MORE CHOICES, BETTER BENEFITS WITH THE MEDICARE + CHOICE PROGRAM

The Medicare + Choice program was created by Congress in the Balanced
Budget Act (BBA) of 1997. The first Medicare + Choice plans began
providing health care services to people served by Medicare in January
1999. Most Health Maintenance Organization (HMO) and Private Fee For
Service contracts (PFFS) with the federal Centers for Medicare &
Medicaid Services (CMS) operate under the Medicare + Choice program. A
Medicare + Choice plan typically provides health care coverage that
exceeds the coverage of original fee-for-service Medicare. Currently, of
nearly 40 million Americans in Medicare, about 4.6 million (12 percent
of all beneficiaries) have chosen to be in a Medicare + Choice plan.

Over the past six years some beneficiaries who enrolled in a Medicare +
Choice plan have been affected by their plan's withdrawal from the
Medicare program, or a decision by the plan to reduce its service area:

* For 2004, 16 Medicare + Choice plans withdrew or reduced their
service areas (5 plans withdrew and 11 reduced service area) affecting
approximately 41,000 beneficiaries (about 0.8 percent of the 4.6 million
Medicare + Choice enrollees).

* About 3,100 enrollees were left without any other Medicare +
Choice option. As of September 1, there were 9 new plan requests to
provide new service and 22 service area expansions pending for CMS
approval.

* In 2003, 33 plans withdrew or reduced their service areas affecting approximately 217,000 enrollees (about 4 percent of the 5 million current Medicare + Choice enrollees). Of these, 186,710 had another Medicare + Choice option - a coordinated care plan, private fee for service plan or one of the preferred provider demonstration options (PPO). About 28,555 had no other Medicare + Choice option (about 0.5 percent of the 5 million current Medicare + Choice enrollees).

* In 2002, 58 Medicare + Choice plans either withdrew (22 contracts) or reduced their service areas (36 contracts) affecting about 536,000 beneficiaries (10 percent of enrollees in Medicare + Choice). About 38,000 had no other Medicare + Choice option.

* In 2001, 118 Medicare + Choice plans either withdrew from the Medicare + Choice program (65 contracts) or reduced a service area (53 contracts) affecting about 934,000 people (15 percent of total enrollment in Medicare + Choice). Of these, 159,000 people were left with no other Medicare + Choice option.

* In 2000, 90 plans withdrew or reduced their service areas affecting approximately 327,000 enrollees (5 percent of Medicare + Choice enrollees) and 79,000 people (1.3 percent of enrollees) were left
with no other plan option.

* In 1999, 96 plans withdrew or reduced their service areas affecting approximately 407,000 enrollees (about 6.5 percent of 1998 Medicare + Choice enrollees). About 51,000 of these people (less than one percent of enrollees) were left without any other Medicare + Choice option.

As private sector managed care companies make business decisions that
affect Medicare beneficiaries, CMS continues to undertake a comprehensive outreach effort to educate beneficiaries about their
remaining health care options and the rights and protections they are
guaranteed by law when a plan leaves Medicare. These options can include
other Medicare + Choice organizations such as HMOs, PPOs or private fee
for service plans or original fee-for-service Medicare with or without a
Medigap policy.

WORKING WITH MEDICARE + CHOICE ORGANIZATIONS
The Centers for Medicare & Medicaid Services (CMS) is committed to provide more choices for seniors by reducing the regulatory burden on Medicare + Choice plans.

In 2003, CMS made the following improvements:

* Waived the need for a 3-day hospital stay prior to entering a
nursing home. For beneficiaries returning to the original Medicare
program during a skilled nursing facility stay, this allows for payment
of the stay without the 3-day hospital stay requirement, if the
admission to the SNF occurred while the beneficiary was enrolled in a
Medicare + Choice plan.

* Provided that Medicare + Choice organizations have the option of
using a uniform local coverage policy for a health plan that covers
multiple localities. A Medicare + Choice plan that covers more than one
geographic area, such as a three State region, can choose which local
policy is most beneficial to its enrollees, based on current practice
experiences. This allows the plan to standardize coverage decisions and
provider contracts across the entire plan.

* Allowed Medicare + Choice organizations to continue to offer extended "visitor" or "traveler" programs to members who have been out of the service area for up to 12 months, as long as the plan includes the full range of services available to other members.

* Allowed plans to await the outcome of an appeal before effectuating a decision by an administrative law judge (ALJ). If a plan intends to appeal a decision by an ALJ, it does not need to implement the ALJ's decision until the Departmental Appeals Board makes its decision.

* Expanded the annual fall advertising campaign to educate beneficiaries about the full range of options open to them. CMS has also enhanced its toll-free telephone help line, 1-800-MEDICARE (1-800-633-4227 or TTY/TDD 1-877-486-2048) with 24-hour service, seven days a week. Additional customer service representatives have been added. They can tailor answers to individualized beneficiary questions and mail a copy of customized information immediately after each call.

FURTHER REDUCING BURDEN FOR MEDICARE + CHOICE PLANS

* Reducing incentive plan reports. CMS reduced physician incentive
plan reporting requirements by no longer requiring annual reports.
Reports only need to be submitted upon request.

