๐ฃ๐ฎ๐ฟ๐ ๐ฐ โ ๐ง๐ต๐ฒ ๐๐ฐ๐ผ๐ป๐ผ๐บ๐ถ๐ฐ ๐๐ฎ๐ถ๐น๐๐ฟ๐ฒ๐ ๐ผ๐ณ ๐๐ฒ๐บ๐ฎ๐ป๐ฑ-๐ฆ๐ถ๐ฑ๐ฒ ๐ฃ๐ผ๐ฝ๐๐น๐ฎ๐๐ถ๐ผ๐ป ๐๐ฒ๐ฎ๐น๐๐ต
Executives donโt need to be told that costs are rising. They feel it every quarter when MLR runs hot, when Stars bonuses shrink, and when reserves are eaten by unplanned utilization.
The deeper pain is that every lever that was supposed to fix population health economics has failed. Utilization suppression. Gap closure. Risk adjustment. Even pricing. Each lever created short-term optics, not long-term stability. And every time a lever ran out, a new hamster wheel was spun up, costing more, delivering less.
๐จ๐๐ถ๐น๐ถ๐๐ฎ๐๐ถ๐ผ๐ป ๐ฆ๐๐ฝ๐ฝ๐ฟ๐ฒ๐๐๐ถ๐ผ๐ป: ๐ง๐ต๐ฒ ๐๐ฎ๐ฐ๐ธ๐ณ๐ถ๐ฟ๐ฒ ๐๐๐ฒ๐ฟ๐๐ผ๐ป๐ฒ ๐ฆ๐ฎ๐ ๐๐ผ๐บ๐ถ๐ป๐ด
The first instinct of every payer has been to suppress demand. Narrow the network. Tighten prior authorization. Raise deductibles. Deny the claim.
For a quarter or two, the numbers look better. But by the next fiscal year, the liabilities arrive.
Deferred care returns with higher acuity. A skipped MRI becomes a $150,000 late-stage cancer admission.
Provider abrasion explodes. Networks destabilize. Appeals eat administrative time. Regulators intervene.
Members get angry. Churn increases. Plans take reputational hits they canโt price their way out of.
This is why cost containment always feels like running downhill, fast gains, hard crashes. CFOs know the pattern because theyโve watched โsavingsโ evaporate into spikes in avoidable ER visits and readmissions. Utilization suppression doesnโt bend the cost curve. It defers the bill and compounds the interest.
๐๐ฎ๐ฝ ๐๐น๐ผ๐๐๐ฟ๐ฒ: ๐ง๐ต๐ฒ ๐ฃ๐ฒ๐ฟ๐ฝ๐ฒ๐๐๐ฎ๐น ๐๐ฎ๐บ๐๐๐ฒ๐ฟ ๐ช๐ต๐ฒ๐ฒ๐น
Next came care gap closure.
The ACAโs Stars system made gap closure the golden ticket to Quality Bonus Payments. Entire departments and vendor ecosystems were built to track, chase, and close gaps. At first, the economics looked promising. Then reality hit.
Every gap reopens annually. Diabetic eye exams, A1c tests, mammograms, none are permanent. Plans pay the same outreach cost every year for the same member.
Outreach ROI is dismal. Member response rates in many MA populations are below 20%, even with multiple touchpoints.
Case managers are overloaded. Burnout is high. Vendors promise โengagement liftโ that rarely translates to score lift.
And when CMS raised Stars cut points in 2025, ratings collapsed. Only 40% of contracts hit 4+ Stars, down from nearly 70% just three years earlier.
Billions spent. Infrastructure built. But when the rules changed, the scaffolding collapsed. This is the definition of treadmill economics: huge effort, no forward movement.
๐๐ฑ๐บ๐ถ๐ป๐ถ๐๐๐ฟ๐ฎ๐๐ถ๐๐ฒ ๐ช๐ฎ๐๐๐ฒ: ๐ง๐ต๐ฒ ๐ฃ๐ฒ๐ฟ๐บ๐ฎ๐ป๐ฒ๐ป๐ ๐ง๐ฎ๐ ๐ผ๐ณ ๐๐ฒ๐บ๐ฎ๐ป๐ฑ-๐ฆ๐ถ๐ฑ๐ฒ ๐ง๐ต๐ถ๐ป๐ธ๐ถ๐ป๐ด
The ACAโs MLR rule institutionalized administrative overhead. Plans had to pour money into โquality improvementโ projects, which translated into armies of staff, consultants, and vendors.
Commercial insurers now spend 12โ15% on administration versus Medicareโs ~2%.
Stars and risk departments are larger than some clinical divisions.
Entire industries sprang up around HEDIS, CAHPS, adherence, and risk adjustment, siphoning billions without addressing root cost drivers.
This is a structural tax on the system. Every health plan CFO knows their administrative cost ratio is bloated, but none can shrink it without threatening compliance. Demand-side economics has made overhead non-negotiable.
๐ฃ๐ฟ๐ถ๐ฐ๐ถ๐ป๐ด ๐ฃ๐ผ๐๐ฒ๐ฟ: ๐ง๐ต๐ฒ ๐๐ฎ๐๐ ๐๐ฒ๐๐ฒ๐ฟ, ๐ก๐ผ๐ ๐๐ ๐ต๐ฎ๐๐๐๐ฒ๐ฑ
When utilization suppression, gap closure, and admin bloat failed, plans leaned on pricing.
Medicare Advantage: aggressive bidding strategies bought membership growth, but now benchmarks are tightening and medical costs are outpacing bid assumptions.
Medicaid managed care: HBR caps are limiting profitability. States are demanding better outcomes with less flexibility.
Commercial lines: employers are pushing back on premium increases and regulators are watching network adequacy closely.
The pricing lever is gone. Health plans canโt underbid their way out of operational failure anymore. Theyโve reached the floor.
๐ง๐ต๐ฒ ๐ฃ๐ฎ๐ถ๐ป ๐ผ๐ป ๐๐ต๐ฒ ๐๐ฟ๐ผ๐๐ป๐ฑ
Executives donโt need more charts to tell them what they already know:
Margins in MA are shrinking even after record spend on Stars and risk infrastructure.
Medicaid MCOs are hitting HBR caps while high-risk members remain unmanaged.
Admin cost structures are locked in and only getting heavier.
Members are angrier, sicker, and more expensive despite โengagementโ programs.
This isnโt bad luck. Itโs the inevitable outcome of demand-side economics. Suppress. React. Score. Repeat. The more plans run, the more they bleed.
๐ง๐ต๐ฒ ๐๐ผ๐๐๐ผ๐บ ๐๐ถ๐ป๐ฒ
The industry is at a breaking point because every lever has been pulled and every wheel has been spun. Utilization suppression backfires. Gap closure doesnโt scale. Administrative spend is locked in. Pricing power is gone.
Demand-side economics has delivered exactly what it was designed to: activity without progress. It has not, and cannot, deliver durable margins.
