Good morning, everyone, welcome to Molina Healthcare's 2023 Virtual Investor Day. I'm Joe Krocheski, Senior Vice President, Investor Relations. Before we begin today, I would like to remind everyone that today's event is being recorded. Shortly after the event ends, a replay will be available on the Investor Information section of our website, www.molinahealthcare.com, where you can also find a copy of the presentation materials we will be discussing today. Turning to the event, we will start the day with Joseph Zubretsky, our President and Chief Executive Officer. Joe will provide a deep dive into our long-term strategy of sustaining profitable growth and how we expect to achieve our growth ambitions. Following Joe's presentation, Mark Keim, our Chief Financial Officer, will speak to our compelling financial profile. We will then have a live Q&A session with both Joe and Mark.
As a reminder, to ask a question, you will need to dial into the conference line with the number provided on the Events section of our investor website. Our presentation and remarks today will include numerous forward-looking statements. These forward-looking statements are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially due to numerous risk factors as discussed in the company's annual report on Form 10-K and in our other reports filed with the SEC. Our forward-looking statements represent our judgment as of today, May 15th, 2023. I will now turn the conference over to Joe.
Good morning. Thank you for joining us this morning. Before we dive into the material, I wanna make some framing comments about the content we're about to share with you. First, there's no glitz, there's no glamour. This is not flashy. This is data-driven analysis, hardcore, hard, and cold facts. A architectural blueprint of sustaining a profitable growth trajectory that we've already achieved for ourselves. Second, the presentation and the content you're about to view is not only strikingly similar to what you've seen before, but in some cases identical. That's not born out of convenience. It's not a matter of not having creativity and ingenuity. It's a result of diving deep into the core markets that are high growth, understanding our competitive position, understanding the competitive dynamics that shape our markets.
The analysis not only suggests we stay on the course we're on, but it demands it. We can achieve the growth targets that we set out a couple years ago by not altering course. I always find it a more effective form of communication, rather than having you flip forward and try to find the answer, giving you the answer up front so you have context for all the data points that Mark and I are gonna share with you for the next couple of hours. On the left side of the page, two years ago, that is what we said we were going to do. We promised 13%-15% revenue growth, and we grew revenue at 20% a year, a solid combination of our current footprint, RFP wins, and revenue realized from acquisitions.
We promised 4%-5% adjusted pre-tax margins, on a three-year basis from 2020-2023, produced 4.5% pre-tax margins. We promised 15%-18% EPS growth and delivered 24% over the three-year period. The targets that we have now set for ourselves are on the left side of the page. They are unchanged. We plan to grow revenues at 13%-15%, a well-balanced combination of organic growth, strategic initiatives, and accretive acquisitions. We're already operating at the high end of our pre-tax margin range and plan to stay there. Because we'll have enough excess capital left over after funding acquisitions and organic growth, we can take our share count down by about 2% a year, and therefore, we can deliver 15%-18% EPS growth.
How we'll do it? We already have momentum. We already have a backlog of $4.5 billion of premium from recent RFP wins that is just yet to manifest itself in the revenue stream. That's producing $4.50 of new store-embedded earnings that will emerge in earnings over the next couple of years. We plan to sustain our industry-leading margin profile. Mark will unpack that for you later on in the presentation. The Molina playbook and the management team is intact, it's solid, and if we can just execute the way we've executed over the past number of years, we can deliver these results. My agenda this morning will be to ripple through a commentary about the franchise that serves as the foundation for this growth strategy.
We'll do a brief retrospective on the last three years, talk about how the current environment clearly is a catalyst to sustain our growth, and then brick by brick, we'll unpack the growth model for you, business by business, Medicaid, Marketplace, Medicare, and acquisitions. I'll briefly comment on performance excellence, but Mark will mostly cover the margin conversation in his piece, and I'll wrap up with a summary of what we plan to deliver for performance over the next number of years. We're very proud of the franchise that we've created. This is the foundation for the next three years of profitable growth. I like to say that in five years' time, we went from fledgling to franchise.
A Fortune 125 ranking, $32 billion of premium, 5.1 million members, now in 22 states. Our core products are pure-play, government-sponsored managed care serving high acuity, low-income populations. You can't just declare yourself a franchise. You have to have earned it. We think the progress we've made over the past five years clearly has created a profile that can be considered a not only well-run, but one of the premier franchises in government-sponsored managed care. We're very proud of the portfolio we've built. It's built on the anchor of managed Medicaid. That's the flagship representing 82% of revenue. When we plant flags in Medicaid across the country, we follow in with our low-income, high-acuity Medicare products and of course, the Marketplace product. That's the model.
You can see on the left side of the page, we're now with our new wins, up to 22 states, representing 2/3 of the Medicaid population of the United States. There's lots of white on the page. It's like an electoral college map. We are where the people are. Our footprint represents 2/3 of the Medicaid population across the United States. Balanced portfolio. Medicaid's the anchor. Follow in with our other products. We like the product portfolio, not just because it's thematically consistent and strategically cohesive, but it actually produces a better lifetime value of our membership. The members that we serve, their life circumstances change constantly.
Working, not working part-time, moving up and down the income spectrum, and whether it's Medicaid, whether it's Medicaid expansion, or whether it's Marketplace, as our members move up and down the income spectrum, we have a product to capture them. Now that's a matter of changing life circumstances, but one thing for sure is you're gonna get older. We have the ability now to capture agents, and in our duals product and our low-income MAPD product, 2,000 of our Medicaid members a month age into Medicare. We have the ability to capture them. Lifetime value of a member, continuity of care, very, very synergistic when it comes to the portfolio view of our products.
I'm gonna turn now to a brief retrospective, and we only do this because if we're going to think about the results we need to produce for the next three years, it is actually important to understand what we've accomplished in the past three. We do not do this to celebrate the past. In fact, we have a saying here at Molina that reaching a milestone is not a cause for celebration, but it's a cause for consternation, because reaching a milestone merely marks the point in time to set a new aspirational goal. As we talk about the goals we're setting for the next three years, looking at what we've accomplished in the past three is critically important.
On the left side of the page, were the targets that we laid out at our September 2021 Investor Day, and on the right side of the page is what we've achieved. We promised 8%-10% organic growth. We produced 10%. We believed a third of our growth would come through acquisitions. We doubled it. We were very successful acquiring long-dated revenue streams that we could then accrete into earnings. Therefore, having promised 13%-15% growth, we produced 20% growth, as I mentioned before. Our product lines all delivered. We promised 8%-10% organic growth in Medicaid. We produced 12. Admittedly, enhanced somewhat by the redetermination pause during the pandemic, but even without the 800,000 member growth, we would've clearly been in the range of 8%-10%. Medicare grew at 12.
We promised 11%-13%. Marketplace was growing nicely until we pulled back, reallocated capital to our other businesses. Even with all that being said, we promised 8%-10% and delivered 10% organic growth in the past three years. It can be done. Our strategic initiatives. The flagship of our strategic initiatives are planting flags in new states and securing existing states, making sure you maintain your footprint, which we've done. Washington, Ohio, Mississippi, and Texas ABD all renewed. A very significant amount of revenue went through the re-procurement cycle, and we were successful sweeping all of it. $3 billion of new premium realized in the 2021-2023 growth trajectory, Nevada, Kentucky, and Iowa. Iowa will begin this year. On the bottom of the page, four and a half billion dollars of premium yet to be realized.
We doubled the size of our business in California, and Iowa, Nebraska, and Indiana LTSS are yet to be harvested. Very proud of the re-procurement track record and the new procurement track record. Including doubling the size of our California business. On the right side of the page, there are the logos, Magellan, Passport, Affinity, and so on and so forth. $7 billion of premium realized in 2021- 2023, while some of it still yet to be harvested in the earnings stream. Track record of winning new states and securing our existing states is very, very strong. If you look at the premium revenue growth trajectory, the 20% that we talked about, as I said, very well balanced. The current footprint produced $4 billion of organic growth.
Our strategic initiatives, another three, M&A, another seven, we grew revenues from $18 billion to $32 billion in three short years. 20% CAGR, promised 13%-15%. If we follow the same formula, it can work and will work. This page is really interesting. It's a little busy, it's worth telling a story. First of all, we grew earnings from $10.67 of adjusted earnings per share to $20.25 in this year's guidance, which is a 24% trailing CAGR. A great result. Look how we produced it. We are delivering double-digit earnings per share growth. In order to have visibility over the forward growth rate, we are building significant backlogged earnings per share called embedded earnings.
We harvest that over a two-year period when the acquisitions close and the new contracts incept. You can see that, we've already harvested, we've already produced $8 of earnings related to new stores. $4.50 yet to manifest itself in the earnings stream, and $3.50 already in our $20.25 guidance. If we can continue to grow our existing footprint, produce strategic initiatives, produce embedded earnings visibility that represents 20%-30% of our run rate EPS, all while delivering mid-teens earnings per share growth, it should give us all clear visibility into the forward growth rate of the business. A few framing comments about the environment, you all are the experts.
You have as much data as we do about the strength of these markets, the demographics, the political and legislative environment, etc . A few comments worth making. You know, environments are rarely perfect, but this one's pretty good. The business has some wind at its back that should catalyze growth over the next number of years. First, we're in high growth markets with managed Medicaid and managed Medicare nearly at half a trillion dollars each, growing at 8% and 9% respectively. We're in the right markets. In managed Medicare, I would say that the sub-segment that we play in, high acuity, low income, is growing at a higher rate. The demographics, the social safety net that's required in this country, the ravaged low-wage service economy creates an environment where the social safety net is critical.
It will be sustained, and these markets are high, high growth markets. $1 trillion of addressable market. We talked about market share the last time a lot. We talk about it again. Really hard during the pandemic to get your arms around what really happened in market share because the market was just growing very rapidly. We believe we actually grew share in some states, maybe lost a little in other states, but on balance, maintained our share. Three numbers to remember. Our national market share in Medicaid is 6.4%. Our statewide market share in Medicaid is 10%. Our service area market share in Medicaid is 13%.
Big enough to be relevant to our state-based customers, small enough to believe that with the hard work we're gonna talk about in a few minutes, we can grow market share. Same thing for Medicare, particularly in our D-SNP product, and with 2% marketplace market share, which used to be 5%, plenty of optionality to grow that business once we decide to allocate more capital to it. Large enough for scale and relevance, but small enough where you can believe that we can grow market share at 1 percentage point, at least, over the next three years. The political and regulatory environment. I mean, if you just ignore all the vitriol and the environment we're in, and just look at the facts and look at what's happening, we understand the political regulatory environment as well as anyone. We have a great government affairs organization.
