Rae Woods (00:02): From Advisory Board, we are bringing you a radio advisory, your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods. You can call me Rae. In our last episode, I spoke with experts about the growing demand for senior focused primary care and one of the key drivers for specializing within senior care is the rise of Medicare Advantage. By the way, go back and listen to that episode, if you didn't already. In part two of our series, we're going to dig deeper into Medicare Advantage and understand its impact on industry stakeholders. To do that, I've invited two advisory board experts, Max Hackanson and Aaron Hill. Max, Aaron, welcome to Radio Advisory. Max Hakanson (00:50): Thanks for having us. Happy to be here. Aaron Hill (00:52): It's great to be here. Thank you. Rae Woods (00:54): One of my favorite parts about this job is that I get to showcase just how many smart strategic thinkers we have at Advisory Board. You both are actually new to the podcast, no pressure. How does it feel to be here? Max Hakanson (01:10): It's been a lifelong dream. Aaron Hill (01:12): I'm very excited, my first podcast, but hope to be the first of many. Rae Woods (01:28): I want us to maybe take a step back for a minute and I want to make sure that our audience is all on the same page. I don't want to assume that everyone necessarily knows what we're going to be talking about. What exactly is Medicare Advantage and how is it different from traditional Medicare? Max Hakanson (01:43): So Medicare Advantage is a program that's a public-private hybrid, which allows Americans who are eligible for traditional Medicare to receive their benefits through a private health insurance company, similar to how a commercial insurance company would operate through employer sponsored insurance. There are some big differences when it comes to the two programs. Some of the big things to call out are network design. In traditional Medicare, a beneficiary can go see any doctor that accepts Medicare, whereas in Medicare Advantage you have a limited network, similar to you would on a commercial insurance or employer sponsored insurance. That's one of the big differences. Another thing to think about is what's actually covered and both of them cover pretty much all medically necessary services. However, in Medicare Advantage, it covers dental, vision and hearing on most plans. Whereas traditional Medicare does not tend to cover those services. Rae Woods (02:43): I don't want to ask a silly question to start with, but why does Medicare Advantage exist? Why do we need something like Medicare Advantage over traditional Medicare? Is there a problem that it seeks to solve that traditional Medicare can't, besides considering that eyes and teeth are part of your body? Aaron Hill (03:02): Well, the program was started by CMS, I believe in 2003 with several aims. But the most fundamental are first to lower healthcare costs, spending by the federal government on older adults. The second is to at least maintain, if not improve health outcomes at that lower level of spend. The program has been around for two decades now, and there's some debates about how well it has addressed those, but that was certainly the reason to start the program in the first place. Central to it was the use of value-based agreements that is risk to achieve those aims. Rae Woods (03:47): You just said this, Aaron, but we've been watching Medicare Advantage enrollment numbers grow and grow and grow for many years now. I mentioned this in last week's episode, but Medicare Advantage is projected to hit 50% of Medicare this year. Why is Medicare Advantage booming so much, especially over the last couple of years? Max Hakanson (04:09): Yeah, there's a few big factors. The first is just clearly the demographic shift. My favorite fact to throw out in this space is that every single day from 2011 through 2030, 365 days a year, 10,000 baby boomers turn 65 and age into Medicare. Rae Woods (04:27): Oh my God. Max Hakanson (04:28): 10,000 every day from that 20 year period, that is a lot of lives to cover. So the big demographic shift is number one. The second reason is seniors really, really like the program. Over 80% of seniors say they're satisfied with the cost and the benefits. So it makes sense they're shifting there. Then lastly, it's a little bit of a self-fulfilling prophecy in that, so many new insurers are entering the space offering products that now appeal to different senior demographics. There's more and more plans chasing more and more people out there, so more people are headed into this direction. Rae Woods (05:01): Yeah, I mentioned this last week, but my parents both have Medicare Advantage plans. All the older adults in my life do. There was an awkward moment when I realized that my parents are clearly older than the guest parents that we talked with last week. But from my experience, they love it. Max Hakanson (05:18): I'll give you a counter. My mom actually turned 65 this year and did not go to the Medicare Advantage route. She had union sponsored insurance. She was a teacher beforehand, so she had benefits through that and went with the Med Supple route. It's a traditional Medicare with a supplemental product. Rae Woods (05:36): I want to come back to