US Managed Care Industry – Trends & Competitive Landscape

Value-based care has been a topic of discussion for 10-15 years. It’s been a long time coming. Do you think the US healthcare system is finally fully embracing value-based care? Do you feel we still have a long way to go? If this was a baseball game, what inning are we in in terms of moving to a value-based care system?

What are the 2-3 prerequisites still needed to advance value-based care implementation within the US healthcare system?

The messaging is value-based care arrangements are complicated, and as they are rolled out, providers don’t always know what they’re getting into. Then providers can feel overwhelmed and want to slow implementation, especially with the other dynamics in play , such as the staffing challenges. If the value-based care model is going to advance, understanding there’s a steep learning curve, does it make sense prior to negative repercussions in a partnership including risk-sharing to allow for a multi-quarter phase-in. Only after a seasoning phase will the risk-sharing kick in. We should de-risk provider implementation to get them where we want to go, but we have to ease them through it vs jumping into a dangerous situation. Is that a practice that happens?

You would think the big provider systems such as HCA, Community and Tenet would have consultant/implementation teams as they roll this out across their national or regional footprint. Is that the kind of process that’s in place already, or are we still not there yet?

Do payers really care about the health of the providers, or do they see them as prey? It seems to me providers get the short end of the stick repeatedly. Managed care organisations are projecting increased utilisation, which they expect will drive up MCRs [medical cost ratios]. As utilisation ramps, there are two obvious outcomes. Either MCR increases and therefore profitability goes down, or managed care organisations are priming everyone for premium hikes. Ultimately, this is about the competitive landscape, because if a MCO tries to increase premiums too much, they won’t be competitive and will potentially lose membership. I want to tie that to the rising salary, wage and benefits that might be finally stabilising. Do the managed care organisations say, “We understand the pressures of the salary, wage and benefit inflation, given the tight labour market within the healthcare system. We need to increase our payments to providers on the commercial side”? Or is it the view is that’s the provider’s problem?

I’m hearing complaints about commercial Medicaid programmes, where states outsource the programme to commercial payers. I’ve heard complaints about commercial Medicaid reimbursement rates, and how that’s causing problems for providers. Is that something that you’ve heard?

Are there healthcare IT solutions that still need to be put in place? We talked about the executive decision-makers and when ideas look great on paper. A lot of progress has been made with the EMR [electronic medical record] push about a decade ago, and you mentioned ICD-10 [International Classification of Diseases 10th Revision]. What’s the biggest missing piece still required in the US healthcare system to advance value-based care? What’s needed?

On a scale of 1-10, where 10 is all-in and one is lip service, what’s your view on managed care organisations willingness to invest in preventative care?

GLP-1 [glucagon-like peptide 1] drugs such as Mounjaro [tirzepatide], Ozempic [semaglutide] and Wegovy [semaglutide] have enormous potential when you consider the number of people with diabetes in the world and embracing these drugs with respect to coverage at the current cost could break the system. Conversations between payers and drug companies should be taking place if coverage is going to be expanded, especially given the demographic tailwind with the ageing population and the connection to type 2, diabetes. I would think there has to be a compromise on price. Have you heard anything with respect to how managed care organisations are thinking about GLP-1s and how they could be potentially cost-saving at a certain price point?

I want to return to the idea of commercial payers subsidising government reimbursement. Research suggests there is a significant percentage of procedures reimbursed by Medicare and Medicaid at rates below the cost of said services. For the last 20 years Medicare and Medicaid seem to have benefited from commercial payers tied to this implied obligation, that commercial pays more and then providers are sustained by commercial payers. Given increasing competition and building momentum for value-based care and capitated contracts or risk-sharing, do managed care organisations have any influence to push CMS [Centers for Medicare & Medicaid Services] to increase its reimbursement rates? Or is this complicated by CMS being part of the US government where budgetary pressures abound? Are there conversations at the executive level between commercial and government where they’re saying, “We’re not going to carry your load anymore”?

At the start of the pandemic, Congress required Medicaid programmes to keep people continuously enrolled through the end of the PHE [public health emergency] in exchange for enhanced federal funding. Subsequently, Congress ended continuous enrolment as of 31 March 2023. Primarily due to the continuous enrolment provision, Medicaid enrolment grew substantially compared to prior to the pandemic. Naturally, the uninsured rate dropped significantly. Now we’re unwinding that continuous enrolment provision, and it’s expected to result in millions of people losing coverage. How could the unwinding of the Medicaid continuous enrolment provision impact managed care organisations? Which companies do you think are most exposed, with respect to membership and plan concentrations?

You brought up the ACA [Affordable Care Act] and risk corridors with the idea that you can’t turn people away for pre-existing conditions. In order for that to work, you have to make everyone participate and pay in, because otherwise you will see significant adverse selection. Of course that would collapse the system, so you have to have insurance coverage, but then under former President Trump, that requirement was removed, which is troubling. Conversations around managed care suggest uncertainty around whether the healthy 25-year-old demographic is coming back. Have we seen a good number of younger, healthier people exit insurance coverage?

What’s your view of utilisation trends in H2 2023 and into 2024? Do you believe that they’re going to keep climbing, given that we haven’t seen a pick-up as significant as some may have thought?

What do you think in terms of pricing around open enrolment? How competitive is that going to be, or will it be less price-sensitive where payers plan to hike premiums? What’s your view on that?

You believe managed care organisations are going to be very competitive on price. Does that foreshadow a more challenging environment for managed care, if payers are going to be ultra-competitive on pricing premiums, and yet there might be increasing utilisation? Does that bode well?