巴克莱美股医疗保健行业美国医疗保健服务医疗保险D部分退税中断可能为MCOs创造机会201932921

FOCUSBarclaysCapitalInc.and/oroneofitsaffiliatesdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.PLEASESEEANALYSTCERTIFICATION(S)ANDIMPORTANTDISCLOSURESBEGINNINGONPAGE16.EquityResearch29March2019Restricted-InternalRestricted-InternalRestricted-InternalRestricted-InternalU.S.HealthCareServicesMedicarePartDRebateDisruptionMayCreateOpportunityforMCOsDisruptioninMedicarePartDCreatesInvestmentOpportunities:RecentlyproposedchangestotheMedicarePartDmarketplacefor2020havecreateduncertaintyandperceivedriskforinvestorsinmanyHealthcareServicesstocks,includingmanagedcarecompanies.Morespecifically,theHHSproposaltoshiftbranddrugrebatestothepointofsale(POS)withintheMedicarePartDmarkethasbeenaprimarysourceofthisperceivedrisk.However,thisreportdemonstratesthatsomecompaniescouldactuallybenefitfromthisshift,particularlyaswebelievealikelyincreaseinPartDpremiumpricesfor2020couldcausecurrentPDPbeneficiariestoconverttofullMedicareAdvantage(MA)products,whichcancarry10xprofitsforplansponsorsvs.standalonePDP.WebelieveHumanainparticularisbest-positionedtocapitalizeonthispotentialconversion:weestimateHUMmaywitnessa~$0.70netrun-rateEPSbenefitfromthisdynamic.Thisequatestoa~4%boostto2020consensusEPSforHUM(seeFigure14).Intuitively,thismakessenseasHUMishighlyleveredtotheMAmarket,andisneck-and-neckwithUNHforleadingmarketshareintheIndividualRetailMAmarket(excludesSNPmembers).PDPMembersMayConverttoMA:Ourhypothesisisthatprice-sensitiveseniorswithanunsubsidizedPDPplanarestrongcandidatestoconverttoMAgiventhatfullMAplansofferattractivelypricedalternatives,includingPartDdrugbenefits.StandalonePartDmonthlypremiumsareinthe~$35-40rangefor2019,butweexpectpricestoincreaseby10-30%in2020ifbranddrugrebatesareshiftedtothepointofsale.Bycomparison,monthlypremiumspaidbybeneficiariesforafullMAplan(whichincludesaPartDbenefit)isonly~$28in2019,with46%ofMAplansoffering$0premiums(HUMhas50%ofMAmembersin$0premiumplans).Assuch,weexpectacceleratedmemberconversionsfromPDPtoMAPDin2020shouldtheHHSproposalgointoeffectnextyear.Basedonourcomprehensivecounty-levelanalysisthatmapslostPDPmemberstoMAplansbasedoncurrentretailMAmarketshare,weestimatethatevery1%ofunsubsidizedindustryPartDmembersthatconvertstoMAequatesto$0.07ofincrementalEPSforHUM.So,ata10%conversionratewearriveatour~$0.70HUMEPSbenefitestimate,whichembeds3%netmarginsonMAPDmembersand4%netmarginsonlostPDPmembers.PartDPlansSponsorsPreparingMultipleBids:OneofthethemesfromtheBarclaysGlobalHealthcareConferencewehostedearlierthismonthisthatMCOssupporttheshifttoPOSdrugrebatesandaregenerallyembracingHHS’1/1/2020implementationdate.DrugrebatesareaccountedforbyhealthplansinPDPbidsubmissions;thusanychangestotherebateprogramshouldbereflectedinplanbids(i.e.higherPartDpremiums).Aslongasplanscanproperlyaccountforchangesintherebateprogram,theyshouldbeabletopriceaccordinglyandPDPeconomicswilllargelyremainintact.Mostplansponsors(MCOsandPBMs)haveconfirmedthattheyarepreparingmultiplePartDbids.Inourview,thislargelyaddressesconcernsaroundpricedislocationinthePartDmarket,andshouldmitigateinvestorconcernsaroundPartDprofits.INDUSTRYUPDATEU.S.HealthCareServicesNEUTRALUnchangedU[e-mail],USAndrewMok,[e-mail],[e-mail],[e-mail],USBarclays|U.S.HealthCareServices29March20192OverviewofthePartDMarketMedicarePartDisasupplementalprescriptiondrugbenefitavailabletoMedicareeligiblesaseitherastand-aloneprescriptiondrugplan(PDP),oraspartofaMedicareAdvantage(MA)plan.WhilePartDislargelyavoluntarybenefit,approximately75%oftotalMedicareeligiblesareenrolledinthePartDprogram.TheCongressionalBudgetOffice(CBO)estimatesthatspendingonPartDbenefitswilltotal$99bnin2019,representing15%ofnetMedicareoutlays.In2019,901PDPswereofferedacross34PDPregionsintheUS.Below,weshowthecompositionofthePartDmarketandthecorrespondingmarketshareofPDPandMA-PDplans.Note,thetotalPDPmarkethasmorethan25mnmembers,whicharehighlyconcentratedamong5carriers:CVS,UNH,HUM,WCG(withlegacyAET),andCI/ESRX.WhiletheMAmarketisnotasconcentratedasthePDPmarket,thetopthreeMAplayers(UNH,HUM,andCVS)stillcontrolmorethan50%ofthemarket.FIGURE1HistoricalCompositionofPartDMarket(MembershipinMillions)Source:CMS,BarclaysResearchFIGURE2PDPMarketShare(25.6mn)FIGURE3MAPDMarketShare(22.7mn)Source:CMS,BarclaysResearch.WCGincludesAET’sPDPmembers.Source:CMS,BarclaysResearch.17171717181819192021212189101011121415151617181112255555552222233334452829303234384042444647480102030405060200820092010201120122013201420152016201720182019IndividualPDPIndividualMAPDGroupPDPGroupMAPDANTM1%CI13%CNC0%CVS24%HUM17%UNH20%WCG16%Other9%ANTM5%CI2%CNC1%CVS10%HUM17%UNH26%WCG3%Other36%Barclays|U.S.HealthCareServices29March20193PartDBenefitStruct