AI is now getting very, very
• 11:16
  - granular from both sides, and and the insurers,
• 11:18
  - of course, themselves are using
• 11:21
  - AI tools to then go over these claims
• 11:23
  - from the providers
• 11:25
  - and, you know, better scrutinize. Well, this is
• 11:27
  - what we do cover. This is what we
• 11:27
  - don't cover. You didn't code this the right
• 11:29
  - way. You didn't submit the claim the right
• 11:31
  - way. It's it's the same old problems the
• 11:33
  - system has been, you know, facing for as
• 11:36
  - long as medical coding has been around, but
• 11:38
  - it's getting worse because now the AI bots
• 11:40
  - are doing it for everybody.
• 11:43
  - And so, you know, I I heard from
• 11:44
  - an Ascension executive at one of our most
• 11:46
  - recent,
• 11:48
  - conferences saying it's basically entrenching
• 11:51
  - the the financial tensions that we've that we've
• 11:54
  - been talking about for decades. But what I
• 11:56
  - think is interesting is, you know, I I
• 11:58
  - we talked recently about how I went up
• 12:00
  - to UnitedHealthcare's
• 12:01
  - headquarters,
• 12:02
  - last month, and
• 12:05
  - they you know, I mentioned that part of
• 12:06
  - that, they were very clearly positioning themselves as
• 12:09
  - this very tech heavy, tech solutions oriented company.
• 12:12
  - They're gonna use Optum to sell tech solutions,
• 12:15
  - AI solutions to the rest of the industry.
• 12:17
  - And, you know, I asked and to lower
• 12:19
  - care costs according to them. And I asked
• 12:21
  - UnitedHealthcare CEO, that's great, but, of course, you
• 12:23
  - know, we're hearing about this AI arms race
• 12:25
  - that everybody is talking about. How do you
• 12:27
  - ensure that your AI coding tools from Optum,
• 12:30
  - for example, don't just keep worsening these problems.
• 12:34
  - And
• 12:35
  - the UnitedHealthcare CEO said, you know, this clearly
• 12:37
  - is an issue. It's a source. It's a
• 12:39
  - driver of higher costs right now, but he
• 12:41
  - doesn't think it's gonna be persistent,
• 12:43
  - and he thinks that we'll get to a
• 12:44
  - saturation moment. Now it's a great answer for,
• 12:48
  - a health insurance CEO. It's, a great PR
• 12:50
  - answer. But I think what's interesting,
• 12:53
  - Scott, here is that, you know, UnitedHealthcare is
• 12:56
  - the insurance company having to deal with,
• 12:58
  - in theory rising costs because of this this
• 13:01
  - very granular coding from AI. But then on
• 13:03
  - the flip side, Optum is selling solutions
• 13:06
  - to health systems. There's a 100 health systems
• 13:08
  - right now across the country at least that
• 13:10
  - have the solution from Optum that helps them
• 13:12
  - do that very coding that then in UnitedHealthcare
• 13:15
  - and other insurers are complaining about.
• 13:18
  - So I think, you know, beyond just this
• 13:20
  - AI arms race problem,
• 13:23
  - to me, this points to these these companies
• 13:25
  - that now do everything like a United, a
• 13:27
  - CVS, a Cigna.
• 13:29
  - These executives are really having to thread these
• 13:32
  - very difficult needles of one side of their
• 13:34
  - company doing one thing and the other company
• 13:37
  - doing something that maybe is in direct opposition
• 13:39
  - to that, but then having to, you know,
• 13:41
  - play that same
• 13:42
  - that same
• 13:44
  - PR corporate speak of here's how we're trying
• 13:46
  - to lower care costs and all that good
• 13:48
  - stuff. I think as these companies just keep
• 13:50
  - getting bigger and keep incorporating new parts of
• 13:52
  - the health care industry, you know, that do
• 13:54
  - that messaging is getting really, really hard to
• 13:57
  - stay consistent.
• 13:59
  - I mean, that's literally insane, that example. I
• 14:01
  - mean, that's literally like
• 14:03
  - selling arms to both Russia and Ukraine at
• 14:06
  - the same time or Iran and Israel or
• 14:08
  - in The US and Israel. That's literally insane
• 14:10
  - that the
• 14:11
  - solution but. Yeah. What's that? You said it,
• 14:14
  - not me. But I mean, it's literally insane.
• 14:16
  - They they've got the solution for health systems
• 14:18
  - to code better, and they got the solutions
• 14:20
  - for the payers to fight the coding better.
• 14:22
  - I mean, it's literally insane. I mean, I
• 14:24
  - and that's not that just it is what
• 14:25
  - it is, and the analogy is imperfect,
• 14:28
  - But it's literally you're you're literally
• 14:30
  - in this arms race where one side's trying
• 14:32
  - to deny, one side's trying to get paid
• 14:33
  - better, and you've got, you know, companies selling
• 14:36
  - solutions on both sides of that. No sense.
• 14:38
  - I guess it's what the market wants, but
• 14:40
  - it's literally insane. There's a lot of money
• 14:42
  - to be made selling selling to all sides
• 14:44
  - of this problem. That is literally insane. Jacob,
• 14:47
  - I wanna thank you again for joining the
• 14:49
  - Becker's Healthcare podcast. It's always fantastic to visit
• 14:51
  - with you. Thank you so much for joining
• 14:52
  - us, and we'll get to visit with you
• 14:54
  - again shortly. You're the best in the business.
• 14:55
  - Thank you very, very much. Thank you, Scott.
• 14:57
  - Appreciate it.