UnitedHealth Group (UNH) Q3 2020 Earnings Call Transcript

UnitedHealth Group (UNH 1.61%)
Q3 2020 Earnings Call
Oct 14, 2020, 8:45 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the UnitedHealth Group third-quarter 2020 earnings conference call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here are some important introductory information.

This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings.

This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the financial and earnings reports section of the company's investor relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated October 14, 2020, which may be accessed from the investor relations page of the company's website. I will now turn the conference over to the chief executive officer of UnitedHealth Group, Mr.

David Wichmann. Please go ahead, sir.

Dave Wichmann -- Chief Executive Officer

Good morning, and thank you for joining us today. The past nine months have hopefully provided you a window into both the values and capabilities of this organization and how they enable us to serve our customers, patients, care providers, team members and their families and you, our investors, in a period of unprecedented challenge. I'm fortunate to witness up close the exceptional work of our team every day, an innovative, growing and highly adaptable enterprise driven by the compassion, expertise and restless spirit of our 325,000 people, over 120,000 of them providing care on the front lines. Our collective experiences over this year have made us an even more deeply committed and energized organization about our potential to help advance the next-generation health system, one which is fair, affordable, simpler and effective.

Our team combines the vision with sharp focus on day-to-day execution, delivering strong, well-balanced results across the enterprise. Third quarter adjusted earnings were $3.51 per share, with the decline from the year ago quarter, reflecting the swift customer and consumer support actions we committed to from the very beginning of the COVID-19 pandemic. Based upon this performance and forward estimate of pandemic impacts, we are updating our full year 2020 adjusted earnings outlook to a range of $16.50 to $16.75 per share. In this, we remain committed to ensuring any financial imbalances arising from the pandemic are addressed proactively and fairly for those we serve.

We have done this consistently over this period even as the ultimate outcomes remain unclear as the timeliness of relief to our stakeholders is critical. Service, fairness and performance with a long-term view, this is what you can continue to expect from us. You should also expect this enterprise will apply its innovative spirit to contribute in new and different ways as our capabilities expand and circumstances require. We have partnered on and led clinical trials, helping resolve the nation's critical PPE and PCR supply chain issues and enabling more rapid testing at considerable scale while keeping the health workforce safe.

We are supporting state testing operations in California, New Jersey, North Carolina and Indiana and contact tracing in New York City. We are supporting the Mayo Clinic's development of convalescent plasma and some of the most promising vaccine and antibody trials. We have helped enable the workforce safety through the development of ProtectWell, a protocol processing technology to enable the safety of the health workforce as well as the safe opening of businesses, schools and nursing homes. We're working to assist with employees' health coverage transitions through our GetCovered campaign, now being offered by employers to assist people who have lost their job.

We provided $2 billion in liquidity relief for the health system. And our customers and consumers will realize over $3 billion in premium and cost-sharing relief, including $1 billion in estimated rebates. We have contributed more $100 million of financial support and six million pounds of meals for communities suffering from food insecurity, homelessness and health disparities. These efforts are possible because we operate a capable set of businesses and capacities that are leading the development of the next-generation health system and expanding our opportunities to serve.

Today, I'd like to give you a brief sense of this work. Early in the pandemic, we quickly enabled Optum physicians and the physicians of UnitedHealthcare's most vulnerable patients to adapt and expand rapidly to meet the needs of millions of patients for care of chronic and emerging conditions. This included advancing telehealth by creating direct connections between patients and their own physicians, a critical element to highly effective digital health, ensuring adoption will extend well beyond this crisis. So far this year, OptumCare physicians have facilitated one million digital clinical visits directly with their patients, and we are rapidly developing a proprietary set of distinctive tools and aligning our clinical practices to further develop and amplify this capability.

I'm sure you can see how advancing modern telehealth fits into our overall strategy to build high-performing systems of care. Our growing therapeutics capacities are positively impacting the management of chronic diseases. With the introduction of Level2, a digital therapy developed to improve the lives of the 30 million people with type 2 diabetes, we are helping patients move toward remission of the disease. Level2 uniquely measures signals and applies artificial intelligence, engaging people and producing better health outcomes.

You can expect more digital therapeutics from us in the coming months and years. Our growing capacities are especially apparent within our OptumCare platform where 53,000 physicians across 1,500 local patient-centered facilities served nearly 20 million patients, over 3.5 million of these in some form of risk arrangements with 1.3 million Medicare Advantage or duly eligible members under global capitation. OptumCare created substantial value by building a deeper clinician-patient relationship and by leveraging data and artificial intelligence to enable our clinical model to intercept and treat disease early and proactively, leading to better health outcomes, value and industry-leading patient experiences. Our patients experience safer, healthier, more fulfilling lifestyles, spending one-thirds fewer days per year on average in a hospital bed and 40% fewer days in a skilled nursing facility than patients supported by traditional Medicare fee-for-service.

Moreover, our most advanced care delivery practices deliver this high-quality care at upwards of 40% lower cost than the equivalent traditional Medicare benefit with the value fully reflected in improved benefits and lower costs for seniors, all at world-class NPS scores in the mid-70s. Improving clinical success of Optum's senior care offerings supports our considerable growth goals for OptumCare and also demonstrates the longer-term potential to greatly benefit consumers and commercial offerings. We have been building this platform for over a decade now and expect it to continue to grow at strong, double-digit rates for years to come. Another aspect of a modern, next-generation health system is managing the specialized and costly medications of the future in a way which works for patients, clinicians, employers and payers.

Our OptumRx integrated specialty solution brings a total approach to managing complex conditions across both the medical and pharmacy benefits where we are able to generate up to $37,000 in annual savings per patient by employing clinically appropriate care at more convenient, lower-cost sites. This approach is enabled by Optum's growing footprint of integrated community pharmacies, which will grow by over 60 centers in 2020. And the number of patients served with our infusion services will grow at double-digit rates. We expect this to be another durable growth trend given the much safer and clinically equivalent patient experience.

