Good morning, everyone. I am Jennifer Gilligan, Senior Vice President
of Finance and Investor Relations.
Thank you for joining us for our June 2020 Virtual Investor Day. We are pleased to have an opportunity to update the investor community and hope you find this morning's program to be a good use of your time. Earlier today, we issued a press release updating our full year 2020 guidance. This press release and the newly issued financial guidance can be found on the Investor Relations page of centene.com. Please mark your calendars for our Q2 2020 earnings call on Tuesday, July 28 at 8:30 a.
M. Eastern Time. Now for the obligatory forward looking statements. Please note that various remarks we make today regarding future expectations, plans and prospects constitute forward looking statements under U. S.
Securities law. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the slide you see in front of you and the Risk Factors section of our most recent quarterly report and other SEC filings. Centene disclaims any obligation to update this forward looking financial information in the future. Additionally, this presentation in this presentation, we will be discussing certain non GAAP that is generally accepted accounting principles financial measures. A reconciliation of those measures with the most comparable GAAP measures can be found in today's slide presentation, which is available on our website atcentene.com.
This is our 1st Investor Day employing a virtual format. I will now walk through some basic housekeeping items, including instructions for Q and A. First, here in St. Louis, the team is observing social distancing guidelines. We are all keeping our distance appropriately.
2nd, for today's Q and A session, questions can be submitted through the chat function at the bottom of your screen. Your questions will only be visible to the Centene Investor Relations team. We will read the question and the name and the organization of the person submitting the question aloud. Questions can also be submitted via e mail. Feel free to send questions to libbyabelt@labeltcentine.com.
After the virtual event concludes,
we encourage investors and analysts to contact Investor Relations with any follow-up questions you may have. During our time together this morning, we have a few key objectives. We will demonstrate Centene's commitment to serve the most vulnerable populations and continue to provide leadership as a diversified healthcare enterprise provide an update on pandemic related dynamics influencing our full year outlook, emphasize the growth opportunities we have in any economic environment and highlight our financial strength and flexibility. You will hear more about these priorities from our presenters today. With that, I would like to introduce Chairman, President and Chief Executive Officer, Michael Neidorff.
Michael?
Thank you, Jen, and we need to adjust these a little bit. Thank you for not meeting the whole stake. And everybody appreciates that. Good morning and welcome, and thank you for joining our virtual June Investor Day. I hope this is the only virtual Investor Day we ever have to have, and we can return to the normal format in New York starting in December.
Before we get started today, I'd like to take a moment to acknowledge the critical conversations about race that are happening in our country. Since its founding in 1984, Centene's heart and soul has been linked to the health of the communities we serve. Today, these communities are in pain, and so are we. In the midst of a global pandemic, the systematic racism and inequities that have plagued our communities have again rightfully come to the fore. Earlier this week, Centene hosted an enterprise wide day of dialogue to encourage our employees to participate in courageous conversations.
I want to take a moment to share some of the reflections that were part of that conversation. Many of us are navigating feelings of sorrow, frustration and anger, and I know that for many and especially for our African American community, these past few weeks have been particularly hard. As we continue to address these critical issues, you can be sure that we see you, we hear you, we care about you. Black Lives Matter. As a matter of fact, I was checking and it turns out that 52% of our population are individuals of color, which is something we're very proud of and it happened hiring the best person for the right job.
We currently made 2 announcements. First, the formation of a health care disparities task force. This group of outside experts is advising Sensene on ways the company can address the health care disparities among its members and communities. 2nd this week, we announced a partnership with the National Minority Quality Forum. This initiative will undertake a longitudinal study on the risk factors associated with the disproportionate impact that they could that the virus is having on racial minorities and rural communities.
As we continue these critical conversations, Centene stands united in our resolve to be part of the solution and to help create systematic change and an equal society for all. The world is changing quickly. When we reported earnings at the end of April, we were in the early stages of the COVID-nineteen pandemic, facing significant uncertainties in terms of the trajectory and impact of the pandemic as well as volatility in the economic environment. Today, nearly 2 months later, we continue to fight the pandemic, the pandemic as the economies work to reopen across the globe. While uncertainty remains, there is a lot we have learned from these initial months.
We are starting to form a clearer picture of the impacts to our business. And as we learn more, we are committed to setting a new standard for transparency in our communications. So while using this virtual format to ensure everyone's safety is a new type of experience, this is an opportune time to be hosting an Investor Day. In this unprecedented environment, organizations like Centene play a critical important role. Collectively, we have risen to the occasion in continuing to deliver on our mission, providing high quality, low cost health care to the most vulnerable populations.
Looking ahead, we remain committed to this mission. We are also prepared to operate in a dynamic environment, while maintaining the continuity of operations and supporting the safety of our employees and providers. We have demonstrated how we are both disciplined and agile, and we will continue to operate in a way that allows us to respond quickly as the circumstances evolve. For example, we are considering new and innovative ways in which we can ensure members continue to have access to the care they need, and we will accelerate the use of technology and use tools such as telehealth. And while we have always been a collaborative partner to providers and state customers, we have implemented new approaches to supporting our partners, safeguarding the stability of the health care system and working with states to navigate through this crisis long term.
For example, we have launched online portals to ensure providers have the support they need to access key benefits through the CARES Act. We also eliminated the need to collect co payments and remove authorization requirements for COVID-nineteen related treatments. Results as a result, providers are guaranteed payment regardless of the patient's ability to pay. Throughout all this, we will leverage the strength of our organization and build on the characteristics that differentiate Centene, namely the scale and diversity of our business, our localized approach, the deep relationships with key stakeholders across health care spectrum, the strength of our balance sheet and our team and culture. Let me emphasize that shareholder value creation remains a top priority at Centene, and our long term track record in this area underscores our commitment to our shareholders.
We are a different company than even just a few years ago. We have advanced to 42 on the Fortune 500 list, where the air starts to get very verified, and our leadership during this pandemic has been recognized by external rankings in Forbes and Fast Company. And as far and we are far from done. We continue to focus on growth, current economic circumstances and unemployment levels will drive a near term growth in membership, especially in our Medicaid business. And while record high unemployment rates are not the way we want to grow, we believe it is critical that we are able to support additional members during this difficult time.
Importantly, significant opportunities for growth remain outside the dynamic of this current environment. By applying our all products, all market strategy, we will continue to drive growth across our business. In this way, we are focused on delivering long term growth, whether we are facing a 15% unemployment rate or a 3% rate. And it has always been our commitment to provide you with as much detail and transparency as possible. While it remains impossible to precisely predict the pandemic's path, we have our April and May data to provide a reasonable assumption about the Q2 and have additional clarity in terms of the full year compared to what we knew when we reported Q1 earnings.
As I have said previously, it will be choppy, but I'm pleased with how we are managing through this environment. Based on the facts we know today, we are raising our full year 2020 EPS guidance as a result of our new membership and where we believe utilization trends are headed. During today's program, you will hear from members of our leadership team as they discuss Centene's 2020 alpha, our near and long term growth opportunities and our operational agility. We have the right team in the right roles to deliver on both goals and our commitment to shareholders. We are excited to showcase them here today.
In closing, our business remains strong, and I'm highly confident in our ability to execute on our long term growth strategy. With state budgets under the constraint, the roles of managed care companies like ours have never been more important. I want to thank and recognize our employees for their commitment and dedication during this time of crisis. They have really stepped up to the plate, and I couldn't be prouder of how we've worked together to continue to serve our members. With that, let me turn the podium over to Jeff.
Thank you, Michael, and good morning. Despite the continued challenges of COVID-nineteen, the availability of April May data and the trends we are seeing across our company and the country give us more confidence in the assumptions driving our outlook for the year. We recognize the environment we are operating in is less certain and predictable and today we will provide more transparency into what we have seen to date and our current expectations for the remainder of 2020. You may recall that during our April 28 earnings call, we discussed some of our assumptions and variables that were impacting our 2020 full year guidance. In today's presentation, I will highlight the trends we have seen across our business through the end of May, including COVID-nineteen related metrics, discuss in more detail what these trends mean for our 2020 expectations, including diving deeper into some of our modeling assumptions, and last but not least, provide an update on the WellCare integration.
Let me start by highlighting some of the trends we are seeing in our business through the end of May. 1st, membership. We continue to experience growth in our membership as we expected and highlighted on our Q1 earnings call. This increase is due to increased unemployment, suspension of Medicaid eligibility redeterminations and extension of grace periods for the marketplace business. Through the end of May, we have added an additional 540,000 members and we are now serving in large part by Medicaid.
The membership increase we have experienced through May is in line with our 2020 full year total revenue guidance increase of $4,000,000,000 discussed on our Q1 earnings call. While it is too early to judge the acuity of these members, we have assumed a consistent level of acuity with our total membership in our guidance. Next, let me highlight what we have seen through the end of May in terms of claims. We have paid $221,000,000 of COVID related claims through the end of May. These payments continue to increase, but have not been significant to date and represent less than 1% of our medical costs since the inception of the pandemic.
I do want to highlight that these are paid claims and not claims we have received and are awaiting adjudication. The second graph on the right of this slide is based on claims received. Through the end of May, we continue to see an increase in the number of tests and claims we receive for our members. Remember, this information is based on the claim receipt date, not the date when the medical services were provided, so there will be a 20 to 30 day delay in the data. This is total Centene across all products.
The next slide highlights the details of the $221,000,000 of payments. While the dollars have been driven by inpatient and ICU claims, the vast majority of claims have been associated with PCP visits and testing. Additionally, we have provided cost per claim information on each category of claim. Again, this is for all products and is the average cost per claim associated with the $221,000,000 of payments. The claims received have been equally distributed by product with the percentage received being relatively close to our product mix.
However, the pie chart on the right shows that the dollars paid by product are more concentrated to Medicare. This is the result of more acute cases being experienced by older Americans consistent with the information from the CDC. For the commercial product, the percentage is higher for dollars primarily driven by the higher average reimbursement levels associated with the product. Again, this is our data and reflects only the markets and products in which we participate. This slide shows the number of claims by state with the darker states being where we have received more claims.
Given our national product scale, our claims appear to be distributed similarly to the national statistics. On the utilization front, as expected, we experienced a significant decrease in non inpatient utilization in April of almost 32%. In May, we saw utilization increase 18% over April, but still well below historical levels. The increase in May relative to April was driven by states or providers opening up and the rescheduling of previously delayed procedures. With respect to inpatient, consistent with the non inpatient trends, there was a 15% decrease in authorizations per day for April with a slight increase in May.
We believe the decrease in authorizations is not as substantial as a decrease in non inpatient costs due to our mix of TANF members where authorizations are driven by births. We expect inpatient utilization to continue to increase into June, driving toward historical levels and later I will discuss our projections of utilization for the remainder of the year. Consistent with inpatient, we have seen a dramatic decrease in ER claims, decreasing over 46% in April, which is relatively consistent with a report issued by the CDC earlier this month. While ER volumes have increased in May by 8%, those volumes are well below pre crisis levels. Note that all the utilization statistics I have shown here today may not directly correlate into medical costs as those statistics are before the normal reserving adjustments that are made monthly to reflect environmental factors.
