Vice President, Investor Relations, Chris Rigg.
Good morning. Welcome to Anthem's 2019 Investor Day. My name is Chris Rigg and on behalf of our team, let me say we have prepared an informative and insightful day. Today, we will make forward looking statements. Our forward looking statements involve risks and actual results could differ materially.
We will also reference certain non GAAP measures. We encourage you to review our SEC filings and our website antheminc.com for a reconciliation of these non GAAP measures to the most directly comparable GAAP measures and for a full description of our risk factors. Today is our 1st Investor Day in 5 years, and we have a compelling story to tell. Our 2018 financial performance is proof this management team is already driving strong results. KIF adjusted Op gain increased 18% compared to 2017.
Real growth and our best in over a decade. We entered 2019 in a position of strength. And today, you will hear about our key business strategies and how we intend to accelerate our long term earnings growth rate. Our 2019 earnings per share outlook of greater than $19 per share represents 20% growth over 2018 and our membership outlook at the midpoint is 41,100,000 members, the highest in company history. Today, we will provide details on the launch of IngenioRx and show you why it's transformative to all of Anthem's businesses.
You know, I joined Anthem only 11 months ago. But what I'm hearing from those who have been here much longer is that they see the change. Our management team is reinvigorated and it's obvious we are operating with a level of intensity, unprecedented in Anthem's history. It is now my pleasure to introduce the person driving this change, our President and CEO, Gail Boudreaux.
Well, good morning, and once again, welcome to Anthem's 2019 Investor Day. When I joined the company in November of 2017, I shared with you my belief that Anthem had a substantial opportunity to improve performance and directly impact the affordability and quality of healthcare in America. 15 months into my tenure as CEO, I am even more convinced and excited about the growth potential and expanding influence within Anthem States and with our alliance partners. In 2018, we made significant progress, but we aspire to accomplish even more. We delivered strong financial results, reoriented Anthem for growth and improved overall performance across our enterprise, while continuing to invest in capabilities and technologies that enhance the consumer experience and reduce the burden of rising health care costs in our communities.
We entered 2019 in a position of strength with growing momentum across all of our businesses and that momentum will continue. Anthem is a company that has changed significantly in the past year. And with these changes, I believe we are entering a new era, an era defined by growth, innovation and the transformation of health care as we know it. Together with my senior leadership team, I look forward to sharing with you our vision for Anthem and our strategies to capitalize on the meaningful top and bottom line growth that we are committed to achieving. We all know that there are many difficult challenges in health care today.
In addition to the rapid pace of change, affordability and access are significant issues for employers, consumers, the government and society as a whole. As a leader nationally and across the diverse markets we serve, we understand these concerns and we know that we play an important societal role and need to be part of the solution. And finding solutions is a role we embrace at Anthem. Corporate responsibility is integral to our success as a company. We were proud to be named to the 2018 Dow Jones Sustainability Index for our work to empower communities, improve the sustainability of our business, operate with integrity and advance an inclusive workforce.
Given the complexity of the health care ecosystem, we know there are no simple answers. Yet at Anthem, we have the power to lead and shape the conversation by partnering and innovating across the system to create real value for all of our stakeholders. Our vision is to be the most innovative, valuable and inclusive partner within health care. This means leading the transition from fee for service to value based care by collaborating with care providers to find flexible payment models, enhancing our data sharing and reducing their administrative burdens. This means demonstrating our value to states and the federal government by addressing the needs of the whole person, which extend beyond physical and mental health issues to social issues such as food, housing and transportation, while also delivering cost savings and improved quality and health outcomes.
This means providing affordable products with an array of price points and features for employers, while simplifying and improving the health care experience for their employees and families. And this means growing our partnerships across the Blue System, where we have an opportunity to expand our influence, create greater value and improve lives together. These partnerships like the one we'll spotlight later today in Louisiana are helping some of the most chronically ill get the right care in the right place and at the right time. This approach is further exemplified by our mission of improving lives and communities, simplifying health care and expecting more. Through our Togetherness program and Anthem Blue Triangle, we are focusing resources locally to improve lives within all of the communities we serve.
Simplifying health care means we're putting the consumer at the center of everything we do. Our consumer digital platform, Anthem Engage, encourages members to be savvy health care consumers with cost and quality information through our customized engagement campaigns, our focus on wellness rewards, benefit account balances and plan details that are all in one place for them. This is just one way that we're empowering consumers to manage their overall health. Expecting more is really powerful. It's important because our members and customers are expecting more of us, and we are challenging our entire organization to improve on our performance.
Our vision, mission and values are our foundation. They are clear, purposeful and bold and they guide our more than 60,000 associates in this new era in Anthem. Across Anthem, we have raised our aspirations to expect more and to deliver more. As proof of our confidence, we are raising our long term sustainable earnings per share growth target to a range of 12% to 15%. This is an acceleration from our prior upper single digit to low double digit earnings per share growth target.
And this is on top of our implementation of IngenioRx, which accelerates our growth even more in 2019 2020. By capitalizing on the opportunities we see for growth in our commercial and government businesses and building out our pharmacy and service capabilities, we project to accelerate our sustainable revenue growth rate to 10% to 12% per year. This is real growth across all of our businesses. Our confidence to fuel this growth comes from 4 key pillars. The first pillar is optimizing performance across our businesses.
We have momentum in our commercial business and currently own market share at or near the top in our core states, thanks to the strength of the Blue brand. It's a strong growth platform and we're committed to growing our share in both the risk and fee based markets. We're improving our sales fundamentals to drive this growth. We're investing in our broker portal and customer relationship management technology to streamline our sales processes. We're committed to developing a best in class sales organization through these new investments and improved training programs.
In total, during 2019, we intend to grow our core commercial fee based business by 150,000 to 300,000 members, with a majority of the growth in the group segment representing a significant improvement over 2018. 2nd, we're investing in high growth markets, which represent key opportunities for real growth. 11,000 seniors age into Medicare every day with enrollment projected to surpass 67,000,000 by 2023. In 2019, we project our total Medicare Advantage membership, individual and group, to grow by at least 20% over the course of the year. We also have tremendous opportunities to grow our Group Medicare business.
Our bullish outlook for Group Medicare Growth is a result of our deep commercial market share. We see a several million member conversion pipeline through our existing commercial relationships, including customers for whom we're providing Medicare services in a Medicare wrap product. We have reason to be confident. As we began January with approximately 150,000 group Medicare members, significant growth from the 25,000 members at the start of 2018. We expect this business to scale significantly.
And over the next 5 years, we see our membership growing 4 fold or more. This growth allows us to keep consumers blue for life, now that we have built our strong Medicare offerings to complement our leading commercial market share. We also know that Medicaid represents significant growth for Anthem with a nearly $80,000,000,000 pipeline of opportunities. To highlight momentum in our growing Medicaid business, we were pleased to partner with Blue Cross and Blue Shield of North Carolina, who recently was awarded a statewide contract. Our partnership represents their strong North Carolina brand, community presence and deep market knowledge and relationships, together with our best in class Medicaid operating platform.
Now that's the power of partnerships. That's the power of community. In the past, we did not fully use our scale to drive growth and create value. Today, that's changing. Today, we are taking a more strategic view of how we do business and who we partner with to improve total health and cost of care.
Anthem's enhanced personal healthcare, our largest value based program is helping strengthen our care provider relationships. Today, we have 6,200,000 members, 166 accountable care organizations and 67,000 care providers. By 2023, we plan to have an excess of 11,000,000 patients aligned with value based care providers. The bottom line, we do not have to own care provider practices, but we can enable our partnerships to define, create and deliver value. IngenioRx is our 3rd pillar.
We are excited about the accelerated launch of IngenioRx, now scheduled for the Q2 of 2019. This is a key milestone in the realization of our vision and strategy to integrate pharmacy benefits with our already strong medical and specialty platform, driving greater value for the consumer and increased transparency. Our customers are looking for a new kind of partner to reduce total cost of care and IngenioRx is the solution. As you will hear later today, our pharmacy benefits model disrupts many historical industry norms. Unlike our competitors, we are focused on delivering a more integrated experience for our customers and consumers.
Our improved pharmacy cost structure will accelerate membership growth across all lines of business. And over time, IngenioRx will be an important source of new third party revenue. In fact, IngenioRx will be the pharmacy benefits manager for the new North Carolina contract I mentioned earlier. The 4th pillar of our strategy is to diversify into services. We are doing this by providing market leading solutions and care delivery models that personalize care for those with complex and chronic conditions.
Today, we possess a solid foundation with AIM, Aspire, CareMore and HealthCore. We've spent the past year restructuring and repositioning these businesses for growth. The services model you're about to hear more about today is based on an Anthem First approach. By embedding our capabilities and services within our 40,000,000 plus membership base to improve health outcomes and reduce the cost of care. We'll continue to drive growth by being the go to partner for non Anthem Blue plans, care providers and other health care systems.
We know this is a longer term opportunity and it will take some time, but we're confident that we've attracted the best talent to deliver on the promise of our services business. As I shared earlier, I joined Anthem because of the incredible opportunity to do something unique and distinctive. I saw the opportunity to redefine what was possible. 15 months later, armed with a clear strategy and a strong cultural foundation, we are unleashing the power of our people and our partnerships to build the next generation of growth and earnings. I see a world where Anthem is the socially responsible enterprise, shaping the discussion and influencing outcomes at the local, state and national level.
I see a world where we are the employer of choice, the partner of choice, and we're changing the conversation around health and wellness. Our leaders and our 60,000 plus associates will make this vision a reality. My 15 months at Anthem add up to 471 days as of today. On each of these days, I have thought about the people we serve and what it means to be a parent caring for a sick child, a senior trying to find transportation to the doctor's office, an employer needing to manage rising health care costs, or a consumer trying to navigate the complexity of our health care system. Each of my days has been spent thinking about theirs.
Right now, they are needing and expecting more. We're delivering, but we know we can deliver even more. Our consumers, communities, associates and Blue partners are the core of Anthem. We are committed to putting them first. It's what makes us different.
It's what unites us. And it's what makes us uniquely Anthem. Thank you again for joining us this morning. I now want to welcome Pete Haitayan to the stage to discuss the commercial and specialty business. Pete joined Anthem through the Amerigroup acquisition and previously led our best in class government business division.
As one of our strongest operators, I moved Pete to the Commercial and Specialty business to reinvigorate growth and to reenergize this division. As you can see in our 2019 growth outlook, this decision is already paying dividends. I now want to welcome Pete. Thank you.
Thank you, Gail. As we just heard from our CEO, this is a new era for Anthem. Anthem enjoys a long history of customers and consumers putting their faith in us to help meet their healthcare needs. We have built long term relationships in our local communities and have been a key partner for those looking to get and stay well. And today, we have the opportunity to take our commercial and specialty business to the next level, the next level of care, the next level of service and the next level of partnership.
Our scale and depth gives us something no one else can match, strong relationships with our customers and care providers. Over the next 5 years, we have the opportunity to build on that depth and scale to grow our commercial business, both risk and fee based, diversify with new sources of revenue, and drive improved administrative expense efficiency. In the commercial business, we expect to grow operating revenue in the mid to high single digits over the next 5 years, while sustaining strong operating margins. And to do this, we must deliver benefits that are simple to use, networks with high quality, low cost care providers, and tools to engage employees in their health and a value proposition that is easy to understand. Since joining the commercial team last April, I made it a point to spend time in every single market we serve from coast to coast.
That gave me a great appreciation for our commercial market reach and our strong relationships. We are the market leader in 10 of 14 states and where we aren't number 1, we're a close number 2 and aspire to be the leader over the next 5 years. We process more than $100,000,000,000 in claims every year on behalf of our members across the individual, small group, large group and national segments. When you add in the government footprint, Anthem represents an average of 1 out of every 3 members that doctors and hospitals care for across our blue states. Simply put, our market position gives us an enormous opportunity to make a positive impact on our members' lives.
And we are making critical investments to improve the quality and affordability of health care for our members, which we will expect will further improve our competitive position and drive growth. Our market share today is strong, but it can even be stronger. To put the opportunity into context, a 1% across the board improvement in commercial market share represents nearly $2,000,000,000 in additional operating revenue. So how are we going to capitalize on the opportunity? First, we need to do things differently.
Since joining the commercial team, I've been focused on creating a best in class organization, recruiting and developing the best in class talent, making sure we've made the right organizational structure, ensuring we have made the right strategic investments to drive growth, To build a strategic execution focused culture, I am deeply invested in hiring and cultivating top talent and bringing in people with diverse experiences and successful track records of growth. Our local brand and our community presence set us apart from the rest of the industry. And as a result, we've been able to retain and attract leaders on our commercial team with deep experience within Anthem and from large national competitors. Along with having the right people to achieve our potential, our second priority is to ensure we have the right structure to implement our strategic initiatives. Overall, key to our strategy is implementing a new segment model that couples our national resources and experience with local market expertise, relationships and products.
This allows us to grow and better align and allocate resources appropriately to the right strategic investments. As you can see, this model maintains our planned presence structure and local community presence. The 5 segment leads each own their respective P and Ls nationally across all 14 states to ensure they view the business on a comprehensive basis and deploy a consistent go to market strategy. We've also created centers of excellence to build practices for key functions. For example, our sales effectiveness center of excellence is focused on developing a best in class sales organization through infrastructure improvements and improved training programs.
And our unified pricing and underwriting center of excellence establishes national parameters and guidelines, but also gives the health plans flexibility within appropriate guardrails to make reasonable adjustments to achieve our strategic objectives at a local level. And we are already seeing momentum from this new structure. We grew our group insured enrollment in 5 of the last 6 months, and our 2019 guidance has commercial insured membership growing by an additional 150,000 to 300,000 members, our strongest growth in the last decade. And finally, our new organizational structure is driving a more disciplined and strategic approach to growth investments. Among our top investment priorities are new products across a broad continuum of price points to meet our customers' needs, including improved offerings and underpenetrated market segments high performing networks to connect members to the highest caliber care providers who deliver unmatched quality, access and affordability.
Digital and data solutions to promote consumer transparency and increase member health engagement, and IngenioRx, which is already a game changer for our pharmacy cost position. These are the initiatives that will fuel our growth. So now let's take a look at how we're going to do this over the next 5 years. We are focused on growth opportunities in several key areas. Number 1, we will grow our risk business again.
2nd is to capitalize on the significant growth opportunity in the Group Retiree business. 3rd, we have an opportunity to improve profitability of our fee based business. And 4th, we are also focused on expanding our specialty products and services, such as dental, vision and new supplemental health products, where we are targeting growth at industry leading levels. So now let's dig deeper into each one of these. There is a significant opportunity to grow our commercial business.
