The paragraph is a transcript from the UnitedHealth Group's First Quarter 2025 Earnings Conference Call. The operator introduces the call and provides important information, including the presence of forward-looking statements subject to risks and uncertainties. The call references non-GAAP to GAAP reconciliations available on the company's website. The CEO, Andrew Witty, then discusses UnitedHealth Group's performance, noting strong growth but also highlighting an unusual and unacceptable overall performance. The company is revising its adjusted earnings per share outlook for the year to $26 to $26.50, and Witty plans to explain the factors behind this revision and their strategies to address them.

The paragraph discusses performance challenges faced by UnitedHealthcare and Optum's Medicare businesses due to changes in care activity and member profiles. UnitedHealthcare's Medicare Advantage business experienced a higher than expected increase in care activity in the first quarter of 2025, particularly in physician and outpatient services. This trend was not observed in their commercial or Medicaid businesses. Optum faces revenue impacts in 2025 due to unanticipated changes in its Medicare membership, including a lack of engagement from new Medicare patients and the effects of CMS risk model changes. The company is working to address these challenges and improve their model transition execution.

In early 2025, the focus is on addressing key healthcare challenges in anticipation of 2026. Key initiatives include engaging complex Medicare patients, improving patient engagement post-discharge, assessing health statuses of high-risk patients, and transitioning to the new CMS risk model by enhancing physician workflows. Medicare Advantage plans for 2026 will reflect these efforts. UnitedHealthcare's Medicare Advantage and Optum Health are experiencing significant growth, catering to more people and expanding value-based care arrangements. Optum Rx is also performing well, emphasizing the role of pharmacy benefit managers (PBMs) in reducing drug prices and maintaining customer retention amid high drug manufacturer prices. Positive growth is also noted in Medicaid.

The paragraph highlights the growing efforts of UnitedHealthcare and Optum to innovate and improve healthcare access, particularly for seniors. It mentions the increase in digital engagement and wellness visits among senior members, which aids in early detection and better management of health. The text emphasizes the cost-effectiveness of Medicare Advantage over traditional Medicare, particularly in value-based care. It introduces the HouseCalls program, offering in-home clinical visits to Medicare Advantage members at no cost, helping close care gaps and reducing hospital visits by following best practices and coordinating necessary follow-up care.

The paragraph discusses the impact of innovations within the Medicare Advantage program, highlighting efforts to enhance proactive preventive care and address funding cuts impacting senior benefits. It acknowledges the recently released 2026 rate notice that reflects rising care costs, offering relief to seniors and recognizing Medicare Advantage's significance. The text mentions new initiatives aimed at improving healthcare experiences and reducing costs, such as removing prior authorizations for certain drugs and aligning pharmacy payment models, ultimately enhancing consumer access and cost consistency. Additionally, AI technology is being utilized to better direct consumer calls, reducing wait times and improving user experience. Despite these efforts, the persistent issue of high healthcare costs in the U.S. remains a challenge.

The paragraph highlights the high cost of common medical procedures in the U.S. compared to other countries, emphasizing the unsustainability of the current system. The speaker reaffirms a commitment to transparency and affordability in the healthcare system. John Rex then discusses the company's financial outlook, expressing disappointment with the adjusted earnings expectation of $26 to $26.50 per share due to increased care activity in Medicare Advantage plans and patient profiles at Optum Health. He affirms a consolidated revenue outlook of $450-$455 billion and details expectations for revenue and operating earnings for Optum Health, noting changes in revenue due to transitioning risk-based arrangements to fee-based ones. The medical care ratio is expected to increase, reflecting higher utilization among senior populations.

The paragraph discusses Optum Health's expectation that about half of its operating earnings will occur in the first half of the year. At UnitedHealthcare, the operating earnings outlook has been updated to $16-$16.5 billion due to increased care activity, especially in the senior business. This rise in activity was mainly observed in physician and outpatient care. The increase in care activity was broad, affecting individual and group senior populations, with member retention in group MA being 98%. Factors like higher member premiums and seasonal shifts in wellness visits are believed to influence this trend. Additionally, Optum Health saw growth in specific markets due to plan exits.