We stay very close to this. We influence when we can, but we understand it really well. Whether it's at the state level with the state houses and legislatures, with Medicaid and insurance regulators, or at the federal level with the White House, Congress, and CMS. Everything points to a very positive environment for the markets we're in. Now, around the edges, things change from time to time. FMAPs, FMAP increases, FMAP decreases. Work requirements are being spoken about right now as part of the debt ceiling package. These are all on the margin. There is no discussion at this point about single payer-Medicare for All. These markets have high perpetuity. The social safety net is important.
Gridlock in Washington, where both sides of the aisle, it's hard to get things done with both sides of the aisle being balanced. The political and regulatory environment is very sound and very amenable to allowing people in our business to continue to grow and to continue to prosper. With that as the backdrop, we're now going to unpack the growth model. As I said, nothing new here, nothing flashy about it. Brick by brick, we're going to build up the markets in Medicaid, Medicare, and Marketplace and show you the strategic initiatives that we will execute and have executed in the past in order to produce these growth results. First, our long-term premium revenue growth targets are unchanged from what we've told you in the past.
We are targeting organic growth in Medicaid of 8%-10%, in Medicare of 11%-13%. In Marketplace, 5% with optionality. We believe that producing a target margin in Marketplace is far more important than attempting to continually grow it. Even with that, we believe we can grow organically at 8%-10%. That combined with yet another view of one-third of our growth coming from bolt-on and tuck-in acquisitions allows us to have clear visibility to 13%-15% revenue growth over the next number of years. Nothing has changed in our outlook. There are the numbers in bar chart format. 2/3 organic, one-third accretive M&A, 4% from the current footprint just by being in the market with demographic increases and with trend being put into rates.
Just by being there, we can grow at 4%. Our strategic initiatives will produce another 4%-6%. We'll take you through that item by item. New contracts, market share, penetration, and carve-ins. Yes, bolt-on and tuck-in acquisitions in our core product lines. $10 billion in the past three years, you'll see when we unpack the numbers for you, we don't need nearly that much in the next three in order to produce the 13%-15% growth rate. 2/3 organic evenly split between current footprint and strategic initiatives, one-third coming from continuing to come from accretive M&A. In Medicaid, we believe we can grow at 8%-10%, as I mentioned previously. 4% from the current footprint yield 1%-2% a year.
Demographics produce another 1%-2% a year. The strategic initiatives listed on the right side of the page. I'll take you through the market share numbers in a moment. We'll continue to win new RFP states. There's plenty in the pipeline. I'll share the pipeline with you in a moment. Lastly, as we know, while 50%, while 80% of the lives are in managed care, only 50% of the cost is, there's still a lot of carve-in opportunities to come into managed care, particularly in LTSS, and perhaps some of the states that didn't expand could, and we'll take you through the math of that in a moment. 8%-10% revenue growth, 4% by being there, and another 4%-6% across the dimension of these three strategic initiatives.
Let's talk about market share. You can't just will it to happen. You actually have to make it happen. Everybody wants share. There's huge value in gaining share. The incremental earnings on one more life in Ohio, Illinois, and Michigan is huge. There's very little variable cost to add, and the medical margin just flows into your earnings. By engaging providers. Providers can attract members, ones with high-quality clinical outcomes, one where the provider experience is wonderful with Molina. We can attract members by having premier partnerships with world-class providers, and we're already doing that. Quality scores to drive auto assignment. Our quality score is rate right up there with the best of our competitors, and the better we do, the higher we rank in the auto assignment algorithm, which means we'll get more auto assignment.
We have a great ground game on voluntary enrollment, you know, through community presence and awareness. Our MolinaCares Accord and our Molina Foundation dives hard into the communities we serve. We say we like to build communities one life at a time, and Molina plays really well in community events and charitable giving. That drives brand awareness and attracts members. Wanna make sure we make the point. We believe redetermination is an excellent opportunity to gain share. We're not gonna be content with just keeping our fair share of members that stay into Medicaid.
We want more than our fair share. We have built operational protocols, outreach-type protocols, to make sure not only that we're in contact with our own members, but as members leave other companies and they need to rejoin Medicaid, they can rejoin with us. Lastly, retaining our existing contracts, critically important. A 1% increase in service area market share is a $2 billion revenue opportunity. Later on in the presentation, Mark is going to take all these opportunities I'm gonna talk about and show you in a model how it adds up to produce the $46 billion of revenue we're promising to deliver by 2026. You may say, "Well, how can you grow market share?" Our market shares aren't that significant.
You know, we're at 20%-22% in a bunch of states like Kentucky, but 11%-12% in Ohio and Illinois, 18% in Michigan. You know, a 1% increase in market share is a 6% increase in revenue in many of our states, a significant opportunity. We need to drive hard at these operational protocols in order to produce it. There's a $60 billion pipeline that's waiting to be harvested. We've been very, very successful in our new business wins. As I said, you know, Kentucky, Nevada, Nebraska, Iowa, Indiana, we've been very, very successful. Here's the pipeline. It's a $60 billion opportunity shown on this page by contract year inception. $60 billion of opportunity over the next three years. It's robust.
We have line of sight and are already working the ground game hard in many of these states. We don't announce exactly where we're going to go because of competitive forces, but I'll give you a good idea. This is the inventory that adds up to an annual contract value of $60 billion of contract inceptions over the next three years. The pipeline is robust enough to where if we can just play in it even mildly successfully, we can produce the earnings growth rate, the revenue growth rate that we talked about earlier. Here's the math. $60 billion of opportunity. Pursue 40% of it, win 50% of it, 20% market share, $2.5 billion of opportunity. Sounds like a stretch? It's not. Look at the right side of the page.
That's what we produced since our 2021 investor day. We only pursued 30% of the opportunities. Some of them were too early on to pursue. We weren't ready for North Carolina. We weren't ready for Tennessee. Some of them we didn't pursue just because we weren't ready. Competitive win rate of 92%, we certainly picked our spots well. We, we target hard. We work it hard. We try to pick opportunities that we know we can be successful, and the right side of the page would prove or suggest that we're pretty darn good at picking our spots. We pursued 30% of the opportunities. We won 90% of them. We had 30% market share. With that as a track record, I think the outlook on the left side of the page is entirely credible, believable, and doable.
It comes with hard work. In 2019, when we went on our pivot to growth, we built a new business development engine, strong proposal writing team, a ground game with our MolinaCares Accord, our government affairs organizations, going into states two years before the RFP drops to develop relationship with providers, develop relationships with the influential leaders in the community. We always look at the strength of the incumbent. Is the contract one worth having? How many award? Are they gonna – do you have to unseat an incumbent? Are they gonna allow a new award? Do you have the ability to form a network, or is it more of a closed network type environment? And of course, is it a rational rate environment, which most states are, given the actuarial soundness concept? The formula wins.
We go two years before. We write strong proposals. More than anything, you can write a great essay, one that talks eloquently about the things you do. You have to be able to do them. We have referenceability. We have capabilities that are as good or better than many of our competitors, and at least the states that we recently won recognize that. Referenceability, deep capabilities, the ability to write about it, and the ability to, and the willingness to spend the money in advance, spend time in the state to develop the relationships that are important to winning the RFP. That's the winning formula. It's worked well in the past. Should work well in the future. As I mentioned before, while, you know, 80% of the lives are in managed care, only 50% of the cost is, LTSS is a big carve-in opportunity.
I think as state budgets become more stretched and more stressed, many of these states will look to carve in LTSS. They don't have to carve it into the Medicaid program, but they likely would. That doesn't assure you that if you have a Medicaid contract, you're automatically going to get an LTSS contract. I'd like to place my bet on that. Texas, Nebraska, Nevada, Ohio, Mississippi are five states in particular that are moving toward strongly considering LTSS as a carve-in to the Medicaid program. Expansion opportunities, those are our five states that haven't expanded. Will they? We all know that it can get very political. Not sure, but they could. An 8%, with 8% service area market share, just carving in these opportunities create a $2 billion revenue opportunity.
Okay, don't have to harvest at all, but we believe over the next three years, many of these programs, particularly the ones for very difficult populations like foster kids, like SMI, like developmentally challenged folks in LTSS, will be carved in to managed care. With that solid Medicaid footprint we have, we should be able to win our fair share of those opportunities. Pursuing LTSS carve-in and expansion opportunities, another $2 billion of revenue opportunity for us to harvest. That's the story on Medicaid. Our Medicare business is a really interesting one. We're not mainstream Medicare Advantage. We never intended to be. We're not going to go up against the big guys who have very strong and robust marketing machines. It's a retail business. We're just not built that way.
If you look at our Medicaid footprint and say there's value in that Medicaid network, low-income people who happen to be eligible for Medicare operate in those urban areas, in those rural areas, we can leverage our Medicaid footprint to provide services to low-income, high-acuity Medicare. This is the product portfolio. I don't know if we've shown this before, but we're on our way to 175,000 members. Not a huge number, granted, but $4.2 billion in revenue. There's the product lineup. Half of it's in the MMP demonstrations, another $1.1 million in the highly integrated and fully integrated dual-eligible products, $700 million in D-SNP, and we've just become a low-income MAPD strategy, all adding up to $4.2 billion in revenue.
The reason we laid this out is the growth characteristics and how you go at these markets is somewhat different by product lines. We wanted to share with you not only the profile of our $4.2 billion of revenue, but the premium growth rates on the right side of the page. MMP is an auto-assignment product. You get auto-assigned. It only grew at 6%. We were able to grow our D-SNP product, which is a retail product distributed through brokers, distributed through telesales, distributed through our own captive network. We grew that at 18% over the last three years. 19% growth rate, $4.2 billion of revenue across these four dimensions of the product suite. How do you grow it? Just by being there. With trend being low single digits, probably 2%-4%.
Demographic increases, these markets grow. We think we can produce 7% growth just by being in the markets we're in. Another 4%-6% for strategic initiatives, adding up to the 11%-13% long-term growth outlook that we talked about. On the right side of the page, how do you do it? Market share again. Our market share in D-SNP and M-MAPD, low income MAPD, is very low. We're just getting started. We're actually in the places we need to be in. We actually have a Medicare product in geographies that represent 75% of our membership. We're not in every county, some counties are so sparsely populated you would never launch Medicare there. We are, we have a live Medicare product in our high population density Medicaid areas. We'll increase market share.
