Solution-Oriented Approaches to Control Health Care Costs Alpha Benefits March 31 & April 1, 2004

HealthAmerica & HealthAssurance Subsidiary of Coventry Health Care, Inc. Statewide health plan founded in 1975 –Licensed in 59 of 67 counties Over 715,000 members 474 inpatient facilities & 19,000 providers Revenue run rate of $1.6 billion in 2004 Full product spectrum Progressive medical management philosophy HealthAmerica & HealthAssurance Overview

“The Perfect Storm” Recovering Economy Medical Malpractice Increased Uninsured & Unemployment Federal & State Budget Deficit Increased Federal & State Regulation Clinical Labor Shortage Aging Baby Boomers Emerging Expensive Technology Rising Premium Rates Unhealthy Lifestyles Insatiable Appetite for Health Care Services End-of-Life Issues Lack of Checks and Balances Health Delivery System Consolidations Cost Shifting - Public Sector To Private Sector

Network management Solutions That Work Effective utilization management Disease management programs Quality improvement Controls currently in place Administrative efficiencies Benefit plans featuring cost-sharing Evidence-based medicine

Solutions That Work Network management  Controlling unit cost demands

Solutions That Work Network management Effective utilization management  Appropriate service, appropriate place, fair & reasonable price

Solutions That Work Network management Effective utilization management Appropriate service, appropriate place, fair & reasonable price Containing Rx costs

Industry trend information is from Buck Surveys. Containing Rx Cost: A Case Study Comparison of Rx Trends

Network management Effective utilization management Appropriate service, appropriate place, fair & reasonable price Containing Rx costs Disease management programs Solutions That Work

Effective Disease Management: A Case Study 2003 Report Cardiac Case Management HealthAmerica and HealthAssurance

Network management Effective utilization management Appropriate service, appropriate place, fair & reasonable price Containing Rx costs Disease management programs Solutions That Work Quality improvement

Network management Effective utilization management Appropriate service, appropriate place, fair & reasonable price Containing Rx costs Disease management programs Quality improvement Solutions That Work Evidence-based medicine

Network management Effective utilization management Appropriate service, appropriate place, fair & reasonable price Containing Rx costs Disease management programs Quality improvement Evidence-based medicine Solutions That Work Administrative efficiencies

Network management Effective utilization management Appropriate service, appropriate place, fair & reasonable price Containing Rx costs Disease management programs Quality improvement Evidence-based medicine Administrative efficiencies Solutions That Work Benefit plans featuring cost-sharing

Solutions Long Overdue Lifestyle choices Emphasis on prevention and wellness Opportunity still exists

Solutions Long Overdue Lifestyle choices

Big Spending: The Price We Pay State Obesity Related Expenditures % of Total Medical Spending CA NY TX PA FL IL OH MI NJ NC 5.5% $7.68 billion Source: CDC States with the highest burden of the country’s $75.1 billion in estimated medical expenditures attributable to adult obesity.

Lifestyle choices 7 in 10 Americans do not exercise regularly 4 in 10 Americans are not physically active 64% of all Americans are overweight 440,000 people die each year from smoking It’s time to “walk the talk” Solutions Long Overdue

Lifestyle choices Solutions Long Overdue Emphasis on prevention and wellness  One way to control the demand for health care services

Opportunity for Improvement Changing health care system’s economic orientation from treatment to prevention End-of-Life issues Inefficiencies in the health care system Modify physician and consumer behavior Eliminating medical errors Fixing reimbursement Regional planning approach to new technology expansion and health care services Medical malpractice reform

Final Take-Aways Health benefit costs are only one component; employers need to be heard Support tort reform Embrace evidence-based medicine Insist on regional planning for new technology and expansion Speak out against new benefit mandates

Base employee cost sharing on lifestyle Final Take-Aways Accept that you cannot have access to every provider, unlimited coverage, and control costs at the same time Accept a little noise from your employees (Rx formulary) Engage employees in true cost of health care

The Solution …. Pursue cost controls privately Fix what we have today before putting in a new system Terrific opportunity still exists –Make a goal for all constituents to work for single-digit medical trends –Allow businesses to retain health care choices for their employees

Future Real cost containment requires real sacrifice If we are to cover everyone, we cannot cover everything We ration care now Challenge is to ration in a way that is more efficient and equitable.