this number that I just mentioned, that 50%, does that milestone actually matter? It's clearly a big number, but does it actually matter for the healthcare industry if Medicare Advantage crests 50% of Medicare? Aaron Hill (05:51): I think it's significant for a couple of reasons. First of all, it indicates, as Max pointed out, how popular Medicare Advantage has become, right? It is a very fast-growing product and it's here to stay. Now we have half of the seniors in this country almost, are now in the program. That means Medicare Advantage will not, even if there is a bubble, even if they have some challenges ahead, it isn't going away. We are living in a landscape now with two kinds of healthcare for seniors. The second point, I think, too, is that as we've seen, if you follow any of the national politics around healthcare, issues about and around the Medicare Trust fund are increasingly involving comments and questions and concerns about Medicare Advantage. So I would say those are the two most important significations for that. Rae Woods (06:41): Yeah, because Aaron, you just said that one of the goals of MA and why the program was created was to save the federal government money. So it makes sense. We have to acknowledge the fact that politics is for better or for worse, getting embedded into conversations about the, dare I say, success of MA? Max Hakanson (07:02): Yeah, I think you're both right on the money in that 50%, we didn't just magically crossed that threshold, a bell rings, everything changes. Nothing actually changes since we hit that number but there will be more scrutiny. It's a bigger chunk of the population. The penetration rates now over 50 or will be about over 50%. So more people enrolled in Medicare will be on Medicare Advantage than traditional Medicare. That just means there is going to be more government scrutiny, more oversight over this program, and we definitely see it coming. Rae Woods (07:34): I think we're actually already seeing that scrutiny start to hit. Haven't there been a couple of big news stories around MA? Max Hakanson (07:42): Oh, there's always a lot of big news stories around MA, but especially over the last couple of months we've seen some policy proposals and some actually changes taking place. So recently the risk adjustment data validation audits have just went through and they removed the fee for service adjuster. This is a lot of lingo and a lot of jargon. Essentially, what this boils down to is the government is going to try and recoup some money starting from 2018, for plans overcharging the government, over coding. They're going to try and claw back some of that money from 2018, and that'll also be going into the future as well. So these are just starting to be some things that are going to claw away at the profitability, the margins in Medicare Advantage, making it harder and harder to succeed. There's still a lot of money there to be made, but it's not going to be as easy as it maybe has been in the previous decade to make money. Aaron Hill (08:37): Since it is my local Wisconsin congressperson who's in that article, so POCUS, his poor 90-year-old mother. We have recently seen a bill put on the floor of the Senate to try to remove the name Medicare from Medicare Advantage. That is due to broader concerns about the way in which Medicare Advantage is allowed to be advertised and sold as a product, relative to the way that folks end up in traditional Medicare. There are advertisements, many of you probably seen them extolling the virtues of Medicare Advantage by popular figures from the boomer generation, generally. Tom, the Tom Selleck's of the world. Of course, traditional Medicare is not allowed to advertise. (09:26): Also, there is some concern by folks who frankly, politically are more on the left, that there is a sense that seniors end up in Medicare Advantage thinking they're in something other than what they are, which is something more like traditional Medicare. But they find themselves in a private plan and hadn't really intended for that to happen. The debates, this bill won't go anywhere because the house is controlled by the Republican Party, which tends to be more supportive of Medicare Advantage broadly, but I think it's indicative of fights that are only going to heat up in the future, back and forth. Rae Woods (10:05): So the program is clearly popular. That's why we're going to be hitting this moment, this big number this year. That popularity is going to create more opportunities for scrutiny, like the two examples that you each gave. But I want to take a step back again, is popularity the same thing as success? Is MA actually accomplishing what it was intended to do when it was created? Max Hakanson (10:33): That depends on which stakeholder we're talking about. It's been very successful. For some stakeholders, particularly health plans have done exceedingly well financially in Medicare Advantage over the last decade. You could even argue for patients that patients have done quite well, they're very satisfied with the program and they keep shifting to it because they do tend to like it, not only- Rae Woods (10:56): Except for your mom, apparently. Max Hakanson (10:57): Oh, well there are some reasons why people do go into one