Health care giants are dependent on payments Trump wants to end

https://www.axios.com/drug-prices-medicare-cvs-humana-unitedhealth-trump-1d66d7d6-66ea-4150-89f5-e3b357b17bb2.html

An older man grabs his prescription drugs at a pharmacy counter.

The 3 big health insurers that control a majority of Medicare’s prescription drug coverage — CVS Health, Humana and UnitedHealth Group — are arguably the most at risk from the Trump administration’s plan to eliminate rebates within Medicare.

The big picture: These companies rely heavily on rebates to offset the costs of covering seniors’ prescriptions. Losing those rebates would shift billions of dollars away from them, and they could lose customers if they raise premiums to make up the difference.

By the numbers: Axios analyzed the Medicare businesses within the companies’ 2018 filings with state insurance commissioners.

  • UnitedHealthcare paid $7.3 billion in prescription drug claims and received $4.1 billion in rebates, according to its major subsidiary in Connecticut.
  • Humana paid $7.1 billion in prescription drug claims and received $3.9 billion in rebates, according to its major subsidiary in Wisconsin.
  • CVS paid $6.3 billion in prescription drug claims and received $3.5 billion in rebates, according to its SilverScript subsidiary.

Between the lines: Those rebates offset more than half of what these 3 companies had to pay for people’s prescriptions.

  • That’s well above the average for all Medicare drug plans, which was just 25% in 2018 (Table IV.B8).
  • Plans don’t keep Medicare rebates as profit, and instead pass them back to the federal government. (They do, however, keep a small percentage of rebates from their commercial plans.)
  • The companies did not respond to requests for comment.

The bottom line: CVS, Humana and UnitedHealth — all of which vehemently oppose Trump’s proposed rebate rule — are “overly dependent on rebates to keep premiums low [so they can] buy market share, which is what these guys have been doing for the past decade,” said Emily Evans, a health care managing director at investment research firm Hedgeye.

  • If those rebates go away, sooner or later the big 3 would have to raise monthly premiums to avoid losses.
  • And hiking drug plan premiums could persuade seniors to switch to competing plans that don’t rely on rebates and therefore won’t need to raise their premiums as much.

 

 

 

Wall Street is still selling off health care stocks

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Yesterday, UnitedHealth Group posted $3.5 billion of profit in the first quarter — its second-most profitable quarter ever — and collected more than $60 billion of revenue, Axios’ Bob Herman reports.

Yes, but: UnitedHealth’s stock price tanked by 4%, which consequently dragged down shares of the other major health insurers and hospital chains. Cigna’s stock price plummeted 8%, and Anthem and Humana were close behind. HCA tumbled 10%.

Driving the news: Wall Street remains fearful of “Medicare for All” becoming a reality, and UnitedHealth CEO Dave Wichmann tried to get ahead of the message by telling investors that single-payer would “jeopardize” people’s care.

  • Many investment bank analysts were perplexed by the sell-off, considering that UnitedHealth has more cash than it knows what to do with.
  • Steven Halper of Cantor Fitzgerald wrote to investors: “What more can you ask for? Take advantage of poor sentiment.”

The big picture: Medicare for All discussions matter far more to Wall Street right now, and that makes the industry’s Q1 financial reports a lot less important.

 

 

 

How Medicare Advantage steers the Silver Tsunami into coordinated, value-based care

https://www.healthcarefinancenews.com/news/how-medicareadvantage-steers-silver-tsunami-coordinated-value-based-care

CMS and other health insurers are using the program to deliver innovative and unique value to customers, both in terms of cost and quality.

Today’s Medicare Advantage plans are flourishing and the Silver Tsunami is among the reasons.

“Over the last four years, Medicare Advantage enrollment increased by more than 30 percent, while the number of people eligible for Medicare grew by about 18 percent,” said Steve Warner, vice president of Medicare Advantage Product for UnitedHealthcare Medicare and Retirement.

