[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
STATUS OF THE MEDICARE+CHOICE PROGRAM
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
DECEMBER 4, 2001
__________
Serial No. 107-49
__________
Printed for the use of the Committee on Ways and Means
__________
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77-455 WASHINGTON : 2002
______________________________________________________________________
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J. D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Health
NANCY L. JOHNSON, Connecticut, Chairman
JIM McCRERY, Louisiana FORTNEY PETE STARK, California
PHILIP M. CRANE, Illinois GERALD D. KLECZKA, Wisconsin
SAM JOHNSON, Texas JOHN LEWIS, Georgia
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota KAREN L. THURMAN, Florida
PHIL ENGLISH, Pennsylvania
JENNIFER DUNN, Washington
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
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C O N T E N T S
__________
Page
Advisory of November 27, 2001, announcing the hearing............ 2
WITNESSES
Centers for Medicare & Medicaid Services, Hon. Thomas A. Scully,
Administrator.................................................. 12
Milwaukee County Department on Aging, Stephanie Sue Stein........ 52
UnitedHealth Group, Richard Jones................................ 47
Oxford Health Plans, Peter Haytaian.............................. 41
SUBMISSIONS FOR THE RECORD
Alliance to Improve Medicare, statement and attachment........... 75
Center for Medicare Advocacy, Inc., Vicki Gottlich, statement.... 77
Israel, Hon. Steve, a Representative in Congress from the State
of New York, statement......................................... 80
STATUS OF THE MEDICARE+CHOICE PROGRAM
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TUESDAY, DECEMBER 4, 2001
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:10 a.m., in
room 1100 Longworth House Office Building, Hon. Nancy L.
Johnson (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON HEALTH
FOR IMMEDIATE RELEASE CONTACT: (202) 225-3943
November 27, 2001
No. HL-11
Johnson Announces Hearing on
Status of the Medicare+Choice Program
Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on recent changes in the
Medicare+Choice program that have adversely affected seniors and people
with disabilities. The hearing will take place on Tuesday, December 4,
2001, in the main Committee hearing room, 1100 Longworth House Office
Building, beginning at 10:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only.
Witnesses will include The Honorable Thomas Scully, Administrator of
the Centers for Medicare and Medicaid Services, an independent program
expert, a beneficiary representative and representatives of health
plans. However, any individual or organization not scheduled for an
oral appearance may submit a written statement for consideration by the
Subcommittee and for inclusion in the printed record of the hearing.
BACKGROUND:
The Medicare+Choice program was created through the Balanced Budget
Act of 1997 (BBA 97) (P.L. 105-33). Medicare+Choice gives beneficiaries
the option of choosing to enroll in private, integrated health plans
that often offer coordinated and additional benefits, such as
prescription drugs. Today, 15 percent of Medicare beneficiaries are
enrolled in Medicare+Choice.
Although Medicare+Choice is popular with many beneficiaries, the
program faces significant challenges. Enrollment in Medicare managed
care had been increasing steadily until the changes mandated by BBA 97.
Since that time, enrollment has declined by about 800,000 beneficiaries
or about 12 percent. Prescription drug coverage has been eliminated or
cut back dramatically in recent years, while program participants' cost
sharing and premiums have increased, in some areas significantly. In
2002, only half of the Medicare population will have access to at least
one Medicare+Choice plan with drug coverage, down from 65 percent in
1999. In addition, only one-third of the Medicare population will have
access to a zero premium plan in 2002, down from 61 percent in 1999.
Cost sharing for Medicare-covered services will jump 78 percent in
2002, from $14.88 per enrollee, per month, to $26.60 per enrollee, per
month.
Next year more than 500,000 Medicare beneficiaries in 28 states
will be forced to change their health coverage or move back to Medicare
fee-for-service largely because reimbursement has not kept pace with
health care inflation. Ninety-two thousand beneficiaries will no longer
have a coordinated care option, 38,000 of whom will have to return to
the Medicare fee-for-service program. These enrollees may supplement
their lost benefits by purchasing a Medigap policy. The Medicare
statute requires guaranteed issue for plans A, B, C, or F with any
company within 63 days if the plan terminates coverage in a
beneficiary's service area, but not if benefits are reduced or cost
sharing is increased.
The Subcommittee is investigating recent reports that certain plans
will significantly reduce benefits and increase premiums and cost
sharing next year as a result of inadequate payments.
``Clearly, we are at a crossroads for Medicare+Choice. Recent
benefit changes and cost sharing increases point to a fundamental flaw
in the underlying payment formula that does not accurately reflect the
cost of providing health services. Some fundamental changes are
necessary this year to rationalize the payment and regulatory structure
so seniors and the disabled who choose a Medicare+Choice plan enjoy the
full range of supplemental benefits like prescription drugs and disease
management not available in traditional Medicare,'' stated Chairman
Johnson.
FOCUS OF THE HEARING:
Tuesday's hearing will focus on announced reductions in benefits
and increases in cost sharing and premiums beneficiaries face next year
as a result of plan decisions. The Subcommittee is interested in
whether plans are meeting their requirement to provide all Medicare
covered services and what needs to be done to improve benefits for
seniors.
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Please note: Due to the change in House mail policy, any person or
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noted above.
Chairman Johnson. Hearing will come to order. Welcome, Mr.
Scully. Nice to have you back before the Committee.
We are here today because seniors are terribly upset by
losing access to their Medicare+Choice health care plans and
facing increasing premiums and changed benefits from those
benefits offered by these plans in the past. In other words, I
want to really put clearly on the record that we are here
because seniors value their Medicare+Choice plans, and they are
anguished, upset, frustrated and angry by the demise of those
plans.
Enrollment in Medicare had been increasing steadily until
changes mandated in the Balanced Budget Act (BBA) 1997. Since
that time enrollment has declined by 800,000 beneficiaries, or
about 12 percent. Prescription drug coverage has been
eliminated or cut back dramatically, and even as benefits
decline, program participants' cost-sharing in premiums have
increased in some areas significantly.
Next year, 500,000 seniors in 28 States will be forced to
change their health coverage or move back to Medicare fee-for-
service largely because increases in reimbursements have not
kept pace with health care inflation. In fact, in the counties
where most Medicare+Choice beneficiaries live, fee-for-service
reimbursements have risen at twice, that is two times, the rate
that Medicare+Choice reimbursements have risen.
And I might also add that even those reimbursements that we
have offered to Medicare+Choice have not been delivered. Of the
5.8 billion scored by the Congressional Budget Office (CBO)
after the Balanced Budget Reconciliation Act (BBRA), only 2.2
billion was received by the plans because of the budget
neutrality provisions elsewhere in that legislation.
Seniors are confused. They are angered by the
unpredictability of Medicare+Choice plans because these plans
have provided attractive and welcomed benefits, an alternative
to traditional fee-for-service Medicare that beneficiaries
value. Importantly, Medicare managed care plans provide health
services that are unavailable to their counterparts.
Consider these statistics. All plans offer annual
physicals, a benefit sorely lacking in fee-for-service
Medicare. Virtually all plans have at least one disease
management program, and the average plan has four disease
management programs in place for seniors with chronic illness,
and usually multiple chronic illnesses. This approach is
extremely productive of good health and a higher quality of
life. Ninety-five percent of plans have diabetes disease
management programs. In 2001, 67 percent of Choice plan
beneficiaries had access to some prescription drug coverage.
Ninety-four percent of Plus Choice beneficiaries have vision
care; 78.8 percent have hearing care. These are benefits that
are not available in traditional Medicare. And seniors are
making it abundantly clear that they prefer Medicare+Choice to
fee-for-service Medicare.
At a minimum, we should reimburse these plans 100 percent
of the fee-for-service cost or its full blended rate. This
would provide the stability needed if, in addition, we create a
more intelligent and less burdensome regulatory environment.
Indeed, it is truly incredible that the General Accounting
Office (GAO) could report that there is no one source plans can
go to find the rules and regulations governing them.
The Medicare+Choice program is at a crossroads. Years of
underfunding in many areas of the country and increasingly
heavy regulations have resulted in reduced benefits, increased
beneficiary costs and plans leaving the market. While last year
very modest funding increases helped 2.9 million beneficiaries
by lowering premiums and maintaining access to plans, next year
costs will increase, and reimbursements will again rise a mere
2 percent or less. This is causing premium increases,
additional restrictions on benefits and more plan withdrawals.
This, in turn, is causing frustration, confusion and a sense of
hopelessness for many seniors who have come to count on the
many benefits of Medicare+Choice plans, and who find sufficient
Medigap plan choices unavailable or too expensive and fee-for-
service Medicare inadequate.
I would point out that I think one of the most burdensome
aspects of the--of our failure to be able to support
Medicare+Choice appropriately is that the people who are hurt
the most are low-income seniors, the ones that are not so poor
that they are helped by Medicaid, but not able to afford
Medigap. And it is this group that the zero premium choice
plans or the low-cost choice plans were a real Godsend to,
because it meant they could go to the doctor and get health
care without the 20 percent copayments.
In the past, underfunding Medicare+Choice, at least
originally, was sort of seen as tolerable because, and I quote,
as I have heard my colleagues say many times before, well, they
can always go back to Medicare fee-for-service. What we see
today is they don't like Medicare fee-for-service. One of the
big complaints that we are going to hear later on is that
seniors in Wisconsin are losing coverage for dialysis that is
very dear to them. In fact, the coverage they are losing throws
them back into the Medicare fee-for-service copayment
structure. It is too expensive. They can't afford it.
But I think the big message here that we have often missed
in talking about Medicare+Choice is that seniors need that
option because it provides better benefits and the ability to
manage chronic illness. Medicare--the Medicare statute requires
plans to provide actuarial value of the Medicare-covered
benefits. Mr. Kleczka and many seniors in my district have
brought to my attention that the variations in some areas in
benefits raise compliance questions.
A second issue is the eligibility of seniors for other
plans. Under current law, seniors are guaranteed access to
Medigap plans if their Medicare plan withdraws from the market.
No such guarantee exists if the plan raises premiums or changes
its benefit package dramatically. What would be the
consequences of such a guarantee for seniors? What would be the
consequences for seniors? What would be the consequences of the
Medigap plans and, therefore, the availability of Medigap to
all seniors?
It is clear that we must take on the challenge of fixing
Medicare and stabilizing it for future years so that seniors
have the choices that we promised them. It is also a pleasure
to note that as we go to the floor this evening with the
regulatory reform bill, we will pass a bill that will waive the
lock-in by 1 year, and move the adjusted community filing date
from July to mid-September, and also lengthen the enrollment
period from 1 month to a month-and-a-half. These small changes
will help, but they are merely a down payment on the regulatory
reform efforts that have to be made to stabilize
Medicare+Choice along with the funding issues which we are all
now keenly aware of.
I look forward to working with you, Mr. Scully, and with
the President and my colleagues on this Committee, and I
congratulate you for the tremendous efforts that you have made
administratively to simplify the governance of Medicare+Choice
and encourage the plans to stay in. But it is this Congress's
obligation to take this issue head on, because seniors clearly
are being well served by the Medicare choice plans. They like
them. They have a right to that choice. And it is abundantly
clear now, as I think will come out over the course of today's
hearing, that we have been negligent by even supporting them
with the same level of reimbursement increases that we have
supported fee-for-service Medicare.
[The opening statement of Chairman Johnson follows:]
Opening Statement of the Hon. Nancy L. Johnson, a Representative in
Congress from the State of Connecticut, and Chairman, Subcommittee
on Health
Today, the Ways and Means Committee continues its examination of
the Medicare+Choice program. This is the ninth hearing by the Ways and
Means Committee or Health Subcommittee on Medicare this year, and the
second on Medicare+Choice.
I am pleased to welcome Tom Scully, the Administrator of the
Centers for Medicare and Medicaid Services, back to the Subcommittee.
The Medicare+Choice program is at a crossroads. Since enactment of
the Balanced Budget Act, the viability of this important option has
faltered, with sagging enrollment, reduced benefits and increased
beneficiary costs. Despite two Congressional attempts to breathe life
back into the program, enrollment will once again decline next year.
While last year's Beneficiary Improvement and Protection Act reduced
premiums and allowed plans to continue serving 2.9 million
beneficiaries, next year costs will increase, and additional
restrictions on benefits will be imposed.
Enrollment in Medicare managed care had been increasing steadily
until the changes mandated by BBA 97. Since that time, enrollment has
declined by about 800,000 beneficiaries or about 12 percent.
Prescription drug coverage has been eliminated or cut back dramatically
in recent years, while program participants' cost sharing and premiums
have increased, in some areas significantly. In 2002, only half of the
Medicare population will have access to at least one Medicare+Choice
plan with drug coverage, down from 65 percent in 1999. In addition,
only one-third of the Medicare population will have access to a zero
premium plan in 2002, down from 61 percent in 1999. Cost sharing for
Medicare-covered services will jump 78 percent in 2002, from $14.88 per
enrollee, per month, to $26.60 per enrollee, per month.
Next year more than 500,000 Medicare beneficiaries in 28 states
will be forced to change their health coverage or move back to Medicare
fee-for-service largely because reimbursement has not kept pace with
health care inflation. Ninety-two thousand beneficiaries will no longer
have a coordinated care option, 38,000 of whom will have to return to
the Medicare fee-for-service program. These enrollees may supplement
their lost benefits by purchasing a Medigap policy. The Medicare
statute requires guaranteed issue for plans A, B, C, or F with any
company within 63 days if the plan terminates coverage in a
beneficiary's service area, but not if benefits are reduced or cost
sharing is increased.
Despite these disappointing facts, Medicare+Choice has provided an
attractive and welcome alternative to traditional fee-for-service for
millions of Medicare beneficiaries. Importantly, Medicare managed care
plans provide health services that are unavailable to their
counterparts.
Consider these statistics:
Virtually all plans have at least one disease
management program.
The average plan has four disease management
programs in place.
95% of plans have a diabetes disease management
program.
In 2001, 67.2 percent of Plus Choice beneficiaries
have access to prescription drug coverage.
94.1 percent of Plus Choice beneficiaries have
vision care.
78.8 percent of Plus Choice beneficiaries have
hearing care.
99.7 percent of Plus Choice beneficiaries are
provided an annual physical.
These are benefits that are unavailable in traditional Medicare.
We have heard testimony in this Committee on a number of occasions
that Medicare+Choice plans are overpaid. Pairing that testimony to the
changes occurring in the Medicare managed care market defies logic.
Plans don't leave profitable areas because they make too much money.
Nor do they reduce benefits and increase premiums on a whim. In fact,
the Medicare statute requires plans to provide the actuarial value of
all Medicare covered benefits, and to offer additional benefits or
rebates on Part B premiums if federal payments exceed anticipated plan
costs.
Because of the continued plan exodus and the erosion of value of
benefits received, it is clear to me we need to immediately stabilize
the program through a short term infusion of additional dollars that
will more accurately reflect the costs of providing health services. In
the mid-term, Congress needs a whole-scale restructuring of the payment
formulas to ensure the long-term viability of the Medicare+Choice
program.
Recent ideas to peg funding to input prices or pay plans based on
certain quality indicators, making government a value purchaser, are
intriguing and merit further investigation.
In addition, Congress must take measured steps to improve the
regulatory environment for plans. Today, the House will pass
legislation to delay implementation of the so-called ``lock-in'' by one
year, move the filing date for adjusted community rate filing from July
to mid-September and lengthen the open enrollment period from one month
to a month and a half.
While the challenge we face is daunting, it is not insurmountable.
I look forward to working with you, Mr. Scully, with the President, and
with my colleagues on the Committee, to get the job done.
Chairman Johnson. Mr. Stark.
Mr. Stark. Thank you, Madam Chair, for holding this
hearing. We appreciate your willingness to use our
Subcommittee's resources to investigate the questionable, if
not illegal, benefit and cost-sharing changes being proposed by
some of the Plus Choice plans for next year.
The impetus of this hearing really came from a proposal by
UnitedHealthcare for beneficiaries in Milwaukee, Wisconsin,
represented by Mr. Kleczka and our Committee, and this plan
contains--or their plan for next year contains excessive cost-
sharing increases that may well violate the statute's
requirement that these Plus Choice plans cover at least all
Medicare-covered services. And while United is the most extreme
example I have seen, I am aware of other benefit packages
offered in my district and other parts of the country that
raise similar concerns.
Beneficiaries join these Plus Choice plans because the
plans hold out the opportunity supposedly to get all of
Medicare's benefits in addition to lowered cost-sharing and,
depending on where you live, additional benefits like
prescription drugs, vision care, hearing aids, as you pointed
out. But at a minimum, the plans are required to employ all
Medicare-covered services. The plans are gaming this, and they
are gaming it with benefit packages for next year, and it calls
into serious question whether they are fulfilling their
obligations under the law.
If you join a Medicare+Choice plan, you are prohibited by
law from also owning a Medigap policy. Yet Medicare+Choice
seniors in Milwaukee next year will face hospital charges that
will far exceed the $812 deductible in Medicare fee-for-
services. Beneficiaries in my district will pay $50 for each
dialysis visit. Medicare-covered drugs that are self-injected
or used for chemotherapy will cost some beneficiaries $250 a
treatment; that is, out of their own pocket. Under these plans,
the beneficiaries are paying more in Medicare+Choice than they
would in fee-for-service Medicare. So if you are a low-income
senior or person with disability, these Plus Choice plans with
this kind of cost-sharing are a worse option than fee-for-
service on its own.
