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Managed Carein the Senior Market

Herb Haigh, President2536 Countryside Blvd

Clearwater, FL 33763800-940-7587

www.medicareselect.com

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Medicare Program Medicare Market Senior Population Managed Care Plans

HMO (Now Medicare Advantage) Traditional Supplements Medicare Select

Distribution “DIMA” – the new legislation

Overview

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Ameri-Plus

National network of participating hospitals Since 1990

500 hospitals 23 states

One out of every 18 seniors who have a Medicare Supplement is a policyholder with one of the ten Insurance Companies Ameri-Plus represents

Exclusive agreement with the largest independently owned Senior Healthcare Organization in the United States

Ameri-Plus Medicare Select policies are the fastest growing segment in the Medicare Supplemental market.

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The greatest gap in our social security structure is the lack of adequate provision for the Nation's health. We are rightly proud of the high standards of medical care we know how to provide in the United States. The fact is, however, that most of our people cannot afford to pay for the care they need.  

In 1945 President Truman Proposed a National Health Program

I have often and strongly urged that this condition demands a national health program. The heart of the program must be a national system of payment for medical care based on well-tried insurance principles. This great Nation cannot afford to allow its citizens to suffer needlessly from the lack of proper medical care.

national health program

The greatest gap in our social security structure is the lack of adequate provision for the Nation’s health.

Source: CMS; CMS/HCFA History; www.cms.gov

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President Johnson Enacted the Medicare/Medicaid Bill 20 Years After Truman’s Proposal

July 30, 1965, President Johnson signs Medicare and Medicaid into law.

Source: CMS; CMS/HCFA History; http://cms.hhs.gov/about/history

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Medicare’s Milestones:Legislative History 1945-2003

1965: Medicare enacted – covers only the elderly

1972: Coverage

expanded to include under-

65 disabled and ESRD

populations

1983: Prospective

Payment System (PPS) for inpatient

hospital services adopted

1989: Prospective

payment extended to

physician services

through use of Resource-

Based Relative

Value Scale

1999-2000: Balanced Budget

Refinement Act (BBRA)

and Benefits Improvement and Protection

Act (BIPA) passed

1997: Balanced Budget

Act (BBA) passed – Medicare+Choice created

1982: Medicare risk

contracts with HMOs authorized

1945: Proposed

as a National Health Plan by

President Truman

1965

19801975 1985 1990 1995 20001970

1945

1993: Medicare SELECT

Approved as a

permanent Supplemen

tal Medicare Insurance

Plan alternative

1992: Congress

created 10 standardized plans. From no-frills: “A” to top-of-the-

line: “J”

2003

2003: Medicare

Prescription Drug

Improvement and

Modernization Act (DIMA)

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Health Insurance Program for: People age 65 or older Some people with disabilities under age

65 People with End-Stage Renal Disease

Medicare Facts

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Medicare Benefits

Part AHospital Insurance

Most people do not pay for Part A Insurance

Part BMedical Insurance

Most People Pay $66.60/month in

2004 Taken out of Social

Security Payment

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Medicare Pays: Inpatient Hospital

Care Critical Access

Hospitals Skilled Nursing

Facilities Some Home Care

(PT, DME,Skilled Nursing, etc)

Individual Pays:Hospital Stays

$876 deductible Days 1-60 $219 per day Days 61-90 (60 Reserve Days Lifetime) $438 per day Days 91-150 100% of all costs Days 151+

Skilled Nursing $109.50 per day Days 21-100

through each benefit period

Part A -Hospital Insurance-

2004 Medicare Costs

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Part B -Medical Insurance-

Medicare Pays: Medical &

Professional Clinical Lab Some Home Health Outpatient Hospital

Individual Pays: $100 Deductible 20% Coinsurance

for Medical Services

20% or Fixed Copay for Outpatient Hospital

50% Coinsurance for Mental Health

2004 Medicare Costs

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Medicare Does Not Pay For

Acupuncture Dental Cosmetic Surgery Custodial Care Hearing Aids

Orthopedic Shoes Outpatient

Prescriptions Routine Foot Care Routine Physicals Screening Tests

Seniors Need Additional Health Insurance

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The Number of Beneficiaries has Doubled Since Medicare’s 1965 Inception

Source: CMS, Office of the Actuary.

