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.
Cigna Acquisition of HealthSpring Continues Deal Drumbeat in Senior Markets
This morning CIGNA announced it was acquiring HealthSpring for $3.8 billion, continuing the drumbeat of M&A deals in the Senior market. HealthSpring Chairman and Chief Executive Officer Herb Fritch will lead Cigna's expansion in the Medicare segment. It's definitive proof that even bit players in government programs like CIGNA are investing heavily in the space as the commercial market continues to dry up while Medicare and Medicaid present tremendous growth opportunities. I'd expect to see Aetna make a similar announcement in the coming months as they acquire a different asset to boost their position with seniors. The deal should have positive implications for the other smaller Medicare plans in the industry, like Universal American and WellCare.
On its face it seems like a great deal to expand CIGNA's presence in the senior market. Assuming CIGNA is paying around $500 per life for HealthSpring's roughly 700,000 Medicare PDP lives (HS lost about 100,000 PDP lives going into 2012 by missing auto-assignment of the duals in CA), the price suggests CIGNA is paying about $10,000/member for HealthSpring's 340,000 Medicare Advantage lives. This is lower than the $15,000/member that WellPoint paid for CareMore, but a huge premium relative to recent Medicare valuations, which have normally ranged from $3,000-5,000 per member -- which argues this was an auction like for CareMore that had the effect of driving up the deal price. From the press release:
"The combination provides Cigna with several significant opportunities to further expand upon its successful growth strategy:
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Scaled presence in the highly-attractive Seniors segment, with a highly differentiated Medicare Advantage business that currently has approximately 340,000 Medicare Advantage members in 11 states and Washington, D.C., as well as a large, national stand-alone Medicare prescription drug business with over 800,000 customers;
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One of the most trusted and well-respected brands offering Seniors quality care through its highly differentiated physician partnerships;
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Future growth opportunities to expand HealthSpring's customer base by leveraging Cigna's current client relationships and to further the expansion of HealthSpring into new geographic regions, leveraging Cigna's nationwide presence, customer base and distribution capabilities;
- Ability to offer Cigna's current commercial and individual customers the opportunity to experience HealthSpring's differentiated physician coordination model; and
- Further leverage Cigna's diverse portfolio of specialty programs for the benefit of HealthSpring's customers.
Congratulations to Herb and his team and best of luck on the integration.
Medicare ACO Regs Out While Private Sector Surges
CMS released the final Medicare ACO Shared Savings Program regulations yesterday after taking a beating in over 1,200 industry comments on the draft. Let's hope they made some big changes, as Medicare is in danger of being left in the dust as ACOs surge forward in the commercial sector.
Aetna has created a company-wide organization whose entire focus is on integrating ACOs into all products and services . The HealthPartners Total Cost of Care system is now applied to two-thirds of its members, Wellpoint's multi-payer Medical Home model is expanding beyond California and New York with emerging evidence of its success, and Blues plans in Massachusetts, New Jersey and Maryland are moving forward with their own commercial ACO initiatives. Ten large national and regional health plans gave an update on how fast the ACO concept is exploding.
By contrast, the Medicare ACO program has been quiet as CMS toiled away on a rewrite of the regs, with the final rules out yesterday but relatively little interest emerging beyond the Pioneer ACO Demonstration finalists -- and many of them are still tentative pending review of the new final rule. All 7 of Gorman Health Group's applicants for Pioneer were selected -- but they're not necessarily in yet. CMS's recalcitrance on considering partial and global capitation models for Pioneers is tamping down our clients' enthusiasm as we're told capitation isn't operationally feasible for CMS until Year 3 of the demo. If the final reg isn't a dramatic improvement over the "fart in church" draft regulation in March, I worry that CMS will be left at the altar as payers and providers seek less burdensome opportunities in the commercial and Medicaid markets.
Watch this page for our take on the final regs.
Stars don't matter to real people
Kaiser Permanente published a study on Monday that found only about 6% of Medicare beneficiaries used the CMS star quality ratings to select a Medicare Advantage plan. And only 2% know what their plan's currnet rating is.
What is important to customers regarding their insurance companies? Pay my claims. Fix problems quickly. Don't let problems happen. Don't raise my premiums too much. Otherwise, I don't want to know you are there.
What does CMS measure? Two years ago 90% of a plan's members got their flu shots. What does that mean to me? I get flu shots from my doctor, not from the health plan. And, if I like my doctor, I assume I'm getting good care. One thing I'm sure of: I don't want my health insurance company in the exam room with me.
The star rating system is based on what CMS thinks should be important for Medicare beneficiaries. I haven't found any evidence that CMS surveyed beneficiareis to discover what is actually important to them.
Kaiser Permanente concludes that plans need to do more to inform beneficiareis about the star ratings, so they can make informed choices. I think CMS should scrap the whole thing and start over with the four or five things that really matter to health insurance consumers.
"Lean and Clean" is Key to Survival for Medicare Plans -- Join the exclusive GHG Compliance Forum November 2-4 in Las Vegas
New regs every other week. 500 HPMS notices a year. RADV audits and Star Ratings surveys. Intermediate sanctions and the threat of termination for poor Stars performance. And now a new, uncoordinated CMS Central Office/Regional Office audit approach that could result in multiple government reviews in a calendar year. "Lean and clean" must define a cultural and management revolution among Medicare plans. If you aren't on the compliance train in these next several years, you're going to be under it.
Tell your compliance staff about our latest Gorman Health Group Compliance Forum. This exclusive GHG event is designed for Medicare Advantage health plans and will provide an intensive examination of the state of compliance in MA, with focus on the changing regulatory environment surrounding both Parts C and D. The meeting is limited to GHG client health plan staff ONLY. No vendors, no CMS representatives, to ensure a frank and open discussion about the way forward.
