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Hello, everyone. This is Jacob Emerson with the
Becker's Healthcare Podcast.
Thrilled today to be joined by a very
special guest.
George Halverson is the chairman at the Institute
For Intergroup Understanding.
George served as the CEO and chairman of
Kaiser Permanente from 2,002
to 2014.
He previously served as a chair of AHIP,
and he was also CEO of Health Partners
in Minnesota.
George, thank you so much for taking the
time to be with me on the podcast
today.
Well, I am delighted,
to be on the podcast. You you folks
do a lot of good work
and,
have a lot of credibility
in the world. So I I think that,
I'm interested in actually,
helping you
maybe understand
an important and relevant topic on
that most people in the media are missing
right now.
So
thank you for giving me the opportunity and
the time and space to do that. Yeah.
Absolutely. Well, we're we're excited to have you,
and we're we're here today to talk about
Medicare Advantage.
Obviously, a huge topic and a lot of
big changes,
in the next few weeks for seniors all
over the country. But before we dive into
that, hoping you can tell us a little
bit more about yourself, your background in health
care for those that might not be familiar,
and what it is that you're doing today
at the Institute For Intergroup Understanding.
I actually have
spent
quite a few years running health plans,
health plans and hospital systems.
Kaiser Permanente
is a vertically integrated health plan clinic system,
also a hospital system. Health Partners is also
a vertically integrated care system and hospital system.
And so I've spent a lot of time
working
with systems,
financing,
customers, and and basic
health care delivery and financing for for quite
a while.
And,
one of the things that
I've worked on in in,
both of those settings,
was
financing of the Medicare program.
We, by the way, both of those settings,
we computerized everything. We were completely and totally
electronic at both Health Partners and Kaiser. We
we did,
the biggest epic implementation
on the planet at the time we
did it at Kaiser,
a $3,000,000,000
total project,
and it worked extremely well. We went to
a care system. It was completely and totally
electronic at every level.
And then we added to that, made it,
accessible to patients electronically.
And so during during COVID, Kaiser actually had
about 80% of patient visits
done electronically and and did it without even
blinking because it was all the system that
was already in place.
So I've been in the systems world for
a while. I've been in the
computer
rollout
world for a while.
And in the Medicare Advantage world, I go
way back because the
very first Medicare contracts that were done with
a 95%
capitation
level were actually
pilots in Minnesota.
And Paul Ildwood and I actually went to
Washington and negotiated those first
95%
contract decades ago.
So this is not a new
field for me, and I I think that
we included
Medicare Advantage in the Affordable Care Act
when we put the process together so that
it could actually
finance
Medicare
and create a care system for Medicare that
had
lower costs,
better care, and better benefits,
and that has been fairly successful. Medicare Advantage
is now over
half of the population of the Medicare.
It's been growing on
a steady pace, and we're we're now at
the point where
not only is Medicare Advantage,
the majority of members for Medicare,
it's 70%
of the African American
members of Medicare.
It's 80% of the Hispanic
members of Medicare,
and it is 90%
of the lowest income members of Medicare.
And one of the thing I've been very
critical of MedPAC because MedPAC refuses to,
discuss in their
materials the income levels, the
care improvement processes
that happen in the various
care settings. And what is absolutely true
is that we have all of those low
income people in Medicare Advantage
because the care is so much
better,
and it is a lot cheaper.
And right the way we finance
Medicare
Advantage
is we take the average cost
of Medicare
in every county
and then every year, the plans bid against
that average cost.
Those are real numbers. They've been around for
a very while, long while.
Everybody knows what those numbers are. The plans
all bid
below
the average cost of Medicare every year.
And the reason they bid below the average
cost of Medicare every year
is because the care is so much
better
in the plans.
The plans
know that you can reduce diabetic blindness
by 60%
by managing the blood sugar of patients.
Absolutely.
So
all but that's the number one goal, quality
goal in the Medicare Advantage quality program is
blood sugar management.
So we built that into the system intentionally
to achieve that goal,
and it's much
cheaper
to actually manage blood sugar. And,
congestive heart failure, another example.
