People who are eligible for both Medicare and Medicaid — a group that is generally low-income with complex health needs — are expected to generate billions in profit for health insurers in the coming years, despite being a group that typically racks up expensive health care bills.
Why it matters: This is part of a major shift in how insurers make their money, with profits increasingly coming from their provision of government plans like Medicare Advantage and Medicaid managed care.
Driving the news: A recent McKinsey report projected that earnings before interest, taxes, depreciation, and amortization — a measure of profitability — from covering the "dual eligibles" population will see a growth rate of greater than 10% between 2022 and 2027, and profits will grow from $7 billion in 2022 to $12 billion in 2027.
"Reimbursement tends to be higher for, in the insurance lingo, the riskier population," said Shahed Al-Haque, a partner at McKinsey. "Because [plans are] getting a higher level of reimbursement and the cost does not necessarily scale at the same level of reimbursement, they're able to achieve profitability."
Plans for dual eligibles had some of the highest profit margins among private Medicare Advantage plans in 2021, according to MedPAC.
Commenti