evolving into a medicare advantage plan · 4. medicare advantage enrollment to continue its rapid...

EVOLVING INTO A MEDICARE ADVANTAGE PLAN

JOHN GORMANEXECUTIVE CHAIRMAN

OCTOBER 8, 2015

A Presentation to CAPG Colloquium, Washington, DC

Copyright © 2015 Gorman Health Group, LLCProprietary and confidential

• Government-sponsored programs now biggest opportunity for payers

• Rates positive, but compliance environment unforgiving

• Star Ratings and member experience now drive the market

• Consumer protections, PBM performance are Achilles’ Heels

• A new wave of provider-sponsored MA plans is coming

• What Medicare Advantage does, Medicaid and ObamaCare follow

CUT TO THE CHASE!

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“TIPPING POINT” IN GOVERNMENT- SPONSORED PROGRAMS Commercial Group: Declining, Shifting.

Government: Sole Source Of Organic Growth.

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December 2014: 9.8% Year-Over-Year Growth

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MEDICARE ADVANTAGE ENROLLMENT TO CONTINUE ITS RAPID RISE: 2005-2024

• Largest 10 MA Plans = 67.1%

• United and Humana = 38.3%• Non-Anthem Blues = 12.2%• All others = 32.9%


CURRENT CONTRACT SUMMARY

NO. OFCONTRACTS

MA ONLYENROLLEES

DRUG PLANENROLLEES

TOTALENROLLEES

Total “Prepaid” Contracts 740 2,085,268 15,513,487 17,598,755Local CCPs 507 1,536,945 13,512,748 15,049,693PFFS 8 78,001 177,510 255,5111876 Cost 16 293,825 266,456 560,2811833 Cost (HCPP) 9 50,762 0 50,762PACE 116 0 32,640 32,640Regional PPOs 10 113,251 1,134,504 1,247,755

Total PDPs 76 0 23,891,959 24,050,487Employer/Union Only Direct Contract PDP 6 0 144,253 144,253

All Other PDP 70 0 23,906,234 23,906,234TOTAL 816 2,085,268 39,563,974 41,649,242

MEDICARE ADVANTAGE MEMBERSHIPNational Snapshot – August 2015

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Includes:2,091,883 SNP3,313,248 Series 8003,984,695 Local PPO

Source: Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract Report – Monthly Summary. Report covers contracts as of July 10, 2015, CMS August, 2015.


GEOGRAPHY OF MA GROWTH, 2006-2015

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DUAL ELIGIBLE FINANCIAL ALIGNMENT DEMONSTRATION STATES AND STATUS

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MANY STATES MOVING ON DUALS/LONG-TERM CARE

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Source: http://files.kff.org/attachment/medicaid-in-an-era-of-health-delivery-system-reform-results-from-a-50- state-medicaid-budget-survey-for-state-fiscal-years-2014-and-2015-report

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MANAGED LTSS MOVES ON STATE BUDGETARY CRISES

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Category 2012 MarginSNPs (total) 8.6%

Non-SNPs (total) 4.3%SNPs, nonprofit -0.6%SNPs, for-profit 11.5%

50%+ partial dual eligible 12.9%50%+ full dual eligible 5.7%

CAN SNPS MAKE MONEY?SNPs generally are more profitable than ALL other types of MA plans.

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Source: MedPAC 2015 Report to Congress, Table 13-6, p.332, March 2015.


SCOPE OF SERVICES TO DUALS CHALLENGE PLANS

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2015-2017 BENCHMARKS: THE COMING TAILWIND

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First round of ACO Demos

expires 2016-17


Red = 114%+Pink = 104% - 114%Light Blue = 100% - 97%Blue = 95% - 98%

RATIO OF BENCHMARK TO UNMANAGED FFS MEDICARE, 2015

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Red = 114%+Pink = 104% - 114%Light Blue = 100% - 97%Blue = 95% - 98%

RATIO OF BENCHMARK TO UNMANAGED FFS MEDICARE, 2017

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DEMOGRAPHICS = DESTINY By 2030 Americans 65+ Up 79%, Overall Growth = 16%

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in millions 2000 2005 2010 10 Yr Change 2015 2020 2025 2030 20 Yr Change

