Supplemental health industry for small companies: Challenges and opportunities
Small companies in the supplemental health products market need to understand the unique challenges these products present in order to compete effectively.
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Jeremy Engdahl-Johnson: Hello and welcome to Critical Point, brought to you by Milliman. I am Jeremy Engdahl-Johnson and I'll be your host today. In this episode of Critical Point, we're going to be talking about one of our healthcare clients, the Puerto Rico Health Insurance Administration, and how our health consultants worked with them in the wake of devastating hurricanes last year. Joining us today is Jose Carlo, who works with our client in Puerto Rico. Jose, thank you for joining us.
Jose Carlo: Hi Jeremy. Thank you for having me.
Jeremy Engdahl-Johnson: Great. So Jose, your client is the insurance administration in Puerto Rico, but this is really-- this is more than just a client. This is-- we're talking about your home.
Jose Carlo: Yes. So I was actually born and raised in Puerto Rico and have been working with the Puerto Rico Health Insurance Administration since 2009. However, Milliman has been working with the agency since 2001, and the program was established in 1993. So for almost the entire lifetime of the program, Milliman has had a hand in helping Puerto Rico develop their Medicaid program.
Jeremy Engdahl-Johnson: And you knew people who were affected by Hurricane Maria.
Jose Carlo: Yeah, I was actually down in Puerto Rico with my father during Maria and was stuck there for about a week until I was actually able to get on a flight out of the island because normal commercial flights weren't coming in and out regularly. Family and friends were definitely devastated by the hurricane-- everybody on the island, really-- and including my mother, who was actually in New York and she had to stay in New York for a couple of months because there really wasn't any reason for her to come back to Puerto Rico because of the power outages and the really bad situation that was on the island in the months after the storm.
Jeremy Engdahl-Johnson: Right. Just to kind of tee this up a little bit, you work for the Puerto Rico Health Insurance Administration, which administers the island's Medicaid program. It's almost $3 billion dollars annually, and it covers, what, 49% of the island?
Jose Carlo: Just about. It covers-- almost half of the population on the island is qualified for Medicaid, and -- the Puerto Rico Health Insurance Administration, or, how it's locally known in Puerto Rico, as ASES-- Administración de Seguros de Salud-- is the agency responsible with the government to provide the benefits and the financing for the Medicaid program on the island.
Jeremy Engdahl-Johnson: And that's to the tune of what? Historically 1.5 million enrollees? Although that number may have been in flux over the course of the last year.
Jose Carlo: Yeah, it's fluctuated around 1.3 million to 1.5 million in the last I want to say decade, but obviously with the effects of the hurricane, and even before then, the economic situation on the island in the past decade, enrollment has increased, even though the actual population on the island has decreased, which is interesting.
Jeremy Engdahl-Johnson: As far as who's paying for this-- we've talked about Medicaid on this podcast before-- there's obviously a federal match here. It's to the tune of around 68%, although there are some caveats on that, I believe. So essentially 68 cents on the dollar being paid by the feds, and what, the program is funded through the end of 2019 right now?
Jose Carlo: Right. The Bipartisan Budget Act in early 2018 approved about $4.9 billion for the island after the hurricanes to provide 100% federal match, actually throughout federal fiscal year '19, which means through the end of September 30, 2019. After that, Puerto Rico reverts back to their allotted capped amount of Medicaid funding, and it's about $380 million. So that would mean, without any further legislation or any act of Congress to either increase the Federal Medical Assistance Percentages (FMAP) or increase the funding, their FMAP would actually revert down to about 20%.
Jeremy Engdahl-Johnson: Wow.
Jose Carlo: So it actually-- even though right now it's probably closer to 90% FMAP because of the hurricane disaster relief, historically it's fluctuated from 20% to up to 68%, and that is actually because the ACA approved about $6.4 billion to last through 2019. But even before then, the FMAP was about 20%. So it's very unpredictable, which is tough, especially for the people who are working with the government, like Milliman, in trying to figure out what their finances are going to be for the next couple years. So it's difficult in terms of planning and trying to project healthcare costs in the future because you don't really know where the source of the funding is going to come from next year maybe.
