BCNEPA/FPH 2006 Seminar Medicare Before and After Part D BCNEPA/FPH 2006 Seminar Medicare Before and After Part D April 26, 2006 Randy Grabiak Highmark Senior Products Medicare Part D Product Director

Agenda Trends in the Senior Market Part D Benefits & Guidelines Plan Participation Provider Challenges Questions

Seniors’ Sources of Information Trends in the Senior Market Seniors’ Sources of Information AMONG SENIORS: Percent who say they would be very likely to turn to each of the following for help in deciding whether to enroll in a Medicare drug plan… Survey March 31 – April 3, 2005 Your doctor Your pharmacist A Social Security office, website or phone number Friends or family members A Medicare mailing, website or phone number A health insurance company A local seniors’ group or community organization An employer or union 49% 33% 27% 27% 23% 21% 18% 8% Survey October 13 – 31, 2005 Medicare Your doctor Your pharmacist Social Security Friends or family members A local seniors’ group or community organization Medicaid An employer or union 33% 32% 25% 24% 20% 16% 14% 9% Source: *Kaiser Family Foundation Health Poll Report Survey (conducted Mar. 31-April 3, 2005) **Kaiser Family Foundation/Harvard School of Public Health (conducted October 13-31, 2005)

Health Insurance Trends Prior to Part D Trends in the Senior Market Health Insurance Trends Prior to Part D To offset the growing out-of-pocket expense, many beneficiaries have turned to various forms of private or public supplemental coverage to help defray the cost of prescription drugs However, more than a third still have no prescription drug coverage Lack of drug coverage can have adverse affects Sources of Prescription Drug Coverage

Health Care Delivery and Expenditure Trends Trends in the Senior Market Health Care Delivery and Expenditure Trends Seniors are particularly vulnerable to the increased cost of prescription drugs because: Drug usage increases with age Prior to Part D Medicare did not cover most prescription drugs Source: Ageworks, a division of the Ethel Percy Andrus Gerontology Center, USC

Trends in the Senior Market The Need for Drug Coverage Medicare Beneficiaries’ Out-of-Pocket Prescription Drug Spending, 2000-2013 Average annual out-of-pocket drug costs among the Medicare population: Projected: * Without Medicare drug benefit. SOURCE: Actuarial Research Corporation analysis for The Kaiser Family Foundation, June 2003 and November 2004.

Recent Trends in the Senior Market Part D is Projected to Reduce Average Out-of-Pocket Spending but the Extent of the Reduction is Likely to Vary Part D Participants Who Receive Low-Income Subsidies (8.7 million) All Other Part D Participants (20.3 million) Average Change: - 37% SOURCE: Actuarial Research Corporation analysis for the Kaiser Family Foundation, November 2004.

Decisions for Beneficiaries Part D Benefits & Guidelines Decisions for Beneficiaries Enroll in Part D Plan Traditional Medicare Medicare Advantage Part D Prescription Drug Plan HMO (Local) PPO (Local v. Regional) Private FFS No Part D coverage Apply for Low-Income Subsidy Dual Eligibles Social Security Office Medicaid Office Meet Income and Asset Test? If yes, qualify for: Below 100% FPL: No premium or deductible, $1/generic Rx, $3/brand name Rx, pay nothing after $5,100 in Rx costs Below 135% FPL: Subsidy for premium, no deductible, $2/generic Rx, $5/brand name Rx, pay nothing after $5,100 in Rx costs Below 150% FPL: Subsidy for premium on sliding scale, $50 deductible, 15% coinsurance to $5,100 in Rx costs, $2/generic Rx, $5/brand name Rx after $5,100

Medicare Prescription Drug Benefit Part D Benefits & Guidelines Medicare Prescription Drug Benefit 2006 Standard Medicare Part D Coverage

Part D Plans Plan Participation To participate in the program, sponsors must offer Medicare Part D benefits to all beneficiaries in one or more of the 34 PDP regions established by CMS

