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Becker’s Healthcare Podcast
Medicare Advantage Faces Rare Decline and Rising Market Pressures with Jakob Emerson
00:10:18
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- [00:00]
A
This is Scott Becker with the Becker Healthcare Podcast. I'm thrilled today to visit with Jacob Emerson. Jacob's a brilliant writer, journalist, leader, thinker. He covers the pear world as well as anybody that I know. Just does an incredible job. Jacob, tell us what's going on in the world of payers and how it ties into the government shutdown and what you're watching.
- [00:24]
B
Yeah, it's good to talk with you, Scott. So first thing I thought I would mention for the audience is some interesting data and announcement from CMS late last month saying that Medicare Advantage enrollment is expected to decline next year, which is a pretty rare reversal for the program that everything that we've seen has expanded rapidly for the last two decades or so of its existence. So CMS projecting that total Medicare Advantage enrollment is going to fall by almost a million people nationally, dropping from about 35 million this year to 34 next year, which is, you know, again, it's a slowdown and a turning point for a piece of the market that for, for a very long time for insurers was a very big, profitable and competitive area. So that's something.
- [01:15]
A
Let me ask you, let me ask you a question about that because, yeah, that could come from two different directions. It could become, it could come from seniors not wanting as much to enroll in Medicare Advantage plans, but I don't sense that that's what's driving it. My sense is what's driving it is more of the plans cutting back where they're offering the plans because they're not as crazily profitable as they were during sort of the COVID period when medical loss ratios plummeted because procedures weren't getting done and so forth. So my guess is it's much about profitability and plans pulling back is about seniors having less demand.
- [01:51]
B
Yeah, no, it's exactly that, Scott. We're the macro forces here is that we're seeing rising medical costs in general, a lot more senior are coming back for healthcare services post pandemic. There's a lot more going on now on the federal side of things in terms of cost containment rules, more CMS oversight, more audits. And then there's that growing reimbursement friction that we've been noting these last few years between the insurers and the hospital systems. And so as a result of all of that, we're seeing these market exits going into next year. But we saw it also this year as well. We're seeing planned consolidations, selective retrenchment by both national and regional patients, payers and what's that what that is leading to is that in some states it's been described as a Medicare Advantage market collapse by insurance regulators. Some, some counties in certain areas of the country or some states in certain areas of the country are going to have large swaths of counties that have no Medicare Advantage plans available. But I should note that nationwide CMS has said that the vast majority, 99% of beneficiaries will still have access to at least one Medicare Medicare Advantage plan wherever they live. So most people will have access. But to your point, it's, it's the lessening of availability that is causing a lot of people to either not choose MA for next year or it's, you know, it's just, it's some of the, the trickiness with the, with the plan consolidation and how, how the data is actually counted. But overall they're expecting about 900,000 less people to be enrolled in the program, which again, it's a big turning point for, for a program that has been growing by millions of people each year over the last few decades.
- [03:27]
A
100% in a program that got up to about 54, 55% of Medicare, I assume now if you lose a million, closer to about 50%. I'm not sure what the exact numbers are, but it really is interesting. I think seniors are still all over the board as to whether they prefer Medicare Advantage or not. And then health systems and providers are not all over the board. They seem to be more increasingly negative towards Medicare Advantage. And the payers go with the flow. If there's money to be made for it, they double dine on it. If they don't think there's money made for it, they slow down on it. And the Federal government under Dr. Oz has wanted to push this further, but market forces are again now sort of fighting against them. It's fascinating how that's how that's evolved.
