Carrot Health Insights | Medicare Advantage Moneyball

Published on November 13, 2018

In October 1997, Billy Beane, an outfielder-turned-front-office-executive, was named General Manager of the Oakland Athletics. The A’s were one of the lowest-revenue teams in Major League Baseball, with an aging stadium and a small but dedicated fan base. With no salary cap and limited revenue sharing, the league placed teams like the A’s at a serious competitive disadvantage. Large-market teams like the New York Yankees and Boston Red Sox could massively outspend their smaller-market counterparts. The Yankees’ player payroll of $125 million in 2002 was three times that of the A’s.

In today’s Medicare Advantage market, the “Big Five” – UnitedHealth, Humana, Aetna, Kaiser, and Anthem – look a lot like the Yankees and Red Sox. With 8.6 million Medicare Advantage enrollees (excluding Special Needs and Employer plans), the Big Five now control 60% of the market. 240 different companies control the other 40%. And the Big Five are getting bigger. Almost all the net enrollment gains in 2017 and 2018 went to the Big Five – they added almost 1.4 million net new members, and the rest of the industry added just 61,600.

Individual Medicare Advantage Growth and Market Share, 2015-2018

Source: Carrot MarketView™

The Big Five have more personnel, technology, marketing dollars, national brand recognition, and contract negotiating leverage. Yet despite their formidable resource advantages, they are not winning everywhere. There are many markets where mid-sized plans are more than holding their own. The five Metropolitan Statistical Areas where the mid-sized plans are performing the best are Baltimore (MD), San Diego (CA), Rochester (NY), Lafayette (LA), and Columbia (SC). In the following map, the green counties show areas where mid-sized plans are gaining share, and the red counties are areas where the Big Five are strengthening:

Where are Mid-Sized Plans Holding Their Own? 2018 vs. 2017

Source: Carrot MarketView™

Back to the Oakland A’s. With the deck stacked against them, they became one of baseball’s best teams under Beane’s leadership, with eight consecutive winning seasons, including 90 or more wins in six out of the seven seasons from 2000-2006. How did they do this? As Michael Lewis chronicled in Moneyball: The Art of Winning an Unfair Game, the A’s figured out how to use information in new and innovative ways. They systematically identified players who were undervalued by the market, uncovering opportunities that others had missed. They re-examined conventional wisdom and tactics for player evaluation and development.

The A’s won because they used data and analytics as a source of competitive advantage. They couldn’t outspend the large-market teams – so they outsmarted them. 

Mid-sized health plans can do the same thing: leverage data and analytics to identify, and act upon, unique and dynamic opportunities in their local markets. For example, several Carrot MarketView customers are reinventing their approach to Annual Enrollment Period marketing outreach – they have begun using hyper-local consumer segmentations and predictive modeling to precisely target individuals who are most likely to respond and become new members. As we showed in a recent case study, this approach is dramatically more cost-effective than untargeted outreach, or one-size-fits-all national consumer models.

By using data and analytics as a source of competitive advantage, your organization can not only stave off the Big Five… but actually win the battle for market share. Are you ready to be the next Billy Beane?

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