The paragraph discusses challenges and plans for future improvements at the company, particularly focusing on addressing issues related to new patients and adapting to a new CMS risk model. Despite operational challenges, the company is taking steps to control costs and align its workforce with strategic opportunities. There are expectations for technological advancements to enhance operational efficiency and drive innovation. UnitedHealthcare anticipates serving up to 800,000 more Medicare Advantage members this year, highlighting its commitment to stability and value. Membership in community and state businesses has grown, with service expansions in several states. However, Medicaid funding falls short of meeting patient health needs. The company also reported an increase in commercial self-funded membership due to strong product innovation, while commercial insured membership faced challenges from individual exchange products.

The paragraph discusses the company's disciplined pricing approach, which has led to some member attrition but shows promising retention rates for the '26 selling season within the commercial sector. At Optum Health, the company expects to add 650,000 new value-based care patients this year and aims to have 5.4 million by the end of '25. Optum Insight is launching new products, including AI-powered claims efficiency tools improving productivity by over 20%. Optum Rx saw a 14% revenue growth, exceeding $35 billion for the quarter. Despite a performance below their standards, the company is committed to improving performance for the rest of 2025 and 2026, aiming to achieve a long-term earnings per share growth target of 13% to 16%. The section concludes with an invitation for questions.

The paragraph discusses an inquiry about Medicare Advantage cost trends, specifically focusing on assumptions for 2024 and changes observed in 2025. Andrew Witty points out that although it's early in the year, there's been a noticeable increase in trends within the senior segment of the UHC business. Tim Noel provides further detail, explaining that the anticipated care levels for 2025 were expected to mirror those of 2024, with an assumption of similar increases in units consumed. He notes that in the Medicare segment, approximately one-third of the trend drivers are related to increased care activity, particularly in physician and outpatient services, which have contributed to a 2x increase in units consumed in the first quarter of 2025.

In the paragraph, the discussion centers around the assumptions and observations regarding trends in Medicare, specifically about the sustained increase in primary care visits and its potential effects on overall pricing assumptions through 2026. Josh Raskin from Nephron Research questions how these trends, specifically the increase in primary care visits, are connected to pressure on Optum Health and why there's an expectation of higher follow-through if primary care is controlled by Optum Health. He also seeks clarification on Optum Health's strategy to control costs effectively in a value-based care environment, given their increased capital allocation to it. Andrew Witty responds by referring to Tim and Amar to address different aspects of the question, acknowledging the distinct operational models within the businesses that might lead to varied experiences.

The paragraph discusses an increase in care activity among fee-for-service and Medicare Advantage (MA) members, highlighting a rise in preventative care, including in-home visits and clinical assessments. There is a notable increase in utilization among the public sector group retiree business due to significant year-over-year premium hikes, driven by Medicare funding cuts. This dynamic, seen before in individual MA businesses, is unprecedented in the group MA sector, with premiums for some groups rising from $50 to $200.

The paragraph discusses the unexpected increase in care activity levels among new value-based patients at Optum Health, particularly due to new Medicare enrollees and those new to Optum Health. These patients were previously less engaged with their health plans and providers. The V28 phase contributed to this situation by causing market-specific plan exits, leading patients to choose Optum Health due to its strong provider network. The paragraph highlights the challenge of adapting to higher acuity patient profiles and the inability of cost containment and medical expense management to offset these impacts. It notes that Q1 is busy for engaging patients, especially given the new member profiles, and there's an increase in outpatient behavioral services utilization.

The paragraph discusses efforts to enhance healthcare performance through several initiatives, including improved access to network primary care physicians (PCPs), expansion of home-based visits and services post-discharge, and accelerated unification of electronic medical records (EMR) with smarter workflows. Heather Cianfrocco explains the focus on value-based care, highlighting the differences between business models, particularly in Optum Health, which is tailored for senior populations and operates under a capitated experience. The value-based care model is designed to offset increased care activity, emphasizing the importance of understanding care gaps and integrating diagnosis and treatment into the overall plan.

The paragraph discusses the importance of early engagement, integrated care, and wraparound services in Optum Health's model, which aims to improve health outcomes, reduce emergency and hospital visits, and lower costs. This model incorporates behavioral health and aims for high patient retention, which supports growth. Optum Health anticipates growth by 2026 due to their differentiated value-based care model, high retention rates, and potential to serve more seniors across its network. This growth is driven by better care delivery and patient experience, enabling their expanded capacity in various geographic areas.