UNITED STATES 281.4 291.2 308.9 9.8% 321.4 334.5 347.3 359.4 16.3%Under 5 Years 19.2 20.3 21.4 11.6% 20.0 20.6 21.0 21.2 ‐1.0%5 to 13 Years 37.0 36.0 36.4 ‐1.7% 36.9 36.8 37.3 38.3 5.3%14 to 17 Years 16.1 17.2 16.6 3.2% 16.8 16.7 16.7 16.8 1.0%18 to 24 Years 27.1 29.2 30.5 12.4% 31.2 30.6 30.7 30.8 1.0%25 to 44 Years 85.0 83.2 82.8 ‐2.6% 84.7 89.5 93.4 95.8 15.7%45 to 64 Years 62.0 72.8 81.0 30.7% 84.0 83.9 82.2 82.4 1.8%65 Years and Over 35.0 36.7 40.2 14.9% 47.8 56.4 65.9 74.1 84.3%

UNITED STATES 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Under 5 Years 6.8% 7.0% 6.9% 11bps 6.2% 6.1% 6.0% 5.9% (104)bps5 to 13 Years 13.2% 12.4% 11.8% (137)bps 11.5% 11.0% 10.7% 10.7% (112)bps14 to 17 Years 5.7% 5.9% 5.4% (34)bps 5.2% 5.0% 4.8% 4.7% (71)bps18 to 24 Years 9.6% 10.0% 9.9% 23bps 9.7% 9.1% 8.8% 8.6% (131)bps25 to 44 Years 30.2% 28.6% 26.8% (341)bps 26.3% 26.8% 26.9% 26.7% (15)bps45 to 64 Years 22.0% 25.0% 26.2% 421bps 26.1% 25.1% 23.7% 22.9% (329)bps65 Years and Over 12.4% 12.6% 13.0% 58bps 14.9% 16.9% 19.0% 20.6% 761bps

Source: United States Census Bureau

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SOLID MA GROWTH 4-EVA

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We estimate MA membership growth at 7% through end of 2023

Source: Barclays and Gorman Health Group research and Company Documents

Medicare Advantage Population Projections: 2014 – 2023E

• Overall Medicare population expected to grow ~3% yearly (Baby boomers)

• Age-ins overtake FFS conversions by 2019

• Medicare Advantage penetration GROWS to ~42.5%, grows 7.0% yearly

• We estimate 29M MA members, revenue at $376 BILLION by 2023

Medicare Advantage 2014 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E Beginning 15,146,627 16,632,565 18,091,997 19,741,380 21,024,830 22,297,434 23,651,552 25,089,563 26,598,497 28,121,837 Age-ins 804,729 893,359 991,195 1,054,753 1,140,087 1,224,105 1,294,708 1,355,959 1,431,227 1,495,853 FFS to MA 1,484,341 1,406,861 1,343,650 1,277,329 1,227,197 1,180,164 1,133,708 1,087,906 1,042,387 999,529 Involuntary Terms (283,999) (299,386) (307,564) (355,345) (388,959) (423,651) (461,205) (501,791) (545,269) (590,559) Voluntary/ Other, Net (519,134) (541,402) (377,899) (693,286) (705,721) (626,500) (529,199) (433,139) (405,005) (383,669) Ending 16,632,565 18,091,997 19,741,380 21,024,830 22,297,434 23,651,552 25,089,563 26,598,497 28,121,837 29,642,992 YOY Growth 9.8% 8.8% 9.1% 6.5% 6.1% 6.1% 6.1% 6.0% 5.7% 5.4% MA Penetration 31.0% 32.7% 34.6% 35.8% 36.9% 38.0% 39.2% 40.4% 41.5% 42.5%Age-in Penetration 28.0% 30.0% 32.0% 33.5% 35.0% 36.5% 37.5% 38.5% 39.5% 40.5%FFS Conversion Rate 4.0% 3.8% 3.6% 3.4% 3.3% 3.1% 2.9% 2.8% 2.7% 2.5%Involuntary Lapses 1.88% 1.80% 1.70% 1.80% 1.85% 1.90% 1.95% 2.00% 2.05% 2.10%


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Source: CMS

Top 15 Market Share in Medicare Advantage Plans 2006-2015

• Top 15 plan market share has grown 2620 bps in less than 10 years

• Only one change in top 5 since 2006 (Aetna) and None since 2010

• Only two changes in top 10 since 2006 (Cigna and BCBSMN)

• 4 plans control 53% of the market today. The top 15 was 46% in 2006.

