If You're Not on the Government Programs Bus, You'll Soon Be Under It
The March enrollment numbers are out from CMS and provides some stark evidence that if you're not in government programs, you're not going to be in health care for much longer. Medicare and Medicaid health plan enrollment continues to grow steadily, and is set to explode later this year as several major states begin to move their dual eligibles into managed care.
CMS's March data for Medicare Advantage (MA) showed a gain of 45,000 new members in March following a strong open enrollment season that added almost 700,000 lives in January and February. All of the major players showed steady sequential organic growth. Medicare Prescription Drug-only Plans (PDPs) grew 62,000 lives this month, following a surprising 810,000 new members during open enrollment. The trends in MA and PDPs confirm our suspicions: Baby Boomers are a much more plan-friendly bunch than the World War II generation, providing a nice tailwind for the sector.
The big story that's emerging, of course, is Medicaid. We know we're on the verge of the biggest premium opportunity health plans have seen since the launch of Medicare Part D in the migration of dual eligibles -- estimated to be around $300B over the next decade, more than half of that in the next 5 years. The surge is beginning in states like Texas (monthly enrollment up over 650,000) and New York (up 35,000 in March). The fun really begins in April when the Michigan and California duals RFPs hit the street -- both rumored to be north of $8B, making them the biggest non-defense RFPs in US history -- and almost a dozen more states releasing theirs in September.
We know commercial health plan enrollment has been stagnant to declining since the before the recession hit in 2009, and that's not expected to improve. Health reform and its promise of coverage expansion doesn't begin until 2014, assuming the ACA survives the Supreme Court and President Obama survives reelection. Remember that Medicaid eligibility expansion accounts for half of ACA's coverage gains (16M), with the remainder coming through Federal subsidies and health insurance exchanges. Neither of those opportunities even comes close to what migration of dual eligibles represent to health plans.
What the March numbers and a crystal ball for the RFP calendar tell us is that if you're not on the government programs bus, you'll soon be under it.
Don't waste your travel budget
We're less than three months from the GHG Forum. This is NOT your usual conference. We've developed a unique educational retreat for management teams working in government programs. I'm thrilled at the presentations our faculty are preparing: we're putting our senior consultants on the stage to deliver case studies, war stories and tales of best practices. But just as importantly, we're building in time for you to react to these sessions with your team--- to develop questions for your track faculty, compare notes, discuss implementing the best practices you've learned about.
We know it's a new concept in an industry that's become accustomed to sales people masquerading as subject matter experts. But we think that's it's badly needed. Many management teams we work with bemoan the lack of time and space to learn, collaborate and plan for success. In this environment, it's easy to simply react. But no one has ever reacted their way to excellence.
No doubt, if you send one to two people they will benefit individually. But isn't the isolation of our departments from each other central to our basic challenge of reforming our plans? We invite you to join other plans (some are sending as many as a dozen attendees) in making the GHG Forum your travel investment for the year. Send a team. We'll show you around.
When Worlds Collide: ACOs and Risk Adjustment
By John Nimsky & RaeAnn Grossman
As we enter the era of ACOs, we have to be aware of all the clinical and operational essentials that are needed to make the ACO a viable health care solution for members, plus the elements needed to support the ACO as an engaged and intelligent communicator with CMS.
If you have a shared cost saving ACO you must have an accurate picture of the member's health status at Day 1. This detailed clinical picture will help you as an ACO:
1) engage the member in appropriate care programs
2) understand their cost today and project cost for next year, and
3) calculate the risks and benefits of treatment.
In traditional Medicare, it is well substantiated that over 75% of the members may have undocumented HCCs or gaps in care. However, as an ACO your primary concern is wellness and cost saving, and so you want to push toward 100% member evaluation completion for each calendar year. Why? Your members really should be evaluated to ensure there is a documented, compliant health status profile of of each member who starts with your ACO, and each year thereafter.