Jeremy Engdahl-Johnson: Right, yeah, and I think we're going to talk more about the future of Medicaid in Puerto Rico later in the podcast, but first let's talk about what’s happened in this very unique year for you. Milliman consultants are often charged with handling very challenging situations and coming in and dealing with socially important work. This one is those things in spades, a rather complicated situation. Why don't you talk just a little bit about what we did for Puerto Rico in the weeks and months following Hurricane Maria?
Jose Carlo: So really the first thing we did-- and this was me because I was on the island and none of my other coworkers were there-- was actually going-- I think it was Sunday after the storm and going to the actual agency to see if windows were broken, if they had gotten any flooding inside the building, and to see really if there were conditions for people to work in and actually get things-- trying to get up and running. I remember meeting the employees-- just by chance got a text message because communications were down, so people just kind of showed up if they got the message or not, and a lot of the employees didn't make it because they were stuck in the towns that were still isolated from debris and roads that were still blocked, but only a handful showed up and we tried to figure out if people can come back to work the next week, and unfortunately that didn't happen. They had to relocate after the storm, but-- so that was the first thing we did, trying to figure out if we can still work from there, trying to get the generators going-- and diesel was another problem, so the government decided to concentrate all the agencies as much as they could into one place so they can have one place to run most of the government, maybe in a skeleton crew, and have all the necessities they needed, like internet and power. So that was the first assessment.
Jeremy Engdahl-Johnson: And these are typical consultant problems. I mean, Milliman consultants are dealing with this sort of thing all the time, right?
Jose Carlo: Definitely not typical consulting problems. I mean, sometimes the worst problems you're going to face is really hard deadlines, but this was definitely unique in the almost 10 years I've been working at Milliman. So then once really the assessment of how the agency could actually start working and have their employees come in-- once that was figured out, the second step was trying to communicate with mostly the MCOs, who administer the program right now, and at that time it was four MCOs who administered the program, and so some of them had presence in the States, some of them didn't. So we served actually as a conduit of communication with the ones in the States because we have offices all over the States, and they have communications, so they-- through email and through satellite phone, we were able to communicate and send some instructions to the MCOs of what were the next steps, who to contact, what were the new phone numbers to contact, satellite phone numbers that were distributed to government agencies, and where was the new office relocated.
And then on the island, people just met in person. There was a central government facility and any time there needed to be meetings, coordination, and efforts to do relief work in some of the parts of the island that had more Medicaid enrollees or lack of hospitals and clinics, those would all be concentrated in one central government facility. So we helped a little bit in that on the island and did some relief work as well afterwards from the storm, and then after figuring out what the real damage was in terms of the healthcare system, then came what actually came to be communicating with Congress, because there was a lot of misinformation in Congress in terms of what was actually happening. So I remember having a call with House staffers maybe about a month after the storm, and they were trying to get a sense of, "Okay, are the news stories that we're reading actually true? Are all the hospitals closed? Is diesel really a problem?" Really they just wanted to know and confirm if really the news that was coming out of the island and the reporters down there were putting out there was actually true, and I would say 99% of it was true.
Jeremy Engdahl-Johnson: Yeah, talk about another atypical role for actuaries, but you had a view of the whole system at that point, so you could answer those sorts of questions for them.
Jose Carlo: Yeah, and even personally, my father is a physician on the island, and he had to close his office for about a month until he was able to find an office to work out of that had power and internet and a place just to see his patients. So just knowing that personal side of, "Okay, if independent practices are having an issue, then obviously people are just trying to go to hospitals," but hospitals are full of people already, or they don't have power, or people can't get to them. It was a combination of all the worst-case scenarios that happen, and I could understand how people would be skeptical about all the devastation that happened. But yeah, it was a very tough situation to handle.
Jeremy Engdahl-Johnson: And it sounds like everything was just made overcomplicated by, what, 98% of cell towers were down? So very hard to communicate, and you talked about the difficulty-- your local doctors closed, the hospital's full. How did people get their prescriptions? That seems like something that would have been a real challenge there.
Jose Carlo: It was, and on the island, the program mostly contracts the independent pharmacies, which excludes the CVSs and Walgreens that you would have in any other place in the States. But because they have a pretty wide network and also have the resources to open up their pharmacies and have generators and diesel-- so we contracted and made an arrangement so CVS and Walgreens and other large chain pharmacies could dispense drugs. So that was kind of an on-the-fly decision that was made, and definitely had to be made, because people were having a lot of trouble in trying to get their prescription drugs.