These are Medicare coverage services that they are playing
with, and the Plus Choice plans are upping the costs of these
particular benefits for only one reason, and that is to avoid
covering people that need those benefits. That is why I, along,
I think, with my colleague from Milwaukee and a number of
others have joined to introduce the Medicare+Choice Consumer
Protection Act. This bill would do three things to help
Medicare+Choice enrollees--not the plans, but the enrollees for
a change. For beneficiaries who have seen their benefits
eroded, it provides them with Medigap protections to leave
Medicare+Choice and join a Medigap plan without medical
underwriting. It eliminates the upcoming lock-in which would
prohibit them from them being able to leave a Medicare+Choice
plan and in general prohibits Medicare+Choice plans from
charging higher cost-sharing for particular services than is
charged in the Medicare fee-for-service program.
The Health Maintenance Organization (HMO) industry has won
the battle to continually delay risk adjustment, which means we
continue to overpay for the relatively low-risk population they
serve. Now they are using benefit and cost-sharing techniques
to further avoid risk and ensure minimal expenditures on this
line of business. It is time we blew the whistle. Our bill
would prohibit these practices and make the playingfield a
little bit fairer for beneficiaries.
Now, unbelievably at the same time these plans are reducing
coverage for Medicare-covered services, the HMOs are up here on
the Hill trolling for increased payments. I hope everyone has
an opportunity to review this new GAO report we released today
entitled Medicare+Choice Recent Payment Increases Had Little
Effect on Benefits or Plan Availability in 2001. As the title
indicates, the report makes clear that the billion dollars in
extra funds that went to Medicare HMOs this year did nothing to
increase benefits or plan options for people. It is further
evidence that what we need in Medicare+Choice are consumer
protections, not additional money.
I am pleased that Mr. Scully and the representative from
UnitedHealthcare are here to answer questions about their
process for approving Medicare+Choice plans and the United
proposal in particular. In addition, I would like to welcome
Ms. Stephanie Sue Stein and thank her in advance for
representing the beneficiary perspective.
I would say, Madam Chair, that it is perhaps time we
recognize that less than 15 percent of the seniors have signed
up for these Plus Choice plans. They have caused more problems
than all the rest of Medicare put together. The premium support
plan that the Medicare Commission came up with is a blatant
attempt to shove people into these Medicare+Choice plans. So
when you don't have one in eight people who like them, why
don't we just can them, use the money to support the Medicare
system, provide perhaps a Federal Medigap policy that would
cover all of our beneficiaries fairly, and one of these days we
might even get around to a drug benefit if we stop giving big
tax breaks to wealthy people.
[The opening statement of Mr. Stark follows:]
Opening Statement of the Hon. Fortney Pete Stark, a Representative in
Congress from the State of California
Thank you, Madame Chair, for holding this hearing at the request of
the Democrats. We appreciate your willingness to use the subcommittee's
resources to investigate the questionable--if not illegal--benefit and
cost-sharing changes being proposed by some Medicare+Choice plans for
2002.
As you know, the impetus for this hearing comes from concern
regarding a proposed plan submitted by UnitedHealthCare for
beneficiaries in Milwaukee, WI which is represented by the Honorable
Jerry Kleczka on our committee. This plan contains excessive cost-
sharing increases that may well violate the statute's requirement that
M+C plans cover at least all Medicare-covered services. While United's
plan is the most extreme example I have seen, I am also aware of other
proposed benefit packages offered in my district and in other parts of
the country that raise similar concerns.
Beneficiaries join Medicare+Choice plans because they hold out the
opportunity to get all of Medicare's benefits in addition to lowered
cost-sharing and, depending on where you live, additional benefits like
prescription drugs, vision care, and hearing aids. At a minimum, the
plans are required to provide all Medicare-covered services.
However, the gamesmanship being played with the benefit packages in
many Medicare+Choice plans for next year calls into serious question
whether these plans are fulfilling their obligation under the law.
If you join a Medicare+Choice plan, you are prohibited by law from
also owning a Medigap policy. Yet, Medicare+Choice seniors in Milwaukee
will next year face hospital charges that will far exceed the $812
hospital deductible in Medicare fee-for-service. Beneficiaries in my
district will pay $50 for each dialysis visit. Medicare-covered drugs
that are self-injected or used for chemotherapy will cost some members
$250 a treatment. Under these plans beneficiaries will pay more in
Medicare+Choice than they would in FFS Medicare. If you are a low-
income senior citizen or a person with a disability, Medicare+Choice
with this kind of cost-sharing is an even worse option than fee-for-
service Medicare on its own.
These are Medicare-covered services that they are playing with and
Medicare+Choice plans are upping the cost of these particular benefits
for only one reason--to avoid covering people that need those benefits.
That's why Rep. Kleczka, myself, and a number of other colleagues
in Congress joined together to introduce the Medicare+Choice Consumer
Protection Act.
This bill does three simple things to help Medicare+Choice
enrollees. For beneficiaries who have seen their benefits eroded, it
provides them with Medigap protections to leave Medicare+Choice and
join a Medigap plan without medical underwriting. It eliminates the
upcoming ``lock-in'' which would prohibit beneficiaries from being able
to leave a Medicare+Choice plan at their choosing. And, in general, it
prohibits Medicare+Choice plans from charging higher cost-sharing for
particular services than is charged in the Medicare fee-for-service
program.
The HMO industry has won the battle to continually delay risk
adjustment which means that we continue to overpay them for the
relatively low-risk population they serve. Now, they are using benefit
and cost-sharing techniques to further avoid risk and ensure minimal
expenditures on this line of business.
We need to say no. Our bill would prohibit these practices and make
the playing field a bit fairer for beneficiaries.
Unbelievably, at the same time that these plans are reducing
coverage of Medicare-covered services, the HMOs are up on Capitol Hill
trolling for increased payments. I hope everyone has an opportunity to
review a new GAO report we've released today entitled,
``Medicare+Choice: Recent Payment Increases Had Little Effect on
Benefits or Plan Availability in 2001.'' As the title indicates, the
report makes clear that the $1 billion in extra funds that went to
Medicare HMOs this year did almost nothing to increase benefits or plan
options for people. It is further evidence that what is needed in
Medicare+Choice are additional consumer protections--not additional
money.
I am pleased that CMS Administrator Scully and a representative
from UnitedHealthCare are here today to answer questions about the
agency process for approving Medicare+Choice plans and the United
proposal in particular. In addition, I'd like to welcome Stephanie Sue
Stein and thank her in advance for representing the beneficiary
perspective.
Mr. Johnson Of Texas. Would the gentleman yield?
Mr. Stark. I will be glad to yield.
Mr. Johnson Of Texas. You know, there are people who don't
like Medicare, too, and why don't we do away with it?
Mr. Stark. Well, Mr. Scully doesn't like Medicare. We will
hear from him about that.
Mr. Johnson Of Texas. Well, that is great. I am glad we got
somebody on our side. Thank you.
Chairman Johnson. There are differences of opinion--there
are differences in opinion in regard to Medicare+Choice plans.
There are differences that we need to air and evaluate as a
Committee. I do regret that Mr. Stark today chose to give us a
copy of a GAO report that he has had only as we sat down.
Indeed, Pete, I think that violates the spirit in which we have
been working, and if we are ever going to work out our
differences of opinion about Medicare+Choice, we are going to
have to give up such gamesmanship.
Mr. Stark. Madam Chair, you are quite right. At least I
invited you to the meeting, which as a courtesy, you don't
always extend to the Democrats. So at least we gave you the
information as soon as we got it.
Chairman Johnson. At the time of the meeting, yes--at the
hearing.
Mr. Kleczka. Madam Chair, I would like to ask unanimous
consent to enter my statement into the record.
Chairman Johnson. You certainly may.
[The opening statement of Mr. Kleczka follows:]
Opening Statement of the Hon. Gerald D. Kleczka, a Representative in
Congress from the State of Wisconsin
I would like to thank Chairwoman Johnson for accepting my request
for a hearing to investigate the reductions in benefits and dramatic
increases in cost-sharing that beneficiaries face next year as a result
of private decisions by Medicare+Choice plans.
I am particularly pleased that the Subcommittee has invited, at my
request, Ms. Stephanie Sue Stein, Director of the Milwaukee County
Department on Aging. Ms. Stein is a tireless advocate for senior
citizens in Milwaukee and throughout the State of Wisconsin. I am
confident that she will provide the Subcommittee a compelling, first-
hand account of the devastating effects the benefit reductions are
having on seniors and their families. Last month, UnitedHealthcare of
WI notified 16,000 seniors in the Milwaukee area that their ``PrimeCare
Gold'' Medicare+Choice plan would be changing to a new ``Medicare
Complete'' plan beginning January 1, 2002. Although UnitedHealthcare
decided to lower beneficiaries' premiums from $65 to $55 per month, the
insurer significantly increased rates and reduced benefits for numerous
health services. For instance, last year, under the PrimeCare Gold
plan, beneficiaries were not subject to a copayment for inpatient
hospital services. Under the new Medicare Complete plan, beneficiaries
will have to pay a copayment of $295 per day. Likewise, for the first
time, beneficiaries in Medicare Complete will have to pay $150 per day
for skilled nursing facility services, $30 per visit for outpatient
rehabilitation, and 20 percent per outpatient visit for renal dialysis.
In addition, Medicare Complete has a $4,800 out-of-pocket limit on
inpatient and outpatient services. Unlike the new name, this coverage
is by no means ``complete.''
The Medicare+Choice program was intended to provide more health
insurance options and benefits for seniors at less cost. As so many
Wisconsin seniors know, it has failed to deliver such promises. Since
UnitedHealthcare is the last remaining Medicare+Choice plan in the
Milwaukee area, senior citizens will be forced to pay significantly
higher rates or return to the traditional fee-for-service Medicare
program. But, if they do so, they are unable to purchase a Medigap
supplemental policy without penalty.
To express my opposition to UnitedHealthcare's dramatic price
increases, I wrote a letter to Mr. Tom Scully, Administrator of the
Centers for Medicare and Medicaid Services (CMS), and requested his
immediate intervention to reject these benefit changes and to ensure a
viable Medicare+Choice option is available to Milwaukee residents. I
have included a copy of this correspondence for the record. In
addition, I have spoken personally with both Administrator Scully and
U.S. Department of Health and Human Services Secretary Tommy Thompson
to urge them to renegotiate this plan.
Both Mr. Scully and Secretary Thompson have been attentive to my
plea on behalf of Wisconsin seniors enrolled in UnitedHealthcare's
plan. Mr. Scully, in particular, has been responsive and has notified
me during each step of the CMS approval process. I appreciate his
personal attention to and concern regarding this critical matter.
Although some progress was made to lower the hospital inpatient
copayment, I still believe that $295 per day for hospital inpatient
services is outrageous and unacceptably high. A senior enrolled in
Medicare Complete plan could be required to pay up to $4,800 for an
inpatient hospital stay that would cost $812 under the traditional fee-
for-service Medicare program. This is ludicrous, and I question its
legality. Certainly, such a plan was not the intent of Congress.
Regrettably, CMS approved the plan, so I have taken other steps to
help protect seniors who find themselves trapped in a plan in the
future that no longer meets their financial or health needs. I have
cosponsored legislation, entitled the Medicare+Choice Consumer
Protection Act of 2001 (H.R. 3267), that would extend much-needed
protections to seniors who would like to exit their Medicare+Choice
plan due to the high rates and return to the traditional Medicare
program with a supplemental Medigap plan.
Under current law, seniors whose Medicare+Choice plan drops their
coverage have the option to buy Medigap insurance to supplement
traditional Medicare without penalty. During this time, an insurance
company that sells Medigap policies cannot: refuse to sell the policy
to the beneficiary; impose a waiting period, exclude coverage for a
pre-existing condition, or, charge a higher price for the policy
because of health status.
Unfortunately, these protections are not provided to senior
citizens who choose to disenroll in their Medicare HMO due to reduced
benefits or increased cost-sharing. This critical legislation would
ensure that seniors who leave their Medicare HMO for those reasons
would be able to purchase Medigap supplemental insurance without
penalty. H.R. 3267 would also prohibit Medicare+Choice plans from
charging higher cost-sharing for a service than Medicare charges in the
fee-for-service program, which has been of debate in UnitedHealthcare's
Medicare Complete plan. It is imperative that the Subcommittee quickly
considers this or other comparable legislation to ensure seniors have
the time to carefully review their health care options and be assured
the best possible care.
In the meantime, I am pleased that CMS seems to have heeded the
concerns of senior citizens--at least for this year--by calling for a
Special Enrollment Period (SEP), in which seniors can leave their
Medicare HMO and have guarantee issue rights to purchase a Medigap
policy. I look forward to hearing more details about this SEP from
Administrator Scully during today's hearing. In particular, I hope to
learn how CMS intends to notify seniors of this new special right to
disenroll without penalty.
Again, I thank Chairwoman Johnson and Ranking Member Stark for
their willingness to put a spotlight on the current situation in
Milwaukee, Wisconsin and investigate the drastic reductions of benefits
and increases in cost-sharing for beneficiaries in Medicare HMOs next
year.
Chairman Johnson. Mr. Scully.
STATEMENT OF THE HON. THOMAS A. SCULLY, ADMINISTRATOR, CENTERS
FOR MEDICARE & MEDICAID SERVICES
Mr. Scully. Good morning, Chairwoman Johnson and
Representative Stark and members of the Subcommittee. Thanks
for having me here today to talk about Medicare+Choice.
I would like to start off by saying I do, in fact, care a
lot and do like the Medicare program. I have spent a lot of
time in the last 20 years with Mr. Stark on things like RBRVS,
resource based relative value scale, which we worked on 15
years ago or 20 years ago, and various other things trying to
improve the Medicare program. And, in fact, contrary to, one of
my more widely quoted but inaccurate statements, which I never
said, I was attributed, as recently as this morning, in the
paper to wanting to expand Medicare+Choice to 30 percent of the
population. I, in fact, have never said that.
What I said months ago in a speech was that Congress and
the CBO projected that Medicare+Choice, in 1997, would expand
to 30 percent of the population, and that has not happened. In
fact, the program has shrunk and is now at about 14 percent of
the population. But it is not, in fact, a goal of the Bush
administration or of mine to expand it to 30 percent.
I hope that I show balance in my interest in supporting the
Medicare+Choice program and the fee-for-service program, which
I have spent a lot of my time and my career working on. And I
hope you find that in my 6 months at the Agency, that balance
has been pretty fair.
Anyway, Medicare+Choice, I think, is, in fact, a very
important option for many of our seniors. It has enabled them
to take advantage of a lot of the benefits, extra benefits and
services than Medicare beneficiaries in fee for service get.
These can include in some areas, in some counties, prescription
drugs, routine vision care and dental care.
Medicare+Choice can, in fact, make it unnecessary for
seniors to purchase increasingly expensive Medigap plans. Those
premiums are often higher than the Medicare premium itself. And
I believe if you look at the demographics of the
Medicare+Choice program, it is disproportionately low-income
people that choose the Medicare+Choice program because it gives
them the ability to frequently trade off slightly larger
networks of coverage for drug coverage and lower co-payments.
And I think it is a very viable and very important option,
especially for low-income people, to have, and one that is
unfortunately becoming more expensive and increasingly
disappearing.
As you know, the Medicare+Choice program has changed a lot,
not for the better, in recent years. I have given each member
of the Committee--I think I have put up for the press--a recent
set of charts that talk about Medicare+Choice changes in
access, premiums, and benefits from 2001 to 2002, and I think
it gives you a very detailed picture of what is going on in the
program and how the benefits are changing and how access to the
benefits is changing. Obviously, hundreds of plans have left
the program in recent years. They have had their service areas
reduced, and as you can see in the chart in the back of my
testimony, beneficiary access to the plans has dropped by about
15 percent over the last few years.
Medicare+Choice can't get access to extra services to these
Medicare beneficiaries who want them if there is not a plan to
sign up for. In 1999, there were about 1,200 adjusted cost
rations (ACR) filed by managed care plans across the country.
This year that number dropped to 474. So you can see that
obviously this is a significant dropoff in plan offerings. Plan
offerings are also far less generous in their drug benefits.
Plans that have been offered with zero premiums or no
significant beneficiary cost-sharing have largely disappeared.
It is very clear that annual increases in the
Medicare+Choice program have failed to keep up with the rising
health care costs and inflation. As a result the plans who stay
in the program are left with two clear options, either reduce
their benefits and increase beneficiary cost-sharing, or get
out of the program. We have taken every administrative action
we can possibly think of to try to stabilize the program and
make it easier for plans to stay in, but it is clear that much
more needs to be done to this program to protect what I think
is still a viable option for many beneficiaries in many
counties. I really believe, and the administration believes,
that if Congress doesn't act to fix many of the problems in the
program, the program will, in fact, blow away in the wind in
the next few years.
Unfortunately, we are seeing a greater share of
Medicare+Choice health care costs borne by beneficiaries, as we
are going to talk about in a few minutes, I am sure, in
Wisconsin. We are very concerned about that, and we have been
tracking it closely. In our guidance to Medicare+Choice
organizations this year, we advised them that their 2002
beneficiary cost-sharing proposals would be examined very
closely. This year we identified a number of Medicare+Choice
plan cost-sharing proposals that we thought were unreasonable,
and we worked with the identified organizations to make the
changes that we could in those programs. We are very interested
in protecting beneficiaries and in being good business partners
with the plans that are trying to provide those services, and
we worked as closely as we could to make those plans better.