If you stratify the patient population within the ACO for relative health status, your plan for future treatment intervention will include identification of those members who can benefit from:
• referrals to case management;
• inclusion in disease registries;
• and other target services on a one to one basis.
Effective population stratification and risk assessment produces a complete health profile, a tool that can help reduce:
• admits;
• re-admits;
• acute utilization;
• ER visits;
• and other avoidable costs found in today's fragmented approach to health services delivery
Specifically, a robust risk assessment approach for a defined populations will
a) identify ACO members who will benefit from treatment but are currently missed by the system and thus are more likely to develop more serious pathologies later;
b) give physicians and members/patients quantitative information about the risks of adverse events and the benefits of treatment;
c) identify priorities for appropriate outreach programs; and
d) assist in calculating appropriate benchmarks and shared savings incentives for physicians.
An in-office or in-home assessment of the patient's medical history and current health status, when appropriately employed at the time of member assignment to an ACO, is a powerful tool that must be ready to launch Day 1 of ACO implementation. Because members are likely to join the ACO throughout the year, the stratification for those new members must occur monthly and integration into the care pathway must be timely and seamless. Timely integration of the member into standardized clinical treatment approaches will lessen the burden on care givers and will ensure that services are provided efficiently and in the appropriate setting. This is not a time for a long implementation phase, lags in data refreshes, or delays in re-stratifying members.
One of the tools available to assist in the process of identifying member current health status and treatment planning is offered by CenseoHealth, which has ACO Advanced Evaluation modules for Medicare, Medicaid, and commercial members. These populations' clinical conditions differ, and so their outreach, analytics, and engagement strategies are also dissimilar.
Deficit Supercommittee: Epic FAIL. Brief Relief for Medicare/caid.
It appeared at the market open Monday that after much hand-wringing this weekend there is no clear path to a compromise for the Congressional Deficit Supercommittee in time for its Thanksgiving deadline. Epic FAIL. The markets responded, down 300 points as of this post. As an American, I'm pissed: now here comes again the credit rating agencies, who will reward this latest political failure with another downgrade and make credit for all Americans harder to obtain. As a healthcare executive, I'm breathing a sigh of relief, however momentary it may be. Sequestration is coming, and it's a better scenario for Medicare and Medicaid than anything this kangaroo court might have come up with.
In terms of the impact on health plans, we fully anticipated that the Super-Committee would not reach a deal, and that sequestration's 2 percent cut to Medicare in 2013 was a given. It won't be without its pain: that's another 2% hit on Medicare Advantage on top of those that helped fund the ACA, and will hurt MA margins in 2013 and 2014. This will make smaller MA players even more vulnerable to assault from large publicly-traded plans and drive a steady drumbeat of consolidation in the program. But we expect that the impact will be manageable for most through mastery of risk adjustment and Star ratings bonuses, with some passthrough to providers and beneficiaries.
The biggest question in the collapse of the Supercommittee is what now happens to the "doc fix" -- the looming 29% cut to Medicare fee-for-service reimbursement rates for physicians that goes into effect in January. The Supercommittee may have been the last bus out of town for the fix.
The failure of the Supercommittee is also a short-term positive for Medicaid, as it was exempted from sequestration. The states' steady march toward managed care for the remainder of the "moms and kids" (TANF) and the dual eligibles and institutionalized will continue unabated, opening up a new market opportunity for health plans in excess of $300 billion per year by 2015.
The focus in Washington will now shift to how to mitigate some of the draconian cuts to the defense budget that are now scheduled to go into effect in 2013 and that will cause Republicans to foam at the mouth. The frenzy to avoid them will accelerate the discussion around more desperate measures for Medicare and Medicaid. The previously unthinkable will become fixtures of the debate in this next year. Raising the eligibility age to 67. Passive enrollment for the duals into health plans. An opt-out only for Medicare beneficiaries -- you're in a plan unless you choose otherwise and pay more. "Death panels."