HIDE and FIDE, code words for fully integrated. CMS is very much a proponent of these products. It combines the best of Medicare and the best of Medicaid into one product to make the experience seamless for the beneficiary. We believe we can take the HIDE and FIDE footprint we have and expand it and grow it because we're only in actually two places, I'll show you in a moment, where we're actually dense. Lastly, that $2 billion of MMP conversions we'll talk about in a minute, that will convert to a HIDE and FIDE product. It's already been determined that it will. We believe we will be able to capture it. Let's take a page on each. Our market shares are just very low. 1%, 2%-5%, and 5%. Very, very low in these areas.
Capturing agents, expanding our direct sales channel. Our direct sales channel's doing great, but it's not at full capacity, and it's not yet at full productivity. Our targeted broker relationships work really well. It's the most expensive channel, but it works well. We continue to deepen it. Provider relationships, also very, very key to a robust Medicare product. We all know that. Lastly, improving retention through member engagement, is table stakes in a retail business. People will move if the experience isn't what they like. 1% increase in share, $1 billion of revenue opportunity, just increasing the very tiny market shares we have in both D-SNP and MAPD. We have a HIDE, FIDE product in Idaho, and we have one at scale in Massachusetts we bought with the Magellan acquisition, Senior Whole Health in Massachusetts.
We actually have product filings in many of these other states but have yet to attract membership. As these products become more prevalent as states introduce them into their portfolio of products, we are well-positioned. We have the administrative technologies. We have the compliance knowledge. We know exactly how they work since we already have, you know, $1 billion of revenue in these products, that if we can expand our direct sales channels to broker relationships and provider relationships, we can grow this business and will. 1% market share, another $1 billion of opportunity. This is coming soon. As testimony to that, it's the conversions. The $2 billion of revenue we have in MMPs will convert to HIDES and FIDES in 2026.
The five states that are shown here shaded have already filed their plans to convert their MMP demonstration into a managed FIDES, HIDES product that will be marketed directly and not sponsored by the government. The reason we're confident in hanging on to this membership is if you look at the state of California that's shaded differently, I believe we have 6,500 members in the demonstration there. They all converted to a D-SNP or an ABD product, and we kept all of them. We'll have these programs in place through the end of 2025.
Each of these states has filed their plan to convert to a HIDES or FIDES that will be fully distributed, unmanaged by the federal government, and go into managed care, and we believe we will keep all, most, if not all of that revenue. It's already been demonstrated to work well in the state of California. Marketplace. We reallocated capital until the risk pool stabilized. Sure, it's a 16 million-member market, $100 billion to spend. We made the decision that until we are convinced the risk pool stabilized for two reasons, the government kept changing the eligibility rules, and two, a lot of irresponsible pricing was into the market and disrupting the competitive dynamics. We reallocated capital to grow our other businesses. It didn't hurt our growth rate. The market dynamics, I think, are settling down.
The enhanced subsidies were extended through 2025. The special enrollment period appears to have quieted down. Under 150 FPL was now made permanent. That appears to have stabilized. The family glitch was fixed, which added a little bit of membership. And we're braced for and going to look forward to people that come off Medicaid have proven to be ineligible for Medicaid, being eligible for a marketplace product. The market dynamics are very positive. The volatility, the inherent volatility of the risk pool appears to be settling.
Competitor rotation, I spoke about the regulatory changes and the membership churn, all created a dynamic that we said, "Let's target mid-single-digit pre-tax margins." If the book shrinks, which it did to 290,000 members on its way to 270, $6 billion, $8 billion in revenue, nicely sized, and with our 1st quarter result, I think we're well-positioned to produce that mid-single-digit pre-tax margin. While I'm not advancing our view of 2024 pricing, as you all know, we're sort of in that cycle right now.
I would say that we're likely to any growth that we target for next year through our product design and our pricing would likely target growing this book of business very modestly and in a very disciplined way until we are convinced that it's going to grow, and if it does, we believe we have optionality to get back to the market share we once enjoyed. We had 5% market share back in 2018. We have 2% in 2022 and 2023, and if we just got back to the 5%, it's a $2.5 billion dollar opportunity. First and foremost, mid-single-digit pre-tax margins and a view of the product that does not have inherent earnings volatility. That is critical for us.
If we continue to focus on the highly subsidized population, leverage our Medicaid footprint, great network leverage, prioritize margin discipline, we may, at some point in time, decide to exercise this option. As we've shown in the numbers that you'll have seen and will see again, we don't actually need to grow the marketplace in order to produce the 13%-15% revenue growth that we've promised. We're really proud of the work we've done here, $10 billion to date, nine deals. We've done it all with internally generated cash flows. We've yet to go to the capital markets to raise any capital to buy these businesses. We look for long-dated revenue streams. This is as good as a new state win.
We look for long-dated revenue streams that have perpetuity of contract value, and the more underperforming it is, the better because we unleash the Molina playbook. We take our management team, we open up the playbook, and figure out exactly what levers to pull and dials to turn in order to get this thing, this property we're buying, this long-dated revenue stream to target margins in two years' time. To me, this is every bit as good, maybe not as celebratory of an announcement as a new state win, but every bit as good as the economics compete hard with a new state win. You know, when you're buying properties at 22% of revenue, they're gonna be accretive. Now, whether we can keep up that pace and buy them at the same level, we don't know.
We're buying these things at very attractive levels, and then we create value with sweat equity, unleashing our management team and our playbook on the target. Our integration team has a full plate right now, and working hard to make sure these things are integrated so that the portion of the $4.50, which we will add to every time we do a deal of embedded earnings, is harvested and adds to the accretion of our earnings per share. The acquisition pipeline is robust. I get asked this all the time. Is it still robust? Are people still coming to market? Yes. Some are coming to market with investment bankers in the process.
Some are proprietary, M&A opportunities that we develop through relationships, across new states, existing states in our core products, provider-owned, non-for-profits, orphan properties, and for-profit entities with for-profit parents. Across all the dimensions, the pipeline is still strong. We are seeking to take capitated risk. We're not looking to buy services or vertically integrate. With our outlook of 2026 revenue at $46 billion, we only need to produce four and a half billion dollars of additional acquired revenue. Having just done $10 billion in the last three years, I would say that that's a pretty attainable target, and we're hard at it.
Mark Keim here, Mark Mankowski, our whole M&A team that we built out when we pivoted to growth, has been hugely successful in finding these revenue streams, getting them signed, getting them closed, and then we get them integrated to accrete earnings. That's the formula. The pipeline is still strong, and it's still robust. The proof is in the inventory. You can see when we announced them over time, YourCare seems like ages ago, but that little Upstate New York plan was the first one we did. Came Magellan. Passport was a really interesting one because we won Kentucky and then bolted Passport onto it. It was sort of a two-fer. Won a new contract and bolted on an acquisition, and so on and so forth. You can see how nicely sequenced they are.
You can't plan it this way, but they're very nicely sequenced to where you sign one, it goes through the regulatory process, you close, it takes six months to a year to integrate, and then the next one follows on. While you can't plan it as carefully as this, they've actually played out quite nicely to give our integration teams the time they need to integrate them and harvest the accretion. Our M&A track record is strong and will continue to be so. I've talked a lot about the growth story. I wanna say a few words about performance. Mark is going to give the complete story of unpacking our margins and helping you understand why we believe 4%-5% pretax margin is a credible range. We're operating at the high end of it right now. He'll unpack that for you.
A few words about our performance before I hand it over to Mark. You know, the investment world clearly measures performance with financial targets. We have maintained our target MCRs, 88%-89% in Medicaid, 87%-88% in Medicare, 78%-80% in Marketplace. Those are the target MCRs they were before, and they will be again. As we grow the top line, we can drive the G&A ratio below 7%. We're hovering at about the 7% range right now, and if you remove those one-time implementation costs, we're actually operating at 6.8%.
If we can continue to have the discipline, and we will, to harvest fixed cost leverage off growing revenue, we can drive that G&A ratio well below 7%, and therefore, we're able to very comfortably and confidently say a 4%-5% enterprise-wide pretax margin is clearly in sights. The performance is more than a series of financial targets because you can't produce it without delivering high-quality healthcare, a member and provider experience that matters. We have proven that we have built the operating infrastructure, we have the management team, we have the experience base, we have the technological platforms in order to continue to deliver high-quality outcomes, clinical outcomes for our members, and a member experience that defines performance excellence.
Lastly, you can't be in this business without being aware of the labyrinth of detailed rules there are, federal and at the state level across the range of products, and you have to maintain pristine compliance. The what, we are going to drive hard at maintaining these target MCRs, drive the G&A ratio below 7% , maintain the discipline of harvesting 4%-5% enterprise pretax margins. The underpinnings of that is a high-performing entity, member experience, provider experience, great clinical outcomes for our members, and always being compliant with state and federal rules and regulations. That's the what. I've often been asked, you know, what is the secret? Well, there really are none.
Focusing on the fundamentals of managed care, I feel like I'm back in January of 2018 in the initial speech I gave on what we are gonna do as an enterprise, focus on the fundamentals of managed care. Managed care is a 3 yards and a cloud of dust business. If you don't focus on the fundamentals, you can't win. There's no whiz-bang technology in the world that's gonna compensate for not being able to conduct proper utilization management control, proper care management on the clinical side, payment integrity to find those arbitrary billing bundles that are constantly being presented to us. By being able to drive high quality scores and to get appropriately compensated for our risk adjustment in our populations. You have to focus on the fundamentals, and we do.
It's the underpinnings of how we've been successful to date. We've also, in a very sort of stealth-like way, built an incredibly robust product suite across the three main product lines, but below that, a series of clinical programs that really helps the member navigate through very, very difficult types of medical challenges. We've developed products that address social determinants of health and racial inequities in healthcare. We have an incredibly robust inventory, SKUs in the warehouse of capabilities that we then bring together and form solution sets for our customers. Focus on the fundamentals and an inventory of capabilities that is formed into solutions where we can always deliver for our customers. The last two items I'll talk more about in a second here. We do have a playbook.
We have the Molina playbook, and we are religiously adhered to it, and the winning team and culture we have built, it really sustains our performance. A couple of points. The roster, I'm just so proud of this team. It's deep, it's talented, it's diverse. It is a team. It's a collection of all-star talent that has coalesced around a single mission to create value for our members, all of our stakeholders, including our shareholders. Very, very proud of the roster. It's intact, it's experienced, and it's deep, and it's deeper than this. This is just the executive committee that I'm showing you here. A couple of points to make on this.