Med

icar

e E

nro

llmen

t (m

illio

ns)

20.4

28.434.3

39.645.9

49.7

61.0

76.8

19.1

0

10

20

30

40

50

60

70

80

1965 1970 1980 1990 2000 2010 2013 2020 2030

Calendar Year

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Source: U.S. Census Bureau, Census 2000

< 100,000 100,000 –

< 500,000 500,000 –< 1,000,000

1,000,000 –< 1,500,000

1,500,000 –< 2,000,000

2,000,000 –< 3,000,000 > 3,000,000

Senior Population

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Traditional Medicare Supplement

Medicare SELECT

Medicare Advantage Plans

Private Fee-for-Service

PPO Demonstration

Today’s Competition in the Marketplace

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Source: MedPAC analysis of 2000 Medicare Current Beneficiary Survey, Cost and Use File.

Employer Sponsored Insurance

32%Medicaid12%

M+C18%

Other2%

Medicare Supplement

27%

Medicare Only9%

2000 Survey

75% of Medicare Beneficiaries have insurance to supplement their Medicare

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MedPAC estimates that in 2002 11-17% of Medicare enrollees will be covered by Medicare FFS with no supplemental coverage.

Source: MedPAC; Health Insurance Choices for Beneficiaries, Report to the Congress: Medicare Payment Policy, March 2003, p. 206

Increase in FFS Enrollment

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Senior Income Wealth = Health

More than half of the Medicare Population has a household income under $28,000/year

The more money you have, the more likely you are to be healthy

Those who earn less than $28,000/year spend 14%-30% of their income on healthcare

Sources: Income: U.S. Census Bureau; 2000 CensusIncome spent on Healthcare: CMS, Office of the Actuary: data from the Bureau of Labor Statistics, Consumer Expenditure Survey, 1999-2000.

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Medicare+Choice Plans Attract the Poorer/Sicker Seniors

Source: Marsha Gold and Lori Achman, Average Out-of-Pocket Health Care Costs for Medicare+Choice Enrollees Increase 10 Percent in 2003, The Commonwealth Fund, August 2003

Out of Pocket Costs for Medicare+Choice Enrollees

$5,305

$2,696

$1,565

$4,783

$3,578

$2,823

$2,210

$1,842

$1,503$1,203

$2,432

$836$997

$1,430$1,194

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

1999 2000 2001 2002 2003

Poor Health

Fair Health

Good Health

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Annual Costs M+C & Supplement

Notes: Supplemental average annual rates are based on average costs of all Plans (A-J) for a 65 year old female. M+C results are weighted by plan enrollment. Costs include Part B premium, M+C premium, co-pays, and drugs not covered.

Source: Supplemental costs: Weiss RatingsM+C costs: Mathematica Policy Research analysis of Medicare Compare using HealthMetrix Research’s Medicare HMO Cost Share Report Methodology

Annual Out of Pocket Spending & PremiumsM+C Vs. Traditional Supplement

0

500

1000

1500

2000

2500

1999 2000 2001 2002 2003Year

An

nu

al C

ost

of

Hea

lth

care

M+C

Supplement

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SOURCE: CMS

Medicare Approved Providers across the United States:

6,000 Hospitals

885,500 Physicians and Practitioners

Notes: These data are as of December 2001

Medicare Providers Availability

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Traditional Medicare Supplements

Understandable Predictable Available

Choice of Physician and Hospitals Guaranteed Renewable

- BUT - Prescription Coverage Expensive

Escalating Annual Premiums

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A BB*

CC*

D*

E FF*

F**

G*

H I J J** K L

Basic Benefits X X X X X X X X X X X

Skilled

Nursing

Co-Insurance

X X X X X X X X X

Part A

DeductibleX X X X X X X X X X

Part B

DeductibleX X X X

Part B Excess

(100%)X X X X X

Foreign

Travel

Emergency

X X X X X X X X X

At Home

RecoveryX X X X

Basic Drugs X X X

Preventive

CareX X

*Plans B, C, F, and G are also offered as Medicare Supplement SELECT Plans.