The staff, after the ACRs were filed this year, identified
seven plans that they thought had beneficiary cost sharing that
was not appropriate. We worked with each of those to make
changes in the plans and did everything we could to make
adjustments. For example, I worked extensively with Congressman
Kleczka on some obviously very difficult issues with
UnitedHealthcare of Wisconsin. And I appreciate all your help
in working those out, Mr. Kleczka. We did make some changes in
that plan. I really believe that in United's case--I am sure we
will talk about this--their choice was to either get out of the
program or change their benefit structure. We made some modest
changes to their benefit structure. I also spent a lot of time
looking at their finances and was convinced that basically they
were making virtually no money on this plan and had a combined
loss ratio of virtually 100 percent.
Mr. Stark, I know you may not be aware of this, but, in
fact, the plan in your district that had the $50 dialysis
copayment has, in fact, lowered that dialysis copayment to $25
after we looked into that very specific issue.
Additionally, we are working to develop specific guidelines
for plans that we hope will address the situation we faced this
year when they submit plans for next year, as again I am sure
we will discuss.
Our ability to either let plans in or deny them access to
the Medicare+Choice program is somewhat limited. I am also
happy to tell you--and this is something we recently
discovered, and I think Mr. Kleczka knows because I told him on
Friday--that we were not even aware legally because we declared
a special election period for December, in fact,
Medicare+Choice beneficiaries that want to drop out of their
Medicare+Choice plan, even if it still exists in their county,
such as United, do, in fact, have the ability during the month
of December to drop out of the plan and will have guaranteed
issue rights to Medigap plans up through March 4, 2002. So I
believe it is relatively happy news.
So our concern, which I share with Mr. Kleczka, that people
in certain districts where they have only one plan left with
high copayments would be effectively trapped in that plan and
not have the ability to drop out is, in fact, not the case. For
this year, if they drop out in December, they can, in fact, get
guaranteed issue to Medigap plans.
We are also trying to take important steps to make sure the
beneficiaries know their health plan options and how to get
answers to all of their Medicare questions. We, as you know,
launched the $30 million advertising campaign to get seniors to
call 1-800-MEDICARE and to use our Web site. We have, in fact,
peaked at 65,000 calls a day. We are still getting about 30,000
calls a day. There is significant evidence that seniors are
starved for information about those plans. We added 1,200
operators to our call centers. The call centers went from 5
days a week, 8 hours a day, to 24 hours a day, 7 days a week.
They provide a whole new level of information that wasn't
available last year. So if somebody calls up from Milwaukee and
asks about their Medigap options, their plan options, their
copayments or any plan offered in Milwaukee, for instance,
hopefully, and I have tried this many times, an operator will
be able to walk them through those options and walk them
through our Web site.
So I believe that the information that is available for
beneficiaries is a lot better than last year. It is still a big
challenge to make sure the beneficiaries know what their
options are, and we are obviously very anxious to work with you
to make sure that everybody knows exactly what their options
are before the end of the open season period.
Medicare+Choice is still an important option for millions
of Medicare beneficiaries, and we are committed to working hard
to make the program work and remain a viable option for the
seniors that want it.
Let me just make a couple more points, and then I will wrap
up. We have, in addition to the Medicare+Choice changes in
benefits that I provided to the Committee and, I think, to the
press, we also--and this is the first of a series--put out a
health care market industry update and provided that for the
Committee. We sent that out to a wide variety of people in
Washington last week. I believe, having been involved in the
managed care and hospital business for a long time, as the
regulators of this business, it is our responsibility to make
sure that we track what their profit margins are, how much
money they are making on Federal programs, what the average
return is. And this is the first of many market reports we are
planning to put out.
This one is on managed care and shows the margins on
managed care, but what it basically shows is the managed care
business made a tremendous recovery in their commercial markets
the last couple of years, but the direct correlation is the
plans that have stayed in Medicare+Choice are doing terribly.
They are the ones that are the worst investments, whether you
are a bondholder or a shareholder. And their shareholders and
bondholders are pushing them hard to get out of the
Medicare+Choice program because their margins and their profits
have recovered enormously in the commercial markets, and they
are terrible in Medicare+Choice program. And anybody that is in
the managed care business basically is getting a lot of
pressure from their bondholders and their shareholders to get
out of the business.
Another point I would make, which Mrs. Johnson made, is
that when we passed the 1997 bill, the 1999 bill and the 2000
bill, one of the theories out there about new money--and I
think what Mr. Stark alluded to--one of the points in the GAO
study which I have looked at--they did give it to us for
clearance--is that essentially a lot of the money that was put
back in the program was put back in relatively rural areas on
the theory that if you build it, they will come. If you put
money in those areas, managed care plans will come.
Well, there aren't many managed care plans in those areas,
and they, in fact, haven't shown up. So I think one of the
points you can draw from the funding that has been put back in
the program is that it has been put back in largely rural areas
where the program is not popular. There aren't managed care
plans in those areas, and they haven't shown up, and so the
money has been largely unspent. And what has happened is that
the urban areas and the suburban areas, where it is popular,
have largely been starved.
So I believe if you go back to the 1999 and 2000 bills and
look at what CBO projected would be spent in those areas, you
could make a very strong argument that the number is about a
billion dollars a year that was expected to be spent in the
Medicare+Choice program that is not being spent. The money has
been allocated to those counties, and there are no plans for
beneficiaries to enroll in. So I think you can make a clear
point.
And one final point, if you look at the years 1998 to 2002,
commercial premiums in that timeframe have gone up 49 percent.
In the Federal Employee Health Benefits Plan (FEHBP) that we
are all in, premiums have gone up an average 46 percent.
Medicare fee-for-service has gone up 21 percent, and yet
Medicare+Choice has gone up 11 percent. So it is pretty clear
that when you look at the comparison in the health care
business, what has happened is that costs have gone up, and the
Medicare+Choice reimbursement has been relatively flat. So it
is a very basic calculation for the plans. They have to raise
their co-payments, raise their deductibles, raise their
premiums or get out of the program. They are just not keeping
up with their costs.
I'll just make one last point just to wrap up. I think
fixing this funding is essential. I don't think there is any
clear way to do it. Bob Berenson, who worked in the last
administration, made a number of very constructive suggestions
in a Health Affairs article that was just published last week.
There are many ways to fix the program and fund it. The
administration is very interested in working with all of you to
do that. I really believe that structural changes to fix
funding are essential, and we also believe that structural
changes to make the program more consumer-friendly are
essential. Basically virtually every plan in the
Medicare+Choice program is a traditional closed-panel managed
care plan, and in the under 65 population what people want and
what seniors want are Preferred Provider Organizations (PPO)
and point-of-service plans. Those are virtually nonexistent in
the Medicare program.
And two things we need to do is fix the funding stream,
one, and two, give seniors what they want, which is what all
beneficiaries want, which is greater flexibility in having
managed care plans that are not traditional closed-panel HMOs,
but that have point-of-service options, PPO options, and give
people the flexibility to choose benefits and plans they want.
Thank you for having me today.
Chairman Johnson. Thank you very much, Mr. Scully.
[The prepared statement of Mr. Scully follows:]
Statement of the Hon. Thomas A. Scully, Administrator, Centers for
Medicare & Medicaid Services
Chairman Johnson, Representative Stark, distinguished Subcommittee
members, thank you for inviting me to discuss the Medicare+Choice
program, and more specifically the level of beneficiary cost sharing
some Medicare+Choice enrollees will be asked to pay next year to remain
in the plans. Medicare+Choice is an important option for millions of
our nation's elderly and disabled, and I appreciate the opportunity to
discuss it with you today.
Medicare+Choice has enabled us to take advantage of private sector
expertise to give Medicare beneficiaries more services for their
premium, often with lower cost sharing and more benefits than are
available under traditional Medicare. The private companies that
provide Medicare+Choice benefits are required to cover all of the
health care services that a beneficiary could receive in original, fee-
for-service Medicare. Moreover, Medicare+Choice plans are valuable to
beneficiaries because they traditionally improve on fee-for-service
Medicare benefits by offering programs and covering services that are
not covered under original Medicare. These can include prescription
drugs, routine vision care, dental care, and lower copayments. They
also make it unnecessary to purchase increasingly costly supplemental
Medigap plans, with premiums that are often two or three times higher
than the Medicare premium itself. By making these services and
additional benefits available, Medicare+Choice provides more options to
millions of people who are covered by Medicare in how they receive
their health care; and millions are able to lower their health care
expenses substantially. In addition, Medicare+Choice plans provide a
valuable alternative to fee-for-service Medicare and Medigap, whose
out-of-pocket costs are often much higher for beneficiaries.
As you know, the Medicare+Choice program has changed significantly
in the last several years. Hundreds of plans have left the program or
reduced their service areas affecting hundreds of thousands of
beneficiaries. Plans with both zero premiums and no significant
beneficiary cost sharing have largely disappeared. In addition, plans
are offering less generous drug benefits. This is because annual
increases in Federal Medicare+Choice funding have failed to reflect
rising health care costs. Unfortunately, as a result, plans that wish
to stay in the program are left with two options: reducing benefits or
increasing beneficiary cost sharing. We have taken many administrative
actions to stabilize the Medicare+Choice program and reduce burden.
Congress has acted to increase funding for Medicare+Choice in recent
years, but much of the increase was targeted to areas with low
enrollment. For example, between 1998-2002, Medicare+Choice rates
increased 11.5 percent in counties that received the minimum payment
update. This compares with a cumulative increase in fee-for-service
spending of over 21 percent over the same time period. Thus, the rate
of growth in fee-for-service rates is nearly twice that of
Medicare+Choice in the counties where 65 percent of Medicare+Choice
enrollees live. It is clear that much more needs to be done and we are
committed to working with Congress and the plans to protect this
valuable option for beneficiaries.
As mentioned above, following the trends in Medicare generally, we
are seeing a greater share of Medicare+Choice health care costs borne
by beneficiaries. This is similar to what is occurring commercially and
in the fee-for-service Medigap market. I am concerned about this and
have been tracking it closely. In our guidance to Medicare+Choice
organizations earlier this year, we advised them that their 2002
beneficiary cost sharing proposals would be closely examined. This year
we identified Medicare+Choice plan cost sharing proposals that we
believed may have been unreasonable, and we worked with the identified
organizations to make changes to their cost sharing proposals. We also
required plans to promptly notify beneficiaries of any changes in their
benefits or cost sharing. Because of our experience this year and our
desire to protect beneficiaries, as well as to be good business
partners to the plans, we are looking at reasonable ways that we can
assist plans in setting cost sharing amounts for different benefits in
the future. For example, I recently worked extensively with Congressman
Kleczka on some tough issues in Wisconsin. I also am happy to announce
that because the process for submitting ACRs was delayed this year, we
declared a nationwide Special Election Period for all plans during the
month of December this year. As a result, for this year only, all
beneficiaries will have the option to request disenrollment from their
Medicare+Choice plan and return to original Medicare during the month
of December and to purchase a Medigap policy using their guaranteed
issue rights, which will last until March 4, 2002. Of course, the
premiums for these Medigap policies' premiums are also rising rapidly
because of the gaps in benefits in the traditional fee-for-service
Medicare program and increasing health costs generally. This is why we
need to modernize benefits in the traditional fee-for-service program,
as well as make Medicare+Choice payments fairer.
We also are continuing to take important steps in helping to ensure
Medicare beneficiaries are informed of their health plan options and
are able to get answers to all of their Medicare questions. We are
conducting a $30 million beneficiary education advertising campaign, we
expanded our toll free beneficiary telephone help line, and we mailed
additional materials to advise beneficiaries of health plan changes.
This sort of education is vital for beneficiaries to understand their
health care options and make the decisions that are best for them, and
the education campaign has generated substantial response from
beneficiaries.
BACKGROUND
Medicare has a long history of offering alternatives to the
traditional Medicare fee-for-service program to our beneficiaries. In
the 1970's Congress authorized Medicare risk contracting with managed
care organizations, and in the 1980's Congress modified the program to
make it more attractive to managed care companies. In the Balanced
Budget Act of 1997, Congress created the Medicare+Choice program to
expand the types of private entities eligible to contract with Medicare
to address some perceived flaws in the risk-contracting program and
reduce variation in payment for plans across the country. Since passage
of the BBA, Congress has refined the Medicare+Choice program through
the Balanced Budget Refinement Act of 1999 and the Medicare, Medicaid,
and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA). These
changes primarily address payments in the ``floor'' counties, not the
``minimum update'' counties that have the majority of Medicare+Choice
enrollees and are facing the tightest pressures to control their costs
even as health costs and costs in the Medicare fee-for-service program
rise more rapidly.
This year about 5.6 million, or nearly 15 percent of all Medicare
beneficiaries, were enrolled in a Medicare+Choice plan. For 2002, about
60 percent of all Medicare beneficiaries have access to a
Medicare+Choice option, and about 536,000 beneficiaries will be
impacted by Medicare+Choice organizations either withdrawing from the
program or reducing their service areas. Fortunately, most affected
enrollees have at least one other plan available in their area for next
year. Of course, these beneficiaries also can choose to enroll in
traditional Medicare. The number of beneficiaries affected by the
departing plans' decisions this year is smaller than many in the
industry predicted and fewer than the number affected last year.
However, despite our best efforts to slow the number of plan
withdrawals through administrative actions, it is apparent that
additional improvements need to be made to the Medicare+Choice program
to encourage more plan participation and greater beneficiary access to
Medicare options. Simply put, the Medicare+Choice payment system must
be more responsive to the health care marketplace, so that the program
can meet beneficiaries' needs. I look forward to working with Congress
to achieve the important changes that beneficiaries deserve. We owe it
to beneficiaries to make these changes soon to ensure that Medicare can
continue to provide affordable options for beneficiaries.
STRENGTHENING MEDICARE+CHOICE OPTIONS
One of the most important ways that we can help beneficiaries is by
working with Medicare+Choice organizations to ensure the program
remains a valuable option. President Bush, Secretary Thompson, and I
share the goal of improving the Medicare+Choice program and reversing
the decline in plan participation. Yet some Medicare+Choice
organizations are struggling with difficult business decisions. In
fact, since my confirmation as CMS Administrator, I have personally
contacted many of these plans and talked with them about how much the
Medicare program and our beneficiaries need their continued
participation. Fortunately, many of them have decided to continue to
participate in the Medicare+Choice program.
To ensure that Medicare+Choice remains a valuable option for
beneficiaries, we have taken a number of steps to reduce administrative
burdens on the Medicare+Choice organizations. Earlier this year we
announced a number of actions that will reduce administrative burdens
on Medicare+Choice plans in a number of ways, including:
Permitting Medicare+Choice organizations to submit
revised adjusted community rate (ACR) proposals in the fall.
Many Medicare+Choice organizations indicated that they would
drop out of Medicare+Choice if forced to decide whether or not
they would continue to participate in the program and provide
final 2002 ACR information by the July 1 deadline. By giving
plans until September 17th to make renewal decisions, and
permitting them to file revised ACR proposals, which contain
their benefit packages and cost sharing structures, as late as
that date, we ensured that plans could better evaluate their
participation in Medicare+Choice and their products for
beneficiaries. We would like to work with Congress to make this
change in law.
Emphasizing better results for beneficiaries. We
will replace calendar-driven audits of Medicare+Choice plans
with results-based performance audits, so that we target audits
at the plans whose level of performance requires review. This
will allow the strong performing plans to spend less time with
paper and more time with patients.
Providing consistency in quality improvement
requirements. We are developing quality measures that are
sensible, reflect current industry practice, and build on the
success of the private sector. To this end, we are working with
industry representatives, such as the American Association of
Health Plans, Blue Cross Blue Shield Association, Health
Insurance Association of America, and American Medical
Association, to plan and enhance the national Quality
Assessment Performance Improvement projects. Additionally, we
recently allowed quality improvement projects created for
private plans and Medicaid to be used for Medicare.
Streamlining marketing review. We are working to
make the approval process for Medicare+Choice marketing
material more sensible and less burdensome on the
Medicare+Choice plans. We are taking steps to fast track our
review of plan marketing materials, while at the same time
ensuring that beneficiaries have timely and accurate
information.
Expediting plan review. We will expedite our review
of potential Medicare+Choice plans that would serve markets
left without a Medicare+Choice option or other alternatives to
traditional fee-for-service Medicare.
Making policy changes quarterly. It is critical that
Medicare+Choice organizations have adequate time to adjust to
new rules. Additionally, we strive to ensure that policy
guidance is issued before Medicare+Choice plans' rate and
benefit filings are due. To that end, and to ensure the
Medicare Managed Care Manual meets evolving needs, we will
update the existing manual chapters quarterly. Any policy
changes contained in the updates that create new burdens will
not be effective until that policy change can be reflected in
an organization's ACR proposals. We also have committed that no
policy changes will become effective until the next contract
year.
Re-evaluating the risk adjustment system. We
suspended our collection of physician and hospital outpatient
department encounter data. Fair risk adjustment is an important
priority, but risk adjustment must be done in a way that
encourages innovation in health care delivery and not in a way
that imposes outdated fee-for-service models. We are exploring
a way of adjusting Medicare+Choice rates for risk that will
balance the accuracy of data and administrative burden.
Consolidating private plan functions.
Medicare+Choice functions that previously resided within three
different components of CMS now are all housed in one place at
CMS: the Center for Beneficiary Choices, which will help ensure
that we are responsive to the specific needs of Medicare+Choice
plans. We are striving to improve coordination between
Medicare+Choice and fee-for-service and to be more sensitive to
the impact of systems changes on the plans. To this end, our
Medicare+Choice staff now participates on the Medicare Change
Control Board, which governs carrier and fiscal intermediary
systems changes. Their participation helps ensure that the
needs of Medicare+Choice plans are considered as the Agency
determines future information systems changes.