The plans
all identify who's at high risk of congestive
heart failure, and then they work with those
patients
and bring down the cost of their
care and their admissions, and they cut those
admissions by over 40%.
Absolutely. And amputations,
I'll I'll just do the amputation real quick
and we'll move out. But the amputation thing
are amazing. The we do way, way,
way too many amputations in this country.
90%
of the amputations
are caused by
foot ulcers.
90% by foot ulcers.
And we know that you could reduce the
foot ulcers by 60%
with clean socks
and dry v.
And so the plans all do that So
the rest of the world has a much
higher rate
of of foot ulcers.
Over a $100,000,000
is spent by Medicare on foot ulcers right
now each year.
The plans
have a very low number of foot ulcers,
and they have very low numbers of amputations,
and that is a lot cheaper. And so
the plans bid 18%
below the cost of fee for service Medicare,
and those are real numbers because
they manage
the foot ulcers
of the
patients. Yes. And your points are so well
taken, George. We've seen study after study showing
that Medicare Advantage patients do see better health
outcomes compared to fee for service Medicare across
a wide variety of of conditions.
To your to your earlier points, a majority
of Medicare Advantage members, as of 2024
are are making less than $25,000
a year, so they are low income. It's
a very diverse
program.
I don't have the exact percentages, but we
know 2024
is a lot of black, Latino, and and
Asian Americans enrolled
in this program. Then you also mentioned earlier,
it is it is now the majority of
the Medicare population. As of this year, Medicare
Advantage now makes up 55%
of of the Medicare population. That's almost 34,000,000
people. So Yeah. I think my my natural
question for you is during your time leading
some of the the nation's,
most largest,
integrated health systems, both being the the hospital
and the health plan, how did that experience
shape your views on the Medicare Advantage Program
going from being there from the beginning of
the program until to where it is today?
We
very much appreciated the capitation cash flow,
because when you get a capitation amount per
patient, then you can use that resource to
manage care
of the patient. And Kaiser
did spectacular work in
reducing
all of the complications of diabetes
and
chronic conditions.
It has very low level of diabetic blindness
because of that. And so I total I
love that. I strongly encourage that.
And what makes me a little crazy right
now is that there are people at MedPAC
and some other settings that are trying to
cut the benefits of the Medicare Advantage Program
and cut those benefits.
And chair MedPAC actually said that
it's unfair to higher income white people
to have to, buy
supplemental coverage to get the same
extensive benefits that the Medicare Advantage patients get
for free.
And he wrote that in a
paper. Right. It makes me crazy because I
worked with in Minnesota,
we worked with the lowest income
population, and I I actually ran senior health
plan for a short while,
before running health partners. And so I've been
in the this for a very long time.
Why do you think that is, George?
What you're saying saying about MedPAC? Is this
is this all come down to politics?
What what's what's the reasoning behind what you're
saying in terms of,
what MedPAC is writing about the Medicare Advantage
Program?
That's that's fascinating. I have pleaded with them.
I have sent them all kinds of data.
I've sent them information.
I've sent them all the Medicare
data. I've actually said to some of the
the leaders there,
so many people are losing their limbs through
amputations because you are steering people. You're not
steering enough people into the special needs plans.
When you pass and karma happens, there's a
good chance that those people are gonna be
standing there thinking, why did you make my
life hell?
I mean,
so I mean, I've been pretty direct in
my communications with them and had no impact
at all. None.
0.
They continue to say
the most recent report said that, Medicare Advantage
cost 22%
more
than the average cost of Medicare,
and they put they put that in writing
in the paper. And that gets quoted a
lot. You guys quoted. Other guys quoted that
22% number.
It is a completely
fictitious number. There's no when you've got 6a
half 1000000 people
with Medicare, Medicaid eligibility
in the special needs plans,
you can't get 22%
risk skimming
from the program.
So just see it. Every year, I I'm
I plead with them. I actually,
depending who's in congress next,
I might even be asking for impeachment,
the leadership there because it is just crazy.
