Medicare Reform Exhibit 12 New benefit administered exclusively by private insurers New benefit administered exclusively by private insurers New income-related premium for higher income beneficiaries New income-related premium for higher income beneficiaries Means-tested benefit for low income beneficiaries Means-tested benefit for low income beneficiaries New solvency measure and trigger New solvency measure and trigger Expanded role for private plans Expanded role for private plans

Number of Medicare Private Plan/Advantage Contracts Exhibit 13 SOURCE: Mathematica Policy Research, Inc. analysis of CMS Geographic Service Area Files, available on Kaiser's Medicare Health Plan Tracker, 3,195 plans 3,971 plans

Enrollment in Private Fee-for-Service Plans, ,178 19,835 24,536 25,897 51, , ,074 Source: Avalere LLC Exhibit 14

Number of Special Needs Plans (SNPs), Source: Centers for Medicare and Medicaid Services (CMS), Special Needs Plans Enrollment Report, November Exhibit 15

Payments to Medicare Advantage Plans as a Share of Medicare Fee-for-Service Costs, 2006 Source: Medicare Payment Advisory Committee, transcript from public meeting, Washington DC, November Average for all MA plans = 112% of FFS Costs Exhibit 16

For Medicare beneficiaries For Medicare beneficiaries Will plans continue to participate, or pull out if/when payments are less favorable? Will plans continue to participate, or pull out if/when payments are less favorable? How transparent are cost-sharing requirements, coverage limitations, and network rules? How transparent are cost-sharing requirements, coverage limitations, and network rules? For private plans For private plans Will government continue to create a favorable financial climate for plans – given deficit concerns? Will government continue to create a favorable financial climate for plans – given deficit concerns? For the program For the program Are current payments to plans sustainable? Are current payments to plans sustainable? Will greater private plan enrollment fragment the risk pool and undermine Medicares entitlement structure? Will greater private plan enrollment fragment the risk pool and undermine Medicares entitlement structure? What is the value to consumers? What is the value to consumers? Does the geographic variation in private plan offerings pose equity concerns? Does the geographic variation in private plan offerings pose equity concerns? Questions about Role of Private Plans in Medicare Exhibit 17

Future Financing: Is Medicare Affordable?

The Medicare population is growing rapidly, while the number of workers per beneficiary is declining SOURCE: Health Care Financing Administration, Office of the Actuary, December 1998; 2002 Annual Report of the Board of Trustees of the Federal Hospital Insurance Trust Fund and Supplementary Medical Insurance Trust Fund. Millions of beneficiaries Number of workers per beneficiary Exhibit 18

Financial Indicators of the Medicare Program Note: Estimates of the HI trust fund reflects assets at end of calendar year. SOURCE: 2006 Annual Report of the Board of Trustees. 2018: Trust Fund projected to be exhausted Estimates of Medicares Hospital Insurance Trust Fund General Revenue as a Share of Medicare Spending Exhibit : General revenues projected to reach 45% of Medicare spending 2006: First Funding Warning 2007: Possible Second Funding Warning

HI Trust Fund solvency projections are sensitive to changes in Medicare and the general economy SOURCE: Intermediate projections from Annual Reports of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. Number of Years to Projected Insolvency and Projected Year of Insolvency: Year of Trust Fund Report (2020) (2019) (2026) (1972) (1994) (2003) (2005) (2002) (1999) (2001) (2008) (2015) (2025) (2030) (2029) (2018) Exhibit 20

Menu of Policy Options aka Pick Your Poison Increase premiums, deductibles, and copayments Increase premiums, deductibles, and copayments Require higher income beneficiaries to pay more Require higher income beneficiaries to pay more Raise age of eligibility Raise age of eligibility Limit growth in payments to hospitals, physicians, other providers Limit growth in payments to hospitals, physicians, other providers Limit payments to Medicare Advantage plans Limit payments to Medicare Advantage plans Defined contribution/vouchers Defined contribution/vouchers Identify new revenue sources; raise payroll tax Identify new revenue sources; raise payroll tax Exhibit 21

Looking to the Future.. Exhibit 22 Medicare must continue to evolve to meet needs of beneficiaries Medicare must continue to evolve to meet needs of beneficiaries New benefits and other improvements could be a challenge – in pay-go environment New benefits and other improvements could be a challenge – in pay-go environment New drug benefit- sorely needed but not perfect New drug benefit- sorely needed but not perfect Role of private plans increasing– with uncertain implications for beneficiaries, program spending, and program stability Role of private plans increasing– with uncertain implications for beneficiaries, program spending, and program stability With aging population, financing challenges are real but many beneficiaries have limited ability to absorb higher costs With aging population, financing challenges are real but many beneficiaries have limited ability to absorb higher costs Medicare enjoys broad public support, high satisfaction ratings among seniors, and could be used as framework to expand coverage to others, such as early retirees. Medicare enjoys broad public support, high satisfaction ratings among seniors, and could be used as framework to expand coverage to others, such as early retirees.