SHARE AGGREGATION WILL CONTINUE

Dec-06 Members MKt Share Dec-10 Members MKt Share Mar-15 Members MKt ShareUnitedHealth 1,482,004 13.2% UnitedHealth 2,149,605 18.3% UnitedHealth 3,448,799 19.9%Humana 1,007,362 8.9% Humana 1,763,312 15.0% Humana 3,175,197 18.3%Kaiser 888,243 7.9% Kaiser 998,487 8.5% Kaiser 1,295,498 7.5%WellPoint 281,309 2.5% WellPoint 488,579 4.2% Aetna Inc. 1,251,364 7.2%Highmark 244,569 2.2% Aetna 436,127 3.7% Anthem 581,934 3.4%Aveta 201,081 1.8% Highmark 313,827 2.7% Cigna 495,991 2.9%Health Net 195,777 1.7% HealthSpring 304,360 2.6% Blue Cross Blue Shield o 394,160 2.3%Independence 179,627 1.6% Universal American 288,729 2.5% WellCare Health Plans, I 341,084 2.0%EmblemHealth 126,624 1.1% Coventry 224,371 1.9% Highmark Inc. 300,204 1.7%Aetna 121,588 1.1% Health Net 221,925 1.9% Health Net, Inc. 294,824 1.7%HealthSpring 113,331 1.0% Aveta 184,439 1.6% Aveta, LLC. 200,255 1.2%SCAN 90,894 0.8% EmblemHealth 169,517 1.4% EmblemHealth, Inc. 184,543 1.1%WellCare 89,221 0.8% Cigna 145,655 1.2% Medica Health Plans 178,863 1.0%Coventry 79,435 0.7% Medical Card System 124,738 1.1% Medical Card System, In 172,072 1.0%Regence 75,096 0.7% SCAN Health Plan 124,671 1.1% Blue Cross and Blue Shie 168,970 1.0%Top 5 3,903,487 34.7% 5,836,110 49.7% 9,752,792 56.4%Top 10 4,728,184 42.0% 7,189,322 61.2% 11,579,055 66.9%Top 15 5,176,161 46.0% 7,938,342 67.6% 12,483,758 72.1%


Aetna Humana

States with Medicare Advantage and/or HIX plans

AZ, DE, FL, OH, PA, TX,

VA, DC

AL, AZ, CO, FL, GA, IL, KY, LA, MI, MS, MO, OH, TN,

TX, UT

Total membership

23.55 million 13.8 million

Medicare Advantage


Medicaid managed care

2.12 million 296,500

Fully insured individual/ group members


Premiums $49.56 billion $45.96 billion

HEALTH PLAN MERGER MANIA IS DRIVEN BY MEDICARE ADVANTAGE

Aetna and Humana at a Glance

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ACOS: SCOPE AND REACH

• ACOs present in 55% of local healthcare markets• Service 42 million people -- 15% of all patients• Private insurers have invested in/formed 600+ ACOs, including

Aetna, UAM, several BCBS plans, CIGNA, and United • Medicare is largest contractor with 424 ACOs in 2 Demonstrations• 34 Medicaid ACOs in 18 states

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MEDICARE ACOS: STATUS• Pioneer ACOs: 19, 285,000 beneficiaries

o Originally 32, 13 dropouts in 2014

• Shared Savings Program: 405, 7.2 million beneficiarieso 1st cohort (2012): 105o 2nd cohort (2013): 211o 3rd cohort (launched 1/2015): 89

• Medicare Next Generation ACO rule offers greater upside, will help stem program losses. 20% of MSSPs expected to participate.

20Source: CMS


MEDICARE SHARED SAVINGS AND PIONEER ACOS

21Source: CMS

= Pioneer ACO


MEDICARE ACOS HAVE A LIMITED LIFE EXPECTANCY

• Unlike commercial ACOs, Medicare ACOs have a legal constraint that guarantees losses over time for mosto Savings are measured against benchmarko Affordable Care Act requires that benchmark

be reset every three yearso Reset benchmark is based on most recent 3

years’ claim experienceo Result: Confiscation of Prior Years’ Savings

for 70%+ of participants• Same or increasing cost to manage care• Reduced benchmark reduces savings, reduces

revenue

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Copyright © 2015 Gorman Health Group, LLCProprietary and confidential Copyright © 2015, Gorman Health Group, LLC

PERCENTAGE TITLE

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ACOs

PERFORMANCE PAYMENTS: 2014

$82M

QUALITY: 2014

87.2%QUALITY: 2013

85.2%QUALITY: 2012

71.8%

2012 2013 2014

$120M$96M$88MIN

MEDICARE, LITTLE LOVE

PIONEER ACO SAVINGS AND MEAN QUALITY SCORES, 2012-2014

Source: CMS


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92/ 333

MSSP ACOS KEPT SPEND BELOW TARGET, GOT PAID $341 MM

VETERAN ACOs MORE LIKELY TO GET PAID:

