Oct 28, 2024

93 – Q3 2024 Healthcare Review | The Election Scenarios w/Emily Evans

Featuring: Vic Gatto, Marcus Whitney & Emily Evans

Episode Notes

In this episode, Marcus and Vic are joined by healthcare policy expert Emily Evans for a detailed Q3 2024 review. They discuss the rising challenges in Medicare, driven by an aging population and increased healthcare utilization, along with the growing costs in employer-sponsored health insurance. Emily highlights key trends such as Medicaid redeterminations and their impact on healthcare providers and insurers. The conversation also explores the effects of benefit costs on consumers and the potential implications of the upcoming election on healthcare policy, Medicare, Medicaid, and insurance coverage.

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Episode Transcript

[00:00:00] Marcus: If you enjoy this content, please take a moment to rate and review it. Your feedback will greatly impact our ability to reach more people. Thank you.

[00:00:17] Marcus: All right. Emily Evans, welcome back to Health Further. Um, Vic is out of town, so we're all on Zoom today. And, uh, it's October 15th as we're recording this. Um, United Health Group did their, uh, um, their public investor Report today. Um, and as always, we have you coming in at the end of one quarter, beginning of the next quarter to kind of give us, uh, just the, the theme that you are most tracking.

[00:00:46] Marcus: Right. And, uh, this time I think we're going to dig into this storm that is all things Medicare. It's, it's been the last week at, just so you know, Emily, last week at Nashville healthcare sessions, this was [00:01:00] basically the theme. Sort of the, the, the impending sense of doom around Medicare and the uncertainty around it.

[00:01:06] Marcus: Um, so you, you, I'm glad 

[00:01:08] Emily Evans: they're catching up. 

[00:01:09] Marcus: Oh yeah, no, I wanted to let you know that the industry is, is definitely getting the, the message about what's going on here. Um, but you've, you've got some good data points that we'll just all talk through and, and, uh, I guess I'll go ahead and share the screen and get this started and turn it over to you.

[00:01:24] Emily Evans: Okay, great. 

[00:01:25] Marcus: Let's let's start here with your overview of the consumer model. 

[00:01:29] Emily Evans: Yeah, and let me preface this by saying United Health Group reported this morning and one of the key takeaways was an increase in their benefit ratio, which means that people that they're. they're paying more for, uh, for their members, uh, to get, to get treatment.

[00:01:47] Emily Evans: Uh, and, uh, and, and they cited, you know, some problems with Medicaid and they cited higher utilization, but I actually think there's, there's a lot more at play here, which, which [00:02:00] actually would suggest not a, problem for a few quarters, but actually a problem that's going to stretch, you know, through the next, uh, decade or so.

[00:02:09] Emily Evans: Uh, and, and I've been talking about this for about a year, so I'm glad, uh, glad to hear the industry's catching up, because it is, uh, it is definitely a, um, a problem. Uh, a change. So what we do is we, we, we have a model where we keep track as best we can as to who's insured by, by what, how do they get their, their health insurance.

[00:02:31] Emily Evans: And, and this model is, you know, based on recorded data through June, Medicaid is a very much a laggard when it comes to reporting data. So we forecast that and that's. That's what the pink bars are to the right. We have real recorded data for Medicare on a monthly basis. Um, and this is, uh, through September and we have to model the Affordable Care Act, uh, marketplace and that's the, the, the dark purple.

[00:02:57] Emily Evans: Uh, and we model that based on, uh, [00:03:00] treasury receipts and, and some other tools at our disposal. Uh, but as, as you can see, uh, you know, health insurance coverage in America is extremely robust. Uh, it is, uh, you know, that you add up all those bars through August, you're talking about about 300 million people.

[00:03:21] Emily Evans: There's about 320 million people in this country. Um, some of their, some of that, uh, charts got duplication, you know, because if you're insured, uh, through your employer and you're on Medicare, you would, you would show up twice. But nonetheless, you have just an extraordinarily robust, um, uh, health insurance coverage, which of course is the goal, uh, and was the goal of our federal policy and a lot of state policies since, uh, you know, around the 1990s.

[00:03:50] Emily Evans: So a goal achieved, right? Right. Okay, so if we look at the next one now, there's a few trends I want to [00:04:00] talk to you both about, uh, that I think tell us that we are at an inflection point, and in healthcare, of course, inflection points could last for years, right? But, uh, but the better you, the, or sooner you know about it, the, the, the better you are.

[00:04:18] Emily Evans: Uh, although, you know, as I've learned not too soon, you don't wanna figure it out too soon. Um, but in, uh, one of the trends that became kind of clear in 2021, but I was waiting to see what 2022 data, uh, or, or what 20, 23 data would tell me. Um, and this is, um, this is a, a annual survey. Kaiser Family Foundation does.

[00:04:43] Emily Evans: We're going to see 2024 data this month, which, um, will help us know whether our trend that we're tracking here is, uh, is, is real, or is it, um, uh, is it something that is Yeah, is it a blip? And so if you look [00:05:00] at family coverage, um, and you see to say to the left of 2019, you can see family coverage and single coverage, the percent that the employee is asked to pay.

[00:05:13] Emily Evans: Kind of right there in line, right? Not perfect, but you can see the relationship. Beginning around 2019, but certainly by 2021 and 2023 with this dip in 2022, which I am told is a result of actuarial calculations due to utilization trends. This is a theme you guys are going to hear more about in a minute.

[00:05:36] Emily Evans: Um, the, the employer sponsored. Plan is trying to shift as much of its employee's family to another insurer. Now that could be a spouse who is working and is employed and will take that because, uh, because that particular, uh, employee plan is employed. [00:06:00] Is is more robust, like if you had a spouse working for the government, for example, um, or it's because, you know, they're just haven't caught up and you're doing a little arbitrage play.