Tomorrow, I believe, we'll announce that Jim Woys and Mark Keim will be promoted in advance to senior executive vice presidents in the company, and Jim will take on the added title of chief operating officer. We've pretty much operated with a virtual COO model for the last two years. It's worked really well, obviously. It's time, given the breadth, the depth, and the size of our company, to streamline decision-making, better accountability, making the matrix work really, really well, and better governance to have a single point of contact as our Chief Operating Officer. Another point I'll make, and I only make this because I've been asked it privately many, many times, so it might be worth mentioning. I plan to see this strategy through to its conclusion. I like what I'm doing.
I plan to do this at least through the end of 2025 and into 2026. The board of directors and myself will make sure that if at that time, we decide to do something else, any plan of succession and transition will be smooth, it will be managed, and it will be very, very visible. This strategy can work. I plan to see it through to its conclusion with this great management team who are just so highly energized and so much fun to be with and so much fun to lead. Very, very proud of them. I've always also been asked, you know, this playbook you talk about, what is it? We actually do have it. It is called the Molina Manifesto.
I remember drafting it back in 2018, where we needed a principles-based formula for how we run the company. I've given you a peek inside. I'm not gonna open the book, but I'll give you a peek inside. Leadership values, operating model, management process, org design, talent, and decision rights. If you don't have the people that can operate in a principles and not rules-based environment, you got the wrong people. We are obsessive and compulsive about how we run the place. We run it flat. No large spans of control, no bureaucracies. We expect our leaders to be on the front lines getting their fingernails dirty in the line of fire. Our management process is intense.
20 basis points of a problem turns into 200 pretty quickly if you're not intense with a management process that is constantly rooting through the complexities of this business and keeping the business on course. I could go on and on, but we do have a playbook. Everybody here, we religiously adhere to it. It has guided us, it has guided this team to our success to date and will guide this strategy in the future. Very proud of my team, and we're very religiously adhered to a way of doing things here that we believe is proprietary and differentiated. That comes to the end of my section. Before I turn it to Mark, just to recap, I think this is a repeat of the slide I showed you at the top of the show.
We will produce 13%-15% revenue growth, well-balanced between organic strategic initiatives and accretive acquisitions. We're operating at the high end of the 4%-5% pre-tax margin range today and plan to stay there. With a minor amount of capital allocated to reducing our share count, we can grow earnings per share 15%-18%. We have great momentum. We have backlogged revenue and earnings already waiting to be harvested. If we can just merely execute on the operational protocols that drive these strategic initiatives, we can produce the results on the left side of the page. Thanks for listening to me on the growth story this morning, and I'll turn it over to Mark Keim to talk about our compelling financial profile. Mark?
Thanks, Joe. Good morning, everyone. This morning I'm going to touch on four areas within our compelling financial profile, starting with our long-term margin targets. The headline is, they're unchanged. If you look at Medicaid, 88%-89%, Medicare, 87%-88%, Marketplace, 78%-80%, unchanged since 18 months ago when we last did Investor Day. You might also note that our guidance for the current year falls right in the middle of these ranges. Medicaid at 88.5%, Medicare at 87.5%, Marketplace would be on the low end on the strength of a great first quarter. What has changed is the weighted average. We're now at 87.5%-88.5% for the weighted average. What's different? Marketplace is a little lighter in our portfolio than it was a year and a half ago.
Joe mentioned we're at about 5% of total portfolio revenues, that skews the weighted average just a bit. What's interesting is that same skew affects our G&A ratio. All told, the pre-tax margin of 4%-5% remains unchanged. The mix might change a bit, the math doesn't, resulting in 4%-5% pre-tax. I'm going to touch on a bunch of areas within our margins, really to give you the full picture of how they come together. Right off the bat, the Medicaid rate environment. We take great comfort that states must make rates actuarially sound. CMS requires states to be actuarially sound. What that means is that state actuaries must look at trends for costs, changes in population, changes in mix, even changes in benefit load, anticipate changes, and put them into rates.
If things change, states always have the ability to go off cycle. They can go proactively. They can go retrospectively. They have a number of tools they can do to remain actuarially sound. We'll talk more about redetermination, but certainly the principle of actuarial soundness is critical to our outlook on rates. Hand in hand with rates is a number of medical cost mechanisms. We've been talking about these COVID-era corridors for quite some time. At one point, we had as many as nine. We're down to just three states with COVID-era corridors at this point. They constrain our current EPS by about $2. Separate but related are a few other mechanisms, such as minimum MLRs and experience rebate mechanisms, which have been around this industry for quite some time. They of course sustain going forward.
On sustainability, you know, a question I get all the time is, "Gosh, Molina's best in class on margins, but is that sustainable?" We put together the page chart on the right, which really demonstrates our thinking on that. We believe the answer is our outperformance is sustainable. In the hypothetical market shown here, there's four managed care plans. In total, they run an MLR of 90%. That's a weighted average of all of their individual performance. When a state actuary looks to set rates, they set rates off that total population, not any particular MCO. When we think about the sustainability of margins, any MCO's margin is sustainable as long as its outperformance versus the other MCOs is sustainable. In so many of our markets, that's exactly the case. We believe our margins are sustainable.
We continue to outperform many of the incumbents, in our markets. 1 point on this, it's not just a numbers game. You can't put up these numbers and not also satisfy your state partners, be a good partner to the providers, and satisfy members. Quality requirements, quality scores are what keep all the players honest, executing fairly, and lets the competition on the MLRs result. We believe our performance is sustainable, and certainly our quality metrics suggest that we're playing the game exactly as we should. Let's turn to redetermination. It's bound to come up today. Right off the bat, there seems to be a notion that MCO margins, MLRs, have been better during the pandemic, almost suggesting that there's something ominous in the future.
Well, here at Molina, we've seen best-in-class margins, we haven't seen margins better over the last five years. They've been sustaining at their normal levels. Just to put a point on that, pre-pandemic, back in 2019, we ran an 88 on our Medicaid book. Last year, we ran an 88 on our Medicaid book. The two years in between, we averaged an 88 on our Medicaid book. Feels pretty consistent. That's a run rate for us. Now, in our guidance is an 88.5 for this year. I wanted to talk through five points on just how we think about trend going forward and how we're thinking about our expectations for MLR. Right off the bat, cohort analysis.
I'll talk more about this in a minute, cohort analysis suggests that very minimal exposure, that is, have we been seeing some kind of a benefit in our rates, in our margins, during the pandemic. Maybe just minimal in our expansion and TANF books. I'll talk more about that in a minute. When we look at expansion and TANF, those PMPMs are significantly lower than ABD. They can be a third to a fifth of ABD. If there's any pressure there onto mix effect, it's greatly diluted in the overall portfolio. It's a little bit of a pressure on a lower PMPM product. The other point to make a note of here is the calendarization. If you have an ultimate in mind, an ultimate trend rate, recall CMS has given states 12 months to May of 2024 to fully disenroll.
What that means is any ultimate is greatly diluted in the early quarters and won't really manifest till the late quarters, at which point many of the other rate cycle items will likely offset it. Experience rebates, minimum MLRs, and even COVID era corridors, all of these act currently to constrain our margins. If a negative trend comes along, the first impact is it just goes to that component that's in the corridors, effectively serving as a buffer to our reported MLRs. Lastly, off-cycle or normal co-course rate adjustments should address any trend should it emerge. Prospectively, retrospectively, that right rate cycle and the requirement for actuarial soundness is the fifth component. Taken together, we feel very good about our MLR projections, and I'll talk more about a few of these components.
The cohort analysis, I think I've talked about this in our earnings call now for three quarters. We look at the components of Medicaid, ABD expansion, TANF, CHIP through three lenses. The overarching question here is there a benefit to medical costs? Is there some benefit to margins because of the cessation of redetermination? The first lens we look at is members with greater than one-year duration. The logic here is if somebody's been with you for more than a year, that is you have more folks in that bucket than you used to, maybe they're less likely to be users, high users. The next lens is members with 0% to 25% MCR. The idea here is they would be inflating margins because they're not using. The last lens we look at is members with coordination of benefits.
What this is members that qualify for Medicaid eligibility in our book, but also have some other form of coverage such that maybe we're not getting the full bill. When we look at the three, and this is consistent what I've seen now for three quarters in a row, is ABD, almost nothing. We call it negligible. Expansion and TANF CHIP, minimal. There's a little something there, but it's not much different than a lot of things we see that affect trend quarter to quarter. This doesn't really surprise us. ABD tend to be long-term users. We have them for many years. They're high acuity, and their behaviors aren't really changed by pandemics, the economy, or even the cessation of redetermination. Whereas expansion, TANF, CHIP, they can be a little bit more transitional populations. The fact that we're seeing maybe a little bit there doesn't surprise me.
What I would remind you of these three lenses are probably highly duplicative. They're not additive. What you're capturing in one of them is probably a similar insight to what you're seeing in the other two. Let's say a word on the timing of disenrollments and the natural rate cycle. Disenrollments have just begun. We reported in April that our first state, Arizona, started to disenroll members. We'll have three more that are just beginning here in May. As you can see, the vast majority of our states start in June, July. CMS has asked states to be done by May of 2024, so effectively another 12 months of track record here. What's interesting is some states will try to front-end load. Some states will move as CMS has requested in a more ratable straight-line basis across the 12 months.
Some states will purposely back-end load, or in some cases it might just work out that way. Operationally, it's gonna be very hard for many of these states to get through their rolls in the next 12 months. We're seeing a pretty probably straight-line effect going across the 12 months of disenrollments, but here's where they start. Across the bottom of the page is the total Medicaid revenue that we have broken up by effectively rate cycle. In this case, fiscal year is the proxy for rate cycle. Fiscal year is when states put out new rates. You can see, 52% of our Medicaid revenues come up in January. Another 25% come up through the fall. We actually feel really good about the period of when states are starting disenrollment to when the first natural rate cycle comes up.
On average for our states, that's about a six-month window. Why that's really fortuitous is it allows us to get out there and collect data along with state actuaries, work with them to get that data into rates, and to make sure that on natural rate cycles, these natural rate updates are reflecting anything we might see out there. States still have the ability to move off cycle, and some will. Some have committed that they will look at things off cycle. They can go off cycle, they can go on cycle, and again, they can go prospectively as they normally do, where if they really saw an issue, they can go retrospectively. Back to the basics of managed care, medical cost management. As Joe mentioned earlier, this is just so fundamental to our margins.