** Plans F and J also have an option called a high deductible Plan F and Plan J.

Standardized - Can Only Be Sold In These Plan Types

Traditional Supplements – Plans A-J

Under New Medicare Law, Plans H, I, and J will be deleted after 2006

New Plans K & L will be added (unknown benefits)

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HMO Plan Benefits

Company Pinellas County, FLHMO

Premium zero

Doctor visits (Co-pay) Primary

$12.00

Doctor visits (Co-pay) Specialist

$25.00

Drug Co-pay $15.00 for non-formulary generic: $500 annual limit; no

coverage for brand name

Hospital Stay 265/day for first 18 days in Hillsborough, Pinellas

$265/day for first 19 days in Hernando, Pasco

Maximum annual out of pocket:

4,800.00

Example of HMO Plan Benefits and Co-Pays

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Supplements vs. HMO/PPOunder DIMA

Must use their network of hospitals and physicians

Reduced out-of-area coverage

Controlled referrals Not guaranteed

renewable Usually co-pays and

deductibles – open ended payments

Retain Medicare card Choice of doctors and

hospitals Coverage extends

across USA No co-pays Guaranteed renewable Paperless automatic

claims One Annual Rate – you

know your yearly cost

HMO - PPO Supplement

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New Part D Benefit

Voluntary Medicare prescription benefit Available 2006

For Part D Benefit You Pay

Annual Premium $420 ($35 monthly)

Annual Deductible for prescription drugs

$250

Prescription drug coverage after deductible is satisfied

25% of the next $2,250 total

100% between $2,251 and $5,100

5% of all amounts greater than $5,100

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Part D Annual Expenses

Annual Prescription Costs

Cost with Part D Enrollment *

$250 $670

500 733

1,000 858

1,500 983

2,000 1,108

2,500 1,420

3,000 1,920

4,000 2,920

5,000 3,920

7,500 4,140

10,000 4,265

* Includes premiums, deductibles and co-paysSource: Money Magazine, Jan. 2004

The participant’s drug expenses must be greater than $810 per year for them to break even

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Private Prescription Drug Cards

There are two different types of cards available Medicare Approved Cards Private Issued Cards

There are 160 card choices The benefits & differences are as yet

undetermined

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Why are Supplemental Premiums Rising?

Source: Weiss Ratings, average annual supplemental premiums plans A-J

•Medicare is covering less, forcing Supplements to cover more•The fall of M+C plans have forced Supplements to accept open

enrollees

On the bright side, the rising cost of traditional supplements makeMedicare SELECT plans more appealing

$0

$500

$1,000

$1,500

$2,000

Av

era

ge

An

nu

al

Pre

miu

m

1999 2000 2001 2002 2003

Year

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Medicare Select

All the benefits of Traditional Medicare Supplements but COST LESS (15-20%)

Medicare Select Policyholders are not responsible for the Part A Deductible if: they receive care in a Network Hospital they receive emergency care in any Hospital

If the beneficiary does not choose a Network Hospital, they are responsible for the Medicare Part A Deductible ($876 in 2004)

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Exclusivity Increased Census Increased Out-patient Services Lower Bad Debt Shorter Length of Stay Marketing Opportunities Contribution to the Community

Why is Select A Win for the Hospital?

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Sales and Distribution

Products Require: Reliable distribution networks

Comprehensible Benefits Stability

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Developing an Independent Sales Force

Insurance Carriers and Agents Depend Upon:

Company Service Competitive Premiums

High Commissions Lead Generation

Product Persistency

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Developing an Independent Sales Force

Agents need three thingsLow Premiums

High CommissionsLeads

Forget the first two if we can offer the thirdLEADS!

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Carrier/Agent/Hospital Partnership

Insurance Carriers, Hospitals, and Agents work together as a marketing force that generates leads and sales

• Direct Mailingsoffer more information about the product and generate interest

• T.V. spots target Local Senior Market - puts your product in front of thousands

[Hospital] SELECT1-800-555-5555

For [Hospital] SELECT Information

call today

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Medicare Prescription Drug Improvement and Modernization Act

“DIMA”

The Medicare Managed Care – M+C (HMO) Plans are changing to “Medicare Advantage” Plans

It is yet to be determined how these plans will differ from current M+C Plans

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Facts about DIMA

Medicare Part A and Part B coverage have not changed

Beginning 2005 Medicare will cover several types of preventive check-ups Physical Exam Blood tests Diabetes screening

The Medicare Part D Prescription benefit is scheduled to begin in 2006

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Questions About Supplements in the Medicare Reform

How will new laws change my coverage? Protection you receive from your Supplemental

policy remains the same

How will laws change My Premium? Premiums will not be affected at all. Supplemental

benefits remain the same

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DIMA

This recent legislation has left most people with nothing but questions about the new “Medicare Advantage” programs

It remains to be determined whether the Medicare Advantage plans will differ from the HMOs of the past.

Until these plans are sorted out, all we can do is speculate as to the “reform” they bring to Medicare