[00:06:11] Emily Evans: Uh, we don't know, but you're definitely seeing a shift, uh, towards, uh, okay, we're going to, we're going to ensure the employee. We're going to provide great insurance for the employee. But your family is a little more on their own. We're going to make less of a contribution, uh, for your, for your family. Uh, this has the effect of kind of breaking a little bit of that social contract on which the whole premise of employer sponsored health insurance is made, which is, which is, you know, you're an employee, your family is with us, we're all kind of in this Social contract together and this is eroding that somewhat the Affordable Care Act family glitch rule Uh is is likely contributing to that which allows people if they can't be [00:07:00] insured by the employee the employer Um, there isn't a spouse who can pick up the insurance.

[00:07:07] Emily Evans: You can go to the affordable care act plans, uh, and, and use, use those, which is something we could not do before 20, uh, 21, when the Biden administration reversed, uh, the Obama administration's, uh, take on that. 

[00:07:24] Marcus: So 

[00:07:24] Emily Evans: next slide. 

[00:07:25] Marcus: And probably reversed. And the 

[00:07:30] Emily Evans: courts are going to reverse it. I mean, you had, you had a, uh, you had the, the, the justice department, I mean, you've got this, this file, you know, two inches thick saying you cannot change this.

[00:07:41] Emily Evans: And then Biden went and, and changed it and the courts will. tear that down. So, um, I'm mentioning it because it has, it's having this effect, but, but ultimately I think it'll, it'll, it'll be, those people will be stranded, uh, and they will either just have to, you know, [00:08:00] buy individual insurance, buy individual 

[00:08:02] Marcus: insurance.

[00:08:02] Marcus: Wow. 

[00:08:03] Emily Evans: Or employers are going to have to adjust. We'll, we'll, we'll see how that, how that plays out. And 

[00:08:07] Marcus: that's not a good, that's going to be something important to track because that would, that will be quite expensive for households. If, if in fact, You have to sort of go person by person in a household.

[00:08:18] Emily Evans: Yeah, that's, that's right. This is something else that we've been keeping track of because of the family coverage being, um, punished, if you will, by, by employers asking employees to pay more, uh, Share of that family coverage. What you've seen is a decline in 21 and then in 22 and again in 23, uh, uh, by the of the ratio of, uh, of employed to insured.

[00:08:52] Emily Evans: The District of Columbia being a very notable exception, the District of Columbia, of course, employs a lot of federal workers. Those [00:09:00] federal workers are typically two income families, and the federal health insurance program is extremely robust, uh, so you, you, you just don't see that kind of decline. But if you go and you look at, you know, say, New Hampshire or New Jersey, You've seen a fairly pronounced, um, pronounced decline in the number of people insured under a particular, uh, under a particular employer plan.

[00:09:27] Emily Evans: And again, it's the shift, get the family off of the employer's insurance, you know, take care of the employee. Uh, and, uh, and that, I think that's going to continue to be, uh, Uh, a challenge for, uh, for the affordability of health insurance, uh, simply because, you know, if you're, you're taking a bigger, if the employee has to pay a bigger share of the insurance, you know, they're more likely to go.

[00:09:52] Emily Evans: Nah, I can't do it. Uh, and, and, and roll the dice, uh, which is, um, which is unfortunate, but [00:10:00] that's, uh, the result of high costs. 

[00:10:02] Marcus: So I'm just eyeballing this chart, but it does look like quite a drop, um, in, uh, quite a drop in. California. Is that right? 

[00:10:11] Emily Evans: Yeah, that would make sense. 

[00:10:13] Marcus: California 

[00:10:13] Emily Evans: is, you know, such a heavily regulated state that insurance is high and the provider costs are so high.

[00:10:20] Marcus: Yeah. Um, and also looks like a, a not insignificant drop in, um, New York as well, 

[00:10:27] Emily Evans: um, not insignificant. Interestingly, uh, look at Utah. Uh, Utah's pretty tight. So Utah as it has one of the highest ratios of employed, uh, individual to, uh, to insured individual, because, you know, the, the influence of the Mormon faith and, um, and the size of the families, uh, and, and so they're, there's, they're sticking with their social contract, uh, in a lot of ways 

[00:10:55] Marcus: in Utah, they, they, they are, they're, they're very committed to their social contract there.

[00:10:59] Emily Evans: [00:11:00] Yeah, okay. So then, uh, so that, that's, that's the kind of the worries in the employer, uh, sponsored insurance commercial. And, and that's important because that's where the margin is for providers. Um, I will also say that's where the sclerosis is, right? Because provide, but employers just don't seem to want to, you know, innovate at all.

[00:11:22] Emily Evans: But, uh, but that's definitely where a lot of the margin is because it's commercial insurance. 

[00:11:26] Marcus: Can you, can you just say a little bit more about. Um, the challenge of the margin and commercial insurance and how that ties to the employers pushing, um, you know, families, uh, just by, by virtue of lowering their contribution to the, to the family plan.

[00:11:44] Emily Evans: Yeah. And it depends, it depends on where the family goes. All right. But, 

[00:11:48] Marcus: but 

[00:11:49] Emily Evans: if, if you typically an, an employee, uh, an individual in employed by, say, a self insured commercial plan, and that could be anybody employed [00:12:00] at a entity that says have over 75 people that, that would be, you know, a common, uh, common scenario.

[00:12:08] Emily Evans: Um, in that case, uh, what you're, um, what you're, you're, you're, you're doing is in that case, the the, The providers, when they're paid by that employer sponsored insurance, they're usually paid two times the Medicaid rate, sometimes three times the Medicaid rate. Uh, and it is where a lot of the margin happens in the provider space, particularly in the, um, amongst the hospitals, uh, where they will, uh, they will, don't ask me why, but employers will pay premium prices, uh, at at local hospitals for, for they're insured, and that's where a lot of the, the, you know, the bread and butter is for, for the providers in a particular community.

[00:12:54] Emily Evans: Uh, and so, sorry, 

[00:12:57] Vic: I'll, I think the reason why is [00:13:00] competitive labor markets, when they are competitive, It then swings to that they want certain health systems or providers in network, and so the ASO book ends up being more competitive than the commercial, than the recovery book. 

[00:13:18] Emily Evans: Um, yeah, but I would think that I would think that the way in which consolidation has happened that they would have been a like, you know, like the city of Nashville, you know, that's a huge plan.