Jeremy Engdahl-Johnson: What about network stuff? This sounds like an out-of-network nightmare, but I suppose if you needed help, you needed help.
Jose Carlo: Definitely. So really the network did not exist. The traditional ways of receiving healthcare just got totally disconnected, and so people either went to hospitals-- that was the first recourse-- and then there were also a lot of organizations that came in from the States and actually made mobile clinics, and I know stories of the MCOs trying to initiate relief missions to different parts of the island, gathering their physicians and people from the physician practices and saying, "Hey, if your office is not open, come join us. We're going to do a three-day trip where we're going to go to different towns and try to see our patients." So the network was really totally disconnected, but then the interesting part is physicians gathered; the people who are in charge of the healthcare system got organized and actually took the care to the people in the different parts of the island. Of course, that's totally hard to do because there's no cell phones and we're totally reliant on cell phones now.
So one of the largest challenges, and I think the factor that made this a whole lot worse, was that you couldn't really call someone and tell them, "Hey, I need a doctor here, or an ambulance here," or "Tell me where I can find the nearest pharmacy." That just didn't exist. So things ran around with word of mouth, and also radio, and there was only one radio station that was up after the storm-- all the other radio stations got disconnected. So those were the only channels of communication, really-- word of mouth and radio-- which is kind of like going back into the Stone Age if you--
Jeremy Engdahl-Johnson: Yeah, really. Old school, along with your doctor coming and visiting you.
Jose Carlo: Yeah.
Jeremy Engdahl-Johnson: Right after the storm, I'm sure there were immediate medical needs that people faced. What were some of those short-term, kind of immediate things that needed to be dealt with the most urgently?
Jose Carlo: The most immediate was-- and this I think has been widely reported-- is that any life-sustaining care that was reliant on power had to be brought back up, and this means people were at their homes with ventilators, people have drugs that need to be refrigerated and their refrigerators didn't have power. Also people who had surgeries that were scheduled that couldn't be done because there was no power at hospitals or OR rooms were occupied by other cases that came up during the emergency. Those really were the most pressing issues, trying to get the people who are receiving constant care back into the fold and getting that care they needed, either at their home or in some other facility. And I think the way that that was mitigated the most was by doing relief flights; a lot of private organizations, a lot of the commercial airlines on the island, filled their planes up with people who needed to go to the States to get care, and I think that was the biggest lifeline in terms of the people who are most vulnerable on the island. And so now what happens with those people who left the island? Are they still going to be in the States or are they going to come back? I mean, I don't really know, but that's another topic and another long-term effect of the hurricane that we can talk about.
Jeremy Engdahl-Johnson: That's the sequel to this podcast. So let's talk about some of the longer-term challenges to the healthcare system and what we've been doing to help our client out in adapting to this and moving forward.
Jose Carlo: Yeah, so after the storm, there was a big push to reimage the financing of the healthcare system. The impact into the network and the areas that were underserved in terms of medical care on the island really revealed that people need to move around the island to get the care they need at the moment they need it, and the previous model was concentrated in eight separate regions on the island, and each region was managed by one MCO, and that really restricted services to some of the people who were in the regions that didn't have more hospitals than others or more physicians than others, especially the specialists, like oncologists and cardiologists, that are in short supply on the island. So the island and the Puerto Rico Health Insurance Administration, along with the government, moved toward a financing of a healthcare system that provided an island-wide network to better improve access and also changed the financing model to pay for conditions that are-- the ones that are the most costly and most prevalent in the population, and those are renal disease, cancer, pulmonary disease, and cardiovascular disease, also diabetes as well. So the objective of that is to focus the financing of the program to those people who need it the most who weren't necessarily receiving the care. So the MCOs have the capital to be able to invest in the healthcare for those people, and then because of the economic situation on the island, then trying to maximize those funds going forward and trying to create a sustainable program that can actually address some of these conditions and try and improve outcomes.
Jeremy Engdahl-Johnson: What's the cost impact been based on that? It sounds like it's kind of level-setting really what the system costs for these most expensive, least healthy patients.