Other reasons for the growth: Innovative models from big insurers and upstarts alike that improve care for health plan members and drive revenue for payers as they look beyond fee-for-service.

IT STARTS WITH THE CONSUMER

Consumers are finding unique value in MA, both in terms of the quality of care and in the financial value.

Medicare Advantage, in fact, makes it easier for consumers to navigate the healthcare system and choose providers, in a way that traditional Medicare does not, said those interviewed.

“Actually it’s pretty hard to navigate the healthcare system on your own,” said Tip Kim, chief market development officer at Stanford Health Care. “Most Medicare Advantage plans have some sort of care navigation.”

Warner of UnitedHealth’s Warner added that Medicare Advantage also offers value and simplicity.

“It provides the convenience of combining all your coverage into one plan so you have just one card to carry in your wallet and one company to work with,” Warner said. “Most plans also offer prescription drug coverage and additional benefits and services not available through original Medicare, including dental, vision and fitness.”

REBRANDING FOR THE NEW ERA

MA plans did not emerge out of thin air. By another name, Medicare Advantage is managed care, a term that was the bane of healthcare during the height of HMOs in the 1980s.

“Medicare Advantage has rebranded ‘managed care’ to ‘care coordination,'” said consultant Paul Keckley of The Keckley Report. “Humana and a lot of these folks have done a pretty good job. Coordinating care is a core competence. Managed care seems to be working in this population.”

MA came along at the right time for CMS’s push to value-based care.

“I would suggest on the providers’ side, embracing Medicare Advantage is an opportunity to get off the fee-for-service mill,” said Jeff Carroll, senior vice president of Health Plans for Lumeris, which recently paired with Stanford Health Care on the Medicare Advantage plan, Stanford Health Care Advantage.

“Provider-sponsored Medicare Advantage plans are a way to put teeth into an accountable care organization,” Keckley added. “Medicare Advantage success is a silver tsunami among major tsunamis. Obviously it’s a profitable plan for seniors and profitable for underwriters. The winners in the process will get this to scale.”

MA is an innovative model that is not a government-run system, but a privately-run system essentially funded by the government.

PAYERS IN THE MA GAME

UnitedHealthcare has the largest MA market share of any one insurer.  Twenty-five percent of Medicare Advantage enrollees are in a UnitedHealthcare MA plan, followed by 17 percent in Humana, 13 percent in a Blue Cross Blue Shield and 8 percent in Aetna, according to the Kaiser Family Foundation.

Numerous insurers, in fact, have gotten into the MA market, including Clover Health in San Francisco, a five-year-old startup which has Medicare Advantage as its only business.

Clover is a tech-oriented company that boasts machine learning models that can accurately predict and identify members at risk of hospitalization.

Because Clover focuses only on MA, it can do a better job at problem solving the needs of an older population, said Andrew Toy, president and CTO of Clover Health.

“The problems we face in Medicare Advantage are very different from a younger generation,” Toy said.

Forty percent of the older population is diabetic. Most seniors will be dealing with a chronic disease as they get older.

In other insurance, whether its individual or commercial, the lower cost of the healthier population offsets the cost of the sicker population. MA has no way to offset these costs. Plans can’t cherry-pick consumers or raise premiums for a percentage of the population.

What MA plans can do is design plans that fit the varying needs of the population. A plan can be designed for diabetics. For younger seniors or those not dealing with a chronic disease, a plan can be designed that includes a gym membership.

“All these plans are regulated,” Toy said. “We have the flexibility to move dollars around. We can offer a higher deductible plan, or a nutrition plan. The incentives for us in Medicare Advantage are different than the incentives in Medicare. CMS has explored giving us more leeway for benefits. Consumers have a choice while still having the guarantees of Medicare.”

Toy believes regular Medicare is more expensive because MA offers a more affordable plan based on what an individual needs.

“When you need it, we get more involved in that care,” Toy said, such as “weight control issues for diabetics.”