We see OptumRx as continuing to transform to be a leader in pharmacy care services. But differently, we believe the value people and the system from pharmacy care services resides in managing personal engagement in health, not just supply chain management. This plays to our strength and will increasingly contribute to the growth of OptumRx in the years ahead. UnitedHealthcare continues to focus on the varied needs of healthcare consumers.

In the next-generation health system, we expect consumer benefits to become increasingly customized to meet these needs as people search for solutions which are simple, affordable and help enable quality outcomes. UnitedHealthcare has seen strong reception to our expanding suite of highly tailored and affordable individual coverages. This year alone, the number of people we serve with individual health coverage has grown by 15%. Likewise, in employer-sponsored coverage, our growing set of consumer-centered, innovative and flexible offerings, such as Bind, All Savers and physician aligned plans, such as Harmony in Southern California, are gaining traction with membership in these offerings having grown over 50% this year.

We know many of you are interested in the annual Medicare Advantage enrollment period, which opens tomorrow. The 2021 benefit year will be UnitedHealthcare's largest Medicare Advantage footprint expansion in five years, reaching an additional 3.2 million people and nearly 300 additional counties. We are emphasizing what we know seniors are looking for this year even more than ever: stability and value. Premiums for most people we serve will be flat or reduced, and nearly 2.5 million people will have no premium at all.

We continue to innovate our product offerings with all Medicare Advantage plans featuring zero copay primary care digital health visits and the expansion of our personal support services, such as an annual clinical health assessment delivered in a senior's home and, for many, the assignment of a dedicated UnitedHealthcare navigator. We expect strong growth in individual MA. And when combined with our group Medicare gains, 2021 is shaping up to be another year of market-leading growth. We also expect continued growth in Medicaid due to transitions in coverage and net new market gains and are looking forward to a record RFP season as we seek to serve more people in more geographies.

What I've described for you this morning is a sampling the initiatives we are pursuing today to help lead in the development of the next-generation health system, a health system that works better for everyone: those who experience care, those who provide care and those who pay for care. Now I'll turn it over to chief financial officer, John Rex.

John Rex -- Chief Financial Officer

Thank you, Dave. Broadly speaking, third-quarter results continued to be impacted by disruptive care pattern, albeit to a much lesser extent than in the second quarter as many regions of the country stabilized nearer to more normalized level. Within the quarter, care deferral impacts were more than offset by the proactive consumer and customer assistance measures we voluntarily undertook earlier this year as well as COVID-19 care and testing costs and broader economic effects. These factors resulted in a 10% year-over-year decline in adjusted earnings per share.

As we discussed last quarter, the deepest period of care deferral, which occurred in the second quarter, and the timing of GAAP recognition of our assistance actions don't entirely line up, which makes for a more pronounced adverse impact to earnings in the second half of 2020. The measures we voluntarily undertook mostly impact our benefits businesses and contributed to UnitedHealthcare's third quarter operating earnings decline from a year ago. In the quarter, we saw total care activity now exceeding 95% of seasonal baseline, with certain categories even more closely approaching normal. This compares to an overall measure of about two-thirds at the lowest point in the second quarter.

Each of the three Optum businesses continue to perform well, while affected in different ways by still-recovering care patterns and economic effects. OptumHealth's third-quarter earnings increased 12% over year as fee-for-service practices and ambulatory surgery activity began to recover while risk-bearing practices still experienced some modest, continuing effect from deferral of care. Our SCA ambulatory surgery centers operated about 95% of seasonal baseline in the third quarter compared to 55% in the second quarter. Year-to-date, over 1,000 new surgeons have performed procedures with SCA as they seek a safe, convenient and efficient clinical partner.

New surgeon affiliations for the nine-month period rose nearly 25% over last year. And we continue to expand the complexity of procedures performed in these settings, having added over 40 new service lines, nearly double last year. Patients increasingly prefer these free-standing centers with NPS measured at 92. These durable, long-term trends will benefit our growth even more strongly in the future as elective care activity fully normalize.

OptumInsight third-quarter earnings increased 24% year over year, while the revenue backlog grew by $0.5 billion in the quarter to nearly $20 billion. Payer services and state government business performed strongly while we continue to see lower activity in the provider-facing businesses due to procedural volumes. While still not fully normalized, business development activity has increased from the second quarter's much lower pacing. OptimumRx earnings declined 2% year over year in the third quarter as script volumes were impacted by lower care activity and economic factors.

First-fill scripts, which are correlated to physician visit activity, greatly improved from the second quarter, which was down about 25%. While not yet fully back to prior year levels, revenues in our expanding pharmacy services businesses have grown nearly 30% year-to-date. Turning to UnitedHealthcare. Third quarter operating results reflect a considerable moderation of the care deferral impact experienced in the second quarter while still not at baseline levels.

This was more than offset by our assistance measures, direct COVID-19 care costs and economic factors. The number of people served in commercial products declined primarily due to employer actions. Within this, for us, about 40% of the fee base decline came from very large employers, primarily in the hospitality, transportation and energy sectors. During the third quarter, growth in Medicaid membership accelerated, benefiting from the continued easing of state redetermination requirements.

We have not yet seen material Medicaid enrollment activity due to job loss. And historically, these transitions lag loss of healthcare coverage by about six months. Our Medicaid business has seen strong year-to-date organic growth of over 500,000 people. Sales activity in Medicare Advantage has continued to move toward more normalized patterns after seeing some slowing in the second quarter due to the pandemic.

