Weekly Health Tech Reads 7/27/2025

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MEDICARE ADVANTAGE

The state of Medicare Advantage is discussed on Capitol Hill

The House Ways and Means Joint Health and Oversight Subcommittee hosted a hearing on Tuesday discussing the state of the Medicare Advantage program with a handful of witnesses across payer, provider, and policy perspectives. The session presented an interesting view into how politicians in DC are viewing the issues Medicare Advantage faces and some of the potential changes we might see to the program this fall. Lots of questions on Stars, prior auth, Stark law changes, how AI is being used by plans, and coding. A quick rundown of my takeaways from the four hour session:

• A number of members of congress noted their general support for the idea of managed care conceptually, but then also expressed their dismay at the current implementation of Medicare Advantage and the desire to reform the program.

• Does MA cost more than traditional Medicare? Fielder highlighted MedPAC’s analysis finding that MA costs 20% more than traditional Medicare and that we’re not getting our money’s worth on MA. Miller made the point that we need to do a better job of comparing populations — its not even ‘apples to oranges’ today, it’s ‘apples to kumquat trees’ in Miller’s point of view. Fun false analogies aside, I remain extremely confused by the answer to this question.

• The use of AI by insurers is going to be a fascinating political debate to watch. There was at least one member of Congress who pushed against the use of AI in Medicare Advantage. Yet the general sentiment of the witnesses was that it would be a mistake to not leverage AI and make automation the default for processes like automation. That seems like a reasonable position to me.

• There were a number of questions about the Star rating program and how options to improve Star ratings. A number of folks questioned how quality is measured in the Medicare Advantage program today and how performance of plans is measured. Given all the lawsuits around cutpoint shenanigans in the last cycle, it’s not hard to envision some change here as it seems like an easy place for politicians and industry to find some win-wins.

• The topic of adjusting Stark laws came up twice, with Miller making the case that a Stark law waiver in managed care settings would be a wise move to promote independent practices as a viable alternative to health system employment for providers and a key step to “make private practice great again”.

• Not surprisingly, prior authorizations came up over and over. Safe to say that nobody is defending the current state of prior auths and there was recognition the process needs to change.

• The topic of coding intensity / upcoding came up often. There were some suggestions for how we could reform the coding process, with some suggestions to automate the coding process at the point of care under the purview of the provider. In general, you get the sense there is the perception there are a few bad actors driving a lot of the problem here.

• CMMI’s WISeR model came up, with a member of Congress pushing back on it as implementing MA prior auth tools in traditional Medicare. I think it’s an interesting example of the different goals different people have in these conversations — when I look at WiSeR I see a no-brainer to reduce fraud in markets like skin substitutes. But I also understand the pushback that this is creating the same sort of prior auth incentives that exist in MA.

• It’s interesting to see just how much members of Congress are influenced by the Wall Street Journal articles covering Medicare Advantage. On a number of occasions, members of Congress made points specifically based on WSJ reporting, and introduced WSJ articles into the record. On other occasions, they quoted data from these articles. It’s clear those articles are having a big impact on politicians, and underscores the PR game that insurers are losing at the moment.

Links to the written testimony from each witness:

• Brian Miller, Hospitalist, Fellow at American Enterprise Institute

• David Basel, VP Clinical Quality and Population Health Officer, Avera Health

• Dawn Maroney, CEO, Alignment Health Plan & President, Alignment Health 

• Matthew Fielder, Senior Fellow, Brookings Institution

• Sachin Jain, CEO, SCAN Health Plan

STARTUP FUNDING

Regulatory uncertainty is the theme of Q2 earnings calls this week, particularly for the payers as they cut earnings forecasts

There’s a pretty straightforward overarching narrative that is emerging for Q2 earnings season — payers are facing pressure across all lines of business and are increasingly focused on 2027+ to hit target margins. Conversely, everything seems to be going right for providers in the current moment, but the same political uncertainty raises questions about future performance. Everyone is trying to digest the impacts of the OBBB, and in particular what the expiration of enhanced subsidies will mean on the various markets — both for payers attempting to manage profitability of their book and providers trying to avoid a revenue hit as people lose coverage.

I’ll dive deep into the payer earnings calls below as they had a number of interesting elements, Tenet and HCA are covered more briefly in the Other News section below.

Molina (earnings release, transcript)

Molina stock dropped ~9% on the week as it reported Q2 earnings and had to adjust 2025 earnings downwards again, after already having done so once when it pre-announced Q2 earnings earlier this month. As of July 7th, it pre-announced that it was reducing its earnings target to $21.50 - $22.50, that was down from initial guidance of $24.50. In its earnings report, Molina shared a new earnings target of at least $19.00, which it now views as the floor for 2025. Molina expects to generate ‘low-single digit’ pre-tax margins across all three lines of business, below long-term targets and the result of elevated MCRs across all of the businesses.

• Interestingly, Molina noted that it expects the impacts of the OBBB to be felt after 2028, and that the impact on Medicaid will be modest and gradual. It expects work requirements will eventually impact 10 - 15% of its 1.3 million members in the Medicaid expansion population. Molina also noted there will be indirect impacts how states will respond to the reduction in federal funding — limiting eligibility, reducing benefits, or seeking additional revenues. Molina believes these changes will be implemented starting in 2027 into 2029.

