1. Medicare Advantage Overview Diane Rowland, Sc.D. Executive Vice President Kaiser Family Foundation Alliance for Health Reform July 16, 2007

2. What is Medicare Advantage?   Health plans offered by private insurers that receive payments from Medicare to provide Medicare-covered benefits to enrollees Medicare pays each plan a per capita payment for each enrollee Plans contract with the government for one year Beneficiaries sign up during annual enrollment period   Medicare HMOs have been an option since 1982 Originally plans were paid 95% of traditional Medicare costs, with goals of achieving savings for Medicare and improving management of care   BBA 97 – created Medicare+Choice Authorized new types of plans (Private Fee-for-Service plans, local PPOs)   MMA 03- renamed Medicare+Choice  Medicare Advantage Authorized new plans (Special Needs Plans, Regional PPOs, Medicare MSAs)   Medicare Advantage enrollees Generally pay the Part B premium Sometimes pay a supplemental premium for additional benefits Typically receive Part D drug coverage Exhibit 1

3. Note: Includes local HMOs, PSOs, and PPOs, regional PPOs, PFFS plans, Cost contracts, Demonstrations, HCPP, and PACE contracts. Source: Mathematica Policy Research, Inc. “Tracking Medicare Health and Prescription Drug Plans Monthly Report” December 1999-2006. CMS Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract Report, Monthly Summary Report, June 2007. The number of Medicare Advantage contracts has doubled since 2004 Exhibit 2

4. Medicare Advantage enrollment is concentrated among a small number of organizations Exhibit 3 4.6 million beneficiaries account for more than half of total Medicare Advantage enrollment NOTE: All Other Medicare Advantage Plans includes plans with enrollment less than 230,000 beneficiaries. Total for Blue Cross/Blue Shield affiliates provided by Blue Cross/Blue Shield. Numbers rounded. Data as of May 15, 2007. SOURCE: Centers for Medicare and Medicaid Services (CMS), June 2007 Monthly Summary. Total Medicare Advantage Enrollment= 8.7 million (1.4 million enrollees) (1.2 million) (1.1 million) (0.9 million) UnitedHealth Care Blue Cross/Blue Shield affiliates Humana Inc. Kaiser Permanente All Others*

5. The majority of Medicare Advantage enrollees are in Medicare HMOs Notes: Local HMO/PPO also includes a small number enrolled in provider sponsored organizations. Numbers do not sum to 100 percent due to rounding. SOURCE: Centers for Medicare and Medicaid Services, Medicare Advantage, Cost, PACE, Demo and Prescription Drug Plan Contract Report, Monthly Summary Report, June 2007. 2007 Medicare Advantage Enrollment = 8.7 million Exhibit 4

6. Characteristics of Medicare Advantage enrollees and beneficiaries in traditional Medicare SOURCE: Kaiser Family Foundation analysis of the 2005 Medicare Current Beneficiary Survey (MCBS). Exhibit 5 Medicare Advantage Traditional Medicare

7. More than one in four Medicare beneficiaries are projected to be in a Medicare Advantage plan by 2016 Projected SOURCE: Centers for Medicare and Medicaid Services, 2007 Medicare Trustees Report Table IV.B6. Actual 27% 19% Exhibit 6 Percent of Total Medicare Population: