The Value of Medicare Advantage

Karen IgnagniPresident and CEO

America’s Health Insurance Plans

July 16, 2007

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Choices Before Congress

Maintain Choices in All Markets

versus

Reducing or Eliminating Choices

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How to Evaluate Choices

Assess History

Assess Value

Consider Constituent Impact

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Medicare Advantage: An Historical Look*

Medicare Advantage Enrollment History and Major Payment Changes

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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Enro

llmen

t in

mill

ions

BBA payment methodology and rural floors-PFFS option begins

(-$97B) /10 years

BIPA Urban floors and higher rural floor payments

$32.5B/10 years

MMA $4.3B/10 years for MA Improvements $10 B/10 years for Stabilization Fund

(Now $ 3.5B per TRHCA)

Risk plansMedicare +Choice

Medicare Advantage

Part D

*Chart based upon CMS Medicare Advantage Fact Sheet (3/07).

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Bipartisan Congressional Efforts to Extend Access to Choices BBA 1997 – Congress established rural “floors” (rates intentionally set above FFS)

BIPA 2001 – Congress established MSA floor

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Congressional Intent Achieved

MA Plans in 2003 MA Plans in 2006

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Medicare Advantage Payment-2007 Floor Counties

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Congressional Intent Achieved --Access to benefits and savings

The overwhelming majority of seniors enrolled in Medicare Advantage plans are satisfied with their

coverage, and satisfaction is up since 2003.

90% 84%

7% 9%

2007 2003

Satisfied

Dissatisfied

53% Very Satisfied37% Smwht Satisfied

53% Very Satisfied37% Smwht Satisfied

49% Very Satisfied35% Smwht Satisfied

49% Very Satisfied35% Smwht Satisfied

Question: How satisfied are you with each of the following aspects of your Medicare coverage: Your Medicare coverage overall?

Question: How satisfied are you with each of the following aspects of your Medicare coverage: Your Medicare coverage overall?

Source: Ayres, McHenry & Associates (March 2007)

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Serving Vulnerable Populations

MA is important choice for low-income and low-income minority

beneficiaries

One-third of all seniors, and three-fifths of low-income seniors, would skip some health care treatments if they no

longer have access to a Medicare Advantage plan.

42%

26%

40%

52%57%

35%

62%

41%

29%23%23%

13%19% 19% 20%

All <$20K $20K-$30K $30K-$50K $50K+

Pay/Continue treatments Not pay/Skip treatments Don't know

Question: If Congress makes cuts to the Medicare Advantage program and you had to use traditional Medicare coverage, would you pay higher out-of-pocket costs so you could

continue to receive the same health care treatments you receive now, or would you not pay higher out-of-pocket costs and skip some of the health care treatments you receive now?

Question: If Congress makes cuts to the Medicare Advantage program and you had to use traditional Medicare coverage, would you pay higher out-of-pocket costs so you could

continue to receive the same health care treatments you receive now, or would you not pay higher out-of-pocket costs and skip some of the health care treatments you receive now?

Source: Ayres, McHenry & Associates (March 2007)

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MA Extra Benefits and Services -- Results

MA Enrollees Are More Likely to Receive Preventive Services Than FFS Beneficiaries w/o Supplemental

Coverage

73%

65%60%

70% 72%

55%52%

46%

58% 58%

0%

10%

20%

30%

40%

50%

60%

70%

80%

PnemoccocalImmunization

InfluenzaImmunization

Mammography * ColorectalScreening

ProstrateScreening

MA Enrollees FFS w/o Supplemental Coverage

Source: Based on 2005 Medicare Current Beneficiary Survey

* For females under 75

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MA and Medicare’s Financial Outlook: Long Term CostsWhat the Trustee’s

Report Says Data

MA Contribution

Factors adding to growth in expenditures:

Continued growth in the volume and intensity of services per beneficiary

–GAO found nearly 60% growth in spending on physician services 2000-2005 –NEJM reports beneficiaries in FFS see multiple doctors.

MA can provide medical home.

The impact of recent legislative changes including Part D

Part D costs lower by $113 B/10-year frame and $96 B result of competition and lower bids

MA reduces Part D expenditures

Demographics-aging of population

-NEJM reports uninsured age-ins have more chronic conditions.

MA plans manage these diseases.

Three-fourths of doctors think cuts to Medicare Advantage will harm seniors.

74%

16%11%

Negative effect No effect Don't know

Question: If Congress makes cuts to the Medicare Advantage program, do you think that will have a negative effect on seniors enrolled in a Medicare Advantage plan, or do you think that

will have no real effect on seniors enrolled in a Medicare Advantage plan?

Question: If Congress makes cuts to the Medicare Advantage program, do you think that will have a negative effect on seniors enrolled in a Medicare Advantage plan, or do you think that

will have no real effect on seniors enrolled in a Medicare Advantage plan?

Source: Ayres, McHenry & Associates (March 2007)