[00:13:31] Emily Evans: Yeah. You would think that they would have done a better job of, of negotiating those rates, but, um, cause 200 percent of, you know, Medicare rate of the medic, it's a little egregious. Right? How about, how about 125% or 130 ? 

[00:13:46] Vic: Yeah, I, I just don't think that the, uh, network, the, the payers managing the a SO book on behalf of the employers.

[00:13:56] Vic: They're not incented like that. They want to make sure they [00:14:00] get, uh, I don't know, the Vanderbilt, uh, pediatric hospital in network, and then their customer, Nashville City Government, is not that price sensitive. Right. 

[00:14:12] Emily Evans: Yeah, that's the question is how long is that that going to endure, right? Um, but the, but the, the, the, that's in this industry, the, the setup is commercial.

[00:14:26] Emily Evans: Yay. Awesome. Right. Uh, Medicare. Okay. Medicaid and until certain changes recently were made, which which now allows Medicaid to compete more with commercial. But that's how the industry is, you know, always looked at the that mix of business, you know, becoming the case. 

[00:14:43] Marcus: But one, one final thing I want to say, and then you've got some other talking points.

[00:14:46] Marcus: I want to make sure we get to, but there is an interesting circular dynamic there where, um, This is exactly where the certificate of need and price transparency and all of those things that that, um, [00:15:00] limit the impact for competitiveness specifically at the health system level in communities plays to the disadvantage of employers.

[00:15:08] Marcus: And I feel like Because employers are not in the business of healthcare. They sort of outsource all this to brokers for the, for the most part. Right. I think that's the other thing. Lawyers are just not really actively playing this game. They're doing it out of necessity. Not because this is their fundamental game.

[00:15:23] Marcus: I think as the cost continues to go up, we might see that change, but, but they're going to lose, you know, in those negotiations because they're just not, um, they, they don't have a lot of optionality. Right. They don't have price transparency. And at the end of the day, as you said, the employer is in the position where, uh.

[00:15:45] Marcus: They are looked at because of the implied social contract as on the hook for this anyway, and providing what the employee wants here, right? So, um, so the only way out is not going to be [00:16:00] negotiating better rates. It's going to be changing what they're willing to do for the employee. 

[00:16:04] Emily Evans: I think that's right.

[00:16:05] Emily Evans: And, and I think the, the, um, the, I mean, how many CEOs do, you know, can't wait to talk about benefit expense, right? You know, they just, they just, that, that that's right down there in the SG& A line, please do not bother me about it. Right. Um, and, and they, they just, they, They just, just like, it never makes it to the C suite.

[00:16:25] Emily Evans: It stays in HR and they, they proceed to do whatever, you know, they, they need to do not to attract any, any attention from the, from the C suite. So, um, so let me move on to, uh, some of the crisis in Medicare, which, which actually is If I want to rank order the problems here, uh, Medicare is presenting us with some very significant, uh, issues, um, and then after that, somewhat Medicaid, but then finally, I would say that the, the, the, the [00:17:00] commercial and employer sponsored, uh, less so, but one of the things that happened in 2020, Uh, it is part of the Inflation Reduction Act, which passed in early 2022, uh, is that it redesigned the prescription drug benefit in Medicare, and in effect moved the risk of higher drug prices and higher, more expensive therapies, uh, you know, to the, um, plan.

[00:17:28] Emily Evans: It was originally with the government. So the government would pick up 80 percent in the catastrophic phase. So over at that time, you know, a 5, 000 deductible, it would move, they would pick that, the government would pick up, you know, that 80 percent in the plan, uh, would, would get the, have to pay, I think, uh, 15 percent in the manufacturer, 5%, which of course results in what?

[00:17:53] Emily Evans: You know, the plan saying, oh, let's buy the most expensive drugs we possibly can, you know, because we'll get, we'll get that patient up into the [00:18:00] catastrophic phase, and it'll be the government's problem, not ours. Well, that's flipped now, um, and the, the, the government is, is paying a smaller share, the plans are paying a larger share, uh, and the plans, uh, have to adjust for that, and one of the things that's been ongoing for a while, Is trying to get people out of the prescription drug plan standalone plan typically paired with traditional medicare Get them out of that and into a medicare advantage plan paired with prescription drug benefit uh, and you can see this kind of steady decline through 17 and 18 as the um as the the prescription drug plans provided incentives to get people to switch to a Medicare Advantage and PDP plan.

[00:18:47] Emily Evans: Uh, it, it, it was, it was, so that was just process. Now you see this vertical line in January of 2024, it makes it look like that's been reversed. Well, no, it hasn't. What happened was the federal employees, [00:19:00] um, Health plan moved its Medicare eligible, um, population onto the PDP, uh, standalone PDP plans. And that's, that's why you see that effect.

[00:19:10] Emily Evans: So the, the decline is going to be restored here as we, we move, you know, to the right. Uh, and, and what you're going to see is a continued decline. CMS has said, okay, we're going to do this demonstration because what's happening is premiums are doubling in the prescription drug benefit and we can't have that in an election year.

[00:19:32] Emily Evans: Um, so, uh, so they've come up with this demonstration. Which has got no basis under the Affordable Care Act demonstrations, but whatever, you know, maybe it buys them time until, you know, somebody stops them in early 2025 and maybe it works out, we'll see. Uh, but the fact of the matter is the benefit expense that is driving the doubling of those premiums is going to be It's not going anywhere, you know, [00:20:00] you can have a demonstration.

[00:20:01] Emily Evans: It's still going to be there, uh, when the demonstration is over or when the court and the court says you, you, you can't do that. This is an important problem because if you cannot get access to standalone prescription drug plan, or you can't afford it because it went from 50 bucks a month to 150 bucks a month, 

[00:20:21] Marcus: right?

[00:20:21] Emily Evans: Your options are Medicare advantage paired with PDP plan. Or, or, or nothing, you know, direct 

[00:20:32] Marcus: plus drugs or whatever. Right. I mean, 

[00:20:33] Emily Evans: yeah, right. Who's gonna, who's going to, you know, go with traditional Medicare without a prescription drug plan. The cost for a lot of people at that age level is, is the drug is, is the drug.