Highmark’s Medicare Approved Drug Plans Plan Participation Highmark’s Medicare Approved Drug Plans BlueRx Benefits Basic Plus Complete Formulary Closed Incentive Monthly Premium $26.55 $33.67 $47.46 Deductible $0.00 Initial Coverage From deductible amount to $2,250 in total drug costs (member and plan) Generic $10 Copay Brand $30 Copay $25/$45 Copay $8 Copay $20/$40 Copay Coverage Gap From $2,251 in total drug costs (member and plan) to $3,600 out-of-pocket (member) No Coverage $8 Copay for Unlimited Generics Catastrophic Coverage Over $3,600 out-of-pocket (member) Greater of $2 Copay or 5% Coinsurance Greater of $5 Copay or 5% Coinsurance To Request Additional Information, please call 1-866-465-4030

Highmark’s Medicare Advantage Drug Plan Options Standard Part D Enhanced Part D FreedomBlue Formulary Closed Deductible $0.00 Initial Coverage From deductible amount to $2,250 in total drug costs (member and plan) Generic $10 Copay* Brand $30 Copay* $8 Copay* $20 Copay* Coverage Gap From $2,251 in total drug costs (member and plan) to $3,600 out-of-pocket (member) No Coverage $8 Coverage for Generics* Catastrophic Coverage Over $3,600 out-of-pocket (member) Greater of $2 Copay * or 5% Coinsurance Greater of $5 Copay* or 5% Coinsurance Greater of $2 Copay* or 5% Coinsurance Greater of $5 Copay* or 5% Coinsurance Greater of $5 Copay* or 5% Coinsurance Greater of $2 Copay* or 5% Coinsurance Greater of $5 Copay* or 5% Coinsurance * Based on 1-34 Day supply. Copayment for 35-90 day supply (Retail) or 1-90 day supply (Mail Service) is 2.5 times 1-34 day supply.

Medicare Prescription Drug Plan Cost Estimator (BlueRx Basic) Part D Benefits & Guidelines Medicare Prescription Drug Plan Cost Estimator (BlueRx Basic) Estimated Savings Report: Current Annual Drug Spend $1,440.00 $120.00/Month Est. Annual Medicare Drug Spend $ 798.60 $66.55/Month Est. Annual Savings: $ 641.40 $53.45/Month Cost Breakdown: Description Cost with Medicare Minimum Annual Premium* $318.60 $ 26.55/Month Cost Share applied toward the $250 Deductible $0.00 Annual Cost Share ** $480.00 $40.00/Month *BlueRx Basic Plan ** Assumption: 4 generic prescriptions/month

*Excludes primary residence and automobiles Part D Benefits & Guidelines Low-Income Subsidy Medicare will provide premium and cost-sharing subsidies to assist low-income beneficiaries Dual eligibles will be automatically assigned to a PDP and auto-enrolled if they do not choose another plan Benefit: Reduction of premium, deductible & cost-sharing Process: Requires completion of SSA form Eligibility: Income Assets* Single $14,355 $11,500 Married $19,245 $23,000 *Excludes primary residence and automobiles

Medicare’s Low Income Subsidy Benefit Design Part D Benefits & Guidelines Medicare’s Low Income Subsidy Benefit Design Title Income Assets Premium Deductible Initial Benefit Coverage Gap Catastrophic Coverage (1) Full-Benefit Dual Eligible Non- Institutionalized Up to 100% FPL Medicaid Eligible $0.00 $1 generic $3 brand (2) Full-Benefit Above 100% FPL $2 generic $5 brand (2) Other Low-Income Beneficiary Below 135% FPL Not Above $6,000 (single) $9,000 (couple) (3) Other Low-Income Between $6,000 & $10,000 (single) $9,000 & $20,000 (couple) $50 15% co- insurance At or above 135% FPL but below 150% FPL Not above $10,000 (single) $20,000 (couple) Sliding Scale up to 100% (4) Full-Benefit Dual Eligible Irrelevant

The Donut Hole’s Impact to Out of Pocket Expenses Part D Benefits & Guidelines The Donut Hole’s Impact to Out of Pocket Expenses