program over the other. Attendings have to do with income level, but that could be a discussion for later. But I would say on the patient side, it's also clear that not only are they attracted to the program, but they stay. The retention rates are really high in Medicare Advantage. Once you end up on one plan, there's a good chance you're going to be there for the rest of your life. Rae Woods (11:21): What about the government though, right? I keep coming back to Aaron's comment about how this was intended to save the federal government money, especially in a time where we are thinking about that Medicare Trust fund not being that far away from running dry. Aaron Hill (11:36): Yeah. This is where it gets very complicated. Because remember MA was started as a demonstration program by CMS to see if using risk and embedding risk based contracts could lower healthcare span and at least maintain, if not improve outcomes. Well 20 years later, Medicare Advantage enrollees cost about $320 at least in 2019, more than traditional Medicare seniors do to the federal government. Now it's complicated why that's the case. They may be receiving more benefits, they may be receiving more services. But again, the original intent of Medicare Advantage was maintaining if not lowering cost and maintaining, if not improving outcomes. So there it gets more complicated for the government, but as you say, it's very popular program, it's not going away. So it's clearly popular with patients. What the government will do to try to align MA with the original intent of the program remains to be seen. But I think we'll likely see that in the coming five years. Rae Woods (12:37): What about providers? Max Hakanson (12:38): It varies on the provider front, depending on the reimbursement levels and agreements with the plans. Some are probably making more than they would in traditional Medicare and some are definitely making less. It really depends on the contract structure, but there is wide variance depending on their contract. Rae Woods (12:56): I know you said it depends on which stakeholder, but I actually also think that there's even more variability within the stakeholder landscape. Who is winning in MA right now? Forget about the stakeholder categories. What kinds of healthcare organizations are winning when it comes to MA? Max Hakanson (13:16): Large national health plans are definitely the big winners. UnitedHealthcare, Humana, those are the two biggest players in the MA space. They're doing very well. They control over 46% of all MA lives. Rae Woods (13:30): Wow. Max Hakanson (13:30): They're doing financially very well because of it. Yes, so they are doing very well. As well as, the other large nationals tend to be doing pretty well, Aetna, Elevance, formerly Anthem, those guys are all doing well. There are a lot of other regional health plans that don't necessarily have as big a slice of the Medicare Advantage pie, but the smallest slice they have, they're doing well with managing those lives and still making a good amount of money. So I would say health insurers overall have done well, but those top guys, the biggest of the big guys, are the ones that have done the best and succeeded the most. Aaron Hill (14:03): Smaller winners are also a lot of ancillary supporting companies like Papa Pals, for instance. So folks, organizations that have received a lot of those supplemental benefit money have actually done well. If you chart the popularity of the success of Papa Pals, it matches very closely to the increase in enrollment. Rae Woods (14:23): Wait, what is this thing you're saying? Aaron Hill (14:25): Papa Pals is- Rae Woods (14:26): That sounds like a Beanie Baby. Aaron Hill (14:30): Papa Pals is a company that provides social support services for older adults. This could be from helping mow your law to coming and just offering companionship. Loneliness is a very impactful comorbidity as people age. They don't provide clinical services, but they provide a lot of social support services. A lot of MA plans offer benefits in that direction, social support on the side. Papa Pals has been a major recipient of that money, Uber makes money that way. There's a lot of ancillary services that have benefited a lot from the spending on supplemental benefits by MA plans. Rae Woods (15:08): That was a big part of our conversation last week around senior focused primary care. Our colleague Sebastian. Gave this great example of a senior in the south benefiting from getting literal air conditioning and how that's not something that the traditional healthcare system would necessarily provide. But some of these extra services that are clearly impactful to the overall health of people, let alone seniors, becomes very important. That's one of the reasons why we decided we needed to have a larger conversation around MA. We'll be right back with more radio advisory after this short break. (16:45): There's one stakeholder that you haven't mentioned yet that I think might fit into this winner category. Tell me about the broker. Max Hakanson (16:53): Yep. Medicare Advantage is still primarily a broker dominated sales business. According to our interviews with Medicare Advantage executives throughout the country, roughly 60% of sales are still done