For example, during this pandemic, we have seen the number of days between the date of service and the date the claim is received increase. We expect this is due to shelter in place policies with a substantial amount of the office staff at providers and hospitals working from home. As a result, the total volume of claims in any given month would be lower, but some of that decrease is due to a delay in billing. Additionally, due to the suspension the relaxation or suspension of prior authorization requirements for inpatient stays in certain states, we do not have a full inventory of inpatient authorizations. We create authorizations in our medical management system for those patients when we have evidence that they are in the hospital.
We have been in regular communication with our provider partners to create a full inventory of authorizations, the estimate we have accounted for 93% at this point in time. Based on this, the utilization reduction shown will be different than what is recorded at quarter end as we adjust for the various environmental factors. Based on our actual results for April May and our forecast for June, we expect our Q2 HBR to be substantially lower than our Q2 last year. We expect total revenues for the Q2 to be between $27,300,000,000 $27,600,000,000 and adjusted diluted earnings per share to be between $2.35 $2.45 As a result, the first half of the year will represent approximately 67% of our full year adjusted diluted earnings per share. Again, we don't intend to provide quarterly guidance going forward, but given the unusual circumstances this year, we believe it is important to be transparent.
Next, I want to highlight some of the assumptions we are making with respect to the remainder of 2020 and our current expectations for the full year. While it remains difficult to provide certainty, we want to give you our updated view on those dynamics and assumptions that feed into our guidance as we see them today. We will provide updates throughout the year as needed. First, the unemployment rate. Medicaid and marketplace enrollment is highly correlated to the level of unemployment in the country.
There are numerous estimates of the unemployment rate for 2020 2021 and those estimates have a wide range of potential outcomes. The average shown here is based on the Bloomberg survey results from 53 financial institutions and the light gray represents the range of those estimates. The current average on this graph is the simple average of those 53 estimates. Note that this survey was before the updated employment rate was released last week. For our 2020 guidance, we have used an unemployment level that peaks at 14.7% in the 2nd quarter in April and decreases thereafter to 10.3% at the end of the year.
The unemployment assumption is the driver behind the membership and revenue increase for 2020. If the actual unemployment rate differs from our assumptions, it will affect our level of membership, revenue and earnings for the year. Based on our unemployment rate assumption, we are projecting membership to grow versus our pre COVID expectations, peaking at approximately 1,900,000 members more than before the crisis. The membership begins to decrease beginning in September due to our assumption that states will reinstitute eligibility redeterminations on their Medicaid programs. Additionally, one note on marketplace.
Typically, we have our peak enrollment early in the year with decreasing membership thereafter due to members lapsing with their premium payments. We have provided premium payment assistance to our members with enhanced flexibility and increased grace periods. This has resulted in the retention of our members longer than we have historically experienced. This in combination with new members joining due to change in employment status will drive our peak membership later into the year. We don't expect substantial new member growth as a result of some employers furloughing employees or offering enhanced COBRA benefits.
We expect the majority of the revenue benefit being driven by the retention of existing membership that previously would have lapsed. Before we discuss medical costs, I want to highlight some of the programs we have initiated to help during the crisis. We have a strong obligation to support our employee members and provider partners during this difficult time. As previously announced, we have supported our employees, provider partners and members through various programs including providing PPE, premium assistance and covering all costs of our members and employees associated with COVID-nineteen. These are just a few of the programs we have initiated to help during this crisis.
Next, medical costs. As we mentioned earlier, we experienced a significant reduction in utilization and medical costs in April. May costs increased over April, but remained below historical levels. And while we expect June utilization to increase further above May, we do not expect June to be above the historical average. Based on our scenario analysis, there is a wide range of medical cost outcomes based on the timing of when states open, the occurrence of a second peak, infection rate and speed of which delayed services return to name a few.
We have shown the range of outcomes associated with our modeling on this slide. One important point, if we use our best estimate, which is the midpoint of the range on this slide, the lower utilization for 2020 is substantially offset by the return of delayed procedures and incremental COVID costs. This is highlighted as the dash line on the slide. If you were to aggregate the costs below and above our historical experience for the year, it is a slight benefit to 2020. This is primarily driven by the fact that we expect only 75% to 80% of the delayed procedures to return this year due to various factors, including capacity of the health care system, continued social distancing guidelines and individual behavior.
This demonstrates why we continue to advocate for a wait and see approach on adjustments to state Medicaid programs, which I will highlight next. We continue to work with our state partners on the effect of the crisis on the Medicaid programs, including more recipients in the effective risk mitigation programs. The vast majority of our states had risk mitigation programs in place, including some form of minimum MLR or risk corridor. We have been advocating to expand these programs to encompass both the lower utilization that is currently being experienced as well as the return of that utilization later this year and into next year. The expansion of the time horizon on these programs can adequately adjust for the seasonality of the costs.
Additionally, there have been structural changes to ensure adequate funding of the Medicaid program, including enhanced FMAP and there is continuing discussion in Congress for further FMAP enhancement. We have been in close contact with our state partners and have been providing them data with respect to trends we are seeing monthly in utilization and costs. Overall, we continue to expect that any changes made to state programs will be required to be actuarially sound. From a historical perspective, this would be consistent with what occurred during the last recession in 2,008 and 2,009, where premium rates continued to be sound throughout the recession. Importantly, we have the balance sheet strength to weather the crisis.
As we have previously discussed, we took proactive measures to strengthen our liquidity position and continue to be balance sheet managers in light of the crisis. We are well positioned to meet the operational and strategic needs of the company going forward. Based on all the information I just presented, including performance through May, we are more confident that additional membership growth and lower utilization will be a slight benefit to 2020. As a result, we have increased our adjusted diluted earnings per share guidance by $0.20 at the midpoint, demonstrating the strength of our business model. Additionally, we have reduced our total revenue guidance by $500,000,000 reflecting the delay in the start up of North Carolina contract to July 1 next year.
The shifting of the North Carolina contract is neutral for earnings in 2020. Note that we are incorporating another peak later this year in terms of infection rate in our guidance, but are not assuming the reoccurrence of shelter in place policies. Before I wrap up and hand it over to Brent, I want to take a moment and update you on the WellCare integration. The integration is going well as we continue to work through the process. Our New York health plans were combined on June 1st and we are on target to go live on the HR and Financial Systems consolidation July 1st and are rolling out our targeted operating model.
We continue to work on the provider network alignment as each Centene and WellCare health plan comes together in line with the regulatory requirements. Based on the work we continue to perform, we expect to deliver on our year 2 synergy target of $500,000,000 net synergies. We are combining the best of both companies by extending our leading clinical programs to the entire enterprise. We are adopting best in class practices from both enterprises and bringing discrete services in house. Overall, we are pleased with the progress we have made on our integration efforts, but recognize there is still a lot more work to be done.
In conclusion, the Q2 will have a lower than normal HBR that will drive outperformance as a result of higher membership, lower utilization and lower cost we are experiencing. We continue to expect 2020 revenue to be in line with what we guided to in Q1 adjusting for the shift in North Carolina timing and expect our membership to peak in the Q3. We have increased our earnings guidance reflecting the confidence we have in the data we are seeing. We have a strong balance sheet that can meet our operational and strategic needs and the WellCare acquisition is on track to meet our integration and accretion targets. Thank you for your time.
And I will now turn it over to Brent.
Thanks, Jeff, and good morning. I appreciate the opportunity to speak at our first video Investor Day. I can't wait until we're back in person, but I'm happy to be able to speak with you all again. First, let me update you on some RFP questions you might have since we last met. We were successful in reprocurements in Indiana for the Hoosier Care Connect program and we retained the legacy WellCare business in Kentucky.
There has been no public update as to when Texas will reprocure its Medicaid Managed Care Programs. As for North Carolina, we are confident in the state's commitment to transformation to Medicaid managed care, but we know like many states, it is focused 1st and foremost on COVID-nineteen and the health and well-being of its residents. The same can be said for Pennsylvania, where we are awaiting the outcome of the Pennsylvania HealthChoices procurement. This is the 1st Investor Day since WellCare became a part of the Centene family. And I thought it was important to level set and highlight what Centene is today.
Now here is our current footprint. We are the largest Medicaid managed care company. We are the largest exchange provider. We are a growing Medicare Advantage operation and a nationwide Medicare PDP company. We are TRICARE West and we are largest in correctional health and we're doing business in 3 international markets.
In total, we serve roughly 24,000,000 individuals. Today, I want to give you a sense of where this company is going. This includes growth, while continuing our commitment to quality, operational excellence and profitability. Centene has grown through challenging times. Let's look at economic conditions for the last 20 years.
As you can see on this slide, when you go back to 2000, there were just over 34,000,000 Medicaid recipients. Then came the dotcombubble, 9eleven and the recession of 'one and you begin to see more people joining the Medicaid roles. As the economy begins to improve, numbers don't decline. In 2,008, the great recession begins. And again, you see the growth of Medicaid recipients and as the economy improves into 2010, the baseline continues to grow.
Today, we find ourselves 3 months into the COVID crisis with over 70,000,000 Medicaid recipients. As Jeff discussed earlier with you, projections estimate that economic conditions could drive that number higher. Here, you can see the progression of Medicaid Managed Care in both spend and enrollment. As state governments turn to managed care companies to bring them budget predictability, quality outcomes and taxpayer savings. From 2010 to 2019, there's almost a 2 50% increase in managed care spend, reflecting state government's confidence in the managed care industry to effectively manage funds.
So where do we think things are headed post COVID? If history is any indicator, there will be a managed care growth and a new baseline in Medicaid recipients. Centene is prepared and has the capabilities to handle this growth while focusing on quality and working to meet the needs of our members, providers and state partners. There is still tremendous opportunity for growth in Medicaid and not just through new members via COVID. Whether it's geographic expansion, the states adding additional eligibility categories to managed care or Medicaid expansion, Centene sees great potential as states look for solutions to budgetary challenges.
Here you see those states where Centene operates as a Medicaid managed care company. There remains many opportunities to add populations in our existing markets, including the aged, blind and disabled and long term services and support, as well as Medicaid expansion. And they are definitely states that could transition to managed care programs, representing millions of Medicaid recipients. All you have to do is go back and look at the last recession. In 2007, there were 29 states in Medicaid Managed Care and today they're 39.
Of those 10 states that added Medicaid Managed Care Centene successfully operates in 9. So there's clearly a possibility that more states turn to Medicaid Managed Care as they did following the last recession. Now I know this crowd likes to see numbers. So let's look at what this represents. In 2019, there was $280,000,000,000 in Medicaid spend that remained in fee for service.
That is 47% of the total Medicaid spend. So with more Medicaid recipients because of the economic impact of COVID, state governments can turn to Medicaid managed care companies for taxpayer savings and budget predictability. We also anticipate growth in our marketplace product. From the very beginning in the marketplace product Centene sold as an entrepreneurial company focused on growth and innovation and we've always believed marketplace to be a great opportunity. Over the years, while insurers backed away from the marketplace, we have continued to grow and support this important product.
