Universal American Corp. (UAM)

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Universal American Corporation (UAM)

JPMorgan 32nd Annual Healthcare Conference

January 15, 2014, 10:30 AM ET

Executives

Richard Barasch - Chairman and CEO

Analyst

Michael Newshel - JPMorgan

Presentation

Michael Newshel - JPMorgan

Okay. Good morning, everybody. My name is Michael Newshel, a member of the team covering Managed Care and Healthcare Services at JPMorgan. To start us off this morning we have Universal American. Following the presentation, we're going to move to the Olympic Room for Q&A.

Now, I'd like invite Richard Barasch, the CEO of Universal American.

Richard Barasch

Thanks very much. Given the fact that it's an overflow crowd in the back, there are some seats upfront, so please feel free to fill in. But thanks for coming. I know it's early.

For those of you who've been following Universal American for several years, we've been pretty consistent. This slide has been the first slide in every presentation that we've given over the past probably 12 or 13 years. It's going to continue to be.

There is a lot going on in our world, lot going on in our markets, exchanges, cost, just kind of here -- from here to the end, but this isn't changing. These numbers are going to happen. Medicaid, they have happened. Their ramp up is happening.

And I think one of the things that the commentators forget when they talk about the problems with Obamacare is on a state level, there is still literally millions of people who have been signed up for Medicare over the past two weeks who are now covered, who weren't. So the Medicaid market is in fact growing.

The Medicare market which is getting a little less attention because it's kind of taken a back seat to the exchanges in Medicaid recently is growing and I think no one doubts; Red, blue, purple stripe that dealing with Medicare is the biggest fiscal issue that this country will face over the next decade or more.

There's some good news around about Medicare cost have moderated. I think there's reasons for it that I think are systemic and are going to keep going. I think that -- I think there is a valid theory around that Part D has fundamentally been free or close to free for the federal government because of the flattening of the cost curve in Medicare A and B because people are taking their drugs. They're more adherent.

So there's that theory -- excuse me, there is a theory that Medicare Advantage, even though it's still sort of 30ish% of the marketplace has really changed the way doctors in the senior space are practicing medicine. I guess they're being asked to practice a certain way for their Medicare Advantage, members who are patients of theirs and it's hard for a practice to differentiate.

I think they've gotten more efficient and more willing to do things in the office that they hadn't been before. And I think that's had an effect. I think some of the -- excuse me, some of the regulations from CMS about reemissions have had an effect. So I think there is an accumulation of things that have actually helped Medicare tremendously, but still -- it's still a problem, and it's still a big problem going forward, politics being what they are. It's going to be hard for there to be major legislation over the next period of time. I think the notion of a grand bargain.

It's hard. I don't think it's impossible, but I think it's going to be hard. So I think there is a consensus and it's actually across the isle consensus that within the context of the programs that we've got Medicare Advantage, ACOs and Fee-for-Service, we can still continue to do better in Medicare, particularly by dealing with some of the specific issues around chronic conditions.

So we're still there. Our business, obviously, has changed quite a bit in the last couple of years now that we're not in the Part D business anymore. It's taken us a little while to retool, but I think we're actually finding ourselves in very, very good shape for going forward.

Just on the landscape, this is -- I couldn't kind of pontificate about this a lot. I'm actually, three years ago, go to a cocktail party. People asked me what I did. Said I was in the healthcare business. Nobody wanted to talk. Now, everybody wants to talk what's happening, what's going on with Obamacare.

And now I can get through two or three sentences without people's eyes glazing over instead of not even be able to get through one couple of years ago. But people are talking about this. This is a big, big deal. Part of its political. The republicans are using this to their advantage. Part of it is policy, but it is on the minds of people far, far more than it was a year, two and three years ago and certainly more than five years ago.

You could talk about all the legislation, all the problems, all the problems with Obamacare, but something else was happening anyway during this period of time as we were reaching a tipping point on cost. And everybody who is the actual payer of healthcare cost was revolting against what was just an incredibly constant increase in cost.

And the employers were trying to figure out ways to save money, individuals, the States in Medicaid and, of course as was mentioned before, the feds in Medicare and Medicaid as well. So this revolution was happening anyway, even without quote "Obamacare". But Obamacare has taken the conversation to the front pages of the newspaper. And it's actually -- you're actually finding a lot more thoughtful commentary about this than they existed before.

Read the rest of this transcript for free on seekingalpha.com