WellPoint, the largest health insurance company in the country, will purchase CareMore, a Medicare Advantage plan with around 10,000 members in Arizona and 44,000 in California. The deal is worth a reported $800 million for the private investment firm that owns CareMore.

An article in the Indianapolis Star, the local paper in WellPoint’s home town said:

“The for-profit Medicare contractor, CareMore Health Group, has pioneered the practice of intensely monitoring and treating chronically ill older patients in order to improve their health while holding down their government-paid medical bills.

CareMore uses a sophisticated information technology system, with proprietary products that include remote monitoring devices, to coordinate care to 54,000 patients who have multiple health problems and are the costliest segment of the population to treat. Payment comes from Medicare, typically in fixed monthly amounts. There are typically no additional fees, copayments or deductibles for patients.

CareMore says its approach saves Medicare money by reducing multiple doctor visits, decreasing hospital stays and offering better instructions and care to patients so they stay on their treatment plans.”

The article is wrong about “no additional fees, copayments, or deductibles”. CareMore members do not pay a monthly premium, but they have co-pays for all medical services – though they are lower than most other Medicare Advantage plans’ co-pays.

Does Medicare Advantage have a future?

Medicare Advantage is very much out of favor with the current administration that runs Medicare – and the Affordable Care Act requires Medicare to cut payments to Medicare Advantage plans like CareMore. The reductions will go into effect over the next three years and will cut into profit margins for all Medicare Advantage plans and the companies that run them. So it is very interesting that the largest insurance company in the country is investing nearly $800 million in a company that is in a business that is supposed to go out of business over the next few years. WellPoint must know something we don’t know!

An editorial earlier this year in the journal of the American Geriatrics Society said:

“The CareMore model may emerge as the dominant model for healthcare delivery for seniors with chronic diseases.”

As Medicare tries desperately to cut expenses while 1 million baby boomers turn 65 each year, the CareMore model – and the Medicare Advantage model – might get a new look. The problem I see for these models is that they are for-profit. But the CareMore model is so cost efficient that they can probably handle lower reimbursements from Medicare.