You'll want your team to be in the room to hear the latest from GHG's compliance experts on:
- Practical tips for implementing a fully-integrated compliance program
- Best practice Sales Oversight strategies that have cross-functional impact
- Part D pitfalls and action steps for oversight and monitoring
- Lessons learned from risk areas in compliance, including sales/marketing, enrollment reconciliation and risk adjustment
For registration information and more details, click here.
To check out the preliminary event agenda, click here.
Have a question? You can always reach our team at ghg@ghgadvisors.com.
I'll look forward to seeing you and your team in Las Vegas.
GHG Revenue Management Forum in Vegas Coming October 6-7
We've been saying since passage of the ACA that the next 3 years' survival in Medicare Advantage is all about revenue management. The rules have changed and MA plans need new processes and new solutions to avoid serious financial troubles these next several years. Clinical initiatives often take years to bear fruit. As rates come down due to the ACA cuts, and more pile on from the Congressional Super-Committee, MA plans must pull every revenue lever they have to offset those losses, stay competitive -- and finance the care coordination and complex case management infrastructure essential to securing our long-term future in government programs.
Our clients said, "how?" We're saying: "come to 'Lost Wages' and we'll show you." The venue couldn't be more appropriate for the subject matter. So please join me and GHG's top experts on revenue management October 6-7 at the fabulous Aria Hotel, for an exclusive event for MA health plan senior leadership with responsibilities for finance, revenue management, Star Ratings, and risk adjustment. We will share our state-of-the-art practical strategies for driving revenue in the new age of austerity and accountability.
This forum will offer actionable, tactical insight regarding:
• Performance optimization and efficiency
• Must-have investments in your STARS programs and where to focus to boost your rating
• A cutting-edge risk adjustment program that drives higher, more compliant revenue and better quality and service for members
• Understanding the various components of MA capitation and their implications for your bottom line
This program is designed for senior-level finance decision makers with leadership responsibilities for Medicare Advantage programs. This event will be advanced, but highly practical and action-oriented. As with our previous events, this program is open to health plans only. The cost of this event is $995; space is limited to 60 for this exclusive event. Pre-register now to secure your plan's attendance.
Click here to pre-register
Click here to view the preliminary agenda
If you're in Medicare Advantage these days you're a gambler, so come to Vegas and we'll show you how to win now that the rules have changed.
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.
It's Official: the Supremes Will Decide on the Mandate. Smack in the Middle of the Presidential Election.
On Monday the Department of Justice confirmed that it did not request a review of an appeals court's decision to overturn the ACA's individual mandate. The decision ensures the Supreme Court will rule on the mandate sometime in June of 2012: just months before the Presidential election.
My thinking up until today was that health reform wouldn't play a prominent role in the election; it's all about jobs and the economy. But a decision coming in the heat of the campaign could escalate the issue for voters. The ACA is one of the most contentious and visible ways the President differs from his Republican rivals. A decision by the Supremes either way — that the law is a valid exercise of Congress's power or an unconstitutional overreach — could have political effects neither side can predict.
I remain convinced the Supremes will uphold the mandate -- legal precedent is well-established that the Congress can tax interstate commerce and even "inactivity" like refusing to buy health insurance. And if it's struck down, there are several other mechanisms by which Congressional Democrats can achieve the same effect of getting the maximum number of uninsured Americans into the insurance pool of the exchanges, like "auto-enrollment" with an opt-out and penalties for late enrollment like we have in Medicare Part D.
Either way, the Republican field must be thrilled about the timing, and the President's spin team will use the decision as an opening to tout reform's successes to date -- like 2.3 million twentysomethings already allowed to stay on their parents' insurance until age 26 -- and the promise of coverage for 32 million uninsured in 2014.
The individual mandate doesn't get a lot of love. It polls horribly, is thought by many to be unconstitutional and, from a policy perspective, is tagged as too weak to push Americans into buying coverage. But let's remember that last month there was new evidence that the mandate could work: 76% of the uninsured say they would rather purchase insurance than pay the law's penalty. That would reduce the number of people without insurance to 5% of the population and have 25 million Americans purchasing through the exchanges, just slightly higher than the 24 million that the CBO projected.
This is surprising - and it isn't. On the one hand, health reform's penalty for not purchasing health insurance - which will rise to $695 by 2016 - is a lot less than the cost of buying health insurance coverage. But on the other, Massachusetts - the only state that has implemented an individual mandate - has seen high uptake.
One other interesting finding to point out here: those with the lowest incomes turned out to be the most likely to comply with the mandate. That bodes well for a sop to Obama's base when the Supremes make their call next summer. But again, it's impossible to predict the effect the Supremes will have on the 2012 elections, so hold onto your backside next summer.
Insourcing: So you are thinking about internalizing risk adjustment . . .
We talk to health plans everyday that want to internalize risk adjustment. Bottom line: It is a good idea.
Taking control and building an expert, internal risk adjustment team is one of the best tactics a health plan can take. Here, we share an initial checklist of those areas needed for "in-sourcing":
 Claims based HCC filtering
 RAPS filtering and submission
 EDPS compilation and submission
 Medical record suspect generation
 Medical record retrieval
 Medical record coding
 Chart warehouse
 Hospital outreach for electronic encounter compilation
 Member evaluation suspect generation
 Evaluation development
 Member evaluation provider network
 Member evaluation findings integration
 Tracking & closing gaps in care with member outreach
 Member care report cards
 Primary care physician medical home
 Metrics, benchmarks, ROI, reports, and performance monitoring
Much of this you can internalize cost effectively, but you still need to be diligent. We've helped several health plans analyze their programs and vendors to determine what to pull in-house. Strategy, discipline, compliance and an engaged multi-disciplinary team willing to make decisions and push forward are critical elements for success.