The drawbacks are narrower networks, though Toy said Clover offers an out-of-network cost sharing that is pretty much in line with being in-network.

UnitedHealthcare’s Medicare Advantage LPPO plans offer out-of-network access to any provider who accepts Medicare, Warner said.

UnitedHealthcare also offers a wide variety of low and even zero-dollar premium Medicare Advantage plans and annual out-of-pocket maximums, Warner said. By contrast, original Medicare generally covers about 80 percent of beneficiaries’ healthcare costs, leaving them to cover the remaining 20 percent out-of-pocket with no annual limit.

“From a consumer value proposition, it makes Medicare Advantage a better deal,” Kim said. “One is Part B, 20 percent of an unknown number. Knowing what the cost will be in a predictable manner is a preferable manner.”

Stanford Health Care launched a Medicare Advantage plan in 2013. Lumeris owned and operated its own plan, Essence Healthcare, for more than eight years. Stanford and Lumeris partnered on Stanford Health Care Advantage in northern California, using Lumeris technology to help manage value-based reimbursementand new approaches to care delivery through artificial intelligence-enabled diagnostic tools and other methods.

“We are not a traditional insurance company,” Kim said. “We’re thinking about benefits from a provider perspective. It’s a different outlook than an insurance company. By definition we’re local.”

MA MARKET STILL HAS ROOM TO GROW

While the Medicare Advantage market is competitive, it is also under-penetrated, Brian Thompson, CEO for UnitedHealthcare Medicare & Retirement, said during a 2018 earnings report.

Currently, about 33 percent of all Medicare beneficiaries are in an MA plan, he added, but UnitedHealth sees a path to over 50 percent market concentration in the next 5-10 years.

It’s a path not so subtly promoted by the Centers for Medicare and Medicaid Services.

As a way to encourage insurers to take risk and get in the market, around 2009, CMS gave MA insurers 114 percent of what it paid for fee-for-service Medicare. The agency began decreasing those payments so that by 2017, traditional Medicare and MA became about even.

MA insurers instead thrive on their ability to tailor benefits toward wellness, coordinate care and contain costs within the confines of capitated payments, the essence of value-based care.

They have received CMS support in recent rate notices that gives them the ability to offer supplemental benefits, such as being able to target care that addresses the social determinants of health. Starting in 2020, telehealth is being added to new flexibility for these plans.

WHAT THE FUTURE MAY HOLD FOR MA

Medicare Advantage plans have expanded and, in so doing, opened innovative new options for plans and their customers alike at the same time that the ranks of people eligible for Medicare continues to swell.

So where is it all going?

Medicare Advantage is changing the way healthcare is paid and delivered to the point that Keckley and Toy agreed the future may not lie in Medicare for All, but in Medicare Advantage for all.

“I think a reasonable place to end, is in some combination where the government is involved in price control, combined with the flexibility of Medicare Advantage,” Toy said. “That’s really powerful.”

 

 

Medicare Advantage industry sees slower growth for 2019

https://www.modernhealthcare.com/article/20190116/NEWS/190119927/medicare-advantage-industry-sees-slower-growth-for-2019

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Medicare Advantage insurers added 1.4 million members to their rosters for 2019 coverage, as they looked to grow membership in a market known for being politically safe and predictably lucrative. But Advantage membership is growing at a slower pace compared with previous years. 

According to the latest federal data showing enrollment as of this month, 22.4 million people are enrolled in Medicare Advantage for 2019 coverage—an alternative to the traditional Medicare program in which private insurers contract with the federal government to administer program benefits. That’s an increase of 6.8% since January 2018. Health insurers, however, managed to grow their Advantage membership base by more than 1.5 million in both 2016 and 2017.

Some industry experts were expecting more. “The formula was there: Health plans were aggressive, they got nice rate increases, the rules around benefit design relaxed a little bit,” explained Jeff Fox, president of Gorman Health Group, which provides technology and other services to Medicare Advantage plans.

