MW Mamdani's election is another headache for Medicare Advantage

By Brett Arends

New York Mayor-elect Zohran Mamdani says he will "reject Medicare Advantage."

Medicare Advantage wasn't on the ballot in New York's mayoral race this week - because it had already lost.

It says something that both Zohran Mamdani, the self-described "democratic socialist," and his defeated opponent Andrew Cuomo had both distanced themselves publicly from the landmark deal struck between New York City and major unions to transfer 250,000 retired city workers from "traditional" Medicare to its privatized alternative.

This was the case even though Mamdani was backed by some of the unions that had struck the deal, which was supposedly going to save the city $600 million a year.

The plan had become so unpopular that outgoing Mayor Eric Adams had actually abandoned it, just days after getting a green light from the state's Supreme Court.

The city council is now considering legislation to prevent any further moves to switch retirees out of traditional Medicare. Andrew Cuomo was among many candidates in the Democratic primary who had signed a "pledge" to keep retirees on their current plan. Mamdani didn't but, reading the room, publicly said that as mayor he would "reject" Medicare Advantage anyway.

Developments like this are yet another headache for the big health-insurance companies that provide Medicare Advantage plans, and used to make big bucks from them. But Medicare Advantage has effectively been in recession, or retreat, for two years - since the insurers realized that members were actually planning on claiming all the benefits they had paid for.

In recent earnings announcements, the major insurers have been reassuring Wall Street analysts that they are going to defend margins, not just market share - meaning that they will be offering fewer benefits to those getting insured. Open enrollment began on Oct. 15 and ends on Dec. 7. It's worth noting that stocks across the sector XX:SP500.35 have continued to tumble.

It hardly helps sentiment that prominent political comedian John Oliver just devoted an entire episode of his TV program to trashing Medicare Advantage. (Views so far just on YouTube: 3.5 million.)

Or that the U.S. Justice Department is accusing major Medicare Advantage insurers and brokers of massive fraud.

Or that the Medicare Advantage program is actually expected to shrink this year for the first time in many years.

The fundamental problem for Medicare Advantage is the math.

Private insurers spend a hefty 11% of their revenues on expenses. That's before they even generate income for their stockholders. By contrast, the government's Medicare program spends 1% on expenses. (See Table II.B1, page 10, here.)

So Medicare Advantage insurers would somehow have to produce miracle savings of about 10% just to catch up.

Taxpayers spent $494 billion on Medicare Advantage last year. The Medicare Payment Advisory Commission, the independent body of experts that advises Congress on the program, estimates that it costs taxpayers 20% more to provide insurance to a retiree through Medicare Advantage than it would through traditional, government-run Medicare.

The extra cost to taxpayers: $84 billion last year alone.

To be fair, the insurers dispute the claims, which they say are based on flawed methodology.

But a cynic might reply: They would, wouldn't they? Why the independent experts at MedPAC would lie about this is one of life's great mysteries.

The health insurers' trade association, AHIP, sources a critique of MedPAC's numbers to "research" by the Health Leadership Council - an organization of healthcare executives financed by healthcare companies, including ... the health insurers.

And the Health Leadership Council, in turn, cites a report favorable to Medicare Advantage produced by the consulting firm Milliman, and commissioned by ... er ... massive Medicare Advantage insurer UnitedHealth Group $(UNH)$.

The AHIP trade association also cites, for example, a favorable "peer reviewed" article about Medicare Advantage appearing recently in the American Journal of Managed Care. But a footnote to the article reports that "the authors are employed by AHIP."

These favorable analyses might be right, of course. But it hardly inspires confidence.

-Brett Arends

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November 06, 2025 14:00 ET (19:00 GMT)

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