(Re)Emergence of Managed Care Strategic Opportunities in an Era of Medicare Advantage ExpansionAvalere Health | An Inovalon CompanyMay 2018
Copyright 2018. Avalere Health LLC. All Rights Reserved.
2
Agenda
1 2 3 4Medicare Advantage: National Outlook
Medicare Advantage: New Jersey Outlook
Defining Your Strategic Options
The Path Forward
Copyright 2018. Avalere Health LLC. All Rights Reserved.
3
Payers Pinning their Hopes on Medicare and Medicaid
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Dec Jan Feb Mar
Heavy Hitters Getting into Medicare Advantage
4
Optum+
DaVita Medical Group
2017 2018
Humana + Kindred
Cigna + Express Scripts
Oscar Health +Cleveland Clinic
CVS Health + Aetna
Walgreens +AmerisourceBergen
Walmart + Humana
Amazon +Berkshire Hathaway +
J.P. Morgan
Recently announced deals /
Tentative deals /
Payer-PBM Payer-Provider
PBM: Pharmacy benefits manager
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5
By 2023, Medicare Advantage Plans Will Oversee 40% of Total Medicare Population
Note: Medicare Advantage enrollment figures exclude cost plans, PACE, and demonstration plans.2018-2017 figures are from the Congressional Budget Office’s Medicare Baseline Projections, June 2017.CBO: Congressional Budget Office1 CMS Medicare Advantage Monthly Summary Enrollment Reports, December 2007-2017 (analyzed January 2008 enrollment as December 2007 enrollment is not publicly available).2 CMS Historical Medicare Enrollment Data, National & Territories for 2007-2011 (each figure represents average monthly enrollment in given year).3 CMS Medicare Enrollment Dashboard Data File 2012-2017 (analyzed October 2017).
17M 18M 19M21M 22M 23M
25M 26M 27M 28M 29M 30M 31M
30.9%31.6%
32.8%
35.0% 35.5%37.5%
37.9% 39.7% 40.0%40.0% 40.3% 40.5% 40.8%
20%
25%
30%
35%
40%
45%
0
5
10
15
20
25
30
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
EN
RO
LLM
EN
T IN
MIL
LIO
NS
CBO PROJECTIONS OF MEDICARE ADVANTAGE ENROLLMENT
MA Enrollment MA as % Total Medicare Enrollment MA AS %
OF TO
TAL MED
ICAR
E ENR
OLLM
ENT
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MA Plans Getting Bolder with Risk-Based Contracts…
6
2016 2017
Breakdown of Medicare Advantage Reimbursement (n = 80 Medical Groups)
Source: MGMA, 3rd Annual Survey on Taking Risk (December 2017).
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…and Not Shying Away from Narrow Provider Networks
7
Distribution of Medicare Advantage Enrollees by Size of Plan’s Provider Network, 2015
Source: Kaiser Family Foundation analysis of 2015 Medicare Advantage plans’ networks in 20 counties (2017).
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The Big Picture – New Flexibilities Accelerating MA’s Evolution Away from a Traditional Insurance Product
8
Flexibility #1: Disease-Specific Plans
MA plans may create disease specific plan designs that offer cost sharing or coverage tied to a specific disease state
Flexibility #2: Expanded Service Offerings
Expanded interpretation of supplemental benefits now allows MA plans to cover more supportive services aimed at prevention
Key Changes to Medicare Advantage in the 2019 Final Rate Announcement
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9
Agenda
1 2 3 4Medicare Advantage: National Outlook
Medicare Advantage: New Jersey Outlook
Defining Your Strategic Options
The Path Forward
Copyright 2018. Avalere Health LLC. All Rights Reserved.
Dramatic MA Growth in New Jersey Over the Last 5 Years
10
NEW JERSEY MEDICARE ADVANTAGE ENROLLMENT, 2013-2018
227,064 223,578 226,215 249,261
331,454
364,590
-1.5%
1.2%
10.2%
33.0%
10.0%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
2013 2014 2015 2016 2017 2018NJ MA Enrollment % Change
MA: Medicare Advantage; FFS: Traditional Fee-For-ServiceSource: Avalere Proprietary 2018 All-Payer Enrollment Model; CMS, MA State/County Penetration files 2013-2018.