Fox expected Advantage enrollment to increase by double-digits over the past year, as health plans invested heavily in marketing and the federal government provided one of the biggest rate increases for the plans in years at 3.4%. The Trump administration also granted Advantage plans the flexibility to provide more supplemental benefits in 2019, such as transportation and in-home care.

But Fox said distraction from the craziness of the November midterm elections may have kept some seniors from enrolling during the annual open enrollment that lasted from Oct. 15 to Dec. 7, 2018. While the CMS data captures some of the sign-ups from open enrollment, figures out next month are likely to be higher.

Despite the slower pace, many Advantage insurers still experienced big enrollment increases as they picked up more market share. About half of all members are covered by just three companies. UnitedHealth held onto the top spot, adding nearly 500,000 Advantage members in the past year for a total 5.7 million. UnitedHealth holds more than a quarter of the total Medicare Advantage market share.

Humana remained the No. 2 Advantage insurer with 3.9 million members, an increase of 10.4% over January 2018. But thanks to its acquisition of Aetna, CVS Health took the No. 3 spot with 2.2 million Advantage enrollees. Kaiser Foundation Health Plan and Anthem rounded out the top five insurers with the most Advantage members.

On a percentage basis, Anthem and Aetna grew membership the fastest. Anthem’s Medicare Advantage membership spiked 53% to 1.1 million members compared with the same time last year. The Indianapolis-based insurer has long focused on serving employers, but recently turned its sights to growing Medicare Advantage rolls through acquisitions and expansions in places where it already operates.

Anthem bought Florida-based Medicare plans HealthSun in December 2017 and America’s 1st Choice in February 2018, together giving Anthem about 170,000 more Advantage members. Anthem CEO Gail Boudreaux told investment analysts in July that the company would focus on selling group Medicare Advantage plans and serving medically complex dual-eligible members in 2019.

CVS Health, meanwhile, grew its Medicare membership by 26.7% in 2018 to 2.2 million through its acquisition of Aetna. The deal is still technically awaiting a federal judge’s approval. In a research note Monday, Barclays equity analyst Steve Valiquette noted that Aetna’s membership growth was driven by its expansion into about 360 new counties. Valiquette wrote that the growth experienced by some public health insurers during the annual enrollment period for 2019 coverage was driven more by market share gains than by industry growth.

Medicare Advantage enrollment is climbing as the baby boomer generation ages rapidly into Medicare. Those seniors are used to employer-sponsored managed-care plans and are choosing Advantage over traditional Medicare more often than previous generations did. Seniors also often get more benefits, including dental care, eyeglasses and gym memberships, with an Advantage plan. 

Medicare Advantage also enjoys support from both political parties and is able to weather swings from one federal administration to the next, whereas insurers that sell plans in the individual market, for example, may have to deal with more volatility.

Moreover, Medicare Advantage margins tend to hover between 4% to 5%, whereas Medicaid margins come in at 2% to 3% and the individual market historically has had even lower margins, S&P analyst Deep Banerjee told Modern Healthcare in August. The group employer business has higher margins, but that market isn’t growing like Medicare Advantage is.

 

 

 

Healthcare’s vertical mergers kick-started a massive industry shift in 2018. Will it pay off?

https://www.fiercehealthcare.com/payer/healthcare-s-vertical-mergers-kick-started-a-massive-industry-shift-2018-will-it-pay-off?mkt_tok=eyJpIjoiTnpBNE1HTmtObUl3WVRkayIsInQiOiJFOU1xMDRPMGtzMCtnWXU4MExUVFAzZ3Jrdm5cL2s3S1dMRkVldTRWS2QyNmJZU255UWRIWW14QmtXVkJ2T2VTeGpYTVBvQXZWWW1JVnB0S0crTXV3aFhDS0wrY3NzTmtEYmJEMHdvSG03bGkxS2ZlREdiaWZydFZkbkdlXC9tTHE1In0%3D&mrkid=959610&utm_medium=nl&utm_source=internal

Mergers and acquisitions deals consolidation

Two massive megamergers in CVS-Aetna and Cigna-Express Scripts dominated the conversation around mergers and acquisitions in healthcare.