Furthermore, we recently gave Medicare+Choice organizations new
flexibility to work with employer-sponsored health plans so workers can
seamlessly merge their pre-retirement benefits into Medicare coverage.
This flexibility will give Medicare beneficiaries the kind of private
plan choices currently available to many working Americans.
Medicare+Choice organizations can tailor plans to the specific needs of
employer group members while supplying all Medicare-covered health
services, making it easier for them. And we plan to further
reinvigorate the Medicare+Choice program by encouraging plans to modify
their designs from ``closed panel'' HMOs to preferred provider
organization and point-of-service models that have proved popular in
the private sector.
PROTECTING BENEFICIARY COSTS
Each contract year, Medicare+Choice organizations submit to us
their ACR proposals for the plans they intend to offer to Medicare
beneficiaries in the following year. The ACR proposals describe the
costs and benefits the plans intend to offer for their enrollees for
the following year. We review the proposals to ensure that beneficiary
premiums and copayments for basic Medicare+Choice benefits (Parts A and
B and additional benefits) do not cost more than beneficiaries would
pay on average for fee-for-service Medicare cost sharing. For 2002, the
estimated average actuarial value of cost sharing amount is $105.31 per
month per person. This $105.31 cap is an aggregate cap, not a per-
benefit cap. Under this aggregate cap cost sharing for particular
benefits can vary as long as the total average cost sharing (for Parts
A and B and additional benefits) does not exceed the aggregate cap of
$105.31. This actuarial figure excludes cost sharing for many other
benefits that are part of modernized health insurance plans, but not
Medicare including prescription drugs and disease management services.
While there are not specific cost sharing limits for most Medicare
benefits, Medicare+Choice plans cannot set cost sharing amounts for
Medicare covered services at dollar amounts that would discourage
people who have greater health care needs from enrolling in
Medicare+Choice plans.
As a general rule, as long as the premium charged in addition to
the actuarial value of cost-sharing under the plan is less than the
actuarial value of fee-for-service Medicare deductibles and cost-
sharing, the Medicare+Choice organization is free to structure its cost
sharing how it sees fit. However, this year we found that some plans
proposed charging beneficiaries what we believed were unreasonably high
copays for particular services. The situation we witnessed this year is
compounded by the fact that payment increases have not kept pace with
plan costs nor have they kept pace with the costs of extra benefits
that plans provide, particularly prescription drugs. Thus, we have a
new challenge in balancing the need for plans to make decisions about
their benefit packages and cost sharing amounts with the important
requirement that plan designs do not discourage enrollment. The concern
is always that high cost sharing could discourage beneficiaries, who
have greater health care needs, from enrolling in or remaining a member
of these particular plans.
To address this, we worked cooperatively with the plans to ensure
that their cost sharing arrangements were made more reasonable, while
at the same time helping to make certain that the plans would continue
to participate in Medicare+Choice. While the final agreements we
reached with the plans were not perfect, they were much more reasonable
than they were at the outset. Moreover, the continued participation of
the plans in the Medicare+Choice program provides beneficiaries access
to additional options and extra benefits. Even with the higher cost
sharing, we expect that many beneficiaries will continue to find
Medicare+Choice plans as a much more affordable option than the cost
sharing and rising Medigap premiums under the traditional Medicare
program.
We also are developing specific guidelines that we hope will help
address the situation we faced this year regarding plans' ACR
submissions. Our guidelines will make it clear that we will not approve
cost sharing arrangements that could discourage beneficiaries with high
health costs from enrolling or staying in a plan. In developing these
guidelines, we will consider a number of factors such as the cost
sharing in fee-for-service, the cost sharing of other plans in the
service area, changes in the plan's cost sharing from previous years,
as well as stop-loss protection and limits on cost sharing expenses.
Our guidance also will explain how we plan to evaluate plans' benefit
and cost sharing proposals.
EDUCATING BENEFICIARIES ABOUT THEIR OPTIONS
We know that our outreach efforts to educate beneficiaries about
their health care options are vital. We also know from our consumer
research with Medicare beneficiaries that far too many of them have a
limited understanding of the Medicare program in general, as well as
their Medicare+Choice, Medigap, and Medicare Select options. So for
this year we added a vastly expanded advertising campaign to educate
beneficiaries about the full range of options open to them. And we have
enhanced our 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. We also have hired 1,200 customer service representatives at our
call centers. These representatives are available to answer specific
questions about an individual's health plan options as well as mail
beneficiaries hard copies of the customized information immediately
after each call.
Additionally, we are continuing to improve the resources we have
available on the Internet for beneficiaries and their families to
access comparative information and are providing a new decision making
tool on our award winning website, www.medicare.gov. Our Medicare
Health Plan Compare gives visitors the ability to compare benefits,
costs, options, and provider quality information. This expanded
information is similar to our other online comparative resources like
the Nursing Home Compare and Dialysis Compare websites. With Medicare
Health Plan Compare, beneficiaries are able to examine by zip code the
Medicare+Choice plan options that are available in their area based on
characteristics that are most important to them, such as out-of-pocket
costs, whether beneficiaries can go out of network, and extra benefits.
They also will be able to compare the direct out-of-pocket costs
between all their health insurance options and get more detailed
information on the plans that most appropriately fit their needs. In
addition, we are working to provide similar State-based comparative
information on Medigap options and costs. These outreach efforts are
vital to ensuring that Medicare beneficiaries understand the options
available to them, and that they can make the decisions that best fit
their personal needs.
CONCLUSION
While Medicare+Choice is still an important option for millions of
Medicare beneficiaries, the program has undergone some substantial
changes since 1997. The days of plans offering zero premiums and no
significant beneficiary cost sharing have for the most part passed.
Health care costs continue to rise, and more and more of the financial
burden is falling on Medicare beneficiaries. I have followed this
transformation closely, and am working hard to educate beneficiaries
about these changes as well as their options, monitoring beneficiary
cost sharing, and working closely with the plans to ensure that
beneficiary choices remain available. We have taken a number of
administrative steps where we were able, but it is incumbent that we
continue to work with you and Congress to strengthen the
Medicare+Choice program for the future. Our beneficiaries depend on the
choice that Medicare+Choice provides. Thank you for the opportunity to
discuss this with you today, and I am happy to answer your questions.
------
[GRAPHIC] [TIFF OMITTED] T7455A.001
Chairman Johnson. I agree with what you say. We certainly
need to fix Medicare+Choice's problems, but we also need to
open it up to the kinds of plans that Americans are choosing
under the FEHBP and under all employer-provided plans.
Your facts that you just laid out are important, I think,
for this Committee and for the public to be aware of. Fee-for-
service Medicare increased 21 percent. Medicare+Choice over the
same period of time, their reimbursements went up 11 percent.
In the private sector employer plans went up 49 percent. And
under the Federal Employee Health Benefit Plans, their costs
went up 46 percent. So it is a dramatic difference. And it is
no wonder that the Medicare+Choice plans are being forced to
impose burdens on seniors that are extraordinary and make it
very hard for them to stay in the Choice plans. On the other
hand, it is also instructive that many of them cannot afford
the Medigap alternatives and are dissatisfied and disappointed
with the benefits under Medicare.
You say that we need to make structural changes in how we
finance Medicare+Choice--changes in the payment formulas. Where
are you in your thinking in regard to what those changes need
to be?
Mr. Scully. Well, I know you have the ability to return to
100 percent of the AAPCC or adjusted average per capita cost,
and there are other options. And I am not sure I am free, from
the administration, to commit to a specific mechanism or
funding level. We certainly would like to work with you.
I think there are a number of ways to do it. As I
mentioned, Bob Berenson made some, I thought, constructive
suggestions in an article he wrote that said that we really
need to have a market basket. At some point we need to have a
market basket to update Medicare+Choice costs just like we do
hospital costs or physician costs or other costs, and that
whatever the mechanism is, I think with all the best intentions
in 1997 we basically detached the Medicare+Choice payments from
the traditional Medicare Program. We made additional changes in
1999 to 2000, but effectively I think you can argue they
backfired in a lot of cases. And in many cases you can find
places where the Medicare+Choice rates are 85, 86 percent of
the AAPCC, and there are other places where they are 120
percent.
So there are some counties where Medicare is doing
extremely well in the funding, and there are some counties
where it is clearly way below fee-for-service. I don't think
reattaching it to fee-for-service is the right way to go, but I
think structurally we kind of lost the balance between the
incentives county by county, and in some places a great deal,
and in some places a terrible deal.
Chairman Johnson. I think one of the things that the GAO
study of this matter points out is that we don't have a good
base as to what the costs are--I think Berenson's thoughts
about improving the base. So I look forward to working with you
on this. It isn't something that we can decide now, because the
100 percent fee-for-service is just a punt that varies
tremendously. One of the problems in Wisconsin is this
variation in the AAPCC in those areas and how much lower it is
than Miami.
So we do need to look at what is that base from which we
measure managed care costs. I think that is one of the ways to
straddle some of the concerns that Mr. Stark has and some of
the interests that I have. So we do need to do a very
significant analysis of how we reimburse the Choice plans so
that we have an honest and automatic factor that they can
anticipate and count on and that will do more to stabilize this
option for seniors than anything else we can do, in my
estimation. Mr. Stark.
Mr. Stark. Thank you, Madam Chair.
Mr. Scully, thank you. We seem to spend an awful lot of
effort, as I indicated before, on 15 percent of the Medicare
population who are in these plans. I begin to suspect that
maybe that is an indication of their relative popularity as
opposed to fee-for-service plans or fee-for-service-plus on
Medigap plan. And I suspect that there is--when you compare our
Federal Employee Health Benefit Plan, for example, or private
insurance, most of those plans pay for--I am going to guess--90
percent, maybe even more, of what we all spend on health care.
And I would imagine that Medicare fee-for-service probably
covers 50 percent of what people are out. And the managed care
plans and Plus Choice plans are based on that 50 percent and
not on first dollar coverage.
So there is a reason for those differences in cost
increases, and if we truly wanted to have--people keep holding
up our Federal Employee Health Benefit Plan--if we were going
to make Medicare the equivalent of that, we would really have
to have a Federal Medigap plan or increase the benefits quite a
bit, wouldn't we? If we were to match Blue Cross low option
fee-for-service under the Federal Employee Health Benefit Plan
with Medicare fee-for-service, there is a big gap, is there
not, by private Medigap, or we would have to increase the
benefits?
Mr. Scully. There are some Medicare+Choice plans----
Mr. Stark. If we are going to make the Medicare fee-for-
service plan equivalent to the fee-for-service plans available
to those of us who are Federal employees, we would have to up
the benefits considerably by filling those gaps that are now
often filled by a Medigap policy.
Mr. Scully. I think one of the points of President Bush's
proposal this summer was to make it consistent. Certainly the
FEHBP has much better benefits in some places than Medicare
does.
Mr. Stark. We have a much more generous plan as Federal
employees than the average----
Mr. Scully. Probably actuarially, I would say that is
probably true, yes.
Mr. Stark. And the idea that we can fill this gap--and let
us say it is 50 percent--by getting people to go into these
Plus Choice plans or any other managed care plan just doesn't
add up with numbers. Now, to the extent that--and I know that
you don't like setting--that I do remember your testimony--you
don't like setting rates, right? You don't like that part of
your job.
Mr. Scully. I try to be as reasonable as I can in setting
rates, but as a general matter, no.
Mr. Stark. I guess what I am saying, if you are going to go
back to the risk contract plans, or if you are going to really
control Plus Choice, you are going to have to offer some
Federal standard, and that means you are going to have to set
some rates for those gaps. I don't see that you are going to
get any way to on--the plans are losing money. They are costing
Medicare money, more money than we anticipated. The studies
indicate that throwing more money in isn't going to get the
plans to--isn't going to solve their problems the way they want
them solved. And it may be we are going to have to have a
Federal managed care plan where we negotiate the whole price
against which the private plans can compete if they choose to,
and then we might--that might be a solution to the problem.
I know you don't like that as well. I mean, I don't see any
other way out is that--or have the Federal Government write a
Medigap policy that says bare bones as we can make it, and,
again, let the private insurers compete against it. It will be
difficult because ours would be subsidized, but I don't see
much other way around this if you want to continue to let the
private managed care plans or encourage them, because they are
going to move out quickly when they lose money, and that is
going to leave a lot of our constituents and beneficiaries very
unhappy, and that is the problem we face.
I hope that we could perhaps broaden the scope of what we
do in how we provide managed care and let the government
participate a little more, because on balance your agency does
a good job on fee-for-service. I don't know why you couldn't do
just as good a job in providing managed care. Are you willing
to try?
Mr. Scully. A couple of things, just to comment on that. I
think the President--you know, with all the things that have
obviously happened this fall, some of our reform discussions
have been set back a little bit. We proposed significant
Medigap reforms this summer, and obviously we are determined to
get a drug benefit. As you remember, we worked on catastrophic
many years ago, and we were on the same side.
Mr. Stark. Good benefit.
Mr. Scully. Not a popular position. It was a good policy.
Not everyone shares that view, but I thought it was a good idea
back then.
But we are determined. We think reforming Medigap on the
private side is a good idea, and we would like to get a drug
benefit. That is one of the major reasons I came back to the
government.
Mr. Stark. I still got a copy of the old one.
Mr. Scully. I am not sure. You and I are the only ones that
share that view. But I personally believe and I think there are
many places around the country--there are still 5.1 million
seniors in Medicare+Choice. There is no question that costs
have gone up, premiums have gone up, but there are a lot of
places where Medicare+Choice is still extremely popular.
I spent a lot of time last week with Mr. English, who is
not here today, last week talking about some of the problems in
his district. It is a tremendous deal.
I really believe that the funding formulas have created
some inequities county by county around the country. Some
places it is a better deal than others. Some places are a lot
worse. I do not think the program is irreparably broken. I did
read the GAO report. I think you can draw a lot of conclusions.
My conclusion from it is the funding increases have gone to the
wrong places. I have zero doubt in my opinion that putting more
money back into some of the counties that I would argue have
been financially starved a little bit would be a significant
help in getting people back in.
I also think it is very difficult to make an apple--and I
have had this discussion with GAO a number of times to
compare--it is not an apples-to-apples comparison because the
cost basis for hospitals, doctors, and everything else is
totally different in the private plans versus the Medicare
plans. And comparing them 4 or 5 years ago, the Medicare+Choice
plans looked brilliant because we were arguably slightly over
reimbursing Medicare. We reduced Medicare rates, and we control
45 percent of the rates, and we reduce those rates, and the
costs could shift back to the private sector.
So it is very difficult to make an apples-to-apples
comparison between the private plans and the fee-for-service
plans. I think they both work well. I really do not believe I
have shown any bias one way or the other toward either plan. I
believe Medicare+Choice is a great option for people, and we
would like to make sure it is still available, but I spend a
lot more time on Medicare fee-for-service than I do on
Medicare+Choice.
Chairman Johnson. Mr. Johnson.
Mr. Johnson Of Texas. Thank you, Madam Chairwoman. I
appreciate the opportunity to talk with our friend Mr. Scully.
I am glad you don't like Medicare either, according to Mr.
Stark.
You talk about county by county. You guys over at Health
Care Financing Administration (HCFA) have been moving the
numbers around county by county, and I swear I don't understand
how you can do that, and maybe you can explain that.
But you also talked about catastrophic, Mr. Stark, and it
seems to me the medical savings account solved that problem.
But let me ask you this question, Mr. Scully: In a November
2000 report on Medicare State Medicaid Agencies (MSA), Medpack
wrote that, ``the Commission believes that the current
demonstration has shown the private sector will not offer
Medicare MSAs because of two basic market characteristics: one,
little demand from the risk-averse Medicare beneficiary
population; and, two, the expense and difficulty of marketing a
complex product such as Medicare MSAs to a fragmented and
scarce set of customers.''
Do you agree with this statement? If not, what do you think
we can do to fix the problem, you specifically, the Congress
specifically, and tell us in detail what we as a Congress need
to do, and what you as an agency need to do, in your opinion.
Mr. Scully. Well, my opinion, which may or may not be the
administration position--I don't think we have one on this--I
have the same concerns about MSAs and Medicare that I had about
MSAs in the commercial market. MSAs in the commercial market
under Medicare, in theory, should be just high-deductible plans
where you give people essentially a cafeteria plan to spend
their own money. I think that concept is a very solid one. I
think the reason that the plans have not caught on in the
commercial market and would have trouble in Medicare is that
basically most people under 65 benefit from significantly lower
negotiated rates in their Blue Cross plan or whatever, and
people both 65 and Medicare do as well.
So most hospitals--and I just recently left the hospital
business--most physicians charge--they have a charge rate and
then what they actually get reimbursed. There are a lot of
reasons why those are not the same, but nobody really pays full
charges. Unfortunately it happens in those high-deductible
plans. If you are not part of a network, you may pay double
what everybody else is paying and burn through your own
personal savings more quickly. I think basically the concept is
the same as just having a high-deductible plan.
In the commercial sector, you are finding increased
popularity to people having $1,000 or $2,000 deductible plans,
but they work best when you can pay the negotiated rate from
your Blue Cross plan up until that high-deductible level. When
you pay full charges, which could be 40, 50 percent higher for
a lot of providers--and really nobody pays those rates--you
find that your pot of money you put aside is a lot less
effective because you go through it more quickly.
