By James Gutman - June 17, 2011
A funny thing happened on the way to what industry critics saw as the coming death spiral of Medicare Advantage plans under health reform. One well-regarded MA plan stands to get a whopping price — reportedly $14,815 per covered life — in a new acquisition deal. That is not only good news for the prospective acquiree, CareMore Health Group. It also shows, as securities analyst Carl McDonald of Citigroup Global Markets put it in a June 8 research note, that "Medicare sentiment has now come full circle," with MA viewed in 2011 "as a strategic imperative by many plans" in light of a shrinking commercial risk business and rapidly growing numbers of baby boomers about to enter Medicare.
Certainly the proposed deal announced June 8 for WellPoint, Inc. to acquire CareMore has some unique features, including the profitable clinics CareMore owns and operates for integrated care of seniors. Clinics notwithstanding, though, the reported $800 million price tag (WellPoint won't confirm or deny that) for the deal "has to warm the heart of every Medicare plan and Medicare shareholder in the country," McDonald said. And he predicted there will be more MA deals by the end of this year, noting that companies such as Aetna Inc. have said they want to get bigger in Medicare.
How did the change in the outlook for MA come so quickly after the initial reform-law doomsday predictions? Was it largely a result of the big quality-bonus demonstration program CMS unveiled last year for MA plans with ratings of three or more stars? Or are people just concluding that MA plans are very resilient, knowing how to take a punch and still win a fight?
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