through traditional brokers. These are people that sell different Medicare Advantage plans to seniors. So they might sell a United product, a Humana product, and a local Blues product. They're receiving a commission from selling these products from the insurer and they're really the primary info and knowledge source for seniors. A senior will walk into their door, they'll get educated by the broker on the different components of Medicare and Medicare Advantage, part A, part B, part C, part D. Then they'll try and figure out what is the best plan for a senior, which one has their doctors in network, has the right medications for them, has the right benefits for them? They're receiving commission from selling those plans. There is a cap on the commission so they can only be paid so much from the plans, but they have been doing exceedingly well, as more and more seniors age into this program and choose Medicare Advantage. Rae Woods (17:59): But that broker role is actually important because a senior is not choosing between traditional Medicare or Medicare Advantage. They have dozens, several dozens of options to choose from. Max Hakanson (18:11): In 2023, the average senior has 43 different plans to choose from. Rae Woods (18:17): Whoa. Max Hakanson (18:17): Let me say that again. 43 different plans to choose between and that's after the decision whether you want to go with Medicare or Medicare Advantage. So first they have to make that primary decision on which one's better for me. Then if you do go the Medicare Advantage route, you're choosing between all of those different plans. We hear over and over again that seniors are really confused about Medicare Advantage and the different pieces of it. So asking them to realistically compare 43 different plans is just not viable. It does not make sense. So it's the broker's job to whittle that big number down to just a couple plans to actually show the senior and help them select a plan. Let me give you another stat in this area. In 27 counties in the country last year, seniors had a choice of 75 or more different Medicare Advantage plans. If that's not out of control, I don't know what is, that is a crazy amount of plans. Rae Woods (19:10): But certainly speaks to the booming market that we have with Medicare Advantage and it sounds like in general, the health plans are doing okay. They're in this kind of winner category. We certainly see the biggest health plans and the national insurers maybe being at the top of the pyramid there. But it sounds like despite the number of options, health plans in general are doing okay. Who's on the losing end? Max Hakanson (19:37): There's definitely been some big winners, but there's also been several plans that, I don't know if you want to call them losers but have not done as well. I would say the Blues plans in general, have historically been very focused on the commercial population, show a younger, healthier population. They've struggled a little bit to get into MA because it's a very different population to manage. They didn't have the care management procedures, they didn't have the extensive infrastructure, especially around data and reporting that you need on the Medicare Advantage side. So they've been slower to get in. They've been increasing their enrollment numbers and getting better at it, but I would say they were slow to adopt it. There's also a whole group of what we call InsurTechs, often called disruptors as well. These usually have venture funding money and they tout all sorts of new digital convenience, personalization. (20:31): Those are a lot of the words you'll hear connected with them. Even though they get a lot of attention in the news, they have been doing very poorly financially over the last few years. We're talking about companies like Bright and Clover, in particular. These are publicly traded companies that have been blowing through capital and are barely solvent at this point. Realistically they've been trying to grow way too quickly at the cost of profitability. So we've seen in the last year they've announced plans to try and shrink their offerings and focus more on profitability, than just flat outgrowing your enrollment numbers. Aaron Hill (21:06): Yeah, it's interesting also to think along those lines about the struggles or the mixed experience that providers have had in these situations. Just to throw another number out there that I think is important to keep in mind is that, only 60% of MA money is actually in risk. I think people sometimes think that MA means risk and traditional Medicare means fee for service. Rae Woods (21:31): Yeah. Aaron Hill (21:32): The fact is it's a much more blended environment, increasingly on the traditional Medicare side but for sure, on the Medicare Advantage side. Often payers will hold on to a lot of that risk themselves, contract out with providers through a classic fee for service model or maybe with some quality metrics involved and keep a lot of the risk money for themselves. Providers have, I think, faced very, very broadly, a choice between do we want to stay in fee for service and then maybe miss out on some potential financial incentives there that the payers are often reaping? Or do we want to try to engage in some of that risk ourselves? And