Within this, we have seen considerably less plan switching than typical for existing Medicare Advantage enrollees, while selection of MA over fee-for-service for people new to Medicare, it's tracking well. We continue to deepen our engagement with those seniors most in need, increasing the distribution of remote digital sensor kits to collect and monitor vital health data and address gaps in care generated by the pandemic. Seniors continue to highly value our HouseCalls program with the number of home visits in the third quarter growing by nearly 30% over last year. Our liquidity and financial position remains strong.

Third quarter cash flows of $3.1 billion, or one-time net income, reflects the extra federal tax payment in the quarter due to the deferral of payments typically paid in the second quarter. Year-to-date cash flows from operations are $16.1 billion or 1.2 times net earnings. And our debt to total capital ratio of 39.1% compares to 43.7% in the year ago quarter. As noted earlier, we have updated our full year adjusted earnings outlook to a range of $16.50 to $16.75 per share.

This reflects third quarter performance while anticipating the fourth quarter will reflect continued customer assistance measures, normalization in care patterns and rising acuity as a result of missed and deferred treatments. We will continue to work proactively to help people obtain the care they need. Now I'll turn it back to Dave.

Dave Wichmann -- Chief Executive Officer

Thank you, John. With the third quarter earnings report, we have, at times, provided some early soundings on our growth outlook. Even as the current environment is anything but routine, I'll still try to offer some useful perspectives. We approach the future with continued conviction on our long-term 13% to 16% earnings growth objective.

Some of the factors giving us confidence include: our rapidly expanding care delivery services, now benefiting from over a decade of building and investing in local, value-based care systems and extension into market-leading post-acute home and modern behavioral health intervention services; our ability to support seniors across multiple channels and markets with increasingly innovative high-value offerings; the way we meet the growing needs of people with highly complex conditions with comprehensive, personalized care, including people across commercial, federal and state-based programs; the innovative and consumer-responsive products now being offered through the employer and individual market channels; our unmatched ability to support a more interoperable and intelligent health system as a result of significant investments over many years to improve performance, integrating data, analytics and clinical information to provide essential insights to evidence-based next-best care actions; and our restless drive to allocate capital and align with other innovative companies as we lead in the development of the next-generation health system in a socially conscious way. These are just a few of the accelerating capabilities which will enable our enterprise to serve more people much more deeply as we look to the years ahead. As to early thoughts on 2021, we expect our underlying business performance to be strong and well supportive of our long-term growth objectives, including the tailwinds we have highlighted throughout this morning. The pandemic and related economic impact, of course, remain difficult to predict and at this distance, likely represent a significant potential headwind.

As a result, we envisioned stepping out initially with a more conservative all-in 2021 starting point to accommodate these still-developing and unknown COVID-related impacts, in particular, the pacing of a return to more normal levels of care services and the condition of the economy. As the environment continues to evolve, we will also continue to evolve our thinking and perspective. And as is our custom, we look forward to providing you further perspectives on all aspects of our business at our investor conference on Tuesday, December 1st, which will be held virtually this year. Thank you for your time today.

Operator, can you please open the line for questions?

Questions & Answers:

Operator

Thank you. [Operator instructions] We'll take our first question from A.J. Rice with Credit Suisse. Please go ahead.

A.J. Rice -- Credit Suisse -- Analyst

Hi everybody. Maybe just to pursue a little bit further the comments that Dave just made about thinking about next year. I guess predicting the medical cost trend, you got a lot of moving parts there: potential further deferrals, potential pent-up demand that could come back, cost of vaccines and therapies that could be there, a number of things. And thinking about the cost trend for next year, how are you approaching that? Do you see a competitive environment that's changing as a result of that? Just maybe flesh that whole comment about how uncertain the ability to predict the medical cost trend is for next year.

Dave Wichmann -- Chief Executive Officer

Thank you, A.J., a very thoughtful question. Hopefully, you took away from the prepared remarks that we're optimistic about the performance of our business. So that's pretty much universal across Optum and UnitedHealthcare. So we didn't get into some of the smaller side businesses, but we're optimistic, in particular, about our relative competitive position and the growth prospects for 2021.But as also indicated, we remain deeply respectful of the environment, both the pandemic and related economic consequences.

And one thing I would underscore, A.J., is what you hit very well: there are a number of moving parts which are very difficult to predict. And you should also know that we're extending our efforts to ensure that our chronic members and patients are getting the care that they need during this unprecedented time. And we also still have a strong commitment toward correcting any imbalances that could occur. So at this distance, we do see our business -- underlying business performing strongly and aligned to our long-term growth objectives, which are 13% to 16% per year, offset in part by these pandemic-related effects.

So the starting point, as we indicated in December, will likely represent a wider range given the possible outcomes and a more conservative all-in expectations than normal that you would normally see from us given the -- all the elements that you just described. So we're taking that into consideration as we develop our point of view about where our MLR might land, what the variability of that might be. We see it, generally speaking, that whole pandemic-related impacts as being an area -- a headwind for the organization. But don't misread it.

We are very bullish on the strong, underlying growth performance of our business.

A.J. Rice -- Credit Suisse -- Analyst

Thank you.

Dave Wichmann -- Chief Executive Officer

Next question please.

Operator

And the next question is from Josh Raskin with Nephron Research. Please go ahead.

Josh Raskin -- Nephron Research -- Analyst

Hi thanks. Good morning. Just a question on OptumCare, I guess. And you're seeing big growth in the PMPMs there on the consumers served.

And I just want to better understand the relative performance sort of 3Q year over year versus 2Q, kind of what's driving that increase in revenue per member. And then if you could also talk about sort of physician recruiting and how that's going over the last six months.

Dave Wichmann -- Chief Executive Officer

Sure. Josh, great question, and I think you're hitting on one of the strengths of the enterprise and one of the reasons why we're bullish on its growth for next year. Simply said, it would be more markets, more deeply penetrated into those markets and a higher percentage of them having a risk-bearing arrangement. But Wyatt, do you want to talk more fully?