Whether you think the mergers will help or hurt consumers, both deals have sparked a distinct shift across the industry as competitors search for ways to keep pace. It also frames 2019 as the year in which five big vertically integrated insurers in CVS, UnitedHealth, Cigna, Anthem and Humana begin to take shape.

Combined, the mergers totaled nearly $140 billion.

Both CVS and Cigna closed their transactions in the fourth quarter with promises that their new combined companies would “transform” the industry. Unquestionably, it’s already triggered some response from other players. Whether those companies can make good on their promises to improve care for consumers remains to be seen, and the payoff may not come for several years, as 2019 is likely to be a year of initial integration.

While CVS and Cigna hogged most of the spotlight, several other notable transactions across the payer sector could have smaller but similarly important consequences going forward.

WellCare acquires Meridian Health Plans for $2.5B

In May, WellCare picked up Illinois-based Meridian Health Plans for $2.5 billion, acquiring a company with an established Medicaid footprint with 1.1 million members. The deal boosted WellCare’s membership by 26%.

But the transaction also thrust WellCare back onto the ACA exchanges. Meridian has 6,000 marketplace members in Michigan.

Importantly, the acquisition gave WellCare a new pharmacy benefit manager in Meridian Rx. CEO Kenneth Burdick said it would provide “additional insight into changing pharmacy costs and improving quality through the integration of pharmacy and medical care.”

WellCare also makes out on CVS-Aetna transaction

WellCare was also a beneficiary of the CVS-Aetna deal after the Department of Justice required Aetna to sell off its Part D business in order to complete its merger.

The deal adds 2.2 million Part D members to WellCare, tripling its existing footprint of 1.1 million.

Humana goes after post-acute care

2018 was the year of post-acute care acquisitions for Humana. The insurer partnered with two private equity firms to buy Kindred Healthcare for $4.1 billion in a deal that was first announced last year. It used a similar purchase arrangement to invest in hospice provider Curo Health Service in a $1.4 billion deal.

Both acquisitions give Humana equity stake in the companies, with room to make further investments down the road. Kindred, in particular, is expected to further Humana’s focus on data analytics, digital tools and information sharing and improve the continuity of care for patients even after they leave the hospital.

Not to be outdone, rival Anthem also closed its purchase of Aspire Health, one of the country’s largest community-based palliative care providers.

UnitedHealth keeps quietly buying up providers, pharmacies

With ample reserves, UnitedHealth is always in the mix when it comes to acquisitions. This year was no different. The insurance giant snapped up several provider organizations to add to its OptumHealth arm. In June, it was one of two buyers of hospital staffing company Sound Inpatient Physicians Holdings for $2.2 billion. It also bought out Seattle-based Polyclinic for an undisclosed sum. The physician practice has remained staunchly independent for more than a century.

Most notably, UnitedHealth is still in the process of closing its acquisition of DaVita Medical Group. DaVita recently dropped the price of that deal from $4.9 billion to $4.3 billion in an effort to speed up Federal Trade Commission approval.

The Minnesota-based insurer is also clearly interested in specialty pharmacies to supplement its PBM OptumRx. UnitedHealth bought Genoa Healthcare in September, adding 435 new pharmacies under its umbrella. Shortly after, it bought up Avella Specialty Pharmacy, a specialty pharmacy that also offers telepsychiatry services and medication management for behavioral health patients.

Centene invests in a tech-forward PBM

Perhaps in an effort to keep pace with Cigna and CVS, Centene has made smaller scale moves in the PBM space, investing in RxAdvance, a PBM launched by former Apple CEO John Sculley. Following an initial investment in March, Centene sunk another $50 million into the company in October and then announced plans to roll the solution out nationally. Notably, CEO Michael Neidorff has said he is pushing the PBM to move away from rebates and toward a model that relies on net pricing.

