1. CHRONIC BOOM
by: Mariza Hardin, Senior Director of Health Plans
PART 1: WHY MEDICARE
NEEDS INNOVATION MORE
THAN EVER

2. 2
BAM!
JUST LIKE THAT,
THE BABY BOOMERS
HAVE BECOME
GRANDPARENTS.
Seems like only yesterday they were
swelling nurseries, schools, then the
workforce. Now they’re exploding
onto the rolls of Medicare. Today
there are almost 45 million people
over 65 in the US. By 2030, the U.S.
Census Bureau projects that number
will be closer to 73 million.

3. 3
This demographic mega-trend will have far-reaching
effects on the single largest payer in American
healthcare. Especially when you consider these other
eye-popping trends: more than half of these folks
already have prediabetes and a third of them have
some form of heart disease. And sure enough, type 2
diabetes and heart disease have traditionally been two
of the most costly chronic conditions.
That’s a lot to wrap your head around in two
paragraphs. So let’s break it down. First, we’ll take
a closer look at medicare enrollment and spending
projections. Then we’ll talk diabetes and heart disease.
And don’t worry, there’s light at the end of this tunnel.
Since 2011, baby boomers have aged into Medicare at
a rate of about 10,000 per day. Think about that for a
second. There have been a lot of days since 2011.
By 2030, Medicare enrollment is expected to jump
to 80 million enrollees. That’s 48% higher than 2015
levels. For perspective: 80 million is roughly a quarter
of all people living in the US today. Or pretty much
everyone currently living in Germany. Ach du leiber!
Between now and 2024, Medicare spending is
projected to grow at an average annual rate of 7.3%.
Just ask any healthcare economist or policy expert:
This rate of growth is bound to force the Centers for
Medicare and Medicaid Services (CMS) to rethink how
it pays for and incentivizes care. More on that in a bit.
THE MEDICARE
BALLOON

4. 4
So, we have the senior population boom. Add to
that the rising cost of chronic conditions. You can
imagine the squeeze this puts on Medicare. As
more seniors enroll in Medicare, and more of them
suffer from chronic disease, more care — and more
spending — will be required from Medicare providers.
Of those conditions, two of the most prevalent and
costly are type 2 diabetes and heart disease.
Consider these numbers from CMS related to
type 2 diabetes:
• Medicare spent over $15,700 managing the
health of each beneficiary with diabetes in 2014.
• For every 1000 Medicare beneficiaries with
diabetes, there are 991 emergency room visits
annually.
• 20% of people with diabetes who are admitted
to the hospital are readmitted within 30 days.
Numbers related to heart failure are even bigger:
• Spending per Medicare beneficiary with heart
disease in 2014: $41,784
• Emergency room visits per 1,000 beneficiaries:
1,657.
• Hospital readmission rate: 24%.
But wait, there’s more.
As our population ages and lives longer, researchers
predict that the rate of heart failure (just one of many
THE CHRONIC
DISEASE DILEMMA
51%
ARE PREDIABETIC
25%
ARE DIABETIC
heart diseases) will grow from 5.1 million Americans
in 2012 to over 8 million by 2030. And the costs
associated with that increase? An extra $30 billion,
give or take.
Sorry, we’re not done yet.
According to the Diabetes Care Project, more than 1
in every 3 Medicare dollars is spent treating patients
with diabetes and conditions associated with the
disease. Can you say, “disproportionate?”
This could help explain it: 11.2 million Americans
currently over the the age of 65 live with type 2
diabetes. That’s more than a quarter of them. And
as we mentioned up front, a lot of seniors are on the
same path.
Here’s how the CDC breaks it down: 51% percent
of all Americans 65 and older have elevated blood
glucose levels, commonly known as prediabetes. This
condition is associated with an increased risk of not
only type 2 diabetes, but heart disease (see stats
above) and stroke as well. Without intervention, one
third of those with prediabetes will progress to type
2 diabetes within four years.
Most alarming: fewer than one in ten Americans with
prediabetes are even aware they have the condition,
despite the availability of simple risk screeners.
The Centers for Disease Control and Prevention has
already estimated that, if current trends continue,
one in three adults will have type 2 diabetes by
2050 — just as enrollment in Medicare crests.
Wow. How on Earth is Medicare going to pay for
all this?