Way back in 2018 when we did the turnaround, many of the things on this wheel were just so fundamental to how we fixed the company. These same components are where we hired big leaders, developed talent, and evolved great capabilities to drive each of these issues. It served us well in the turnaround. It served us particularly well in the pivot to growth. Now that we're buying sometimes distressed properties, this is the playbook about how to get medical cost management back to portfolio targets. Finally, as we move into new states through new procurements, when we inherit new populations, these are the same tools that help us get to the right target margins. I'll call attention to a couple of things here on medical cost management. State-of-the-art Med Econ platform. Remember, this is our cost of goods sold.
We have a crackerjack Med Econ team. What they do is they get in there at a very low level with the data, identify trends, hotspots, aberrations in member behavior, aberrations in provider behavior, changes in trend, anything that might help us to manage the business better. It's really critical to have that transparency. High acuity care management. Joe touched on this. Molina skews more high acuity. We are disproportionately a high acuity book. Having strong medical cost management is just critical in that situation. These are ABDs, these are LTSS. These are our duals populations. Very often, these populations can run at 10x to 12 x the PMPM medical cost of, say, our TANF or our expansion members. Getting it right on those high-cost populations is a massive opportunity. Finally, value-based contracting. We continue to develop our toolset here.
As everyone knows, value-based contracting is critical to aligning our interest on medical cost management with those of our provider partners. It's not just about medical costs. What we're finding is big advantages on value-based contracting in risk adjustment as well as quality scores. When our interests are aligned with our providers, we get the best outcome. G&A expense management. This continues to be a hallmark of the company. We have a really strong G&A team, and what they do every day is create transparency. The first key to G&A expense management is identifying your fixed costs and keeping them fixed. Transparency helps us with that. On the variable costs, it's identifying them and scrutinizing them all the time. Are we getting the most value out of our G&A dollars? Are we driving efficiency? Are we driving benefits to the company, our state partners, and our members?
Our fixed cost base is about 50%. As we grow the company, and we execute this discipline, we can create a lot of value. Not all of that falls to the bottom line. Significant amount of value goes back into building capabilities, making sure that our services and capabilities are top-notch, that our integrations go smoothly, and that our new age capabilities around population health, Med Econ, continue to be state-of-the-art. I've gotten questions lately, specifically, how does it work? We threw this slide in just to really bring this to life. I call it G&A leveraged geography. On the left, a typical Molina plan might run a 7% G&A ratio. That is typically split about 50/50 between local in-state costs and corporate costs. Those corporate costs are services that we've centralized to make sure that we have scale and expertise.
Think claims, think call center, things like that. When we do a new state, of course, we replicate the in-state local costs. Because corporate costs are 50/50 fixed, we're able to drive significant value on leveraging those costs, such that the marginal G&A ratio for the company drops dramatically. You can see here it's about a quarter down. Where the real magic happens is where we can stack meaningful revenue on a state where we already are. Once again, 7% reported G&A ratio for a particular state. If we can put on meaningful in-state revenue, not only do we capture that corporate cost leverage, but we're now leveraging the in-state fixed costs as well, effectively a twofer. You can see this cuts the marginal G&A ratio in half. You know where I'd call attention to this?
We currently run about $2 billion of revenue in California. With our new state wins there in California, we'll double that for 2024 to $4 billion. You can imagine that these G&A leverage principles factor meaningfully into our target outlook. Let's turn to 2023 guidance and our outlook for revenues. Just two and a half weeks ago, Joe and I did the first quarter earnings, where we increased EPS guidance to $20.25, at least $20.25. That was a $0.50 raise over the prior, with premium revenue unchanged at $32 billion. You can see the target margins down below that fall out of that. It's too soon to give 2024 guidance, but what we've done a pretty good job of doing is exposing to you our forward EPS growth.
In a minute, I'll take you through a 2024 revenue bridge. I think between these embedded earnings and the revenue bridge, you should be able to update your models and take your own view on 2024 as we do here as well. Within embedded earnings power, Joe talked about this this morning. What we call new store growth is the combination of new contract wins and acquisitions. On new contract wins, we've won $5.5 billion of revenue over the last six months. On top of 2023 guidance, there's an additional $4 of EPS yet to come from those wins. Finally, on acquisitions, in our P&L this year are the new acquisitions of AgeWell and My Choice, but there's an additional $0.50 of upside as they grow into their target margins.
All told, $4.50 in new store growth. On new store implementation costs, in our current P&L, we're burdened by about $0.75 of implementation costs for all these new state wins. Next year, that goes away as we actually move and go live with those new states, such that $0.75 becomes a good guy next year. I'll talk more about redetermination here in a minute, but that becomes a headwind next year of about $0.65 as some of our members do fall off. Finally, just to complete the picture, our P&L today is burdened by about $2 of these three remaining COVID era corridors. A word on redetermination. We're currently up about 800,000 members gained organically since the start of the pandemic.
Not all of the 800,000 are necessarily from the cessation of redetermination, but we are up 800,000 organically. In my current P&L, that's about three and a half billion of revenue. We've talked today how states have given how CMS has given states 12 months to get through redetermination. That goes to May of 2024. Our best estimates are that we'll retain 50% of those members we've gained organically. That would be the 400,000. You have to work through the member month math to actually get the revenue implications, but that 3.5 billion falls to 3 in the current year. We've got a $500 million headwind in the current year's revenue and an additional $1.1 billion next year. Two important notes on this page.
One, as these members come off, we expect about 400,000 to come off. Our assumption is that we won't pick up any in our marketplace product. Many of these will need to pick up insurance. A really interesting statistic is that within our Medicaid footprint, 2/3 of our Medicaid members are in the same footprint as our marketplace product. There's likely some upside here about cross-selling redetermination members into our marketplace products, but remember, our guidance gives nothing for that. The only other statistic I think is really interesting here is a lot of conjecture out there about is 50% the right number. You know, when I think about the 800,000 members gained, that's 30% gained since the start of the pandemic. If we're saying we'll keep 50%, then 30% growth falls to 15%.
The window from the start of the pandemic to the end of redetermination is five years. 15% divided by five years is an average growth of 3% a year. What I found really interesting is if you go back 10, 20 or 30 years, on any of those periods, the total nation's Medicaid population grew on average 4%. One school of thought here is at the end of redetermination, Medicaid and Molina's Medicaid population will be maybe exactly where it would have been if there hadn't been a pandemic. The numbers certainly bear that that's likely the outcome. Just an outlook for 2024 premium revenues. I'll jump off $32 billion. That's in our current guidance. Joe talked about how the current footprint yields about 4% growth. There's the $1.1 billion.
Of all the new state RFP wins, we'll recognize about $4 billion next year. The acquisition of My Choice Wisconsin will close this year, but the full run rate will benefit next year by an additional $500 million . I just talked about redeterminations, $1.1 billion of an estimated headwind next year. Finally, we had a pharmacy carve-out in New York this year. The full run rate will carry a little into next year for an additional $300 million headwind. I'm getting to $36 billion total or 13% growth, but we're not done yet. Joe talked about the growth playbook. It's only May. We have a lot of time this year to execute additional initiatives, which will hopefully drive these numbers up higher. As of today, this is our initial outlook for 2024 revenue.
Same exercise for 2026, this backs into our long-term targets. Jumping off to $32 billion. Three years of 4% growth in our current footprint is the $4 billion. The announced state wins add $4.5 billio in this case. Additional identified initiatives are an additional $2.5 billion of our revenue build. Finally, M&A of $4.5 billion. This dovetails with the number Joe gave earlier. It's about 5% growth. Remember, in the three-year period leading up to today, we drove 10% growth on M&A. Our forward projections are just 5% here. Add up the waterfall, you get the $47.5. I'm backing out redeterminations and pharmacy carve-out to get to $46. All of that should be very clear.
The two and a half of identified initiatives in the middle, though, requires a little more of a double-click. Where does that $2.5 billion come from? Joe walked through a variety of initiatives this morning totaling $11 billion. There were three big ones in Medicaid totaling $6.5 billion , two big ones in Medicare totaling $2 billion, and finally, this optionality on Marketplace if and when that risk pool stabilizes for us to grow back into more of a legacy market share in that market. Totaling $11 billion. We need to harvest just $ 2.5 billion or less than 25% of the opportunity to essentially make good on the three-year target we talked through. Let's talk about capital. Capital's critical to our story.
It's the stability that we live with every day, but it's also the fuel for how we'll grow on the framework that Joe laid out. On the upper left, our leverage is low. These ratios are low. The revolver's never been tapped at $1 billion. On reserve strength, a lot of chatter over the last two quarters about DCP. I find DCP to be a little bit of a crude metric. We rely on real actuarial science with some of the best in the business doing the numbers. We take great comfort that every quarter our development is consistent, backing up the strength of our quarter-to-quarter picks and just proving that our picks are reliable and consistent. We feel really good about that. Acquisition capacity, $2.5 billion of dry powder. Finally, parent cash flow.
Getting dividends from the subs up to the parent is how I actually get to deploy cash. Our conversion ratios have been pretty good. We've been very efficient about moving net income cash from our subsidiaries up to the parent. How do we deploy capital? You've seen this chart before. It's our pecking order of capital. Highest and best use of capital is organic growth. I'll do that every day of the week if I can. Accretive acquisitions drive a big part of the story Joe talked about this morning. Finally, returning capital to shareholders, in the most tax efficient way, share repurchase. All three of these are part of our formula. Over the last three years, we did about 25% of our capital in organic growth. We put 50% into accretive acquisitions and about 25% into share repurchases.
I expect the next three years to be very similar. Finally today, our value creation model. There's some important points here. Just to summarize Joe's look on the long-term growth. 8%-10% organically, another five on acquisitions, unchanged growth story. We'll just execute more the way we have. Convert that into EPS growth. You start with the 13%-15%. I talked about our ability to harvest operating leverage. That's a very real opportunity for us. Sometimes we'll plow it back into capabilities, sometimes we'll offset margin fluctuations. Sometimes some will fall to the bottom line. We're estimating 0%-1% there. Net income growth grows to 13%-16%. The capital allocation I talked about comfortably drives 2% accretion as it has over the last three years, getting us to 15%-18% total EPS growth.
