Tavenner appointment reveals that insurers will continue to chase federal money.
Washington’s notorious revolving door was in full swing again last week as the health insurance industry snagged another top federal official to help it get what it wants out of lawmakers and regulators.
America’s Health Insurance Plans, the industry’s biggest lobbying and PR group, announced Wednesday that its new president, starting next month, will be none other than Marilyn Tavenner, who served as the chief administrator of the Centers for Medicare and Medicare Services from 2013 until she stepped down in February.
Tavenner’s appointment comes just a few months after the industry recruited former Congresswoman Allyson Schwartz, a Pennsylvania Democrat, to head its newest front group, the Better Medicare Alliance.
These two hires tell us all we need to know about where insurance companies see their pot of gold in the not-too-distant future. Some insurers, in fact, have already discovered that taxpayer-supplied pot of gold and want to make doubly sure that nobody in Washington dares take it away.
The pot of gold is the Medicare Advantage program, which over the past several years has become an increasingly important revenue stream for the country’s insurers, especially the big for-profit corporations. As I wrote last week, one of the main reasons behind the recently announced consolidation in the insurance industry—Aetna offering $37 billion for Humana and Anthem bidding $54 billion for Cigna—is the desire of the acquiring companies to boost their presence in the privately-run Medicare business.
I’ll have to admit, the Tavenner announcement caught me a little off guard. But after thinking about it for a couple of minutes, I realized it made perfect sense. It probably has been in the works for months, maybe even before she left CMS or at least since May, when AHIP’s longtime CEO, Karen Ignagni, said she was leaving to become CEO of EmblemHealth, a New York insurance company.
This Washington version of musical chairs should have been clear from the way lawmakers on both sides of the political aisle warmed up to Tavenner when President Obama nominated her to lead CMS, which oversees a budget that is inching toward a trillion dollars a year. The Senate vote to confirm Tavenner on May 15, 2013 was 91-7, an indication that AHIP had told its friends on Capitol Hill that insurers liked her.
A big chunk of that federal money is now flowing through the insurance industry, so much so that many companies have become dependent on it to sustain their profits. The efforts by some of those companies to recruit Medicare eligible Americans into their privately operated (but publicly financed) Medicare Advantage programs have been wildly successful. As many as one in three of the country’s senior (65 and older) and disabled citizens are now enrolled in a private plan.
By far the largest Medicare Advantage insurers are UnitedHealthcare, Humana, Kaiser Permanente and Aetna. More than half of all the 16.6 million Medicare Advantage enrollees as of Dec. 1 last year were in plans administered by one of those four companies, all but Kaiser of which are investor-owned. Just two companies—UnitedHealthcare and Humana—controlled 37 percent of the market. If the Aetna-Humana deal is approved by regulators, at least 44 percent of the market will be controlled by two companies.
While Humana has operated private Medicare plans for more than two decades, its competitors are relatively new to the business. I can recall my former CEO at Cigna, Ed Hanway, turning his nose up at Medicare money as recently as the mid-2000s. He told investors he didn’t see the government as a reliable partner because of the changes that can occur in the Medicare Advantage program’s funding, depending on who is in the White House. CEOs’ attitudes began to change, however, as they watched Humana’s bottom line swell along with its Medicare membership.
Aetna’s CEO Mark Bertolini has even startled some investors by predicting both the death of health insurers are we know them and the growing involvement of government in health care—and saying he’s cool with that. Indeed, when he and Humana CEO Bruce D. Broussard announced their companies’ plans to become one, they said that 56 percent of the combined company’s revenues will come from government-related business—Medicare, Medicaid and TRICARE, which provides health benefits to military personnel. If the Anthem-Cigna deal goes through, that combined company will also have a hefty percentage of revenues coming from the government.
It was often said that one of the reasons Ignagni had such a successful tenure at AHIP was her ability to see where the puck was going—in other words, to focus more on where health care was heading than where it was at the moment. By selecting Tavenner as her successor, it seems as if she taught her board well. I’m certain that at the top of Tavenner’s new job description is the objective of keeping the government money tap flowing.
Wendell is a senior analyst at The Center for Public Integrity where this first appeared on 7/20/2015.