Wyatt Decker -- Chief Executive Officer, OptumHealth

Yes. Sure. Thanks, Josh, and thank you, Dave. I think, Dave, you captured it well.

What we're seeing is as we grow, we not only have increased the number of members we serve to 98 million, but we've increased by 25% the revenue per member. And that's being driven in part by the more extensive services that we would offer somebody through a risk-based arrangement in OptumCare versus the lighter type you might see through some of the other businesses within OptumHealth. We expect that trend to continue, and frankly, are very excited double-digit growth in our MA risk lives and related fully capitated lives that we serve. The other piece I'd say, Josh, around your question about physician recruitment is we have seen continued robust interest in both small, tuck-in acquisitions as well as medium and large physician groups who are attracted to both stability, the physician leadership and the evidence-based approach that we've embraced in OptumCare.

Thank you for the question Josh.

Josh Raskin -- Nephron Research -- Analyst

Thank you.

Wyatt Decker -- Chief Executive Officer, OptumHealth

Next question please.

Operator

We'll go next to Justin Lake with Wolfe Research. Please go ahead.

Justin Lake -- Wolfe Research -- Analyst

Good morning. I wanted to circle back to the comments on 2021. First, from a consensus in and around 11% range for growth year on year, Dave, I know you said that the rate is going to be wider than average this year. Wondering if you think consensus will fall within that range at any point? Making the point as to, given the breadth of the business, what specific segments...

Dave Wichmann -- Chief Executive Officer

Justin, we're having a hard time hearing you. If you're on a headset, can you pick up a handset?

Justin Lake -- Wolfe Research -- Analyst

Sure. Is this better?

Dave Wichmann -- Chief Executive Officer

No.

Justin Lake -- Wolfe Research -- Analyst

No. OK. Hold on a second. Is that better?

Dave Wichmann -- Chief Executive Officer

It is. Thank you.

Justin Lake -- Wolfe Research -- Analyst

Sorry about that. So I wanted to do was circle back to the comments you made on 2021. First, consensus earnings growth, I think, appears to look like it's targeting around 11% year over year, so below your 13% to 16%. Wondering if you think that you're wider than typical guidance, still might include that consensus estimate within the range? And then can you point us to the specific businesses where you're seeing the potential impact of the COVID and recession concerns maybe beyond just the typical commercial membership?

Dave Wichmann -- Chief Executive Officer

Sure. John?

John Rex -- Chief Financial Officer

Good morning Justin, it's John Rex here. As Dave pointed out, I think we are quite confident in terms of the underlying growth of the organization as we look toward 2021 and kind of, in a normal a year, I would think kind of things like even kind of where that consensus range sits at this point would be kind of like a normal zone that one could expect of an -- what an area that we would think about stepping out with. We are very respectful to the fact how it's anything but a normal year, and we've learned so much every month, I got to tell you, during this period, over the last six months and in terms of how we operate, how our businesses perform, how we need to respond for the people we serve. And so we continue to be in a respectful mode in terms of learning more, understanding the situation better and realizing there could be significant impacts in certain businesses as we think about as we think about performance.

So we look at it in excluding kind of this world we operate in today with kind of COVID-related impacts, a good zone, but you should expect that we think that there are potential headwinds within there, whether those are economic headwinds, whether those are factors in terms of what we need to do from a customer assistance perspective and really the pacing of direct COVID care and treatment cost. So perhaps a long-winded way of getting asked, we are in a mode still of really trying to be responsive to what we're seeing in the environment and evolve our thinking as that environment evolves. And Justin, I don't think I've picked up your second question. If you could repeat that one.

It was just hard to hear.

Justin Lake -- Wolfe Research -- Analyst

Yes. What I was asking is specifically around the segments that could be impacted. And most of all, I know COVID is a potential uncertainty. What I've heard in the market is a lot of companies are trying to price for that, adding a little bit to trend.

Is that something that you felt like you did for last year or you're just still being conservative? Or do you feel like that's something that's tough to do in this environment?

Dirk McMahon -- Chief Executive Officer, UnitedHealthcare

Now, Justin, this is Dirk McMahon. What I would say is we're, of course, going to price to our best estimate of forward trends. That's going to include COVID. But you asked about the economic impact, so as we sat back and we looked at the third quarter, actually, our membership was a little less impacted than we thought it was going to be because of things like the Payroll Protection Program as well as some furloughs that large employers did.

So yes, there will be a little bit of a run-in problem, but less than what we expected. So from a membership standpoint, we're actually fairly optimistic about how we priced. We continue to look at how our block is priced for 1/1. And as we look at that, we're more than competitive and we monitor that every day.

Dave Wichmann -- Chief Executive Officer

Thank you, Justin. Great questions.

Operator

We go next to Frank Morgan with RBC Capital Markets.

Frank Morgan -- RBC Capital Markets -- Analyst

Good morning. John mentioned an expectation for a decline in plan switching this year in the MA market. Just curious if you any color on why you expect that to be the case.

John Rex -- Chief Financial Officer

Thanks. Just to follow up. I think what one of the things I commented on was actually, we are seeing less plan switching than normal actually. And what we're seeing is strong adoption of people new to Medicare coming into Medicare Advantage.

Dave Wichmann -- Chief Executive Officer

So Tim, do you want to add anything? Tim Noel?

Tim Noel -- Chief Executive Officer, UnitedHealthcare Medicare & Retirement

Yes. Yes, Frank, thanks. Tim Noel. Yes.

What John alluded to is that what we've seen in the marketplace is a decline in people that are switching from one MA carrier to the next. However, a lot of strength in what we call the chooser market, which are folks that are newly eligible for Medicare or people that are choosing Medicare Advantage plans compared to other coverage types throughout the course of the year. So we've seen really good, strong demand in those categories, but the plan switching activity was lighter. And in particular, in March and April, it's come back a little bit throughout the course of the year.