* Working aged payment reporting. CMS created a simplified process
to identify working aged beneficiaries. Starting in 2004, CMS will use
an annual survey to establish working aged status for the year, rather
than requiring individual-level factors that are updated monthly.

* Consistent quality improvement requirements. Quality requirements
for Medicare + Choice Organizations reflect the best practices
requirements of the private sector in 2003. CMS again awarded more than
two-thirds of the Medicare + Choice Organizations incentive payments for
exceeding the thresholds on two quality indicators for Medicare
beneficiaries with congestive heart failure.

* Emphasis on better results for beneficiaries. CMS has replaced
calendar-driven audits with results-based performance audits so that we
target audits at "bad actors." "Good actors" can spend less time with
paper and more time with patients.

* Restricting mid-year changes. CMS has established a policy of
restricting the implementation of significant new requirements mid-year.
Any changes in requirements that add cost or burden cannot be
implemented until the following calendar year.

* Quarterly policy changes. CMS has coordinated policy changes to
coincide with contracting cycles and is working to provide quarterly
updates in a manual.

RISK ADJUSTMENT

In improving payments made to Medicare+Choice organizations, CMS has
implemented risk adjusted payments in a budget neutral manner. Risk
adjustment modifies capitated payments to account for differences in
health status among Medicare + Choice enrollees. By implementing risk
adjustment in a budget neutral manner, aggregate payments that might
have been reduced under risk adjustment are instead redistributed among
Medicare + Choice organizations. Implementing risk adjustment in this
manner will have the effect of increasing county rates by 4.89 percent
in 2004.

National coverage determinations
All national coverage determinations will be bundled to determine if,
in combination, they result in a significant cost increase, which will
be added to plan payments in the subsequent year. All national coverage
determinations and legislative changes in benefits will be added
together. If all these changes exceed a "significant" cost threshold,
payments are increased.

A COMPREHENSIVE EFFORT TO PROVIDE BENEFICIARIES AFFECTED BY
NON-RENEWALS WITH ACCURATE INFORMATION ABOUT THEIR REMAINING OPTIONS
CMS continues to work with its partners to provide Medicare
beneficiaries affected by non-renewals with accurate information as soon
as possible. CMS works to inform beneficiaries through 1-800-MEDICARE (1-800-633-4227), www.medicare.gov, its regional and national offices, State Health Insurance Assistance Programs (SHIP), including some 12,000 trained counselors in 1,000 local organizations administered by the states' insurance departments or departments of aging, and other programs, as well as through the Medicare + Choice Organizations that are withdrawing.

CMS also provides information to public officials including members of
federal, state, and local government agencies, members of Congress. CMS
works with their questions about education events with insurance
counselors to help with their questions about Medicare + Choice plans
and Medigap insurance.

CMS also works with the news media to provide information to
beneficiaries affected by non-renewals. A key piece of the CMS message
is that beneficiaries are still in the Medicare program. They may be able to join another Medicare + Choice plan or they can return to original fee-for-service Medicare. If they return to the original fee-for-service plan, they have a right to buy supplemental insurance policies, known as Medigap policies, on a guaranteed issue basis. A Medigap plan can help pay for some costs not covered by Original Medicare.

Medicare & You 2004 contains basic information about Medicare and plan comparison information and will be mailed to 36 million beneficiaries during October 2003. Information about how to choose and buy a Medigap policy is available in our free publication, the 2003 Guide To Health Insurance for People with Medicare: Choosing a Medigap Policy. (This can be downloaded at www.medicare.gov or ordered by
calling 1-800-MEDICARE (1-800-633-4227).

Again this year, CMS will conduct a national advertising campaign, with
a special outreach to people with access barriers to information,
including language, location and culture. The purpose of the campaign
is to acquaint Medicare beneficiaries and their caregivers with easy
access to information available on CMS' toll-free telephone help-line,
1-800-MEDICARE (1-800-633-4227), which is staffed 24 hours a day, seven
days a week. After the phone call, information can be mailed directly to
the beneficiary. Helpful publications can be ordered by calling
1-800-MEDICARE or downloaded at www.medicare.gov.

Partners in CMS' efforts to disseminate information to Medicare
beneficiaries include: the Leadership Council of Aging Organizations,
the American Association of Health Plans, AARP, the National Council of
Senior Citizens, the National Rural Health Association, the National
Council on Aging, the National Hispanic Council on Aging, the National
Caucus and Center on Black Aged, the Older Women's League, the Social
Security Administration, the U.S. Administration on Aging and State
Health Insurance Assistance Programs.

MEDICARE + CHOICE ORGANIZATIONS' OBLIGATIONS TO BENEFICIARIES AFTER NON-RENEWAL

Even after Medicare + Choice Organizations notify CMS of their intention to withdraw for the coming year, certain obligations to enrollees remain. Chief among them is the plan's obligation to provide contracted services through December 31, 2003, when most annual plan contracts expire. Non-renewing plans, or those reducing a service area, are required to send plan members affected by the change an information package by October 2, 2003. This package explains remaining options in their area for health care coverage, including another Medicare + Choice Organization, if available, or Original Medicare, which can be supplemented by a Medigap policy. The package also explains beneficiaries' rights and protections if they choose to return to fee-for-service Medicare and buy a Medigap policy.