In the individual market, we are very disciplined about participating only in the markets where we see a path to profitable and sustainable marketplace. And we've modestly expanded our presence in 2019 and will continue to be prudent as it relates to the marketplace participation. In the Group Insured business, where we faced the headwind of a shrinking market and deteriorating share over the last 10 years, we are determined to not only reverse that trend, but to grow and recapture share. To put the size of the opportunity into context, if we had maintained our local group insured market share over the last 5 years, Our operating revenue would have been $8,000,000,000 higher in 2018. In addition to winning back share in segments like small group, where we've historically been very strong, we're also focused on growing in segments of the population where we have historically been underpenetrated, like mid market accounts.
And to do that, we're following 2 core principles: Meet the customer where they are with products and services they want and make it simple to do business with us. Our strategy translates in the following ways. Our competitive position will be greatly enhanced by our new pharmacy contract through IngenioRx. As we've discussed, we expect our new contract to lower enterprise pharmaceutical spend by $4,000,000,000 on a total spend of about $20,000,000,000 Considering that pharmacy drug costs currently represent a little more than 20% of medical spend in the commercial market, our cost position will improve meaningfully as we migrate to our new PBM. Additionally, we're developing a broad suite of products with flexible designs and enhanced clinical capabilities.
One example is Anthem's chamber based association plan, which we expanded earlier this year to provide our lower cost option in the small group market. We're also focused on developing the right products for selected sub segments where we see opportunities, such as the student health or the prison business. And we are developing new go to market tools that make it simpler for our customers and brokers to do business with us. In 2018, for example, we launched a new small group broker portal that gives brokers a single site to manage their Anthem business and provides new online tools for automated quoting and enrollment. The portal reduces the amount of time it takes new customers to receive their membership cards to only 5 days on average.
Our investments in sales effectiveness are translating into a high performing execution focused sales organization. We are improving our sales execution and maximizing the time spent with our customers by making better use of enhanced pipeline and trend analytics, revamping our sales training and leveraging improved broker tools for our sales team. Taken together, achieving market share growth not only relies on increased sales to our new customers, but also on improving retention of our existing business. Our improved cost position, enhanced specialty products and the impact of strategic investments will drive future growth. We're also working hard to increase our presence in the Group Retiree market.
The group retiree market is one of Anthem's largest growth opportunities. And what makes Anthem unique today is our rich internal pipeline that is ready to be cultivated. First, we have a tremendous base of existing commercial clients where we currently provide Medicare services and a Medicare wrap product. The Group Medicare Advantage product offers these clients a compelling financial, value and quality of care proposition. We need to more effectively educate our clients about this value proposition to spur participation in Group Medicare Advantage.
2nd, we have a deep history and very strong relationships with a large number of commercial clients, including the labor and public sector, who currently outsource their group retire business to other competitors. And finally, there is a significant pipeline of Asian opportunity in our 14 states. The combination of these three differentiators represents a several million member opportunity across our markets and a significant growth opportunity as well for non Anthem Blue plans. We already experienced momentum in 2018. Over the past year, we grew our Group Medicare Advantage membership from 25,000 to more than 150,000, and we expect to grow to nearly 200,000 members by the end of 2019.
Looking ahead, we expect our Group Medicare Advantage business to scale significantly over the next 5 years, with membership growing 4 fold or more. Given an average revenue per member per month of around $900 an 800,000 member plan would represent more than $8,000,000,000 of revenue for Anthem. And to translate the opportunity into operating gain, we are targeting long term operating margins similar to our individual Medicare Advantage margins of 3% to 5%. It is important to note that our 2019 guidance does not expect Group Medicare Advantage to be at target margins as we grow this book of business of scale. We expect to improve the margin profile of new members into our target margin range over the 1st 2 years of a contract.
And we will do this by continuing to improve the medical cost performance of the population and realizing fixed cost leverage from growth in membership to reduce our administrative cost burden. Within our commercial fee based business, we expect to continue our strong track record of growing membership. Our ability to control medical spend through deep network discounts and improving medical cost management programs has helped us grow fee membership by nearly 5,000,000 members and improved market share by 6% over the past 5 years. This is particularly noteworthy international accounts business, where buyers are highly sophisticated. Our position in the market has helped us gain market share by winning new business and achieving industry leading retention rates.
However, our success has been limited by our ability to capture the full revenue potential through a variety of buy up services. Looking broadly across our fee business, we currently experience a substantial operating gain differential. It takes about 5 self funded members to equal the operating gain contribution of 1 fully insured commercial member. And we are focused on narrowing that gap over the next 5 years to 3:one through improved buyouts of ancillary products and services and a continued focus on administrative expense efficiency. The biggest opportunity to narrow the operating gain contribution gap is by improving the pharmacy retention rate of our medical book of business.
And we are already seeing the power of IngenioRx to be a key differentiator in the market. In addition to competitive pharmaceutical pricing, customers want to know that we can integrate medical, pharmacy services and ensure members receive the highest quality healthcare at the lowest net cost. Another way we will narrow the operating game differential is by increasing penetration rates in our clinical bio programs, such as Total Health Total You, shared incentive programs like program integrity, and our specialty offerings such as dental and vision. We've also built out competitive stop loss offerings for our clients. Overall, these products have attractive margins individually and improve the retention of our membership when fully integrated.
If we are able to improve the financial contribution of our self funded membership and narrow the gap to 3 to 1 on our current base, we will increase our earning contribution meaningfully by 2023. And finally, our specialty offerings also present a significant opportunity to drive growth. First, let's focus specifically on the dental and vision markets. Across our 14 markets, the dental and vision business represents more than $1,000,000,000 in premiums and our penetration rate is currently in the low to mid-20s. Over the past few years, we have made sizable investments improving the competitive position of our offerings and developed improved more effective go to market strategies to sell our products.
Looking ahead, we will improve the penetration rates of our products and are targeting low double digit growth, which would be industry leading. 2nd, we continue to develop new specialty products. In the second half of twenty eighteen, we successfully launched new supplemental products, including voluntary accident, critical illness and hospital indemnity for large group and national account segments. These products have a total market size of over $6,000,000,000 and are growing 10% per year. These supplemental health products are designed to provide an added layer of financial security through lump sum cash payments to members recovering from a major accident or illness to help pay for daily living expenses.
This further supports our strategy to deepen our relationships with customers. I'm really encouraged as the initial market reaction has been positive and sales results have exceeded our expectations. 3rd, we've made investments in standardizing our clinical and well-being solutions into preset packages, which make it easier for employers to better understand our offerings and purchase a suite of products that is most relevant to their needs. This is an example of basic sales packaging improvement that simplifies the way we are meeting our customers' needs. And finally, we're doing a better job at selling the benefits of connecting different areas of a member cell, such as medical, pharmacy, dental and vision, which I'll cover in more detail shortly.
We recognize that our strategies to improve growth aren't only unique to Anthem. There is a tremendous opportunity to partner with other Blues plans to improve the lives of even more people and communities across the country. As I mentioned earlier, a key opportunity is around partnerships. For example, one opportunity is in Group Medicare. Group Medicare Advantage has not been an historical strength across the Blue System.
However, it represents a total market of 4,500,000 members and continues to grow in the high single digits per year. Our operating platform can be combined with other Blues plans' local market position and customer relationships to drive new business. Another area where we've been collaborating with the Blues system is in the development of high performing networks designed to connect members to high caliber providers who deliver unmatched quality, access and affordability. Additionally, we are developing a next generation member engagement platform through Anthem Whole Health Connection that can be scaled on a national level. Overall, working together with our Blues partners has the potential to unlock enormous synergistic value that no individual company would be able to create on its own.
We're excited about the many opportunities to drive growth for the commercial business and we are confident in our strategies to deliver on those opportunities. As you can see, it's all about leveraging our strong foundation and expecting and delivering more. Before transitioning to Paul Marchetti, I want to highlight how our deep relationships with care providers enables Anthem Whole Health Connection, a fully integrated medical record available to providers at the point of care. Anthem Whole Health Connection is at the center of a healthcare information ecosystem that can improve the health and lives of our members. So let's see how it works.
It only takes one piece of data, a single insight to spark better care. Meet Lily. Lily's annual visit to her eye doctor reveals early signs of diabetes, triggering a referral to a care management program. Lily engages with Anthem's diabetes care management program, which gives her more information about her condition and how to stay on track. If Lily But if she doesn't, a gap in care alert will trigger proactive outreach and will remind her and her doctors.
Thanks to Anthem's whole person connected care approach, members, doctors, and care managers are all part of a team, a team that works together to improve health and increase savings. With a simple click of a button, Lilly's BlueView Vision eye doctor can access a collection of relevant HIPAA compliant data driven information in the online claim system they're already using. This provides a big picture view of a patient's health, making it easier to diagnose their conditions and be part of their health care team. And it's revolutionizing the way optometrists care for their patients.
NuVision has been sending us care alerts on patients that were overdue for certain types of visits. Ultimately, the end game in healthcare is patient outcomes. And I think that BlueView Vision's orange button is just another tool in a doctor's bag of tricks that helps him provide better outcomes.
And it's not just optometrists who are seeing the benefits. With Anthem's deep local presence and sizable footprint across individual, commercial, Medicare and Medicaid market other specialists can take advantage of our connected care approach. Anthem's provider tools consolidate information the the the the the the the the the the the the the the the the the the the the the the the the the the
makes
a difference. It's made my job easier and it's makes a difference. It's made my job easier, and it's kept my patience healthy.
That's whole person care. That's Anthem Whole Health Connection.
This platform has the potential to be a game changer in the market for our members and providers. As you can see, Anthem Whole Health Connections brings together all available patient data, so care providers can see a patient's complete health picture in real time. That means identifying potential health problems earlier, addressing medical concerns faster, receiving alerts when problems arise, and tracking preventative care so healthy patients stay well. Now I'd like to introduce my friend Paul Marchetti, who will share more about how Anthem is advancing our provider partnerships and network strategies. Paul was once a competitor of mine for many years.
I'm really glad he's on board with us now. Paul?
Thank you, Pete. After competing against one another for so many years, I'm so glad we're finally on the same team now. I joined Anthem 4 months ago after over 25 years of leadership roles in the healthcare industry. I was so excited to join the company because of our strong recognized brand as well as our deep market penetration. The simple fact is the fee for service system doesn't work.
But you know what does work? Having the kind of market penetration that we have at Anthem. This enables us to transition care providers to a value based world where compensation is based on outcomes. That means Anthem can help make healthcare work and drive business growth in today's rapidly changing marketplace. So let's take a closer look at Anthem's market making share.
We are very proud that in our core 14 markets, 1 in 3 people seeing their physician right now is an Anthem member. This market share with our care providers enables us to develop deep relationships that Pete talked about and positions Anthem to be the preferred partner with care providers as they consider their own business growth and performance strategies. And it's our market share that also allows us to have a very sharp focus on providing affordability to our customers. We have the size and scale to deliver a best in class cost structure. And we are strongly positioned to continue to deliver competitive unit price and utilization.
As a result, we are making strong progress on our basic metrics. For example, we're leveraging our commercial scale across all lines of business to drive more competitive unit pricing, which also gives us a significant growth opportunity in our government business. We're creating reimbursement structures that are more predictable and more automated in our claim system. And we're centralizing clinical assets to manage utilization consistently across all lines of business with a continued focus on quality of care. As I said in my opening, our market share allows Anthem to help care providers make the transition from fee for service to value based care in an accelerated way.
One of the most important ways we are driving the shift to value based care is through a variety of provider collaboration models, including accountable care organizations, primary care physician, specialist and behavioral health contracts. We now have more than 3,000 hospitals and integrated systems and over 80,000 physicians in a value based arrangement, with over 8,000,000 members attributed to those care providers. We think this collaboration is incredibly meaningful and so do our partners. Let me share with you a representative quote from Mark Clement, the CEO of TriHealth in Ohio, who is a very satisfied participant in our value based program. Their results are outstanding, generating almost $50,000,000 in savings since inception back in 2013.
And while we are very proud of the success that TriHealth has experienced, we're delivering similar results across the entire program. As you can see, our value based programs have delivered significant results by driving better outcomes with fewer inpatient admissions and ER visits, rapid improvements in quality of care, such as faster improvements and better compliance rates, all wrapped with significant cost savings, reducing costs by almost $2,000,000,000 We're confident that these results are sustainable and that Anthem is shaping the future of value based care. Anthem's risk programs are continually evolving to drive greater provider accountability. We provide a flexible glide path to risk for providers by focusing on key improvements for their businesses. These include transparent payment models, enhanced data sharing and reporting and reduced administrative burdens.
These initiatives will lead to meaningful growth in both value based payments and risk sharing. Our growth model assumes a sizable increase, more than double the amount of spend shifting to risk sharing. And we also expect $4,000,000,000 in projected savings. Our glide path reflects Anthem's ability to help care providers make the transition along with aligning our strategy to move more members to high quality care providers that deliver better outcomes and financial savings. This sustainable course has allowed us to achieve industry leading results in this healthcare environment.
Simply put, we are outperforming the competition and moving to value based programs, and we have the metrics to prove it. That's extremely important since the government is tracking this transition closely. Here you can see a comparison reported by the Healthcare Payment Learning and Action Network, which is funded by Health and Human Services to accelerate and measure the adoption of value based payment programs. The Learning and Action Network measures the progress across the spectrum from fee for service to full risk. All of our major national competitors and smaller regional plans self report their results.
And as you can see, Anthem's value based payment penetration is significantly better than that of the industry. Given our size and scale, Anthem can make deeper inroads into value based care with fewer care providers than that of our competition. It is also important that we always look outside in to see to assess the effectiveness of our programs and approach. We do this by asking them for their feedback and here's what hospitals and physicians are saying about our value based program and their experience with Anthem. From coast to coast, across many types of clinical settings, they're describing Anthem with words like partnership, true collaboration, making a difference and driving market change.
Now when was the last time you heard a provider say that about a payer? So now let's turn and look at one of the markets where Anthem is changing the game. Given Anthem's deep market share, we don't need to use our capital to acquire parts of the delivery system. Instead, our strategy is to disrupt the market by making investments and integrating assets in partnership with selected care providers. New Hampshire, for example, has the 2nd highest premiums in the country.
And while Anthem already has the number one position in that market, we see an opportunity to fundamentally change the model for healthcare delivery to help New Hampshire residents get quality of care in a financially sustainable way. We are sponsoring a new 50,000 square foot medical complex in New Hampshire to house primary care, internal medicine, lab and specialists, all in a lower cost setting. As a sponsor, Anthem will have exclusivity on product alignment with lower co pays to encourage members to use the new complex. Also by integrating electronic medical records, we can capture risk stratification, extend services into the home, provide preferred appointment scheduling and even ensure easier access through convenient parking. This is a great example of a partnership that we believe will grow membership, improve quality, reduce costs and create a differentiated member experience.
