John Rex
President & Chief Financial Officer at UnitedHealth Group
Thank you, Andrew. And I'll add my deep gratitude for the enormous outpouring of support over the past few weeks. Brian helped build this company and forged deep trusted relationships for over 20 years, and the positive impact he had on people will be felt for years to come.
This morning, I'll discuss both 2024 results and our performance expectations for '25, including some of what we had planned to discuss with you in December. 2024 revenues of over $400 billion and adjusted earnings per share of $27.66 were well within the outlook ranges we set out over a year ago.
To be sure, things played out differently than initially anticipated. But it is an enduring trait of this enterprise that we deliver on our commitments to the people we serve and to you, even amid unforeseen circumstances. Over the course of '24, we undertook initiatives and made investments to strengthen us for the future, initiatives to improve consumer experience and bring new innovations to market more quickly; drive the most compelling ways to further our mission, to help make the health system work better for everyone; and continue to optimize and refine our offerings and business portfolio to enhance future growth potential, whether that meant moving into new opportunities, reconfiguring or moving out of areas, which contribute historically, but may no longer be core, all with an eye to unlocking value.
We know you have a number of questions that we were not able to discuss last month. So, today, I'll start by stepping through a couple you have indicated are top-of-mind. The first one is, why our '24 medical care ratio was 150 basis points above our original outlook?
It's important to frame-up the challenges of '24 to offer some perspectives on the commitment and response of our people. Compared to the midpoint of the care ratio range we stepped out with over a year-ago, that alone created a nearly $5 billion gap we needed to overcome, and that's before we get to the nearly $1 billion in business disruption impact due to the cyberattack.
So, we start with about $6 billion in unanticipated impacts just from these two examples; in addition to managing through the already known multi-billion dollar impact of the Medicare rate cuts as we sought to preserve as much benefit stability for seniors as possible.
Regarding the elements impacting our '24 care ratio, we've spoken about the key factors on prior earnings calls, so no surprises here. The first comprise about 70% of the total impact and are comparable in magnitude to each other. First, the mix of people served. We ended-up with a different profile of consumer than expected. This is because of one factor, we didn't grow as anticipated due to the unusual Medicare Advantage benefit designs in the marketplace in '24.
Next, the timing mismatch between the health status of the remaining people being served by Medicaid and the lagging state rate updates. Then there were the costs related to the cyberattack and our South America business impacts. The remaining two elements comprise about 30% of the impact and are evenly split.
These include, a more rapid-than-expected acceleration in the prescribing of certain high-cost medications as drug companies took early advantage of the Inflation Reduction Act, and an aggressive upshift in hospital coding intensity. This is incorporated into our outlook even as we work to get it back in line. Those are the '24 care ratio elements.
Next question. Given all that, are we confident in the adequacy of our pricing for '25?
The answer is yes and here's why. To start, for '25, the outlook we shared in December incorporates a view of care activity commensurate with what we saw in '24, even the care activity we experienced as we exited the year. I'll break that down with some business line perspectives.
In Medicaid, we see the gap between people's health status and state rates narrowing over the course of the year. Our outlook assumes a measured pacing of that process. Actions to-date, including the important January 1 renewal cycle support this view.
In Commercial, pricing for '25 is appropriately capturing the care activity we are seeing. This is evidenced by growth heavily weighted towards self-funded offerings. We will continue our disciplined approach. In Medicare, we had strong AEP results, which included winning back people we had served previously and near-record retention. These are a direct result of our long history of offering sustainable benefits for seniors.
With strong retention and the many returning consumers, we start the year with highly informed insights into the care needs of the people we will be serving. In addition, this year, we are seeing a notable uptake of our more managed offerings. Think HMO style, which provides strong value for consumers, effective care tools for doctors and more predictable performance.
We expect a '25 full year medical care ratio of 86.5%, plus or minus 50 basis points, 100 basis points above the '24 result. In addition to factors discussed earlier, the increase is driven by IRA impacts, the second year of the Medicare funding cuts, a continued mix-shift toward public sector offerings and a respectful view of care activity.
Our '24 operating cost ratio improved about 150 basis points over the prior year. Roughly half of the change was driven by contributions from the business portfolio initiatives mentioned earlier. The other half was due to accelerating our efforts to realize operating efficiencies, even as we improve consumer experiences. Some of these advances are a result of the very early-stage impacts we are beginning to realize from AI-driven initiatives to help our customer service representatives respond to consumers' needs more effectively and quickly.