And actually, we've seen some better activity recently. So the dynamic in the marketplace as we head into annual enrollment period is one where we're trending back to an environment that's more normal compared to selling seasons in the past.

Frank Morgan -- RBC Capital Markets -- Analyst

OK. Thank you.

Dave Wichmann -- Chief Executive Officer

Thank you Frank. Next question, please.

Operator

We go next to Ricky Goldwasser with Morgan Stanley. Please go ahead.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Yes. Hi. Good morning. Question on the Medicaid side.

Obviously, enrollment impact from higher unemployment is coming in lower than you expect. When do you expect the impact to peak? How do you think about the balance of going to Medicaid versus exchanges? And then on the Medicaid side, has the pandemic changed how states think about transitioning their higher-acuity populations to Managed Care from fee for service? And what type of visibility do you have more Medicaid rates for next year at this point of time?

Dave Wichmann -- Chief Executive Officer

You pretty much covered the entire landscape, Ricky. Well done. We will try to be as responsive as possible on all of that. Tim Spilker is our chief executive for Community & State.

Tim?

Tim Spilker -- Chief Executive, Community & State

Yes. Thanks for the question. And you were definitely hitting on a lot of the factors that we've been tracking. So first up, just in terms of enrollment, and Dirk mentioned, as did John in his opening comments, so far, what we've seen just in terms of enrollment gains is really the result of the suspension of redeterminations as a result of the CARES Act.

We really have not yet seen unemployment pull through, and I think that's reflective of some of the dynamics that we're seeing in the commercial market. And that's been supported, I think, by a lot of external studies as well. So we continue to watch this. I think we would expect that unemployment would pull through at some point, especially as the time frame between loss of coverage increases.

As for your second question, just around complex populations. Yes, we are actively monitoring states as they explore transitions to Managed Care. We believe there's a very strong value proposition, especially for complex populations, including those that receive long-term care services and HCBS services. We know, based on our experience, that Managed Care can deliver significant value, not just in terms of cost savings, but also in terms of helping individuals remain in their homes, helping people access social services and support.

And so we've been working with states and monitoring states activity as they transition. I think we are seeing a very robust RFP pipeline, as Dave mentioned. And we're hopeful that many states include long-term care services in complex populations in those. And then finally, I think your last question was on funding and rate.

Yes, and so just on that one, yes, this is something that we've also been working closely with our state customers on really to ensure that funding is sustainable, both now and into 2021, especially considering all the dynamics in play. States are really taking a rational approach to funding. They're leveraging the appropriate risk management mechanisms depending on their experience. That could include risk corridors and MLR structures.

They're also benefiting from some of the additional federal funding through the CARES Act. And then, of course, just as a reminder, Medicaid funding must be actuarially sound, which our states really do continue to use as a guiding principle. So this is certainly an area of focus for us. We have strong relationships with our customers, and we feel good about those conversations thus far.

And then maybe just the last thing I'd say is sustainable funding and all of this work is really critical as it enables us to invest in programs that really do drive substantial social and health outcomes for our customers as well as for the people that we serve.

Dave Wichmann -- Chief Executive Officer

So Ricky, I hope that was responsive, at least responsive enough. Thank you for the thorough question. Next question please.

Operator

And the next question is from Gary Taylor with JP Morgan. Please go ahead.

Gary Taylor -- J.P. Morgan -- Analyst

Good morning. Two-part question, just in case I strike out on the first one. I was wondering if you could quantify the consumer and customer assistance, how that impacted the MLR this quarter. The second part of the question, just thinking about cost trend heading in 2021.

I think by the time this year is all said and done, you might end up being, on your core commercial group cost trend, down a couple of hundred basis points at least. So when you're thinking about your guidance for '21, are you thinking it could be a normal cost trend on top of that? Are you thinking it -- deferrals would accelerate? It could be 200 basis points or more higher than normal. I'm just interested in your thought process on how you're going to comp? Was it easier than expected all-in trend for 2020?

Dave Wichmann -- Chief Executive Officer

Well, I'll give you the strike on the first one because I don't think we're going to quantify customer and consumer assistance in the quarter. The one thing I will tell you is it's extensive. In particular, this is one of the primary quarters where the Medicare business was offering full copay waivers on both primary care and specialist visits. And the reason for that, Gary, is that we were deeply concerned and remain deeply concerned that Medicare consumers access their physician just as quickly as possible because they're obviously managing chronic disease.

And we saw a very nice response to that program, so much so that we're extending elements of it into the fourth quarter. So that's where customer systems will continue. In addition to that, we extended some other programs. You probably saw that our $1.5 billion initial estimate went to $2 billion.

And in part, that was because of additional premium waivers and adjustments that we have made that will extend through the balance of this year and modestly into next as well. So that gives you color for the kind of the volume and the quantity of things that were going on during that time frame. With respect to cost trends in 2021, Dirk, do you want to speak to that?

Dirk McMahon -- Chief Executive Officer, UnitedHealthcare

Yes. I would say, Gary, this goes back to what Dave said originally. We do consider all those factors you described. We consider what we expect COVID to do with respect to testing, with respect to treatment.

All things that are associated with abatement as well, we make an estimate of that. We try to make a forecast when the vaccines would become available. So all those things are considered as we price our business for next year. I'm not going to get into the exact number of basis points associated with each one of those.

That's competitive. But I mentioned earlier, we do monitor what's going on in the market, what we see with the ongoing trends in all three of those buckets as well as all the underlying costs. And we make our best estimate as to where we should land to be competitive from a membership growth standpoint as well as an earnings standpoint. That's what we do.

And we have actuaries, and we have our management teams that are pretty experienced with that.

Dave Wichmann -- Chief Executive Officer

We can take a question. Next question please.

Operator

We'll go next to Scott Fidel with Stephens. Please go ahead.