This will harden partisan battle lines around the future of our two most essential healthcare programs as we head into the elections. In the end, the elected class will duck and cover, demagogue the issues and scare the crap out of seniors, and then take it to the voters in 2012. Election Day can't get here soon enough.
The Impact of Health Reform
Estimates and projections of the costs of a new health program are often way off the mark. Two major expansions of Medicare had opposite impacts. The ESRD benefit which was added to Medicare in 1972 has resulted in significantly higher costs than originally estimated while the Medicare Part D program ended up costing about 40 percent less than originally projected.
We are now starting to see the impact of several new programs added by the ACA. A recent IRS study found that fewer small employers took advantage of a new tax credit with the result that costs to date are approximately one-fourth of the CBO estimate. Similarly, expenditures for the pre-existing condition insurance plan have been less than expected due to the low take up rate. On the other hand, thousands of employers have benefited from the subsidies under the Early Retiree Reinsurance program and the funds are expected bo be exhausted before 2014 and millions of children have been insured by the provisions to extend coverage to young adults.
Several articles in the November issue of Health Affairs have taken a second look at projections for expanded coverage under Medicaid and the health exchanges which will start in 2014. In an article reviewing the estimate of 16 million new Medicaid recipients by faculty from Harvard, the title says it all: "Policy Makers Should Prepare for Major Uncertainties in Medicaid Enrollment, Costs and Needs for Physicians Under Health Reform". Authors Benjamin Sommers, Katherine Swartz and Arnold Epstein estimate that there will be 13 million new enrollees with a range of 8.5 — 22.4 million new enrollees and that costs could range from $34 - $98 billion per year. Discussion at a conference to roll out the new Health Affairs issue concluded that the take up rate could vary dramatically by state, for example take up could be discouraged in states with budgetary woes through limited marketing or could be high in states that have historically had aggressive outreach programs to expand Medicaid eligibility.
At the same conference John Shiels from Lewin discussed his article "Without the Individual Mandate, The Affordable Care Act Would Still Cover 23 Million; Premiums Would Rise Less Than Predicted". The article concludes that if the individual mandate is overturned, there will be no death spiral since the government subsidies are so generous that they will not deter large numbers of individuals from signing up. The authors estimate that premiums will increase 12.6% if fewer young and healthy individuals sign up. While the government would have to pay more for the costs of the newly insured who qualify for subsidies, overall costs to the government will be lower since fewer people will qualify for subsidies and there will be fewer Medicaid enrollees.
It will be interesting to see how it all turns out.
Forbes Gets it Wrong on Medicare Advantage
Forbes recently published a blog post ("Seniors: No, You Cannot Keep Your Plan Even if You Like It") that was wildly off the mark on the future of Medicare Advantage. I commented directly there (my handle on the Forbes blog is MedicareNinja), but had to call it out here.
I agree, the President overpromised to seniors when he famously said during the health reform debate "If you like your health care plan, you can keep your health care plan." You can't cut $135 Billion from plan payments and expect to have no impact on beneficiaries. But Forbes got it wrong: we are NOT about to see another exodus from the program as we did in the late 1990s.
As we've said here before, the exhortations of the death of MA are premature. We got confirmation from CMS last month: MA premiums will fall another 4% in 2012, and enrollment will grow by a brisk 10%. This after a robust 2011 where we think AEP will close with MA enrollment up over 8% vs. 2010.
The plans aren't going anywhere for several reasons -- none of which you see if all you're reading is wonky CBO and MedPAC reports.
First, government programs (Medicare and Medicaid in particular) are the only segments of the insured that are growing. As noted earlier, MA enrollment will grow over 8% this year, topping 12.5 million beneficiaries. Part D is approaching 20 million enrollees. Just this week Cigna announced it's spending over $3 Billion to acquire HealthSpring, a pure-play MA plan. Why? Because they see tremendous continued growth in the program, not because of its imminent demise.
Second, publicly-traded companies like MA leaders Humana and United are now dependent on Medicare, deriving twice their earnings from the program than they did a decade ago (average publicly-traded health plan earnings from Medicare in 1999: 13%; today, 26%, with some like HealthSpring and Universal American over 70%.) Bottom line: the big boys ain't going anywhere.
