Sinking Stocks: UnitedHealth's Medicaid Warning

UnitedHealth is warning investors and other payers of a disturbance to the Medicaid market.

The Medicaid business is under watch, according to UnitedHealth CEO Andrew Witty. At a conference on May 29, Witty told investors that Medicaid managed-care payers are getting hit with low state reimbursements, and it may go on for some time. Shortly after this, UnitedHealth’s stock dipped, also bringing down the Medical-Managed Care group.

"We've come through this prolonged redetermination cycle in Medicaid," Witty said. "Making sure the utilization, and the rate and everything else stay in perfect synchronicity during a multi quarter cycle — there's probably going to be some disturbance around that."

Medicaid Unwinding

In April 2023, states began disenrolling ineligible Medicaid members— ‘Medicaid unwinding’—for the first time since the beginning of the pandemic. The rules preventing states from removing members from their Medicaid plans were peeled back, but surveys found that many were wrongfully disenrolled while payers continued to profit.

One study showed that Medicaid fee-for-service physician payments are about 30% lower than Medicare payments, and commercial payments are even lower.

CMS extended Medicaid waivers into 2025, protectingthose who would otherwise be left without coverage. In some states, like Texas and Florida, Medicaid unwinding has left millions without coverage.

A year after Medicaid unwinding began, 22.4 million people have been disenrolled from Medicaid through the redetermination process, according to KFF.

UnitedHealth

Medicaid reimbursements are coming as states continue to determine member eligibility,; drastically cutting beneficiary rolls over the past year.

Witty’s comments indicate the state reimbursements will need to reflect Medicaid per-patient costs, but this could take some time to figure out. Speaking to investors at the conference, Witty also said that this may mean a “multi-quarter cycle” for states to begin paying Medicaid premium rates that are adequate enough to meet the cost of coverage for Medicaid patients, Bloomberg reported.

Utilization is the top concern, as it's currently the primary driver of medical costs. This uptick in costs has accelerated spending on benefits and also hurt Medicare Advantage plan profits. Just this week, UnitedHealth’s stock dropped about 4%, leaving it at $484.72, making it the worst performing stock in the Dow Jones Industrial Average.

The stock of other insurers, like Molina Healthcare and Cetene, also fell this week. UnitedHealth’s stock dropped to a six-week low, despite the insurer’s favorable first quarter earnings, which pacified investor apprehension toward Medicare Advantage and unease after the Change Healthcare cyberattack.