As we're doing in New Hampshire, we are taking innovative approaches across the entire country to improve quality of care, while increasing cost savings. Another way we are doing this is carving a powerful new path with non anthem blues. In conjunction with those partners, in 2020, we're launching a national high performance network. Our new network will provide Anthem members with the tools to access care providers with better outcomes in a location that is most convenient for them. We will provide metrics and other tools for members to make decisions along with incremental cost savings above and beyond the BlueCare PPO.
The National High Performance Network is a great example of our approach to driving value based care by creating a network of providers who are committed to delivering better outcomes and financial savings for our members. We are using opportunities such as this to develop better cost structures for care delivery. In 2018, we delivered medical cost trends slightly below the midpoint of our original guidance. In 2019, we expect local group medical cost trend in the range of 6% plus or minus 50 basis points. Our ability to drive price stability is the direct result of our size and scale.
Approximately 75% of our trend is driven by unit price, while only 25% is the result of increased utilization. Right now, the entire country is fighting unsustainable medical cost inflation. I believe that in order to defeat that, you must fundamentally change the game. And at Anthem, that is exactly what we are doing. Anthem's size and scale presents opportunities for us to continue to deliver the fundamentals, including competitive unit price and utilization transition care providers to a value based world and create high performance networks that will enable sustainable growth.
So with that, let me ask Pete and the commercial leadership team to join me up here for Q and A. Thank
you.
So now we'll have time for a brief Q and A session on our commercial and Specialty business, as well as our network and care delivery strategy. Joining Paul and Pete on stage are Patrick Blair, Commercial Segments Pam Stahl, Sales Operations and Effectiveness and Jeff Plant, CFO of Commercial and Specialty Business Division.
I was hoping you could maybe go into some more depth about what you've done in the middle market in particular to improve your group commercial enrollment, your insured enrollment and also self insured?
Yes. I appreciate the question. We've made big investments obviously as we talked about in people and structured. We've spent a lot of time on segments. I'm really pleased to have Patrick Blair here with me, who's leading the segments in some of our strategies.
So I think I'll let him answer some of that question.
Okay. Well, maybe I'll start with the segments, Pete. The segments is really the linchpin of how we sort of pull through the enterprise value that and scale that Anthem provides and really connect that to local market density and local market knowledge as it relates to price and product and distribution. As it relates to the fully insured segment, I first would say that we continue to believe that the fully insured segment represents a very attractive growth opportunity for the company. We've built a long foundation of being able to deliver on medical costs and deploy a variety of cost saving strategies in that segment.
And so if you go back to Pete's opening remarks, we've really started with our product portfolio and attempted to diversify that as broadly as we can as makes sense. We've not only extended the breadth of our product portfolio, but the price points to match that. And then as Paul said, the breadth of our provider collaboration relationships are now something we're connecting much more purposefully to our products and to our benefits. As we think about the fully insured segment, it's also a segment where we've lost some market share, frankly, over the last few years. And as you look at that, we see a great opportunity to recapture customers that already know Anthem.
Additionally, within each of the segments, if you double click, even though we have very strong market penetration, as Pete showed on the market share, When you get deeper into it, we certainly have pockets of fully insured business in that middle market segment, which I'd probably define maybe up to 2,500, not to be too precise there, but maybe up to 2,500 where it captures most fully insured and ASO members. So we've got a great segment to not only recapture members we've lost in the past, but also there's some sub segments in specific industries like Student Health, Pete mentioned Corrections, the key market segment, which is sort of the 100 to 300 range. So even within that fully insured segment in ASO segment, there's a lot of opportunity for us within our existing book to bring market share up to targets.
I think one major change and Patrick has done a great job leading the segments. We've had success in distinct markets with respect to mid market opportunities, but wasn't as broad. And so Patrick with the initiation of the segments, we're able to scale opportunities across all fourteen more effectively. It's been very effective.
Yes. Thanks, Chris. Two questions actually. The first is just on that 10% to 12% top line growth. That's the number that kind of struck me more than the EPS number.
And I think about number 1 market share, shrinking markets, share eroding a little bit in the last couple of years and it feels like that's more than kind of 2x the healthcare growth rate. And so I just think I want to understand a little bit better how does that translate into 10% to 12% because I think that's the struggle I'm having. And then the second question just on the value based arrangements that you talked about. I guess, again, that number one market share, I understand how that resonates with the providers. They care most about the Blues because that's their biggest source of business.
But when you talk about 55% value based, what does that really mean? Does that include any downside risk? Or is this just a simple bonus at the end of the year? Do the providers really engage in what you're saying? It just doesn't jive particularly well with what some of the big hospital systems are saying in terms of what they're seeing for value based.
Thanks, Josh. Just quickly, we will talk about the enterprise wide growth in greater detail in John's presentation later. So I think what would be most appropriate if Pete just sort of focused in on what his growth is for commercial and then we'll talk about the enterprise a little later. Thanks.
Yes. I mean we're extremely confident with respect to the growth opportunity that we have and what we're representing in the long term growth plan. As I talked about, our pillars are our talent, our segments, our organization and then investing in the right areas. If you look at some of the stats we talked about, it's pretty compelling. I mean, we've lost a decent amount of share over the last several years.
We talked about if we were able to gain back share where we were 5 years ago, it was $8,000,000,000 in incremental revenue. Every 100 basis points of share that we gain back, we're talking about $2,000,000,000 in incremental revenue. If you look at our blue brethren across many of the other states and the market share they have, we represented in our slide, you see about 35% market share across the board. We have distinct markets where we are underpenetrated and we have an opportunity to grow. And so when you look at some of our Blue Brethren plans, they have market shares much more significant.
I think that's a decent yard mark. And so we're very confident with respect to what we represented in our long term growth plan here in terms of taking back share.
Yes. Pete, the only thing I would add on that is, we talk about a declining fully insured market, but it's not a precipitous decline. So it's still a really healthy market. It's going to be a healthy market for a long time.
And I should have added, obviously we talked a lot about it, but IngenioRx is a big differentiator for us. I mean this really has been something that has been holding us back. It's been a disadvantage for us. It says a lot about our organization with respect to the share that we were able to keep not having that. And now that is win behind us.
That will be very helpful.
To address the point on value base, Karen, thanks for that question. I can't underestimate our size and scale, which you referenced. Working for some of our competitors before, having only 7% to 8% market share, providers actually come to us and want to partner with us because as they think about their strategy. So that's a starting point in terms of where could they drive meaningful growth in their business strategy. But to answer your question in terms of deconstructing, that 56% that we have today, we have a strong that is all value based payments, okay, as a percent of spend.
But then the other portion of that is, we have 24% in what we consider or what CMS considers categories 3 or 4. And that's a combination of risk sharing, and that could be where they put just their fees at risk to also a percentage of the medical spend at risk as well. So that is a more meaningful statistic that we think about, that the industry should think about and we've demonstrated that we're further along ahead. Now strategically, our strategy is to take that broad foundation. And as you can see, we're not looking to broaden that value based penetration on a global basis.
We're focused now on working with them, giving them data. We have a differentiated model where we're giving them engagement resources, enablement resources to work with them and coach them along, so we could build trust as a partner and move the downside components of risk more to that side of the equation over the next 2 to 3 years. And that's where we think we could be very successful. But it will take a couple of years, 2, 3 years for us to get there. But we have a strong foundation right now in
which to build off of. Thanks, Wilks.
Yes. Just a couple of questions on how you're seeing progress in some of these initiatives as you went into the oneone enrollment cycle here. So can you talk maybe on some specifics on cross sales? And you may not want to give all the stats, but maybe just the improvement in things like PBM penetration or certain package types or things like that? And then the other aspect of that is for Oneone this year and then for going forward, as you're looking at more commercial risk growth, how much of that is coming from the under 500 ASO or self insured book as opposed to you're taking share from other kind of risk players?
Yes. No, it's a great question. Thanks, Lance. I'm really happy that Pam Stahl was able to join us today. Pam came from a large national competitor.
She established the sales organization, sales execution organization at that plan and did a wonderful job. So to your point about execution and performance improvement, the investment we've been making in sales tools and capabilities, I'd love for Pam to provide some input on that.
Sure. Thanks, Pete. So my team, my sales effectiveness team is focused on improving the sales process and the sales experience for all of our partners. And that's not only our inside sales team, our telesales team, but also our team in the markets and our brokers and employers as well. Specifically, in terms of some of the tools that we're delivering, we are significantly increasing their ability to have easy access to us and our products.
We've launched a tool called our front office automation tool for brokers where they can go online, get their quotes and we've improved the turnaround time in small group by 75% from the time the group app comes into the time that the card is delivered to the member. Because of the success of that tool, we're going to pull that upstream into the lower end of large group as well. One other tool I'll bring up that will enable our sales success for our customers is our plan selector tool, which is a direct to employer tool. We know that most employers like to do some shopping before they make their decision. So this tool enables them to go online, look at benefit designs, look at plan designs, get some quotes and have a full online experience.
Both of these tools, key to both these tools by the way is that they're linked directly to our CRM. So our sales and marketing teams can see that activity and we can deploy outreach to those customers to in terms of leads and providing additional information. So we're really excited about where we're going. As we think about our sales team mantra now is let's be appreciative for our Anthem past and where we've been in terms of relationships and market share. Let's be excited about where we're going, but never be satisfied.
So that's where we're started and a lot more to come.
And I'd just add Lance, some proof points. We've seen a lot of momentum as we talked about in the back half of twenty eighteen and into twenty nineteen. With respect to closing this gap from 5 to 1 to 3 to 1 and our opportunities to sell clinical packages and specialty products, etcetera. We are tracking that with rigor and we're seeing improvement from up selling and cross selling to a great degree. And so we're making the improvement that we expected over the last several months.
I think that will continue. And as we talked about in the presentation, with the onset of IngenioRx, I think it will accelerate all that. Pete Costa?
This is really for Paul. Paul, can you tell us what did you see at Aetna that was better at Aetna that you want to bring here to Anthem that you think can actually deliver the most growth and value for Anthem?
So I'm not going to comment specifically on, but I'll talk about what we do well, obviously, we have depth and penetration. We have a strong competitive unit price position. We've obviously demonstrated from CMS' standpoint our ability to move the value based world. I think we've also, with our non Anthem partners, we have an advantage of connecting broad networks across the country. I think opportunities that I see, as we consider some of our legacy acquisitions, there's an opportunity to synchronize our contracting across all product lines to make sure that we are presenting 1 Anthem face providers.
So what I mean by that, Pete, is making sure our renewal date calendars for commercial, Medicaid and Medicare are all in sync. So we can go negotiate on behalf of all those products at one time versus 1 month or another quarter later. I think the other thing opportunity is there's an opportunity for us to continue to simplify our contract structure to make sure that it's more automated with our systems. That's not a specific comment to what my experiences were in other places. But here, we have an opportunity to put in line a simplified structure that is more predictable and more automated.
Okay? Thanks.
Who is the mic? I can't tell. Justin Lake. Thanks.
Two questions for Pete. 1, you talked about $8,000,000,000 as the opportunity if you were to get back your market share over the last 5 years. Is that what you're expecting in that 5 year guidance that you provided there in the commercial side? And specifically, do you expect to be able to get back? Does that include getting back into California and New York small group?
And then just secondly, on the Group MA side, you talked about a big number, dollars 600,000 I guess give or take is what you think you can get 5 years from now. Can you give us the total opportunity that sits in your book in terms of group MA that you think you can convert on the retiree side? Thanks.
I'll start with that. Maybe I'll let Jeff answer the first part of the question. With the group retiree opportunity, we're not going to get into specifics about the number of what the pipeline represents. We talked about a several million member opportunity. To give you a little bit more specificity on those buckets, as I said, bucket number 1 are really those folks that we have a relationship today with a Medicare wrap like product.
Those members and there's a decent amount in that pipeline that are ripe for change, right? I mean it's a great value proposition across the board for them, for us. It's a win win for everybody. And we've been seeing a lot of activity with respect to conversion in that bucket number 1. Bucket number 2 is those which we have a very strong commercial relationship with, but they may have group retiree benefits or a relationship on the Medicare side with a competitor.
We also see an opportunity in that bucket. The combination of those 2, plus the agent opportunity for our individual business is several million of opportunity. We're confident that that pipeline is rich. And as we get out and talk to our employer clients about the product and the fact that we're in this business, our success with regard to our Medicare business and our platform, it is resonating and picking up as you saw with our membership growth this last year and then going into 2019. With respect to the first can you repeat the first part of the question again?
I just want to make get on the mic. Do you remember what he said?
I do. Jeff
can answer it. Sorry.
So thanks for the question. So we're not going to get into specifics exactly about the membership that we're looking to gain. However, it is our goal to recapture really all of that lost market share that we've had over the past several years. And as Pete has noted, we are confident. I don't want to get into state by state detail, but we're confident that we can grow in all of our states.
I think you'd mentioned New York and California. Those are states where we see opportunity and we're confident we're going to be able to bring back some market share in those states.
Steve Tanal.
Thanks. I guess this question
is really for Pete. When you
talk about recapturing the market share, can you give us a sense for why you think you lost that share over the years and how you're addressing that specifically? And then just another question around kind of getting back to growth on the commercial side. How are you thinking about the HIF in all of this? And if this comes back in 2020, what impact that may have? And how do you plan for that?
Yes. I'll let Jeff answer the HIF. With regard to the first part of the question, it's pretty straightforward. It has to do with the things that we laid out from a foundational perspective. We spent a lot of time on focusing on talent and getting the right talent into the organization.
Number 2, our structure that we talked about in the segment model very meaningful. And then making the right strategic investments, those three things have made a meaningful difference with respect to even the improvement and the momentum we've seen in the back half of the year. I would also say that you can't understate the heavyweight that IngenioRx well, the fact that we didn't have IngenioRx and our former relationship on pharmacy had on us. So the combination of those plus with Ingenio now behind our backs, we feel very strongly that we can gain back market share. We have deep relationships in the community.
We have deep relationships with our providers. We have strong relationships with our distributors. And now that we're making the investments to solidify all those basic fundamentals combined with pharmacy, we are all confident with respect to the opportunities that exist over the next few years. On the HIF, I'll let Jeff respond on that.
Sure. And of course on the HIF, it's something we all hope goes away because it's not good for affordability really for our members and our customers. With that said, unlike 2018 where we had some challenges where we didn't have a complete product portfolio to really help our members and employers navigate to better products, we feel much more confident about our product portfolio that we can help them find a product to stay with Anthem and continue to grow our book of business despite the health insurer fee coming back.