I think that is a structural problem, and I think a lot of
the rhetorical debate about this issue gets lost in the label.
The reality is, in the commercial sector, you find a quick
growing movement toward high-deductible plans where people
spend their own money, but for the first $1,000 or $2,000, they
are doing it at the Blue Cross or CIGNA, whatever their
negotiated rate is. So they are getting the benefit of the
lower negotiated rates for physicians, hospitals, clinical
labs.
So I do think it can work. I think the biggest reason it
hasn't worked in the past is the pot of money you put aside has
generally not been spent at a negotiated discounted rate, which
is what the insurance companies do for you. So I think the
concept is solid as long as it is part of the negotiated rate
up until the threshold.
And I think it could work in Medicare as well. The issue
there, which is a very complicated one that we spent a lot of
time on, is when you set up different rate preferences, just
like in Wisconsin, you draw different populations, and in a
high-deductible plan you are generally going to draw certain
populations. So you need to make sure you have a very risk-
sensitive adjustment mechanism to make sure that you don't let
all the people who aren't sick go into the high deductible.
Mr. Johnson Of Texas. Before we run out of time, tell me
specifically in detail what you as an agency can do to fix it
and what we as a Congress need to do to make that fix happen.
Mr. Scully. Well, my suggestion would be as a
demonstration, we certainly could look at Medicare+Choice plans
that have high deductibles, but that also trade-off on other
benefits. I mean, high deductibles are obviously on the
hospital side, but you can certainly give people the option, as
long as you can risk-adjust it for the population you draw, to
choose high deductibles and spend their own money with their
physicians. That is certainly a viable option.
I think the issue is what is the rate they are going to be
charged for whatever the pot of money is. If they go into the
hospital--and, again, I am not trying to be critical--you will
see a hospital will charge $3,000 for a service, and the local
Blue Cross plan will pay $1,800 for that service. Well, if you
are not benefiting from that discount, you lose the benefit of
your own funding pretty quickly. It is just the way the
hospitals, out-patient clinics, rehab clinics--virtually
everybody does that. They have a charge rate that virtually
nobody pays, and they have a rate that most of their customers
pay, which is significantly reduced.
Mr. Johnson Of Texas. But you are still citing some facts
and not telling me what we need to do specifically as a
Congress and what you need to do as an agency to make it work.
Mr. Scully. I think as an agency we can work on some
demonstration programs to use high-deductible Medigap plans and
to make sure that we are trying to risk-adjust them
appropriately so we are putting the right amount of money into
them.
Mr. Johnson Of Texas. What does the Congress need to do, in
your opinion?
Mr. Scully. Well, the issue there is at what point do you--
there is an existing limit, which we are going talk about in a
few minutes, which kicked in in Wisconsin that the beneficiary
cost-sharing can't be more than $105.31 a month. When you get
into high-deductible plans, obviously as an actual matter you
probably get above that, depending on how you allocate your
resources. But clearly, if people wanted to have catastrophic
coverage, drug coverage, and trade that off for higher
deductibles on hospitals or physicians, that is an option that
doesn't exist right now.
Mr. Johnson Of Texas. Thank you, sir. Thank you, Madam
Chairman.
Chairman Johnson. Mr. Kleczka.
Mr. Kleczka. Thank you, Madam Chair.
Let me start off by thanking you for calling today's
hearing. As the Administrator said, there are six other areas
in the country having a similar problem to Wisconsin and the
UnitedHealthcare problem. So I think it is important that the
Subcommittee examine what is going on in the Medicare+Choice
marketplace and in future meetings try to respond to that.
I also want to acknowledge my colleague from Wisconsin Mr.
Ryan, who is with us today, who, although his district has no
Choice plans left, has interest in naturally the direction of
the Medicare Program.
Mr. Scully, I also want to acknowledge you and thank you
for being accessible over the last weeks. I think you showed
true concern for the problem in Wisconsin and I am assuming the
other parts of the country. As you know, we did talk numerous
times. You did go back to the negotiating table to try to get
the rate down, and you did to a small degree. I find the ending
rate still outrageously high, but you tried. In my experience
here in Congress, I have very few administrators such as
yourself give me their home number. So if we don't get a better
correction to this problem, you are going to be the recipient
of many pizzas, but I do want to thank you.
You did, on Friday, announce that there will be a special
enrollment period for those seniors in the UnitedHealth plan
that chose to leave before the end of the year. Could you
explain to the Committee if that is an existing authority in
the Agency, and what is the criteria for you to grant a special
enrollment period?
Mr. Scully. It is an existing authority in the Agency that,
unfortunately, until Friday when I called you, we didn't
realize we had. I think it was a difference of legal
interpretations. I was not aware until Friday. I think it is
good news. The issue is--hopefully we can get it out broadly--
we declared a special election period for December so that
seniors have an extended enrollment period in December to make
their choices about changing health plans. By virtue of doing
that, which I was unaware of until recently, we have the
ability to give seniors the ability to drop out during the
month of December and have the opportunity, for I think it is
63 days up until March 4, to enroll in a Medigap policy.
Mr. Kleczka. Based on what rationale?
Mr. Scully. Apparently when we declare a special election
period, we have the ability to waive the Medigap guaranteed
issue restriction. It is not just in Wisconsin. So anybody in
any plan, even if their plan stays in under prior law--just to
clarify, because you have been more involved in this than
others, previously if you were in Medicare+Choice plan, and you
were an enrollee, and your plan stayed in that county, and you
wanted to get out, there was no guaranteed issue for the
Medigap plan. By virtue of us declaring an extended enrollment
plan for December this year, the Secretary has the authority to
basically give people guaranteed issue rights to get into a
Medigap plan. So anybody that drops out of Medicare+Choice in
December 2001, even if their plan remains in that county--
United being an example this year--has the ability to get
guaranteed issue into Medigap up through March 4, which is a
significant benefit for people who have found that their
copayments or premiums have gone up, and Medigap is a better
deal for them. And one of the real concerns we both had in
Wisconsin about people that wanted to get out of a plan with
higher cost sharing and switch over to Medigap, and when we
first discussed this, I did not believe this option was
available, and I was very happy, as I dug further, to find that
it was.
Mr. Kleczka. Like you, I join in your happiness that we do
have this option so seniors not only in Wisconsin but in other
States aren't trapped into a plan because of the legislative
enactment of Medicare+Choice.
Now, what begs the question is, how are we going to notify,
for my situation, the 16,000 seniors who are currently enrolled
in United and try to get through all the mail that they are
going to be getting during the holiday period to give them the
news that should they decide and desire, they can dis-enroll
with United, go back to fee-for-service, and then have a clear
shot of getting a supplemental? How is your Agency going to
inform at least this group of seniors?
Mr. Scully. It is a broader problem beyond your district,
but certainly the word--we are trying to figure out the best
way to do it now. Our concern is that it might be confusing to
send out a mailing this month with all the other mail that
comes through and all the information they have gotten from us
already. So we are looking at a lot of other options as to what
to do as far as working through our State health insurance
programs with our partners in educating seniors, as well as
working through the plans. We are making an aggressive effort
to make sure that every senior that signed up for this plan
knows that is an option.
We haven't quite decided what is the best way to go as of
yet. We will be happy to work with you in the next week or so
to figure that out. We have not decided whether an additional
mailing is an appropriate route or whether we should go through
the State health insurance department, State health insurance
programs. We only discovered this on Friday, so we are still
trying to figure out the best way.
Mr. Kleczka. We better start acting on it immediately. And
I will ask UnitedHealth some questions on this very same thing.
One last question, Madam Chair, if I might. Based on the
other six plans that had similar problems in Wisconsin, were
any as high in, let us say, the inpatient hospital deductible?
Currently, as you know, for the United Choice plan, there is no
deductible, no copayment. Their initial intention was to raise
that to $350 a day. Through your efforts it was reduced to
$295. Any other plans that fit that same criteria relative to
such a dramatic change?
Mr. Scully. There were a few others around the country.
There were seven that my staff came to me with right off the
bat. We are calling them up and fixing them. And United is a
little more complicated. I spent a lot of time with them. I
think they did have some good arguments. They do have $4,800
stop loss, which is a catastrophic cap that a lot of plans
don't have. You can debate the merits of that, but the fact is
that most Medicare+Choice plans do not have the catastrophic
stop loss.
The real compelling factor to me when I sat down with them
is we can't force people. I spent a lot of time this summer, as
I testified before, trying to call chief executive officers
(CEO) around the country and say, please, on the margins, stay
in. I hope, certainly, the Congress will fix the funding
formula. And I spent a lot of time talking to many plans,
including a couple of Mrs. Johnson's plans in her State that
did drop out, trying to encourage them on the margins, to stay
in one more year, and hopefully the program will be fixed.
I talked to the CEO of United this summer, Dr. McGuire, and
asked him to do that, and I think they made an effort in many
districts to stay in. I told them $350 was not acceptable, and
they lowered it to $295. I asked them to make a number of
changes, and I said, ``Look, if you can't make the changes, I
would like to see your financial statements, and come in and
show me that your medical loss ratios is how much you spend in
Medicare, and your administrative loss ratio, your projections
add up to pretty close to 100 percent.'' And theirs did; from
what I can tell, close to around a little over 99 percent.
And my belief is we can't force somebody to lose money in
this business. They aren't making money in this business. They
stayed in Wisconsin in the hopes that the funding will be
fixed. You can debate the merits of how they set up their plan.
The plan was scored by our actuaries as being under the $105.31
monthly cost sharing out-of-pocket equivalent. And so I think I
did the best I could to make the adjustments I could, but I
couldn't force them to lose money, and I don't think they
should be expected to do that. I think under the circumstances,
United reacted responsibly to what my requests were, and I
think had I seen that they had a total spending of 90 percent,
I would have felt differently.
Mr. Kleczka. Thank you for your help in this matter, Mr.
Scully.
Chairman Johnson. I am now going to recognize Mr. Ryan, who
is a member of the full Committee, not a member of this
Subcommittee, but is keenly interested in this situation in
Wisconsin. Mr. Ryan.
Mr. Ryan. Thank you, Madam Chairman. I was interested in
what you said earlier, because as my colleague in Wisconsin
just north of me noted, we lost all the Medicare+Choice in my
area. Three years ago PrimeCare or UnitedCare pulled out of our
area then, Racine, Kenosha and Walworth Counties. This year the
last provider is pulling out. At that time 3 years ago when
United pulled out of our area, we were able to in that give-
back bill, the Medicare+Choice bill, increase the reimbursement
rate for counties like southern Wisconsin counties.
Blue Cross came in and provided basically the same benefit,
and they just pulled out this year reporting--and I was able to
take a look at their books because I had the same questions you
did--they reported $38 million in losses in that area, in
Medicare+Choice, in our State.
So what we have seen in Wisconsin and what we saw already
in southern Wisconsin, like what Mr. Kleczka is seeing in the
Milwaukee region, is that this program isn't working. This
formula isn't working. And when we take a look at this formula,
you know, to put it quickly because it is such a complex issue,
the formula is so flawed in its base premise that it basically
rewards States that in the past had inefficient systems, had
high, high costs, and it penalizes those States like Wisconsin
that had efficient health care that kept its costs in check,
and we were penalized with a lower reimbursement rate. And
since the inception of Medicare+Choice, we have never really
fully addressed that issue.
In the past I have always been part of the legislative
effort to fund the blend, to try and average the AAPCC system
together to try and get the same kind of benefit in Wisconsin
that seniors in Florida and other areas got, but we have really
been unable to accomplish that.
I just got this GAO report and haven't had a chance to look
at it, but I was interested in something you just said a minute
ago, that the money that had been sent from Congress back into
the Medicare+Choice program was sent to the wrong places.
Could you give me more comment on that and isn't this a
case of literally having to redesign the entire formula so that
it more appropriately and adequately addresses the true cost of
providing the same benefits for Plus Choice across the country
and were the last few Medicare+Choice bills written in more or
less an inaccurate way, so that it actually benefited areas
that shouldn't have gotten the benefit and left areas short
that really needed the benefit because, as evidenced by the
fact that we had this pullout in Milwaukee County, we saw the
pullout in all the other areas in Wisconsin like other parts of
the country, it just isn't working.
So the problem we have is everybody paid the same Medicare
tax wherever they worked and lived in this country, but they
are not getting the same benefit where they retire. That is
especially true in Wisconsin.
So could you give me an idea of where we missed the boat,
how our formula is flawed right now today and how we should fix
it, and why and how we sent money to the wrong areas and how we
can fix that, hopefully this year in this session?
Mr. Scully. I wish I could give you all those answers. I
can give you some opinions. I mean, if you look county by
county nationwide at the fee-for-service spending, there are
massive variations, and I don't think the Medicare+Choice
program can fix that. Everyone does pay the same taxes, but
they most certainly don't get the same benefit in fee-for-
service either. If you look at the county-by-county difference,
the managed care plans are still loosely based on fee-for-
service spending, and if you look at Miami or Los Angeles or
New York City versus Milwaukee or rural Wisconsin, there are
massive differences in what is spent, 2-to-1 in some cases in
the Medicare Program, and those are due to practice patterns,
hospital costs.
There are a lot more things going on in this program than
meets the eye right off the bat. Believe it or not, Wisconsin's
rates have actually gone up a little better than some other
States in the last few years; they were lower to some degree,
but the point about CBO is when you make actuarial judgments--
like in the past few BBA bills, CBO makes a judgment about if
we bring up the floor rates, which are based on the rural
counties, by X number percent, how many people show up to
provide those plans, and they assume that money will be spent
and it is allocated in this way.
What has happened is nobody has shown up. So you have many
rural counties across the country in Iowa, Minnesota,
Wisconsin, and other places where Congress put money in
assuming that if you put those plans together, they'd come, and
nobody has come. There are many reasons why they didn't come,
including the fact there was an assumption 5 or 6 years ago
when I came out of the hospital business when hospitals were
reasonably weak, and basically, most managed care plans could
negotiate significant discounts from them. Hospitals have got
smarter, tougher, there has been a lot of hospital
consolidation.
It used to be managed care plans could get significant
discounts from Medicare fee-for-service amounts and
Medicare+Choice, and now they are frequently paying 130 percent
of what the Medicare Program pays because the hospitals have
basically said, ``we don't want to negotiate managed care,''
and they have gotten a lot tougher and stronger in the
negotiating position. They have more leverage.
So in a lot of rural areas, we have one hospital chain, you
show up with a managed care plan to offer Medicare+Choice and
they say ``we don't want you.'' So it is almost impossible to
put together a network. So there are a lot more things going on
here as to why Medicare+Choice just hasn't shown up, but my
point was that Congress allocated money that is sitting there
theoretically for somebody to show up and spend, and no plans
have shown up.
So theoretically, the money was arguably misallocated, but
the way the budget rules work, once it is put there, if nobody
spends it, it is gone. So--and a lot of what Congress had done
in past years was try to put money into the rural areas because
theoretically, we are on cruise control in the urban areas, and
what has happened in places like Atlanta, Milwaukee and other
places where the--it was popular and there actually are managed
care plans and people showing up, and there are multiple
hospitals competing in the business and it still works
reasonably well, is they have had 10, 11, 12 percent a year in,
``inflation increases,'' and 2 percent cap increases in their
Medicare rates and the math doesn't work.
Mr. Ryan. Well, I see my time has run out, but the risk
adjustment you mentioned, I think, needs to be addressed by
your agency because one of the base assumptions when
Medicare+Choice was written in 1997 was that the healthy people
would go. That is not the case. It is more sicker seniors and
we need to work on that risk adjustment.
Chairman Johnson. Mr. Lewis.
Mr. Lewis. Thank you, Madam Chair. Madam Chair, like my
colleagues, I want to thank you for holding this hearing. I
think it is very timely. Mr. Administrator, I thank you for
being here. I have some question regarding your efforts on the
800 line. You mentioned in your prepared statement that you are
spending more than $30 million in a massive advertising
campaign to reach out to people. Are you tracking the
questions, the concerns of the seniors that are using the 800
line?
Mr. Scully. Yes, sir. We have spent--it is not just the 800
line. We also spent quite a bit of money more than doubling the
number of operators answering the 800 lines giving a lot more
detailed information, and we do have--I think we have a million
dollars-plus contract to evaluate it, and when the campaign is
finished on December 16, we will have a report to Congress on
how it went, and I know the appropriators, who were nice enough
to allow me to reprogram the money for this year, because it is
the first time I have ever done it, will be as interested as I
am in figuring out how it works, but we have gotten--we peaked
at about 65,000 phone calls a day. I think we are still running
about 30,000 calls per day. And I think it has been very
popular with seniors, and one of the things that I found out
when I came into the agency was that seniors love the Medicare
program.
They think it is a great program. But they don't understand
the difference between their Medicare premium of $50 that comes
out of the Social Security check or Medigap, or where to find
the nursing home or dialysis clinic. They love the program, but
they are incredibly underinformed, and my view was that when we
are spending around $7,000 a person on Medicare, spending 80
cents per person per year trying to give them better
information about where to go is a good investment.
And fortunately the Appropriations Committee, at least for
this year, agreed, and I hope they will agree to do it in the
future, but so far I think it has been very successful. I hope
we will find that out during the more objective evaluation. My
personal evaluation--I still call the 1-800 number pretty
regularly--they are probably tired of getting my mom and dad's
information, but so far I have been pleasantly surprised. The
operators have been great, the information has been great, and
I would invite you to call yourself.