Scott Fidel -- Stephens Inc. -- Analyst

Hi. Thanks. Good morning. Just wanted to follow up on Medicare Advantage for 2021 and the comments that David made around industry-leading growth expectations.

And I guess really just a two-part question to this. Just one, so we do have CMS projecting the, at least, 10% enrollment growth for individual MA for 2021. So just interested in terms of your commentary on industry-leading growth, how you take that into context and whether that would support double-digit enrollment growth in individual MA for 2021. And then just secondly, it sounded like the comments around group MA, it sounded pretty bullish in terms of sales.

Just interested if you can maybe quantify for us the expected -- the group MA lives that so far you think you've added for 2021.

Dave Wichmann -- Chief Executive Officer

Just to clarify, Scott, from at least my standpoint, what I really look at is the number of people served and what our performance will be relative to the market overall. And as has been pretty consistent over time, UnitedHealthcare Medicare & Retirement has outperformed on that metric in particular. What I like about this year, in particular, is what not only the group MA component really coming off of what would be a disappointing year in 2020, meaning the 2021 actual policy year, but also the kind of the setup for individual MA and continuation with our duly eligible members and their growth. So that's the essence of the backdrop of the comment that I made.

Tim, do you want to add anything further?

Tim Noel -- Chief Executive Officer, UnitedHealthcare Medicare & Retirement

Yes, yes. Thanks, Scott. So selling obviously starts tomorrow for individual Medicare Advantage. We've been marketing our products since the beginning of October, receiving really positive feedback from the broker community about how we're positioned.

And once again, as you know, our top priority is providing stability and benefits for the members that we serve. And as we go to market, we are happy to have succeeded in providing that for our members. And in fact about 75% of our members will experience improving benefits in 2021 compared to 2020. And we also made some additional investments and capabilities to support seniors.

So given that backdrop, we do feel really good about our positioning to gain share in individual MA, group MA as well as the dual special needs plans market. We're not going to comment specifically on any point estimate for industry growth, but we really like our positioning from inside of the growth, whatever that might be. And to Dave's comments, we're really excited about our group MA growth in 2021.

Dave Wichmann -- Chief Executive Officer

Thank you Scott. Next question please.

Operator

And then next, we'll go to Robert Jones with Goldman Sachs. Please go ahead.

Robert Jones -- Goldman Sachs -- Analyst

Great. Thanks for the question. I guess maybe just want to get your latest thinking on participating in direct contracting next year, obviously, through OptumCare. I was wondering if this would contribute at all to your projections around global cap lives growth.

Or would that be incremental? And then maybe just relatedly, how are you thinking about direct contracting relative to the opportunity, obviously, around MA on the UHC side?

Dave Wichmann -- Chief Executive Officer

Let's start with UHC.

Brian Thompson -- Chief Executive Officer for UnitedHealthcare Medicare & Retirement

Sure. Brian Thompson here. As it relates to Medicare Advantage, as you've known from us for a long time, we've had the enterprise perspective of modernizing fee-for-service. But we're certainly encouraged by any activities like this.

We participate in things like bundled payment programs, et cetera, and I see direct contracting as a positive to try to modernize the overall fee-for-service system in total. And why it obviously is looking at direct contracting, to go into OptumCare.

Wyatt Decker -- Chief Executive Officer, OptumHealth

Yes. Thanks, BT. And Robert, thanks for the question. We are very encouraged by every effort to move from fee-for-service to value-based contracting, so view this as a positive trend.

The direct contracting proposals are primarily geared toward smaller groups that are in fee-for-service, and we have been in risk-based arrangements for over 10 years. And so while we will embrace this where it's appropriate, we have relationships with over 80 payers, and we'll expect to see continued double-digit growth of our MA and dual-risk lives that we care for. And I don't anticipate that the direct contracting will be a major factor for us. But again, I don't mean to say that in any kind of a negative way.

It's a good program, but we will embrace all vehicles to grow.

Robert Jones -- Goldman Sachs -- Analyst

Thank you.

Operator

We'll go next to Sarah James with Piper. Please go ahead. Your line is open.

Sarah James -- Piper Sandler -- Analyst

Thank you. I was hoping you could give us some context around corporate tax reforms. Looking back to 2018, you sized the benefit around $2 billion. Wondering where that sits now.

And if there's a difference between product lines and how we should think about which line benefited on the margin side versus what's passed through for pricing changes or other items?

John Rex -- Chief Financial Officer

Sarah, it's John Rex here. So I think we go back to that former period that you were discussing in core protection. I think there are a number of things that we commented on during that period and in terms of impact. And if you recall, during that period, we also commented about investments that we are making as a result to build for future growth and how we were investing in the businesses for the longer term.

Certainly, that was an element there. Clearly, kind of since that period, a number of years ago now, the company is much, much larger, so you would expect that kind of that impact is kind of much smaller from an effective tax rate impact than we would have had back in that time. Among the other elements that you're talking to in corporate tax reform and impacts, I think it's tough really to kind of get out ahead of anything in terms of potential impact and even how those impact on specific businesses just because there isn't some really don't want to get ahead of any kind of policy that might be out there. So probably would just leave it at that.

Sarah James -- Piper Sandler -- Analyst

Thank you.

John Rex -- Chief Financial Officer

Thank you Sarah. Next question please.

Operator

Next is David Windley with Jefferies. Please go ahead.

David Windley -- Jefferies -- Analyst

Hi. Good morning. Thanks for taking my question. I appreciate the comments, several kind of percentage of baseline utilization numbers offered in the prepared remarks.

I'm curious how that has progressed perhaps through the quarter. For example, by the end of the quarter, were some of those at or above 100%? Are you expecting that to get to above baseline in the fourth quarter? And based on your assessments of kind of pent-up underutilization and system capacity, how long might you expect that to last? And then just to tag on, the DCP for the first couple of quarters of the year, had been pretty consistent year over year, but at the third quarter is down a couple of days, two to three days. I'm wondering how that folds into that view of where utilization is going?