Ralph Jacoby, and then we'll probably go to Anna for the last question in the group.
Thanks. You talked a lot about Ingenio X obviously. Can you just remind us where the PBM penetration is right now across commercial? And how quickly you think you can sort of convert those back in for those that obviously you've lost? And then the second piece of that is you've talked a lot about sort of the buy up on the ASO side.
Any help in sort of framing that 1? And then 2,
is there
an opportunity also on the risk side of the buy up or that's not really sort of an area of focus? Thanks.
Yes. So the first just the first part of your question again was on, I'm sorry, the penetration rates. Yes. We're not going to get into specifics on the numbers in terms of how penetrated we are, but we are under penetrated. Let me be straightforward with respect to that.
We have over the last several years lost pharmacy business because of our disadvantage in pharmacy. And we have a wonderful opportunity to carve that business back in. So we're feeling very optimistic about that. Your second question, I'm sorry, I'm not was?
It was on the buyout.
The buyout. The buyout. Yes. And a little more specifics on that. It's really what you saw on that slide.
I mean, there really is a tremendous opportunity to take this to 3:one. We're confident in it. Pam talked about it. In the prepared remarks, pharmacy plays a big role. But I wouldn't understate the benefits of the other components of this.
So when we talk about clinical packages, we've been able to package our clinical solutions more effectively and sell that more effectively. Stop loss, we've made investment in our stop loss business. We're able to sell that more effectively now. We're seeing the improvements in that regard. The series of things that you saw on that slide are making a meaningful difference.
I think the combination we will be able to achieve the 3 to 1. I mean anything you want to add to that Patrick?
No, only I think it's I'd make it clear that the Ingenio brings more than just the sort of pharmacy price value. I mean, I think of Ingenio as giving us a much stronger sort of total cost of care value proposition from pharmacy and medical integration. So in the field, when we're selling the product, it's definitely not just about price. It's very much about the overall value we see through pharmacy and medical integration.
Yes.
And the sales teams are really excited about it.
Yes, yes. Okay. Last question for the sessions.
The first question was for Paul and I had a quick one for Pete as well. Paul, on the primary care, we've got Optum employing a lot of primary care docs. CVS is going out with retail clinics. Humana is putting a lot of emphasis on that. Do you think that Anthem now that you've come from Aetna is in a unique place because of the market share to be still in a position of negotiating well influencing those docs and so on, commercial and Medicare?
Yes. Thanks, Anna. The as you can tell, my excitement about the
competitive position on the fee for service side.
That said, to expand our competitive position on the fee for service side. That said, primary care physician, our value based payments, we have targeted within our enhanced personal health care program, primary care and those smaller groups to really help them along, because you think about the larger delivery systems that you many of you cover, they have the resources, right? But when you get down into the local medical groups, those are providers that need the help, that need the tools, that need the data and the incentives, and we're giving them that road map, which has really been a welcome from that community. And it enables us to also give them roadmaps on the high performing specialists and who they're referring to. And with that enablement model that we have in coaching them as to where and where they could do better and where better outcomes will be a result, has been an absolute breath of fresh air.
And given our penetration, it's so much more meaningful than that of our competition that may have 1 in 10 members or 1 in 10 patients going through their door.
Helpful. One quick one for Pete, just to follow-up on the others. As you're picking share, is this kind of a zero sum game as far as the large five companies of 4 if you want to exclude Humana here? Or is there share being pulled out of some of the smaller players? So is it just share shifting among the big four, if you will?
Yes, I don't know how I would describe that. I mean, we're taking share in all our markets like we talked about across all segments. Whether or not we define it as taking it from the big guys versus the smaller local plans, I don't think we've talked with that type of specificity. Would you
We agree. We will. Opportunity market share taker. I agree.
Thanks.
Okay, great. Well, thank you all for your questions. At this time, we'll take a brief break. Thank you.
Ladies and gentlemen, we will now take a short break. Our program will resume at 10
am.
Our program will begin in 5 minutes. Please be seated. Once again, our program will begin in 5 minutes. Please welcome to the stage EVP and President, Government Business Division, Felicia Norwood.
Good morning. I have dedicated much of my career to Medicare and Medicaid, and I have witnessed massive change. 20 years ago, fee for service dominated the landscape, and we paid for volume. Today, our state and federal partners are paying for value. We believe there is tremendous potential in both Medicare and Medicaid, especially for the people who need help the most.
That's why we're doing more. In fact, Medicare represents the highest growth potential at Anthem right now. And our growth in Medicaid is coming from our unique way of treating the sickest of the sick in a sustainable way. So let me show you what that growth looks like. While we're going to cover a lot of ground this morning, these are the key things I hope you walk away with today.
In Medicaid, the Medicaid market continues to offer strong growth potential. We see a significant amount of that growth coming from serving individuals with complex and specialized health care needs. And we are well positioned to accelerate our growth in this space. In Medicare, we also see strong growth potential. We are well positioned with competitive products, a clinical and quality model and significant market share in our commercial and Medicaid markets, allowing us to drive strong growth in our Medicare Advantage business.
The growth in Medicaid continues to be promising for us. CMS projects total Medicaid enrollment through 2023 to increase from approximately 80,000,000 to 87,000,000 lives, about a 9% increase, with total spend projected to jump from approximately $614,000,000,000 to $801,000,000,000 a 30% increase. This growth in enrollment and spend will primarily be driven by populations with complex and specialized healthcare needs. The states have already transitioned the less complex populations into managed care and now face continued budget pressures to transition those groups with greater acuity. While 74% of Medicaid enrollees were enrolled in a private managed care plan as of fiscal year 2018, they represented less than half of the total Medicaid spend.
This presents significant growth potential as we continue to demonstrate our value to states who are looking for budget predictability, cost savings and improved quality and health outcomes in their state Medicaid programs as I did when I was a regulator. When we look at the Medicaid Managed Care Growth Pipeline over that same period, we see over $80,000,000,000 in incremental revenue growth opportunities. Historically, our experience has been that higher acuity, complex and specialized populations accounted for approximately 40% of Anthem's Medicaid Managed Care revenue. However, over the next 5 years, we see a shift in the pipeline to these higher acuity populations, which are typically associated with higher PMPMs, representing nearly 60% of the total revenue growth opportunity. So now that you have some insight into our view of the Medicaid growth opportunity, the logical question is, how well are we positioned to capture more than our fair share of this pipeline?
Our foundation is strong. We have over 27 years of experience serving Medicaid members and currently serve approximately 7,000,000 members in 22 markets. This makes us the 2nd largest Medicaid insurer in the U. S. And an industry leader in serving individuals with complex and specialized needs.
We know that growth in Medicaid is subject to all of the variables that it says when you're procuring new business, not the least of which is the increasingly competitive contract procurement process. Despite all of this, we have proven to be the industry leader, winning nearly 85% of the time we've gone out to bid, more than any of our competitors. Our growth has also been fueled by our alliance with Blue Cross partnerships and our care provider partners. We currently have 8 such arrangements and continue to see future opportunities over the long term. Most recently, Blue Cross Blue Shield of North Carolina, in partnership with Anthem, was awarded a North Carolina Medicaid contract statewide, proving the strength of the Blue Cross partnership.
To help you further understand the importance of these partnerships, let's hear from the CEO of our Blue Cross Blue Shield Louisiana partner and our Anthem Louisiana plan President.
We're a company that's been in business since 1934, committed all that time to our mission, which is to improve the health and lives of Louisianians. But we weren't serving all of Louisiana at that time. We didn't have experience in the Medicaid market, although we knew Louisiana well. When we talked to the folks at Anthem, they were excited. They knew the power of the Blue brand, saw what that could do and we very quickly forged a partnership that I think is going to make a positive difference.
The Blue brand is well respected across the country. And there's a lot of organizations that have been competing in the commercial and Medicare space for a while that want to enter into Medicaid, but aren't quite sure how. The ability for Anthem to bring its years of experience and best practice and solutions in Medicaid space to partner up with a blue plan that wants to get in is a great way and there's a lot of synergy that comes from that.
The partnership with Anthem was important to us because we wanted the ability to bring the brand to bear in the Medicaid population. And we wanted somebody that culturally was consistent with our organization, had the same commitment to the community and would work with us.
One of the things about healthcare is that it's local. We have to be able to partner with the community where our members reside.
What we've been able to do is take the best of a national experience that Anthem has coupled with our 85 years of understanding Louisiana. We've seen a 12% growth in membership and a 9.5% growth in market share since we launched Healthy Blue in September of 2017. So last year during open enrollment, what we saw is that when people had the opportunity to choose, they chose Blue. Anthem and Blue Cross Blue Shield Louisiana are 2 of 36 6 Blue Cross Blue Shield plans across the country. It doesn't make any sense for each of the 36 of us plans to individually invest in the
duplicate that. This partnership works. We're improving lives together and we're really delivering on the value that the state expects us to
have. What we bring to the Medicaid population together is the best of knowing Louisiana better than any other plan in the Medicaid space, combined with national operating experience that makes us efficient and effective and helps them get healthy and stay that way. It's been a great partnership and if we had the chance to do it again, we wouldn't hesitate. We would do it in a minute.
As you can see with our Healthy Blue Louisiana partnership, we are committed to partnerships that work, partnerships that allow us to improve lives together and further position us for growth. Now it's one thing to grow the business. It's actually another to run it well and ensure long term success. We believe our continued success in the Medicaid space will come down to the following elements: our proven operating model, the deep roots we have in the local communities we serve, our expertise in serving individuals with complex and specialized healthcare needs our person centered approach to care management, addressing the needs of the whole person that extend beyond physical and mental health, to include removing barriers such as the lack of housing, food and transportation, our integrated care delivery system. In particular, we are differentiated by our ability to leverage key assets such as CareMore and Aspire and IngenioRx in our Medicaid bid responses going forward.
We will be able to improve outcomes while at the same time lowering costs. You will hear more about this later on from my colleague, Prakash Patel, who leads our diversified business group. And finally, our discipline around managing cost of care. Case in point, Anthem's experience in markets where we serve both the long term services and supports and intellectually and developmentally disabled populations shows that our care management programs helps people get the care they need in the right setting, close to home. While the Medicaid growth opportunity is certainly strong, we have an even more significant growth opportunity in our Medicare business.
With about 11,000 people aging into Medicare every day, the government estimates that the Medicare population will exceed 67,000,000 beneficiaries by 2023, making it as much as 20 percent of the U. S. Population at that time. The resulting financial burden is staggering, with Medicare spending expected to be over $1,000,000,000,000 by 2023, making it 4% of our GDP. Now this creates both challenges and opportunities for all of those who serve, treat, fund and ensure Medicare beneficiaries.
The days of the federal government questioning the value of managed care are largely behind us. Savings to the federal government from Medicare Advantage are now a guarantee in the bidding process. The STARS program provides tangible financial incentives to health plans to facilitate preventive care for all their members, which has led to increased quality and better outcomes for Medicare beneficiaries. The government itself projects enrollment in Medicare Advantage plans to reach as much as 40% of the Medicare population by 2023. Moreover, rather than questioning the value of the tenets and tactics of managed care as they had in the past, the federal government is increasingly looking for ways to bring them into the fee for service population with accountable care organizations, bundled payments and other demonstration programs.
This creates opportunities for us to pursue new business revenue streams in Medicare, even outside of Medicare Advantage. So having painted a picture of the market opportunity that we see in Medicare, let me turn to what that means for us. We know that Anthem is uniquely positioned to benefit from these opportunities more than other plans, and will therefore see more growth from them. Anthem today has a very strong and stable Medicare platform that produces best in class operating results. This is the result of our efforts to assemble a brand new highly experienced team 5 years ago.
We then invested in a comprehensive plan to deploy a Medicare business strategy and built an operating model for long term success. With that work well behind us, Anthem is now ready to be the competitor in the Medicare space that it should be, and we are on a path to achieving membership and market share growth in the years to come. We began transitioning to growth mode in 2017, ending the year with 19% more Medicare Advantage members than the previous year. We continued our growth in 2018, ending the year with 35% more members, and we'll be furthering that trend in 2019, with Medicare Advantage Growth expected to be greater than 20%. With a strong Medicare platform, this growth came and will continue to come from a number of things.
1st, our competitive products. These not only include competitive medical and pharmacy benefits, but a market leading supplemental benefit portfolio that includes much needed services not covered by Medicare, such as dental, vision, hearing and fitness. Importantly, while we remain committed to offering a full product portfolio that includes special needs plans and traditional HMOs as well as PPOs, we firmly believe that long term success in Medicare Advantage requires that our HMO products be our most competitive products where we drive our growth. An HMO plan design allows the best outcomes and operating results to be produced long term through strong partnerships with participating providers, which I will speak about a bit later. In addition, we now have the most attractive over the counter pharmacy benefit in the industry through Anthem's partnership with Walmart.
Our members can use their over the counter benefit to access hundreds of health related items by calling, ordering online or visiting any Walmart location across the country, as well as other affiliated retail locations. Moreover, CMS has significantly expanded flexibility to enable Medicare Advantage Plans to offer far more benefits that address social barriers to health. We can confidently say that no other Medicare Advantage plan went as far as Anthem in terms of the breadth and value of our benefits in this area. We have established ourselves as the clear leader here and intend to hold that position. Taking a leadership position with social determinant of health or SDOH benefits not only makes our products more attractive to beneficiaries, but also to providers, and affords us the opportunity to build new and expand existing partnerships with the communities that we serve, taking advantage of the deep roots we already have and strengthening them even more.
Lastly, we believe we will see value from a rich STOH health benefit offering in terms of better health outcomes and lower health care costs. It is well documented that these can be significant barriers to individuals, particularly our seniors, in accessing much needed quality health care and living healthy, active lives. Next, I'd like to turn to our clinical and quality management model. We feel we are well positioned to create substantial incremental value through our collaboration with health care provider partners. We will leverage our own assets that deploy effective programs like AIM and ASPIRE, integrated care models such as CareMore and HealthSun, and market leading provider collaboration models improved by exporting best in class practices from Simply Healthcare and America's First Choice.
Related to this work, it is important to point out that our significant penetration in the markets where we serve, commercial and Medicaid, makes us the most significant partner to our providers, increasing their interest in and their willingness to work with us relative to our competitors. Simply put, we are one of the most relevant partners that they have. Our significant market share in commercial and Medicaid is also the basis for Anthem's more significant growth opportunity in Medicare Advantage than our competitors. On the commercial side, with our large membership base that Pete referenced, we have tremendous opportunity to convert commercial members to our Medicare products as they age into Medicare. And now with competitive products, we are beginning to do this with greater frequency than we ever have before, and we're just getting started.
