National Medicare Prescription Drug Congress The Perspective of

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National Medicare Prescription Drug Congress The Perspective of Health Plans Leonard D. Schaeffer Chairman

National Medicare Prescription Drug Congress The Perspective of Health Plans Leonard D. Schaeffer Chairman and CEO Well. Point Health Networks Inc. February 26, 2004 1 1/21/2022

Agenda • The Need For Change • Role of Health Plans • Challenges •

Agenda • The Need For Change • Role of Health Plans • Challenges • Conclusion 2 1/21/2022

The Need For Change Medicare must be enhanced to address: • Rising Costs •

The Need For Change Medicare must be enhanced to address: • Rising Costs • Shift to Chronic Illness • The Baby Boomers • Spending vs. Outcomes 3 1/21/2022

Rising Health Care Costs The Need for Change Medicare Spending, 1966 -2001 $236. 8

Rising Health Care Costs The Need for Change Medicare Spending, 1966 -2001 $236. 8 B $1. 8 B Source: Centers for Medicare and Medicaid Services, 2003 4 1/21/2022

The Need for Change Shift to Chronic Illness Age and demographic change drive evolution

The Need for Change Shift to Chronic Illness Age and demographic change drive evolution to a system to manage health status and chronic illness Percent of health care services used by people with chronic conditions 88% Prescriptions Physician visits Inpatient stays Source: Agency for Healthcare Research and Quality, Medical Expenditure Survey, 1998 5 1/21/2022 72% 76%

The Baby Boomers The Need for Change Seniors Consume More Health Care Relative Spending

The Baby Boomers The Need for Change Seniors Consume More Health Care Relative Spending Relative Per Capita Health Spending, By Age Cohort (Age 35 -44 Equals 1), 1999 Source: Health Affairs, Nov/Dec 2003 6 1/21/2022

The Baby Boomers Senior Population To Expand 7 1/21/2022 The Need for Change

The Baby Boomers Senior Population To Expand 7 1/21/2022 The Need for Change

The Baby Boomers Expect Choice Open access 8 1/21/2022 The Need For Change

The Baby Boomers Expect Choice Open access 8 1/21/2022 The Need For Change

Spending vs. Outcomes The Need for Change Dartmouth Study: Medicare patients receiving the most

Spending vs. Outcomes The Need for Change Dartmouth Study: Medicare patients receiving the most care did not fare better • Patients in higher-spending areas received 60% more care, but not improved survival • Utilization driven by local supply of physicians, specialists and hospital resources • Study concluded that savings of up to 30% of Medicare spending might be possible Source: Annals of Internal Medicine, 2003; darker shading = higher spending 9 1/21/2022

Agenda • The Need For Change • Role of Health Plans • Challenges •

Agenda • The Need For Change • Role of Health Plans • Challenges • Conclusion 10 1/21/2022

Product Opportunities Role of Health Plans MMA provides two-year window for: • M+C HMO

Product Opportunities Role of Health Plans MMA provides two-year window for: • M+C HMO Payment Increases • Rx Drug Discount Card • Medicare Advantage Plans • Stand-alone Prescription Drug Plans • Medigap Changes • Health Savings Accounts 11 1/21/2022

Quality Opportunities Role of Health Plans MMA will support current efforts and stimulate others:

Quality Opportunities Role of Health Plans MMA will support current efforts and stimulate others: • Plans required to have quality assurance systems • Hospital annual payment updates tied to quality reporting • IOM to develop pay-for-performance strategy for Medicare • FFS disease management demonstrations • Electronic prescribing standards 12 1/21/2022

Health Plan Experience Role of Health Plans • Serving Seniors • IT Infrastructure for

Health Plan Experience Role of Health Plans • Serving Seniors • IT Infrastructure for Data Collection • Chronic Care Management • Physician Connectivity • Pay-For-Performance • Consumer Information 13 1/21/2022

Health Plan Experience Serving Seniors Role of Health Plans Private sector familiar with seniors’

Health Plan Experience Serving Seniors Role of Health Plans Private sector familiar with seniors’ needs and managing drug benefits • Medigap plans serve 10 million* • Medicare+Choice serves 4. 6 million** • Rx benefit nearly universal in commercial market • PBMs serve 200 million** – PBMs currently administer Drug Discount Cards for 17 -18 million enrollees*** *GAO/2001; **2003; ***GAO-03 -912/Feb 2003 ( administered on behalf of retail pharmacies, employee assns, and insurance companies) 14 1/21/2022

Role of Health Plans Health Plan Experience IT Infrastructure for Data Collection Shift to