Jose Carlo: Yeah, so because of the unique financial situation that the island is in, the Fiscal Control Board, which is the Congress-approved board that manages the finances for the island, has oversight over the budget for the Medicaid program as well, and one of their larger concerns going forward in the fiscal plan, which is a plan that actually takes into account the next 40 fiscal years for the island-- is the healthcare costs. It's been increasing in the past 15 years by a lot, and it's-- little by little. it's been consuming a lot of the island's budget. Longer term, there could be a lot of new conditions, worsening conditions, that could spring up that would increase the budget by a significant amount. And I think we've seen that recently, especially with pulmonary conditions. Asthma was a big driver of cost because of the debris left over from the hurricane. People had their pulmonary conditions exacerbated, and there were a lot of asthma ER admits, and you can see the spike.
Another thing is mental health costs as well. It's expected from any other storm or traumatic natural disaster that mental healthcare costs and utilization increases, and we've definitely seen that as well in the data. Also mosquito-borne diseases, which include dengue fever and Zika, have increased, and I think that's an effect of the debris left over as well from the hurricane that still hasn't been picked up that creates stagnant water for mosquitoes to breed. And I've been down there pretty recently, and I could say that mosquitoes down there are a lot worse than they were before. So firsthand I can tell you that there's-- you have to go down there with bug spray.
Jeremy Engdahl-Johnson: Wow. So I guess we will see what happens with some of those diseases that are directly a result of the hurricane. So clearly there are a lot of new problems now facing the Puerto Rican health system. There were certainly challenges before, and we've talked about the variability of the federal match on Medicaid and it can range from 20% to 90% from year to year depending on what's going on. So a challenging situation prior to the storm. How has this exacerbated some of those challenges?
Jose Carlo: So, if you go back before the storm, a couple years back before the storm, the financial situation on the island has definitely affected the healthcare system, probably the most, because the financing for the healthcare system, as we talked about, is really reliant on federal funds, and that's been variable in the last decade, even though the ACA provided a lot of funding. But also Medicare funding was affected from the ACA, and when you have a program that covers almost half the island, if the financing for that program is not adequate, then there's definitely going to be a shortfall for the whole healthcare system, and that means hospitals not being able to reinvest in their practices, physicians having to work with reimbursement rates that are probably not updated each year. So there really needs to be a level-set from those past years that really have squeezed the healthcare system, and I think the hurricane has provided this level-set because Congress is now paying a lot of attention to Puerto Rico and how our healthcare dollars are being spent and how they can help the island, and they're constantly down there.
I was just recently with a congressional delegation, speaking to them about the funding for the island for the next three fiscal years. And so they're definitely concerned and definitely want to lend a helping hand, and I think it really falls on the Puerto Rican government, with help from us, to show Congress and people on the Hill that there really is a need for more funding to be able to update the healthcare system, and it's not even the effect from the hurricane; actually the past decade of inadequate financing, I think. So I think that is the past history that kind of has brought us now into all these changes, and the hurricane just really revealed all the issues that were on the island already. But now they're just up in the surface.
Jeremy Engdahl-Johnson: Setting aside some of those financial questions, a lot of which are still open and which we're helping Puerto Rico to resolve-- what lessons have been learned from this experience? Let's say next hurricane season there's a Maria-type storm. Will the island be better prepared to deal with that sort of situation?
Jose Carlo: I think definitely. The government now knows how to handle such a major disaster. Since-- in my lifetime, I've only gone through one major storm, which was Georges in 1998, and that was a pretty bad storm, but nothing on the level as Maria. So hopefully this is a one-in-100 -year event. But as we know, storms are getting more powerful each year, so it's only reasonable for the government to be prepared for the next Maria. And so I think the number one issue is communications-- being able to wake up the next day after a storm and having a report from all corners of the island of how things are affected, giving priority to hospitals. So getting communications back up and having the systems and the infrastructure to have that happen.
I think also the federal government has learned that they have to prepare as well for these sorts of storms, especially in the Caribbean, for the U.S. Virgin Islands and Puerto Rico. So I think they'll be preparing much more rigorously for hurricane season, as they did for this season as well, for 2018 hurricane season. Apart from communications and federal response, I would say the power grid-- having power come back up as quickly as possible-- and obviously power in Puerto Rico didn't come back up until months after the storm. I mean, people didn't have power until May in some cases. So getting the priorities in terms of getting power back to hospitals and government facilities and any other facilities that need power immediately-- having that occur in the days after the storm will be one of the priorities.