Yeah. Okay. So, George, let me ask you
about some of the criticisms we've heard from
health system executives currently running some of the
nation's largest largest hospital systems.
They they often tell us about some of
their issues with Medicare Advantage Carriers and and
their relationships with them. They talk about restrictive
provider networks. They talk about the prior authorization
and other administrative hurdles they're they're often facing
almost always with some of the large national
carriers.
We've seen all over the country,
large health systems pouring down some of their
Medicare Advantage contracts. We've seen some notable examples
of large health systems,
terminating all their Medicare Advantage contracts. Only a
few examples, but certainly among some large systems.
So, how do you respond to this to
this trend and to these criticisms and are
what what can be what can be done
to address these issues that health systems are
are seen as being very real?
Well, the a very, very, very small number
of health systems are finding those
problems to be real. When when you look
at Optum,
Optum right now has 50,000
contracted care providers,
and they have
less than a 10%
even delay process
on the referrals
because they want their caregivers to do well,
and and they use care protocols to to
get to the
right outcomes.
And so it's
there are some
plans
that have performed at lower levels,
but the major players
are doing amazing. Look at their satisfaction levels.
95% in 2020 4 across the board. Exactly
when you spend 95 satisfaction
You're doing a really good job
They know their plan is to have the
members love them. Their plan is to have
the members
bonding with them the the optimum assigns
a
nurse,
to the diabetic patients
to study
Berwick actually said that those nurses are there
to upcode
He's written that three times.
He said the nurses
that the that Optum sends into the homes
are there at Up, which is just BDS
at the most monumental level because Optum really
wants to deliver great care because they know
they can get
profit, good profit
from,
spending less than the capitation amount that's there,
and
they they make so much money on each
of the patients. They wanna keep them there
forever.
They wanna keep them enrolled permanently enrolled. They
wanna have a very highest decanis level.
And and so the there are there's a
small subset of
plans that have a small subset of problems,
but that's not the business model. Yeah. That's
a great point. Tens of thousands of contracts.
It is a only in the dozens of
of health systems making these types of decisions.
So you are you are correct. Very, very
small percentage.
Yes.
You mentioned upcoding, and, you know, this has
also been a, a highly scrutinized issue within
the media.
But we have also seen the federal government
accuse or settle
this issue,
with most of the major carriers over the
last few decades,
in terms of inflating or potentially
inflating risk scores to receive higher payments
from the government. We've seen Medicare Advantage executives
be indicted by the DOJ over this very
issue.
So so what do you make of this
issue, and are what steps should be taken
to ensure program integrity?
Yeah. That's,
this team at CMS
did that 3 years ago.
They literally chained. They eliminated all those old
coding systems. You cannot upcode today. A plan
cannot upcode today at all
because the all the data on the diagnosis
comes from the encounters.
It's an encounter report. It's no plan reporting
at all. And the encounter reports are extremely
accurate.
So when they audited those last year, they
found 95%
accuracy
on on, higher than that actually,
on the upcoding. So that has been eliminated.
The upcoding issue is not possible
because CMS eliminated the coding system
and replaced it with a different access to
the data that's based on the individual encounters
filed by each person. Brilliant move by by
CMS.
Media has never mentioned it.
The media has never mentioned what a huge
change ad is.
And even though CMS,
was absolutely totally clear about it because it's
the new
world. So,
that the answer, there were some plans that
did some upcoding. They couldn't today because
the encounter is the only source of that
data.
Sure. Absolutely. Absolutely.
Yeah. So, George, we we,
just we we were reporting about what the
large carriers were discussing on their their last
earnings calls with investors.
Some of them, Aetna, Humana being the most
notable examples, talking about rising rising costs within
the senior population, rising utilization rates, especially as
seniors come back,
back into the health care ecosystem post pandemic.