Late Enrollment Penalty Part D Benefits & Guidelines Late Enrollment Penalty Medicare Part D is an entitlement but enrollment is voluntary Low-income subsidy provides additional cost savings Waiting to enroll until after May 15, 2006 may come at a penalty Nov 15, 2005 May 15, 2006 January 2007 January 2008 Sign up & pay = $34.78/Month** Sign up & pay = $32.20/Month* Sign up & pay = $38.95/Month** *Amount based on $32.20 national average monthly beneficiary premium (CMS, August 2005). **Assumes national average premium does not increase annually

National Part D Enrollment not meeting HHS Projections 39.1 million beneficiaries would enroll in 2006 of which 10 million would have creditable coverage under a qualified plan such as an employer or union sponsored plan. 29.3 million would be enrolled in a Part D plan. Additional 11.4 million will need to sign up for a stand alone or MAPD plan in order to reach the 29.3 million member target. *Projected Part D Enrollment = 29.3M 30.0 *Includes MAPD & Stand Alone PDP 17.9 million 20.0 15.8 million 14.3 million 11.6 million 6.4 mil 4.9 mil 3.6 mil 1 mil Enrolled in Stand Alone PDPs 10.0 4.7 mil 5.1 mil 4.4 mil 4.5 mil Enrolled in MA-PD 6.2 mil 6.4 mil 6.2 mil 6.2 mil Dual Eligible Auto Assigned from CMS 0.0 Dec 2005 Jan 2006 Feb 2006 Mar 2006 Actual Part D Enrollment Source: Projected: HHS, Medicare Drug Benefit Final Rule 1/28/05. Actual: HHS 12/22/05, 1/17/06 , 2/22/06, & 3/23/06

Formulary Covered Drugs Statutory Exclusions Provider Challenges Antidepressants Antipsychotics Anticonvulsants Antiretrovirals Immunosuppressants Antineoplastics. Over the counter medications Weight gain and loss drugs Fertility and cosmetic/hair growth drugs Drugs to relieve cold symptoms Some vitamins and minerals Barbiturates, and benzodiazepines Prescription Drug Plans Must: Assure a broad access to drugs Require two drugs per Categories & Classes Must comply with USP model guidelines

Formulary Provider Challenges Drug coverage can differ based on how the drug is prescribed dispensed or administered to the patient Inhalation DME supply drugs – solution for inhalation via nebulizer only Oral Anti-cancer agents Diabetic test strips & lancets Influenza, pneumococcal, Hepatitis B vaccines

Exceptions & Appeals Process Provider Challenges Exceptions & Appeals Process Plans must have a drug transition process in place to assure a seamless transition for patients A 90 day period may be needed for patients taking non formulary drugs For rapid transitions, beneficiaries may need to use a plan’s exceptions & appeals process Establish an adequate exceptions process to help LTC residents who need non formulary drugs Provide a one time temporary or emergency supply to ensure that there is no coverage gap during the exceptions process

Medication Therapy Management Provider Challenges Medication Therapy Management MTM programs must be designed to assure that covered medications will be used appropriately by targeted beneficiaries. A plan’s MTM services must be developed in cooperation with licensed and practicing pharmacists and physicians. Optimize therapeutic outcomes Improve medication use Reduce risk of adverse events & interactions Increase patient’s adherence & compliance with regimens

Key Date May 15, 2006 – The last day that current Medicare eligible beneficiaries can join a drug plan without paying a penalty.

Message Points for Providers Patients will ask you for advice One plan does not fit all Medicare beneficiaries Evaluate Drug Benefit Cost Sharing Encourage patients to look into low income subsidies Premium Penalty for delay in signing up Advise to compare formularies and pharmacy networks Know where to tell patients to turn for more information

Where to Turn for More information: Highmark 1-866-465-4030 www.highmarkblueshield.com Medicare 1-800-MEDICARE www.medicare.gov & www.cms.gov www.medicare.gov/medicarereform/minitool.asp Social Security Administration 1-800-772-1213 www.socialsecurity.gov