John Rex -- Chief Financial Officer

Thank you David. John Rex. Let me answer to get at those. So first of all, let me give you a little more color in terms of what we saw in utilization over the course of the quarter and how it fits to what we were seeing last quarter and such.

So I spoke to kind of baseline exceeding 95% across our businesses as we look at the utilization at this point here. Maybe give a little color kind of -- context within that and different categories and how those would trend. I'd point out, if I look at physician services, that would be below that baseline. I'd put kind of outpatient surgery, that kind of -- right at kind of in that zone at baseline.

And I'd put inpatient above that baseline zone. As we look down at kind of various populations and such, maybe a little color commentary in terms of how that trends. So commercial, certainly kind of higher in terms of where we're seeing utilization and where we're seeing against baseline; government program services, lower. And within that, I would say, kind of within the government programs, let's say, the community state business being the lower element of those in the way it's trending.

One important element here. So what you referred to some of the commentary we had for our expectations for the fourth quarter. And then so among those were that care that has been deferred, that we are able to help facilitate that care incurs. And that's kind of where we're making investments and what we want to see happen here.

The other element that we anticipate as we look toward the end of the year is we have been anticipating to see rising acuity because of deferred and missed treatment, we'd see a higher-acuity population. I would tell you, we really haven't seen that yet. Where we see rising acuity on the overall book is it's because of the COVID-19 cases that come in at a higher acuity level, and so you see a higher acuity on that component. But if you take that component out, we don't really see it across the full scope of the book of our business at this point.

As to your comment over in terms of over the course of the quarter, what we saw, well, it was an interesting quarter from that perspective because you saw different incidence rates in different parts of the country over the course of the quarter. So we really monitor that quite closely. And you would see as a particular part of the country, you saw infection rates begin to rise, you would see deferral come into that mix. Given our platform across the entire country, we have a viewpoint into that, but you see deferral and then you'd see it come back in.

I think the last thing that I would place, I would just point out is within kind of that baseline that we're talking about -- and so I said exceeding 95%, I put kind of in the zone of five points or so were probably COVID-19-driven in terms of within that mix. And that's inclusive in the baseline we're talking about.

Dave Wichmann -- Chief Executive Officer

And then DCP.

John Rex -- Chief Financial Officer

And DCP. Thank you for reminding me. So DCP, the decline year over year, David, so that is due to the really the acceleration in provider payments that we took on earlier in the year. So as we're trying to get liquidity injected into the healthcare system when we accelerated our payment cycles very, very significantly, and that continues.

The reason you wouldn't have seen that in the second quarter is because of the very significant deferral of medical care in the second quarter. But kind of getting into the math of it, right, you get a denominator here where medical cost per day was declining very, very significantly in the second quarter. So that more than offset the impact of those payments. As we saw care being restored much closer to normal levels this quarter, then that comes up.

And so now you're seeing the impact of that accelerated payment cycle show up in our DCP, but that was impacting.

Dave Wichmann -- Chief Executive Officer

And just to remind you, give you a sense of that, as we indicated in the prepared remarks as well, it's around a $2 billion advance to the market or acceleration in payment. Thank you David.

Operator

And next is Charles Rhyee with Cowen. Please go ahead.

Charles Rhyee -- Cowen and Company -- Analyst

Yes. Hey thanks for taking the question. Maybe if I could follow-up on that, about utilization and then tie it back to sort of your comments around the outlook for '21. It sounds like inpatient volume is a little bit above normal.

Other areas are a little bit below. And overall, let's say, we're kind of getting back to a normal baseline utilization. Given at that kind of pace that we're on this year and then we think about next year, what is it in your thinking that makes you think that we're going to see a really big uptick in utilization? Because it sounds like when we go back to the earlier part of the Q&A when you're -- in your comments, Dave and John, at the end was next year, you're thinking about a more conservative starting point to think about the '21 outlook. And I understand that we'd want to back out some of the onetime items that were positive for this year.

But maybe help us understand a little bit what is your underlying assumptions for utilization? Because it seems to me and the pace that we're going at, it doesn't strike me that we're going to really have really overutilization per se next year. Maybe help us understand what maybe you're seeing here as we're now into part of the fourth quarter that kind of gives you that sense.

Dave Wichmann -- Chief Executive Officer

Yes. So my comments are really grounded in the unprecedented uncertainty as we look forward and a deep respect for the pandemic and its impact on the economic climate. And that's why, as you think about being at this distance, stepping out, recognizing that as your -- kind of the future expectation, you would normally widen your range and you would probably take a more conservative posture. And that's essentially what we were trying to communicate.

John, do you have anything further to add?

John Rex -- Chief Financial Officer

No, Charles, the one thing I'd comment and I think you said kind of we've seen inpatient kind of above normal. I wouldn't say that's where we are. I said on that exceeding 95% baseline, I was orienting those categories around how they orient around that, exceeding 95%: that inpatient rides a little above that; physician, below that; and outpatient surgery is kind of right in that zone. So that's more the commentary that I was providing there, not that inpatient is running above baseline yet.

But certainly, categories are progressing to that. And I think in terms of your broader commentary into what to expect for utilization, so we want to make sure people get the care they need. That's why we're here, ultimately. And so we're going to do everything in our power to make sure that, that care occurs.

But you heard some of the commentary offered earlier in the year even in terms of what was going on in different categories in terms of cancer diagnoses, different areas that we're off significantly. That's not kind of good for people. That's not good for the system. We want to make sure that, that care is getting delivered.

And there are areas of care that we're going to be very proactive in making sure that people are able to access that. In our business, we have both direct access in the OptumCare businesses. UnitedHealthcare is being very proactive in its outreach to vulnerable populations and making sure that they're getting the treatments that they need. So our ambition is to make sure that, that care is delivered.