So what do you view as as the
key challenges
facing Medicare Advantage
right now, and how can it continue to
offer this high quality care while remaining
cost effective? Well,
I I think it,
it it's relatively easy to maintain the high
level
of care while being cost effective because it's
based on
identifying the blood sugar to patients, identifying who's
at high risk for congestive heart failure, getting
the foot ulcers out of play. All of
the things that drive the major costs are
things that plans are gonna continue to do,
and they're gonna have really good results with
that, and they're all gonna work. The reason
they're gonna work is because of their good
care.
I mean, a foot my best friend's mother
has a foot ulcer right now. She is
in so much pain. She wants to die.
And,
they're maybe gonna have an amputation.
If she was in a Medicare Advantage plan,
she wouldn't have that ulcer. She wouldn't have
that health. She wouldn't have that lousy life.
So
I'm gonna try to,
get her enrolled on a plan, but
the plans are going to do just fine
going forward
because it's not about risk skimming. It's about
care management.
And Optum has,
Optum stole the old Kaiser model of owning
all the employing all the.
Optum is now doing that themselves,
and they studied
Kaiser very closely as they went down that
path and figured out which thing
made sense. The model works. It's a really
good model,
and the doctors love it because
they're all told to do the right thing.
Absolutely.
Yeah. I mean, they why do they do
that? Because the leaders at Optum Optum know
that their long term success and future
is gonna depend on them
delivering
good care at a low cost
and keeping the patient loyalty.
So they it's like the computer companies
that figured out
our way of keeping
customer loyalties by having a better computer.
Sure.
And they they literally use that as an
example. I mean, the computer company succeeded by
having better computer. We're gonna succeed by having
better care. Yeah. So I I don't think
that's gonna I don't think that's gonna change
any,
trajectory. If there was a different business model,
it might, but not with the one we
have now. Yeah. So, George, in terms of
the headwinds that we do see some carriers
talked about right now, you see those as
temporary?
Yeah. I see the I see those as
temporary. And Mhmm. Well, I and I think,
there there are people who are gonna
if if they can
get those numbers to a slightly higher number,
they will Sure.
Argue for it. But
we also know that those numbers are 18%
below the average cost of fee for service
Medicare now.
If they go up to 12% below or
10% below, they're still way below.
They are so far below the average cost
to fee for service Medicare
with the current model that there's a huge
amount of leeway before they get
close
to a danger point for the cause.
Absolutely.
And because it's capitation,
the gover I I've capitated a bunch of
plants. I actually started some of the first
capitate plans Minnesota decades ago. I've done a
lot of capitation deals.
Capitation works really well.
When you capitate a care system
and pay them a fixed amount per patient,
then they figure out the right thing to
do for the patient. That's a that's a
good model.
And the beauty of it is then you
you've got a fixed cost.
Medicare now has a fixed cost
on all of those Medicare Advantage patients.
It can't go over the capitation level.
So it's a permanent savings. It is a
permanent
win for Medicare.
If you understand the model,
the the,
success is a permanent success.
And
if they go into the future
and pressures come at them to bring those
costs up,
All Medicare has to do is stop
increasing
beyond
the point that they want to pay.
They have total control. Sure. Sure. They have
almost no control on the fee side of
the business. They have total control
on the capitation side. Yeah. Well, and and
to your earlier point, George, regarding Optum and
and just their their sheer impressiveness and their
goal of continuing to provide high quality care,
UnitedHealth
overall and Elavance are not among the major
carriers talking about headwinds right now. They've they've
been very open that they feel really good
about the Medicare Advantage Program moving forward, that
they've priced correctly, and,
they they seem to be in the best
position as we head into the annual enrollment
period.
Absolutely. They're they're gonna be huge
yes. Absolutely.
There there are I don't know who is
complaining out there
now, but whoever is complaining right now might
not be
they might not be a long term player.
I don't know who they are, but what
I know is
the model works. And if you manage care
against that model, you're gonna do well. Yeah.
And there are CFOs who will argue, you
know, try to get the number up.
But
if the number is still based on a
discount from the average cost of fee for
service,
even there, it's gonna cost less. Yeah. Absolutely.
