11/20/2018 TODAY S AGENDA CUT TO THE CHASE! The Post-Midterm Outlook for Medicare Advantage in Year 3 of Trump. Trump

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1 The Post-Midterm Outlook for Medicare Advantage in Year 3 of Trump JOHN GORMAN DECEMBER 3, 2018 A Presentation to the Industry Collaboration Effort (ICE) Annual Conference TODAY S AGENDA 1. Impact of the Midterm Elections 2. The Outlook for Medicare Advantage and Dual Eligibles Under Trump 3. New Policy for Medicare Advantage/ Part D Benefits 4. New Trends and Opportunities 5. Conclusions and Q&A CUT TO THE CHASE! Government programs = sole growth opportunity for payers and providers Trump/Verma effect = Medicare Advantage is the only safe game in health insurance now New supplemental benefits policy is a game-changer Growth, aggregation, new entrants Risk Adjustment and Star Ratings drive market, bar rises A Darwinian and Edisonian moment 1

2 IMPACT OF THE MIDTERM ELECTIONS Blue Wave was real Dems reclaim House with ~40 seat pickup Trump legislative agenda grinds to a halt, dozens of investigations to begin Medicaid was big winner of midterms: Red State blockade of ObamaCare Medicaid expansion crumbles Expansion ballot measures pass easily in NE, UT and ID Dems taking governorships in ME, KS and NM means expansion moves forward ~500,000 Americans will gain coverage Repeal of Affordable Care Act now dead Block granting Medicaid now dead Slashing Medicare/Social Security to pay for GOP tax cuts now dead Health care investigations to come: DOJ failure to defend ACA in court Medicaid work requirement waivers MEDICARE ADVANTAGE AND MEDICAID KEEP THE LIGHTS ON FOR THE INSURANCE INDUSTRY MEDICARE ADVANTAGE MEMBERSHIP National Snapshot September 2018 Includes: 2,783,271 SNP 4,167,191 Series 800 5,660,242 Local PPO CURRENT CONTRACT SUMMARY Total Prepaid Contracts NO. OF MA ONLY DRUG PLAN TOTAL CONTRACTS ENROLLEES ENROLLEES ENROLLEES 698 2,624,898 18,627,235 21,501,520 Local CCPs 467 2,021,546 16,613,606 18,875,998 PFFS 6 48, , ,026 MMP , , Cost , , , Cost (HCPP) 9 71, ,598 PACE ,151 43,303 MSA 3 6, ,671 Regional PPOs ,921 1,223,012 1,351, 690 Total PDPs ,358,315 25,566,837 Employer/Union Only Direct Contract PDP All Other PDP , , ,246,534 25,453,289 TOTAL 761 2,624,898 43,985,550 47,068,357 Source: Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract Report Monthly Summary. Totals reflect enrollment as of the September 1, 2018 payment. The payment reflects enrollments accepted through September 11,

3 PPOS ARE EXPLODING IN MEDICARE ADVANTAGE Go-To Product for Affluent Boomers and Retiree Groups; When Done Right, a MediGap Killer MACRA S SEISMIC CHANGE TO MEDIGAP IMPACTS MA AND PDPS TODAY MACRA Bans Sale of First-Dollar Coverage Supplements in 2020 MACRA S SEISMIC CHANGE TO MEDIGAP IMPACTS MA AND PDPS TODAY MACRA Bans Sale of First-Dollar Coverage Supplements in

4 ANOTHER HEALTH INSURER TAX HOLIDAY IN 2020 WILL DRIVE GROUP MA ENROLLMENT National Carriers Plowing Proceeds Into Richer Group Benefit Designs 16.00% 14.00% Y/Y Group MA Enrollment Growth 13.80% ~15% ~19% 12.00% 10.00% HI Tax Holiday 8.60% 8.00% 6.00% 5.50% HI Tax Reinstated 4.00% 2.00% 2.00% 0.00% HEALTH SYSTEMS FLOCKING TO MEDICARE ADVANTAGE 27% of major U.S. health systems intend to launch a Medicare Advantage plan in the next four years. Only 29% felt confident in their organization s ability to do so. Drivers: o controlling more of the premium dollar vs FFS Medicare o senior population continues to grow and becomes a larger proportion of providers patient panels o market and regulatory trends supporting Medicare Advantage Source: Lumeris, May 2018 survey of 90health systems 40 EXPLOSIVE GROWTH IN MEDICARE ADVANTAGE CONTINUES 4-EVA Enrollment in Millions, % 11.5% 11% 11% 11% 0 4