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Significant Variation in MA Penetration Across NJ Markets
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MEDICARE ADVANTAGE COUNTY PENETRATION RATES
MA: Medicare Advantage Note: See appendix for county specific rates.Source: CMS, MA State/County Penetration files, February 2010 and 2018.
13.5%11.5%
9.2%
31.7%
21.2%
13.8%
Hudson Co. State Average Sussex Co.
2010 2018
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Slowly but Steadily, MA Plans Capturing More of the Medicare Market in NJ
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PROJECTED NEW JERSEY MEDICARE ADVANTAGE AND FFS ENROLLMENT IN MILLIONS, 2018-2023
MA: Medicare Advantage; FFS: Traditional Fee-For-ServiceSource: Avalere Proprietary 2018 All-Payer Enrollment Model; CMS, MA State/County Penetration files.
1.3M78%
1.3M77%
1.3M75%
1.3M74%
1.3M73%
1.3M72%
0.36M22%
0.39M23%
0.42M25%
0.45M26%
0.48M27%
0.52M28%
2018 2019 2020 2021 2022 2023FFS Enrollment MA Enrollment
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Horizon, Aetna, and Oxford/United Continue to Dominate the New Jersey MA Market
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MA MARKET SHARE OF TOP 3 ISSUERS, 2013-2018
MA: Medicare AdvantageSource: CMS, Monthly Enrollment By Contract/Plan/State/County, February 2013-February 2018.
32%
18%
12% 10%
21% 20%23% 23%
25% 26% 26% 26%
28%
34%36% 35%
29% 30%
2013 2014 2015 2016 2017 2018
Oxford Health Plans
Aetna
Horizon BCBS
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No Need to Sugarcoat – MA Expansion Presents Challenges for Health Systems
14
Exclusion from Provider Networks
• Narrower networks have the potential to adversely impact lower-tiered facilities
• Limited enrollee pushback on restrictions could result in expansion of narrow and tiered networks
Tighter Reimbursement
• Rates under MA are comparable to Medicare FFS rates in the aggregate, but payment levels could be significantly lower for certain providers and certain services
More Denied Medicare Claims
• Denial rates likely higher under MA compared to Medicare FFS
• Potential for increased costs and administrative burden to ensure adequate and timely payment of claims
Health System Risks under Medicare Advantage
Copyright 2017. Avalere Health LLC. All Rights Reserved.
15
Agenda
1 2 3 4Medicare Advantage: National Outlook
Medicare Advantage: New Jersey Outlook
Defining Your Strategic Options
The Path Forward
Copyright 2017. Avalere Health LLC. All Rights Reserved.
Sources: Commonwealth Fund, “Health Care Marktet Conncentration Trends in the United States: Evidence and Policy Responses. September 2017. Available here. Health Care Cost Institute. Health Marketplace Index: Hospital Concentration Index, Issue Brief #14. May 2017. Available here
One Option: Consolidate to Gain Leverage
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PERCENTAGES OF MSAs WITH HIGHLY CONCENTRATED MARKETS
of hospitals affiliated with a health system in Trenton, NJ
of admissions were to health systems82%78%
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Another Option: Launch Your Own MA Plan
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TOTAL NUMBER OF PROVIDER-OWNED PLAN MEDICARE ADVANTAGE CONTRACTS
0
20
40
60
80
100
120
140
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Kaiser Permanente
Geisinger Health System
UPMC Health System
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Partnership Opportunity #1 – Aligning Incentives on Measures that Matter Most to MA Plans
Star Rating Plan Quality Performance Implications
Excellent 5% bonus, 70% rebate, year-round enrollment
Above Average 5% bonus, 65% rebate
Average 50% rebate
Below Average Possible loss of CMS contracts if 3-year trend, 50% rebate
Poor Possible loss of CMS contracts if 3-year trend, 50% rebate
Star Ratings Measure
Categories
Quality Improvement Outcomes Intermediate
OutcomesPatient
Experience Access Process
Applicable Weight 5x 3x 3x 1.5x 1.5x 1x
Number of Measures 2 3 6 10 7 16
CMS: Centers for Medicare & Medicaid Services
Copyright 2017. Avalere Health LLC. All Rights Reserved.