Role of Health Plans Health Plan Experience IT Infrastructure for Data Collection Shift to using information --not controls-- to improve efficiency & quality Intersection of key data flows --claims, Rx, lab-creates opportunity Emergence of Infomediaries Knowledge transfer to providers and patients to improve outcomes Capture, integration, & analysis of data used to identify effective care Sources: James C. Robinson, “Beyond Managed Care” (presentation); Academy. Health Reports: Knowledge Transfer: Building Better Bridges 15 1/21/2022

Role of Health Plans Health Plan Experience Chronic Care Management Admissions per 1000 members

Role of Health Plans Health Plan Experience Chronic Care Management Admissions per 1000 members 500 2000 Baseline 400 2001 -53% 300 2002 2003 200 -29% 100 -16% -36% 0 Asthma. Related CHF-Total Diabetes. Total Program Source: Well. Point Experience with Prior Disease Management Programs 16 1/21/2022 Diabetes. Related

Health Plan Experience Role of Health Plans Physician Connectivity: i. DOC WLP invested over

Health Plan Experience Role of Health Plans Physician Connectivity: i. DOC WLP invested over $100 M in its own IT strategy in ‘ 03. To encourage physicians to adopt technology, WLP will: • Provide an additional $40 million in new information technology to 19, 000 network physicians • Enhance patient care, reduce admin costs and improve physician communication • Offer physicians a choice of: • Negotiate discounts for 170, 000 physicians in our networks – Prescription Improvement Package – Paperwork Reduction Package 17 1/21/2022

Why WLP? Role of Health Plans “Somebody has to do something and it is

Why WLP? Role of Health Plans “Somebody has to do something and it is just incredibly pathetic it has to be us. ” Jerry Garcia Courtesy Martha Marsh, President & CEO, Stanford Hospital & Clinics 18 1/21/2022

Health Plan Experience Pay-For-Performance Role of Health Plans • Historically, both mistakes and corrections

Health Plan Experience Pay-For-Performance Role of Health Plans • Historically, both mistakes and corrections reimbursed • Providers paid the same regardless of outcomes • Leading plans now using pay-for-performance programs – Providers respond to comparative information and financial incentives • 19 1/21/2022 Challenge is raising consumer sensitivity to clinical quality differences

Health Plan Experience Consumer Information: Subimo 20 1/21/2022 Role of Health Plans

Health Plan Experience Consumer Information: Subimo 20 1/21/2022 Role of Health Plans

Agenda • The Need For Change • Role of Health Plans • Challenges •

Agenda • The Need For Change • Role of Health Plans • Challenges • Conclusion 21 1/21/2022

Immediate Challenges • Product development without knowing: – Regulatory requirements – MA payment rates

Immediate Challenges • Product development without knowing: – Regulatory requirements – MA payment rates – Definitions (e. g. “actuarial equivalence”) – Degree of design flexibility (e. g. formularies) – Late enrollment penalty – Service areas • Regional PPO Networks • NAIC Redesign of Medigap • Beneficiary Education 22 1/21/2022

Immediate Challenges Beneficiary Education • Outreach & education needed to: – Explain “donut hole”

Immediate Challenges Beneficiary Education • Outreach & education needed to: – Explain “donut hole” design – Understand plan choices – Underscore importance of enrolling early to minimize selection problems Catastrophic Coverage Out of Pocket Spending 5% No Coverage $2, 850 Partial Coverage Deductible 25% $5, 100 $2, 250 $250 Estimated $35/month premium Source: Kaiser Family Foundation, 2003 23 1/21/2022

Long-Term Issues • Senior response to new coverage options • Feasibility and flexibility of

Long-Term Issues • Senior response to new coverage options • Feasibility and flexibility of regulations • CMS resources and staffing • Sustained commitment to quality incentives • Risk inherent in government partner • Legislative amendments/new requirements 24 1/21/2022

Agenda • The Need For Change • Role of Health Plans • Challenges •

Agenda • The Need For Change • Role of Health Plans • Challenges • Conclusion 25 1/21/2022

Conclusion • • • 26 1/21/2022 MMA complex, but most plans optimistic Successful implementation

Conclusion • • • 26 1/21/2022 MMA complex, but most plans optimistic Successful implementation requires feasible, flexible regulations Modernizing Medicare requires meeting the needs and expectations of baby boomers A 21 st century health care system should provide seamless transitions Ultimately. . .

Conclusion, cont. • Health care systems are a reflection of social values– not science

Conclusion, cont. • Health care systems are a reflection of social values– not science and not economics • A system that works for all should be evidence-based, choice-based, equitable and affordable • We can hope that outcomes will improve, but we can count on patient expectations continuing to rise and total cost continuing to increase 27 1/21/2022

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