5 FINAL CMS CALL LETTER FOR 2019 IS BEST EVER, AFFIRMS MA AS ONLY SAFE GAME IN INSURANCE % average gross revenue increase 160 bps increase from draft Biggest pay raise since MMA of MA plans providing 1.5 million enrollees new types of supplemental benefits in 2019 SUPPLEMENTAL BENEFITS POLICY CHANGE IS A GAME CHANGER CMS seeks to allow for benefits which diagnose, prevent, or treat an illness or injury, compensate for physical impairments, act to ameliorate the functional/psychological impact of injuries or health conditions, or reduce avoidable emergency and healthcare utilization. Opportunity for plans to offer more meaningful benefits that address social determinants of health, and include in the bid: Assistive devices in the home Food security Transportation to doctor s appointments or to urgent care Telehealth 2019 BUDGET RESOLUTION = GOODIE BAG FOR MA Permanent Special Needs Plan (SNP) reauthorization CHRONIC Care Act (expand MA-VBID to all 50 states by 2020) Codifies expansion of supplemental benefits Allows plans to build telehealth into MA bid Jelly in the Donut Hole: 5

6 WHY FOCUS ON SOCIAL DETERMINANTS OF HEALTH (SDOH)? SDOH are responsible for half of all health care expenditures New Medicare Advantage and Medicaid policies now enable benefit designs to address SDOH New sources of cheap capital can help pay for new services and interventions POVERTY CHARGES INTEREST in health care. Addressing SDOH makes business and medical sense. THE SCIENCE OF MOTIVATING MEMBERS TO IMPROVE HEALTH HIGHLY ENGAGED -I follow my doctor s orders religiously. -I seek ways to improve my health. -I take my medications as prescribed. -I have resources to meet my needs. Self- Actualization ENGAGED -I know how to improve my health. -I appreciate reminders from my MA plan. -I generally follow my doctor s orders.-i use good judgment regarding my health. Importance ALMOST ENGAGED -I know I should improve my health.-i know how to improve my health. -Sometimes I don t make good choices. -I give up when it gets hard. Belonging (friends, family) NOT ENGAGED DISENGAGED -I m not willing to change my behavior. -Sometimes I need -I don t know how to manage my health. help from others. -I don t have resources to meet my needs. -I do not want to -I rely on others for many daily activities. change. Security (safety, shelter) Survival (food, water, warmth) 6

7 STORIES FROM THE FIELD: SETTING STRATEGIES THAT MOTIVATE MEMBERS 40% of the members in a D- SNP are illiterate (to the extent that they sign their name with an X) Vast majority of the members of a D-SNP reside in multi-story, aging, innercity apartment buildings with unreliable elevators Almost 50% of a D-SNP plan s members rely on public transportation and live in neighborhoods where gang/gun violence is at an all-time high 60% of a Medicaid plan s members struggle to find providers with appointments available after 4pm 10% of an MA-PD plan s members use a churchbased clinic staffed by locums tenens physicians Almost 50% of an MA-PD plan s members report being food insecure 68% of an MA-PD report not being able to afford the medications prescribed by their doctor using their plan s formulary structure SOCIAL IMPACT INVESTING: WORKING CAPITAL FOR CLINICAL INNOVATION $50 Billion in Funding Available in 2019 Principal +5% Interest Expected After 8 Years WHAT COMPETITORS ARE DOING ON SUPPLEMENTALS AND SDOH Blues workgroup on supplementals, focus on palliative and home care Anthem Essential/Everyday Extras (GA, IN, KY, MO, OH, VA, WI, TN, TX, NJ, CA, AZ): o Up to 16 home delivered healthy meals per health event, up to 64 per year. o Up to 60 one-way trips per year to health-related appointments. o Up to 124 hours of support from a home health aide or similar assistance. o A $500 allowance for home safety modifications. o Up to 1 visit per week for adult day services. o Up to 24 acupuncture and/or therapeutic massage visits. o In CA and AZ add a fitness program, acupuncture and/or therapeutic massage for pain management, and an outreach program aimed at addressing loneliness. 7