As Pete noted earlier, our large commercial membership affords us a meaningful opportunity to grow in our group Medicare Advantage space. Without a stable competitive operating model in the past, our Medicare Advantage products offered very little value to employers. Now that we do, we are poised to take advantage of this significant opportunity, which we expect will drive exponential growth. We've already shown early signs of our ability to take advantage of this, growing our Group Medicare Advantage members over 100,000 membership in just the last year. With respect to our significant Medicaid membership, here too we have an opportunity to dually enroll members who are and become Medicaid eligible, Medicare eligible enter our dual special needs plans.
We have grown these dual plans to be a part of our product portfolio in virtually every market we serve. With these individuals already are Medicaid members, they are much more likely to consider enrolling in our Medicare plans. We believe Anthem is better positioned to take advantage of that opportunity than our peers. The number of dual eligibles is increasing in sync with the growth of the Medicare population. Dual eligibles are estimated to be as much as 14,000,000 by 2023, or about 1 in 5 Medicare beneficiaries.
Importantly, this is just the estimate of those who are actively enrolled in both programs. A significant number are eligible, but not enrolled. While the launch of the Medicare Medicaid Demonstration Program, or MMP, in 2014 was not the facilitating event it was expected to be to increase the trajectory of dual eligibles in MA, it was an important step in the process to get us there. It provided opportunities for CMS, states and health plans to learn how to approach funding, financially managing and administering Medicare and Medicaid programs in a closely coordinated manner, and serving these individuals in a seamless fashion. Anthem participated extensively in the MMP program.
Between this experience, our best in class Medicaid operating platform, and the close relationships we have with states, we believe Anthem is both best positioned to convince more states of the value of launching new dual eligible integrated programs, as well as producing market leading enrollment growth and operating results. The other opportunity we have in Medicare is to take a page out of our Medicaid story and partner with other blue plans and care providers to help them drive success in Medicare. We are already seeing signs that this and which will go live in 2020 and Blue Cross Blue Shield of Louisiana, which could go live as early as 2020. Until recently, with a handful of notable exceptions, Blue plans have not invested significantly in the pursuit of the Medicare opportunity in their markets. This has made it easier than it should be for other plans to grow in Medicare in their markets.
It's our intention to leverage the outstanding platform we have built to offer to assist other Blue Cross Blue Shield plans to enter or get more aggressive in this space, challenging the plans in their markets with the power of the cross and shield with this population. Lastly, IngenioRx will create tremendous opportunity for Anthem, as Dede will explain in detail. Our Medicare business will see significant incremental value from the launch of IngenioRx. As a result, the improved pricing will enable us to further enhance the competitiveness of our Medicare Advantage Part D products and to finally offer a stand alone Part D product portfolio with competitive premiums. This will help fuel incremental growth of the often underappreciated, yet very attractive Medicare Supplement business.
After years of deploying initiatives to recommit to driving membership growth in this market, we are now seeing that business beginning to grow at impressive levels, and we expect to reclaim market leading share in the years to come. We've long believed that treating the whole person is so important in Medicare and Medicaid, and whole person care is the driving force behind our newly formed diversified business group. Prakash Patel was invited to lead this business. He has deep experience in solving today's toughest problems, and he is a highly respected physician. It's my pleasure to introduce my colleague, Prakash.
Thank you, Felicia. Good morning. We are at a critical time in health care. The opportunity to deliver what I call the hyper personalization of whole person care. In other words, treating people as people and not as a condition or as a disease.
At Anthem, we are empowering the era of hyper personalization of whole person care, starting with the development of the Diversified Business Group or DBG. I came to Anthem to run this group after spending 25 years addressing some of the toughest challenges in healthcare, including behavioral, advanced imaging and other high cost outliers. What my experience as a doctor taught me is that quite simply, we are in a human to human business. We take care of individuals and families and that's what the diversified business group at Anthem is all about. In this presentation, I'm going to focus on broader trends in the healthcare marketplace and give a high level overview of how the diversified business group will capitalize on those trends to drive incremental growth for Anthem.
So I will not be discussing specific DBG Financials. Let me start with some of the critical market needs that drive DBG's creation. First is the rise of the individual in the healthcare marketplace. Overall market growth is being driven by individual buying markets, especially Medicare and Medicaid as you just heard from Felicia. Individual markets are also much less healthy than employer groups.
Individuals are also spending more of their own money on healthcare as seen in the continued rise in out of pocket spending. They are also driving the expansion of on demand multi site healthcare with rapid growth of convenience care, urgent care centers and telemedicine. And these changes are impacting the way we think of the whole person. A second major trend in the healthcare marketplace is the shift from thinking and acting about members on the basis of annual sales and enrollment periods, a more transactional view to a mindset focused on the need to drive retention in lifetime customer value. This change in mindset is demonstrated by the increased measurement of net promoter scores around customer satisfaction and a greater percentage of revenue coming from lifetime customer value as evidence from the need to close care gaps and capture accurate medical risk scores.
The 3rd major market theme recognizes the challenges of meeting individual needs and expectations. And that is driving in part the rise in various partnerships, mergers, acquisitions and new entrants into the health space. These three themes in our view are leading to the hyper meaning accelerated and comprehensive personalization of whole person care. The greatest need for this movement is with those with chronic and complex conditions. We know from our experience and data that 30% or more of our membership have 3 or more chronic conditions and drive more than 70% of every dollar spent on health care in the U.
S. That number has not changed in 25 years, but that's why we want and will do more to address these needs. One of the biggest reasons these patients are consuming so much health care spending is because they get caught in what I refer to as the Bermuda Triangle of Healthcare. The points of this triangle are the home, the facilities and skilled nursing centers. This chronic condition population gets fragmented care, which creates a huge burden for the patients and their families and is the biggest driver of pain points for providers, health plans and the government.
And that's why we're on a mission to transform the triangle into a circle of whole person care. It is clear that those with chronic conditions are most impacted by these major market themes. These patients are the most in need of whole person lifetime integrated care. DVG has been established to address these market needs. Our purpose is to provide innovative solutions and care delivery models to personalize and integrate care for those with complex and chronic conditions.
Whole person care sounds like wonderful words, but let me show what it looks like because we are making it happen
now.
What we do here
in Connecticut is we focus on the most complex patients. We are providing home based interdisciplinary care.
Each member of our team that walks into huddle every morning from a community health worker to a case manager to a social worker. Everybody's lens matters. It's a team effort. I'm not alone when we're trying to solve what our patients' needs are. This feels good coming into work every
day. Touch is an amazing program that brings that same model of care to the patient and their place of residence, which is usually an assisted living facility or a group home or a skilled nursing facility. Instead of That is the beauty of the TOUCH program.
To bring the clinicians with the payers, with the health systems, with the patient centered focus, all working who typically fared far worse than their more affluent counterparts are doing better. That kind of vision and that passion, I think that's part of the DNA of CareMore and certainly the thing that keeps driving me every single day.
As you can see, we are focused on meeting this large unmet health care need both with Anthem's members and the larger marketplace. As we succeed in our purpose over the next 5 years, we will contribute to Anthem's overall operating gain. And here's how we'll do it. To accomplish our purpose, one of the first things I did was lead a significant restructuring of the DBG organization, our focus and our approach to the market. We centralized key corporate functions for better coordination and integration.
We now have 3 independent but strongly interrelated business units. 1st, clinical pathways with AIM Specialty Health at the center, which is focused on creating and managing best practice clinical pathways with emphasis on chronic conditions. 2nd, Care Delivery, which now is the combination of Aspire, a recent acquisition focused on palliative and end of life care and CareMore, which is focused on wrapping around existing provider networks and supporting primary care providers managing chronic conditions. And third, we are creating a new unit, advanced analytics that will use centralized data to drive better care through predictive and comprehensive insights as well as to create data assets that we can monetize. Inside this division is HealthCore, which today serves the biopharmaceutical industries.
DBG's primary customers are the Anthem Markets and other non Anthem Blues, but we are also focused on opportunities to serve non Blue Health plans, risk bearing provider groups and systems and other care partners including the life sciences industry. We are well positioned to meet the whole person requirement with these foundational units by delivering high-tech and high touch care. On high touch care, we have the 2 units in our care delivery side CareMore and Aspire. Bringing these 2 together enables us to truly address the end to end care for populations in the Bermuda Triangle I described earlier, the home, the hospital and the facility. On the high-tech side, we have key foundational capabilities including AIM with clinical pathways and HealthCore with its deep analytics around measuring safety, best practices and outcomes.
We are in fact creating new delivery models for integrating comprehensive care for chronically ill populations. And the integration of CareMore and Aspire is just an example. With these new capabilities, DBG can more effectively pursue and manage this large unmet chronic care market need. DPG has several competitive advantages and relationships that provide key differentiators for us. We are pursuing a targeted strategy focused on the fast growing chronic condition population as opposed to holding company acquisition model of disparate assets.
We have strong foundational business units that blend high-tech and high touch care using integrated delivery models. We are in partnership with our network of providers rather than looking to compete with or acquire them. DBG is leveraging Anthem's broad market share and extensive relationships with other Blues. For example, we are working with IngenioRx on the pharmacy side to drive provider and member engagement. And our focus on providing personalized whole person care will absolutely set us apart in the marketplace.
I'd like to wrap up by sharing our growth plan, which is focused on 3 core areas. 1st, we'll increase our presence with Anthem's 40,000,000 covered lives by creating value added deals and bundled solutions that take risk for medical dollars on a per member per month basis. As we deploy our plan, we will also increase overall Anthem profit margins through more focused and integrated management of members with chronic conditions. In some cases, we will replace vendors that Anthem currently works with. 2nd, we will pursue opportunities across DPG's client base to cross sell, win new sales and create new products.
These efforts are already underway. And 3rd, we will pursue acquisitions and partnerships in a selective manner. We will focus on adding capabilities and services that enable chronic whole person care and we will be disciplined in evaluating potential acquisition targets. Our acquisition criteria include capturing meaningful earnings, the ability to address significant needs for Anthem and other plans, representing 5% or more medical spend and the potential for double digit growth year over year. We are creating a new era with Anthem's diversified business group.
It won't happen overnight, but we are not going after small issues. We are instead using a focused integrated approach to address the single largest area of cost and customer experience that need to be improved. It's an area that every partner in the healthcare ecosystem struggles with. We also have a great foundation of high-tech and high touch business units. We have a compelling growth opportunity, not just with Anthem, but throughout the Blues system and with others.
Thank you. And I'll now invite my colleagues to the stage for our Q and A. Thank you.
Okay. So we'll have time again for a brief Q and A session. This time is obviously for government and diversified business group strategies. Joining Prakash and Felicia on stage are Doctor. Sachin Jain, President of CareMore Doctor.
Thunde Satunde, President, Medicaid Amy Daly, CFO of the Government Business Division and Mark Russo, President of Medicare. Kevin?
Yes. So I wanted to ask about the rebate reg, it seems we get a lot of focus from investors. How do you think about the implications for if the reg was to go into effect next year, the implications for how you would be pricing for Part D? And then longer term, does the rebate reg in any way change your views about the profit margin opportunity in either the Part D or the MA business over time?
So Kevin, thank you for that question. I'm going to ask Mark Russo, the President of our Medicare business to respond to that.
Thanks, Felicia, and thanks for the question, Kevin. We talked a bit about this last night. At the end of the day, the issue at hand here is transparency. And I think the first point I'd like to make is that transparency, as you'll hear from DeepD later, is a key tenet and a significant area of focus for the launch of Ingenio. As far as the impact, the government itself suggests that in its current form, it's expected to cause premiums to increase for all beneficiaries.
Importantly, we'll work with CMS as we do with all big policy issues. And frankly, I would argue we do more effectively than most plans across the country in hopes to make sure this ends up in a place that's good for the program and good for beneficiaries. Based on what we know and understand today, we're comfortable that the impact of this is manageable through the bid process over time. And we expect that it will continue to allow Part D and the Medicare Advantage business to be as attractive as it is and has no impact on our outlook for our long term success.
Thank you. Maybe just on both Medicare and Medicaid, if you can talk to, I guess, 2 things. 1 would be M and A and given all the consolidation that's happened, how many opportunities are left among smaller Medicaid and or Medicare plans. And then just along with that, the visibility that you think you have on the pace of conversion of the high acuity, high spending Medicaid populations, the willingness of states to make that conversion?
So thank you for the question. And I'll take the first part and ask Doctor. Satunde to take the second part. I will say from an M and A perspective, we're going to be very opportunistic in terms of taking a look at things that we might find very attractive, similar to what happened in Florida. So those were very nice tuck ins for us with respect to our business there, gave us the opportunity to really improve our footprint.
And so I think when you take a look long term with where we are in Medicare and Medicaid, we believe we have a solid strategy around organically growing our business. But at the same time, we will be very opportunistic when we see things that look attractive that give us the ability to be deeper in the markets that we currently serve today. And Tunde, why don't you talk about the higher acuity populations? We follow this very closely and Doctor. Sathunde leads our team in doing this.
Yes, absolutely. Thanks, Felicia. As Felicia mentioned, we had Anthem see over $80,000,000,000 in incremental revenue opportunity in the Medicaid managed care pipeline over the next 5 years. Furthermore, over half of that opportunity is expected to come from the complex and specialized populations, the medically frail and elderly, which to the most part today are in fee for service as they get increasingly moved into Medicaid Managed Care. What we are seeing is that not surprisingly, as those populations are to the most part, unmanaged today, they are high cost, they are high acuity and there is more confidence in Medicaid Managed Care's ability to better manage those members to provide for capabilities and solutions like what we've described with respect to the whole person care centered approach that not only addresses physical, mental, but also social barriers to care, which are prevalent in these complex and specialized populations.
And as we've continued to demonstrate our value proposition, we're seeing states have increasingly more of an appetite to move those populations into Medicaid managed care.
Great. A. J. Rice?
So I
was hoping to ask about 2 areas. First of all, I know that the comment was made earlier, especially on the commercial side that there's you don't see the need to buy physicians to have physicians align with you. The 2 peers of yours that have been the most active in that are very big in MA and have success with risk sharing arrangements with those physicians that they own are very tightly collaborative. As you get bigger in MA and high acuity Medicaid, might that become more of an interest to you? And then my second question is in a different direction.
You've got 2 things going on, you're pushing in high acuity Medicaid and Medicare, but you're also trying to do collaboration with Blue plans. Is your default position if I'm in a state or a location where the Blue plan is willing to work with me, that that's going to be the priority to partner with them because you're giving up the 100% if Amerigroup goes in and wins the contract, you get 100% of the economics, you're sharing it fifty-fifty, but there's obviously back end opportunities. How do you think through whether you collaborate in the state when you're going for a Medicaid contract or even Medicare down the road?