And we see continuing opportunities both in the near-term with operating costs for '25 improving still further and well beyond, given the rapidly expanding scope and impact of these initiatives. These actions and the resourcefulness of our people help deliver upon the objectives set out over one year ago and helped to partially balance the multiple billions of unanticipated impacts.
With that, I'll run-through our businesses, offering some key points for each, starting with Optum Health, where revenues grew to about $105 billion in '24 and are expected to approach $117 billion in '25. Our care delivery business continues to deepen its presence in existing areas, while expanding into new geographies and services.
In '25, we expect Optum Health will serve about 5.4 million value-based care patients, growth of 650,000 over '24. While our current position provides a solid footing, it's a small fraction of the hundreds of millions of patients who can ultimately benefit from value-based care. We see value-based care as foundational. It is perhaps the fullest expression of our mission.
As Andrew noted, the outdated activities-based fee-for-service system won't help the health system work better for people. Value-based care is outcomes-based, aligning processes, actions and incentives, helping keep people healthy in the first place, rather than just seeing them when they are sick. Optum health is an integrated, multi-payer care delivery company, helping to lead the transition to a truly sustainable, value-based care system.
As we move into '25, we will continue to enhance access and care integration through the home, a much needed area to help people with their health. More than 75% of our in-home patient visits results in a primary-care visit within 90 days. Medicare Advantage patients with chronic conditions who receive a home care visit have a lower rate of ER visits, fewer in-patient stays, stronger health outcomes and a better experience, all while saving the health system billions.
Turning to Optum Rx. Revenues in '24 grew to over $130 billion and will be about $146 billion in '25. Our pharmacy benefits management team again had customer retention exceeding 98% while welcoming a record 750 new clients. Further proof of the value, sophisticators [Phonetic], employers, health plans and labor unions see in Optum Rx's ability to negotiate lower drug prices for consumers.
Optum Rx's pharmacy care services support the entire system in the delivery of clinically-driven pharmacy care, serving the highest need and hardest-to-reach patients. These offerings include community pharmacies, specialty and infusion drug services; all large, strongly growing areas with our current presence quite small.
Optum Insight revenues were $19 billion in '24. And in '25, we'll approach $22 billion with a backlog of $35 billion, as sales of new products begin to take hold and the customer clearinghouse business continues to rebuild. The solutions offered through Optum Insight and our health technology growth pillar delivered at scale will improve consumer experience, and payment, and claims flows; enable access to the next best action guidance in a doctor's workflow; and help life sciences customers more rapidly bring innovations to market, and there will be much more to follow.
Shifting to UnitedHealthcare. Full-year revenues in '24 approached $300 billion, and for '25, will approach $340 billion as we grow to serve upwards of an additional 1.9 million people, balanced across both the commercial and public sectors. Within our domestic commercial offerings, we grew to serve 2.4 million more people in '24 and expects to continue to grow strongly in '25, especially in our self-funded offerings, which serve some of the most sophisticated buyers of healthcare, large employers.
The fact that so many more people are choosing UnitedHealthcare is a direct result of our bringing much-needed innovation to these more mature markets through consumer-centric offerings. As noted earlier, UnitedHealthcare's '24 Medicare Advantage growth was impacted by the unusual benefit designs in the market.
Our focus has always been on providing consumer stability and sustainable value, a factor that has built confidence and trust over the long-term. As a result, in '25, we expect growth of up to 800,000 people in individual, group and special needs offerings. And the growth outlook for the years ahead remains strong with nearly half of American seniors still in outdated Medicare fee-for-service offerings, which provide less value to them and costs taxpayers more.
In Medicaid, we expect to serve more people in '25, with redetermination activities now concluded. UnitedHealthcare's value proposition is resonating with state customers, consumers and provider partners and we are participating in a substantial number of expansion proposals. Most recently, we were honored to have been awarded a new opportunity in Georgia.
Our growing businesses support and -- are supported by substantial financial capacities and a strong balance sheet. In '24, we deployed nearly $17 billion in growth capital to help build for the future, further strengthening our capabilities to serve more people, more comprehensively. We also returned over $16 billion to shareholders through dividends and share repurchase.
In '25, we expect cash flow from operations will approach $33 billion or 1.2 times net income. We will continue to deploy growth capital and remain committed to returning to shareholders, as outlined in December. Our growth capital deployment efforts deliver their greatest benefits over the course of two, four, or even six years, and as new capabilities are scaled and deployed across the enterprise and beyond.
To summarize, our strong start to the year reinforces the growth objectives we shared last month and is underpinned by the broad growth drivers, operational excellence and strategic capital deployment you have come to expect from us.
Now, I'll turn it back to Andrew.