Third, over 40% of beneficiaries aging into Medicare have enrolled in MA plans the last two years, indicating the Boomers are a much more plan-friendly population than the World War II generation given managed care trends in the commercial market (HMOs, PPOs and POS plans represent more than 90% of all insured Americans).
Fourth, and most importantly, market-leading plans are adapting to the health reform cuts by focusing on Star Ratings quality bonuses and mastering the new state of the art in risk adjustment: the prospective home advanced evaluation. It's working, enabling plans to hold the line on benefits and premiums, and maintaining the attractiveness of these products vs. Medigap or traditional Medicare.
As long as the Congressional deficit Super-Committee doesn't fire another broadside at MA plan payment rates this fall, 2012 is shaping up to be a VERY good year, and I'd venture an estimate of over 15 million beneficiaries in these MA plans by the end of 2015.
The Forbes piece struck me as a wonky political hatchet job, trying to score cheap political points against Obama without any real basis in reality. They're usually above that sort of thing.
A Big Deal in Medicaid Following One in Medicare
Right on the heels of the CIGNA/HealthSpring deal, AmeriGroup announced it's acquiring Health Plus, a large Medicaid plan in New York City with around 320,000 members owned by safety net hospital sponsor Lutheran Healthcare in Brooklyn, for $85 million. The price reflects just 0.09x of Health Plus' $1 billion in revenue, a big discount to public Medicaid MCO market valuations of 0.3x to 0.4x revenue, indicative of a company that was struggling. Amerigroup is significantly expanding on its current base in NY, which stands at about 100,000 members. The company's Medicaid market share in NY will increase from 3% to 11% when the deal closes next year.
The New York Medicaid market is an attractive one to target, given its large enrollment, plans to expand managed care state-wide by April 2012, and the potential expansion under health reform in 2014. With approximately five million Medicaid recipients, New York has the second largest number of Medicaid enrollees in the nation. Texas currently accounts for 30% of AmeriGroup's Medicaid enrollment so this is a nice "triple-down" bet on another of its large markets.
As we've noted in these pages recently, consolidation is intensifying in the managed care industry over the coming 12-18 months. The Cigna/HealthSpring acquisition could be just the beginning as the Medicare and Medicaid markets appear particularly ripe for consolidation due to their tremendous growth prospects while the commercial market continues to dwindle.
The Continuing State vs. Federal Struggle to Manage Dual Eligibiles
I was just beginning to believe that the states, CMS and the health policy community were finally recognizing a larger scale opportunity for managed care to integrate Medicare and Medicaid funding and care for the most expensive and vulnerable beneficiaries, thus reducing costs and improving quality.
After decades of demonstration projects and waivers, a discussion at the Alliance for Health Reform yesterday revealed that only 250,000 dual beneficiaries are enrolled in integrated delivery systems where the services and funding streams are coordinated around the patient and not the payer. Even Medicare Advantage plans including Special Needs Plans have had difficulty working with state Medicaid agencies to get full funding for services under both programs. Now the light bulb has gone off as states are seeing managed long term care services and supports and shifting duals into managed care as a significant solution to Medicaid budget woes.
I remember discussions at CMS where the difficulties of integrating the funding streams was stymied by political issues with state vs. federal control. And yesterday the Robert Wood Johnson Foundation and the Urban Institute recommended that Medicare should take the lead for dual eligibles in recognition that the federal government already finances most of the care costs and has the most to gain with improved integration of care and care coordination.
Pioneers Move Forward, But Medicare May Still Be Left Behind on ACOs
A CMS official announced Tuesday that final regulations for the Medicare Accountable Care Organization (ACO) Shared Savings Program are now expected mid-October. It looks like ACA's requirement that the SSP launch January 1 is now out of reach, and there's scuttlebutt here in DC that the launch date will be pushed to June or July 2012. These regs can't come fast enough -- and must be dramatically redrafted from the disastrous April draft -- or Medicare could be left behind as the ACO revolution surges just about everywhere else.