Yes. I will say that partnerships are very, very interesting. And if you've seen one, you've seen one. What we want to do is to be very strategic with our partners around what they're looking to do in their own local geographies. So as you take a look at what we've done so far, a great example of what we've done is to leverage, for example, Louisiana.
So Louisiana started as a Medicaid partnership for us, but Mark and the team were soon in there meeting with the Louisiana plan with respect to Medicare, another area where they really hadn't taken a lot of time to invest in that business. So once again, the kind of Medicaid partnership provided an entry for us with respect to that relationship. And then we were able to piggyback on that around bringing to the table our best in class Medicare operating platform as well. So I think as we take a look at these going forward, the same thing happened in Minnesota. We started out in Minnesota with respect to Medicaid, but Medicare was also involved in the mix.
So for us, when we look at the opportunities, we're in 22 markets today. Our blue partners have an opportunity to, I think, grow in Medicare and Medicaid, and we believe that we provide platforms on both sides of the equation that will allow them to do that. And at the end of the day, that means sharing in terms of the upside that that represents. And we're perfectly fine with doing that, working in a collaborative way that we know this will mean for us as we go forward. I think with respect to M and A and the opportunities with respect to buying physician groups and others, I'm going to have Doctor.
Patel talk about that from a DBG perspective.
Yes. Thank you for the question. And it really piggybacks off of some of the comments that Paul made about partnership. So just to be very clear about our strategy and the way we think about provision of care and providers, our primary strategy is not to acquire providers in the marketplace, includes ambulatory surgery centers, specialists, primary care providers. Now we never say never because there could be issues in the marketplace.
We have gaps. We have a competitive disadvantage. There could be some reasons that we may have to do that, but that is not our primary strategy. Instead, if you look at, for example, with CareMore and what we're doing with Aspire, we're really partnering with our providers in the marketplace and the health plans to wrap around the services that can help them manage their most difficult multi site areas and patient population. So we're helping them where they have the biggest gaps, which is going into the hospital, following their patients in skilled nursing facilities, hospice, leveraging technology, co locating with providers, doing other things to really bolster their capabilities, improve the experience they have with members.
And ultimately, providers want to make a difference in the marketplace with their patients and earn value based dollars. And that's the way we think of our strategy. We're enablers integrating and complementing our services with those providers in the marketplace.
Thanks. Maybe just real quick on the collaboration. I think Gail mentioned in her comments that the win in North Carolina for Medicaid, Ingenio was going to provide the PBM services on the Medicaid. I know Blue Cross Blue Shield of North Carolina uses a different PBM for most of their business. Is that on the table as well as a result of all this potentially?
I can't speak to the rest of the business. I do know that the certainly the partnership that we have with them will afford us the opportunity to have IngenioRx in there for the Medicaid business, which represents a tremendous opportunity around the integrated value story and the
we'll also be working with Blue Cross Blue Shield in North Carolina, their most complex patients. And AIM also. MA and Medicaid.
And AIM, yes.
Dave Windley.
Hi, thanks. My question is on Medicare Advantage as well. In terms of growing, wanting to kind of grow toward the bigger players in that market, some of those smaller competitors are targeting certain sub segment kind of income stratification. I'm curious if your interests are kind of across the income spectrum, if you're designing product to address different segments. And Felicia, you talked about in your prepared remarks kind of lifting some best practices out of Simply and America's First, if you could elaborate on what those might be?
Thank you for that question. I'm going to have Mark answer that for you.
Thanks, Felicia. Yes, I guess the short answer, the very direct answer is, we have invested over the last few years in making sure our portfolio of products is across the spectrum. That included expanding, as Felicia noted in her remarks, our dual special needs plan products across virtually every market. We're now beginning to add to that portfolio of chronic special needs plans in partnership with the DVG and frankly that's come from some of our learnings from the newly acquired companies. But all the way across the income spectrum from low income duals, chronic populations for the C SNPs, traditional HMOs and PPOs.
And of course, we extend the portfolio with our med supp products and our standalone Part D. So there is no disproportionate focus we're hoping to serve the whole income spectrum.
Great. And just one quick follow-up. You also mentioned partnerships in Medicare Advantage with Sister Blues. Are the what are the economic sharing relationships in those deals or do they follow what you're also doing to Medicaid? Thanks.
Gary, Taylor.
Yes. So we're just getting started here and we're learning some from the wonderful experiences that the Medicaid team has had. And I hear them say, as Felicia said, you've seen one partnership, you've seen one partnership. But we're generally looking to follow the same approach as the Medicaid team has. The economics are fundamentally different in the business.
But as far as how we're going to work with other Blues plans, we expect the relationships to look similar.
And I would just add the relationship ranges, it's not as static as I think you'd said A. J. Earlier, it ranges from 50% to 100% depending on the partnership.
Gary Taylor.
Hi, thank you. Just wanted to ask a little more about these joint ventures. Two part question. First, when you look at the guidance that you've laid out and the growth you're going to have in Medicare and Medicaid, can you sort of ballpark how much of that you think comes from these JVs with the Blues? Is it 10%?
Is it 20%? Could it be more than that? And then my second question is, some of the feedback we've heard, I think, is a very innovative strategy and congrats on the success you've had. Some of the feedback we've heard from some of the Blues is that we're still trying to ascertain if Anthem is friend or foe. And some of that is fallback from the failed Cigna merger where you would have been in the backyard competing with them on the commercial book of business.
So can you give us a little color on is that a selling point that you face and you have to overcome and maybe a little color on how you're doing
that? Certainly, there's always that question. But I do think at the end of the day, the best testimonial of whether we are friend or foe comes from people like Doctor. Oberheis. And having the reference from our partner in Louisiana with respect to other Blue plans that are considering that, I think goes a long way.
So we can say it ourselves that we're focused on being a strong partner. I think it speaks volumes when you can have one of your partners deliver that message for you. So you know, there's always going to be that hurdle you have to overcome. But we do really see this as a new era here. And Gail has ushered that in.
I think that in all of our relationships, we are demonstrating what partnerships really mean. And that's mean being right there side by side with the deep local expertise they bring in their markets and then using the leverage of our operating platform to help them understand the business with respect to Medicare and Medicaid. So it's certainly one of those things that's a consideration, but I certainly think it helps tremendously to have the messages from the partners that we have today.
Okay. We're out of time for this Q and A session. There will be another Q and A session, but to keep this on track, I want to thank the panel here. At this time, it's my pleasure to welcome up Deepti Jain, Senior Vice President of IngenioRx.
Good morning, everyone. My name is Deepti Jain. I have been in healthcare for 25 years. In fact, I have dedicated most of my career to pharmacy care, starting in the hospital systems, then at the nation's 1st premier PBM and now I have the honor of leading Anthem's next generation PBM, IngenioRx, where we are reclaiming the power of pharmacy to make people healthier. Let me start with our name and our logo.
IngenioRx, it represents the people that we serve and how they are at the heart of everything we do. We accelerated the launch of IngenioRx, and we will be able to reclaim the power of pharmacy sooner. We will begin serving our clients in the coming months, and they will see value upon conversion to IngenioRx. Our members will experience expanded service capabilities and improvements to their digital experience. For example, upon conversion to IngenioRx, our members will be able to access their pharmacy and medical benefit information in one place.
IngenioRx is poised to be Anthem's platform for growth. Let me tell you why. 1st, having a competitive pharmacy offer will allow Anthem to expand more services with existing medical clients. We will have greater opportunity to win back pharmacy if pharmacy has been carved out. In addition, by expanding our services within a given client, we will improve we expect to improve client retention.
2nd, having our own PBM allows us to compete for stand alone pharmacy business outside the existing Anthem footprint. Number 3, IngenioRx opens up the opportunity to create new partnerships with non Anthem Blue plans by offering them a pharmacy solution that understands their Blue plan position and can be tailored to meet the unique needs of their market. Everyone is looking for a viable alternative to the current system, and here's why. When I first began my career, pharmacy was considered a cost effective tool in the health care toolkit. But unfortunately, today, it's looked at as a runaway train of escalating costs with misaligned incentives.
Our clients understand that pharmacy plays an important role in the health of the people they care for. However, they have lost faith in the current system and they are looking for someone who can restore trust and confidence in pharmacy. With IngenioRx, we are doing just that. IngenioRx has been built around a whole health approach. A perfect example of this is how we make formulary decisions.
Formularies are at the heart and soul of every PBM. Our philosophy is different. We don't just focus on drug costs. We consider the effects the decision may have on overall health, total health care costs and the member experience. By demystifying and simplifying the way pharmacy works, we drive better decisions.
A great example of this is we are introducing a new integrated guarantee that will help our clients better understand and plan for their health care expenses. And finally, what we all strive for, making pharmacy care easy. Our proactive prior authorization program is a great example of how we do this. By combining medical and pharmacy data at point of sale, we streamline the application of our prior authorization criteria, removing obstacles to care and making our members' experience seamless. This steadfast commitment to integration is core to our total health strategy, and that's why Anthem is a thought leader in the pharmacy industry.
In 2018, we launched the first, the first of its kind integrated drug trend report. One of the key statistics in the 2018 report is that 42% of specialty drug spend is paid on the medical side. When you consider that specialty pharmacy spend is projected to grow to $400,000,000,000 by next year, by 2020, it should be clear that if you don't manage both sides of the benefit, you cannot effectively manage total costs. Here are just three examples that showcase the power of integrating pharmacy and medical and demonstrate that overall management was far more effective in the integrated setting. We saw meaningful reductions in hospital admissions, in medical costs, resulting in significant savings.
Another great example of how we are harnessing the power of integrated benefits is our whole health connection. We have a program for our vision providers that we affectionately call the orange button. You saw that earlier in Pete's video. The orange button gives vision providers alerts when the patient is on a drug with a vision warning. This is really important because we have identified 22 out of the top 25 most prescribed drugs have a vision warning, and we are working to bring these insights to our dental providers this year.
For our clients, it's not enough to just measure the value of integration. They need to know what it means for them. To that end, we're introducing a new integrated medical RX spend guarantee. The current method of evaluating PBMs has been to look at discounts on a static set of claims, not on outcomes. The guarantees that are in the marketplace today are hard to compare, they are hard to track and they are hard to report on.
We use advanced client specific analytics to provide predictability, which enables us to guarantee a very specific cost structure per member per month. Now with the accelerated launch, we can bring such solutions to our clients sooner. Let me share with you why we are so confident in our ability to seamlessly transition our members to IngenioRx. There are 3 key strengths that we bring to transition readiness. Number 1 is the strength of our people.
We have a highly accomplished pharmacy team with deep expertise in all aspects of the PBM business and in managing large pharmacy transitions. We also have an experienced and dedicated team on the CVS side, and we have been working together with them since October 2017. Number 2 is testing. We have deployed comprehensive and robust testing since 2017, and this will continue till the transition is complete. Number 3 is member experience.
We have made tremendous effort to ensure that our members will have a smooth experience with their pharmacy benefit upon conversion to IngenioRx. As you can see, we are ready to launch IngenioRx and reclaim the power of pharmacy. Thank you. And now it's my pleasure to introduce you to the man who is going to make sure we hit all of our numbers, our CFO, John Gallino.
Thank you, Deepti, and thank you for the great work that you and your team have done to accelerate the rollout of IngenioRx. Good morning, everyone. You know, we're here in New York today, and I forgot my Frank Sinatra voice. Although I can tell you with the help of Tamiflu and a local physician, our healthcare system truly works. So you've heard the game plans today for our leadership team.
Now let's make it real. What does this mean? My job is to connect the dots and show you how these strategies will flow through the income statement. So as a brief aside, this June is my 25th anniversary with Anthem. My first day on the job was June 1, 1994.
My first day as CFO, June 1, 2016. Since that time, I have witnessed our company undergo a tremendous transformation. In the past 3 years, we've welcomed the new CEO. Our stock price has more than doubled, and we have grown to serve more than 40,000,000 members. We are building on our recent success and have real growth prospects for the future.
We have a solid outlook and are well positioned for 2019 and beyond. To demonstrate our confidence in our trajectory, we are raising our long term sustainable EPS growth rate to a range of 12% to 15%. And this is on top of our implementation of IngenioRx, which will accelerate our growth rate for each of the next 2 years to approximately 20%. As you've heard today, we expect growth across each of our businesses, real growth. And I'm going to show you what that means for 2019 and how that translates into our long term financial outlook.
So we ended 2018 in a position of strength with adjusted earnings per share of $15.89 which was $0.89 ahead of our initial 2018 guidance. We generated more than $91,000,000,000 of revenue and delivered more than $5,000,000,000 of operating gain. In 2019, we expect to grow earnings per share by nearly 20%. Core operating gain is contributing to the majority of that growth, with the benefit from the accelerated launch of IngenioRx contributing an additional $0.70 to $0.90 per share. All of this results in at least $19 of adjusted earnings per share.
Now let's take it one step further and look how each of our segments is expected to perform in 2019. To put it simply, we are building on momentum and we are growing our top line at the fastest rate since acquiring Amerigroup in 2012. Operating revenue for our commercial segment is expected to grow by mid to upper single digits compared to 2018. In our Government segment, we expect operating revenue to grow by low double digits over the prior year. And we project full year commercial fully insured membership growth the range of 150,000 to 300,000 members and fee based membership growth in the range of 100,000 to 150,000 members.
Taken together, total commercial enrollment is expected to end the year with more than 30,000,000 lives. And consistent with 2018, we still expect the majority of our membership growth to come from the government segment. For the 3rd year in a row, we are on track to outpace the broader market as we expect our Medicare Advantage enrollment growth to exceed 20%. In Medicaid, we project more we will end 2019 with between 7.2 and 7,300,000 members. As you will recall, we added 330,000 lives in January with the launch of our Medicaid alliance with Blue Cross and Blue Shield of Minnesota.
We also expect organic growth between 1,200,000 2 and 20,000 lives across our existing 22 Medicaid markets. This growth is prior to including our successful partnership with Blue Cross and Blue Shield of North Carolina, which is expected to go live in a phased approach beginning in Q4. So we will update our guidance later this year once we have more insight into the implementation timeline. Total government segment enrollment is estimated to approach 11,000,000 lives by the end of 2019. All in, we expect to serve over 41,000,000 members at the midpoint of our guidance.
That means we'll be serving more members than at any time in Anthem's history. And that growth will be coming from all lines of business. It is real growth that is sustainable over the long term. Of course, as you just heard, one of the drivers of that growth is IngenioRx. Our commercial members will begin transitioning to IngenioRx in the Q2 of 2019.