[00:20:45] Emily Evans: So, um, so this is the, you know, the progressives in Congress hate this because they do not want. And they don't want any incentives for Medicare Advantage. Um, and, and that's what they've actually created. [00:21:00] Nonetheless, so this is, this is a political problem. Um, it's certainly a benefit ratio problem, but it is first and foremost a political problem.

[00:21:08] Marcus: So, so we, so we have, um, on one end, we have the pressures of the star ratings, 

[00:21:16] Emily Evans: Yes, 

[00:21:17] Marcus: that are that are making Medicare Advantage a far less, um, attractive and maybe even palatable. You know, model for managed care organizations 

[00:21:27] Emily Evans: potentially, yes, 

[00:21:28] Marcus: right. And then potentially because it's still up in the air, how it's all sort of shaking out.

[00:21:32] Marcus: But it's not looking good. That's for sure, right? It's not looking good based on the last year of trends. Um, and on the other side, we've got this pressure coming in from the premiums on the PDP that is actually hitting the households directly. So they're going to be motivated and incentivized once they get those updates on what their premiums are, um, to move in the direction of Medicare advantage.

[00:21:56] Marcus: And some markets, there's going to be less options [00:22:00] there because we've had a rash of people exiting markets where they didn't have, um, significant share from a Medicare advantage perspective. So that's actually going to be a less competitive market with increased premiums, um, and probably increased premiums for the same or lower benefits.

[00:22:17] Marcus: So, so on the whole, um, it's going to be the, the, the American citizen that's going to end up losing, right? I mean, the, the, the, the, the payers will adjust their models. They will adjust their models. They will adjust their incentives or they will leave markets, right? They'll just decide to opt out entirely, um, where the margins don't work.

[00:22:37] Marcus: Ultimately, the loser is going to be, um, The 65 and over population in America, 

[00:22:43] Emily Evans: correct? Um, and that is, you know, it's a fairly politically active population, although I think one of the things we need to watch here in the coming year or so is exactly how, how much political [00:23:00] power they still have, 

[00:23:01] Marcus: right?

[00:23:01] Marcus: Because that's, that's shifting to the, the millennia. Go ahead, sorry. 

[00:23:07] Vic: Well, I don't know if I agree that, that the shift to more people using Medicare Advantage is inherently negative. I think it does make sense to the government is saying we want the payer, the underwriter to be responsible for the, The prescription costs alongside the medical cost and they're incentivizing this standalone prescription plan to not be as attractive to get people to move towards Medicare Advantage.

[00:23:37] Vic: And then simultaneously, they're trying to push the star ratings to be more, to have more teeth, to have more impact. Right. I think that in the long run will benefit consumers, the over 65 crowd. But it has to be, we have to have enough Medicare Advantage plans that there's coverage, that they exist in your market, wherever your market is.

[00:23:58] Vic: Is that the right [00:24:00] frame? 

[00:24:00] Emily Evans: And I, I think an important part of what you just said, you know, has to do with the, the long run. Um, because I think that the, the, this is a population, if you're say 75 and you're, you know, On a Medicare Advantage plan, or you had Medicare paired with a PDP plan. You've been getting some fairly robust coverage at a very attractive price relative to say, if you were 64, for example, okay.

[00:24:33] Emily Evans: Um, your drug benefit, a lot of it was picked up by the government. So, and you were incentivized to get great, the best drugs on the market because they were the most expensive and that's what your insurer wanted. Um, you're, it will get to the what's going to drive some of the benefit design and the premiums of Medicare advantage in a minute.

[00:24:54] Emily Evans: Uh, but those two are going to be under pressure so that you're going as a, as a [00:25:00] Medicare beneficiary. from an expectation that this benefit that you've been paying into for a long time is going to be, you know, freer, more free than what your, your employer, what you're buying on the ACA exchanges or whatever.

[00:25:19] Emily Evans: Um, and that's not good. That, that thesis is going to be stretched, um, and, and that I think is where the problem will exist is, is you're going to have some, some very unhappy people. And that's why CMS went and said, oh, we'll do this demo over the prescription drug plan because they don't want to deal with the political consequences of that.

[00:25:39] Emily Evans: But, but the, but the real, the real on the ground issue is that something that was free or almost free is no longer. It's not anywhere close to free, uh, which we'll get to, uh, on the rest of the Medicare thing if you want to flip the page there, Marcus. So Medicare population, [00:26:00] we knew that, we know this is coming, but we haven't been able to see it until really now, uh, with, or maybe last quarter when United Health Group started issuing some, some warnings.

[00:26:13] Emily Evans: And that is the. The population that is 65 to 69, those are people come into Medicare. They're still playing tennis. You know, they're, they might even be running marathons. I don't know. Um, but they're generally pretty healthy people. Okay. Um, even though they're, you know, over 65, uh, that population will still pay premiums into a Medicare Advantage plan.

[00:26:38] Emily Evans: Um, and, but not need a ton of services. Well, as you start to get older, and the big, the high cost bands are really 75 to 79 and 80 to 84, it's in that group where you see the most expensive utilization of healthcare services, more [00:27:00] frequency and more expensive care. Well, that population band, those two cohorts are growing.

[00:27:08] Emily Evans: And they're growing simply because in 1947, 48, 49, uh, you had this huge, you know, birth, you know, that's why they call them the boomers, right? You had a baby boom. Um, and that, that group of people turned 65, in, uh, in 2012 and on, uh, and now they're hitting their highest utilization period. United Health Group says on their call, oh, well, it's higher utilization due to pent up demand.

[00:27:39] Emily Evans: I don't think it's that simple. I think what's actually going on here is, yes, pent up demand, sure. I think that's a big part of it and it's been a big part of our thesis, but I think the other part of it is the population covered in Medicare Advantage plans is getting older and demanding more services.

[00:27:58] Emily Evans: Uh, they can't stay [00:28:00] 65 forever, and I can't stay 39 forever. So, so that's, and you can see these, how this is changing. Um, and 2020, it looks like there was an inflection point around 2017. But then another reflection point around 2020 and what we didn't see it. We couldn't see it. Why couldn't we see it because of the public health emergency and all this money flowing into the system.