Mr. Lewis. I will try. I will do it. Are you spending
resources on both printed and electronic media?
Mr. Scully. Yes. We spent $30 million. You would probably
be particularly interested, I hope. One of our concerns was
that obviously minority and particularly the Hispanic--Spanish-
speaking Hispanic population is more unaware of their Medicare
benefits. I think we spent 20 percent of the finances on the
Spanish media. We have spent a lot of advertising on Univision,
Telemundo, and we in fact, have a whole separate ad campaign.
You may have seen the Leslie Nielson one on TV, but there
is a separate one running on Spanish language TV. There is a
large print campaign targeted at minority communities across
the country, because obviously, they are the folks that tend to
understand Medicare the least, but I would be happy to share
our ad budget with you and show you----
Mr. Lewis. I would be very interested in seeing it, Mr.
Administrator. I think it is important to reach out to the
minority community, the Hispanic, African American, and others
that need to receive this information to get the necessary
information in help and assistance.
Mr. Scully. I can assure you that I am very sensitive to
that, but my deputy, Ruben King-Shaw who is, as you probably
know, African American, if I ever forgot it, he reminds me
about 40 times a day. And he spent a lot of time working on the
ad campaign.
Mr. Lewis. Thank you very much. I appreciate it. Thank you,
Madam Chair.
Chairman Johnson. Mr. Camp.
Mr. Camp. Thank you, Madam Chairman. Mr. Scully, thank you
for being here and for your testimony. I know a couple of times
at least through the discussion, you have mentioned that
payment increases have not kept pace with costs, and as a
result, there has been increased cost-sharing and reduced
premiums have resulted from that. And as you look at the
reasons that Medicare+Choice plans have pulled out of the
program, GAO cites in their report that it is for reasons other
than payment, and I was just wondering what else needs to
happen to make this program work, particularly what can
Congress do to help make this program work?
Mr. Scully. I am actually surprised to hear that I really
do believe that the biggest issue is really finances. I have
tried--we have done a lot of things that, I think, make it
easier. It was not uncontroversial that we moved the filing
date back with a lot of encouragement from some in Congress to
September 17. I believe, and some of you may know, I was on the
board of Oxford Health Plan, for one of the big Medicare+Choice
plans, for 8 years while I was in between my government stints,
and I watched a lot of what they went through in
Medicare+Choice.
It is very difficult in June or July to make a judgment on
what your revenue's going to be for the next year, what your
costs are going to be for next year and decide whether you are
in or out and decide how you are going to accurately set the
premiums. The longer you can wait, as an actuary, the easier it
is to way make those judgments. Obviously, there is a tradeoff
there about how long you can wait to tell the beneficiaries
what their options are, and we have tried to reach that
balance. I think that helped. I think we streamlined a lot of
the options for managed care plans as far as their--you know,
how quickly we look through their filings. I hope that has
helped.
I think we have given them options to do more easily wrap-
around seamless plans for employers. There are an awful lot of
people that have managed care plans in their employer base when
they hit 65 and they are retirees. They have to drop out and
rejoin Medicare. We have made a number of changes this summer
to make it more seamless so that employers could design wrap-
around Medicare plans so that when employees hit 65, they could
switch to Medicare without really knowing it.
So I think we have made a lot of changes to make the plans'
lives a little bit easier. I am sure there is more that we can
do. I think we have been pretty open to that. We have, as you
may know, created 11 working groups. One of them is for managed
care that includes all the beneficiary groups and the unions
and patient advocates and the plans. We try to work with them
all to sit down every couple of weeks and figure out what we
can do to fix it. We are going to keep plugging away.
But I really do believe in many counties, this is still a
great plan. In some counties, it is a terrible plan. I think a
lot of it is funding and a lot of it is the distribution of the
funding.
Mr. Camp. We have put some funding in in the last two
pieces of legislation that we have passed; yet there is still a
lot of instability. You still think that is the primary----
Mr. Scully. I really believe--I may be wrong--most of that
funding was put into what are called floor counties, which are
mainly the rural counties to bring up the base, and if you look
at it there are still shockingly few--I mean, Senator Grassley,
who we all worked with a lot, was interested in--a lot of
people in the Senate from rural States were interested in
having Medicare+Choice, which had been popular in urban areas,
to come into their States. If you look at it, there is still
very little Medicare+Choice, almost none in Iowa. Very little--
I mean, we put in funding into the rural areas, and the fact
is, managed care plans are not interested in offering the
benefits there. So we created the magnet and no one came, I
think.
Mr. Camp. OK. Thank you very much.
Chairman Johnson. I would just like to clarify that the
point is that the big money that went into Medicare+Choice went
into creating the rural floor. Since there aren't plans, hasn't
been any big growth of plans in the rural area, that money is
actually not being spent. So it is not going into the
Medicare+Choice system.
In the highly populated areas, because of the budget-
neutral nature of the 2 percent or blend options, the money is
not going in; so while $5.9 billion was supposed to go into
that area according to CBO, only $2.2 billion went in. So where
the recipients are, where the seniors who benefit from the
programs are, they got no more than 2-percent increase and in
the rest of the Nation they got huge increases, but there was
no plan there to serve, and I think when you look at the number
of years that the budget-neutrality provisions have limited the
increase to 2 percent in an era when costs were rising much
more rapidly and we were increasing reimbursements under
Medicare fee-for-service at twice the rate, you can understand
why these plans are doing poorly.
Now, no company puts a big investment in any new product, I
don't care whether it is machine tools or whether it is health
care, and not want to stay there, and the fact that plans are
withdrawing isn't because they are lily livered, it is because
they can't afford to stay. And if you look at what investors
are saying about these plans, you can see the tremendous
pressure from the private sector for them to pull out. That is
all direct evidence that we are radically underfunding the
choice options, and what the seniors are telling us is they
like them and we have an obligation to tend to this issue. Ms.
Thurman.
Mrs. Thurman. Thank you, Madam Chairman, and thank you for
having this hearing, and I would say to Mr. Scully that I agree
with Mr. Kleczka that we have had an ability to get a hold of
you, and we do appreciate the fact that you are very accessible
to us when we have questions.
Mr. Scully. I love pizza, by the way.
Mrs. Thurman. You love pizza? I don't have your home phone
number that I know of. But I am a little concerned about what I
am hearing today and I would say to Mr. Ryan, I have to tell
you that I made your very same arguments 2 years ago when we
had some of these hearings about Medicare and MedicareChoice
that it was the same tax dollar, that this was, in fact,
supposed to be a program that we all are supposed to enjoy and
the benefits should be the same.
So I agree with you. I think there is a potential
discrimination against this, but in saying that, one of the
things that has concerned me, Mr. Scully, and maybe just
because it wasn't asked for, but in your report that you gave
us on the Medicare+Choice changes in access benefits and
premiums, the one thing that we don't compare any of this to is
fee-for-service. All we talk about is what is happening in the
Medicare-for-Choice and not really looking at what happens to
the benefits under Medicare-for-Choice as versus what is
happening under fee-for-service, and let me just give you an
example.
In our Medicare and You 2002 Handbook, under the part where
it talks about hospital stays, for example, it says for each
benefit period, you pay a total of $792 for a hospital stay of
1 to 60 days. Under one of the current plans that we have
discussed and we are hearing a little bit about, right now the
copayment in inpatient hospital co-pay is $295 per day. It only
takes 3 days to get almost to that $792. And then on top of
that--so I did a little calculation and found out that under
original fee-for-service, if I stayed in the hospital for 190
days, my out of pocket under fee-for-service would be about
$6,554 but under the plan it would be $26,550. And if I am
wrong, then that is fine. I just need to understand where I
have made this miscalculation.
Mr. Scully. You are----
Mrs. Thurman. But remembering this is under a plan in an
area of--that we are looking at. The second would be then, I
guess, under that same calculation under skilled nursing
facilities, it says it went to $125 per day, but if I go into
the skilled nursing I get the first 20 days basically free
under Medicaid fee-for-service; is that correct? OK. But then
under the plan that I am looking at, it would cost me about
$12,500 under a particular Medicare+Choice plan, saving me then
about $4,729. Now, if I am wrong----
Mr. McCrery. Ms. Thurman.
Mrs. Thurman. I just want to be corrected.
Mr. McCrery. What plan are you looking at? Would you share
that?
Mrs. Thurman. I would prefer not to say, Mr. McCrery,
because I don't want to take any shots at anybody at this
particular time because I would rather have the opportunity to
work out, but I can assure you this is a plan that is in the
district that I represent, and we have looked at it very
closely.
Mr. McCrery. OK. Thank you.
Mrs. Thurman. I don't want to take shots at anybody.
Mr. Scully. I think I know the plan. I may be wrong but I
hope--I believe that plan has a $1,400 catastrophic cap.
Theoretically, you have to spend about 80 days in the hospital
before you get to the break-even point, but----
Mrs. Thurman. But even if I spend 3 days in the hospital
under the $295, I am still almost to that cap; so if you stay
to 4, I am still $200 less or paying more under my managed care
than I would be under my fee-for-service so---
Mr. Scully. I think the argument on those plans because I
have had it with them the last 2 weeks is that for a senior--
obviously, if you are a poor senior, you are in trouble in any
case, but if you are relatively low-income senior who doesn't
want to buy a Medigap plan and is worried about catastrophic
coverage, you limit your catastrophic potential to $4,800 a
year, which is something that Medicare does not cover and a lot
of Medigap plans don't not cover.
Mrs. Thurman. But does Medicare+Choice?
Mr. Scully. Well, hopefully you have an informed choice.
That is the issue. And that you can drop out and if you want to
join the Medigap plan. But the Medigap plans are obviously very
expensive and some of them don't have any catastrophic caps
anyway.
Mrs. Thurman. So I guess what I am trying to get at is that
I would really like to see you all at some point do the
comparison for those issues for fee-for-service because, quite
frankly, the other issue is, and you make mention of it in your
sheets again, that most of the drug coverage will decline in
the overall population. Three States already are going to see
significant declines in access to drug coverage. We already
know that most of them are losing brand names, going to
generic. The annual maximums are going down.
So I am trying to figure out if I have a senior come into
my office and say, you know, Karen, I really need some help
here, I am having a hard time understanding. If I have a real
concern that I am sick or what--and I am looking at all these
different things that I might have an option to, but the fact
of the matter is under what currently fee-for-service is, which
I pay my $50 with no premium other than that $50, I may be
better off long term than I would if I went under a Medicare-
for-Choice program, and if just you looked at--again, and I
understand the 100 day part of it, but still $4,729, just under
the skilled nursing, that is a drug benefit for me as a person.
I mean, I might be able to----
Mr. Scully. I think that plan has a $4,800 catastrophic
cap, but again, you have to get of a lot of service before you
get there. I think the issue is the Medigap plans are also
incredibly expensive. And when one of your seniors comes in and
says, ``am I better off under Medicare+Choice?'' The real
comparison is Medicare+Choice versus Medicare plus the Medigap
and the premium, it is not always--it is not a simple
calculation. I hope our 1-800 number has helped answer some of
the questions.
I know the State health insurance programs which get grants
from us, help that. But it is not an easy calculation. We do,
in fact, have those comparisons, and you can get them on the
Web site, but you have to compare--we do have those kind of
breakouts on the Medicare+Choice plans, and you basically have
to go back and compare it to the fee-for-service, and they are
not--you know, you have to be kind of fast on the system to get
there, but all of that information is on there.
But you are right, it is not always easy to figure out. It
is one of the things we are hoping to help explain to seniors,
but trying to figure out and sit down, because I have done it
with my parents, and figuring out whether you are better off
with Medigap plus fee-for-service or Medicare+Choice is a tough
calculation in many cases.
Mrs. Thurman. Then the follow-up question I would have to
you because you made the statement with Mr. Kleczka that, and
he was thankful that you went into negotiations with some of
these plans, and in fact we did see the benefit or the premium
reduced and/or the copayments reduced. When you talked to them,
I mean, was that a part of the--I mean, I don't--is that a part
of the conversation with them, I mean that here is what they
could get under Medicare fee-for-services versus what you are
giving them to under Medicare-For-Choice as to--as arguments?
Can you give me some----
Mr. Scully. Yes. That is exactly the issues in the one case
which we have talked about, $350 deductible seemed to me to be
high and seemed to our actuaries. They brought it to me. The
staff came to me and said we have 474 filings and we have seven
that we think are the outliers that may, in fact, you know, not
have the appropriate incentives for beneficiaries. And we
talked to all seven of them to make changes, and the most
difficult one was United, and the reason was they felt very
strongly that the most attractive part of their plan was the
$4,800 catastrophic cap.
We were concerned about the incentives provided if somebody
was going to have a lot of hospitalization. You know, the
reality is in a lot of cases, what happens is the hospitals eat
the bad debt, but we were concerned about that. We knocked it
down. But to be honest with you, the real issue for me was when
I looked at their finances and found out that they basically--
it wasn't like they had 90-percent loss ratios. They had 99-
percent loss ratios, which is the combined administrative and
medical costs, and I didn't think they had any more wiggle
room; so I pushed them to change their benefits as much as I
possibly could, and legally we have limited authority not to
have them in there and to be honest with you, a lot of these
plans stayed in there because I asked them to hang in there for
one more year until Congress changed the benefits. So we were
kind of between a rock and a hard place.
Mrs. Thurman. So that analysis is available then?
Mr. Scully. Mainly with me, but I would be happy to go
through it with you. It was largely me talking to them with a
couple of my staff.
Chairman Johnson. Congresswoman Dunn.
Ms. Dunn. Thank you very much, Madam Chairman, and it is
good to see you again, Mr. Scully. Thank you for being here to
listen to our questions and our objections and our support and
everything that goes into trying to beef up this program, so it
becomes an efficient additional choice for people. I come from
the State of Washington where health care has been provided in
a very efficient way for the last 20, 25 years we have used
HMOs, and people in Washington State, and especially in my
district, appreciate this choice.
Obviously because our reimbursement rates are lower, we
feel like we are being penalized for our effective delivery of
efficient services and so the funding of the blend is very
important to us, and budget neutrality has been a problem for
us. But in the 1 year that we were able to increase our
payments, we were very appreciative. One of our HMOs, I think
it was Group Health actually passed the savings through to
its--to its customers, and we appreciate that very much.
I want to ask you a question on a bit of a different topic
today, though, that has to do with the Department of Veterans
Affairs (VA) and the ability of veterans to be counted among
Medicare beneficiaries when it comes to the reimbursement rate.
Two years ago we required HCFA to submit a record, a report
accounting for the health services furnished by the U.S.
Department of Defense (DOD) and the VA to Medicare
beneficiaries in both the Medicare+Choice program and also in
fee-for-service, but since Medicare+Choice, that formula does
not account for the services that are provided currently in
military facilities, the reimbursement rates in Washington
State and other areas with high military presence are going to
be lower than they really should be.
So I am curious, has the Centers for Medicare and Medicaid
Services (CMS) completed this report and how can CMS address
this issue so that we can find greater equity among the health
care plans?
Mr. Scully. Well, I am not sure I have great news for you.
When I knew you might ask this question from your staff, I
looked into it. Apparently this report is done and should be
sent to you shortly. It is in clearance, probably sitting in my
inbox, but I will get it to you quickly, but I think what I
learned last night was one of the conclusions was that we had
limited ability to get good data from the VA and DOD and so
there really was not--I think you are going to find one of the
conclusions of this report is probably not going to be what you
are looking for. Part of that is from not having good
information. Now that I am more aware of this, Secretary
Principi is an old friend of mine, I will try to work with the
VA to get better information and with DOD and see if we can
come up with more than I think is in the report that is coming
to you. It goes through all the problems, but probably doesn't
give you the results you want.
Ms. Dunn. We would very much appreciate that, and I think
other folks who represent military areas, if they haven't
noticed this inequity, it is important to a lot of us around
the country. So we would appreciate your working with him to
get the information, see if you can't get this one squared
away. It is only fair and right now we are penalizing our
recipients. Thank you. Thank you, Madam Chairman.
Chairman Johnson. I would like to recognize Mr. Cardin, who
is also not a member of the Subcommittee, but has been very
involved in our work.
Mr. Cardin. Thank you, Madam Chair, and I very much
appreciate the courtesy, and I appreciate your holding this
hearing.
Mr. Scully, it is always nice to hear from you. I don't
think there is much you could do or Congress could do on the
reimbursement structure that would affect choice in the State
of Maryland. Maybe you disagree with that, but from my
conversations with the HMOs that have left the State of
Maryland, any changes we make here in the reimbursement
structure will have virtually no impact on their decision to
stay out of the Maryland Medicare market. We could argue why,
but I am not sure we are going to have any impact.
It seems to me that there are two approaches we could
consider in regard to beneficiaries in Maryland. One is what
Mr. Stark has talked about, and that is offering or expanding
choice within the government-run insurance program by offering
more choices than just straight fee-for-service Medicare. We do
that, by the way, in Maryland, through the Municipal Health
Services Program, which still exists in the State of Maryland.
That program offers government-run HMO coverage to Medicare
beneficiaries in my State. Second, if Congress does move
forward in covering prescription medicines within the basic
reimbursement structure--if it becomes a covered benefit within
Medicare--a lot of the uncertainty and a lot of the marketing
changes will end. Reimbursing plans for the cost of
prescription drugs will give us a better chance to attract
private insurance companies into the Medicare market.
So I would appreciate your comments as to my observations.