We will migrate our Medicaid business as state approvals are received. Then on January 1, 2020, our Medicare and ACA compliant membership will transition as part of the last phase of the migration. As a result, the transition will be complete in the Q1 of 2020. We expect $250,000,000 to $300,000,000 of value to fall to the bottom line this year with an incremental $500,000,000 to $550,000,000 in 2020. Altogether, we are on track to deliver the $800,000,000 run rate value a full year ahead of schedule.
So 10 years ago, more than 70% of our operating revenue was concentrated in the commercial segment. Since then, we've made significant progress towards diversifying and de risking our business. In 2018, 61% of our operating revenue was derived from the government business with 39% from the commercial business. By capitalizing on the opportunities for growth in commercial and government businesses and building out our pharmacy and services capabilities, we are accelerating growth and diversifying our revenue base. In 2023, we expect IngenioRx and Diversified Business Group to represent at least 8% to 10% of our total operating revenue.
So now turning to the financial ratios. In 2019, we anticipate a medical loss ratio of 86.2 percent, plus or minus 30 basis points. Adjusting for the health insurer fee moratorium, the medical loss ratio is consistent with 2018. Our outlook assumes margin normalization in the individual business, growth in Medicare Group I'm sorry, growth in Group Medicare Advantage and improved performance in Medicaid. We are intensely focused on ensuring our products stay affordable.
Our SG and A ratio is expected to be 13.5%, plus or minus 30 basis points in 2019. As we know, any time you go from having the health insurer fee in 1 year and then not in the next, none of your metrics are comparable. The health insurer fee moratorium drives 140 basis points of the improvement, with the additional 40 basis points of improvement being the result of our operational of improvement being the result of our operational efficiencies.
To be clear, over
the long term, the SG and A ratio benefits from both our operational excellence as well as our growth in revenue. So here is an example of increasing operating efficiency. Over the years, we've made a number of acquisitions, and with each company comes a unique set of highly embedded systems. For example, in 2,008, we had 13 claims processing systems making it cumbersome and costly to maintain. Any time a change was made in one system, it needed to be replicated 12 times.
Fast forward to today, even with adding more systems through acquisitions, we have 6 claims processing systems with a goal of having 2 end state platforms by 2022. Currently, we have about half of our members on their destination system. Our transition teams are diligent and thorough, and member abrasion has been minimal. We know what we are doing. We know how to transition members and minimize the risk.
This includes systems focused on the medical benefit as well as the pharmacy benefit. All in, we expect improved system stability and reduced ongoing maintenance expenses. This strong performance also assumes a consistent level of investment spending over the long term. 2019 is an inflection point for our company in many ways. Capital allocation is fundamental to value creation.
And for the first time in many years, we are allocating a greater percent of our capital to growth rather than foundational projects such as systems consolidation and automation. Are investing more dollars in AI and digital. We have innovation hubs across the country with the sole objective of simplifying health care. With AI, we have a team in place working on things like how can we alert providers to errors in claims even before they click submit. Initiatives like that will save both time and money and most importantly, improve the member experience.
Capital deployment is a key component of our operating strategy. Our approach will be balanced. Over the last 5 years, we prioritized share buybacks and bought back 60,000,000 shares at an average price of 140.94 dollars Today, our share price is nearly $300 per share. This clearly demonstrates that our share buyback program was a great use of capital. Going forward, we're going to be opportunistic with respect to capital deployment.
We will look to allocate 50% of our free cash flow to M and A and reinvesting in our business, 30% will be allocated to share buyback and the remainder will go to dividends. To be clear, we'll be disciplined with regard to M and A and we'll carefully balance the interest of our stakeholders and our shareholders. And we do not need to rely on share buybacks to drive earnings growth. Our focus at Anthem is on emphasizing long term sustainable total shareholder return. So turning to our segment outlooks.
Operating revenue for the commercial business is expected to grow by mid to upper single digits with margins increasing to a range of 10.5% to 11.5%. The improvement in margin reflects market share growth, increased penetration of specialty and clinical solutions and improving operating performance within our fee based businesses. Operating revenue in the government business is expected to grow by low double digits with margins in the range of 3.5% to 4.5%. The Diversified Business Group and IngenioRx are estimated to produce at least $14,000,000,000 of revenue in combined revenues with margins in the range of 10% to 11%. All in, total revenue is expected to grow by 10% to 12%, representing solid top line growth, real growth.
In addition, margins are projected to increase to a range of 6% to 7% as a result of our changing business mix. Now let's look at what will drive our long term EPS growth. From year end 2013 through 2018, half of our earnings growth was driven by capital deployment. Going forward, our emphasis is on growing the core business and delivering high quality earnings. Our new 12% to 15% long term growth target is predicated on solid core performance and assumes operating gain will drive 65% of earnings growth in 2021 and beyond.
These kinds of results are why I'm looking forward to my 25th anniversary at Anthem. A few thoughts to summarize the morning. Anthem's long term growth outlook is robust, credible and sustainable. We are delivering growth across all lines of business, guided by the 4 key pillars that Gail described earlier. First, we are optimizing performance across our businesses.
We are becoming better at everything we do and delivering greater value to our customers and consumers. 2nd, we are investing in growth. 2019 is an inflection point, and we are prioritizing growth investments. 3rd, with IngenioRx, we are improving affordability and outcomes for our members. And 4th, we're diversifying in the services and capabilities.
So thank you. I'll now welcome Gail and her senior team to the stage for our final Q and A session of the day.
Yes, Steve Balaket in the back there.
Just for the new medical and Rx integrated guarantee concept that you talked about, it wasn't totally clear whether that was meant for all customer categories beyond the employer carving opportunities? Or is there a wider set of bidding strategies that you plan for the carve out PBM opportunities that may or may not include a pass through pricing as well. Just curious to hear more about the overall pricing and go to market strategy? Thanks.
Sure. Let me ask Pete actually, because mostly we're talking about the commercial business, but I can address it more broadly as well. Why don't you start Pete?
Yes. I mean, I think we are really excited about the onset of IngenioRx and this integrated value proposition. It is resonating in the marketplace. To answer your question, it is specific in large part to the commercial business. As Deepti talked about, the value proposition is really resonating in our national account business and our local business.
We're talking about the pillars that D. P. Described. Specifically, we're not focused on a particular drug or rebates per se, but we're focused on the integrated value proposition across medical, behavioral, pharmacy, etcetera. So that is a significant issue.
We're talking a lot about as Deepak talked about demystifying the pharmacy value chain. So specifically in the employer based business, in the fully insured business, with the onset of Ingenio, we're actually going to be providing rebates at the point of sale, which we decided as that gets implemented. And then from a service perspective, we're going to have differentiated service as Deepti talked about. So with respect to 20 four 7 customer service, other clinical capabilities, so this value proposition, these pillars that Deepti talked about is really resonating in the marketplace.
Yes. So let me in terms of the broader question too, because I think Pete did a great job of explaining the commercial value proposition. But I want to go back to think about across all of our businesses, government, etcetera, the whole Person Care, we really see this as driving total net lowest costs. And remember, we're deploying $3,200,000,000 because of this new arrangement and our new PBM into the marketplace, which gives us, I think, a very distinctive opportunity. So I wouldn't only focus on the guarantee, I'd focus on the value deployment.
And then you saw from our whole health, what makes pharmacy powerful in that is because of the 1 in 3 patients in our doctor's office. Now you add pharmacy to that and you add that to our value based payment arrangements, which pharmacy will include on upside downside risk. It gives us a real opportunity to manage total spend across government and commercial. And I think that's where the power of the integrated story in the guarantee comes from. And I think that is very different than what you're hearing about integrated stories, because again, we have market density and depth to be able to do that where we can add that with the care provider and then do point of sale again rebates, point of sale for the consumer.
So I think that's a really important part of the story. And I think that's what drives the distinctive value for us and why we're excited to have Ingenio added to our product portfolio across all of our businesses.
We'll go to Scott Fidel and then next Charles Reed.
Okay, thanks. Had two questions just on the 10% to 12% long term revenue guidance given clearly that it will give Anthem basically the most robust targets now in the industry in terms of top line growth. So the first one is just in terms of how you're thinking about sort of what you're building in terms of the economic sort of broader economic growth sort of view into that. Does that sort of require that we sort of continue with the same type of economic environment we're in right now or how are you thinking about that? I guess that commercial business probably is sort of the most relevant to that.
And then second, just clearly that top line growth is really sort of distinguished by the build out of Diversified Business Group, which starts at a base of 0. So clearly, that's going to influence that growth rate higher. Maybe help us think about just within that DBG growth sort of how that sort of layers out between just bringing Anthem onto the IngenioRx platform as compared to thoughts on sort of building out sort of standalone pharmacy growth for that and then the other components of DBJ.
Great. Well, there's a lot there. So I'll we'll try to get through the multiple layers of that. Maybe John, if I'll have you address that.
Yes, sure. No, thank you for the question. In terms of the 10% to 12% top line revenue growth and the current economic assumptions, our long term growth rate assumes a similar stable outlook in terms of the economy versus today. However, I will say that we have done a significant amount of sensitivity testing associated with that. And obviously, if the economy continues to get stronger, we think that we can even accelerate that.
If there is a pullback in the economy, we may end up seeing a slightly greater growth rate in our government business with the Medicaid offering and a slightly lower in commercial. But all in, we are very comfortable with the 10% to 12% regardless which direction the economy turns at this point.
And then did you want to talk a little bit about Ingenio and D.
I'm sorry. And then yes, with the IngenioRx and the diversified business group, I talked about 8% to 10% of the total revenue associated with that and $14,000,000,000 in total by 2023 with the 2 combined. And we're not going to split those out separately at this point. Very clearly, you can look at it's 10% to 11% margin is what we're assuming on that. The diversified business group part of that would have a little bit higher margin and Ingenio would have a little bit lower margin, it would net out to the 10% to 11%.
But it's they're both very important in our long term future.
Right. And the only other thing I would add to both commentaries is that looking at the chart that John showed about where we were in sort of our concentration of business to where we are now, we are a much different organization and much more diversified. Obviously, we've seen the growth in the government sector, but within that sector, Felicia shared with you the specialized populations. And I think that's an opportunity not just for our government business division, but also for our diversified business division, because that is the area that we're focusing and trying to truly demonstrate with our capabilities and deep market penetration. North Carolina is a really nice example of our ability to win with a partner in Medicaid, then deploy CareMore into that marketplace to be able to deliver
a very differentiated solution. So that I think is
the power of the combination of the assets that market now.
Charles?
Thanks. Two questions. First, obviously, we can see that IngenioRx fits in across the strategy across all your segments here. Maybe you can give us a sense on what kind of markers we can watch for as IngenioRx is implemented to the market to give us a sense on how it's progressing? And then secondly, you talked about with Ingenio, you're moving to point of sale rebates.
I think there was a bill introduced recently trying to push for that to be mandated across the commercial market. Given that you and some of your peers have already been moving that direction, would you be in support of such legislation?
Yes. So there's a couple of questions here. Let me address sort of the rebate question first, because I think it's really important. The model and I think we've said it in a number of different ways about transparency. We are not building a rebate focused PBM.
We have the benefit and the advantage of building a new generation PBM and that is really different for us and important. And we don't have to retool old contracts and different types of assets. And I think 1st and foremost, so given that, I think that that's an important thing. And as we think about our outlook in total for Anthem, we feel very confident in our growth rates and our margin profile across all of Anthem. I think the second issue around where we are in terms of employers on that second piece of the bill.
I think this is a discussion with employers quite frankly, because employers have deployed very different strategies. In our fully insured business, we are going to go to point of sale rebates. We think that that's important again, solidifying the model that we're at. But I think employers also want to be part of this debate and that's going to be important. And we are again building this model to be supportive of where employers want to go, because across that spectrum based on the size of the employer, we're seeing right now a much greater desire to integrate and bring it back into the total health.
And that's why our focus has been around driving true net lowest cost of care with better outcomes and moving it into value base. And I think that's actually a stronger conversation for employers than again piecing out all the parts. So again, that's very early in the days, but I would say we feel very confident about where we're heading and the value that we're putting in the market. And again, we're not a rebate built PBM. So I think that's very different.
We're going to go to A. J. And then Mona.
Zach.
Zach, okay.
No, I'm sorry.
Thank you for the question and thanks for the transparency today. I want to ask about your partnership opportunity. And I'm curious is the partnership an opportunity more a function of the potential partners needing to partner due to a lack of scale and more competitiveness within the space from the larger players? And then when you think of competing for those partnership opportunities, who are you competing with? And what do you bring more specific that other potential partners may not operate?
Yes. I'll start it and then I'll ask maybe Felicia to share her thoughts because it's mostly in the government business. But honestly, it's also in the commercial business. So we've got opportunities across all of our business to do more partnerships. I think 1st and foremost, Felicia did a very nice job of articulating the local relationships, local market, provider relationships, deep penetration in the market, when you think about Medicare and Medicaid and us bringing a national platform that has quite frankly more markets and we can spread risk and we know what's happening.
For us, I think someone asked the question, why would we want to do this alone versus partner? The reality entering a new market where you don't have provider contracts, you don't have a brand relationship, that's a lot harder than a partnership. So we think it's an incredibly capital efficient way to take our assets and leverage those assets with someone who's already, as you heard from Louisiana, been in the market 85 years. They know it. They know those provider relationships.
They're further along in the value based. So if you come brand new into a market, you don't have that depth immediately. You're building those networks, you're building those markets. And North Carolina, Louisiana, Minnesota, great examples where that infrastructure at the market and provider already exists and we're able to take things that Paul has discussed and help them bring some of those value based things. In terms of who we're competing with against partnerships, I think they vary.
But in terms of the blue partnerships, these are conversations we're having over longer term. So I don't necessarily view them as competition against another party. I view them as do I build it myself or do I think it's more leverageable for me to work with Anthem. So certainly there are others who'd want to do it, but for the most part these are conversations we're having where we're building trust with them and showing them that we can accelerate both of our market penetration together. Felicia, if you want to add anything?
No, I think you said it well, Gail. It really isn't a lack of scale because in their markets, they're deeply penetrated across the commercial business. It's a lack of capabilities in the government space. I've seen plans before, try to kind of manage Medicare, Medicaid off the side of their desk, leveraging a platform that is more akin to commercial. Business doesn't work that way.
And so I think that what we bring to the table are the operating platforms that we have in both Medicare and Medicaid in a way that helps to really work with the local provider relationships that are already there, deeply penetrated across commercial business and the knowledge in the local communities that they serve. So what we bring to the table is really the know how, the operating platform, the best in class capabilities that we have on the Medicaid and Medicare side in order to accelerate their growth in this space.
Thanks for the question. Two questions. 1, how do you deal with all this political wind about Medicaid, Medicare for all, Medicaid expansion? No, we're not going to let them expand it, etcetera. And the second question is, I've been hearing louder than usual the talk about potential M and A.