if so, I think Max might have mentioned this, there is a level of data gathering that is new for a lot of providers- Rae Woods (22:23): And really hard, yeah. Aaron Hill (22:25): ... Hard. There's no experience there. All the reporting, there's not a lot of experience. Providers I think have had a more mixed experience with MA in that respect. Rae Woods (22:34): So the biggest thing that I'm hearing from you two is that success isn't necessarily guaranteed. Even though the market is ginormous and it feels too good to ignore some of those numbers that Max was sharing at the beginning, success is not necessarily guaranteed. So I want to talk about plans for a second. What do Medicare Advantage plans need to do to be successful or maybe remain successful? Max Hakanson (23:00): So really the first thing is standing out amongst the crowd. I talked about those 43 different plan options that a senior has. How are you going to be those one to three plans that a senior's actually choosing between? The first two things always most important, is their doctor in network, especially their primary care physician? Seniors have long-term relationships and will not switch. If it means having to switch doctors, they won't go to your plan. Secondly, cost more and more $0 premium MA plans have become available, so it's been the lower cost option. But then you look at some of the smaller factors, you look at things like supplemental benefits. We know CMS expanded what could be considered a health related benefit in 2019. So now we've seen an explosion of supplemental benefits and that's one area plans have used to try and stand out amongst the crowd. Aaron, what do you think? Aaron Hill (23:51): I largely agree with that it's a challenging environment as more and more folks get in there. I would also keep in mind to Max's mother's point earlier, that despite the breadth of MA plans available to everybody, 50% of older Americans are still choosing traditional Medicare. There's reasons for that. So despite all the success of Medicare Advantage, which is undeniable and it continues to grow, keep in mind that half of the folks take a look at those 48 different plans and choose traditional Medicare. So there's plenty of work to be done I think, as plans try to continue to expand in areas that are maybe more resistant to Medicare Advantage. Max Hakanson (24:31): One other key to success, and really this might be the most important factor, is how you're doing when it comes to coding and star ratings. That is going to determine what your bonuses are in Medicare Advantage. You get a one to five star rating. If you have a four plus star rated plan, you get bonuses, higher going to those five star rated plans. Medicare Advantage is very much a positive feedback loop. If you're doing well when it comes to coding and getting better star ratings, you can reinvest that money you're making into better benefits and then you can reinvest that money into better marketing. So it's really a positive feedback loop. If you're doing well financially, you can invest in your plan to make it look better in the future. So it really is this positive feedback loop keeping the incumbents that are at the top, at the top. Rae Woods (25:18): Earlier in this episode, I asked if MA was accomplishing what it was intending to do? My question now is what would you change moving forward for Medicare Advantage to actually live up to its goals for all stakeholders? Aaron Hill (25:33): That's a question that is going to be increasingly asked as the Medicare Trust Fund becomes more and more stressed. We can look at the federal government right now as a guide here for what we expect probably will happen. First of all, we've just seen the legislation or the regulations around the risk adjustment. There's probably going to be a bit more scrutiny there. The penalties are going to probably be a bit more severe. They're not going to be so onerous that plans will get out of the business, but they're going to be enough to have a bit more of a bite. I would also expect that there's going to be increasing scrutiny at the outcomes for that cost. So of all the various analyses of health outcomes, there's not a clear distinction between MA and traditional Medicare, in terms of health outcomes. There will probably be increasing pressure, or at least a tighter gaze on Medicare Advantage plans. Say, "Okay, you cost a fair amount of money, can you demonstrate better health outcomes for that spend?" My guess would be on those two fronts, we'll see more scrutiny. Max Hakanson (26:37): And it's interesting because I'm seeing conflicting reports come out pretty much every month about which program Medicare Advantage or traditional Medicare is more expensive, which one delivers higher value services? Obviously the AHIPs and the insurance backed companies of the world are saying Medicare Advantage is the better program. Then the government companies like Medicare Payment Advisory Commission, MedPAC says the exact opposite thing saying, traditional Medicare is less expensive. We really do need better data in this space to really know which program is better. One interesting report that just came out from Kaiser in late 2022, that was talking about how Medicare Advantage beneficiaries