Today, we're the largest insurer by membership through our Ambetter product. We do believe in marketplace and I will say this, as our competitors begin to believe in it as well, we welcome the competition. We think this only strengthens the product. This will be the 1st recession where the marketplace exists. The estimates where recently uninsured people will find coverage varies widely, But whatever the correct number is Centene is perfectly positioned to serve this increased enrollment in both our marketplace product and Medicaid health plans.
We are confident and have every expectation that we'll continue to be the leader in the health insurance marketplace. Now our Medicare story is looking a bit different than last time we all met. Historically Centene has not been the largest Medicare Advantage plan. Back in December, this footprint is what we could have shown you for Medicare, 20 states 400,000 Medicare Advantage members, but this next slide looks very different. With legacy WellCare now part of the Centene team, we have a Medicare Advantage Plan in 31 states with almost 1,000,000 members.
We have commented in the past about our disappointment in Medicare growth over the last few years. The story has changed and we expect to be a leader in growth in this very competitive industry. With a great leadership from legacy WellCare, we have a Medicare team with a proven playbook to drive growth, improve stars and profitability. Our approach is to offer a quality product with the best customer experience and with a focus on provider partnerships. We're fully focused on Medicare today and our ambition is to continue to grow.
And Centene is a growth company and we have year after year of successful growth because we have the systems and capabilities to support it. Now you've probably heard Michael say before Centene is a technology company that happens to do healthcare. You know what, he's right, we are. We are able to focus and lead our Reducer and provider administrative hassle, close care gaps, increase quality outcomes and quickly respond to challenges as they appear. Technology has always been a differentiator at Centene.
We pride ourselves in having the systems and the capabilities to ensure the highest quality of care at the appropriate cost. As a global company and one that operates in all 50 states, we are constantly modernizing our IT approach. As we move forward, you will see us redesign the Centene Technologies organization. We are creating a group focused on next generation technologies that accelerates the development of key technologies and allows our core IT teams to focus on the integration of acquired assets. Our focus is on our programs are in member experience, provider payments, interoperability and care management, ultimately working toward one goal, operational excellence.
Underlying these focus areas is a platform that has all the artificial intelligence and robotics necessary to change the healthcare landscape. With these cloud enabled tools, we have already made significant advancements, including the introduction of real time ADT transactions for the majority of our health plans, as well as enhancements to our member experience. Many of our IT investments are beginning to make an impact. For example, the investments we made in Interpreter for real time care gap distribution and Quartet bringing behavioral health integration at a level that has not been seen in the industry and helping to improve the whole health outcomes. We continue to grow our IT partner landscape to deliver improved experiences for our members and providers.
Let me give you one example of how this technology allows Centene to quickly pivot and bring solutions to our customers. The State of Illinois asked if we could assist with their COVID-nineteen community testing program. Within 3 days, our cloud based technology allowed us to create and stand up a call center that is integrated with several labs. The call center delivers COVID-nineteen test results and instructions to members to the community on behalf of the state. Through the end of May, we provided nearly 93,000 community members with test results.
I know of no other health insurer that is as flexible and responsive as Centene. During the past 3 months, we have spent a lot of time engaging with our stakeholders, trying to better understand how we can be the best partner. And in the past 2 weeks, we have seen direct action throughout this country in response to the death of George Floyd in Minnesota. As our nation looks for ways to bridge the racial divides in this country, it's incumbent upon Centene to continue to look for ways to bridge the divide in healthcare. Let me be clear, it's imperative that all people have health equity.
The COVID crisis has highlighted these inequities. As Michael mentioned during his opening comments, building on a long term commitment to the communities we serve, we have created a healthcare disparities task force. Made up leaders from around the nation with experience in healthcare delivery, technology, behavioral health and community engagement. The expertise of these individuals is a unique strength for Centene. In the near future, the task force will study the cases and causes of healthcare disparities during the COVID-nineteen and recommend actions to address them.
The task force is empowered to recommend improvements in Centene's policies and practices to further address healthcare inequity among the most vulnerable. The skills and experience these task force members have connected directly to many of the trends that we've seen over the last few years in our Medicaid RFPs. Access in underserved areas, behavioral health integration, social determinants of health and value based payments. I've spent a lot of time over the past few weeks talking with our customers, including our state Medicaid directors, Secretaries of Health, Commissioners of Health and yes, our providers about how the landscape of healthcare is changing. And clearly these trends and the need to support our members are only accelerating.
We have worked hard to provide services to our safety net providers and to be a valuable partner to the states during this unprecedented crisis and we know that things are going to look a bit different in the coming months years. We are making the internal adjustments and improvements of our systems, policies and processes to meet and support these demands. During pandemics, you just cannot maintain the status quo. We are focused on making sure that our stakeholders survive and thrive. In my conversation with our regulators and our providers, there's been one clear theme.
We need to support our provider network and help ensure their ability to survive long term. Now more than ever, we aren't just a payer, but truly a partner to our providers. Our state partners want to know that we're focused on operational excellence, support the communities we serve and that we have the financial wherewithal and the systems and technology to face today's challenges. This means making certain that certain providers are paid in a timely fashion and looking at new reimbursement models to guarantee that they can secede. We will remain focused on meeting the needs of our members and stakeholders as we tackle new challenges.
COVID has directly impacted the way that many of our providers provide care for our members and we are working to support these changes. One change has been the increased use of telehealth. Has the promise of telehealth finally been realized after all these years? Here's a bit of our experience I thought you would find of interest. Centene telehealth claims went from less than 1 half of a percent of total claims in April of 2019 to 17% in April of this year.
This is happening mostly through our contracted providers using their own access to telehealth solutions. We find this to be a fantastic outcome because this is allowing people to remain connected to their own provider. While our investments in technology have kept us on the cutting edge, our real success has been our relationship with providers and now it's more important than ever. We have refined our support structure so that providers can spend time with their patients and not paperwork. COVID has encouraged a new kind of partnership with providers as we've worked to support them finding access to PPE, enabling and reimbursing telehealth, wrapping services around our providers to be successful and empowering our staff to be of assistance in this partnership.
We believe this will further propel value based purchasing. We use a unique alternative payment methodology for contracting that we call Model 1. Model 1 is a value based approach that empowers providers, improves cash flow and quality. It's putting the provider in charge to make decisions. This is the real promise of what a partnership between a provider and Centene can be and will be and this happens only by having the willingness and technology to enable it.
We are the leader in governmental healthcare solutions and our focus is to remain the leader of the pack. To be the leader you need size and scale, a strong balance sheet, strong provider partnerships and the lessons learned from history and our experience enable us through challenging times to remain successful. Leadership requires creativity, strategy and execution. We continue to examine the full range of government healthcare solutions, not solely limited to what we discussed here today, but looking at the needs of state, county and city government workers, teachers and university employees. We believe that in order to remain the leader, we must look at a full range of options to serve all governmental needs.
These are the traits and the abilities that open the door to new growth and that is the story of Centene, profitable growth. Now I know you all have been waiting for this for our revenue number. Our starting point for revenue guidance for 2021 is at least $114,000,000,000 We see opportunities across all lines of existing business and continue to explore new avenues of growth, both organically and through M and A, and we have a proven track record of converting opportunities to revenue. We're a disciplined company focused on profitable growth and most importantly quality of care. Let me provide you with slightly more detail on our initial 2021 outlook.
When we spoke in March, we believe that our revenue for 2020 would be approximately $105,000,000,000 This has now increased to $110,700,000,000 largely as a result of COVID. The growth from $105,000,000,000 to $114,000,000,000 is compelling and demonstrates the momentum of our business. As always, dollars 114,000,000,000 is what we're aware of today and does not include any potential M and A or any new RFP implementations. In addition, this includes a reduction of pass through payments of $1,000,000,000 and a reduction of the health insurer fee of 1 point $7,000,000,000 from 2020. We are showing no incremental revenue benefit in 2021 due to COVID-nineteen.
And while North Carolina has not announced the go live date for their managed care program, we have assumed July 1, 2021 for the purpose of this revenue guidance. We look forward to refining this number over the next 6 months as we consider this number just to be the starting point. I'll now turn it over to Shannon Bagley, Senior Vice President of Human Resources who successfully led our efforts to enable our employees to effectively work remotely in response to COVID-nineteen.
Thank you, Brent, and good morning. Today, I will be sharing an overview of how we are leading through coronavirus, specifically as it relates to the safety and the well-being of our workforce. And in a moment, Brandy will provide additional insight into our business operations in light of the pandemic. My commentary builds upon Brent's discussion, one which shows active leadership with our communities. The health and safety of our employees is our uncompromising priority as we navigate these difficult days.
And we remain steadfast in our commitment to serving our members, our providers and our communities. From the early onset of COVID-nineteen, Centene was able to leverage its modernized infrastructure, which includes automation and digitization across multiple areas of the company and its agility to enable prompt decision making and swift execution of critical actions to ensure continued delivery of services. As you'll see, we are working closely with cross functional teams and using all of this experience to drive even further agility and design for the new normal. While we leveraged our business continuity plans early in the pandemic, we also used our strengths as a company to quickly pivot and enact change across the organization. For instance, we transitioned nearly 90% of our workforce to a work from home environment in less than a week.
And to support this new working arrangement, we activated our digital learning experience to accelerate remote working effectiveness and well-being trainings. And although our workforce has shifted to a home setting, we continue to act on hiring needs. In fact, we've held numerous virtual career fairs, engaged in 7,500 virtual interviews and hired over 2,500 employees since the transition mid March. When hiring remotely, it is important to have a foundation to immerse new employees into one's culture. And our digital learning experience enables real time onboarding and participation in e learnings to accelerate that cultural immersion into Centene.
To care for our workforce, we worked quickly to enact several new benefits early in the pandemic. For instance, within the 1st 2 weeks of moving to a work from home arrangement, we enacted 10 days of additional emergency paid sick leave. We provided a new technology stipend and an in office premium pay. We waived prior authorizations and cost sharing for COVID-nineteen related employee care. And we created a new resource site with a dedicated employee concierge team to support employees' well-being and provide easy access to HR professionals.
We also established a medical volunteer benefit, which provides employees with paid volunteer time off for up to 3 months and over 1,000 licensed medical professionals at Centene expressed interest in volunteering their time and hundreds of volunteer hours have already been logged. And it was our active leadership with our employees along with our members, providers and communities, which recently gained us recognition by Forbes Magazine as number 14 out of the 100 largest employers for our response to the COVID-nineteen pandemic. Centene has offices across the globe, and we decided early in the planning process that as we began to return to the office, we would do so in a conservative phased approach and in line with CDC recommendations and national, state and local guidelines. Our conservative approach will not begin until we can provide healthy interaction and a safe working environment. And we've been diligently working to prepare our offices for the first of several phases.