[00:28:25] Emily Evans: And now, you know, really beginning sort of the end of 23 and now clearly, uh, based on some things, United Health Group is saying, and I don't think they're being entirely direct. I think they're telling you what they know. But I think they're probably missing this, this important demographic shift. And if you go to the next slide, I actually, 

[00:28:44] Vic: before we go to the next slide, I have a quick question.

[00:28:45] Vic: So boomers are, um, they started retiring in 2012. They're now something, turn 

[00:28:53] Emily Evans: 65 in turn 2012. I don't know if they retire, 

[00:28:56] Vic: but it started being eligible for Medicare. 

[00:28:59] Emily Evans: Right. It 

[00:28:59] Vic: looks to [00:29:00] me like the over 85, two categories have not really changed significantly. Is that because the boomers haven't aged into that cohort yet?

[00:29:10] Vic: The 

[00:29:13] Emily Evans: biggest bolus of, of, of, you know, the, that population is 1947, 48, 49, and then it starts to normalize in the fifties. Um, even though you call the boomer population 45, to 64, you had much more normal fertility patterns, you know, by the, by the mid fifties, you still had pretty large families, you know, that, that persisted into the, um, into the sixties.

[00:29:43] Emily Evans: But you definitely had a, um, had an unnaturally large group of, uh, uh, of, uh, children born in the, um, in that immediate post war, uh, period. 

[00:29:55] Vic: I guess the question is, are, is the, uh, the higher age cohorts, are [00:30:00] they going to start growing over the next few years where this might even be further exacerbated? Or could 

[00:30:06] Emily Evans: be, but I think what you, you know, you have natural mortality pressures there too, um, which, uh, which will have some effect.

[00:30:15] Emily Evans: And also, interestingly, if you look at utilization, medical utilization. Uh, it is pretty, it's not so high and, uh, on, on that 60 to 64 band. Um, and then, but that's 70 to 74 and 75 to 80 is where you see like a really chunk, for whatever reason, once you start hitting your late eighties and early nineties, there's less.

[00:30:44] Emily Evans: less utilization. So even if that population grows, the effect on the, the, the, the premium pressure because of utilization may not actually develop in the same way and apply the same pressure as the [00:31:00] population moves into these high utilization, high cost periods. 

[00:31:04] Marcus: Oh, I think, I think, I think there's two things there.

[00:31:07] Marcus: First of all, I mean, I, My, my parents are in their mid eighties. That's the silent generation. So the, so the boomers are not, are not in that band at all yet. When you get there, um, the decisions get different, right? Because A, you've already beaten the life expectancy actually by a good clip. Um, you know, at this point you've almost, you know, Beaten it by 10 years.

[00:31:28] Marcus: So the decisions become much more about quality of life. And you start having palliative care conversations, even if you're not on death's door, right? So you're not talking about a ton of utilization at that point. And Medicare really doesn't cover the palliative care offerings, right? So, you know, It just becomes more about, okay, you're going to live at home.

[00:31:47] Marcus: You're going to be in a nursing home, blah, blah, blah. But that's not really Medicare. Medicare is the, the inpatient heavy acute incident stuff. Um, and even on the, even on the home health, it doesn't cover very much there as well. It doesn't [00:32:00] cover those like. Final years that you're just sort of maintaining it.

[00:32:04] Marcus: Um, and so, yeah, it's, it's good. I would expect the seventies to be where the utilization of inpatient stays and things like that, you know, surgeries, stroke, heart attack, all would be the highest. That's, that's what. 

[00:32:17] Emily Evans: Yeah, then that's what we know from the H cups. Uh, data is, is that's where you see that kind of, uh, that kind of utilization and that kind of cost.

[00:32:28] Emily Evans: And then it starts to drop off once you get into the, uh, certainly by the mid the mid eighties. I mean, it gets to be kind of borderline unethical, you know, once you start getting into the, into the late eighties, cause you've already, you know, you've already, you're already playing with house money at that point.

[00:32:44] Marcus: That's that's right. 

[00:32:45] Emily Evans: Okay. So the, these are, this is the share, actual percentage share. And I think you can see the, the, the, first of all, you can see the inflection more clearly around 2019, 2020, which we completely missed because of the public [00:33:00] health emergency. Um, and that's those blue boxes. That's the 75 to 79 year old group.

[00:33:05] Emily Evans: And then the, uh, lighter gray, that's the 70 to 74 gray group. And you can see that inflecting up. But at the same time, you're 65 to 69. Those are the people who pay premiums, but don't actually use the services, um, that much. You could see there's a, there was a bit of a decline there in that, uh, 15, 16, 17 range, and it's really pretty flat with kind of a bias, uh, to the downward trend.

[00:33:33] Emily Evans: And what that means, of course, is that if you're a Medicare Advantage plan, the federal government, uh, but if you're a Medicare Advantage plan, you are going to have a lot continued utilization pressure simply because of demographics, uh, and that utilization pressure is going to translate into premium pressure.

[00:33:50] Emily Evans: Uh, which we are seeing now with the October release of, um, of plans, uh, which is, we're seeing higher out of pocket, [00:34:00] we're seeing benefit reductions, uh, we're seeing all the levers are getting pulled, uh, in order to, uh, in order to balance these, these things out. And again, this population has enjoyed a Very low cost insurance for a very long time and suddenly they're coming to face to face with with these, these realities, uh, which is, you know, a negative economically.

[00:34:25] Marcus: So Emily, just, just one thing. I mean, at the highest levels, the people in the healthcare industry are very intelligent people. Um, and they knew that this was coming, right? And so I, I think you can see that, um, There was going to need to be a shift somewhere in the overall payment model for how we were going to deal with Medicare.

[00:34:50] Marcus: We've been talking about this for a while now. Now the rate of change of the star ratings, obviously the courts did not feel that that rate of change was appropriate. [00:35:00] Um, but clearly we're just at the beginning of a lot of, um, regulatory changes that CMS is going to be forced to make with this trend line, right?

