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.