Over the past months, we've prepared our offices to reduce the spread of COVID-nineteen and have communicated new office guidelines to employees to ensure transparency and safety. All of our offices have new signage with instructions to enable social distancing. And while most of our cubes are 6x6 or larger in dimension, we've invested more than $20,000,000 to retrofit our cubes with acrylic screens for additional protection from the spread of respiratory droplets. And in addition to signage and screens, we've installed thermal temperature scanners for our high volume offices and have a dedicated contact tracing team for positive diagnosis. As there is not a one size fit all solution, we've established a return to office framework for our business unit leaders, enabling consistency and return to office timing and approach across our offices.
And just as no community is the same, neither are our colleagues, and we will be providing special work from home arrangements for employees with challenges outside their control. We continue to listen to our employees and their voice will continue to provide us with additional insight as we draft our longer term working arrangements. And now, I'll turn it over to Brandy as she shares insight into our business operations during the pandemic.
Good morning. I'm Brandy Burkhalter, Chief Operating Officer for Centene. As Shannon mentioned, I'm going to provide some COVID related insights into our operations. At Centene, we were primarily at work at the office organization prior to the COVID pandemic. We believe in an office setting, you can do your best collaborative work, more easily seek counsel and feedback from your peers and supervisors and work more efficiently across departments in the enterprise, particularly as it relates to process optimization improvements.
During past Investor Day conversations, I have shared work we have done around robotics that increase the efficiency of our claims processing, the creation of our next generation systems and other Centene Ford initiatives, all designed to streamline our operations, ready us for continued growth and improve the experiences and interactions with our members and providers. And prior to the pandemic, all of this work was delivered in an office setting. As we were monitoring the pandemic in February early March, we began efforts to practice working from home in case we needed that option, leveraging our extensive business continuity plans and in partnership with our HR and IT teams and using our operational agility, we started to send our people home to validate Internet service and equipment functionality with our call center agents, our claims processors and our clinicians that interface with our members and providers on a daily basis. A short time later, we made that transition. Shannon mentioned, we transitioned nearly 90% of our entire workforce to work from home.
From an enterprise operations team perspective, we moved 96% of our operations team to a work from home disposition in a matter of days. As Jeff mentioned in his earlier remarks, we have seen some declines in overall work receipts and some inconsistent patterns in items such as new claims, authorizations to perform procedures and call inquiries. For instance, our call volumes declined 30% at one point during April before starting to slowly return at the end of May. It was important to our operations team we continue to deliver the same quality services to our members, our providers and other stakeholders no matter where we were performing our work. The lower work receipts in April May allowed us to mature our work from home processes, redeploy staff to other important outbound call projects, such as checking on vulnerable members during this crisis, cross train on other enterprise tools to increase our future flexibility and prepare for growth, and continue our work efforts on digital and other efficiency programs like Centene Forward Initiatives.
At the same time, consistently achieving all of our operational metrics around call center performance, things like average speed to answer and other service level agreements, enrollment processing, authorization review and approved turnaround times and claims processing all remained consistent. During this time, 4% of our operations team continued to work in our offices, making sure essential services like caring for our most vulnerable populations and communicating and reimbursing our providers were performed. We are preparing to return employees back to the office setting with some changes during the summer and fall. Consistent with guidance from the CDC and the various government agencies in the communities we live and work, we have made investments in the safety of our workforce. We are anxious to work again in that collaborative office setting to continue to advance
all of
our enterprise initiatives. As we return to the office, we will continue to practice and be prepared to shift back to work from home disposition if we would see future COVID peaks and those shelter in place orders once again. We are especially focused on any new business and operational process changes made to ensure that all can be formed at both the office and home work settings. We have an extremely dedicated, talented, purpose driven workforce without which none of this would be possible. I am honored every day to work with this team in any setting, and I want to thank those who may be listening.
This concludes our prepared remarks. Give us a few moments as we transition to the
Gentlemen, we will be starting in approximately 1 minute.
Good morning. My name is John Dinesman, Senior Vice President of Government Relations for Centene. And as what has become a staple for these investor conferences, we have another esteemed panel for you today. We have Governor Ed Rendell, who served as Governor of Pennsylvania from 2003 to 2011. As Governor, he was committed to making government more responsible and responsive to the public's needs.
His legislative agenda focused on common sense political reform and putting progress over partisanship. Governor Rendell has also served as Chairman of not only the National Governors Association, but Chairman of the National Democratic Party. Known as America's Mayor, he was Mayor of Philadelphia from 1992 to 2000 and he's been an on air political analyst for NBC News and MSNBC. And then who can forget, he's also an author of the book, A Nation of How America's Leaders Boss the Guts to Make Us Great. In addition, we have Tom Bedlak, who's a nationally recognized thought leader in Medicaid and Healthcare Policy.
He is currently a partner at Spire Healthcare Strategies. Prior to joining Spire, he served in a variety of leadership roles for the State of Arizona, including Access Medicaid Director. He also served as President of the National Association of Medicaid Directors and serves on the Board of NCQA and is a member of the Congressional Budget Office Panel of Health Advisors. Last and certainly not least, we have Doctor. Mark McClellan, who is the Director of the Robert J.
Margolis Center For Health Policy at Duke University. Formerly, he was Senior Fellow and Director of the Healthcare Innovation and Value Initiative at the Brookings Institute. He's also probably best known by serving as Commissioner of the FDA under President George Bush from 2,002 to 2,004 and as CMS administrator from 2,004 to 2,006. So with that, I'd like to open it up first for opening remarks with Governor Ed Rendell.
Good morning, everyone. It's a pleasure to be here and I want to thank Centene for inviting me. The current Governor of Pennsylvania, Tom Wolf, was my revenue secretary during the 2nd term of my tenure as Governor. And Governor Wolf and his staff tell me that Gentine is easy to work with and a great corporate citizen. And those things do add up when you're looking for help in the governor's office.
So, pleasure to be here. My presentation is going to be broken into 3 parts. First, to talk about what's going on right now and what's likely to be the roadmap between now and the November election. Secondly, what's likely to happen substantively after the November election. And thirdly, my prediction of what's going to happen in the November election.
But let me start by telling you, I'm a pretty lousy predictor, because in 2015, I said that Donald Trump would never get more than 15% in any state in the union. So take my prediction with a grain of salt. Let me start with what's happening now. States have lost and cities have lost tremendous amounts of revenue. Obviously, that's to be expected because our revenue depends on wage tax in many instances and business taxes and even property taxes.
How are the states going to make up for this revenue? Well, normally, if it was just an economic depression, you might say that healthcare would suffer. But that's not going to be the case here, I believe strongly, because this is more than just an economic depression. It's a healthcare crisis. And when I was governor in 2,008, I'm Chairman of the NGA at the time, we had a recession that was purely economic.
But even there, the thing that we were most interested in the governors when we met with President-elect Obama to talk about the stimulus plan, thing that we were most interested in was getting relief under FMAP. We needed it desperately. We had in many states, a large state like Pennsylvania, we had holes of 100 of 1,000,000 of dollars and even 1,000,000,000 of dollars to fill. We got expanded healthcare under the Obama stimulus plan. And I think when Bill number 4 comes out of the current Congress, it will have an increase in FMAP.
And an increase in FMAP is more valuable now than it ever was to states, because under Obamacare, the states that have Medicaid get federal contributions of 90% of the cost. When I was governor, our federal contribution was about 58% of the cost. So the Republican governors as well as the Democratic governors will put enough pressure on the Congress and on the President. So I think Bill Ford will have an adjustment, which will allow them to do something with an increased FMAP. So I don't think healthcare will suffer at all.
And it shouldn't suffer at all, because I think all of us believe that at any time, but especially a time of crisis, we should provide healthcare to our citizens. Now, what's going to happen after the election? Well, let's take 2 scenarios. The first that everything stays the way it is. President Trump is reelected, the Republicans continue control of the Senate, but the Democrats continue to control the House.
That is a possible outcome. If that happens, you have basically the status quo, but the Republicans will not be able to replace Obamacare. They will not be able to repeal Obamacare, because that will never get through the House of Representatives. So they're not going to be able to implement their plan and they're going to be left with a stark choice of letting Obamacare die on the vine, but at the same time not providing healthcare to Americans that need it and severe consequences, which would I think cause them in the 2022 election to get the same type of beating they got in 2018. So I don't think they're going to do that.
So I think you basically have the status quo, I think they'll pump more money into Obamacare, they may find a way to call it something different. But I think that will be the result there. Let's take the other result. Democrats hold the house, win the Senate, and I think they have a legitimate chance to win the Senate now and Vice President Biden becomes President. If that occurs, people say, oh my gosh, we're going to have Medicare for all healthcare companies, we're not going to be as vital as they are now.
That is in my judgment not going to be the case. 1st and foremost, because Vice President Biden has staked out a position, which is not just a political position, but something he believes in, that we should not have government run healthcare entirely. What I think you'll see with Vice President Biden and Democratic Congress, you'll see Obamacare dramatically strengthened every American added to the healthcare roles. There may be a slight public option, but the public option will be on the exchanges. And the exchanges will also have increased subsidies for Americans who want to get private healthcare insurance, but need a subsidy to afford the payments.
So I think we're going to have private insurance companies for a long time to come regardless of the electoral outcome. And that's a good thing from a government standpoint. Private insurance companies have this level of expertise that the government, no matter how good your government is, you don't have. They offer stability to you. And most of the companies, because of course they get their contracts by bidding with the government, Most of the companies are very good partners and Centene has been an excellent partner to Pennsylvania for example.
They'll work with you to try to address your problems. They'll find ways to cut costs, etcetera. Now, those are the 2 possible outcomes in terms of what's going to happen to the healthcare, which do I think is likely to happen. If I were a betting man, I would bet that Joe Biden would become president, the Democrats would hold the house and the Democrats would narrowly lose control of the Senate to the Republicans. Well, I'm basing this on just the electoral realities as you go state by state.
There's no way the Republicans with the mood of the country as it is now with Biden's lead in the polls can take back the House. I think the Democrats margin in the House may drop a little, but the Democrats will emerge with a fairly substantial margin in the House. In the Senate, it's going to be very, very close. I think the Democrats will capture Arizona, the Senate seat in Arizona. They will capture the Senate seat in Colorado, they may even capture the Senate seat in Montana and then they need a 4th seat because Senator Jones is likely to lose in Alabama.
And the question is, can they get a 4th seat in Maine, they get it in North Carolina, they get it in Iowa and you don't really know the answer to that. Now for President itself, Donald Trump now is down in one poll, CNN poll, which is a good poll by 14 points. He's down in most polls, the real clear politics average is almost 8.5% down in polls. That's a large margin to make up. But I remind my Democratic friends that when we left Philadelphia in late July of 20 16, Philadelphia was where we had the convention, the Democratic convention, Hillary Clinton was up by 13 points nationally and you know what the outcome there was.
And Donald Trump in one sense has just begun to fight and no matter what you think of Donald Trump, he's a very good marketer. He's very good at distracting. He's very good at making other things the issue. He's going to try to deflect the issue onto the Democrats and Joe Biden. So he's going to try to convince the people of the country that Joe Biden is going to lead a socialist revolution.