[00:35:11] Marcus: I mean, as we have, as we have this very large generation moving into the very high utilization years, making up a larger percentage than they have. And I think we're about to talk about just costs. You know, going up as well. Um, it's going to put more pressure back on the payers and the providers just because the government has to find ways to sort of cut this off.

[00:35:36] Marcus: I mean, the, you know, the, the, the punctuation here is the deficit is going to grow significantly. The percentage of GDP is going to grow significantly. Um, if there are not significant changes made to the Medicare model, I mean, that's, that's so, so it's, so overall the government, meaning the American population, um, you know, the American people will [00:36:00] lose by way of the deficit growing or the healthcare industry by way of the payers and providers will have to meaningfully adjust the way that they deliver care to this segment of the population.

[00:36:13] Marcus: The households are going to pay significantly more. And that, you know, Don't 

[00:36:20] Emily Evans: forget, don't forget, you know, you, you're, you have this unnaturally large piece of, you know, chunk of population. So once you get past 27, 

[00:36:30] Marcus: right? Yeah. 

[00:36:30] Emily Evans: You, you, your rate of growth in that population is really, is really going to get declined and you have until 2040, roughly.

[00:36:38] Emily Evans: to, to make some, some changes, to do something different, uh, and at that point you also have a political opportunity because the political power of this group of people, you know, will have, will have shifted. So, so that, that's the, that's the, the way out now. I tend to think that there's going to have to be some deregulation of this system.

[00:36:58] Emily Evans: I don't think there's any, I mean, [00:37:00] we, we've probably been saying this forever, you know, everybody hates the working in healthcare, they hate the healthcare system, but it's getting to an untenable position when you start seeing erosion of Medicare, uh, enrollment, doctors enrolling in Medicare, uh, you see erosion of that.

[00:37:17] Emily Evans: You know, um, the heritage, you know, one of the big practices here in town, uh, you know, they've got a lot of docs who don't take Medicare. Um, you know, there are in heavily regulated states, you know, getting a specialist on Medicare, very difficult. Um, and that, that problem is going to have to be solved. Um, and the only really, the only, you can either throw money at it, which clearly hasn't worked, or you can start saying, all right, I'm How do we, how do we allow people to go their own way?

[00:37:47] Emily Evans: So let's go back to the Medicaid slide real quick. And then I just want to talk about the, the pressures, the sort of United health group said today in their earnings call, Oh, you know, we're, we've got some timing [00:38:00] issues, uh, with, uh, with Medicaid, one of Medicaid, um, redeterminations took place over about a year.

[00:38:08] Emily Evans: Our data is saying it's pretty much done. Um, and, uh, and as a result of those redeterminations, you had, uh, healthy people who had jobs, whatever, leave, uh, the Medicaid enrollment. These are people who don't need a lot of healthcare services. And what's left behind are much sicker people. Uh, and so what united health group is saying, all right, we are, uh, we've got some timing issues where you have to kind of reset those capitation rates in order to accommodate these, um, uh, this new mix of sicker people.

[00:38:45] Emily Evans: Now, there are a few states that giving. Everybody a little bit of trouble and these are identified for the American, uh, community, uh, health insurance plan lobby group, um, Michigan, Minnesota, New Mexico, Pennsylvania, [00:39:00] Virginia, where they aren't resetting their rates, you know, they're not really catching up to this new population.

[00:39:07] Emily Evans: And they, they can lean on, um, models that the actuaries do, which are, include 20 and 21, where you didn't have a lot of utilization. Uh, and that is a naturally depressing these capitation rates, which is something United Health Group is struggling through. This will wash through. Um, by 2020 or the end of 2027, but it'll continue to be, I think, a bit of a, a, a problem for the Medicaid, for the insurers in the Medicaid space, especially as state budgets get stressed a little bit.

[00:39:43] Emily Evans: Especially ones that are dependent on sales tax because we're seeing less consumption, uh, and a number of other, uh, factors. So, I just mentioned that so everyone, so people understand. This is a little bit more of a simple timing problem. And I understand why you not use those words. [00:40:00] Sure. That's that's very fair.

[00:40:02] Emily Evans: Um, but but it's it's a little bit more um complex than that So if we go to the last side we can talk about you know We've got we got obviously pressure on premium pressure on the benefit expense, which is putting pressure on the premium So so that's coming from the insurers, right? Um, but at the same time the providers are experiencing resurgence in their hour hourly wage costs and You And you can see that uptick, um, in the last few months there on the far right, uh, and, and we've seen this translate into a lot, dramatically fewer job, job openings on a nominal basis on a percentage of employed.

[00:40:42] Emily Evans: It's still much higher than before the pre, uh, the, before the, uh, public health emergency. But, but, But you're seeing a fairly dramatic decline in, um, uh, in job openings that began around January of 2024, uh, and is, has, has accelerated here late in the year. [00:41:00] And then on top of that, the employment, uh, in the sector has, has, has very much, you know, on a month over month basis, you know, still high numbers, you know, running three and a half, 4 percent added jobs each month, uh, year over year.

[00:41:17] Emily Evans: very much. But, but still, um, but, but turning down a little bit. So, so we're seeing a little bit of a softness. Is that because insurers are going, boy, we can't keep paying for a lot of this stuff, or we can't keep paying the price. Is it because of the, um, wages? The answer is it's probably both. 

[00:41:33] Marcus: So I feel like the takeaway here is tremendous opportunity for innovation in Medicaid and Medicaid.

[00:41:40] Marcus: Holy cow. 

[00:41:43] Vic: Employer sponsored too, and everyone is. Yeah. Earning more than they would like to pay and having stress on the system. So Emily, maybe as we, as we sort of finish up, the election's going to happen before our next call. [00:42:00] It's looking, um, it's looking to toss up right now. I mean, various people will, will call it one way or the other.