Within the value creation model, the ROEs are just so strong. Within organic, 60% levered ROE on incremental organic growth. I get the question all the time, how does that number come together? Typically, our after-tax margins are about 3.5%. Typically, we put about 10% of revenue against new business to support it. 3.5% into 10% is 35% at the subsidiary. At the corporate level, I leverage 1- 1. A 35% at the subsidiary turns into 70% at the parent. A little bit of interest expense, I'm down to the low 60%s. Really compelling ROEs on incremental organic growth. Similar story on acquisitions, except I'm just capitalizing at a higher level. The ROEs fall, but still quite attractive. You roll this together, 13%-15% top line, 15%-18% bottom line.
Value creation story is very real and compelling. Investment thesis. Molina is a pure play government-sponsored healthcare in the highest growth segment of healthcare. Joe talked about our growth opportunities both in legacy markets and new markets, yielding double-digit growth, 13%-15%. Attractive margins and operating leverage. I talked today about both the ROEs, the operating leverage, and the consistency of our margins. High return capital deployment across three venues. Finally, a proven management team. You know, for the most part, that team that Joe talked about are the same folks that were with us back in 2018 when we started the turnaround. They're the same folks that helped us execute the pivot to growth, they're the same folks today that are signed up for the next three years. We feel really good about that.
That completes the prepared remarks that Joe and I had today. Operator, we're ready for questions.
Thank you. To ask a question, press star then one on your touchtone phone. If you're using phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. As a reminder, if you're asking a question and listening to the webcast, please turn off the volume on your computer. Our first question will come from Josh Raskin with Nephron Research. You may now go ahead.
Hi. Thanks, and good morning. I guess I had a question, maybe a two-parter on M&A. I think the first question, maybe, Joe, could you talk about the pipeline development and, you know, when you're talking to plans and maybe why you're not seeing more competition for some of the announced M&A. The second part would be, do you still have an interest, a similar interest on the Medicare Advantage side with, you know, an MA plan? Not capabilities necessarily, but just that same playbook of buying premium and applying margin improvements.
Yeah, Josh. You're right about the pipeline. It can be competitive. As I said, if a company hires an investment bank and they pitch a book, there'll be other people trolling around it. We have created great proprietary deal flow, working with potential partners, telling the Molina story on why a not-for-profit would wanna be part of a strong capital story, a strong capability story, the perpetuity of local mission. The story really sells really well. From a competitive standpoint, I still think when you're $32 billion, $1 billion matters, and to some of the bigger guys, it may not. It doesn't move the needle. A lot of these are fixer-uppers.
You have to have the willingness and the desire and the intestinal fortitude to wanna go in, unleash your management team that has a day job on fixing an underperforming property. I think the fact that they're big enough to matter to us, but small enough, too small for the big guys, the fact that they're underperforming, and the fact that we create proprietary deal flow through relationships, I think is the combination of why some of these things don't seem to be competitive. On your second part of your question, sure. We are in Medicare Advantage through D-SNP, high acuity duals and Medicaid. If a Medicare opportunity in our core markets, new market, core market, bolt-on, tuck-in were available, we certainly would be attracted to it.
We've executed Medicaid up to now because that's what was available. If a Medicare opportunity should be out there, we certainly would look at it if it's in our core product suite.
Perfect. Thanks.
Our next question will come from Justin Lake with Wolfe Research. You may now go ahead.
Thanks. Appreciate the question, and thanks for all the detail today. Two things, Joe. One, on the $4 billion that you put up there in terms of new wins, wanted to understand your viewpoint of how the margins are likely to ramp in 2024 and beyond. When, you know, should we expect those to be kind of breakeven in year one? I know you're in some of those states, so maybe it's a little bit better ramp. Maybe you give us some color there. Then two, there's been a little bit more discussion around Medicare Advantage cost trends specifically.
You know, some discussion that trends have, you know, were running, you know, from a little bit below pre-COVID levels, trended forward over the last couple years, now getting back to, let's call it, 100% of normal. Curious what you've seen there in terms of what you were seeing previously and what you're seeing now, knowing that that's not a huge business for you. Thanks for the detail.
On the new contract wins, it really does depend. It depends whether you get a lift and load of membership on day one, or it's a slow build through an auto assignment. Lately, it's been lift and load. We start out with 20% share or more, which means there's a population there, a full revenue flow. You're not under leverage on fixed costs, etc. If they're used to managed care, they are used to care management. Providers are used to UM. You can get on a new contract win to target margins by the end of the second year. That's what we generally plan in our model. In fact, when we talk about embedded earnings, which is a combination of new contract wins and M&A, we talk about the manifestation of those earnings over a two-year period.
On a new contract win, it would be back-end loaded. Mark, you wanna take Medicare cost trend?
Sure. On Medicare cost trends, we're seeing a lot of what the market's seeing, on a go-forward basis. Certainly rates, a little bit tougher, with CMS rate guidance. In general, not a lot going on with trends outside of the ordinary. Maybe a little bit of a tick up, but at the same time, what many Medicare plans will be doing is adjusting their benefit loads, and working within the confines of the trend and the new rates.
Thanks. Mark, if I could just follow up for a second there. Would it be fair to say that trend was running kind of below expectations the last couple years, and now it's ticked up to kind of be in line with where you bid, so maybe a little bit of upside before and now just more in line, not ticked up above expectations?
I think that's a fair summary.
All right. Thanks.
Our next question will come from Calvin Sternick with JP Morgan. You may now go ahead.
Yeah, thanks for the question. Just wanna understand the marketplace strategy and optionality a little bit better there. Just given all the Medicaid business that you've won, it seems like that could be a pretty big opportunity to expand the overlap longer term. I know you also mentioned the optionality of potentially getting back to a 5% market share, which is a pretty substantial growth rate. What do you need to see to get comfort to accelerate growth in that business? How do you think about the margin implications longer term, as you look to potentially meaningfully grow membership? Thanks.
It's a capital allocation decision, I think we made the right call. We had so many other opportunities to allocate capital to grow. We took the opportunity to retrench in Marketplace, rebaseline it to $1.8 billion in revenue, and get back to mid-single-digit margins, which with first quarter performance, we think we're on the road to achieving. It's all about the stability of the risk pool. Two factors created instability in the risk pool. One was irrational pricing by some competitors in certain markets, and two was the government constantly changing the rules on who's eligible, sometimes after the pricing was actually complete, which isn't very helpful. If the risk pool is deemed to be stable from those two dimensions, we will allocate more capital and start to grow it.
However, we will do it in a measured, disciplined approach. You never want too many, a too high a percentage of your members being new. You don't have their medical cost history, and you have to work really hard to get a first-year risk score. Keeping it stable, meaning, 75% of them are renewal members, keeping it silver at 2/3 is really, really important. Those would be the calibrations against the growth rate. Mid-single digit margins, I want the highest complement of renewal members, I want 2/3 of it to be silver. If we can allocate capital with those as the constraints and grow this again, we will, but it'll be measured and disciplined over time.
Thanks. If I could just ask one. I know you mentioned, you know, close to 100% converting to some of the D-SNPs there. What are you seeing in some of the other states that gives you the confidence that you're able to retain sort of a similar percentage?
The fact that our other five states have filed detailed plans with CMS to convert those members to a FIDE or a HIDE SNP plan in 2026. We're gonna enjoy the $2 billion+ of revenue here for the next number of years. It'll be in 2025 into 2026 where they'll convert them. We have the product, we have the technology, we have the administrative infrastructure, and in many of these states, we actually have the product already filed, we just haven't turned on distribution to get membership. We're highly confident that working with those states that we will convert a high percentage, if not all of those membership into a qualified product in 2026. It's a few years out, but it's worth keeping an eye on.
All right. Thanks for the questions.
All right.
Our next question will come from Stephen Baxter with Wells Fargo. You may now go ahead.
Yeah. Hi, thanks. The competitive win rate target in Medicaid might have felt a little bit aggressive just two years ago, obviously, it's hard to argue with the results that you've seen. You talked some about this, but, you know, what do you believe has really allowed the company to succeed in RFPs versus entrenched incumbents? You know, presumably they're focused on a lot of the same things you are, making investments in the state, you know, having a strong ground game. What do you see as the key area of RFP innovation for the company over the next two years? Thanks.
It's really across the dimensions. There's a page in the deck which you referenced, that really lists out all of the criteria, for what you need to do to win. We have just built a new business development engine that's quite good at it. Going to a state early, investing in the regulatory and political relationships, investing in the provider relationships. There is an emerging set of capabilities. It's always changing. Rural access to healthcare is huge. We build pop-up clinics and mobile units, on the backs of Kentucky and Mississippi and California membership. We have been as innovative or more innovative than the next guy, our states are recognizing it.
Referenceability, capability building, rural access to healthcare, social determinants of health, figuring out how food insecurity, how home insecurity, and all these other factors influence healthcare. We have a fully integrated behavioral model. We own all our entire behavioral network. The list goes on and on of what we have built in order to continue to win. I believe your statement is correct. I don't think it's any secret what you need to focus on. We focus on it intensely, and we work hard to win, and so far we've been successful. I have no other secret formula or magic wand to wave over it except that we know what states want, we've built what is important to them, and we deliver on it and have incredible referenceability now in 22 states across the country.
Our next question will come from Nathan Rich with Goldman Sachs. You may now go ahead.
Hi. Good morning. Thanks for all of the details. Joe, I maybe wanted to start with one on the policy outlook. You know, when you think about the next few years, you know, how do you think of the various kind of policy swing factors? You mentioned Medicaid work requirements, but also obviously expansion opportunities, LTSS. Can you kind of, you know.
Give us a sense of how that impacts the revenue outlook for 2026, and how important some of those swing factors could be. On the state rate cycles, definitely appreciate the detail and help in thinking about timing. I guess with most states kind of getting underway in June, July, you know, I think they'll still be in the early stages of the redetermination process come January. Have they talked about how they're going to approach rate setting for 2024 and, you know, maybe, you know, the criteria or the way that they'd approach it being different from a normal cycle?
Great. I'll take the policy question first, and then I'll kick it to Mark to talk about how we think about the rate cycle. There are no major policy initiatives in tow that, in our view, change the trajectory of these markets. They're all on the margin. With a split Congress, you know, gridlock is actually good in a way for nothing dramatic actually happening. Things happen on the margin. CMS passes rules and regulations all the time that are very friendly to Medicare and Medicaid, promoting the integration of Medicaid and Medicare in these demonstrations in FIDES and HIDES that is incredibly helpful to our long-term outlook. Our states, while they don't require a Medicaid footprint to launch a D-SNP product, many of them prefer it and require it when in fact they introduce it.