And we don't want socialism. We don't want Medicare for all. We don't want government controlling all of the healthcare system. He's going to try to convince people that Joe Biden and the Democrats are going to abolish police forces. This defund police stuff that the demonstrators are talking about has a real danger for Democrats.
It could backfire in the long run. So don't underestimate Donald Trump's ability to do that. And the caveat about the polls, some of you, if you're from Philadelphia or if you're my age bracket, you'll remember a Philadelphian there by the name of Frank Rizzo, very controversial, was police commissioner first and was known to be hard on crime and not to have great relationships with our African American or Latino community. Frank Lizzo always told 5 points worse than he did on Election Day. Why?
Posters explained it and I know they were right. And some people, even though you're talking to an anonymous pollster on the phone, some people did not want to admit publicly they were going to vote for Frank Rizzo, because they thought that that would cast them as a racist or something else. So RIZZO traditionally ran 4 or 5 points better than you both. That's what happened with Donald Trump in many cases, many different states in the election. So I wouldn't count Donald Trump out.
If the election were held this coming Tuesday, Joe Biden would win with a comfortable margin, win about 300 electoral votes and win about a 4 or 5 point margin in the popular vote, which is a significant victory. But the election isn't held in June. It isn't held in August. It isn't held in September. It isn't held in October.
It's held in November. And who knows what's going to happen. If Donald Trump rights the ship, if his people write the ship, if they do a good job of putting the Democrats on trial, anything can happen. So I know that doesn't leave us with much clarity, but I think it's going to be a difficult election to pick unless these things continue to spiral out of control. When there's lack of control, people tend to say, well, I may like the guy who's president, but I wanted to go back to peacefulness, I'm sick and tired of reading all of this controversy in the news.
And if that's the case, the American voters usually punish the incumbent. If I have to bet, I bet that enough of them would do that so that we'd have a new president, But there's a very good scenario for Donald Trump, if you realize.
Thank you.
So that's my prediction for what it's worth.
No, appreciate that is a perfect way of setting things up for the rest of this panel discussion. Definitely gives us a much better clarity in terms of what you're seeing from a national side. Let's go to Tom Bedlak who not only has unbelievable experience in Arizona, but he's worked with Medicaid directors and folks across all the states. So Tom, what are your thoughts?
Well, these are certainly unique and challenging times. And during these challenging times, leadership is so important. And when you look at the role of the Medicaid Director right now, their plates are incredibly full in terms of dealing with the pandemic and then layered on top of that the recession and the difficult decisions that lie in front of them. When you think about the Medicaid directors and even governors and oftentimes many legislators, most have not been through a recession. And the equations around Medicaid are evolving and different and really need to be thoughtful.
One of the things that I think has been a positive aspect is the National Association of Medicaid Directors is bringing together Chief Financial Officers and they're working more collaboratively together than they ever have before. And I think that's incredibly important in these uncertain times. As part of that, states will be looking to MCOs to be a collaborative partner. They know that they want a trusted partner who can help look at the various options and various policies that states need to consider. And I know Centene wants to be that trusted partner in their various markets and helping states look at various options that they have before them.
It's still early in this process and states are still assessing the economic impact of where we are and what opening up looks like. We're also trying to assess what enrollment trends are going to be playing out over the next many months. The federal government in passing the first series of enhanced federal matching dollars included a maintenance of effort requirement and we're seeing growth from enrollment in terms of that redetermination process being suspended. But many states have not seen significant growth above that. And I think there's reasons for that.
One is the suddenness of the downturn and people actually looking for other priorities like applying for unemployment insurance and working through that process. And there's really no link in terms of many organizations when you go in and apply for unemployment insurance. They're not necessarily pointing you directly to Medicaid as a second benefit. Another reason is that people are not going to the doctor and that's oftentimes a place where people show up and they apply for Medicaid. Another reason for, I think, the limited enrollment growth that we've seen so far is the most impacted population is the 18 to 29 year old group.
And oftentimes folks may be covered by their parents' insurance or they may be healthy and not feel the need to suddenly go get their Medicaid coverage. But we also know that when the last recession played out, the enrollment growth actually played out over the course of greater than a year. So it's still early in terms of really trying to assess not only the enrollment side, but also what the revenue impact side is. And just for example, here in Arizona, our budget offices came out with an estimated shortfall of about $1,100,000,000 for the remainder of this fiscal year fiscal year 2021. Yet in both the April May revenue estimates in terms of what's actually come in, revenues are $271,000,000 higher.
So I realize that's just one state. It certainly does not reflect trends of everything that we're seeing nationally.
But I think
it is a sign of that level of uncertainty that states are grappling with in terms of what's the breadth and depth of the economic impact. Of course, layered on top of that, state Medicaid programs are assessing what is going on with their provider networks. So you have providers that are incurring higher costs. You have providers like hospitals and nursing facilities that have had to increase their costs. You have other providers in the network like behavioral health providers, FQHCs, dentists, day programs, all that have seen incredible fall off in terms of utilization and some are able now to build back that utilization through telehealth and other efforts.
But Medicaid directors and Medicaid programs are grappling with this phenomena of some providers having much higher costs and some providers just needing some cash infusion to stay in business. And states are looking to our federal partners in terms of rapidly pushing out the $150,000,000,000 that's been appropriated by Congress to help support providers. And so far, much of those dollars have gone out based on Medicare utilization and states are looking for more dollars to flow out based upon who the Medicaid providers are that are being impacted throughout this pandemic. One thing seems certain though, there may be some cuts coming in terms of what states are grappling with and as they look forward to their fiscal year 2021 budget. But the key in all of that is what happens with the federal assistance.
And the governor touched on that. And already there's been authorized the 6.2%. What's concerning is we need more clarity around how long those funds will be available for. Right now, they're just tied to the declaration of the federal emergency, which would end at any point in time. And what states are looking for from Congress is actually provide us more clarity, so that from a budgeting perspective, we can say, well, we know these federal funds are going to be good for say halfway through the next fiscal year.
And as a result of that uncertainty, many states are taking a conservative approach and may only be assuming that these dollars are good for say through September 30. And so that lack of clarity from our federal partners and from the policymakers, really, as they look towards the 4th bill, providing certainty around how long those funds will be available for is critically important as states look at their budgeting. Another positive aspect about the federal action so far is the suspension of MPAR. MPAR was a proposed regulation that would limit how states can generate the local match and how they can use local dollars and that's been suspended. And I know states are looking for the continued suspension of MPAR for the next time period for a number of years or make it go away just in terms of its negative impact and it would negatively impact a number of states.
So it was tremendous that Congress took some policy action around that. So that leads us to, if there are cuts, what are the options? And the options are pretty limited because of maintenance of effort and what levers states have to generate funds quickly. So the first is cutting provider rates and the governor touched on this. How do you really go in and cut provider rates during a pandemic?
I think that's incredibly challenging. A second area states are looking to our risk corridors with their managed care organizations. Some states already have these in place, other states are looking at them as a tool to sort of deal with the uncertainty around utilization. A third, and I think a tool more states will look to is provider assessments. A number of states already have them in place for nursing facilities and hospitals.
I think states that have them may look to increase them and states that don't will look to adopt them. And there's a number of other provider potential cuts may look like, it's important for policymakers to hear from their Medicaid directors and others about how the math has changed within the Medicaid program. So the governor mentioned the previous recession. The previous recession was before the Affordable Care Act. And now for states that have expanded Medicaid, the impact is different because your weighted match is so much higher on the federal side.
So for example, in Arizona, to get $33,000,000 in state savings, we used to have to cut $100,000,000 But now with expansion, you have to cut a total of $135,000,000 just to get the same state savings. And states are always just focused typically on what is that state amount, but they really need to take into consideration the overall multiplier effect of those federal dollars. And now for states that have expanded what that looks like in terms of the new weighted match. Now, in times of crisis, there may be opportunities. There may be opportunities to put new populations into managed care as states look at more longer term sustainability and roll that into managed care as part of strategies again around sustainability.
So in conclusion, the Feds have provided some help. We really need clarity. We need more dollars. And if that happens, that would be great. But we certainly need the enhanced dollars to last longer and a defined end period and preferably a phase out of those dollars.
States are still trying to assess what the problem really looks like and where enrollment is going. We need dollars to more flow more quickly from HHS and states really need to have understanding of how providers will be receiving those dollars as part of their strategies. And finally, states will be looking to their managed care partners to be trusted partners during these challenging times. And we know Centene will be there partnering with states and looking at strategies and how states can deal with these difficult times.
Thank you, Tom. Really appreciate that. Next, we've got Doctor. McClellan, who clearly is able to give us a different usually had at these investor conferences and it couldn't be a better time with everything going on with the pandemic. So with that, Doctor.
McClellan?
John, thank you. And just want to build on the comments from my fellow panelists. I'm going to talk about where we are in the pandemic and what's likely to unfold from here. And I'll use the same caution about as Governor Rendell did. There is a lot of uncertainty, depends a lot on what we do, what businesses do, what the American public does and what our political leaders do as to how this is all going to unfold.
And there will be a lot more signals along the way that you can use to get a sense of how the pandemic is going. But just to put this in context, first, we are seeing some growth in cases in many parts of the country that previously were able to keep the rate of infection way down when we were at that shelter at home phase. The overall caseload in the United States is holding about steady, maybe growing slightly at this point, but that's made up of a couple of very different trends. One is the continued big declines in the areas that were really hard hit, New York, New Jersey, Chicago, New Orleans, other major urban areas with public transport that now have in place some additional steps to contain further outbreaks and are starting to reopen. For most of the rest of the country, remember this was about flattening the curve.
So we succeeded early on in flattening, but that doesn't mean there isn't still COVID-nineteen virus present around the country and we're seeing some steady now community level growth as we've taken some important steps to limit outbreaks and super spreader situations like nursing homes and meat packing plants and the like. And that's happening at different rates in different parts of the country, depending in part on how fast state policymakers are reopening in places like where Tom is in the Phoenix area and the surrounding areas. There's been a substantial growth in cases this past week. In places like North Carolina, where I am, where the state's been slower in reopening policies, we're also seeing case growth. So it depends a lot on behaviors of individuals, business practices, as well as the policy decisions.
And my expectation is that you're going to see some areas that will have local outbreaks. This is already a regional pandemic in terms of its effects and that's going to be increasingly so over the course of the summer. I think the good news in all of this is that we do know that the steps we've taken make a big difference and the growth rates that we're seeing in the areas with outbreaks are not ones where the cases are for the most part really shooting up like the way they did back in April in New York, but rather growing at a steadier rate, more of a slow burn, something that could be affected by further decisions by individuals about wearing masks, about their practices in terms of staying in proximity to others for longer periods of time. Those are the main ways of affecting transmission on the individual side by businesses on how rapidly and how they reopen and of course by policymakers on how they oversee all of this. The limiting factor because of the strong pressure to reopen for purposes of the economy and because people just want to get back towards their new normal lives, that pressure means that the limiting factor in some of these outbreaks is likely to be pressure on healthcare systems.
