Medicaid Expansion AnalysisBy

Ankit Raheja

Medicaid Expansion AnalysisBy

Ankit Raheja

Agenda

The rationale for Medicaid Expansion

Opportunities, Risk, and Mitigation

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Impact on Stakeholders of Healthcare Industry

The changes in the Medicaid program

Effect of Medicaid Expansion on Pharmaceutical Industry

11

22

33

44

55

66

77

Medicaid Expansion funding

Opportunities for the Consulting Industry 77

Key Details About Medicaid•Jointly funded and administered by Federal government and States •Largest source of funding for medical and health-related services for 60M limited-income individuals- 16.6% of spending in healthcare in the USA

Rationale for Medicaid Expansion

The Rationale for Medicaid Expansion

Medicaid Expansion will reduce the number of uninsured in USA by 48%

• The ACA called for nationwide expansion of Medicaid eligibility• Upheld by Supreme Court but not allowed to force states to adopt and

not allowed to take away the existing Medicaid funding• Jan 2014, Medicaid will increase eligibility limits for adults to 133% of

FPL - $14,856 for one person , $30,675 for a family of four• The CBO estimates 11 Million Americans will gain coverage by 2022• Funding mostly by Fed over 2013-2022 . Saving for States by $10

Billion

What is Medicaid Expansion Program?

In Billion Dollars

Changing Nature of Medicaid

• Medicaid Expansion for the newly eligible will be funded mostly by Fed and the Fed Share will be set at 90 % from 2020. Currently Fed

sponsors 60%

• Newly Eligible Medicaid Population will be unmarried , have median age of 31 , and will have median income of $7261 for a single individual

Other Changes in Medicaid…

Changes from existing Medicaid

Expanded to include newly eligible , who have income below 133 % FPL and changes to category of children , pregnant women and families

MAGI Methodology will be used to determine eligibility for “newly eligible” using Health Benefit Exchange web portal

States to cover smoking cessation programs and fiscal incentive to cover prevention service without enrollees paying any cost sharing

Creation of Centre of Medicare and Medicaid Innovations to test new payment and healthcare delivery models

Medical Expansion Funding

• Fed would be funding most of the expansion 92% , while the remaining 8% funded by State

• Over the 2013 to 2022 period, an additional $781 billion will be spent on newly eligible

• Under the Medicaid Expansion Act, reduced spending on uncompensated care and net saving of over 10 billion dollars for State

In Billion Dollars

Unique Opportunities and Risks for Pharmaceutical Industry

New Market entry Strategy•Changing Customer Demographic•New capability development •New Sales Force and Marketing Strategy , Stronger Value Proposition•Increase in number of people with chronic condition under Medicaid expansionReduction in Payer Profitability and pass through to Pharmaceutical Companies•Pharmaceutical Companies need to communicate the efficacy of their drugsStrong Fed and State Power•Medicaid expansion is funded by Fed so existing models of lobbying may changeHealthcare Data Explosion•Increased number of people , digitalization , accountability will provide unique opportunity to analyze terabytes of data and provide competitive edgeNew Fees•IRS now imposes an annual fee on manufacturers and importers of branded drugs:•Excise tax on pharmaceutical companies based on market share – $ 2.5 billion

pro

ducts

Quantifying the Benefits

Number of newly eligible : 20 MillionAverage spent on drugs per year : 333$Pre 2014 rebate : 15% on AMPPost 2014 rebate : 23% on AMPNew spend on drugs : 333*(1- 23%)/(1-15%) = 302 Net Benefits

20 Million20 Million $302$302 $ 60 Billion

A 60 Billion Dollar OpportunityA 60 Billion Dollar Opportunity

Opportunities for Healthcare ConsultingFirms for Pharmaceutical Industry

• Healthcare reform strategy development/deployment

• Medicaid expansion segmentation / targeting / positioning strategy

• Healthcare Analytics

• Statewide cost benefit analysis of Medicaid

• Marketing and Sales force strategy

• AMP , Rebate % determination strategy

THANK YOU!

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