5. 5
Don’t worry. They’re all over it. And have been for
some time.
Medicare beneficiaries have been allowed to receive
health insurance through private providers since
the 1970s — an option now known as Medicare
Advantage. Most of these plans operate as HMOs or
PPOs, and they’re required to offer benefits equal to
or better than Medicare Parts A and B.
The Medicare Advantage plans operate under a
system known as “capitation,” which sounds much
more gruesome than it is. In a nutshell, it means
that CMS pays each private plan a set amount every
month for each member. If the plan can provide
care at a lower cost than the CMS per-member
benchmark, it either has to offer beneficiaries a
premium rebate OR invest those savings in additional
benefits for members.
When these plans offer additional benefits aimed at
keeping high-risk patients from developing chronic
conditions (like type 2 diabetes or heart disease),
they can, potentially, generate even more savings.
Indeed, some Medicare Advantage plans have
become test labs for adopting preventive, outcome-
focused approaches to delivering care.
And here’s the first piece of good news: An
increasing number of seniors (30% and rising) are
opting for Medicare Advantage plans instead of
traditional Medicare.
THE GOOD NEWS
Now, that growth doesn’t come without a hitch. A
recent Avalere study asked: If CMS sticks with the
funding formula they’re currently using, will they end
up shortchanging the Medicare Advantage program?
Marilyn Tavenner, former head of CMS (and current
President of AHIP), shares that concern. Last
spring, she responded to questions about Medicare’s
sustainability, especially in the face of demographic
trends and rising chronic care costs. “Rather than
relying on an antiquated fee-for-service model for
care delivery,” she proposed, “CMS should focus
on strengthening Medicare Advantage and the
innovative programs that improve seniors’ health.”
Current CMS Administrator, Andy Slavitt, took it up a
notch in remarks to pharmaceutical industry leaders
late last year, saying it was critical “to find ways to
improve affordability and access for patients, support
and increase innovation in the industry, and — most
importantly — make people healthier.”
The capitation formula, and plans’ ability to capture
savings, are two of the main reasons that Medicare
Advantage plans invest more in prevention strategies
than straight-up Medicare does. And it ends up being
good for their bottom line. Their members really like
what the plans have to offer. Nearly 90% of them
say they definitely will renew their coverage, and
that they would recommend their plan to friends and
family.
Which means that investing in preventive care — as
CMS has already started to do — may hold the key
to improving affordability, access, support, and
innovation in healthcare. It could also go a long way
to lowering Medicare’s cost projections.
Here’s the second piece of good news: Type 2
diabetes and heart disease are largely preventable.
The unhealthy habits that move individuals from
prediabetes to type 2 diabetes can almost always
be changed. Same with the habits that turn
hypertension or dislipidemia into heart disease. At
Omada Health, we’re already helping seniors make
lasting changes in their health, with our digital
behavior counseling program, Prevent®
.
This news isn’t just good for aging baby boomers.
It’s good for CMS. Because, put simply, prevention
delivers value.
AN INCREASING NUMBER
OF SENIORS (30% AND
RISING) ARE OPTING FOR
MEDICARE ADVANTAGE PLANS
INSTEAD OF TRADITIONAL
MEDICARE.

6. 6
As CMS amps up its transition away from fee-for-
service healthcare, Medicare Advantage plans can
provide a blueprint that leads the way forward.
These plans already have experience implementing
prevention strategies, reinvesting savings to provide
more benefits, and driving higher rates of customer
satisfaction and loyalty. But their ultimate success
will depend in large part on how the preventive
benefits they offer:
1. engage their members to
2. achieve meaningful outcomes that
3. decrease chronic disease risk.
It’s pretty easy math: The more chronic conditions
they can help their at-risk members sidestep, the
more preventive benefits they can offer. And that
trend has the potential to create some welcome
aftershocks of its own — better health and quality of
life for seniors, lower Medicare expenditures, and
more opportunities and demand for innovation in
disease prevention.
In Part 2 of this series, we take a look at how
Omada Health put risk reduction into action for some
Medicare Advantage members, and share our
three key takeaways about engaging seniors in
preventive care.
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