And right now, in just about all areas of the country where we are seeing significant growth in cases, it's kind of slower, but concerning rate, we do have sufficient healthcare capacity. There are some other things that could affect these trends going forward too. One is the development and availability of additional testing and also going along with it, the capacity to trace contacts. That's taken some time in the United States to get up and running in many parts of the country, but that's what enables you from a technological standpoint to do something other than just put in place broader pauses or slowdowns in reopening in whole regions of the country and make it a much more localized containment effort if people who do have symptoms isolate and if we're able to trace the contacts and get those individuals into quarantine and testing an appropriate response as well. And right now, very important for businesses around the country is having a strategy in place to do that with respect to their own workforce and their customers.
We're going to see continue, we've seen a lot of growth in testing over the past month. We're going to see a lot more as this starts to take off in the business community too. So those are steps that help potentially contain further outbreaks in the months ahead and make us much better prepared for the fall when there are some real concerns from an epidemiologic standpoint about another wave of cases that could be exacerbated by students being back at school and the change in seasons and the like. The other thing that's happening along with all of this is that we're getting better at treatment. If you look at the trends and outcomes so far, we're doing better at containing outbreaks in the most worrisome settings, including nursing homes.
We're also doing better in improving outcomes for the most seriously ill patients. Remember, many people, most people don't have serious symptoms from COVID-nineteen. But of those that do, of those that are hospitalized, the initial mortality rates were in the range of 25% and for people who had ventilator support up to 50%. Those are getting better and that's because we're starting to have treatments that actually work like remdesivir, it's an antiviral, it's not a transformative drug, it's not a complete game changer, but it does seem to affect the severity in these most intensive cases. And as that drug becomes more widely available, probably will have a bigger impact on the serious cases.
There are many clinical trials underway of other treatments that are especially likely to be effective for these patients who have the most severe complications of their COVID-nineteen courses. And looking ahead, treatments like antibodies from people who have recovered from COVID-nineteen and synthetic version of those antibodies, so called monoclonal neutralizing antibodies are going into larger scale clinical testing now. Again, they may not be complete game changers, but the way progress typically happens against a virus is through step by step changes. We learn more based on initial treatments that work. We build those out.
We develop combination treatments. So I see if current trends continue, significant improvements even before we have a vaccine in the severity of cases. And hopefully that will all happen by fall. There are lots of efforts underway to really accelerate the usual linear uncertain very time consuming process for drug development, making it more compressed with clear pathways into clinical testing, manufacturing that's going on at the same time, and therefore an ability to get treatments out to people faster. We still have some challenges ahead.
Probably the demand for many of these treatments, just like we're seeing now for remdesivir, is going to be greater than supply. But again, lots of efforts underway that could mitigate those kinds of challenges. Of course, the way out of this is herd immunity and that is going to take vaccines because even in the big outbreak areas, most people are still not immune to COVID-nineteen. It doesn't take a very large share of the population to be infected to get real stresses on healthcare systems. And you're seeing progress in vaccines that also is taking place in an unprecedented way for that same kind of strategy of moving from a long uncertain linear process to a compressed, very well resourced hyper parallel one.
So 3 vaccines, different types going into clinical testing at a large scale this summer, a couple more in the United States coming right after that by early fall. And while that is going on, a lot of steps to build out the manufacturing capacity for 100 of millions to billions of doses of these vaccines, we don't know that they work, we don't know that they're going to be used, but they will be available by the time the clinical studies are done in the coming months. So that when Tony Fauci says that now he's reasonably confident that we're going to have several million doses of a vaccine that's at least partially effective by the end of the year, there's very good reason for saying that even though we've never seen that kind of medical progress in a vaccine before. Now that doesn't mean we're out of this for sure, but it does mean there's some reasons for thinking that the impact of these further outbreaks could be mitigated. And the things to watch are how well we do with these steps like testing and tracing and individuals' behavior, wearing masks, things like that over the course of the summer.
My sense is that people are going to take this more seriously, at least in some regions, if they see that the cases and the stress on the healthcare systems continue to go up. And if we continue to make that kind of progress on the therapeutic side as well. I do want to say just a couple of words building on Tom's and Governor Rendell's comments about the healthcare system implications. As you know, the American economy has been hard hit across the board and it is going to come out different, not just operating below 100% for a while in the short term, but different in terms of the way that workplaces will be set up, the way that people will use transportation, the way that they'll use lots of kinds of services with a general push towards more services from home in the local community, different kinds of supply chains and that are more secure locally and the like too. That's going to apply to healthcare and the question for where companies like Centene can really be leaders is in helping to drive that forward.
I do think there will be some FMAP support, some additional financial support coming from the government to states and to Medicaid programs that have been very hard hit. But no question, it's still going to be very tight financial times for states and a challenging economy in the months ahead. And there are 2 ways that we can deal with that in healthcare. 1 is by restricting services, cutting prices to providers, but the other is by building on the kinds of steps that Centene and other companies have been taking already in the innovative Medicaid Managed Care space. And that includes using telemedicine more, giving people more services at home, getting people who would otherwise be in institutions like nursing homes out, giving them care and support in the community and Medicaid, Medicare so called dual eligible programs and providing mental health services for people who have had big mental health impacts from the pandemic or who need other kinds of support, access to food and the like through innovative transportation and through innovative virtual care as well.
I think there's a lot of interest in Congress in finding ways not just to put in more money to try to build back up that old healthcare system that wasn't working well in many of these respects and that had led to a lot of health disparities by race and ethnic groups that are also a very big concern now. So as Congress moves forward and as CMS moves forward, my old agency, they're looking for ways to reinforce and support these innovative models of care. So some great opportunities for building a future healthcare system that not only as I agree with Governor Rendell, this isn't going away, even if there's a change in party leadership in the White House in the November election, but a stronger model for what people would really like to see in their healthcare system. So unprecedented opportunities for continuing the changes that we've seen in a positive direction that have been the silver lining of the pandemic in this public health crisis.
Thank you, Mark. And we're going to open this up to questions. I do want to tell the audience that for those questions we cannot get to, we will make sure that we get answers to you from the esteemed panel. So with that, let's go with the first question.
We have a question from Matt Borsch from BMO Capital. And this is for Doctor. McClellan. Would you expect any differences in CMS regulatory tone on Medicare Advantage in a reelected Trump versus the Biden administration?
Good question. I think in general, this administration has been known for providing a lot of flexibility in Good question. I think in general, this administration has
been known for providing a lot of
flexibility in Medicare Advantage, including telemedicine, including site of service, including flexibility in using healthcare providers. And as I was just saying, the pandemic has provided an opportunity to reinforce that. Seema Verma, the CMS administrator has called for finding ways to continue all of these flexibilities and that's easier to do in Medicare Advantage than traditional Medicare.
So it's really going
to affect the next Trump administration continue building on those steps. From the standpoint of Senator Biden, he's proposed some Medicare expansions, as Governor Rendell said, not a replacement of the whole healthcare system with a government run Medicare for all, but maybe Medicare expansions to people at somewhat younger ages, age 60 or the like. And within that, remember that most of Medicare is no longer fee for service. It's either Medicare Advantage, which is now 35%, 37% and steadily growing through now both Republican and Democratic administrations since we first implemented it back in my times at CMS. And also that in the traditional program, there's been a lot of growth of these so called alternative payment models, which Senator Biden's advisors and Senator Biden himself have come out in favor of as well.
So I think that's all bodes well for the future of Medicare Advantage and the future of other kinds of innovative ways of delivering care regardless of who wins the election.
This question comes from Gary Taylor of JPMorgan. And it's a question for Governor Rendell. How can Biden expand ACA and manage Medicaid without 60 Democratic Senate votes?
Well, he can, if he does it during reconciliation, there are ways to get around it, but it is difficult. But and he certainly won't have 60 Democratic votes no matter what happens in the Senate election. It is difficult, but I think there's going to be a push. There are certain things I wrote an op ed piece for the inquiry in which I said, what's America going to look like after the pandemic is over? We certainly learned a few lessons like for example, essential workers, we all give praise to essential workers.
There are all sorts of TV, PSAs, the essential workers, we thank our essential workers. Well, a lot of those essential workers make $9 $10 an hour. We've got to pay essential workers. We've got to pay everyone in America in my judgment of living minimum wage. I think you'll see an increase in the minimum wage to $15 over a course of time, not necessarily in 1 year.
But that's coming. I think it's a wave that can't be listed. Secondly, I think the wave that can't be listed, we've learned from this pandemic is every American has to have access to healthcare. So I think you will find some Republicans like a Romney, like a Susan Collins, if she survives, certainly Lisa Murkowski, maybe even Ben Sasse, people like that saying, okay, we've got to put this issue to bed, Democrats 118, Democrats 120.
We've got
to find a way to do this. So I think there will be enough Republican votes if there's a President Biden and the Democrats, let's say, have 52 senators and 51, there'll be enough Republican votes to get something significant done.
And if I could add to this as well, there are things that don't need legislation. So there could be things like special enrollment periods, more advertising out there, making people aware that some people who may not be eligible for Medicaid or even if there's COBRA, but with the expense of that, that the reality is with the advanced premium tax credits that the marketplace may be the best option. So we don't necessarily need legislation for there to be growth. There just needs to be more information out there.
But
But John, I want to add one thing. I think Mark said it during his presentation. There's likely to be a push for adding some sort of public options, particularly if President Biden's elected. And I think Mark said it right, but maybe this time I forget, it's likely to be age driven, probably 58, 60 to 65, 66, that sort of group
that where
a lot of Americans have lost their healthcare because they're no longer employed, not too young for Medicare now. I think you might see a public option with that specific age group, but I don't think the public option will be any broader than that.
This is a question from Scott Fidel from Stephens. And this is a question for Tom. Do you have a sense on whether state Medicaid directors and their actuarial consultants will assume a similar normalization in healthcare utilization in the back half of the year, similar to what Centene is assuming in its guidance, so that capitation rates will be set at an actuarially sound basis for full year 2021?
Well, actuaries tend to be pretty conservative people when they're looking at what assumptions they need to make for building rates. I believe that they're going to assume that utilization is to rebound relatively quickly in many different areas. We've already seen significant growth in the use of telehealth to make up the difference for some provider types. And I also you're starting to see now not only those organizations that were hit by this expand office hours and do other things to make up for that lost utilization. I think the wild card in this is what happens if there's a second wave in the fall as Mark described and what does that do to utilization.
But I think initially actuaries are going to look to this as an initial dip. They're going to go back. They're going to look at historical trends. They're going to probably trend right over it and recognize that this was a unique period. That said, I also think actuaries and I mentioned this in my comments and states will be looking at some limited risk corridors for this time period to sort of try and capture what might be uncertainty as it relates to utilization.
One more from the web. This is a question from Lance Wilkes of Bernstein. What FMAP size and increase and duration would you expect to see in COVID Bill 4? And what might a democratic sweep mean for additional FMAP post election?