The paragraph discusses Optum Health's approach to managing membership growth and value-based care amidst significant industry-wide price cuts imposed by the administration, averaging around 9%. Despite these challenges, earlier cohorts who joined Optum Health's value-based care model, starting around 2023, have shown strong performance across various metrics. The ongoing effects of the price cuts are being felt by both payers and providers, with the second year revealing additional impacts, referred to as "second order derivative effects." The discussion highlights the company's strategy of focusing on specific geographies and integrating new members with their PCP network and in-home services.

The paragraph discusses the second-order effects of pricing pressures and underfunded rate increases in the healthcare market. These pressures have led to higher group premiums, changes in behavior among group members, and significant plan exits as insurers withdraw offers in various regions to cope with price cuts. This has resulted in disruptions for plan participants, who must find new coverage and may not engage with their new plans as expected, impacting reimbursement models and causing challenges for Optum Health. However, these issues are seen as temporary and expected to be resolved by 2025. The paragraph highlights that these effects do not relate to the benefits of value-based care.

The paragraph discusses the impact of value-based care, which aims to prioritize health and prevent expensive acute treatments through early diagnosis and healthy lifestyles. The speaker acknowledges adjustments in market pricing that have led to new industry dynamics, which they believe are manageable and do not undermine confidence in their value-based care approach. A question from AJ Rice of UBS touches on elevated care costs mainly in the group sector, attributed more to changes in benefits and premiums rather than a rise in utilization. It also notes the distinction between competitive exits impacting the Optum side more than the insurance side, and how concerns about Part D mentioned earlier in the year were not brought up again.

In the paragraph from the article, Tim Noel addresses a question by AJ regarding patterns in Medicare Advantage plans, noting that their community and group Medicare Advantage books are primarily experiencing increased care activity, unlike their chronic special needs or dually eligible populations. This activity is also not seen in newer members. He mentions that issues like provider up coding and pressures on specialty drugs are aligning with expectations. The trend is slightly more pronounced in group business and is tied to areas where premiums have risen, causing higher care activity pressures. The same trends influencing individual community Medicare Advantage may be affecting group business. Lisa Gill from JPMorgan then asks Andrew Witty about returning to long-term growth rates, with Witty expressing confidence in achieving this and noting that the 2026 rates look promising.

The paragraph highlights the company's positive outlook on recent rate increases and states' adjustments in Medicaid, which reflect current realities. They acknowledge the upcoming pricing step down from the V28 model but are optimistic about moving past the transition period, as they feel well-positioned despite market pressures. They aim to address challenges by 2025 to enhance performance by 2026 and regain growth momentum. An operator transitions to the next question from Stephen Baxter, who asks about the expected MA margins within the 2025 guidance and the timeline for achieving target margins.

In the article, the discussion focuses on long-term margin targets for Medicare Advantage post-V28 and the potential for improving margins in 2026. Tim Noel mentions that the anticipated margins align with the targeted range for 2025, with plans to return to historical targets by accommodating increased care activity levels. On the policy front, Erin Wright from Morgan Stanley inquires about PBM reform and Medicaid funding cuts. Patrick Conway responds by highlighting the company's focus on transparency, choice, and affordability, emphasizing their move to a 100% commercial rebate pass-through model, which has driven market growth and positive reactions by aligning incentives.

The paragraph discusses three key changes aimed at improving the healthcare system: reducing list and net prices of drugs, decreasing prior authorizations to simplify processes, and implementing cost-based reimbursement for pharmacies. The speaker expresses significant concern over a new Arkansas legislation regarding PBM and pharmacy ownership, fearing it might restrict patient access to necessary medications and services, particularly for vulnerable groups like those with mental health issues or those in remote areas. The speaker emphasizes the commitment to work with the state to address these issues and ensure continued patient access to essential medicines.

The paragraph discusses the priorities and strengths of a Medicaid-focused business, emphasizing its commitment to member health and high-quality coverage across 32 states. Despite unspecified changes, the business's experience and diverse programs position it well to support state partners. Andrew Witty then shifts to discussing the pharmacy sector, noting the President's recent executive order that explores various aspects of the pharmacy value chain. Witty criticizes the narrow focus on pharmacy benefit managers (PBMs) and highlights the unique role PBMs play in reducing drug prices for Americans, often at narrow margins and significant risk. He argues that PBMs operate differently from other system participants, as their success depends on lowering drug costs for clients.