Work requirements on the margin. States can still choose to not have work requirements. They'll lose the FMAP match, and that might go blue, and it might go red. There's none of the dramatic impacts that have all been talked about over the last number of years are sitting over the political, regulatory, or judicial environment that in our view changes the trajectory of these markets. It's a barbelled economy. The low-wage service economy has been really damaged during the pandemic. The government keeps making more people eligible for these products. There are no major initiatives in discussion that in our view disrupt the trajectory of the markets we're in. Mark, do you wanna talk about how we think about the rate cycle?
Thanks for the question, Nathan. We're at the very early stages, of course. We've got four states now, April and May, that are just beginning. The rest will go through and start by June and July. What you're really asking is, at what point is the data ripe enough that it starts to help an actuary to maybe go someplace with rates? What they're gonna start looking at is what most folks call the stairs and levers. In industry jargon, it's the 834 files of the people actually coming off. Whether a state moves quickly or slowly, by the time these annual rate cycles come up, there will be enough data, maybe the majority of the redeterminations will have happened or maybe a subset, but in either case, there will be enough data out there.
For most of our states, it's gonna be six months worth of data that actuaries can look at it, extrapolate where necessary, and try to understand if there is any impact to pick up in rates. Six months is still a lot of data, even if it's not the entire population. These 834s, these stairs and levers, will drive real data-driven insights that help these state actuaries to actually look at the rates, work with our folks, and get to the right rates on a go-forward basis.
Nathan, you asked about, I jotted down a note here. You asked about LTSS, and I didn't address it. There's a significant portion of LTSS that's still in fee-for-service, that we believe will go managed in the future. Look, the nursing home lobby is very much a proponent of it staying in fee-for-service, and that's just sort of an ongoing dialogue between all the interested parties in the state. If state budgets get pressured and they know managed care can shave 5, 8, 10 points off a fee-for-service budget, it will go managed. We have an incredibly robust LTSS platform. We have LTSS benefits that are attached to $10 billion of our premium. We pay about $7 billion in LTSS benefits a year. It was the strength of our win in Iowa.
It was certainly the strength of the win in Indiana, 'cause that's where the program was. We have an incredibly robust platform, one of the largest installations of LTSS benefit management in the nation today. With the prospects of at least five or six states going managed here over the next three years, we think that's a real opportunity.
Thanks very much.
Our next question will come from Kevin Fischbeck with Bank of America. You may now go ahead.
Great. Thanks. You guys talked a bit about, you know, the G&A and the leverage you get on the G&A, but it looks like you guys are still talking about kinda average margin loss on the redetermination membership. Can you talk about why you get so much leverage when you add membership, but you're not soon to be forecasting a similar amount of negative deleveraging when this membership rolls off?
Sure. Thanks for the question, Kevin. Essentially the leverage only happens if the entire book declines. Recall over the next year, 2023 and 2024, our book grows. At an enterprise level, there isn't a deleveraging. Any members that come off are replaced by our organic growth with new members. Essentially the enterprise stays whole.
You broke out the G&A leverage into both enterprise level and then local market level. Wouldn't you be getting the local market deleveraging at least?
We would in a local market, Remember other local markets are gonna be gaining. Net-net, we've got a roughly flat G&A proposition in that scenario.
Okay. Is that why you're kind of 0 to 1 on the leverage 'cause there's an issue here where you're mitigating it?
The zero to one, which was in the final net EPS math, was for a couple of different reasons. One, depending on how much you grow in any given year, you get leverage or you don't. Two, we're constantly reinvesting in our business, which means that some years we spend a little bit more on capabilities. Third, even if we do harvest leverage, what I didn't model is that it always goes to the bottom line. What if there's an aberration in rates in any given year where 0.1 essentially just offsets year-to-year rates? You might get the 0.1, falling to the bottom line, but for any one of three reasons, you may not. That's the zero to one.
Okay. That's distinct from this dynamic. Okay. Maybe just second topic. The Medicaid market share that you guys expect to get in your existing markets, can you just go back through that slide, maybe focus on one or two things where you feel like you historically weren't doing it well enough, and that's where the opportunity is, and that's what's gonna drive the incremental share? Is there anything like a state or a product maybe where you feel like you're more likely to get some of that incremental share, that would be great. Thanks.
You're referring to slide 27 where we outlined it. It's really across all the dimensions. Provider relationships, critically important. Find the providers that drive high-quality outcomes. Give them a provider experience that makes them wanna do business with Molina. Their patients will select Molina when given a choice. We can do a lot better, and we started an initiative probably 18 months ago to identify those really important partners in our local catchment areas that have high-quality clinical outcomes, have a great provider experience with us, and can help us accumulate members. Quality. Our quality scores are good. They're not the best, they could be.
The higher you rank in an auto assignment algorithm, the better off you're going to be in a state that is more of an auto-assigned state than a choice state, but some states are choice states. This company never really had a retail brand at the local level. It underinvested in that local recognition. With the MolinaCares Accord, with our community involvement, with more and more advertising, particularly during Medicare season, the brand name of Molina is resonating better at the local level to drive more member choice. So, I would just say those are the three that have worked already in a handful of states during the pandemic. As I mentioned before, it was really hard during the pandemic to measure share. Everything was just growing.
1% share, $2 billion of an opportunity across those three dimensions, very confident in our ability to do it.
Is there a state or a market segment that's more likely to see this improvement?
Can you repeat the question please, Kevin?
Sure. I mean, you got a number of products like LTSS, ABD, HNF, etc. Like, is there a market segment where you feel like there's a greater ability to gain share, or is there a state or two where you would point to that, you know, you're more likely to gain share?
I look at the states where we have, you know, $1.5 billion-$2 billion of revenue. All this is public information. A state like Michigan, Ohio. Ohio and Illinois, 11%-12% market share. Michigan, 18%. Kentucky, 22%. We have various states where we're hovering between 18% and 22%. A point of market share on a 20% market share is 5% growth. It doesn't seem like a stretch through these initiatives. Obviously, the competitors are trying to grow share as well, but in some of those states where we have scale at $1.5 billion-$2 billion of revenue, but market share below 15%, I like our chances.
Great. Thank you.
Our next question will come from Scott Fidel with Stephens. You may now go ahead.
Hi. Thanks. Good morning. wanted to just, you know, thinking back over the last four or five years and at the different investor meetings, you know, there's been so many different opportunities you've highlighted for us around driving efficiency in the business, and you guys have had a lot of success with that, you know, over the last four or five years in terms of really both in the medical and G&A front. You know, just interested, I know that you gave us, you know, some sort of structures around, you know, driving further efficiencies in the business. Interested, are there any, you know, still significant buckets that you would highlight to us, either on the medical or G&A side that still remain, you know, meaningful opportunities for harvesting here?
When just looking out to 2026, if you could just remind us, you know, in terms of the PBM outsourced, you know, contracts, sort of when that would re-procure and, you know, whether there's any further savings, you know, would that be assumed on the pharmacy side looking at 2026? Thanks.
I'll give some framing comments and turn the G&A discussion to Mark. If you recall for our 2023 guidance when we initially gave it, we talked about three components of savings that helped us produce the 2023 rate. Rent, given the significant reduction in real estate, was one. The continuation, the full run rate of our PBM contract was another. You know, whether there are any major initiatives like that, we continue to shift manual labor to technologically-based labor. We continue to, on the margin, continue to become more efficient. If we have another major announcement to make on some huge cost component, we'll have to wait and see.
You know, Jim Woys and his entire shared service team are constantly looking for ways to be more efficient, particularly converting administrative manual work to more technologically-based work through bots and other types of technologies. Mark?
Just, Scott, when you think about the G&A journey we've been on, way back, since the turnaround, we took a G&A ratio in the high 7%s. As Joe reported earlier today, on an adjusted basis, we're currently at a 6.8% ratio. If you take out those implementation costs, that's $0.75, which are really all about next year's growth. We're already down to a 6.8%, the growth rate just drives that operating leverage on the fixed costs. We're dead set serious about harvesting that leverage. You'll expect to see quite a bit of that going forward.
On the PBM question, I'm not gonna get into details about the particulars of our PBM contract, but we have reserved ourselves a lot of autonomy on what we might do with that contract going forward.
Stated another way, there are mechanisms in the contract that keep pricing current and competitive.
Okay, thanks.
Our next question will come from A.J. Rice with Credit Suisse. You may now go ahead.
Thanks. Hi, everyone. Thanks for the information about the RFP pipeline. That's always helpful when you guys give that at your investor days. We saw that slow down somewhat or get a little disrupted during the COVID crisis. I wonder, as you've talked to the states, do you think going through a reverification process puts any risk on the timing of getting RFPs done? Are they gonna have to slow down some of these near-term ones that you're looking at while they go through the reverification process? I guess my second question is, it's continued to strike me as conservative that you do not factor in any recapture of your redetermined lives off of Medicaid into the public exchanges or marketplaces.
A lot of the other peers are talking about how they're out there talking to their Medicaid at-risk reverification eligibles and telling them about their products on the marketplace. Are you pursuing that strategy or you're go conservative this year, rather the marketplace maybe doesn't have you doing that as actively? It would seem like to me if you're in 2/3 of the states, where you have Medicaid presence with a marketplace, there ought to be a decent opportunity for recapture. Just give us some flavor for what the thinking is there for not putting any of that in your outlook.
Couple of framing comments. I'll turn it to Mark for color. On the timing of the RFPs, we fully considered the best expectation we have on what a state has told us or what their reprocurement calendar would look like as we gave you those contract inception dates. Obviously, with the redetermination, I wouldn't say any of those would ever be accelerated. Could they get extended? Sure. That was our best calculation in discussions with these states on the contract inception date of a reprocurement that is likely to happen, so we already contemplated timing in the chart that we gave you. You know, on the marketplace membership due to redetermination, it's not that we haven't operationally implemented processes to capture it, we just haven't included it in our forecast. Mark?
Yeah. A couple of things. A.J., on the RFPs, Joe's exactly right. That pipeline contemplates everything we know, what states have told us about timelines. For the most part, it looks like states are not too troubled by RFP process and redetermination. I would note that Florida just began redeterminations here in the month of May, and as many folks are aware, there's a process with their ITN on their new RFP process. I think many states will follow suit. On Marketplace, as Joe mentions, we've got a very skilled team reaching out to members to keep them reverified, to keep them in Medicaid. They have text, they have emails, they have a cell phone. They have all different approaches to reach out to members, in many cases, help them retain eligibility.