[00:42:08] Vic: I, the only thing I've seen is the Senate seems likely to go Republican, to be Republican. Uh, which, 

[00:42:14] Emily Evans: that's almost, that's almost, that's a high, high likelihood. And 

[00:42:19] Vic: then depending on who you trust, uh, you know, you could say. Kamala or Trump or, you know, there's different, there's different views of it, but maybe just instead of making a prediction, give us a sense of if, if Democrats have the White House and we have a split Congress, or if Republicans have a White House with a split Congress, what should we be thinking about in healthcare?

[00:42:40] Emily Evans: I, and I don't want this to sound partisan, um, but, uh, the, the problem with a Harris presidency. It's not partisan. It's just the facts of policymaking. The Harris presidency's healthcare policy is based on the Biden administration healthcare policy, which is based on the Obama [00:43:00] administration healthcare policy, which is a derivative of the Clinton administration healthcare policy.

[00:43:06] Emily Evans: So essentially you've had very little evolution in healthcare policy from the perspective of the democratic party. Uh, for, uh, 30 years. Okay? And, and particularly the last, uh, 15. Okay, that and with Harris as the president, what you're going to do is continue to double down on those policies. That's what she said, which is preserving the Affordable Care Act.

[00:43:33] Emily Evans: There are some bipartisan things like price transparency. I think that that will continue to get done. Whether that affects anything, we will, we will have to see. But the, but the, the real problem I think is going to be that the, the policy, the regulatory system is protectionist for the sector. Uh, you know, and except for, 

[00:43:54] Marcus: except for 

[00:43:56] Emily Evans: pharma, except for pharma.

[00:43:57] Emily Evans: Thank you, Marcus. That's a good point. Pharma is, is [00:44:00] a completely different story and I don't think they really appreciate exactly what they're doing there, but, but that would 

[00:44:05] Vic: you say that the big thrust from Clinton to Obama to Biden to Harris has been getting full insurance coverage. 

[00:44:13] Emily Evans: Yeah. 

[00:44:14] Vic: And then a lot of federal support to the industry.

[00:44:19] Vic: Is that correct? Or would you say it's 

[00:44:22] Emily Evans: different? The way to think about it is if you were a politician, uh, after the war, 1950, you're Eisenhower or Harry Truman, uh, all of these countries were in Europe were establishing, you know, universal health insurance, pay for everything. And that became the ideal.

[00:44:41] Emily Evans: And that ideal has has dominated the vision and the thinking of the policy for uh for decades Um is is that a good ideal? I I don't think it fixed fits the american model particularly well But that's that's the ideal and and and the and of course the problem [00:45:00] with the ideal is there's no There's no catch on the upward pressure in in costs and and so yeah that 

[00:45:07] Vic: that and we're also You Approaching, checking the box.

[00:45:11] Vic: We're finished with that idea. I mean, we have 320 million people covered, 

[00:45:15] Emily Evans: right? Yes. And, and I mean, we mission accomplished. Congratulations everyone. All right. Now you have to figure out how we're going to like deal with the fact that the cross side is completely out of control. 

[00:45:26] Marcus: Yeah. 

[00:45:27] Emily Evans: Um, and, uh, and that is a, that really, 

[00:45:30] Marcus: and really the, the, the, the problem is that, um, I mean, there are, there are several things that when I look on both.

[00:45:42] Marcus: Both sides of the aisle when it comes to the presidency and for good reason, by the way, these are gnarly problems. I don't see any real solution because they're so the real solution is so politically unattractive and and maybe palatable, right? Because somebody's got to lose [00:46:00] big time to fix the cost issue, right?

[00:46:03] Marcus: Um, the free market. The free market will never commit suicide, right? Like it'll, it'll, it'll just leave a market or it'll charge more premiums or like, it will do what the free market always does. So it's not them. It's the, it's the, the households on the, on the large scale social contract, right? We might all have coverage, but the value of that coverage, I think is likely to significantly Deteriorate and, you know, what's interesting is, is Gen X might be the generation to actually take it on the chin.

[00:46:40] Marcus: Um, you know, we, we have, we, because by demography, we, we don't have the numbers to beat the millennials on it. Um, and. You know, we're, we're far enough out that I think the, what the boomers are going to do to the country from a financial perspective is going to be so devastating. [00:47:00] They'll just say, you know, that's, that's it.

[00:47:02] Marcus: You, you, you guys are on your own. 

[00:47:04] Vic: Well, I think that I agree with the free market does its own thing. I think Emily will know the facts. I think we spend something like 800 million a year in the administrative activity of reconciling all these payments. And you know, which is 20 percent a 15, 20 percent of the total cost.

[00:47:23] Vic: And that just seems like a lot of money to be spending on adjudication and moving things around. 

[00:47:30] Emily Evans: Yeah, it's the system is reaching an absurdity, right? You know, with, with the way in which, um, you know, you've got computers at the big insurance companies talking to the big healthcare providers, try each one, trying to figure out how it can get the bill through, you know?

[00:47:44] Emily Evans: Um, so it's, it's just sort of reached this absurd, uh, level. Um, but what I, I, I think that the outcome will be the same, which is when you think about a sclerotic system that doesn't work for [00:48:00] people, what do they do? They go around it. Find another route, you know, and, and the questions are right. How, what's that gonna look like and how is that gonna emerge?

[00:48:10] Emily Evans: Um, because it will emerge if we stay on this path. They will find other solutions. You know, you're right. Um, whether that's, you know, health, health sharing ministries, you know, is, is one example of that, uh, that hasn't really taken off like it could. But they'll find a way around it, not 

[00:48:30] Marcus: enough reason for it to take off like it could, right?

[00:48:32] Marcus: Not 

[00:48:32] Emily Evans: enough reason, reason to 

[00:48:34] Marcus: do it yet. Right. 

[00:48:35] Emily Evans: Yeah. 

[00:48:35] Marcus: I was, I was on a call earlier today and they were talking about, um, not being able to get an appropriate level of cyber security insurance. Right. And they were just saying, okay, you know, we're just going to self insure, like, you know, we're not going to pay for this.

[00:48:50] Marcus: Unnecessary substandard policy. And so, you know, you could look at, I think generally speaking, risk management is so under pressure, you know, [00:49:00] like, like what, what's going to happen in Florida, right. Uh, or, or so many places where you're just not going to be able to ensure your, your properties. What are people going to do in these situations?