The paragraph is part of a discussion involving a question-and-answer session where Andrew Witty responds to questions about potential pharmaceutical tariffs and their implications. He mentions that the situation is dynamic, and the administration is currently analyzing possible tariffs, with outcomes still uncertain. Despite this uncertainty, Witty feels confident about their company's position due to existing price protection mechanisms in contracts and legislation that restrict manufacturers from increasing prices. Following this, Dave Windley from Jefferies asks a question about the broader issue of healthcare costs in the United States and the administration's focus on budget deficit reduction, which might involve healthcare spending cuts.

The paragraph discusses the need for continuous innovation in the healthcare system, emphasizing a patient-centered approach. Andrew Witty argues that while the U.S. has plenty of innovation, such as new devices and models of care, these are often isolated and don't yield substantial results due to misaligned incentives and disjointed workflows. The focus should be on maximizing patient health outcomes over their lifetime, rather than one-off encounters. UnitedHealthcare aims to drive innovation with this value-based care focus, though initiatives like V28 have unfortunately directed cuts where innovation is most happening.

The paragraph discusses the impact of recent changes, referred to as V28, on the Medicare Advantage program, which originally incentivized efficient care delivery to benefit members and save government costs. The changes are criticized for their blunt approach, causing disruptions by removing funds from the system. The author argues for a more holistic approach to managing the healthcare budget, emphasizing that Medicare Advantage is more cost-effective than traditional Medicare. The paragraph suggests integrated strategies, like those used in value-based care models such as Optum Health, provide better outcomes and savings. It calls for a comprehensive view of the healthcare system rather than targeting individual components, paralleling this perspective to the President's agenda on pharmacy reforms.

The paragraph discusses updates on Medicaid and healthcare cost management. Andrew Witty invites Krista Nelson to address a question about Medicaid state renewals and closing the rate acuity gap by the end of the year. Krista mentions progress made in adjusting Medicaid rates, with the gap between population acuity and rate funding narrowing. She highlights ongoing optimism due to collaborative relationships with states and improving base data with each rate cycle. The operator then introduces another question, asking about first quarter Medical Loss Ratio (MLR) impacts, focusing on premium and deductible increases, as well as changes in prior authorization processes.

The paragraph discusses how there were no one-time positive factors affecting the first quarter's results, specifically regarding the medical loss ratio. John Rex confirms this when responding to a question from Lance and mentions that no shifts in preauthorization procedures impacted results. The conversation touches on increased wellness visits, which varied across populations, and questions whether this is a new seasonal pattern. Rex also notes the effect of IRA-driven changes in Part D on the results, estimating an impact of around 90 basis points. This change in seasonality might not have been fully anticipated by analysts, contributing to variations between the quarter's results and expectations.

The paragraph discusses a question about the potential impact of tariffs on Medicare due to price hikes by pharmaceutical manufacturers exceeding inflation. Sarah James from Cantor Fitzgerald queries how the Inflation Reduction Act (IRA) penalties might mitigate this impact and whether state flexibility exists for alternative bid submissions with or without tariffs. Andrew Witty responds, indicating uncertainty about future developments but noting existing protections like Medicaid best price rules and Optum Rx's contractual safeguards. These mechanisms provide multiple protection layers, and Witty emphasizes bidding carefully within this protective framework.

The paragraph discusses the growth and success of UnitedHealthcare (UHC) in the Medicare Advantage (MA) market, especially in Chronic Special Needs Plans (C-SNPs). UHC has experienced significant growth, adding 521,000 members up to April, with almost half from C-SNP plans. Bobby Hunter from UHC's Medicare & Retirement (M&R) business explains that they are on track to achieve their full-year target of 800,000 new members, with strong retention and diversified growth across different plans. This success positions UHC well economically for 2025 and beyond. The company is pleased with its performance and optimistic about sustaining its growth momentum.

The paragraph highlights United's commitment to improving its Medicare Advantage Plans through value-based care integration with both internal and external providers. The company aims to better manage members with chronic and complex conditions. Despite being unsatisfied with their performance at the start of 2025, United is determined to enhance its services, believing that a value-based care strategy can address healthcare issues related to cost and patient outcomes. United remains committed to resolving any issues and improving company growth, expressing gratitude for participants' engagement in the call, which has now concluded.

This summary was generated with AI and may contain some inaccuracies.