What we love about the approach is if they lose eligibility, there we are live with them and can warm transfer them into our marketplace product. Now, we have not put that into our numbers. It's a bit of a wild card, who comes off and when? Is that for calendar 2023? Is that for calendar 2024? Honestly, we've just been conservative on this. Is there upside? Almost certainly. My next best question would be, is the more upside in 2023 or 2024? My hunch is there's a little bit in both places.
Okay. Thanks a lot.
Our next question will come from Michael Ha with Morgan Stanley. You may now go ahead.
Hey, thank you. Just a quick follow-up on policy and then my real question. On policy, Joe, I believe you mentioned a split Congress gridlock is good, but
Do you believe a Democratic Congress would provide a better chance to pass further extension of APTCs and enhanced ACA subsidies beyond 2025? Real question on D-SNP. It's been a success story over the past six years, growing, what, 20%+ membership growth CAGR. With that said, the integration requirements between Medicaid and MA have remained fairly loose in the requirements around coordination only. With more and more states beginning to implement stricter integration requirements, I think there's 10, 15 states that currently require D-SNP plans to operate a Medicaid contract. One, do you see a future where most states eventually make this requirement? Two, how do you think about the timeline of this happening?
Three, if this does increase over the coming years, do you see your Medicaid footprint presenting a competitive advantage for future D-SNP growth versus other plans that might lack that footprint and potentially drive upside to your long-term Medicare growth target? Thank you.
On the last topic, certainly, I think I mentioned it in the prepared remarks. It is not a legislative requirement. Sometimes it's not even a regulatory requirement. When a state has full authority to issue a MIPPA contract wherever they want one, they can actually make a Medicaid presence, a requirement, and they routinely do. We actually believe that a Medicaid footprint is a huge catalyst for growth in D-SNP. Maybe it'll become by regulation and legislation at some point, but it's clearly strong preference. When the state holds the power to issue a D-SNP contract or not, they can make it a licensing requirement, and they routinely do. Yes, a Medicaid footprint, in our opinion, is currently and will continue to be a huge catalyst for D-SNP growth.
On the policy front, I'm not sure I understood your question. The only point is that when there is a gridlocked Congress, big things, good or bad, generally don't get done. They're on the margin. You know, whether it's work requirements, which is what's being talked about now, the family glitch was fixed, the subsidy has been made permanent. The SEP at less than 150% of FPL appears to be permanent. There's really nothing on the horizon. You know, the benefit package memorandums that go out were again, on the margin, easy to handle.
There's nothing on the horizon, in our opinion, that changes our view that the marketplace business still provides great optionality when we absolutely are convinced the risk pool is stabilized, and then we decide to allocate more capital to that business line.
Our next question will come from Steven Valiquette with Barclays. You may now go ahead.
Great. Thanks. Yeah, just back on that topic of Molina potentially recapturing Medicaid members in the marketplace and the 2/3 geographic overlap. We took a stab at calculating that previously, but it came out a little bit higher than 2/3, but we had data from 2022 instead of current. Really just two or three questions around all this. I guess first, I'm curious if you're calculating the geographic overlap at the county level or state level? Two, it's probably safe to assume you're using, you know, the current 2023 geographic footprint when calculating this? Really the third question, just within this whole recapture opportunity, just remind us how critical your silver focus is, you know, versus bronze, and how that plays a role in the dynamics?
Does that hold you back in any way, or, you know, or could that help in some way? Just curious to hear the thoughts around that again as well. Thanks.
I'll frame it and kick it to Mark. The other criteria, yes, the footprint, you have the numbers correct, 2/3 of the footprint. You also have to look at where your product is number one or two or lacks competitiveness, we've done that. We've done all the math. We've looked at where we're competitive. We think we have our arms around how membership growth could emerge in 2024 in the redetermination process. Again, we've just been conservative in not forecasting it.
Sure. Stephen, we look at the county level. We're focused on 2023, for many of the folks coming across, if they're fully subsidized on silver, that's obviously an attractive product for them. If they're at some lower level, then bronze is a product that we offer in many markets as well. In our catchment area, silver and bronze, we think are both very viable options, but again, not in our guidance or our outlook.
Okay, thanks.
Our next question will come from David Windley with Jefferies. You may now go ahead.
Hi. Thanks. Good morning. Thanks for taking my question. I wanted to come back to rate cycle in the context of comments around actuarial soundness and what that affords in terms of range of outcomes. There's been some recent data that shows the pre-pandemic margins being, you know, maybe as much as 200 basis points below where current margins are on a pre-tax basis. I guess I'm wondering as we go through redetermination and those rate cycles that you hit six months after, should we be anchoring to recent margins in terms of where the states will true up? Or should we be thinking about margins from pre-pandemic or maybe somewhere in between? Thank you.
Well, as we suggested, or demonstrated in the material we showed you, we were at 88% pre-pandemic, during, and post in our Medicaid business. The concept of actuarial soundness is a principle. Routinely, state actuaries look at all the factors that drive trend. Let's determine a credible medical cost baseline pre-pandemic, during the pandemic, ex-COVID, whatever that baseline is, and let's trend off of that using all the factors that drive trend, whether it's benefit changes up and down, whether it's a fee schedule up or down, or whether it's acuity. Acuity shifts in a population are a common rating factor. This is not new. Acuity up and down has always been considered in the rate development process, which is why when the suspicion or the projection is maybe there's an acuity shift coming, that we're sanguine.
We're absolutely confident it will be considered in the rate conversation and negotiation because it's always been a rating factor. Mark?
Dave, the only other thing I'd add is any perception that rates are, at a given point in time, more margin-friendly or less margin-friendly, honestly, that's kind of the cycle of the way rates work year-over-year. Sometimes they get it a little high, sometimes they get it a little bit of low. I can't for a minute say that that's a national trend. I can point to as many markets where maybe it's a different place in the rate cycle, a little bit better or a little bit worse. It really goes state-to-state. It's hard for me to see that as a national trend. I think you've really got to go state-by-state.
Got it. Helpful. Thank you. To ask a different question. It's kind of been asked around your efficiency initiatives. Joe, I'm thinking back to when you stepped into the role, and evaluated functions that should be internal versus outsourced at the size that Molina was at that time. Your I think $18 billion, you're now talking about $46 billion a few years out. I'm wondering if on the, on the axis of internally done versus externally done, anything changes over this time period.
No, Dave, it really hasn't. I mean, we generally have proprietary capabilities, that we own and manage. When it comes to niche-y, esoteric things that are, by definition, commoditized or under-scaled, we could choose best-in-class partners, and we routinely do. Certain technology functions are outsourced to some of the big technology outsourcers. For the most part, all of our capabilities to drive these efficiencies are done internally with proprietary capabilities. Our strategy is called rent-to-own capital light. Instead of building a transplant unit, instead of building, a end stage renal disease unit, we can outsource that on a capitated basis very, very efficiently.
It's rent to own capital light, but for the most part, we have built and manage proprietary resources to drive our results, the one exception being a lot of the commoditized work in technology, coding, testing, and those types of production functions are outsourced to a very, very good, capable world-class partner. For the most part, we're proprietary and internal.
Great. Thank you.
Our final question will come from Gary Taylor with Cowen. You may now go ahead.
Hi, good morning. Had a numbers question and then just more of a conceptual question. Just on the numbers, Mark, I just wanted to make sure I didn't miss any nuance around 2024. I know you said we weren't guiding 2024, but giving us some pieces to help us with modeling. You know, the streets north of $36 billion, which is your established floor for 2024, it's got about 14% earnings growth. It still looks like the biggest swing factor for 2024 is really how much of the embedded earnings get realized during that, you know, calendar year, which could create quite a range of potential earnings performance in that year, I guess.
First question was just wanna make sure there wasn't some more specific, you know, nuance that I was missing in terms of what you were trying to say about 2024?
I think you've set the stage well. As you know, what I'm not prepared to do is to give more specific guidance for 2024. On the revenue, we've given, you know, the 36 are the building blocks where they stand today. We're not done yet. Hopefully, we'll have some more progress that builds on 2024 shortly. On the earnings, yes, you're dipping into the embedded earnings. There's some judgment call on how much to bring in. I'm not ready to give you firm guidance on that yet, but you certainly have the building blocks right.
Okay. Then, Joe, just maybe my second question would be on, just a few weeks ago, you know, CMS put out, pretty sizable proposed, you know, regs around network, access standards, state-directed payments, some incremental stuff on medical loss ratio and Medicaid programs. Just wanted to see, what your thoughts were, what your comments were, anything that looks onerous, anything you guys, you know, disagree with, strongly agree with? How should we think about how you're looking at those proposed rules?
We routinely look at all the emerging rules, regulations, and policy memos that come out of CMS and other forums. Nothing on the horizon, either all of the different rate mechanisms in Medicare with respect to RADV, with respect to Stars, with respects to rate themselves on the margin, all types of nuances and Medicaid. As I said, they're all on the margin. These markets just flex up and down with time, but the trajectory of the overall market is still there, which we take a great deal of confidence in that 8% market growth rate in Medicaid, 9% in Medicare, etc. All of these different types of regs, policy bulletins that come out are processed quickly, understood in how they impact our business.
If a course correction needs to be made on something we need to do to address it, we do it. All of that was certainly contemplated in the outlook we gave you, and we see great trajectory to both our growth in Medicare and Medicaid and the margin picture we've outlined, despite routinely all of these different rules, regulations, and policy notes that come out of Washington, D.C.
Okay, great. Thank you.
Okay. Have we heard our last question? I think we have. We've heard our last question.
Yes. That concludes the Q&A session. I will turn the call back over to Joe Zubretsky for closing remarks.
Well, thanks for sharing the time with us this morning. We enjoyed it, and we enjoy talking about our prospects for the next three years. Look, when we talked about our goals, objectives, and our strategy a few years ago, we delivered on it. We're repeating the message. There is nothing new. The brilliant part of this is nothing needs to be new. The attractiveness of this is nothing needs to be new in order to continue to deliver on these attractive targets that we've put on the board for you this morning. You know, at that time, the one question that loomed was, you know, can we do it? Now, the question that looms is, can we do it again? We fully intend to. We will work tirelessly on your behalf to deliver the results that provide superior returns.
We thank you for your continued interest in our company, and we'll talk to you again in a couple of months. Thanks for being with us this morning. Have a great day.