8 THE NEXT GENERATION OF MA BENEFIT DESIGN Movement to reduce/eliminate copays and deductibles Menu of tiered supplemental benefits becomes the norm Vision, dental and OTC benefits become new table stakes THE NEXT GENERATION OF MA BENEFIT DESIGN 2020: widespread offering of new evidence-based benefits, especially home modifications, home and palliative care, transportation, food security, housing, loneliness 2021: o Successful 2020 benefits go mainstream in large urban markets o Serious offerings on opioid treatment, polypharmacy o emergence of mental/behavioral/dementia benefits o more experimental options in telehealth, caregivers MEDICAID ENROLLEES AND EXPENDITURES 8

9 DUAL ELIGIBLES ARE THE INSURANCE INDUSTRY S BIGGEST OPPORTUNITY STATES WITH PROGRAMS FOR MANAGED LONG- TERM SERVICES AND SUPPORTS (MLTSS) CAN SPECIAL NEEDS PLANS (SNPS) ) MAKE MONEY? SNPs are generally more profitable than ALL other types of MA plans Category 2012 Margin SNPs (total) 8.6% Non-SNPs (total) 4.3% SNPs, non-profit -0.6% SNPs, for-profit 11.5% 50%+ partial dual eligible 12.9% 50%+ full dual eligible 5.7% Source: MedPAC 2015 Report to Congress, Table 13-6, p.332, March

10 CHALLENGES FACING PLANS: CHILDLESS ADULTS, DUALS, AND LTC Enabling Social Clinical Meals Transportation Personal care Habilitation Assistive devices Home modification Communication services Light cleaning, personal care Caregiver respite Care coordination Skilled nursing Caregiver training Palliative/End of life care VALUE-BASED CONTRACTING GOES MAINSTREAM Aetna: 50%+ of spend in VBC, 75% by 2020, investments in JVs with health systems (e.g., Inova in VA) United: 45% of spend in VBC ($52 billion), investing heavily in accountable care arrangements. Anthem: 58% of spend in VBC, with 75%+ in shared savings/risk. Invested $255 million in care coordination payments BCBS-MI: $100 million invested in IT, analytics, operations, and human resources, $1.5 billion in VBC 29 STAR RATINGS CHANGED THE GAME IN GOVERNMENT HEALTH PROGRAMS % Percent 60% 50% Average Star Rating 40% 30% % of Members in 4+ Star Contracts Average Rating % of contracts rated 4+ stars

11 STAR RATINGS SUPPORT A CULTURE OF EXCELLENCE Complaints per 1,000 % Disenrollment Star Rating ½ ½ ½ Star Rating ½ 20% 20% 17% 16% ½ 11% 11% 10% 8% ½ 7% 6% 4% 5% THE PURSUIT OF QUALITY BONUS PAYMENTS Net: 870,000 beneficiaries WellCare: Net +100,000 Cigna: Net +80,000 Humana: Net +15,000 **41 plans gained 4 th star in 2017** Net: 1,400,000 beneficiaries United: Net -340,000 Centene: Net -130,000 Aetna: Net -70,000 Anthem: Net -30, plans lost 4 th star 21 plans gained 4 th star THE BAR RISES AND EVERY BENEFICIARY MATTERS IN STARS MEMBER EXPERIENCE MEASURES 95% 90% 85% % 75% % Cut Points Getting Needed Care Getting Appts and Care Quickly Customer Service Rating of Health Care Quality Rating of Health Plan Care Coordination Rating of Drug Plan Getting Needed Drugs 11

12 LEVERS OF LOYALTY Varying Factors Impact the Member Experience Source: Deft Research, 2018 Medicare Member Experience Study HIERARCHIES IN MEMBER CONTACTS PER YEAR Plan Staff: 8-10 Outpatient Providers: 26 Retail Pharmacy: 40+ Member Materials: 220+ GROWTH OPPORTUNITIES FOR MEDICARE ADVANTAGE Baby Boomers o 50% enrolling in MA in first two years of eligibility o More affluent skew toward PPOs Medigap conversions o First-dollar coverage plans (e.g., Type C and F) banned in 2020 Prescription Drug-only plan conversions Retiree group/egwp/series 800 Dual Eligibles/MLTSS populations 12

13 CONCLUSIONS Medicare Advantage remains safe and stable in Year 3 of Trump New tools to address social determinants will be a major draw Expansions in PPOs and SNPs, huge changes to Medigap Risk adjustment and Star Ratings remain focal points of competition Improving the member experience and managing medically complex patients are keys to long-term survival JOHN GORMAN johngormandc@gmail.com 098b265/ 13