Is there anything we can do for the people of Maryland, and
what is your view of the two suggestions that I have made--
looking at a more innovative approach within Medicare itself,
and of course, you are already on record on prescription
medicines?
Mr. Scully. Well, among other things, I think you may know
my dad was--I think he is close to one of your constituents and
was in the Medicare+Choice in Maryland and lost that a couple
of years ago. I can tell you from personal experience, his
options that he had to fill in were significantly less fun and
more expensive. I think one of the problems, and I watched this
when Oxford dropped out county by county, when seniors lose the
option, they get angry, and so once the plans drop out--one of
the reasons I have tried to get a lot of plans to stay in by a
thread this year is once they get out, seniors get angry, it is
hard for them to get back in, and in some cases, they can't get
back in under the law, but when they raise copayments, they
raise premiums, they finally make the decision to get out, it
is a big expense to get back in. It is a big expense to market.
Frequently they leave irritated seniors and they just
aren't getting get back in for a while. So getting them back
in, you have to make it a pretty good deal to get them back in
once they drop out.
So I think you are probably right. I think one of the ways
to get people back in is to change the benefit structure and
then it is probably more expensive than we are talking about,
but as I said, Medicare+Choice does not--there is only one PPO
in the country basically, and that's Independence Blue Cross in
Philadelphia. There are a couple other quasi point-of-service
plans, but what most people under 65 want, and most of us are
in, are hybrid plans that have some of the characteristics of
managed care, and some of the characteristics of indemnity
where you basically get to choose, and if you want higher co-
payments or higher deductibles, you can go outside the network
and go to any doctor you want.
So if you find out you have colon cancer and you want to go
to a specialist, you can get any doctor you want. It doesn't
have to be in the network. You are just going to pay a little
more, and that is what is exploding in the under-65 market, and
that is what sick people want, and it doesn't exist in Medicare
outside of a couple of counties in suburban Philadelphia. I
think that if we really want to make the private sector models
an option in Medicare for seniors increasingly in the under-65
market, traditional HMOs are disappearing and these hybrid
plans are what are exploding and that is not an option in
Medicare. You either have traditional fee-for-service or you
have basically a closed plan, managed care plan and there is
nothing in between.
Mr. Cardin. Of course, Congress had hoped that
Medicare+Choice would encourage more private insurers to come
up with these different models. We didn't want to just limit
options to the traditional HMO and government fee-for-service.
If I understood Mr. Stark's point, why not experiment with
Medicare itself within the government-run program so that if
the private sector is not willing to offer coverage we should
devise different benefit models within the Medicare system at
the same level of public support. This way, we would not be
putting the private sector at disadvantage.
Mr. Scully. Well, there are a lot of things that I think we
can also experiment with that I am very interested in, like
disease management capitation--like capitating some of these
end-stage renal disease, ESRD, payments. There are a lot of
places in the traditional Medicare Program where you can
basically set up kind of many disease management programs to
create the right incentives that are still in the traditional
fee-for-service program, and we are looking at doing a lot of
those things.
Mr. Cardin. I will be talking to your dad to lobby you on
behalf of new programs for Marylanders. Thank you, Madam Chair.
Chairman Johnson. Thank you very much, Administrator
Scully. It is pleasure to have you before the Committee with
your broad background in the history of Medicare and the
problems it faces, and also the depth of your insight into the
opportunities to strengthen it and offer to seniors some of the
options that they clearly have demonstrated that they want.
Thank you for being with us. We look forward to working with
you to solve these problems. Thanks.
Mr. Scully. Thank you. The administration is very committed
to helping you try to fix this, and we appreciate your
invitation today.
Chairman Johnson. Thank you. May we now have Ms. Stephanie
Sue Stein, the director of the Milwaukee County Department on
Aging; Mr. Richard Jones, president, Government Relations,
UnitedHealth Corp.; Mr. Peter Haytaian, vice president,
Government Programs, Oxford Health Plans. Each of you will have
5 minutes. You may submit your statements in whole for the
record and highlight them in your 5 minutes.
I will recognize Mr. Kleczka at this time for purposes of
an introduction.
Mr. Kleczka. Thank you, Madam Chairman. Madam Chair and
members of the Committee, it is a great privilege for me to
introduce a good friend of mine and a very good friend of the
seniors, Stephanie Sue Stein, who is director of the Milwaukee
County Department of Aging since 1993, and for the previous 19
years, was director of the Older Adult Services at Milwaukee's
Social Development Commission. This outstanding agency that she
currently is director of serves over 160,000 persons age 60 or
older who live in Milwaukee County.
Ms. Stein has been a strong and effective voice for seniors
in our community and throughout the Nation. She is an
enormously well-respected and innovative leader and a tireless
advocate for elder rights. I have had the privilege of working
with Stephanie on a number of projects over the years and have
always been impressed with her unfailing dedication to the
seniors in our community and her impressive expertise on aging
issues. It is a great pleasure for me to introduce Stephanie
this morning and we look forward to hearing her comments.
Chairman Johnson. Thank you. I would also like to make just
a very brief comment about Mr. Jones and the Oxford Plan. They
have really been one of the creative actors in Connecticut and
the northeast in not only Medicare+Choice, but also in managed
care in general. When they were the first ones to offer to the
general public a managed care plan that covered acupuncture and
some of the alternative medicine approaches. So they have been
a very creative contributor in this era of dynamic health
benefits. Sorry, not Mr. Jones. Mr. Haytaian. Sorry.
We will start in alphabetical order, Mr. Haytaian.
STATEMENT OF PETER HAYTAIAN, VICE PRESIDENT, GOVERNMENT
PROGRAMS, OXFORD HEALTH PLANS, TRUMBULL, CONNECTICUT
Mr. Haytaian. You want me to go first? Can you hear me?
Madam Chair, Congressman Stark, Committee members, thank you
very much for having me here today. My name is Pete Haytaian,
and I am the vice president of Government Programs at Oxford
Health Plans. We have--for those of you who aren't familiar
with the plan, we are a Connecticut-based, New York regional
plan that has 1.5 million members, 85,000 of which are
currently Medicare+Choice members. When I joined the plan back
in 1998 and took on the position of vice president of
Government Programs, we, in fact, had 160,000 Medicare+Choice
members and as I said today, we are down to 85,000 members, and
as of January 2002, unfortunately down to 65,000 members. At
the core of the problem--without repeating everything that has
already been discussed, the core of the problem is in most of
the counties that we were in predominately in places like
Connecticut, all of Connecticut, all of New Jersey, Long
Island, the northern counties of New York, the problem is the
2-percent increases that we received every year versus the 8 to
10 percent medical cost trends.
So it is precisely the issue you all have been talking
about today, and we have unfortunately had to make a very, very
difficult decision to exit those counties over the last couple
of years. We are truly committed to the program and love the
program and think that it offers a lot. I think there is a
couple of points--a lot of points actually that weren't touched
upon earlier that I think are fundamental to this program, but
let me talk about where we are offering products and what we
are offering, because I think we are offering products to all
constituencies through the Medicare+Choice program that is
fundamentally impacting their lives. Most importantly offering
products to the financially vulnerable population, folks that
have annual incomes of less than $18,000 a year.
We offer basically 3 products. Our lower tier product is
called the Essential Plan, and in this plan we have an almost
no-cost sharing. There is no premium. There is almost no cost
sharing. There is a zero PCP, primary care physician, co-pay.
There is a $10 specialist co-pay. We offer an unlimited generic
benefit and the folks that we are targeting for this product
are generally folks that are eligible for Medicaid and/or are
eligible for State pharmacy assistance programs that I know you
are all familiar with, in New York, for example, the EPIC or
Electronic Privacy Information Center program, where folks
generally can get probably the most comprehensive Medicare
benefit package, I would argue, in the country today with all
the aspects of everything we talked about today, including
unlimited generic, and then being able to pick up brands
through programs like Medicaid and/or State Pharmacy Assistance
Program.
We also have a mid tier product where most of our members
reside and that--the fundamental distinction between that and
the essential plan I just described is there is more cost
sharing, but it also includes a $750 brand drug benefit, and
then we offer another product to meet a different constituency,
a point-of-servce product which Administrator Scully just
talked about. But for folks that find premiums in the Medigap
program to be exorbitant and want an added network option, we
offer a point-of-service product for those folks. But again,
our products focus in on the financially vulnerable population,
folks that really don't have a choice. We talked about Medigap.
The true numbers are that if people want to get comparable
benefits that we are offering through Medigap, they are paying
in excess of $3,000 a year in premiums in some instances,
versus in our case, in the two products I described, zero
premiums and unlimited cost sharing, or in the case of the
Essential Plan, no cost sharing almost.
One other fundamental point that I want to make that no one
has really talked about that I think fundamentally
distinguishes the Medicare+Choice program from the fee-for-
service program is within all our products, we offer not only
disease management programs, but intensive health promotion
programs. We built a program called the Falls Prevention
Program, which is one of only--I think we are the only ones in
the country that built a similar type program, where we built
this with Yale.
We identify folks that are at risk for falls, we have OTs,
or occupational therapists, and PTs, or physical therapists,
that actually physically go into people's homes, meet with them
on whether or not they have mats in their homes that are
slipping or they have the appropriate durable medical equipment
(DME) in their homes. We actually purchase these products for
them so that they can prevent unwanted falls. You all hear
about disease management programs all the time, but I don't
know if you really understand how intensive they can be and how
fundamentally they can impact people's lives.
We have a program for folks with COPD, which is chronic
obstructive pulmonary disease, diabetes where folks for 7 weeks
every week meet with professionals, both doctors and nurses and
folks from our plan and learn about their disease in an
intensive course. They get a book and they sit in the room for
2 hours and really understand how to live with their chronic
condition. These are programs that fundamentally impact
people's lives and are fundamentally different than the fee-
for-service program when we ask what this program can offer.
So in conclusion, I think this serves a vital need, this
program. I think that we can offer a very comprehensive set of
benefits to folks that are in a financially vulnerable
category. Folks love all the additional programs that we offer
where we can offer it. I hope that you seriously consider the
bills before you. I know there are a few bills in the House
right now that talk about bringing reimbursements in at parody
with fee-for-service, and I think that will create stability in
the urban areas like we have talked about and it will also give
us the opportunity to reenter some counties that we
unfortunately had to exit. So I thank you for your time and
welcome any questions.
[The prepared statement of Mr. Haytaian follows:]
Statement of Peter Haytaian, Vice President, Government Programs,
Oxford Health Plans, Trumbull, Connecticut
I. INTRODUCTION
Good morning. Madam Chairwoman, Congressman Stark, and other
distinguished Committee members, my name is Peter Haytaian and I am the
Vice President of Government Programs for Oxford Health Plans. I would
like to begin by thanking you for the opportunity to come before this
Sub-committee to discuss the status of the Medicare+Choice program.
As you may know, Oxford Health Plans provides services to about 1.5
million members in the tri-state region of lower New York, all of New
Jersey, and Connecticut through traditional health maintenance
organizations, point-of-service plans, third-party administration of
employer-funded benefit plans and Medicare+Choice plans.
When I first joined Oxford back in 1997, Oxford had approximately
160,000 Medicare members in a service area that encompassed all of New
Jersey, the greater New York City area, including Long Island, the
northern counties surrounding and including Westchester County, and
most of Connecticut.
Due to the payment inadequacies of the current system, Oxford has
made the difficult decision to curtail our participation in the
Medicare+Choice program in 1999, again in 2001 and most recently for
2002. At the core of the problem is the flawed M+C reimbursement
methodology in the Balance Budget Act of 1997 that limits the growth of
reimbursement in urban areas to two percent per year.
During the same period (1998-2002), most commercial and government
health insurance programs experienced annual premium increases ranging
from high single digits in the late 1990s to more recently mid to high
double-digit increases. Meanwhile medical inflation has been
approaching ten percent annually.
Consequently, as of January 2002, Oxford's Medicare Advantage
program will serve approximately 65,000 members in a service area that
has shrunk to include only the five boroughs of New York City and one
county in both New Jersey and Connecticut. (See Attachment A)
We especially concerned with member displacement since a majority
of our senior members are financially vulnerable, most with household
annual incomes of less than $20,000. Without an M+C option many of
these seniors are forced back to the Medicare fee-for-service program
and are unable to afford supplemental policies (as high as $300/month)
to receive a comparable level of benefits.
In fact, recent research shows that the rate of Medicare
beneficiary health maintenance organization (HMO) enrollment is
inversely proportional to income. Medicare beneficiaries had a HMO
enrollment rate of 28% when their yearly income was less than $15,000.
This rate decreased as annual income level increased.\1\ In addition,
in the urban Northeast, among beneficiaries who had Medicare
supplemental coverage that was not subsidized, 41% were enrolled in
Medicare HMOs.\2\
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\1\ B. Virnig, et al., ``Medicare HMOs: Who Joins and Who Leaves?''
American Journal of Managed Care, April 1998.
\2\ American Association of Health Plans, 2000.
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II. OXFORD HEALTH PLANS ROLE IN THE MEDICARE+CHOICE PROGRAM
In spite of the existing funding issues, the Medicare+Choice
program has demonstrated that adequately funded plans can provide high-
quality, comprehensive, affordable health coverage for a variety of
populations that is not available in the Medicare fee-for-service
program. This is readily evident in the New York metropolitan
marketplace.
Through its many years of experience, Oxford has learned to craft
its plan design to accommodate the needs of a diverse Medicare
population by creating a portfolio of plan choices. Oxford's business
decisions are governed in part by our understanding of our members'
needs and preferences (e.g. zero premium products and prescription drug
benefits), the local medical services market, etc. Oxford's philosophy
firmly endorses the concept that one size does not fit all.
Oxford Medicare Advantage Plan Offerings As Compared to Alternative
Medicare Products
Oxford's portfolio includes three plans: The Oxford Medicare
Advantage Essential Plan, The Oxford Medicare Advantage Plan, and The
Oxford Medicare Advantage Plus Plan. These three options are
specifically designed to cater to different populations.
The Advantage Essential Plan is designed to operate in tandem with
New York's public assistance pharmacy program (EPIC) and to provide
access to low-income beneficiaries. Through EPIC, low-income New
Yorkers are able to get brand pharmacy benefits. Oxford also provides
additional benefits not provided in fee-for-service program as well as
relaxed cost-sharing requirements.
For example, in New York, the majority of members in the
Medicare+Choice program are served through HMO products, with little or
no monthly premiums. This population is predominated by low-income
status beneficiaries that embrace gated delivery system products. For
these populations, the Oxford Essential Plan's zero premium provides a
rich benefits package that includes unlimited generic drugs, hearing
and vision benefits, with no co-payments for in-patient hospital
services, primary care physician visits or generic drugs, and minimal
co-payments for specialty physician visits.
By contrast, less comparable Medicare supplemental policies are
exorbitantly expensive. Last year, in New York, the average annual
quote for a Medigap Plan A, which only covers only basic cost sharing
was $890, while the average annual quote for Medigap Plan F, which
covers 100% of Part B excess charges, was around $1,571.\3\ In many
instances, this means that beneficiaries would have to choose to pay
premiums beyond their means for a Medigap policy to the detriment of
other life necessities. Alternatively, Oxford's Medicare+Choice
products provide an economical substitute that limits beneficiaries'
out-of-pocket costs for catastrophic illnesses without saddling
beneficiaries with undue financial burden.
---------------------------------------------------------------------------
\3\ Weiss Ratings, 2001
---------------------------------------------------------------------------
The standard Advantage plan is an example of the traditional
Medicare+Choice offering that is based on a zero premium product with a
prescription drug benefit. This plan constitutes Oxford's core product.
The plan covers physician visits, in-patient and out-patient hospital
care, and $750 of outpatient prescription brand name drugs and
unlimited generic drugs with minimal cost-sharing on the part of
members-less than fee-for-service Medicare but more than our Essential
Plan.
Finally, the Advantage Plus plan is meant to capture the
beneficiary population that has traditionally shied away from
Medicare+Choice in favor of ``open access to care'' products with
additional benefits such as prescription drugs. We have identified this
population as ``Gap with concern'' beneficiaries. The Advantage Plus
plan is attractive to these beneficiaries because it combines a ``point
of service'' product with extensive prescription drugs at a premium of
$110 per month ($1,320 per year), whereas the national average for the
richest Medigap policy (Plan J) is approximately $3,065 a year.\4\
---------------------------------------------------------------------------
\4\ Weiss Ratings, 2001
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III. THE MERITS OF THE MEDICARE+CHOICE PROGRAM
Oxford's Medicare+Choice Plans Offer Additional Benefits
One of the reasons for the popularity of Medicare+Choice plans is
that they typically offer traditional benefits not covered by the
Medicare fee-for-service program. All three of Oxford's New York M+C
plans include pharmacy benefits, physical exams, vision and hearing
services, preventive dental care, routine podiatry services, nutrition
services, and a fitness benefit. Oxford also has an education and
outreach program that works closely with local Departments of Aging, in
order to access the best resources for our members throughout the
communities we serve.
Moreover, our roster of participating physicians include more than
15,000 doctors, specialists, and complementary and alternative medicine
providers ensures that our members have plenty of choices in choosing a
physician. When our Medicare members need healthcare guidance when
their physician's office is closed they may telephone Oxford On-Call
(OOC) and immediately speak to a registered nurse. OOC is a 24-hour/
seven-day-a-week healthcare guidance service operated under the
direction of an Oxford Medical Director.
Oxford's Medicare+Choice Plans Offer Innovative Patient-Care Programs
Some of the most popular Medicare+Choice programs for our
beneficiaries are the innovative disease management programs. Oxford's
current M+C disease management programs include stroke prevention,
dialysis, asthma, congestive heart failure, and diabetes.
