People who are eligible for both Medicare and Medicaid are expected to generate billions in profit for health insurers in the coming years, despite typically racking up expensive health care bills, Caitlin reports.

Why it matters: Discussions about how to make sure people with pre-existing conditions get access to affordable health insurance have dominated health policy debates for more than a decade.

• The Affordable Care Act was designed to address the fact that sick people with greater health care needs weren't an attractive population to cover, and the ensuing wars over Republicans' attempts to repeal the law have centered around the impact on people with pre-existing conditions.
• But within this segment of the insurance market — a group that is generally low-income with complex health needs — the opposite is true: The greatest-needs population is expected to bring in the biggest bucks in the coming years.

Driving the news: A recent McKinsey report projected that earnings before interest, taxes, depreciation, and amortization — a measure of profitability — from covering the duals population will see a growth rate of greater than 10% between 2022 and 2027, and profits will grow from $7 billion in 2022 to $12 billion in 2027.

• "Reimbursement tends to be higher for, in the insurance lingo, the riskier population," said Shahed Al-Haque, a partner at McKinsey. "Because [plans are] getting a higher level of reimbursement and the cost does not necessarily scale at the same level of reimbursement, they're able to achieve profitability."
• Plans for dual eligibles had some of the highest profit margins among private Medicare Advantage plans in 2021, according to MedPAC.

The big picture: The profitability of insurance plans' government segment is expected to be 65% higher than the commercial segment by 2027, per McKinsey.

• This coincides with the rising prevalence of people with government-funded insurance enrolling in private health plans.
• More than half of seniors are now enrolled in MA plans, spurring contentious debate over whether the program is a good deal for the government in light of Medicare's financial instability.

By the numbers: Between 12 million and 13 million people receive health coverage from both Medicare and Medicaid, and in 2023, 29% of them were enrolled in a private Medicare Advantage plan specifically designed for this population, per KFF.

• About half received their coverage in 2020 from traditional Medicare while the other half were enrolled in Medicare Advantage, whether that was a special plan or not.
• Humana recently reported that enrollment in its special dual eligible plans increased by 30% between December 2022 and December 2023.

Zoom in: People enrolled in both programs make up a disproportionately high amount of the total spending in each, but they vary vastly in their health needs.

• The overwhelming majority have low incomes. In 2020, 87% of all Medicare-Medicaid enrollees had an income of less than $20,000, per KFF.
• Nearly 40% were under age 65 but eligible because of a long-term disability, and around one in 10 lived in long-term institutional care, such as a nursing home. Just over a quarter of total enrollees had five or more chronic conditions.

Yes, but: It's unclear how well most of these private plans are coordinating enrollees' care between Medicare and Medicaid, experts say, and insurers may be attracting some of the less costly dual patients.

• "Yes, they are the sickest and most disabled and most vulnerable, but within them you have people who are extremely high need and some who are not very high need," said Arielle Mir, vice president of health care at Arnold Ventures.
• Because the government pays insurers more for covering higher-risk patients, "either that means they have a stronger incentive to do great care management ... or if they can find the dual eligibles who aren't as sick, who don't have as high of needs, it's very profitable," she added.

The bottom line: This is part of a major shift in how insurers make their money, with profits increasingly coming from their provision of government plans like Medicare Advantage and Medicaid managed care.

The advocacy group Patients for Affordable Drugs Now is launching ads today against the lone Democrat on the Hill to support a drug industry-backed change to Medicare price negotiations, Peter reports.

Why it matters: The move highlights the notable step that Rep. Don Davis took in cosponsoring the bill, and could serve as a warning to other Democrats. The Cook Political Report rates Davis' district a tossup.

Driving the news: The TV and digital ads will run in Davis' North Carolina district, as well as on MSNBC's "Morning Joe" and the "Rachel Maddow Show," the group said. It declined to say how much the ad buy is.

• "He's the only Democrat in Congress to support weakening the law that lets Medicare negotiate lower drug prices," one ad states. "Tell Davis: Stand up for patients, not drug companies."
• Davis' office didn't immediately respond to a request for comment.

The big picture: The Inflation Reduction Act's drug price provisions call for small molecule, or synthetic, drugs to be eligible for government price negotiations after nine years, while biologic drugs are eligible after 13 years.

• The bill in question, which Davis cosponsored with GOP Reps. Brett Guthrie and Greg Murphy, would close that gap and carve out more exclusivity for small molecules so that both are at 13 years — one of the pharmaceutical industry's top priorities.
• Backers argue the current disparity will harm investment and innovation in drugs that are a cornerstone of public health.

A pair of House hearings on legislation to support patients and caregivers and federal vaccine safety systems round out the pre-Presidents Day agenda:

1. E&C looks at 19 health bills: The House Energy and Commerce health subcommittee reviews a series of largely non-controversial measures and reauthorizations focused on patients and caregivers Wednesday at 10am ET.

2. Oversight of vaccine safety: The Select Subcommittee on the Coronavirus Pandemic hears from officials from the CDC, FDA and HRSA on U.S. vaccine safety systems Thursday at 10am ET.