Jeremy Engdahl-Johnson: One of the other dynamics here that I find interesting is just the variability of the Medicaid population that we're seeing in Puerto Rico, especially with people maybe coming and going. Milliman has certainly seen in the Medicaid expansion work we've done for various states that those total dollar amounts can change rather dramatically depending on how many people end up being part of that insured base. How do you plan for that? How do you deal with such a dynamic and changing kind of population? What, maybe 70,000 people have left the island since the storm?
Jose Carlo: Right, so that's what the data shows, but unfortunately there's been several variables that really have made it very difficult to say if that number is right or not. So after the storm, CMS, along with the Medicaid program on the island, had to basically recertify everybody in the program on an ongoing basis because people couldn't go to their appointments to reenroll into Medicaid, show that they're eligible, right? And so that response from the disaster and the reenrollment, the automatic reenrollment of people into the program, ended in July 2018. So you really had an increasing population, and then after July a huge drop, because the people who had left the island or passed away or do not qualify anymore suddenly dropped off the rolls. So we're still trying to see, from July 2018, how the fluctuation happens. But yeah, the population dropped about 70,000, but it's still to be seen if some of those people were people who just moved to the States, if some of those people are still on the island, if they're people who actually got work because they're doing contracting for FEMA or they're doing construction work right now on the island and they actually do have an income and don't need Medicaid right now. So that is probably one of the biggest variables going forward in the next five years for the island, in terms of their total finances, of how much they're going to spend in healthcare.
Jeremy Engdahl-Johnson: Makes sense. One of the odd realities of Medicaid in Puerto Rico is that it's kind of started not to look much like Medicaid. There may be a federal match and all that, but as far as the system itself, somebody who is familiar with a state Medicaid program in the U.S. might look at Puerto Rico and say, "Wait, this is Medicaid?" So talk about that distinction a little bit. What's happened and where is the system going?
Jose Carlo: So the biggest difference between Medicaid in Puerto Rico and the States is really the financing, as we talked about. It's completely different. It's a capped amount, which is supplemented by periodical congressional grants that are allotted. And that financing difference has brought a lot of peculiarities on the program. It doesn't cover most of the benefits that other Medicaid programs cover, like long-term care or subsidizing Part B for dual-eligibles. It actually has a separate and different way that Puerto Rico manages the dual-eligibles. They actually have a separate program that's called Platino-- Medicare Advantage Platino. So all dual-eligibles can enroll into a Medicare Advantage program or stay in Medicaid, but that's a totally different way that is managed, and most states have both their duals in their traditional Medicaid program and traditional Medicare. That is not as common in Puerto Rico. So someone from the outside who might be a Medicaid expert working with different states, they might come into Puerto Rico and have a solution but realize that it's completely different and new approaches have to be taken, and I think that is part of the reason why the financing going forward for the program has changed as well. It's also completely different from most of the states as well.
Jeremy Engdahl-Johnson: Right, and it's exciting, the role that you're playing in modernizing the system, and hopefully in explaining to the powers that be what's going to be necessary to fund the system going forward. So what should we expect? We talked about the fact that it's funded through 2019. Obviously there's a big ask there as far as funding it forward, but what are you looking forward to in the future with Puerto Rico Medicaid?
Jose Carlo: The future of the program really is going to be driven by how the federal government is going to handle the financing going forward. There's definitely a need for more money to come into the program to provide care for people, and I think the new financing model will demonstrate that, because as people develop new conditions or worse conditions, more money will be required from the island to pay for the program, from the state government. And so the federal government realized that there needs to be a match there, and so the biggest difference going forward is probably going to be removing the capped amount, or developing a sustainable financing solution that is not just a yearly financing approval by Congress each year, because that is not a sustainable way to run a program because you can't really plan for the future and, as we know, medical care and medical costs and development of a healthcare system really needs to have a long-term plan-- five, 10, 20 years out. So long-term financing, sustainable financing, and addressing the actual need on the island are probably the three things in the future that will change, or need to be changed, in order to develop a sustainable healthcare system on the island.
Jeremy Engdahl-Johnson: Great. Well, thank you, Jose. Appreciate you joining us. You've been listening to Critical Point, presented by Milliman. To listen to other episodes of the podcast, visit us at milliman.com, or you can find us on iTunes, Google Play, Spotify, Stitcher, or wherever else you find your podcasts. See you next time.