- [04:10]
B
Yeah, definitely the government wants to push it further. But I would also say on the flip side of that, it's nuanced. So, you know, we do know that at least rhetorically, the federal government has been pretty, has been continuing with what the Biden administration was doing in terms of reimbursement pressures on the payers and cutting some of those and then the audits and, or at least wanting to ramp up the audit of these plans, though there has been some, some pretty big stumbles there. And then I should also mention, Scott, you know, of course the largest payers, we've seen them cutting back in certain markets on, on ma, but it really is, it's it's the small regional players that are having the hardest time, which, it's nothing new, but it's the, the health plans attached to the health systems, it's the small regional Blue Cross plans, some of the nonprofit insurers that only operate in some states that, so those, those insurers are, or some of them are literally shutting down their entire Medicare business going into next year. Again, not a new trend, but it just really reflects how difficult it's been to, to continue operating in this space if you don't have national scale. And then I think, you know, just leading into the second thing I wanted to touch on with you today is this, this reimbursement friction that we're seeing not just in Medicare Advantage, but certainly a big portion of that is this. All around the country we're seeing the provider payer network negotiations get just more intense. And we've seen some really notable examples over these last month, few months so with UnitedHealthcare specifically, of course, they're the largest Medicare Advantage and commercial insurer in the country. And they're now out of network with Johns Hopkins over in Baltimore. And then they're out of network with all of Ascension's facilities in Wisconsin. So, and that's 10 hospitals alone, over a thousand physicians. And so that's really telling us that there are some significant financial pressures at play on both sides of the aisle here. And we asked, we were asking about this because we of course last week had our RCM conference and those are the hospital executives that are dealing with these issues firsthand. And a lot of them really, it was interesting to me told told us about that. In this time of extreme friction between these two industries, a lot of them are leaning more on personal relationships with executives on the other side. So literally the hospital, the RCM or the CFO executive calling the CEO or the president of the insurer they're having issues with and trying to have more personal relations to try to e. Get contracts in place or just little things, little margin increases that play to, to their side. So that was an interesting tidbit that we picked up that in a time of extreme financial tension that personal relationships are mattering more than, more than ever between the executives on both sides.
- [06:55]
A
It's fascinating, right? It gets back to actually doing business together as people, not just as numbers and really understanding how you could work together and sort. That's a fascinating, that's a fascinating, fascinating perspective and important particularly in the world of information overload. It talks how important in digital information overload Actually dealing with people and working through things is, I think that's just a fascinating take. So thank you for that. And, and you do have some plans. I thought Blue Cross or Healthcare Services Corporation was doubling down on Medicare Advantage. You do have some.
- [07:26]
B
Yeah.
- [07:27]
A
Trying to, to do more with it, right?
- [07:29]
B
Yeah. I mean at the end of the day, Scott, if you look at the, the long term projections of population demographics in the country and every insurer knows this, you know, the country's aging, it's getting older, we're every single day, I believe it's 10,000 people age into Medicare or become Medicare eligible. And so that's a massive business opportunity for the, in the decades to come, even if the current market is difficult, difficult to be profitable and sustainable within. So to your point, we are seeing companies, large Blue Cross parent companies like Health Care Service Corporation wanting to play that long game and purchase Cigna's Medicare business for $3 billion. Earlier this we talked to SCAN Group, which is a nonprofit out on the west coast and they really think that they want to pick up market share because they're trying to frame themselves as a, you know, the nonprofit that does, does Medicare. Right. Compared to some of the national players. We've heard that from some of the health system owned plans, some of the larger ones that have been able to remain successful in this space like Intermountain and Providence and then there's a few, few smaller Blue Cross plans that are still expanding in Medicare Advantage as well. So it really is, it depends on the market, it depends on the state, but I think overall the enrollment is shrinking here and the vast majority of insurers are not having an easy time in Medicare Advantage despite some of these outliers.
- [08:47]
A
Thank you very, very much. And Jacob, anything else? I mean we're watching this fascinating reversal of the trend of Medicare Advantage. Just a couple years ago it thought I moved to 80% of all Medicare enrollees and now it's going to go back to 51, 52% from 54% or about that. Anything else you're watching closely currently, that, that's top of mind for you.
- [09:08]
B
We're just keeping on top of the what's going to be going on with the enhanced ACA subsidies at the federal level. Obviously that's a big hinge point amid the government shutdown. You know, CMS still has a lot. Some parts of the agency are shut down, parts of it are not in terms of payer and provider disputes under the no Surprises Act. So we're just trying to keep on top of that. As well and seeing what policy either does or does not come out of this, this current situation in Washington.
- [09:35]
A
Thank you very, very much, Jacob, as always, a total pleasure visiting with you. Thank you very much for joining us on the Backers health care podcast. Yes. Watching how they resolve the shutdown and what it means for healthcare is just going to be fascinating to see where that, where they, where they close the gap or how they make that, how they fix that. At some point, both political parties will take enough stress on it that will drive some sort of movement towards finishing this government shutdown. It doesn't feel like today that it's going to be immediate, but at some point, yes, I assume that we'll get there.
- [10:08]
B
Yeah. Yeah. No, it's going to be interesting to watch. So appreciate you taking the time, Scott. It was good to talk with you.
- [10:14]
A
Always fantastic.