Medicare / Medicaid / Advantage — Where Are The Opportunities For Startups? — Part 1 of 2

2 min read

Medicare, Medicaid, Medicare Advantage. The words often get thrown around and are mixed with generalized association of government social programs for the underserved and those over 65, but what are they actually? In part I of this article we discuss the difference between them, as well as potential white spaces that open up opportunities for startups: 

1) Medicare – Started in 1965 as part of the federal health care program, Medicare originally was intended as a program for parts of the US population that were over the age of 65. In 1972, the program extended to cover patients with disabilities and patients with kidney failure who needed either dialysis or transplantation. The program as it currently stands covers inpatient hospital stays, hospice, and nursing care. Medicare includes four different sub plans categorized as A, B, C, and D. A and B are often bundled and referred to as Original Medicare, and rely on area of service for eligibility and are federally funded. Though A and B cover hospital insurance, it does not cover vision and dental coverage, among other things. In a more recent expansion, Medicare Advantage has become a larger point of discussion; also known as part C, it extends coverage to a larger population and will be discussed later. 

2) Medicaid – Medicaid was founded alongside the Medicare program in 1965 and focused on health coverage for low-income families and individuals. However, Medicaid is differentiated in that it is jointly funded by both the federal government and state government, which implies that it varies in the range of benefits offered across different state borders; basically, the design and administration of each states’ programs are individually and independently structured and practiced. Medicaid generally covers specific doctors’ services, outpatient care, medical supplies, and preventative services. Currently, Medicaid provides health coverage to around 97 million low-income patients each year and two fifths of enrollees are children. 

3) Medicare Advantage (MA) – Part C, otherwise known as Medicare Advantage, is an optional enrollment service that is available to those eligible for and enrolled in Medicare part A and B, and can extend to cover vision, hearing and dental services. Similar to Original Medicare Advantage, these plans are region-specific and sold through insurance firms that are contracted with the federal government. Part D incidentally covers prescription drugs through private insurers and requires a monthly premium in exchange for covering local or mail-order pharmacies. It is often received through MA, combining parts C and D. 

4) Opportunities for Startups – We have seen a trend in startups migrating into Medicare oriented fields, with the notable examples including Oscar Health and insuretech shifting market focus and setting sights on MA. Despite these recent trends, we continue seeing significant white space within both Medicare and Medicaid: 

  • toolings for billing and coding
  • streamlining signups– friction reduction 
  • increasing accessibility within health centers and matching plans
  • increasing transparency of bundled payment pricing of insurance companies to give hospitals systems more leverage in negotiations

At the same time MA specifically has received so much attention from companies that we worry it’s reaching saturation. Part II of this article will explore a deeper dive into opportunities as well as case studies. 

Note from Amit Garg: Primary author for this article is Sharon Huang at Tau Ventures. Originally published on “Data Driven Investor,” am happy to syndicate on other platforms. I have 20+ years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (I call it gl;dr — good length; did read). Many of my writings are at https://www.linkedin.com/in/amgarg/detail/recent-activity/posts and I would be stoked if they get people interested enough in a topic to explore in further depth. If this article had useful insights for you comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are the authors’.

sharonshuang MD Candidate | VC in Healthcare, Digital Health
Amit Garg I have been in Silicon Valley for 20 years -- at Samsung NEXT Ventures, running my own startup (as of May 2019 a series D that has raised $120M and valued at $450M), at Norwest Ventures, and doing product and analytics at Google. My academic training is BS in computer science and MS in biomedical informatics, both from Stanford, and MBA from Harvard. I speak natively 3 languages, live carbon-neutral, am a 70.3 Ironman finisher, and have built a hospital in rural India serving 100,000 people.

Leave a Reply

Your email address will not be published.