89 MSSP ACOS REDUCED SPEND, BUT DIDN’T QUALIFY FOR SHARED SAVINGS

2014 2012

ACOS: IN MEDICARE, LITTLE LOVE

ACOs RECEIVING SHARED SAVINGS BY YEAR OF ENTRY

19%

38%

Source: CMS


• A successful Medicare ACO has already mastered the hardest part: care management

• Need to develop and operate an insurance company. Build or buy?o State licensure and regulationo Substantial financial reserveso Highly developed Federal regulatory

structureo Hold 100% of risk and reward (net of

reinsurance protection)o Sales and marketing componento Transaction processingo Customer service component

CONVERTING AN ACO TO MA

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DARWINIAN “DO OR DIE” IN MEDICARE ADVANTAGE

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COMMON CHARACTERISTICS OF HIGH-PERFORMING PLANS

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THE MEMBER EXPERIENCE: ONE-THIRD OF STARS

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Effective execution of member- and provider-facing contacts is the central feature of high Stars performers

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COMMON CHARACTERISTICS OF HIGH-PERFORMING PLANS


OPPORTUNITIES FOR NEW RETAIL PHARMACY COLLABORATION

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Medication AdherenceHigh Risk MedicationsAnnual influenza vaccineCare for older adults – medication review, pain screeningDisease Management – A1c control, controlling BPRA, Osteoporosis managementReducing the risk of falling

HEALTH PLANS

PHYSICIANS

RETAIL PHARMACIES

Profile the Star performance of the pharmacies in your network. Evaluate opportunities for chains/stores to expand services to targeted members through MTM-like programs and expanded services.


LOOK TO YOUR PBM FOR SUPPORTCreate and Refine Your Part D Stars Game Plan

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• Medicare Advantage success requires accountability and consistent member- level execution by the PBM.

• PBM can cause member dissatisfaction and CMS compliance problems:o Coverage determination timelinesso Benefit set up/reject code verbiageo Transition functionalityo Medicare Plan Finder file accuracy

• Take a fresh look at partnering with retail pharmacists


• Risk adjustment data validation (RADV) audits are leading item in 2015 HHS OIG workplan

• DOJ investigating multiple plans, providers and vendors under False Claims Act

• NBER: $10B in extra payments to MA plans

RADV SCRUTINY IN MEDICARE ADVANTAGE

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http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.acfe.com/investigation-and-examination.aspx&ei=sLkkVcfAHvWTsQSB84DwAw&psig=AFQjCNFr6i8e8hV4WUhMI3oM0k12NPI4vw&ust=1428556557386011


• Success as an MA plan necessitates:o Flawless membership onboarding and accounting.o Member-centric, proactive, high-touch approach and service model.o Active, data-driven medical management.o Engaged managers, staff and leaders.o Engaged providers, PBM’s, pharmacies and vendors.

• Successful risk-bearing medical groups and ACOs have done the hard part. Questions now are: o Move up the food chain?o Build or buy?

• Member lifecycle and experience begins with, and must be maintained by, providers.

CONCLUSIONS

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Gorman Health Group, LLC (GHG) is a leading consulting and software solutions firm specializing in government health programs, including Medicare managed care, Medicaid and Health Insurance Exchange opportunities. For nearly 20 years, our unparalleled teams of subject-matter experts, former health plan executives and seasoned health care regulators have been providing strategic, operational, financial, and clinical services to the industry, across a full spectrum of business needs. Further, our software solutions have continued to place efficient and compliant operations within our client’s reach.

GHG offers software to solve problems not addressed by enterprise systems. Our Valencia™ software reconciles the capitation payment of more than six million Medicare beneficiaries and continues to support customers participating in the Health Insurance Exchanges. Nearly 3,000 compliance professionals use the Online Monitoring Tool™ (OMT), our complete Medicare Advantage and Part D compliance toolkit, while more than 45,000 brokers and sales agents are certified and credentialed using Sales Sentinel™. In addition, hundreds of health care professionals are trained each year using Gorman University™ training courses.

We are your partner in government-sponsored health programs

T

E

JOHN GORMANExecutive Chairman

202.255.6924

[email protected]

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mailto:[email protected]