Health Plans’ Success in Medicare Advantage Hinges on their Start Ratings
PLAN SELECTION
• Star ratings were originally conceived to help Medicare beneficiaries and their caregivers choose the best option when shopping for plans
• High and low performance plans are indicated as such on Medicare Plan Finder
• Beneficiaries have special election periods (SEPs) to select 5 star plans
COMPLIANCE
• Contract termination for plans consistently below 3 stars
• Prohibition of enrollment via Medicare Plan Finder for low-rated plans
• Special enrollment period for members of plans with fewer than 3 stars
• Proposal to include star ratings performance requirement in MA and PDP contracts and to remove outliers from program
ACA: Affordable Care Act; MA: Medicare Advantage; PDP: Part D Plan 1. CMS. “Part C and D Performance Data.” Available at: http://cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovGenIn/PerformanceData.html.2. CMS. “Proposed Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year
2012 and Demonstration on Quality Bonus Payments.” Available at: http://www.cms.gov/apps/docs/Fact-Sheet-2011-Landscape-for-MAe-and-Part-D-FINAL111010.pdf.
3. CMS. “Establishing a Special Election Period (SEP) to Enroll in 5-star Medicare Advantage Plans in Plan Year 2012.” Available at: http://www.cms.gov/Medicare/Eligibility-and-Enrollment/MedicareMangCareEligEnrol/downloads/SEPtoEnrollin5starplans.pdf.
4. CMS. “Advance Notice of Methodological Changes for Calendar Year (CY) 2016 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2016 Call Letter.” April 7, 2015. Available at: http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/downloads/Announcement2016.pdf.
PAYMENT
• The ACA linked star ratings to Medicare Advantage (MA) plan payment
• Plans with star ratings of at least four stars receive bonus payments that can be used to offer more benefits to enrollees at no extra cost.
• Plan rebate payments tied to star rating level
• 5 star - 70% rebate• 4 star - 65% rebate• 3-star or less –
50% rebate
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DISTRIBUTION OF MA ENROLLEES BY PLAN STAR RATING, 2016-2018, IN MILLIONS1
0.1 0.2 0.11.3 1.4 0.7
3.3 4.04.0
5.77.2 8.7
4.9
3.94.51.5
1.61.7
16.818.2
19.7
2016 2017 2018
Num
ber o
f Enr
olle
es
2 Stars* 2.5 Stars 3 Stars 3.5 Stars 4 Stars 4.5 Stars 5 Stars
Star Ratings Clearly Influencing Plan Selection
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1 Does not include plans without star ratings*No plans had a star rating of 2.0 in 2016 and 2017. <1% of plans had a 2 star rating in 2018.MA: Medicare Advantage Source: Avalere Health analysis using enrollment data released by the Centers for Medicare & Medicaid Services. The analysis uses enrollment files released in February of each year, from 2016 through 2018, reflecting enrollment effective in January of each respective year.
Copyright 2017. Avalere Health LLC. All Rights Reserved.
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Health Systems Can Directly Impact Key Measures
Staying Healthy: Screenings, Vaccinations,
Testing
Managing Chronic
Conditions
Member Experience
Member Complaints and Changes in
Health Plan
• Breast Cancer Screening• Colorectal Screening• Annual Flu Vaccine
• Diabetes – Eye Exams, Blood Sugar Levels• Rheumatoid Arthritis Management• Medication Adherence
• Access to Primary Care Doctor Visits• Complaints about the Health Plan
• Getting Needed Care• Getting Appointments and Care Quickly• Rating of Health Plan
MA Star Ratings Domains Sample Measures
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Zeroing in on Payer’s Pain Points
22Source: CMS, Part C and D Performance Data 2017.
