1. Impact of the Medicare Rx Drug Legislation on Consumers Rx ______________________________ Willis B Helpin, M.D. 10 Betterhealth Lane Anytown, USA

2. John Rother Director Policy & Strategy

3. Medicare Rx Drug Coverage: The Need Todays pharmaceuticals do far more than mitigate symptoms: Control chronic conditions Protect against acute episodes Reverse course of disease, in some cases And, significantly improve the quality of life

4. What are peoples Rx drug costs? Distribution of typical costs over approximately 40 million beneficiaries CBO Projected 2006 For Medicare-eligible $0<$1K$1-3K$3-5K$5-8K$8-10K$10K+ 10%25%30%16%11%3%5%

5. Impact of New Law in 2006 Prescription cost TOTAL Rx SPENDING

6. The Standard Benefit Design 75% $35 monthly premium ($420 per year) $250 $2250 $3600 out-of-pocket Total Rx Rx Spending Spending FINAL As passed … 95% Referred to as the DONUT HOLE

7. 13.4 Million Low-Income Medicare Beneficiaries Helped Dual Eligibles Below 100% FPL Below 135% FPL Assets Below $6,000** Below 135% FPL Assets Below $10,000** 135% & 150% FPL Assets Below $10,000 No Premium No Deductible No Coverage Gap $1 Copay for Generic $3 Copay for Brand-name No Copay if in nursing home No Copay over the $3,600 limit* No Premium No Deductible No Coverage Gap $2 Copay for Generic $5 Copay for Brand-name No Copay over the $3,600 limit* No Premium $50 Deductible No Coverage Gap 15% Coinsurance $2 Generic or $5 Brand-name Copay over the $3,600 limit* Sliding Scale Premium $50 Deductible No Coverage Gap 15% Coinsurance $2 Generic or $5 Brand-name Copay over the $3600 limit* 4.4 million6.9 million0.7 million1.4 million 2003 CBO Estimate

8. Other Low-Income Protections Offers a Medicare discount card as a transition benefit for low-income without other Rx coverage --adds $600/yr Begins in June, 2004 and ends January, 2006 Immediate help

9. Choices in Benefit Design Private benefit designs will differ even though based on same actuarial value as Medicare Rx 2 or more private insurance plans or federal fallback using the standard benefit

10. Enrollment Voluntary, can choose either: –Stand-alone plans sponsored by PBMs –PPO/HMO plans (Medicare Advantage) –No plan, pay no premium Annual open-season Late sign-up penalties = 1% per month, or as HHS Sec determines

11. Medicare Structural Changes Adds chronic care management Adds new prevention benefits Requires electronic prescribing for doctors and pharmacies, which will improve quality Strengthens Medicare

12. Allocates $71b in direct subsidies –now tax free – for employers who offer retirees Rx drug coverage equivalent to Medicare Sec. 631 was dropped (permitted employers to provide retiree health coverage only until age 65) Employer-provided retiree health coverage Protects Covered Retirees

13. Effect on Employers Typical employer: Expected to retain benefits for present & near-retirees -- limit for future Large employers most likely to wrap-around Medicare Rx, AARP surveys in 2002 indicated

14. Unfinished Agenda Initiatives to keep pharmaceutical costs down Initiatives to strengthen benefits

15. Unfinished Agenda Cost initiatives Give HHS Sec negotiating power Legalize importation Call industry to limit price rises Fund effectiveness research Speed generic approval Require plans disclosure prices Reform direct-to-consumer ads Reform detailing practices –AMA

16. Unfinished Agenda Benefit design initiatives Close the donut hole Eliminate asset tests Change indexing to CPI-U Improve coordination with State Rx aid Strengthen fallback provisions Allow States to be Rx plans

17. Impact of the Medicare Rx Drug Legislation on Consumers Rx ______________________________ Willis B Helpin, M.D. 10 Betterhealth Lane Anytown, USA