are more likely to receive immunizations and regular checkups than traditional Medicare beneficiaries. (27:27): The services they're receiving we do think tend to be better value service ads but the cost still is a big question. To Aaron's point, I think he's totally right. More oversight is coming. They're already going to make it tougher when it comes to risk adjustment, already crackdowns on marketing. I think we're seeing a crackdown on how easy it is to get high star ratings. I think that's already coming. There's more focus on consumer experience in those star ratings trying to actually bring down that number and focus in on more important components. I think those are just a few of the changes that I'd expect to see coming. Aaron Hill (28:04): The Biden administration has signaled in the last year and a half how important health equity is, as part of their overall healthcare project. They are certainly looking to MA now that it has 50% of the seniors involved in it, to really demonstrate that they are able to improve health equity. CMS is running its own value-based programs. It's called the Medicare Shared Savings Program, which contracts directly with providers to do exactly that. It's like an ACO program basically, but just for seniors. MA has competition on that front and the current administration is very keen to see some changes there for the better. So I would keep an eye on that one as well. Max Hakanson (28:49): Aaron, I'm glad you called that out. Specifically because they recently announced a proposal for 2024 changes to Medicare Advantage, and one of them would be a health equity index that would be impacting the star rating scores. That wouldn't actually take effect till 2027, but they would have to start gathering that data starting in 2024. So that's definitely something that we're watching and likely will be coming eventually. Rae Woods (29:17): So the Medicare Advantage story is clearly complicated. It's complicated depending on which stakeholder that you're talking about, and it sounds like it's actually going to get more complicated going forward. We're going to see more scrutiny. We're going to be looking for whether or not it's actually successful in some of its previous goals and its new goals, like health equity. I actually want to push you to give us a takeaway before we close this episode. What in your mind is the most important thing that health leaders need to know, regardless of what part of the healthcare ecosystem they fall in? Max Hakanson (29:49): Medicare Advantage is still a huge and tremendous opportunity just due to the number of lives and the amount of money in this space, but it's not going to be as easy to succeed as it may have been over the last decade. There's more and more players vying in this pie of money, and the government is coming down with more oversight. There's going to be lower margins than there would, companies are going to get squeezed out, there's going to be more consolidation. So there's huge opportunities still, that's not going anywhere, but it's going to be more challenging to succeed than it has been. Aaron Hill (30:23): Absolutely agree with everything Max has said. I would add that in honor of the 50% threshold, folks in the senior care landscape need to acknowledge that for the foreseeable future, seniors will have two somewhat different approaches to organizing their healthcare. That's just going to be the facts of the senior experience in healthcare for the foreseeable future. So my takeaway would be this is the lay of the land now. Learning how to navigate and negotiate two fairly different systems for stakeholders is going to be essential to succeed in this environment. Rae Woods (31:01): And for adult children like us. Aaron Hill (31:04): Yes. Rae Woods (31:04): Well, Max, Aaron, thanks for coming on Radio Advisory. Max Hakanson (31:08): Thanks for having us. Aaron Hill (31:09): It's a pleasure. Rae Woods (31:15): That was our 150th episode of Radio Advisory, and like I said at the beginning, we love having guests on our podcast. In fact, Aaron and Max, there our 116th and 117th guest on Radio Advisory. Because whether you're getting in-depth knowledge from advisory board researchers, or you're hearing from collaborators across the industry, remember as always, we're here to help. If you haven't already, I want you to go back and listen to last week's episode about senior focused primary care. As always, you can find a ton of resources on advisory.com. If you like this podcast, please share it with your networks. Subscribe to Radio Advisory, wherever you get your podcasts, and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods, as well as Katy Anderson and Kristin Myers. The episode was edited by Dan Tayag with technical support by Chris Phelps and Joe Shrum. Additional support was provided by Natalie Trebes, Sarah Hostetter, Miriam Sznycer-Taub, Jared Landis, Mallory Kirby, Carson Sisk, and Leanne Elston. (32:32): One more thing, the podcast team wants to know how we can make Radio Advisory better for you. So we created a listener survey. You can find that link in our show notes, or you can go to advisory.com/podsurvey. Please take our survey and let us know what you want to hear on Radio Advisory. Thanks for listening.