Sure, the Pioneer ACO Demonstration was some progress, especially on the beneficiary alignment provisions and the apparent willingness of CMS to consider our partial capitation proposals. All 6 of GHG's applicants for Pioneer made it to the finals this week, advancing both partial (Part B only) and global (Parts A and B capitated, excluding transplants and ESRD) capitation models. CMS intends to pick 25-30 Pioneer ACOs to launch on January 1 -- these are the advanced "already ACOs" that are ready to go given their significant integration and deep experience in Medicare Advantage -- and they'll give CMS some early wins to tout to a skeptical Congress. We are thrilled all of our Pioneers are moving forward -- with no arrows in their backs yet.
But it's the Shared Savings Program with its applicability to a much broader swath of providers that's significant here -- and that messy draft reg from last spring was like a cold shower from Medicare for most providers that might consider it. The irony is the draft regs forced many sophisticated provider systems and medical groups to recommit themselves to Medicare Advantage. CMS got over 1,200 comments on the NPRM and we're hopeful next month's final reg gets it right.
The ACO train is leaving the station in both the Medicaid and commercial markets, and Medicare must be on it if there's to be any hope of significant delivery system reform. Take for example the following initiatives being undertaken by the major payers:
- United Health Group has 1 ACO in Tucson and expects to expand to 9-13 this year
- Aetna is in more than 100 conversations about building ACOs and is actively marketing ACO back end operations functions to providers
- Centura is developing a strategy to market ACO development and operations support functions and is pursuing several ACO pilots in the commercial market
- Cigna has ACO experiments in 12 markets expanding to 30 by year end
- Humana is in discussions to develop ACOs in several of its markets, especially FL and AZ
- Wellpoint is partnering with major medical groups to establish ACOs
- Coventry is creating ACO models and may roll them out first in support of its Medicaid diversification strategy
- HealthSpring has committed to a major ACO development initiative with its major provider groups and clinics its acquired in the Bravo transaction
We're crossing our fingers that our friends in the CMS Innovation Center took those 1,200 comments to heart and that we'll see a viable final reg on ACOs next month. Broad participation in Medicare by ACOs would be another tremendous achievement to add to the legacy of Dr. Berwick.
Obama Kicks the Hornet's Nest on Medicare
The President laid out his recommendations on Medicare and Medicaid to the Congressional Super-Committee on Tuesday: about $320 Billion's worth, mostly retreads of long-standing recommendations from other budget-cutting panels like Bowles-Simpson. Kaiser Health News has the details in their Wednesday story. The White House fact sheet on the President's proposal can be found here.
Obama really kicked the hornet's nest on this one -- and may have forfeited the political gift of House Budget Committee Chairman Paul Ryan's broadside to Medicare just a few months ago. Obama's taking lumps, as you'd expect, from Congressional Republicans, who in their outright refusal to look at revenue raisers, are setting up for Debt Ceiling Battle Royale Redux. But now AARP, AMA and the hospital lobby, just to name a few, are piling on.
The President gave a long-overdue impassioned plea in the Rose Garden yesterday, with the exclamation point of a veto threat for Republicans if they try to close the budget gap purely with cuts. The problem is, he's giving Democrats very little raw meat to line up for, only pain. Sure, Obama backed off the idea of raising the eligibility age for Medicare to 67, explicitly tied entitlement and tax reform, and didn't cut as much from Medicaid. That may placate his base. But not much.
I suspect he's going to have a hell of a time getting his own caucus to line up for him in the coming weeks. And my money's on an epic fail by the Super-Committee, resulting in sequestration in December -- and that's a more favorable outcome for Medicare Advantage and Part D.
P.S. I'll be talking more about this and other issues on the national stage at the Opal Medicare Advantage Strategic Business Symposium, September 26-27. Click here for more details about that event.