There's a lot of necessary care that's not happening also. But I'd come back to Dave's commentary. As we look out to 2021 and some of the earlier themes, we've been learning stuff all along the way over the past many months. And we continue to evolve that thinking.

We continue to feel like we get better perspective and why deeply respectable in terms of we don't really know how this moves over the next several months also. So I think that's what you hear in terms of our commentary, in terms of how we think about stepping out and why, that we want to be respectful of an environment, frankly, that no one has navigated before. And I think that's just what you would expect us the way you'd expect us to approach it.

Dave Wichmann -- Chief Executive Officer

Thank you. And we'll take this next 30, 45 days or so to accumulate more facts, understand even better and then lay all this out for you in more detail to the best of our ability when we get together on December 1. We have time for one more question with a quick question and answer, and then I'll close.

Operator

And we'll take that question from Lance Wilkes with Bernstein. Please go ahead.

Lance Wilkes -- Sanford C. Bernstein -- Analyst

Yes, just wanted to ask for employer enrollment, how's that progressing in October? And what's your outlook for 4Q and beyond? And if you can give any clarification in OptumRx on kind of the real sharp increase in revenue per script and some of the compression in margin, that would be helpful, too.

Dave Wichmann -- Chief Executive Officer

So I don't think we'll be able to give you insights into October and the quarter specifically, but what we can give you insights into is what the progresses we're making across the board in the commercial market going forward, give you some sense of that without quantifying it. Dirk?

Dirk McMahon -- Chief Executive Officer, UnitedHealthcare

Yes. I would say that as you think about the fourth quarter, the sense should be is there's a good amount of stickiness with respect to the end of this year in terms of persistency that we're seeing with our groups. And further, I think as we look at next year, I think we talked about it in the script, we'll have a lot of good products coming off the assembly line that we're very enthused about: All Savers, our level-funded product; Bind, a good product, which basically is a scenario where you have a kind of base level of coverage and you buy up if care is needed in certain categories. Then we have what I would say a bunch of provider-centric products, where we're looking at really efficient, high-quality networks and having low consumer out-of-pockets associated with those.

So what I would say is we're optimistic about our product portfolio for next year. As you look at the third -- the fourth quarter specifically, we've had good stickiness in terms of our persistency.

Dave Wichmann -- Chief Executive Officer

Yes. I think the commercial business is doing a nice job. Obviously, we're very dissatisfied with the start of this year, but I think they've come on stronger as the year has progress with a wide array of product choices and offerings, but also getting their cost structures in line and being able to reflect that in more competitive price positions in the market overall, again, appropriately indexed to the forward view of cost-plus margin, which reflects the variability of the future marketplace. John, do you want to touch on the script?

John Prince -- Chief Executive Officer, OptumRx

Sure. Lance, John Prince. Talking about revenue growth, we've had really strong growth in our specialty business as well as infusion. Our community pharmacies and -- which is Genoa, that has been a big driver as well as our external client wins we had on the beginning of the year.

If you look at our services businesses, which is both services, as I mentioned, they're growing almost 30% inside that. So really strong growth in that. In terms of our margin and why it's declined year-over-year, it's really two factors: One, on the earnings side is the impact of COVID-19. As you know, with the pandemic, we've had less first fills in Q2.

That continued in Q3 as well as we've seen in Q3, less utilization per member as well as some loss and unemployment. So that's impacted our earnings. And then on the denominator side, the retail copayment, which was added to revenue in 2020, was added to the denominator, which actually impacted the margin in Q3. Overall, we're quite pleased with our margin performance.

As you see between Q2 and Q3, our earnings grew sequentially by 16% and continue to improve our margins. So overall, we're seeing we're executing very well.

Dave Wichmann -- Chief Executive Officer

Yes. Thanks, John. Thank you, Lance. And thank all of you for your interest and the very thoughtful and insightful questions that you offered today.

As you know, this is an unprecedented time in our company's history. And as you've come to expect, we will continue to respond and lead with the full strength, compassion and fortitude, restlessness. We're serving the unique needs of every one of the 140 million people we serve around the world. Despite the challenging times, the 325,000 people of the UnitedHealth Group are deeply committed, and they're energized about our work to advance the next-generation health system in a socially conscious way.

It's a health system that will be universal, affordable, simple and effective. And we look forward to engaging you in several weeks at our upcoming annual investor conference on Tuesday, December 1. We see the virtual format as an opportunity to provide you an even deeper view of our company, its strategic plans, its people and our future. Thank you very much.

Operator

[Operator signoff]

Duration: 63 minutes

Call participants:

Dave Wichmann -- Chief Executive Officer

John Rex -- Chief Financial Officer

A.J. Rice -- Credit Suisse -- Analyst

Josh Raskin -- Nephron Research -- Analyst

Wyatt Decker -- Chief Executive Officer, OptumHealth

Justin Lake -- Wolfe Research -- Analyst

Dirk McMahon -- Chief Executive Officer, UnitedHealthcare

Frank Morgan -- RBC Capital Markets -- Analyst

Tim Noel -- Chief Executive Officer, UnitedHealthcare Medicare & Retirement

Ricky Goldwasser -- Morgan Stanley -- Analyst

Tim Spilker -- Chief Executive, Community & State

Gary Taylor -- J.P. Morgan -- Analyst

Scott Fidel -- Stephens Inc. -- Analyst

Robert Jones -- Goldman Sachs -- Analyst

Brian Thompson -- Chief Executive Officer for UnitedHealthcare Medicare & Retirement

Sarah James -- Piper Sandler -- Analyst

David Windley -- Jefferies -- Analyst

Charles Rhyee -- Cowen and Company -- Analyst

Lance Wilkes -- Sanford C. Bernstein -- Analyst

John Prince -- Chief Executive Officer, OptumRx

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