CMS reviews and approves the information packages that are sent by plans to Medicare beneficiaries affected by the plan changes. Basically, the letter says that beneficiaries can remain in their plan through December 31, 2003 or they can disenroll before that time and either return to Original Medicare or enroll in another Medicare + Choice plan if available. In general, if no action is taken, they will automatically be disenrolled from their plan after December 31, 2003 and return to original Medicare. For help in selecting their best option, beneficiaries are invited to call 1-800-MEDICARE, or their local SHIP.

BENEFICIARIES MAY HAVE OTHER MEDICARE + CHOICE OPTIONS

Other Medicare managed care plans and private fee-for-service plans that operate in the same area as a non-renewing plan are required to be open to accept new enrollments during a Special Election Period from October 1 through December 31, unless they have a CMS-approved capacity limit that has been met. If another plan in a county accepts new members, beneficiaries can select an effective start date of November 1, December 1, or January 1 as long as the new plan receives the completed election form prior to the start date. Beneficiaries who enroll in another Medicare managed care plan or a private fee-for-service plan should not submit a disenrollment form to the non-renewing plan. They will be automatically disenrolled.

RETURNING TO ORIGINAL MEDICARE

Beneficiaries who wish to return to Original Medicare should consider
whether they need to buy a Medicare supplement (Medigap) policy before they disenroll from their Medicare + Choice plan. A beneficiary can stay enrolled in the Medicare + Choice Organization until December 31, 2003, or voluntarily disenroll and return to Original Medicare before
December 31. Each beneficiary is encouraged to get complete information
about his or her specific situation in order to protect the right to buy
a Medigap plan.

People who wish to leave their Medicare + Choice Organization before
December 31, 2003 can call 1-800-MEDICARE (1-800-633-4227) or complete a disenrollment form that is available from their health plans, any Social
Security Administration office, Railroad Retirement Board office (for railroad retirees). Buying a Medigap plan does not automatically disenroll a beneficiary from a Medicare + Choice plan.

In general, beneficiaries who do not disenroll will automatically be enrolled in Original Medicare starting January 1, 2004.

Medigap Policies:
Beneficiaries whose Medicare + Choice plans leave Medicare have a
guaranteed right to buy Medigap Plan A, B, C, or F. Some beneficiaries
may have more choices of Medigap policies depending on the length of
time they have been in a Medicare managed care plan, or if state law
provides additional rights.

Beneficiaries must apply for a Medigap policy no later than 63 days
after coverage under their Medicare + Choice plan ends. During this time period, an insurance company that sells Medigap polices must sell the
beneficiary a policy and cannot refuse to cover preexisting conditions
or charge the beneficiary a higher price for the policy because of past
or present health problems.

CAUTION: Beneficiaries should make a copy of their Medicare + Choice
Organization's final notification letter (dated October 2) to send with
their application for a Medigap policy to show they have a special
right to buy a Medigap policy. Beneficiaries should also keep a copy of
their Medigap application as proof that they applied for a Medigap plan
within the required time period.

Supplemental Coverage For Medicare Beneficiaries Enrolled In An Employer or Union-Sponsored Plan A beneficiary whose employer, former employer or union has an arrangement with the managed care organization offering the Medicare + Choice plan in which he or she is enrolled is advised to consult with that employer, union or benefits administrator before making plan changes.

AFFECTED BENEFICIARIES MAY BE ABLE TO RETAIN THEIR DOCTORS
Beneficiaries who choose to return to Original Medicare will probably
be able to continue with many of the doctors they saw in their Medicare + Choice Organization. More than 90 percent of Medicare + Choice doctors participate in Original Medicare, as well as in multiple Medicare + Choice Organizations. To see if a physician participates in Original Medicare (and accepts Medicare assignment) look at the Participating Physician directory at www.medicare.gov.

INFORMATION ON OTHER MEDICARE+CHOICE PLANS AND HEALTH CARE OPTIONS
Current information about other Medicare + Choice plans available in a
local area is available at 1-800-MEDICARE (1-800-633-4227 and TTY
1-877-486-2048), and on the web site:
www.medicare.gov. Once on the site, click on Medicare Personal Plan
Finder, and then enter your zip code. (Some Medicare + Choice plans are
available only in certain zip codes.)

Many libraries and senior centers can also help with web site access and information. Information about Medicare + Choice Organizations available in 2004 will be online October 21, 2003. The Medicare Personal Plan Finder tool helps beneficiaries compare the aggregate out-of-pocket costs of available Medicare + Choice options and Medigap policies. For general help understanding health care options, beneficiaries may contact their State Health Insurance Assistance Program. They may also contact the U.S. Administration on Aging's toll-free Eldercare Locator at 1-800-677-1116 (Monday through Friday, 9am - 8pm Eastern time) to be referred to their local Area Agency on Aging.