• Molina mentioned it does not expect ACA subsidies to be extended.

• Molina sees a strong strategic M&A pipeline, as the market dislocation is creating multiple opportunities with smaller health plans needing to evaluate strategic options.

• Medicaid is seeing cost pressures across the board — behavioral, pharmacy, inpatient and outpatient. A typical set of challenges were cited — high cost oncology and HIV drugs, supply and demand side in behavioral health, higher complexity inpatient stays, and increased primary care visits leading to specialty care in outpatient.

• One analyst asked about why trend is elevated across the lines of business, with Molina noting that while it has its arms around the ‘what’ that is driving trend, it thinks the entire industry doesn’t understand the ‘why’ yet.

• Molina repeatedly mentioned its “small, silver and stable” approach to the ACA business as being the right one. I can’t help but note the quote in Centene’s earnings call about changing silver plans as a key driver of healthy individuals leaving the market driving up medical costs, and wonder if Molina is going to have a major challenge here in 2026 as a result of that strategy.

Centene (earnings release, transcript)

After a midweek slide, Centene’s stock jumped 6% on Friday after reporting Q2 earnings, seemingly easing some investor concerns about the path forward for the business. Centene shared on its earnings report that the ACA and Medicaid miss essentially wiped out its entire earnings forecast for 2025 — Centene had previously forecast $4.45 billion in pre-tax income for the year. Centene sized the ACA miss at $2.6 billion and the Medicaid miss at $2.1 billion, which would put them at -$150 million in income. Outperformance in Medicare and SG&A management to the tune of $700 million and $500 million respectively will keep Centene in the black. Between the two, they’re forecasting a $4.7 billion hit to earnings — ACA is $2.6 billion, Medicaid is $2.1 billion — and the previous earnings estimate for 2025 was $4.45 billion. They’re still projecting ~$1.1 billion in earnings, a result of $700 million favorability in Medicare and $500 million in SG&A savings.

Here’s a quick rundown by line of business:

• ACA: will be slightly negative margin this year versus 5% - 7.5% target. While the Wakely data suggests a market average morbidity increase of 8%, Centene noted some states are at 17% - 18%. An interesting quote on this below. Centene sees three issues in ACA: 1. healthy members leaving, 2. sicker members coming in, 3. providers coding more aggressively.

• Medicaid: missed on MLR in the quarter, posting 94.9%. The issue was driven by three categories: behavioral (50%), home health (30%), High cost drugs (20%). In behavioral, ABA is the biggest issue, with the Florida program alone driving a 40 bps miss in the quarter. On home health, home and community based services were the biggest driver, with New York state driving a big part of the miss. On high cost drugs, cancer and gene therapies were called out.

• Medicare: Seems like this is actually going pretty well, at least relatively speaking, in that it is performing slightly favorable to expectations. Centene noted it will be hard to hit its target of 85% of members in 3.5 Star plans given where cutpoints are coming in, but that it still expects to get back to breakeven in 2027 in Medicare.

Centene’s call included two particularly interesting quotes, which I highlighted in HTN Slack on Friday. I won’t include them here in full because they’re quite long, but the basic gist:

• On ACA, federal exchange states where there was a change in one of the two low-cost Silver plans saw significantly higher morbidity shifts (up to 17% higher) as the 2025 program integrity changes caused low-utilizers to leave the market and not join. In markets without those changes, low-utilizers could re-enroll in their existing plans without issue. Presumably that churn will happen in 2026 in those markets

• On Medicaid / ACA, Centene noted it isn’t seeing a shift from Medicaid coverage to ACA coverage as driving ACA trend. Instead, they think it is more macroeconomic uncertainty — people concerned about losing coverage, providers concerned about losing revenue

STARTUPS

Medicaid startup Fortuna Health raises $18 million for eligibility determinations

Medicaid enrollment startup Fortuna announced $18 million in a Series A funding round led by a16z this week. Given the amount of dialogue about the Medicaid program at the moment — just reference the earnings calls above for a good example — it seems like a really good example of a startup going after a meaningful problem at the right time in the market. KFF’s coverage last fall of Deloitte’s $6 billion business managing state eligibility programs and the errors in those programs highlights the need for a model like this. It’s particularly interesting to note the Tradeoffs podcast below about how a rural provider thinks they’ll be required to staff up to support Medicaid eligibility determinations and how models like Fortuna fit into that process moving forward.

Fellow nerd Martin Cech and I had the chance to ask Fortuna’s CEO Nikita Singareddy about the Fortuna model and the broader Medicaid landscape this week. Check it out below if you’re interested. She has a unique perspective on the broader Medicaid market, and it was fun to get to learn from her perspectives here:

Director, Digital Product Strategy at Highmark Health, an insurer and integrated delivery network. Learn more.
$126k - $236k | Remote

CEO and Co-Founder at StealthCo, a pharma payment integrity company backed by Alloy Ventures. Learn more.
$NA | Remote

Senior Director, Clinical Operations at Zócalo Health, a provider for the Latino community. Learn more
$NA | Remote

SVP, Chief Operations Officer, CenterWell Home Health at CenterWell, Humana’s senior-focused primary care business. Learn more
$NA | Remote

Operations Lead at Fortuna Health, a Medicaid enrollment platform. Learn more
$130k - $150k | New York

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