UnitedHealth earnings fall as MA utilization jumps

UnitedHealth Group’s Q1 2025 earnings seemed less like a routine checkup and more like a triage.

While care patterns for commercial and Medicaid members were “as expected,” care activity in Q1 2025 for Medicare Advantage (MA) members increased at twice the rate of 2024, particularly for physician and outpatient services, UnitedHealth Group CEO Andrew Witty said during a Thursday morning earnings call. And as a result, United—the country’s largest MA provider—is taking a hit.

Plus, Optum, the company’s typically reliable healthcare services business, is struggling with unanticipated changes in its value-based care membership.

“This is far from the performance we expect from ourselves,” Witty said.

UnitedHealth Group now predicts adjusted earnings of $26 to $26.50 per share this year, down from December’s projected adjusted earnings of $29.50 to $30.00 per share. 

Medicare mess. UnitedHealth reported a medical care ratio—the amount spent versus earned —of 84.8%, a little higher than last year’s 84.3%. Total medical costs for Q1 2025 jumped to $7.3 billion compared to about $6.6 billion in Q1 2024.

The company predicted care utilization increases in line with 2024, but MA members—particularly United’s MA public sector group retiree business—had utilization that “far surpasses” expectations, Tim Noel, CEO of UnitedHealthcare, the company’s insurance arm, said during the call.

Government blamed. Many MA plans exited or slashed benefits in 2025, blaming rising costs, increases in care, lower-than-expected star ratings, and policy moves.

Witty and Amar Desai, Optum Health CEO, said some beneficiaries who lost their plans migrated to United’s Medicare plans and Optum Health.

UnitedHealthcare’s MA membership jumped to 8.2 million from 7.7 million this time last year. Optum Health is expected to add 650,000 new value-based care patients in 2025 to reach a total of 5.4 million by year’s end.

The problem: Many new Optum Health members didn’t get much care last year, Witty said. MA and Optum are paid in part based on patients’ diagnoses from the previous year, and because patients didn’t go to the doctor, they didn’t get diagnoses. The Centers for Medicare and Medicaid assumes patients are healthier than they really are and pays less.

Optum earned $1.6 billion from operations this quarter compared to $1.9 billion during last year’s Q1, according to the company’s earnings report.

Witty and Desai also specifically called out a Biden-era change to the MA risk-adjustment model (V28) that intended to tackle MA overspending. Witty said payments decreased as a result and lamented “a very dramatic price-cutting regime” started by the Biden administration.

Usual suspects out. Prior headwinds—like increases in specialty drug prescriptions—weren’t to blame here, Noel said, and are “in line with how we’ve planned.”

Witty also downplayed the threat of potential pharmaceutical tariffs on United’s business and praised the average MA plan payment increase of 5.06%.