Which areas are you looking at that can complement and fit within your strategy?
Yes. Let me start and I think I'll ask my colleagues to join me on a number of the questions that you've asked. First, I think it's you answered the question or asked the question that's sort of been a headline lately, which is expansion of Medica. There's a number of proposals at the federal and state level. The reality of them, they all have very little specificity and they haven't been costed.
So I'll start with that. And the price tag even for the ones that were cost in the past were astronomical. That's not to say that we fundamentally believe that it's about affordability, access and quality. And we think that there is a huge opportunity actually for this in the discussion. When we went through this with the Affordable Care Act earlier, remember that most Americans still deeply value their private health care coverage and that has still shown in all of the polling and other things.
And again, what they are concerned about is rising health care costs. And that's the point about our focus on really changing that trajectory of health care costs. So we believe that's why deep we feel positioning around deep community, the integration of really changing the trajectory of health care costs for them in that community. And we are because of our long relationship with government business, public private partnerships, we think are opportunities to do that, particularly around value based care. I think there are opportunities to stabilize the market.
So yes, there's a number of proposals. The reality is we think that there is a really strong role for us in that and we're delivering really strong value and you can see in our government programs already. And we actually feel incredibly well prepared because of the unique relationship we have with our states to have that discussion as well as with the federal government. And again, the core still has not changed, which Americans value their private coverage. And I think that's a really important tenet.
And then let me I'm sorry, let me ask sorry, the other components of it, if you want to address any of those. Sure, please.
I can comment on the M and A side, certainly as it relates to DBG and I'm obviously not going to talk about specific targets. But if we look at the capabilities we have today, we have a very strong foundation as I described on the high-tech and the high touch side. Having said that, there are a number of components that we think we can add to supplement and extend what we do already to address the Bermuda Triangle of Healthcare that I described. So some of the things we'll be looking at to add to the capabilities that we already have include advanced analytics around specialized populations that Felicia mentioned, certainly programs around social determinants of care becoming more and more important, especially around the chronic care populations, look at home, transition of care, add more complex condition management. And ideally, we also want to be able to marry reimbursement models with the kind of care models we're putting in the marketplace too.
So we'll look at alternative payment models. And at the end of the day, all of this is has to be integrated in a very seamless way for our customers, our patients and our providers. And that's really what's going to drive our differentiation. But we will be looking at acquisitions that will bolster the capabilities that we already have.
I think the last part was Medicaid expansion.
Yes. I think that there while I think there are 33, 34 states now that actually have expanded, Don't hold me true to that number. But you will still see, I think, across the board opportunities for states who didn't initially expand to think about how they expand in a different way. We saw a proposal last week, I want to say from Georgia. And Georgia is looking to expand Medicaid.
I think they currently are at 36 of the FPL, federal poverty level today. They're looking to move that up to 100% of FPL, which is still expansion, which is good. The states under the Affordable Care Act are right around 138%. But anytime we can see an opportunity to improve access in a market is something that I think represents strong growth opportunity and certainly the opportunity for individuals to have access to affordable healthcare coverage.
A. J?
Yes. So I just wanted to go back to the target revenue growth in the commercial business mid to high single digit. I think people hear that and they think about, well, the risk based business is not growing that fast, ASO members aren't growing that fast. But I know you've got embedded in that, at least I think you do, a fairly nice pickup in specialty services over time. You've got, I think, maybe the group MA is included in that or it's not.
No.
But I just try to decipher out of that how much I guess there's a question is Anthem saying the next few years are going to be very disruptive in the commercial business? Or is there just runway regardless of that? And then an aspect of that's also I hear this question a lot with the $3,200,000,000 of incremental investments you have. Pete laid out a lot of things you're investing in, but people worry that are you going to be a price discounter given that you have that
in that number, Group MA is not. Group MA is actually reported in our government sector. So that obviously changes that a little bit. I just want to be really clear and I think we've said it on every call and we probably didn't say it today, but we are absolutely staying disciplined in our pricing. So you're not seeing a change of body language or philosophy at all in pricing.
What you're seeing is a better underlying cost structure that we believe makes us competitive. And as you saw from the margin profile that John shared across Anthem that we are increasing and improving our margins. So overall, you are not going to see us change anything about our discipline. And quite frankly, we've even as part of our segment structure and center of excellence, I think become even more disciplined around that across the commercial business. But with that, I don't know if you want to comment anymore about Versumac because we feel it's a very robust profile given where we've been.
Yes. I think the only other component with respect to our growth trajectory and when you look at the total revenue growth in commercial, Gail mentioned 1, the group retiree. The other part is Ingenio. We're going to be a major accelerant in Ingenio growth and that's not falling in our P and L as well. And so when you sort of combine the 2 of those with our core markets and what Gail talked about in terms of being competitive in all our markets across the product portfolio, it would be very attractive revenue growth in the commercial business overall.
Yes. So I'll just add it. It's as simple as health care trend. We will grow commercial fully insured, fees on ASO Business, specialty penetration, mid to high single digits.
Kevin Fischbeck.
Yes. So I want to go back to the rebate reg just because it seems to be such an area of confusion in the marketplace. Two questions there. First one, I think straightforward. The $800,000,000 to you, dollars 4,000,000,000 of savings, that's not impacted at all, rebate reg, no rebate reg, you feel comfortable that you're going to get those deliver on those numbers?
Yes. So we've said this consistently. Again, I'll go back to what I just said a moment ago. We're not a rebate based model and we feel very comfortable in the total earnings picture we've given you.
All right. So the second question then is, you mentioned 10%, 11% margin in the Ingenio and the diversified business with Ingenio being a little bit below that. That still puts you in line with or maybe even slightly higher than some of your competitors on the PBM business in a model that doesn't rely on rebates at all. So the market seems to be very skeptical about PBMs being able to maintain their margin much less, maybe you can do a little bit better than what they're doing right now. So can you just give us a little bit of comfort or color on how it is that you're going to be to provide those types of margins if you're not getting revenue streams through rebates?
John, you want to address that?
Yes, sure. No, thank you, Kevin. And the $4,000,000,000 that we've talked about with $3,200,000,000 going to the customers to help provide more affordable product, The vast majority of that $800,000,000 we expect to be reflected in the Ingenio P and L. So it's going to be retained within Ingenio to is reflection of the services that they perform on behalf of their health insurance partners. And quite simply, if you just take that $800,000,000 and sort of work your way backwards, you'll see that our margins are very reasonable.
Right. And I think the other thing too, again, not to lose sight of, there are a lot of strategies and levers inside of our business. So again, I would look at what we're putting out as a total growth picture and Ingenio isn't accelerated to that growth picture across our businesses and because we just fundamentally believe this has to be a net lowest cost story and proof point for employers, that's what's going to drive the growth.
I got Ralph Jacoby and then Anag Gupta.
Thanks. John, just wanted to clarify the 12% to 15% EPS growth that includes buyback?
Yes.
Okay. And is there a placeholder for how much you have in there for that?
Well, as I stated, our approach to capital deployment is going to be balanced. And so you look at the cash flow that we're going to generate over the next 5 years, 50% will be used for M and A and reinvesting in the business, 30% for buyback and 20% for dividends. And that's part of the 12% to 15% EPS growth. But the capital deployment is only about a third of our total EPS growth. The rest is coming from core operations.
Just to follow-up
on that. So just if you have a couple of 100 basis points sort of off that relative to the revenue growth, meanwhile, we're sort of talking about sort of SG and A coming down and you guys have talked about sort of margin expansion. Is there sort of a there seemed to be a little bit of a disconnect. Is there something that would be sort of pressuring margins where you wouldn't get more leverage off of that revenue growth? Thanks.
I wouldn't say it's necessarily pressuring, but our growth is obviously pressuring. Every time we enter a new Medicaid state, it's dilutive in the 1st year. As we continue to grow our group retiree Medicare Advantage at the rate that we're going to grow it, the 1st year of that new membership is typically dilutive. We have baked all that dilution from that growth in, and that is all part of the 5 year projection that we talked about. So I think if you pull that dilution out, you'll probably get back to your numbers pretty quickly.
Anna? Yes. Just following up again on the margin question that was asked on the PBM, but more broadly, you have margins now DBG plus the Ingenio at, I don't know, 10.5%, 11%. Commercial, I think you guided to normalize something north of 10%. First question is, is there any kind of ceiling that you see on either of those businesses from a regulatory or competitive perspective or not?
Both of those signal, I think, commercial as well margin expansion. And then related to that, it sounds like your Ingenio strategy is more of an integrated strategy, right? It's integrated with your commercial business, your Medicare. So would you, at some point, consider, I guess, building in Ingenio into those businesses? Or is your philosophy more about 3rd party sales and how does that tie into your future reporting?
I guess, it's kind of a broad
Yes, I'll start with 1. I mean, let me in terms of Ingenio, I think what's important to understand is it's kind of all of those. We have our intense focus right now is to take advantage of the value deployment we have right in front of us, which is the conversion of our existing business and to ensure that that goes incredibly well, as well as to sell new business. And we're seeing even with the North Carolina contract and ability to begin to package that. The net cost story is really compelling and we believe it's uniquely compelling for us because of our value based provider relationships and our deep integration.
With that said, we are also going to sell into the standalone market. So that's not not to say that's not a very important market to us, but in terms of the timing of the opportunities, the most immediate opportunities in front of us we want to execute on and we see those as opportunities too. In terms of your second question, I guess I'll ask John to comment on any of the financial questions. We haven't broken out any of those financials yet as you know.
And I think you were Anna, if I understood your question, you're really asking about the margin profile. The vast majority of our margin improvement is associated with mix of business. So like in commercial, margins are going to go up because we're going to take the 5 to 1 to 3 to 1 over time. That incremental revenue comes on at a higher margin than a regular fully insured member. So clearly, there's an affordability issue.
Fully insured business does have a ceiling in terms of the amount of margin you can earn on it. But if you look at the entire portfolio we have, we're very comfortable with the low double digit numbers of 10.5% to 11.5% that I discussed in my presentation.
Got it. Thanks.
Great. Thank you. Okay. We probably have time for 2 more, 1 in the back and then Justin.
Given you said that unit cost is driving about 75% of your overall trend and lots of discussion today about lowest net costs. When you're thinking out over the next 5 years, how are you thinking about trend as compared to the 6% range we've been in the past few years? Do you start changing that cost curve?
I don't know if
you want to talk about trend, but I think we haven't given projections on trend beyond our current. I mean, obviously, we believe that value based reimbursement and really the alignment of incentives changes this game as does consumer incentives. But we haven't really projected out our trend beyond that.
So I
don't know if you want to
Yes, but thank you for the question because one point that I do want to make to make sure it's crystal clear for everyone is that the $3,200,000,000 of savings from IngenioRx is not yet reflected in that 6% number. We will factor that in as it becomes real over the next year plus and that will then lower our baseline of which trend will then be projected off of in the future. In terms of the 75%, 25%, Gail is exactly right. The value based contracting, a lot of things that Paul Marchetti talked about are very, very critical to that. We hope to be able to continue to mitigate it.
Obviously, our pricing is going to be very disciplined, but it's really premature for me to provide a number 2, 3, 4, 5 years out from now. But it's something that's very front and center in our strategy every day.
Great. Justin?
John, can you tell us in terms of that long term growth rate, is over the next 5 years, is there anything we should think about in terms of that being higher in the early years, lower in the early years? Or do you think it's pretty consistent from 'nineteen through 2023?
And thank you, Justin, for providing me the opportunity to clarify. And I had said in my slides, the 12% to 15% was from 21% to 23%. So the rollout of IngenioRx, the accelerated rollout is incremental to the 12% to 15%. Our greater than $19 earnings per share guidance for 2019 is a 20% increase over 2018. We have not yet provided 2020 guidance yet, but I did provide commentary that Ingenio will add $500,000,000 to $550,000,000 of incremental operating gain in 2020.
That $500,000,000 to $550,000,000 is on top of the 12% to 15%. Then in 2021, we're at 12% to 15% on a sustainable basis. Thank you for asking that question.
So the 12% to 15% should be in underneath the 500,000,000 of PBM, there should be 12% to 15% growth in 2020 as well as beyond?
Yes, sir. Okay.
And then just the SG and A number kind of stood out a little bit, meaning I didn't I don't have anything close to that in my model on the 11% to 12%, the hits coming back next year. So if that does happen, it looks like your SG and A is down 300 basis points or 400 basis points from 2018 to 23. Can you give us some color on I know you're shrinking systems and probably going to grow government faster, which is lower SG and A, but still that number kind of jumps out. Can you give us some color on how it's going to get there and maybe the pace at which it gets there over the next 5 years?
That's a great question, and you've already answered a major portion of it. We will continue to have operational efficiencies. We talked about having AI and digital, helping take some of the waste out of the system, improving the member experience. As you said, we're at 13 systems just a few years ago. We've bought companies and added systems, and we're down 6%.
We're going to be down to 2%. All those things help reduce administrative costs in 2023. And quite honestly, look at our top line. We're going to grow the top line by 10% to 12%. And just the leverage of that in and of itself is going to help drive down the SG and A ratio.
So operational efficiency and revenue growth will both contribute.
Any pace you want to give
us in terms of how
to think about it?
I'm sure your model is very sophisticated.
Thank you.
Thank you.
All right. Well, great. This concludes the Q and A panel. At this time, Gail Boudreaux will come to make some closing comments. Thanks a lot.
Well, thank you. Today's investor conference has been an important step in the evolution of Anthem. As I shared earlier, this is a new era. We have the right team and the right strategies in place to deliver on our commitments. As you heard, we have a solid foundation and it's our vision, mission and values which form that foundation.
Our culture is guiding our leaders and associates to expect more of themselves and create real change for those we are very fortunate to serve. We're confident in our growth plans. Our strategies are focused on growing the core commercial business, seizing the new growth opportunities within Medicare and Medicaid, along with leveraging the tremendous possibilities within GenioRx and our service business. Across Anthem, we've raised our expectations and our aspirations to expect and deliver more. As we've shared, we're raising our long term sustainable earnings per share growth target to a range of 12% to 15%.
And as John just said, this is on top of our implementation of IngenioRx, which accelerates our growth even more in 2019 2020. We're delivering real growth to influence the healthcare landscape, reduce costs and deliver better care. Today, we are building on our deep relationships within our communities, with care providers and with our blue partners in unprecedented ways. Given Anthem's market depth and scale, we're uniquely positioned for the growth we've talked about today. We're focused and committed to deliver solutions that simplify the health care system and improve lives and communities where we live and work.
Thank you very much for your interest in Anthem, and I look forward to speaking with you at future investor conferences. Travel safely. Thank you.