As of July of 2021, 28.6 million Americans were covered under a MA plan provided by one of several insurance companies. That is an increase of 41% from just 2017. One of the largest insurance companies in America noted that 200,000 of its members are turning 65 every year. If 50% of those chose to stay with the insurer, it becomes a guaranteed growth opportunity. In fact, the stats for the industry forecast a compound annual growth rate (CAGR) of +6% just being in the business with CAGR of +10% when done efficiently. The ratio between Medicare and MA beneficiaries is further expected to grow and we anticipate it could reach over 60% of Medicare beneficiaries in the next 10 to 15 years.
Recently, we have observed relationships being established between companies not in healthcare with those providing delivery of care. One of the most famous of these “partnerships” is between ARRP and UnitedHealthcare (UNH). Now we are seeing retailers and even grocery chains getting in the act. As healthcare becomes more consumer driven versus employer driven, these relationships will likely expand. During open Medicare enrollment, a window soon to open again in November, the new Medicare beneficiaries, as well as existing ones, will be able to make choices between Medicare and MA, with the ability to switch between plans, or even payer companies that are being marketed on our televisions in a mind-numbing amount. MA is not just growing but growing faster than traditional healthcare insurance. Since 2014, MA has grown at a rate of 7.3% while the traditional health insurance has grown only 4.7%. All the costly television commercials are indicative of something….!
This summer Anthem, Inc. (ANTM), the largest for-profit managed healthcare company in the Blue Cross BlueShield Association, recently announced a plan to launch a MA program with the supermarket giant, Kroger, in the Greater Atlanta area. We have also seen Walmart partnered for a brief time with Clover Health and now Walmart has cobranded a Medicare Part D (drug plan) with Humana. However, the most lucrative partnership of these is the ARRP / UNH – clearly, Humana is playing catchup.
The interesting part of the Anthem deal with Kroger is that this is also a huge opportunity for the food or supermarket chain that has 2,300 pharmacies and 200 clinics. The supermarket sector had been growing by less than 1% since 2014.
On the others side, we have CVS who also owns Aetna, a very large health insurance company. CVS has clearly recognized the play in MA and the importance of the real estate component. So, CVS has begun matching its real estate and customers with existing clinics leveraging both their retail real estate as a magnet. Don’t underestimate the value of real estate in all of the MA business – CVS, UNH, HUM are all heavily leveraged in real estate along with MA. Telemedicine is an important component; however, it will not eliminate the need for in-person office encounters and will never eliminate or even reduce the need for the physician office in the next 10 to 15 years.
In the end, what we see developing is a “new” Consumer-driven Healthcare in which the more profitable companies not only own their real estate, but also their technology and provide a consumer, or patient, a new experience fashioned around their needs and not that of the provider or payer. The evolution of this new healthcare business model will drive a shift in the medical records that will place them under the control of the patient – a Universal Medical Record System. In turn, this will open the door to greater quality of care and provide the means to reduce the cost of healthcare delivery substantially. We believe that the opportunity for companies that seize this vision and implement the tenets of MA/physician practice, ownership of real estate, and their own technology and IP will be the new leaders in the 2030 Healthcare revolution.
More on Medicare Advantage and Consumerism in upcoming blogs.
-Noel J. Guillama, Chairman