Well, let me clear that first. I think I'll come back to what President Obama did in the ACA. I think we had enough dollars in the expanded FMAP to get us through 2 budget years, 2 budget years after 2,008, that would have been the 2,008 2,009 budget year and 2,009-twenty 10. And that 2 years was perfect because the Pennsylvania economy after 2 years rebounded to where it was producing the same amount of revenue as the year before the recession. So that 2 year bridge was very important.
I don't think there'll be a 2 year bridge in this bill. Tom said maybe those end of September, I think a little longer than that. I think it may be at least for the rest of this fiscal year at the very least.
What I would hope to see is that right now, CBO has the increased FMAP score all the way through March of 2022. So in essence, if Congress can provide clarity that the enhanced FMAP lasts that long at the 6.2%, it's in essence free against the baseline right now at the federal level. So I would hope that as part of the 4th stimulus bill, there's at least clarification on the existing 6 0.2% that it be extended out all the way through what CBO has its score at, which is March of 2022. And then if Congress can add some additional funds to it for a near term increased bump that allows for some increased funding over the course of 3 quarters or so and that phases back to the 6.2. I think that would be incredibly beneficial for states.
Yes. I also when you look at the FMAP, I think at times we start looking at all these issues as partisan issues, but they aren't. So when you look at the FMAP in the previous package, it passed in a strong bipartisan fashion. At the same time, it's not just Democratic states or Republican states that are hurt fiscally. So they're all going to be dependent on the need for that FMAP.
And that's why we see things like the National Governors Association made of both Republican and Democratic governors supporting not only that 6.2 percent FMAT, but actually have proposed to Congress a 12% increase. So I know that we are at 9:30, 10:30 Eastern. So we can take a few more questions. We're not sure
if we have.
Yes. And Mark, I know you have to leave. We would love to hear from you also as well as what do you see in terms of if there are spikes? Do you anticipate any shelter in places? Or how do you see states as you've been advising them, how do you see them handling it moving forward?
Yes, it's a good question. I think the governors right now are feeling like they're bowed out of bullets and they're gone in terms of steps that they've already taken to try to contain outbreaks. I do think if
the
spikes, this growth in cases continues to the point that it's threatening healthcare systems, and again, we're not there in just about anywhere in the country right now. That's going to lead to some further steps, hopefully some steps on the part of individuals to pay a bit more attention to wearing masks and keeping a bit of distance from others and avoiding kind of large gatherings. It will also probably lead to some local official responses, maybe not statewide, but local officials. So we're seeing that I think Tom in the Phoenix area considering some stuffs like that and other parts of the country, Houston as well. If you can get ahead of these spikes, remember the spikes in hospitalizations come way after the actual exposures and cases, 10, 14 days before, I think they can be slowed down.
And this is where over time, we're also hopefully going to get better at things like using testing and tracing and partnerships between business and the public health responses to contain the outbreak. So I do see some potential risk for local spikes, but hopefully we will keep getting better at managing those. This is still an active pandemic though and a considerable amount of uncertainty about how all of this will unfold.
Mark, before you leave, it's Michael. I've been trying to stay in the weeds today, but there's one issue on this whole thing that I was going to say later, but I want to say it now while you're here. I was talking to an epidemiologist, and he used Japan and Hong Kong as an example, where there is a there's always been a mass mentality. We know somebody thinks they're getting cold, they put on a mask. And he pointed out that Japan has 147,000,000 people and the time and they wear masks.
And in the time that we lost 100,000 lives, they had under 1,000, 832. And it's a congested population. Hong Kong, which is even more congested with 7,000,000 people in that same time frame, plus literally 4 people died as a result of it. So I mean, I think we have to find a way to help people understand that these masks do make a difference.
They do. They do.
Well, thank you all.
I apologize. I have to leave a great discussion.
Good to see you, Mark.
I just wanted to thank the panel for your great comments today, very enlightening and informational. And as I mentioned, for those that have not been able to get their questions answered, we promise we will get those questions to the panelists to make sure that all your questions have been answered. So thank you all very much.
Thanks to the leaders for joining us. We'll start out with a question from Michael Newshel from ISI. In addition to the voluntary investments you mentioned, are there any states that are talking about clawing back some premium dollars in 2020 due to the low utilization? And could that help mitigate any potential budget pressures on rates next year?
Yes. Thanks, Mike, for the question. As I mentioned in my prepared remarks, we've been working with our various state partners around designs around risk corridor programs if they don't already have either minimum MLRs or other kind of risk sharing mechanisms. So right now, I think it's early. There's been a lot of discussions with every one of our states, with our actuaries, with our planned presidents and obviously leadership here at Centene.
And I would say it's just a little early to tell right now, but a lot of states are considering risk mitigation programs such as risk corridors if they don't already have something in place. And we continue to work collaboratively with them in order to make sure that again, I think our focus is really on expanding the time horizon of those programs to capture both the lower utilization that we're experiencing today and then obviously the return of that utilization later. If those programs are properly designed, it can effectively smooth out the effect.
Great. And as a continuation on a similar topic, this is from Sarah James of Piper Sandler. I thought there was going to be a rate discussion. Do you think California and New York rate proposals will go through? Is there pass through?
Is the overall rate still 1% to 3% for 2021?
Yes, a couple of things. There has not been really any progress, as you can imagine, in New York. They're focused on the COVID crisis there, so no real update on the New York rates. California is in early discussions. Again, this would be a state that I would mention we've had discussions with our actuaries and our leadership teams.
And so nothing final to report there. And on the composite rate adjustment, we haven't updated that since the last guidance. I think ultimately as you've seen today, there's a lot of assumptions in our guidance for the rest of this year and it's early in this process. We try to be as clear as we can and give you what we're assuming in our guidance. And we're just going to have to see how it plays out for the rest of this year.
Great. This question comes from Matt Borsch at BMO Capital. Am I correct that your assumption that new Medicaid lives, partly from economic disruption, have health status consistent with your overall book is somewhat conservative relative to your experience?
We're always looking at ways to put the numbers out and obviously we are always conservative and look at things. But we see great growth and opportunity, whether it's coming from the potential of COVID new members now and down the future, but more importantly, the opportunities we see through organic and M and A. And very specifically, we think there'll be a lot of opportunity as states like the last recession now looks now at opportunities to turn to companies like Centene, whether it's long term support services, whether it's aged, blind, disabled being added to managed care. And we think that many states, like we showed in the slides earlier, could turn to managed care and drive many opportunities for SIM to continue to grow. And that's really what we anticipate.
And normally, we would see a lot of RFPs coming out later in the fall. And there will be some. I mean Hawaii has said they will put an RFP out. We're still waiting to see when Ohio might come out. But the bottom line is as those opportunities avail themselves in states look for opportunities really to build with whatever budget challenges they have, we think there's tremendous opportunity for growth organically.
Yes. And I think the other important thing on that is our assumption. We have assumed that the members, the new members that we've shown on the slide today are coming in at the average of the product rating. That assumption could show to be conservative, but right now it's a little early. So we don't have the acuity, the relative acuity of those members as they just recently come to us.
Thank you, both. This question comes from Ricky Goldwasser of Morgan Stanley. Looking at the 2021 revenue bridge, it doesn't look like you're assuming any impact to Medicaid rates. How do you think states will offset fiscal pressure between payer rates, provider cuts and supplemental services?
I think we heard a lot of good examples by the previous panel. So number 1, they'll be looking to the federal government, what the federal government might be. And as I mentioned a moment ago, many states are going to look at various ways of using managed care, whether it's behavioral health, whether it's duals, whether it's long term support services, whether it's age, blind, disabled, there's $280,000,000,000 in fee for service that's not in managed care. And state governments have turned to Medicaid managed care because we do provide taxpayer savings and budget predictability. And at the end of the day, we'll think that there'll be much opportunity from the last recession we saw it and we believe we'll see it now.
Great. This question comes from Josh Raskin of Nephron. Is there a risk that states make assumptions on lower utilization in the future that are too aggressive leading to rates that don't keep up with trend? What is the process that states are using?
Yes, I think that sorry. I think that that is a concern of ours and the way we're trying to deal with that is by, as I think Jeff was mentioning earlier, being in very, very close communication with the states so that they understand what we're seeing and making sure that they have the data that they need to make the right choices about what the rate should be going forward. So it is an issue that we've identified, but we're all over that working together with the folks in the markets, the folks in finance and the folks in government relations to make sure again that the states have the data they need to make the right decisions.
Great. Thank you. This question comes from Gary Taylor of JPMorgan. I think you said assuming only 75 to 80% of deferred medical procedures return. COVID costs so far are only 1% of spend.
So even assuming a similar second wave, the math implies more than $0.20 upside to annual estimates. Is the offset related to state MLR or profit limits and or state rate actions or are there other factors?
Yes, Gary, thanks for the question. We provided the slide today. If you went to the medical cost slide, you can see the range of potential outcomes on the slide and we highlighted the dash line. The dash line really represents the average of all the lines on the slide. So if you look at it from a cost perspective and you use the midpoint of our range on a going forward basis, actuals through May and the midpoint going forward, we actually see that costs are just slightly below our historical average, which is one of the drivers for the guidance increase today.
So you are right that we are assuming that not all the delayed procedures returned this year. And obviously, there's other components of the guidance, including revenue and the potential for states. As David just mentioned, we're working with states on MLRs, and we've taken that all into our guidance as we stand here today.
Great. This is building on a similar topic. This is from Dave Windley of Jefferies. Jeff mentioned ongoing rate discussions. Can you please speak to your current view of the composite rates?
Yes, I think I already covered that one a little bit earlier. So we don't have really an update on the composite rate. We're giving revenue and earnings guidance and we've not given any other metrics. So it's really going to depend on how some of these programs play out the rest of the year. So again, our view is that whatever happens to rates, they have to be actuarially sound and obviously that's what we're focused on.
And so more to come as the year progresses.
Great. This is on top line. This is from Justin Lake of Wolfe Research. You indicated revenue growth of $6,000,000,000 next year. I assume about $2,000,000,000 of that is WellCare Group.
So $4,000,000,000 excluding WellCare Group. That's about 3.5%, including $1,000,000,000 from North Carolina. Are there any headwinds to that number given the lower end of typical range and any insight into growth expected for Medicaid versus exchange versus Medicare?
I mean, clearly what happens with COVID and economic conditions is going to drive a lot of that answer. But absolutely, we think there's tremendous opportunity as I've said a couple of times now. We anticipate that many states are going to look to opportunities in Medicaid Managed Care such as adding age blind disabled, they've not done it, long term support services that they have not done it. I believe there's 15 states that we're currently in that does not have long term support services. I believe there's in that does not have ACE, blind, disabled.
So we think there's a lot of opportunity to have those discussions with states to talk about tax payer savings and how we have the infrastructure and the history to be able to do that. And at the same time, we believe a lot of states will begin to look at Medicaid Managed Care. And we saw that in the last recession where 10 states did, and we're in 9 of those. So we think there's tremendous opportunity. We think the exact same, yes, we think there'll be great growth in Medicare Advantage, but also we think the opportunities, we are the leader in exchange.