[00:49:08] Marcus: I think Emily, you're right. People are just going to find new cooperative models to work around it. I think 

[00:49:15] Vic: So the dam, the dams, they're not going to be very changed. Uh, what about the Republican side? Is there any difference? 

[00:49:22] Emily Evans: The, again, not, I don't want this to sound partisan, but, uh, the fact of the matter is that Donald Trump hates healthcare.

[00:49:32] Emily Evans: He didn't mind going after the pharmaceutical companies. They became everybody's, you know, favorite. But this is not something he's in the weeds on. It's not even something he's interested in. You know, he is a, he is a international tariffs. Trade defense. That's this thing. Okay. Oh, borders. I put that in defense.

[00:49:52] Emily Evans: Um, he, he, that's his thing. Uh, so, so in terms of like original policies or whatever, [00:50:00] it's probably not coming from him, but It looks like he's going to hire or engage Vivek Brahmaswamy, who's a biotech executive and a venture capitalist, and Robert F. Kennedy, who has very strong feelings about the system.

[00:50:13] Emily Evans: Um, and, you know, and whether they're able to get something done. I don't know, but what they aren't probably likely to do is stand in the way. Um, so if everybody is saying, all right, I'm, I'm just not doing this anymore. If you're an employer, you're like, I'm not doing this. I'm gonna do something different.

[00:50:34] Emily Evans: Um, they're not going to get in the way. Yeah. Uh, and that that's a big difference. 

[00:50:39] Marcus: Look, I'm not that well read in, but I think both of them would be much more likely to focus on the FDA than CMS. So 

[00:50:46] Emily Evans: I, I, I tend to agree with you. Um, I think there is some, uh, some interest in, in a great example, star ratings.

[00:50:56] Emily Evans: Okay. Yeah. Star ratings. Star ratings. You get a higher star [00:51:00] rating if you prescribe statins for people with, um, high cholesterol. So check that box. All right. Statins are pretty controversial. All right. Um, 20 percent adverse effects, you know, in some cases, and, and, but you're building it into the system and what's happening.

[00:51:18] Emily Evans: People are prescribing statins It's not appropriate because they, they chase those star rates. So, so there is some, I think some role like that, that's pharma pharma adjacent, but there is, I think it'd be some role. 

[00:51:32] Marcus: Yeah. That's, that's pharma Jason. I mean, Vic, I, I only feel right in on this. Cause Emily, Emily and I talked about it.

[00:51:38] Marcus: Cause we're going to do a panel with the GNV CA, like the day after the election. In which there's unlikely to be sort of a clear answer on where we land. Um, but I think the big issue, as far as CMS goes, is really split government. That's, you know, like it's not about who's going to be in the White House, because neither side has a strong platform to [00:52:00] deal with just how gnarly this problem is, and the split government is also unlikely to resolve many of the issues, I would say.

[00:52:05] Vic: Yeah, so what, well, the, If Harris wins, it'll be a split government. If Trump wins, there's a chance it would be all Republican, right? I think I like It's 

[00:52:17] Emily Evans: possible the there's a number of house seats that i've been surprised to move to toss up Um, so it could be that the the the house is shifting, you know, a political campaign is like a wave So if you crest too early, you're a white cap And you're done if you crest too late you hit the beach after the election Okay, so your goal is to hit the beach on november the 5th And the and again not to sound partisan.

[00:52:45] Emily Evans: I ran three times. I know what i'm looking at Um right now the trump campaign is on the right trajectory. It has the momentum um So and if that is the case Here [00:53:00] three weeks out, you probably could have a, you not, you probably, I shouldn't say that. You could have all three, uh, branches go to the Republicans.

[00:53:10] Vic: Yeah. I mean, my, who do you maintains it? My simple assessment, which is not as good as yours is the Senate is likely gonna be Republican. And so you can't, you can't have. Uh, blue sweep, because the Senate's a Republican, and so it's likely to be split government, and there's a small chance that the Republicans could win the White House and the, and the House of Representatives, which would be all red.

[00:53:38] Vic: I think, for my professional purposes, I'd prefer a split government, but I, I don't get to decide. 

[00:53:46] Emily Evans: No, you, you're stuck with whatever, uh, whatever you get, but, uh, but yeah, 

[00:53:51] Vic: I'll vote in Tennessee and I'm not sure. 

[00:53:53] Emily Evans: It's, it, it is a, uh, it, it, my assumption or my, my assumption about the [00:54:00] House is being challenged right now.

[00:54:01] Emily Evans: Cause I, I thought it was going to be a sure thing Democrat, but I'm being, it's the thesis is getting stressed. 

[00:54:08] Vic: Yeah. I listened to her. Democrat kind of leaning podcast this morning who, who was worried about the house, but I think it's up in the air. It's unknown, right? Yeah, 

[00:54:19] Emily Evans: but I mean, Spanberger's, Spanberger's district, um, Abigail Spanberger, great, great moderate member of the house, uh, who departed.

[00:54:31] Emily Evans: She, it's in toss up and that, that should not be. She should not be toss up. She should be a, a, a D safety. So, uh, so I don't know what's going on, but it's not, it's not turning out exactly like I thought. 

[00:54:45] Marcus: Well, we, we have from the date of, of, uh, this recording, we have three weeks. So, uh, that's a lifetime that's so long.

[00:54:54] Marcus: I just feel like let's, let's not, I mean, Vic, the last time, you know, we were on, we were talking about how the, how the, [00:55:00] the, uh, The dock workers thing was, was going to go along with that night. So let's, let's, let's refrain from, from, uh, you know, too, too many predictions y'all. Cause I think the reality, it's a rollercoaster.

[00:55:13] Marcus: Nobody knows, um, where this is going to land. All right, Emily. Thank you. Sounds like health care either way. So it's good. Yeah. 

[00:55:20] Emily Evans: You know, I'm, I, I'm, I feel very comfortable with my job security in the meantime. 

[00:55:25] Marcus: Yeah. Same, same. I agree. 

[00:55:26] Emily Evans: Bye y'all.

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