1. Medicare Part D: How Can You Assist Seniors in Your Life? Tim Jongerius, FSA, MAAA Sr. Actuary Wellmark Blue Cross Blue Shield of Iowa Iowa Actuaries Club February 28, 2006

2. 2 Medicare Part D Program Effective 1/1/2006 Created by Medicare Modernization Act (MMA) of 2003 Features of Medicare Part D Program include...  Drug coverage on either stand alone basis (PDP), or when purchasing a Medicare PPO product (PD or MA-PD)  US divided into 34 PDP regions  Minimum standard benefit design prescribed

3. 3 Regions Map

4. 4 Standard Coverage MMA defines a minimum benefit design Member pays...  $250 deductible first  25% of next $2,000 (i.e., yearly drug costs from $250 to $2,250)  100% of next $2,850  At this point, member has paid $3,600 in out-of-pocket costs (TrOOP)  Beyond $3,600 in TrOOP (or $5,100 in drug costs), member pays 5% of drug costs (or small copayments)

5. 5 More Features of Part D - Coverage Beyond Standard Coverage Benefit design can be richer than standard coverage Some designs eliminate $250 deductible Some designs provide benefits in the “coverage gap”

6. 6 More Features of Part D - Financial Aspects Member Elements  May pay penalty if don’t enroll by May 15, 2006  Premium assistance and cost-sharing assistance for low income members and dual-eligibles Industry Elements  Risk-adjusted payments from CMS to carriers  Risk-sharing components Overall risk corridors (±2.5% of expected claims, government has 75% share; ±5.0%, government has 80% share) Low income subsidy (LIS) support for premium and cost- sharing Reinsurance payments for catastrophic claims

7. 7 Products Offered in Region 25 Includes contracts/plans approved as of November 13, 2005. The data does not reflect information for PACE organizations, Employer sponsored plans, or plans that were not approved by the 'As of' date of the chart. 1 The beneficiary drug premium covers prescription drugs only and does not cover medical or hospital benefits. Beneficiaries are also responsible for their Part B premium and any premiums for Medigap coverage to meet their individual needs. 2 Formulary data as of November 16, 2005.

8. 8 CMS Enrollment as of 2/11/2006 -- Nationwide 42 - 43 million Medicare beneficiaries  25 million beneficiaries with drug coverage 5.3 million voluntary sign ups Approximately 10 million on employer coverage Approximately 10 million from others who already had drug coverage (duals and MA)

9. 9 CMS Enrollment as of 2/11/2006 -- Region 25

10. 10 Initial Operational Results IT/file issues with moving so many people at one date (1/1/2006) Accretion process Some states have stepped in to cover drug costs as a result of enrollment issues

11. 11 How to Help the Seniors in Your Life? Use the internet to get information Agents of carriers which offer drug plans Public assistance

12. 12 Use the Internet First and foremost, go to the CMS website...”www.medicare.gov/pdphome.asp”  Select “Medicare Prescription Drug Finder”  5 steps within the site a. search options b. current coverage information c. review plan results and options d. medication and pharmacy selection e. review plan details and enroll  Also, refer to specific company’s website

13. 13 Case Studies

14. 14 Items Needed Drugs used in calendar year 2005 Dosage Quantity Costs of drugs Canadian drugs used?

15. 15 Case Study #1 “Mr. X” – Low/Moderate Drug User

16. 16 Case Study #2 “Mrs. X” – Moderate/High Drug User

17. 17 Case Study #1 Results

18. 18 Case Study #2 Results

19. 19 Other Sources of Assistance - Agents Note: need to be sure most appropriate comparison is being done

20. 20 Other Sources of Assistance - Public Federal  Website: www.medicare.govwww.medicare.gov  Publication: “Medicare & You” booklet  Phone: 1-800-Medicare (1-800-633-4227)... available 24/7 State  Senior Health Insurance Information Program (SHIIP) at www.shiip.state.ia.us... Select “Drug Assistance”www.shiip.state.ia.us Talk to your Pharmacist

21. 21 Notes and Comments to Consider Remember insurance aspect of decision Try to sign up before 15 th of month Penalty if don’t enroll by deadline of May 15, 2006 Beneficiary can switch plans each enrollment period (November 15 of each year) Canadian drugs Don’t succumb to “paralysis by analysis” Prepare for some bumps in the road, but problems will be resolved

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