Medicare Reform Bill passed by Congress
...What does it mean?

As many of you have been aware, the Medicare Reform Bill has been approved by Congress and signed into law by President Bush (H.R. 1-Medicare Prescription Drug and Modernization Act of 2003). The Bill has been the source of much discussion as it provides for some of the most significant changes to the Medicare program since it's inception. We wanted to provide you with a summary of some of the main changes the bill provides as well as an assessment of what the changes mean for you and your current and potential customers.

How Does This Affect Me?

Please keep in mind that many of the changes contained in the Medicare Reform Bill do not go into effect until 2006 or later. The changes set to take place sooner include changes in reimbursement amounts/calculations to Medicare Providers as well as the Medicare prescription discount card program.

Medicare Prescription Discount Card
Starting in early to mid 2004, people with Medicare will have the voluntary option to join a drug discount card program that Medicare has approved. This care will likely be similar to the prescription discount card that is already provided free of charge to all Mutual of Omaha Medicare Supplement customers. This card will provide savings/discounts on prescriptions for seniors with Medicare. It does not provide drug coverage, however.

Medicare will contract with private companies to offer the new discount cards. Seniors may have multiple discount card options to choose from. The specific features of the available discount card options and applicable cost for the card(s) are yet to be determined. Once details are finalized, general customer information will be available from Medicare online at www.medicare.gov or by phone at 1-800-Medicare.

Also, individuals whose income is less than $12,124 or married couples whose income is less than $16,363 may qualify for $600 to help pay for prescription drugs.

Medicare Prescription Drug Benefit
Starting in January 2006, the Medicare prescription discount card option will be "phased out" by Medicare and replaces with the Medicare Prescription Drug Benefit option. The standard benefit will include/or be similar to the following:

• A monthly premium (estimated to be $35)
• $250 annual deductible
• Beneficiary pays 25% coinsurance for all expenditures $25 - $2,250.
• Beneficiary pays 100% for all expenditures $2,250 - $3,600
• Beneficiary pays the greater of 5% coninsurance or $2 generic/$5 brand for all expenditures above $3,600 annual out-of-pocket threshold.

(These thresholds will be annually increased based on average expenditures)

Will I lose my current Medicare coverage (Part A and B) and Medicare Supplement coverage?

NO. For the vast majority of seniors on Medicare that also have a Medicare Supplement, they will be able to keep their current Medicare and Medicare Supplement coverage "as is" with no significant changes. Recent surveys have shown that the majority of seniors are highly satisified with their Medicare and Medicare Supplement coverage.

Also, new Medicare beneficiaries (i.e. just turning age 65) will still be able to choose Medicare Parts A and B as well as a Medicare Supplement Plan that meets their needs.

Note: Starting in 2006 seniors that have a Medicare Supplement drug Plan (Plans H, I, or J/state special Plans in MN and WI) that also voluntarily elect the Medicare Prescription Drug Program (new Medicare Part D) will have their Medicare Supplement coverage modified/replaced to exclude the drug coverage benefit since they will have drug coverage under the new Medicare Program.

Other Medicare Supplement changes
Among other potential medigap changes, the legislation also provides for two Medicare Supplement Plan option designs starting in 2006. The framework for these two new options are as follows:

The first benefit package would cover 50% of otherwise applicable Parts A and B cost sharing, with some exceptions/exclusions included for such things as the Part B deductible, preventative coverage, hospital inpatient coinsurance and lifetime reserve days, etc. There would be an out-of-pocket limitation of $2,000 insead of $4,000.

Summary
This is a high level overview of some of the changes created by the new Medicare Reform legislation and is not inclusive of all of the changes. Overal these changes will provide more options for seniors for Medicare Plans, including prescription drug coverage. Equally important is the fact that the new legislation allows seniors the right to continue with the current plan options (both Medicare and Medicare Supplement coverage) that they have been satisfied with for many years. Medicare Supplement coverage will continue to be a popular and needed health insurance option for seniors through the upcoming changes.

We will continue to provide updates as further details of these changes become available.

If you have any questions, please contact John Towson at 360.378.3843