Medicare “Reform” Medicare “Reform”

Exhibit 12

New benefit administered exclusively by private New benefit administered exclusively by private

insurersinsurers

New income-related premium for higher income New income-related premium for higher income

beneficiariesbeneficiaries

Means-tested benefit for low income beneficiariesMeans-tested benefit for low income beneficiaries

New solvency measure and triggerNew solvency measure and trigger

Expanded role for private plansExpanded role for private plans

412357

243204

237 234273

522

615

1999 2000 2001 2002 2003 2004 2005 2006 2007

Number of Medicare Private Plan/Advantage Number of Medicare Private Plan/Advantage Contracts 1999-2007 Contracts 1999-2007

Exhibit 13

SOURCE: Mathematica Policy Research, Inc. analysis of CMS Geographic Service Area Files, available on SOURCE: Mathematica Policy Research, Inc. analysis of CMS Geographic Service Area Files, available on Kaiser's Kaiser's

Medicare Health Plan Tracker, http://www.kff.org/medicare/healthplantracker/topicgeo.jsp?i=5.Medicare Health Plan Tracker, http://www.kff.org/medicare/healthplantracker/topicgeo.jsp?i=5.

3,195 plans

3,971 plans

Enrollment in Private Fee-for-Service Plans, Enrollment in Private Fee-for-Service Plans, 2000-20062000-2006

2000 2001 2002 2003 2004 2005 2006

1,178 19,835 24,536 25,897 51,214

208,990

835,074

Source: Avalere LLC

Exhibit 14

Number of Special Needs Plans (SNPs), Number of Special Needs Plans (SNPs), 2004-20072004-2007

11

125

276

400+

2004 2005 2006 2007

Source: Centers for Medicare and Medicaid Services (CMS), Special Needs Plans Enrollment Report, November 2006.

Exhibit 15

Payments to Medicare Advantage Plans as a Share Payments to Medicare Advantage Plans as a Share of Medicare Fee-for-Service Costs, 2006of Medicare Fee-for-Service Costs, 2006

100%

110%

117%119%

Fee-for-Service Local HMOs Local PPOs Private Fee-For-Service

Source: Medicare Payment Advisory Committee, transcript from public meeting, Washington DC, November 2006.

Average for all MA plans = 112% of FFS Costs

Exhibit 16

For Medicare beneficiariesFor Medicare beneficiaries Will plans continue to participate, or pull out if/when Will plans continue to participate, or pull out if/when

payments are less favorable?payments are less favorable? How transparent are cost-sharing requirements, How transparent are cost-sharing requirements,

coverage limitations, and network rules?coverage limitations, and network rules?

For private plansFor private plans Will government continue to create a favorable Will government continue to create a favorable

financial climate for plans – given deficit concerns?financial climate for plans – given deficit concerns?

For the programFor the program Are current payments to plans sustainable?Are current payments to plans sustainable? Will greater private plan enrollment fragment the Will greater private plan enrollment fragment the

risk pool and undermine Medicare’s entitlement risk pool and undermine Medicare’s entitlement structure?structure?

What is the value to consumers?What is the value to consumers? Does the geographic variation in private plan Does the geographic variation in private plan

offerings pose equity concerns?offerings pose equity concerns?

Questions about Role of Private Plans in Medicare Questions about Role of Private Plans in Medicare Exhibit 17

Future Financing: Is Medicare Affordable?Future Financing: Is Medicare Affordable?

The Medicare population is growing rapidly, while the The Medicare population is growing rapidly, while the number of workers per beneficiary is decliningnumber of workers per beneficiary is declining

76

62

47

19

40

34

20

1966 1970 1990 2000 2010 2020 2030

SOURCE: Health Care Financing Administration, Office of the Actuary, December 1998; 2002 Annual Report of the Board of Trustees of the Federal Hospital Insurance Trust Fund and Supplementary Medical Insurance Trust Fund.

Millions of beneficiaries

4.0

2.0

2.4

1995 2001 2030

Number of workers per beneficiary

Exhibit 18

Financial Indicators of the Medicare ProgramFinancial Indicators of the Medicare Program

-$100

$200

$500

2001 2004 2007 2010 2013 2016 2019

Note: Estimates of the HI trust fund reflects assets at end of calendar year.SOURCE: 2006 Annual Report of the Board of Trustees.

2018: Trust Fund

projected to be

exhausted

Estimates of Medicare’s Estimates of Medicare’s Hospital Insurance Trust Fund Hospital Insurance Trust Fund

General Revenue as a Share General Revenue as a Share of Medicare Spendingof Medicare Spending

Exhibit 19

15%

25%

35%

45%

55%

65%

1995 2000 2005 2010 2015

2012: General revenues

projected to reach 45% of

Medicare spending

2006: First Funding

Warning

2007: Possible Second Funding Warning

HI Trust Fund solvency projections are sensitive to HI Trust Fund solvency projections are sensitive to changes in Medicare and the general economychanges in Medicare and the general economy

214

6

76

54

1016

25

2828

2315

1512

13

1410

2006200520042003200220012000199919981997199619951994199319921991199019801970

SOURCE: Intermediate projections from 1970-2006 Annual Reports of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

Number of Years to Projected Insolvency and Projected Year of Insolvency:

Year ofTrustFund

Report

(2020)

(2019)(2026)

(1972)(1994)

(2003)

(2005)(2002)

(1999)(2001)

(2001)

(2001)(2001)

(2008)(2015)

(2025)

(2030)

(2029)

(2018)

Exhibit 20

Menu of Policy Options Menu of Policy Options aka Pick Your Poisonaka Pick Your Poison

Increase premiums, deductibles, and copaymentsIncrease premiums, deductibles, and copayments

Require higher income beneficiaries to pay moreRequire higher income beneficiaries to pay more

Raise age of eligibility Raise age of eligibility

Limit growth in payments to hospitals, physicians, Limit growth in payments to hospitals, physicians,

other providersother providers

Limit payments to Medicare Advantage plansLimit payments to Medicare Advantage plans

Defined contribution/vouchersDefined contribution/vouchers

Identify new revenue sources; raise payroll taxIdentify new revenue sources; raise payroll tax

Exhibit 21

Looking to the Future..Looking to the Future..

Exhibit 22

Medicare must continue to evolve to meet needs of beneficiariesMedicare must continue to evolve to meet needs of beneficiaries

New benefits and other improvements could be a challenge – in pay-go New benefits and other improvements could be a challenge – in pay-go environmentenvironment

New drug benefit- sorely needed but not perfectNew drug benefit- sorely needed but not perfect

Role of private plans increasing– with uncertain implications for beneficiaries, Role of private plans increasing– with uncertain implications for beneficiaries, program spending, and program stabilityprogram spending, and program stability

With aging population, financing challenges are real but many beneficiaries With aging population, financing challenges are real but many beneficiaries have limited ability to absorb higher costshave limited ability to absorb higher costs

Medicare enjoys broad public support, high satisfaction ratings among Medicare enjoys broad public support, high satisfaction ratings among seniors, and could be used as framework to expand coverage to others, such seniors, and could be used as framework to expand coverage to others, such as early retirees.as early retirees.