Issuer Contract Contract Enrollment
MA Summary Rating
Oxford Health Plans
H0755 91,535 4.5
H3113 16,720 3.5
Enrollment Weighted Average 4.3
Aetna
H3152 43,868 4
H3931 16 3.5
H5521 47,577 4
R6694 2,574 N/A
Enrollment Weighted Average 3.9
Horizon
H3154 22,094 2.5
H7971 43,879 N/A
H8298 6,173 N/A
Enrollment Weighted Average 2.5
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Partnership Opportunity #2 – Collaborating on Disease-Specific, Value-Based Insurance Products
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Diabetes Heart Failure COPD Stroke
Coronary Artery
Disease
Mood Disorders Dementia Arthritis
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Value-Based Insurance Design (VBID) Demonstration Expanding Opportunities for Win-Win Partnerships
24MA: Medicare Advantage; VBID: Value-Based Insurance Design
AK
HI
CA
AZ
NV
OR
MT
MN
NE
SD
ND
IDWY
OK
KSCO
UT
TX
NM SC
FL
GAALMSLA
AR*
MO
IA
VA
NCTN
IN
KY
IL
MIWI
PA
NY
WV
VT
ME
CTMANH*
WA
OH
RI
DEMD
NJ
DC
Participating States in 2018 (10)
Participating States in 2019 (25)
Participating States in 2020 (50)
EXPANSION OF MA VALUE-BASED INSURANCE DESIGN (VBID) DEMONSTRATION
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Agenda
1 2 3 4Medicare Advantage: National Outlook
Medicare Advantage: New Jersey Outlook
Defining Your Strategic Options
The Path Forward
Copyright 2018. Avalere Health LLC. All Rights Reserved.
Imperative #1 – Demonstrate Your Value
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Risk Profiles /
Process Measures /
Outcomes Relative to Benchmark /
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Our Managed HF Patients Benchmark (Matched Control Group)
Annual Rate of OccurrenceRisk Factor
% of Program
Population
Risk Factor Weight
Reduced Ejection Fraction (LVEF < 40) 44%
Prolonged QRS (> 120) 36%
NYHA Class 3 24%
Diabetes 48%
Severe Mental Illness 9%
Medication Regimen % of Population
Adherent (>80% PDC)
ACE/ARBs or Entresto 67%
Beta blocker 76%
Diuretics 52%
ACE/ARBs or Entresto and Beta blocker and Diuretics 34%
HEART FAILURE PERFORMANCE BENCHMARKING (SAMPLE)
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27
More likely to engage in health-harming
behaviors
Higher prevalence of socio-demographic risk
factors
Difficult to manage and coordinate all care
needs
More likely to experience
comorbidities
Harder to reach and get involved in health
interventions
Worse health outcomes than non-dual eligibles
Imperative #2 – Develop Innovative Partnerships around High-Cost Patient Populations
Source: Centers for Medicare & Medicaid Services. “Advance Notice of Methodological Changes for Calendar Year (CY) 2016 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2016 Call Letter.” February 20, 2015. Available at: http://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2016.pdf
Medicare / Medicaid Dual
Eligibles
28
Imperative #3 – Define the Path Forward for Disruptive Innovation in Medicare Advantage
Consumer-ism
• Direct member engagement: retail stores and urgent/primary care clinics
• Digital platforms: sophisticated user interfaces
Provider Engagement
• Consultative partners: providing the tools to providers and engaging on the ground
• Optimizing care delivery: building infrastructure to support population health
Strategic Growth
• Condition-specific MA plans: new growth opportunity for MA plans
• Low-income populations: concentrating business in Special Needs Plans and Medicaid markets
Population Health
• Analytics: predictive modeling to drive clinical operations
• Platforms: support functions to build platforms that support population health
(Re)Emergence of Managed Care Strategic Opportunities in an Era of Medicare Advantage ExpansionAvalere Health | An Inovalon CompanyMay 2018