“You talk about ultimate transparency—that gets us there,” he said recently.

 

 

 

Anthem partners with Walmart to expand access to over-the-counter drugs

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Walmart sign

Anthem has entered a new partnership with retail giant Walmart to offer members access to over-the-counter (OTC) medications.

Beginning in January, Anthem’s Medicare Advantage members will be able to use OTC plan allowances to purchase medications and other supplies such as support braces and pain relievers, the two companies announced on Monday.

Previously, MA beneficiaries with OTC allowances could purchase medications through a catalog or by calling a designated number. Some members were provided a card they could use at a limited set of retail stores.

The new partnership significantly expands access to OTC drugs and supplies by allowing members to make purchases at any of Walmart’s 4,700 locations. 

“The program with Walmart will allow consumers to pick the shopping method that best fits their lifestyle and the initiative is expected to significantly reduce the out-of-pocket cost burden for those enrolled in Anthem’s affiliated MA health plan,” Anthem spokesperson Hieu Nguyen said in an email.

Walmart says 90% of Americans live within 10 miles of a Walmart. The partnership will also give members access to free two-day shipping on orders $35 or more.

“We believe that programs like this can make a tremendous difference for healthcare consumers who often live on a fixed income or are managing chronic medical conditions,” Felicia Norwood, executive vice president and president of Anthem’s Government Business Division, said in a statement. Sean Slovenski, senior vice president of health and wellness at Walmart, said the company is “thrilled to be working with Anthem to provide its Medicare Advantage members with convenient access to our broad assortment of high-quality over-the-counter products.”

Interestingly, the partnership comes months after Walmart was reportedly considering an acquisition of Humana. Slovenski, the former vice president of innovation at Humana, joined Walmart last month. 

 

Humana completes sale of long-term care insurance policy business KMG, at a loss of $790 million

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Humana has completed the sale of its wholly-owned subsidiary KMG America Corporation, in a transaction first announced in November 2017.

Humana has owned KMG since 2007.

KMG subsidiary, Kanawha Insurance Company, offers commercial, long-term care insurance policies and currently serves an estimated 29,300 policyholders.

Humana sold its shares in KMG for a reported $2.4 billion to HC2 Holdings, which includes Continental General Insurance Company, based in Texas.

In its second quarter earnings statement, Humana reported a $790 million loss on the sale of KMG, which is expected to close during the third quarter.

Humana said it would no longer have plans in the commercial long-term care insurance business.

Humana instead is closing on two transactions to acquire an at-home provider in Kindred at Home and Curo Health Services, which specializes in hospice care, according to the Q2 report.

Curo provides hospice care in 22 states. Humana and a consortium of TPG Capital and Welsh, Carson, Anderson & Stowe, purchased Curo for $1.4 billion, Humana announced in April.

Humana will have a 40 percent interest.

Also, this past June, Humana partnered with Walgreens Boots Alliance in a pilot to operate senior-focused primary care clinics inside of two drug stores in the Kansas City, Missouri area.

Revenue remained strong for the insurer, which specializes in Medicare Advantage plans. Its MA business in Q2 realized both growth and lower utilization.

While revenue remained strong, Humana’s net income dropped to a reported $684 million this year compared to $1.8 billion last year.

The insurer benefitted from a lower tax rate year-over-year as a result of the tax reform law and negatively felt the return of health insurance tax in 2018.

“Our strong 2018 financial results are testimony to the underlying improvement in our operating metrics, like Net Promoter Score, digital self-service utilization and call transfer reduction, and to the growing effectiveness of our national and local clinical programs,” said Bruce D. Broussard, Humana’s CEO and president. “Also, we took another large step this quarter in helping our members, especially those living with chronic conditions, by beginning the integration of important clinical services through our investments in Kindred at Home and Curo, and through our partnership with Walgreens.”