“This appears to be a fairly profitable market,” said Tricia Neuman, director of the Kaiser Family Foundation’s program on Medicare policy. The group sees more carriers enter the market than exit each year. “If it weren’t profitable, they wouldn’t be doing it,” Neuman said.
Big Winners
The market for Medicare Advantage plans has become increasingly concentrated. In 2018, the top four Medicare organizations had 59% of enrollment, up from 46% in 2011, according to MedPAC. And while it may seem like an attractive market, it’s difficult for new competitors to enter.
“We had no idea how hard it would be, how long it would take, the infrastructure we’d have to develop,” said Vivek Garipalli, chief executive officer of Clover Health. The company has about 42,000 members, mostly in New Jersey.
Other new technology-focused insurers are trying to break into the market. Oscar Health announced its first Medicare plans this year. Startup Devoted Health, which is led by former Obama administration officials, raised $360 million to launch its Medicare Advantage plans in 2019.
Those companies are betting that technology can deliver better care more efficiently, by using data to help physicians manage patients with chronic conditions, for example. Medicare Advantage is an ideal proving ground to test that idea, because plans make money if they can deliver savings without compromising quality.
“Health care has effectively had zero productivity gains over the last 20 years,” said Bob Kocher, a partner at venture firm Venrock. The firm backed Devoted Health and Kocher served as the company’s chief medical officer for a year. “There should be a lot of pent-up opportunity here to apply technology to make health care much more productive, and that would also make health care more affordable.”
--With assistance from Hannah Recht.
This article was provided by Bloomberg News.