My Talk at AHIP's Medicare Conference
I had the pleasure of addressing a standing-room-only crowd at the AHIP Medicare conference yesterday, sponsored by our friends at TMG Health, our 4th year together there. That speech always keeps me on my toes, especially this year -- a tough, smart audience that demands a tough, smart message on how to survive in the new Age of American Austerity. Here are the main points of what I said:
- Volatility and Accountability will define the sext several years in Medicare. Volatility: rates, the Medicaid dual eligible explosion, the Congressional "Super-Committee", industry consolidation, and the 2012 elections. Accountability: it's already here. Star Ratings bonuses, minimum MLR regulations, compliance, rate reviews, RADV audits, and Accountable Care Organizations.
- The State of the Union in Medicare Advantage (MA) and Part D is strong. All predictions of the demise of the program following health reform were wildly premature. MA will grow about 7% this year, and over 40% of beneficiaries aging into Medicare have chosen MA in the last two years. Local PPOs with the drug benefit integrated remain the product of the future in MA, as do Special Needs Plans given the tsunami of dual eligibles -- a $300 Billion market alone. We think MA will pass 15 million members by the end of 2015.
- Medicaid managed care is risky (BIG) business. We've already seen major awards this year in TX, LA and KY. CA is prepping the biggest RFP in US history: 150,000 duals in plans by end of 2012; all duals in plans by end of 2015: a $21 Billion opportunity. WA, FL, NH, NE, MI and HI are all preparing to move duals into plans.
- Volatility: many of us thought we "gave at the office" in health reform when the ACA whacked over $120 Billion from MA rates over a 7-year period. There's more austerity to come from the Congressional "Super-Committee" on the debt. Best case scenario? The Super-Committee fails, sequestration occurs, and we get hit with a 2% cut in 2013, 2014 and 2015, compounded. And what about the "doc fix"? If they don't fix the SGR and docs take a 29.5% cut in Medicare reimbursement in 2012, MA gets hit by about 7% in 2013, and the beneficiaries take it in the shorts. Bar the exits! Consolidation is intensifying in both payer-payer transactions, and payer-provider deals like United/Monarch (CA). And then there's the elections. My money as of today is that Obama gets re-elected by the narrowest of margins, Democrats lose the Senate, and we have another 4 years of economic doldrums with the HUGE exception of the ACA's implementation in 2014.
- Accountability: it's already here, a cornerstone of the ACA. It's embodied throughout, in Star Ratings bonuses, Accountable Care Organizations, with growing incentives for chronic care improvement, member satisfaction, and compliance. The cornerstone is transparent data reporting. Berwick's legacy will be his embedding the "Triple Aim" in the DNA of CMS. And CMS says it will terminate MA plans with less than 3 stars for 3 years running. A "good" star rating is not a hedge against the rate cut: it is an existential issue -- and a management revolution.
- What to Do?
- Aggressive revenue management in the near term. Master risk adjustment and audit-proof the function by embedding it where it belongs in Medical Management, move from claims extracts and chart reviews to Prospective in-home Evaluations, and be a Star Czar.
- Care coordination and chronic care management over the mid-term (3 years). It will take years to see results, but this is what it's all about in the mid-to-long-term. High-touch with the frequent flyers.
- Commit to a Culture of Compliance. The regulator is the purchaser, and you keep this account happy by following their rules. To. The. Letter.
- Revisit the service model and move from reactive to proactive. Health care is still a service business and Boomers are tough customers.
- Establish and Invest in Medical Homes, Accountable Care Organizations, and Exclusive Provider Organizations. In the end, it's all about the docs.
Questions? You can always reach our team at ghg@ghgadvisors.com.
PS Join me for another talk September 25-26 in Arlington at the Opal Events MA Strategic Business Symposium. Complimentary passes are still available today.
Remember, Mom: Digital is Forever.
Humana has launched a social network for its Medicare Advantage and Part D members called "Humanaville." No word yet if members have started posting embarrassing pictures of shenanigans in the skilled nursing facility...
Actually, it's not exactly a social network like Facebook. Rather, the design and functionality more closely resembles Second Life, in which users build an avatar and move within a multi-dimensional space, meet others, barter/trade, etc. This is not the first medical network of its kind. The Starlight Children's Foundation maintains a space for chronically ill teens called Starbright World, which more closely adheres to the Facebook model.
No doubt the plan should be given credit for pushing the boundaries of member engagement. However the model--and more specifcally the decisions made by Humana for the members within the model--seems to adhere to an older model of communication. At a cursory glance it appears Humana is attempting to carefully script and guide users' experiences, rather than create an environment, a social utility, full of user-defined content.
Like society at large there must be rules of engagement in these environments. But the brilliance of the social media model as an economic force (that's why Facebook is in the news... it's not because of Farmville) is that by allowing participants to wander around at will "liking" stuff and joining groups they track people's actual interests. This means that by the time Facebook puts a particular Old Spice ad in front of you the algorithm already knows: you're a man, you have a slightly juvenile sense of humor, and you care how you smell.
There is much talk in clinical circles about the tyranny of the internet on two fronts: in making every patient an expert via WebMD et al., and in the public rating of physicians. An entire industry called "Reputation Management" has sprung up in the last two years to protect physicians (and lawyers, and others) from the ignominy of having patients share their experiences with each other. This is a losing battle. It remains to be seen if payers or providers will rise to the challenge of the digital age--which has heretofore been defined by the inability of choice-makers to control it--or if they will revert to type and attempt to narrow choice and access to information along prescribed paths that lead inevitably to the next sale.
Medicare Advantage and PDP Plans Continue Robust Growth
The August enrollment numbers are in from CMS. 61,000 new MA members in August and 544,000 year-to-date. MA and PDP plans continued their robust growth on pace to exceed 2010's enrollment gains. Year to date it appears Boomer "age-ins" are continuing to choose MA at a higher rate than their forebears -- more than 40% for the last two years. With major MA/PDP sponsors like Aetna and HealthNet now relieved of marketing and sales sanctions from CMS, MA enrollment growth may exceed 7% for the year.
The story behind the numbers is clear: MA plans are adjusting just fine to the "new normal" post-ACA. Benefit designs have held relatively steady, and plans are making big investments in better revenue management, like mastering risk adjustment and the new Star Ratings bonuses, to offset the ACA's cuts. Many are revisiting their entire service model in response to Stars, recognizing that keeping members is the new selling.
At the pace we are on, MA will hit 15 million beneficiaries sometime in 2016. But that of course assumes Congress and the debt reduction "supercommittee":
- don't require another pound of flesh from the plans in whatever deal they hatch up in November
- get the Medicare physician pay fix enacted permanently. There's an enormous price tag of over $300 billion over 10 years for this, but without it, MA rates could be cut another 7% in 2013 and beyond. This is the single largest threat facing the program in the next several years.
Let's hope the noble experiments in creating insurance markets that are MA and Part D are allowed to continue when Congress reconvenes in September.
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