We think there's still a lot of growth there and we absolutely believe in it from that standpoint. And we'll always look at M and A whether it's big or small as long as it's strategic. So there's multiple angles and multiple levers that we look at pulling to be able to grow our revenue. And I said earlier that we said our starting point was $114,000,000,000 It's our starting point.
Excellent. Thanks, Brent. This question comes from A. J. Rice of Credit Suisse.
How much flexibility does the state have to adjust rates if it faces a budget crunch? Does it have to get federal approval to adjust rates? Can the state make changes to benefits or other aspects of the programs to justify a rate reduction if it needs to adjust the spending?
So as you've heard before, the rates have to be actuarially sound and the states can make changes, but they still have to get verified and reviewed by CMS. So it can't be without data underlying the rationale behind the rate change.
John?
I think the other important thing to remember, especially when it comes to benefits is in order for states to access that FMAP increase, there are maintenance of effort provisions, which will limit some of that ability to cut back on benefits.
Good color. This is also from A. J. Rice and this is about the public exchanges. Looking for Kevin.
Can the company address two questions regarding the public exchanges? Is the company planning to enter new geographies on the exchanges for 2021? Also, with the economic downturn, what is the company seeing in terms of new members qualifying for the exchanges and current exchange enrollees reverting to Medicaid?
Thank you for the question. First, with respect to the last question, which is how are we seeing enrollment growth going? We are actually seeing like the rest of the country, a fairly tepid growth with respect to special enrollment periods or growth directly related to COVID. And we think that that's primarily based on 2 factors. One is the fact that many employees have been furloughed as opposed to being laid off and typically under a furlough, health insurance and other benefits are continued.
The second is that one looks at real segments that have been most impacted by the COVID work related losses, often those folks are most eligible for Medicaid. Now obviously, this can change. I think John and others have mentioned earlier the impact of a national special enrollment period that can certainly make a change. And by the way, we're doing our own outreach efforts independently of any of those activities to make sure that businesses and associations and brokers and others understand the competitive benefits of marketplace coverage versus COBRA, because in many instances, it's both priced more competitively and also individuals can customize their coverage better. COBRA tends to be a one size fits all at just one price.
Secondly, with respect to new state development, we're always looking at opportunities to expand our market. We're always looking at opportunities to add more value. At this point, it's premature to talk about what those initiatives might be for 'twenty one.
Kevin, you can stay standing. I have another one for you. This comes from Ralph Jacoby of Citi. There will seemingly be a number of new entrants and some competition coming into the exchanges for 2021. Can you discuss your historical retention rate on the exchange and your approach to pricing given the current backdrop?
Well, as Michael has often said, we actually encourage competition because it drives more attention to the category. And given our position and given our strengths in the product, we think more attention to the category creates more demand and thus more opportunity. Now retention strategy for us has not been really that different from new business, which is that it's focused on 3 things. 1 is product strength, make sure that we have products that are attractive and meet the needs of our customer. The second is that they're competitively priced, so and that they're affordable.
And the third is that we provide outstanding service. Now on that last element, that is something which our team is pretty obsessed about continually to improve every year. Folks brought about talked about technology this morning. That's one of the areas that we continually use to make the experience of our members easier. One of the things that we know of course is how complicated the healthcare system can be.
So we believe that a real competitive advantage that we offer is the ability to simplify that and to simplify and make more rich the customer experience.
Excellent. Thank you. This one is for Drew, who we have remote. This is a question from Steve Tanal from SVB Leerink. Relative to the WellCare integration.
PBM pricing alignment, would you mind elaborating on this? What was achieved in negotiations with Caremark? What will be the role of RxAdvance?
Can you guys hear me?
We can now. Thank you, Drew.
All right, thanks. PBM pricing alignment, basically taking the best that both companies had to offer in terms of tools and capabilities and cost structure and pulling together our over $30,000,000,000 of pharmacy spend and leveraging that to create a cost structure that's advantageous for our customers and our members. Think back to, you'll recall WellCare was going through a PBM RFP process in 20 19 that finished at the end of 2019 prior to closing the transaction. But when we think about rates, definitions, reconciliation structure, all these things have economic value and we were able to negotiate a provision that enabled all of those attributes to apply to future affiliates. So that gave us the ability to apply the best of what each company brought to the table, some beginning oneone, some beginning January 'twenty three, throughout this year and even more next year.
Excellent. Thank you, Drew. This question comes from Scott Fidel from Stephens. On Slide 22, you show that you expect membership growth due to the pandemic to peak in 3Q and then moderate in 4Q on lower unemployment. However, Brent said in his presentation that he expects to see a new and higher Medicaid baseline post COVID.
Can you please reconcile these two observations?
Yes, a couple of things. That's exactly right. So I mean, our view certainly is that the growth that we've seen now sets the new kind of baseline, if you will, for the Medicaid and that's a position to grow from. However, in our forecast, you could say we're being conservative from that perspective because we don't have visibility on to what each state is going to do, specifically around Medicaid eligibility redeterminations, obviously the unemployment rate. And so from that perspective, right now, we've assumed that the enrollment growth that we've seen is closely correlated to unemployment both for the end of this year, through the end of this year and obviously into 2021 as well.
Great. Thank you. This question comes from Kevin Fischbeck of Bank of America. You mentioned that your guidance assumes a 2nd wave of COVID, but not shelter in place. What does this mean to MLR?
Is this a negative? Is this a net positive or negative to healthcare costs and EPS?
Yes, I think that highlighted on the graph. If you look at the graph of our medical cost projections for the back half of this year, you could see that the costs that we're incurring on a normalized basis kind of tail down towards November December. So we have assumed a second peak in later in the year, although no shelter in place policies, which is obviously what we've experienced here in April May. So the line doesn't go down as far and the cost savings aren't as much as they are in the period we're experiencing right now.
Great. Thank you. This one comes from Dave Windley again. Your membership growth forecasts are steep from the end of May to July. Can you expand on your visibility to that growth?
The question is May of this year to July of this year, is that the timeframe?
That's right. Can you expand on the visibility into the growth? And are seats equipped to process that many applicants?
We've had many discussions with Medicaid directors and commissioners about taking on more Medicaid recipients and about the eligibility processes and so forth. And the states for a handful of months now have been getting ready. So initially there was a thought that a lot of the Medicaid recipients as they were new unemployed from COVID would come on, maybe it's March, maybe it's April and they have been some as Jeff showed. But they had also been to believe there'd be a lot more. And states have been preparing.
So system wise, staff wise, and then even learning how for a lot of their employees to work in new ways are prepared for. So yes, I think the states are prepared whether there is a wave then or whether there is a wave coming in the fall or somewhere in the future to do the enrollment.
Jeff?
Yes, just one quick thing to add on that. So a couple of things. Some states have had difficulty shutting off the eligibility redetermination. So a lot of the growth that we've seen right now has been purely on eligibility redeterminations and the suspension of that. And so as you look at how the growth goes from there, it's continued suspension of the eligibility redetermination plus I would say it's the backlog of applications that states have to process in order to put the members into managed care.
And right now, we've seen some members that are, I would say, in the fee for service program awaiting assignment into the managed care program. That's why we continue to expect the membership to sharply increase through Q3.
Great. Thank you. This one will be for Mike Poland on the line. And this question comes from A. J.
Rice of Credit Suisse. Can the company comment further on how it is approaching Medicare Advantage in 2021? Is there a chance to pursue geographic expansion in MA that will aid growth? Any thoughts as to how the elimination of the HIF and the potential to take on ESRD members impacts your thoughts on 2021 bids? There's a lot packed in there.
Mike, you can start
it off.
Great question. So let's talk a little bit about MA growth here. So first of all, as you heard in Brent's comments earlier, we are very excited about the opportunity of the combined organization. When you think about the combination, we are able to finally get scale between the 2 organizations. And as we all know, scale really is important in this industry as you see where the lion's share of enrollment goes every year.
When you think about our ability to put together the best of both companies, we have a very strong leadership team and we have a playbook that has proven success over the last several years and we plan to continue to drive that through. When we think about short term opportunities, a couple of things come to mind. One is we have opportunity to leverage the distribution channels that we have and be able to get more out of them. We have the ability to expand our networks to help us continue to drive growth. And we have the opportunity around product portfolio and expansion.
So part of that question is around do we have the opportunity for further geographic expansion? The answer is yes. That will be something that we will continue to look to do. In addition and maybe even more importantly, we'll continue to expand our product portfolio and give us a consistent portfolio of options that are really geared at targeting all the different beneficiaries and the different demographics that exist in the industry. Longer term, we have a great opportunity to continue to improve Starz and we have a great opportunity to improve our customer experience.
So those are some of the key elements that are going to help us drive growth and continue to help us improve profitability. As we think about 2021 specifically, it's a little too early for us to be able to comment on 2021 specifically. We're still in the process of finalizing bids. But again, what I would leave you with is that we are certainly positioning ourselves for growth and we expect that we will be able to drive growth in 2021 and beyond. And as we think about the impacts of where we're at right now with COVID, we've also been focused on making sure that we have different options available to us in different scenarios, so that whatever COVID throws at us when we come into the next selling cycle, we'll be ready to take advantage of that.
Okay. I want to thank everybody on the panel. And I take off my mask and so you still weren't. I want to thank everybody on the panel. And any additional questions, I should forward them to Jen and Investor Relations.
They'll work with the team to get you the answers. But we want to be sensitive of everybody's time. So before we adjourn our 1st final viral, whatever we want to call it, virtual Investor Day, I'd like to take a moment to summarize what we've heard here today. Simply put, Centene remains strong, and We have a long runway ahead. Shareholder value creation remains a top priority for the company.
And by applying our all products, all market strategy, we will continue to drive growth across our businesses. We will continue to leverage and build on the characteristics that differentiate us, including the scale and diversity of our businesses. The strength of our balance sheet and our team and culture. I believe and I hope today showcased a total team that really is what's driving this company and it's no one individual, it's a team effort that does it. During this time of the COVID-nineteen and as our country engages in critical conversations about racism and inequity, Sensene has risen to the occasion in continuing to deliver on our mission of providing high quality, low cost health care to the most vulnerable populations.
As you all are aware, the current economic uncertainty and the social unrest our society is experiencing have rippled effects that reach far and wide. Centene is committed a committed corporate citizen, and we have announced a series of initiatives to support our communities during these difficult times. Jeff provided estimates relative to these initiatives earlier today. In prior investor days, it has been our tradition to give a Sensene branded gift as a token of our appreciation for your attendance. In the spirit of giving to those who have been impacted by the current crisis, in lieu of a Centene branded gift, we are pleased to be announcing a $50,000 donation to the Kipp Schools in New York City for the K-six grades, which will be made in the names of those attending this conference today.
We recognize that education at that age group and the underserved is essential to starting to effect changes in our society. So we want to make this a joint effort and that's why we're doing this. Thank you for joining us. Our business is strong and growing profitably. We are blessed to have the organization and senior staff and balance sheet to be successful in good and challenging times.
I thank you for your support, and we don't want to disappoint you. With that, I wish everyone and everyone safety and health, and please don't forget to wear your mask. Thank you.