So, George, the the Medicare Advantage enrollment growth,
it's not gonna be slowing down. We know
it's gonna continue to grow in terms of
the percentage of of the overall Medicare population.
So where do you view the role of
the program evolving over the next, let's say,
5 to 10 years as more seniors opt
for Medicare Advantage over fee for service Medicare?
Well, the benefits are far, far, far better
with Medicare Advantage. And and here's a really
important point.
Our retirement programs in this country are terrible.
Over half of the people don't have a
retirement
plan, pension plan of any kind.
And so they're
getting to the old age and retiring
and have no resources, no assets.
The average Hispanic family has less than $20,020,000
in
net assets at retirement.
So when you get to the
retirement time, Medicare Advantage
has vision benefits,
and Medicare Advantage has dental benefits,
and Medicare
Advantage has hearing benefits.
And when you need dental care
and you don't have Medicare Advantage, you're screwed.
You there's where do you go for dental
care? That's a great point. You're not gonna
find a dentist. You're totally But if you
or Medicare Advantage Plan, not only do you
have that benefit,
you also have it with a requirement that
they know the language.
I mean, that is so spectacular. The the
level
the Medicare Advantage System is far, far, far
superior
at many levels
to not being in the in the program.
And so I I think what's gonna happen
is those benefits are gonna continue to be
enriched, and all of those benefits are free.
The dental benefit free to the Medicare trust
fund.
There is not 1p because
it comes
after the capitation.
The trust fund is only affected by the
capitation payment.
So after that, it's all free to the
trust fund.
So the fact that we have dental benefits
now, vision benefits, hearing benefits
for a lot of people and some a
number of social and the Medicare special needs
plans are absolutely
spectacular.
They are the best thing we are doing
in this country right now for low income
high need people. Yeah. They're Medicare eligible, Medicaid
eligible.
And
And they're booming and gross. They're they are
growing. That's the fastest part of Medicare growing
right now. Yep. We've got 6 and a
half 1000000 people in them. And the reason
that that's good
and the and the Medicare trustees love it,
and the Medicare CMS loves it because they
are really getting good care in the special
needs plans.
And we need if we care about our
older people who are in
trouble, we want them to be in special
needs plans.
So that that's a really good place to
be. So we're I think the special needs
plans and I I think they're up now
to 80% of the eligibles.
Mhmm.
And that
should go to 90. There's some percentage are
just gonna do it because
it's just hard to figure out
for some too
too difficult probably for some people, but
but I I think that everyone else is
gonna be there. It's already 90.
And and when you look at the satisfaction
levels on the special needs plans,
it's
90%
satisfaction.
Think about that. Take the highest need, lowest
cost people,
and check their satisfaction
level with their care and have it be
over 90%.
Yeah. What else in their world do they
have that
gives them a 90%
level of of service? Yeah. No. It's it's
a great point. And it is one, I
think, to your point. It doesn't get discussed
enough in terms of just the sheer
growth we've seen in the dual special needs
plans over these last few years. Like you
said, George, it is the fastest growing piece
of of the Medicare Advantage
program.
And that's the most important. It's really hugely
important because most people really need it. Absolutely.
They really need it. Yeah.
Before we go, though, George,
we hear your criticisms.
We appreciate them. We've got a lot of
health system leaders listening in. So your final
thoughts, your final message that you wanna convey?
We need to do continuous improvement in health
care. We need to have system based care.
We need to take
the artificial intelligence tools that are available,
use them against the database that we've got
now,
and put that all together into a package
and end up with continuously improving care. And
if we put all those pieces together, we
should end up with far, far better care
and less expensive care because it really does
cause less when you don't have to do
the amputation.
So I I'd recommend everybody take a look
at the total package
of all of the tools with database
and the artificial intelligence in the best practices
and look forward to,
delivering continuously improving care in every site in
as a country.
Fantastic.
George, thank you so much for taking the
time to be with me and for sharing
your insights with our listeners. We truly appreciate
it.
Happy to do it. Thank you. If you'd
like to listen to more podcasts from Becker's
Health Care, you can visit beckershospitalreview.com.