Oxford's Options for Living With Lung Conditions is a self-
management program is designed to empower the lives of Oxford members
living with chronic obstructive pulmonary disease (COPD) and asthma. A
seven week workshop was created to educate members on lung conditions
in general, and on topics of nutrition, exercise, coping skills, daily
living skills, understanding medications/complications, and alternative
wellness. An identical program exists for Oxford members living with
diabetes.
In addition to the aforementioned program elements, the programs
utilize health professionals to develop written materials and
interactive presentations to teach members how to manage their
conditions on their own. Comprehensive workbooks (150 pages long) have
been developed to target various avenues of self-management.
The benefits of such programs have been validated through a number
of scientific studies that have found that outcomes of care in HMOs
were better than or equal to care in non-HMO settings.\5\
---------------------------------------------------------------------------
\5\ See J. Seidman, Medical Care, Vo. 36, 1998 (heart disease); and
Preston and Retchin, Journal of the American Geriatrics Society, July
1991 (diabetes and hypertension).
---------------------------------------------------------------------------
One of Oxford's most unique programs for members is our falls
prevention program. The Oxford Activity & Safety Program For Fall
Prevention is a primary prevention program, which uses in-home
rehabilitation therapy services to reduce falls in a targeted Medicare
population. To meet this objective, Oxford is the only managed care
organization that offers the combined approach of occupational and
physical therapy, and issues durable medical equipment for this
program. (See Attachment B)
IV. THE CURRENT STATUS OF MEDICARE+CHOICE
Payment Relief Is Needed Now As A Bridge to Medicare Reform
A survey of the landscape of the Medicare+Choice program reveals
that the program is at a critical juncture in its history. The lack of
payment parity with traditional Medicare fee-for-service has led to
significant losses that have forced plans to reduce benefits, raise
premiums and other cost sharing, and in many cases like our own plan
even withdraw from the program in certain areas. The current payment
environment is untenable and threatens the viability of existing plans.
A readjustment of the current payment methodology is essential to
insure the continuing success of Medicare+Choice.
As I stated previously, the core of the problem is the flawed M+C
reimbursement methodology in the Balanced Budget Act of 1997 that
limits the growth of reimbursement in urban areas to two percent per
year while medical inflation has been approaching ten percent. The Act
and its successors (BBRA and BIPA) have elevated M+C reimbursement in
areas of the country where fewer seniors reside and a select group of
suburban areas. It is now time to significantly increase the
reimbursement in the urban areas where most of the beneficiaries live.
As you know legislation has already been introduced to address this
urban funding shortfall. HR2836/S1317 creates a fifth payment prong for
urban counties by primarily reimbursing M+C plans at 100 percent of
fee-for-service (FFS). One hundred percent of fee-for-service is a
significant boost in most urban areas. However, in many urban counties
graduate medical education (GME) accounts for a significant portion of
fee-for-service costs, as much as 14% but generally about 6%. HR 2980
also creates a fifth payment prong for urban areas based on 100% of
fee-for-service but including the GME costs without taking any funds
from the current GME pool that is directly distributed to the
hospitals.
I urge the Committee to act expeditiously on these proposals.
CONCLUSION
In the Medicare+Choice market, Oxford has tailored products to meet
each segment of our market. We have launched new products and services,
such as the ``point of service'' concept, alternative medicine
initiatives through a contracted network of alternative medicine
providers, a host of disease management programs and quality monitoring
techniques. None of which are available to seniors in the traditional
Medicare fee-for-service program.
A properly funded Medicare+Choice program is ripe for further
benefit and health delivery innovation. Oxford's commitment to the
Medicare+Choice program is evidenced by our long history of providing
Medicare beneficiaries with access to high quality, affordable,
patient-centered health coverage. We believe that Congress should enact
a minimum payment two-year solution that addresses concerns about
inadequate funding for the program. This will create a stable
environment for our company's participation in the Medicare+Choice
program in anticipation of further Medicare reform. Madam Chairwoman
and members of the Committee, I again thank you for the opportunity to
discuss the Medicare+Choice program, and welcome any questions you may
have.
______
ATTACHMENT A
[GRAPHIC] [TIFF OMITTED] T7455B.001
______
ATTACHMENT B
Options For Living With Diabetes
Options for Living With Diabetes is a self-management program
designed to empower the lives of our Oxford Medicare Advantage members
living with diabetes.
The seven-week workshop has been created to educate members on
diabetes as a disease, and on topics of nutrition, exercise, coping
skills, daily living skills, understanding medications/complications,
and alternative wellness. It is emphasized to the members that
increasing knowledge of these areas can positively impact living with
these conditions and subsequently improve the quality of their lives.
Meetings are held for 3 hours, once per week for seven weeks. Members
are encouraged to attend all of the seminars as the material presented
builds on lectures from the previous weeks.
Health professionals have developed written materials and
interactive presentations to teach members how to manage diabetes in
their own lives. A 150-page, comprehensive workbook has been developed
that targets various avenues of self-management. We encourage all
members and their family members to take advantage of this exceptional
opportunity for comprehensive learning.
Options For Living With Lung Conditions
Options for Living With Lung Conditions is a self-management
program designed to empower the lives of our Oxford Medicare Advantage
members living with lung conditions.
The seven-week workshop has been created to educate members on lung
conditions as a disease, and on topics of nutrition, exercise, coping
skills, daily living skills, understanding medications/complications,
and alternative wellness. It is emphasized to the members that
increasing knowledge of these areas can positively impact living with
these conditions and subsequently improve the quality of their lives.
Meetings are held for 3 hours, once per week for seven weeks. Members
are encouraged to attend all of the seminars as the material presented
builds on lectures from the previous weeks.
Health professionals have developed written materials and
interactive presentations to teach members how to manage lung
conditions in their own lives. A 150-page, comprehensive workbook has
been developed that targets various avenues of self-management. We
encourage all members and their family members to take advantage of
this exceptional opportunity for comprehensive learning.
Activity & Safety Program For Fall Prevention
Description of Innovation
One of Oxford's most unique programs for members is our falls
prevention program. The Oxford Activity & Safety Program For Fall
Prevention is a primary prevention program, which uses in-home
rehabilitation therapy services to reduce falls in a targeted Medicare
population. To meet this objective, Oxford is the only managed care
organization that offers the combined approach of occupational and
physical therapy, and issues durable medical equipment for this
program.
Description of Interventions
Oxford Medicare Advantage members who have been
identified as being at risk for a fall receive up to six
physical therapy and six occupational therapy visits.
Assessment and interventions include: balance, gait,
medications, musculoskeletal strength, transfers, range of
motion, environmental safety, and postural hypertension (blood
pressure changes).
Home visits by nurses are conducted if a member has
postural hypotension or is taking medications associated with
an increased risk of falling.
Members are given a program of exercises to continue
following the intervention.
Collaborative Arrangements
Oxford Health Plans has collaborated with Department
of Geriatric Medicine at Yale University to develop the Fall
Prevention program.
Community-based healthcare providers, including home
care agencies and independent physical and occupational
therapists.
Chairman Johnson. Thank you very much. I think your point
that they are fundamentally different from fee-for-service is
extremely important. Mr. Jones.
STATEMENT OF RICHARD JONES, PRESIDENT, GOVERNMENT PROGRAMS,
UNITEDHEALTH GROUP, MINNETONKA, MINNESOTA
Mr. Jones. Thank you, Chairwoman Johnson, Representative
Stark, and members of the Subcommittee, for the opportunity to
testify on our experience in Medicare+Choice program. I am
Richard Jones, president of Government Programs for
UnitedHealth Group, responsible for our Medicare+Choice
offerings across the country. As many of you know, UnitedHealth
Group has a longstanding commitment to Medicare beneficiaries.
Over the years, we have been proud of the services and benefits
we have been able to offer to Medicare beneficiaries. We
believe that the Nation's seniors and persons with disabilities
who choose our plans have received a quality product that has
produced positive medical outcomes, but like our health plans--
like other health plans participating in the Medicare+Choice
program, low reimbursement rates have forced us far too often
to scale back the scope of benefits we offer enrollees.
Rather than abandon Medicare altogether as some of our
health care plan colleagues have done and as many of our own
investors have advocated, we decided to stay in as many
Medicare markets as possible. It has been our hope that by
staying in as many markets as possible for as long as possible,
we can illustrate our commitment to the program and to the idea
of providing competitive and innovative choices to our Nation's
Medicare beneficiaries. Plans like ours bring value beyond the
traditional Medicare Program by coordinating the fragmented
diverse elements of the health care system and organizing the
delivery of care around the patient.
Our enrollees benefit from many of our value-based
offerings such as individually assigned customer service
representatives, access to 24-hour nurse line and Internet-
based health information resources as well as programs that
track their special health care conditions and remind them to
get regularly scheduled diagnostic tests.
They also become part of our care coordination program
where dedicated nurses follow hospitalizations and make sure
that the services are understood, accessible, and coordinated
before, during and after they are hospitalized. These services
are unavailable to beneficiaries in fee-for-service Medicare.
Over the past several years, some beneficiaries have
experienced the deterioration of benefits in Medicare+Choice
and in some markets, beneficiaries have lost their health care
plan coverage altogether. We agree with the CMS that with--and
many members of the Subcommittee that flaws in the current
payment formula have caused this instability as annual payment
increases have not kept pace with medical cost growth in many
areas.
Our experience in Wisconsin is an example of the problems
faced by Medicare+Choice plans nationwide. We offered a
Medicare+Choice plan in Wisconsin since 1995. Medical cost
inflation has exceeded 20 percent over the past couple of years
and it has caused mounting financial losses. In fact, the other
health plan in the Milwaukee area will leave the market at the
end of this year and others have previously left. In order to
stay in the market, we were forced to increase beneficiary cost
sharing, including imposing co-pay on inpatient hospital and
other services. This was a difficult decision for us.
As a result of our ongoing discussions with CMS, we
recently altered the benefit package we originally filed to
lower the inpatient co-pay to $295 per day. We are continuing
to work with CMS on a demonstration in Wisconsin that would
improve benefits and share financial risk between UnitedHealth
Group and CMS. We believe we still provide Wisconsin seniors
with a choice that many will value. For example, in fee-for-
service Medicare, there is no limit on the out-of-pocket
expenses a beneficiary may incur each year. Expenses like
inpatient hospital visits, stays in skilled nursing facilities,
diagnostic tests, durable medical equipment and supplies,
outpatient services and emergency room care.
For seriously ill Medicare beneficiaries, these costs can
quickly add up to tens of thousands of dollars. Under our
Wisconsin Medicare+Choice plan, there is a $4,800 cap on the
amount of out-of-pocket expenses that our members would pay in
any 1 year. This is not simply a limit on hospital copayments.
It is a total and complete limit on out-of-pocket costs for
catastrophic protection for costs such as I outlined above.
This limit, combined with the clinical and preventative
services described, is especially attractive to people with
serious illnesses who have high service utilization during the
year. Our plan is the only Medicare+Choice product in the
Nation that offers such a benefit like that.
Madam Chairwoman, we know that even under the best of
services, making a decision about health care is not easy for
many seniors, given the complicated set of options around
Medicare fee-for-service, Medicare+Choice and Medigap policies,
and we believe there is particular confusion over these changes
in Wisconsin. We want our enrollees to be knowledgeable and
comfortable with the health plan choices they make and we are
committed to take whatever actions to support these choices,
and as part of that we are prepared and announce today and we
share Representative Kleczka's concern that we are preparing
and will be mailing to every enrollee a simple newsletter
explaining the changes in the product as well as their Medigap
rights.
We have been in contact with CMS to expedite that mailing.
We are extending the hours of our customer service line from
8:00 a.m. to at least 7:00 p.m. each night. We will be using
paid advertising, including an ad in the Milwaukee Journal
Sentinel to publicize the extended customer service hours, and
we are working with the Wisconsin Board of Aging and Long-Term
Care to increase beneficiary awareness of their independent
Medigap hotline.
In conclusion, we reiterate and appreciate the recent focus
on these issues. We believe that Medicare+Choice has much to
offer. We want to work to develop innovative solutions, work
together to address the items that have been raised today and
have been raised to date, and I will be happy to take any
questions.
[The prepared statement of Mr. Jones follows:]
Statement of Richard Jones, President, Government Programs,
UnitedHealthGroup, Minnetonka, Minnesota
Thank you Chairwoman Johnson, Representative Stark, and members of
the Subcommittee for the opportunity to testify on our experience in
the Medicare+Choice program. I am Richard Jones, President of
Government Programs for UnitedHealth Group, responsible for our
Medicare+Choice offerings across the country.
As many of you know, UnitedHealth Group has a longstanding
commitment to Medicare beneficiaries. Our participation in the Medicare
program is fundamental to our core mission--to support individuals,
families, and communities to improve their health and well-being at all
stages of life. We aim to facilitate broad and direct access to
affordable, high quality health care through a variety of arrangements,
including Medicare+Choice.
UnitedHealth Group is nowthe largest provider of health care
services to seniors in America. For over 20 years, we have provided
seniors and disabled individuals a comprehensive alternative to
traditional Medicare benefits, now known as the Medicare+Choice
program. Today, over 300,00 Medicare+Choice beneficiaries are enrolled
on our health plans across the country. And through our Evercare
program, an innovative Medicare demonstration program, we provide
coordinated care services to an additional 20,000 frail elderly
individuals, the majority of whom live in nursing homes.
Over the years, we have been proud of the services and benefits we
have been able to offer to Medicare beneficiaries. We believe that the
nation's seniors and persons with disabilities who choose our plans
have received a quality product that has produced positive medical
outcomes. But like other health plans participating in the
Medicare+Choice program, low reimbursement rates have forced us far too
often to scale back the scope of benefits we offer enrollees. Rather
than abandon Medicare altogether, as some of our health plan colleagues
have done and as many of our own investors have advocated, we decided
to stay in as many Medicare markets as possible. It has been our hope
that by staying in as many markets as possible for as long as possible,
we can illustrate our commitment to the program and to the idea of
providing competitive and innovative choices to our nation's Medicare
beneficiaries.
Medicare+Choice Value
We bring value beyond the traditional Medicare program by
coordinating the fragmented, diverse elements of the health care system
and organizing the delivery of care around the patient. Our enrollees
benefit from many of our value-based offerings such as individually
assigned customer service representatives, access to a 24 hour nurse
line and internet-based health information resources, and programs that
track their special health conditions and remind them to get regularly
scheduled diagnostic tests. They also become a part of our Care
Coordination program where dedicated nurses follow their
hospitalizations and make sure that services are understood, accessible
and coordinated before, during and after they are in the hospital.
These services are unavailable to beneficiaries in fee-for-service
Medicare.
Since 1996, we have offered a majority of our beneficiaries a
health plan that requires no additional premium beyond the monthly Part
B premium. Beneficiaries have access to a wide range of preventive
benefits with no cost sharing requirements, including vision, hearing,
and physical examinations. These are not covered in traditional
Medicare at the same levels. In addition, we offer stop-loss coverage
to beneficiaries with very high out-of-pocket costs.
The following are dexcriptions of some of the benefits that our
Medicare+Choice enrollees enjoy that are not available to beneficiaries
in traditional fee-for-service. For example:
Care Coordination allows enrollees to work directly
with their physician to determine the best way to coordinate
their own health care needs. Care Coordination is designed to
make it easier to get care while identifying and addressing
gaps in care. It encompasses hospital admission counseling,
health education, prevention and reminder programs, inpatient
care advocacy, phone calls to high-risk enrollees post-
hospitalization, identification and support programs with
enrollees with complex and chronic illnesses and long-term
assessment and education programs to support enrollees with
asthma, cardiovascular disease, and diabetes.
Personal Service Specialists are individually
assigned to each member, providing them one name to call to
answer any questions they may have and resolve problems. This
program helps to provide a familiar face to the health plan,
helping beneficiaries navigate the complexities of the health
care system--a service particularly important to seniors.
Care24 provides enrollees 24 hour a day, 7 day a
week, access to registered nurses, masters-level counselors and
lawyers to get answers to questions about medical issues,
personal and emotional health, legal and financial issues,
eldercare and other concerns. It also offers recorded messages
from a health information library on over 1,000 health topics.
In addition, we offer a range of health and wellness education
for individuals.
UnitedHealth Passport allows members to obtain
coverage for routine care when they travel to other
UnitedHealthcare Medicare+Choice markets. This is invaluable
for ``snow birds'' that spend part of their year in Florida and
other parts of the country.
All of these offerings are underscored by our commitment to
supporting the physician-patient relationship. Our relationship with
physicians, hospitals and other health care providers is critical. Our
medical directors, physicians themselves, work closely with network
providers to share our data on best practices within their community
and in other cities as well. We also have undertaken a number of
initiatives to simplify a doctor's interaction with the health plan so
that they can focus on their patients instead of paperwork. Our
Medicare health plans have been most successful in markets where we
work closely with physician groups who apply the quality and cost data
we can provide to them.
Challenging Decisions for 2002
Over the past several years, beneficiaries have experienced a
deterioration of benefits Medicare+Choice plans are able to offer to
supplement those covered in fee-for-service, as well as an increase in
cost-sharing requirements. In addition, in some markets, beneficiaries
have lost their health plan choices altogether. We agree with the
Centers for Medicare and Medicaid Services (CMS) and with many members
of this Subcommittee, that flaws in the current payment formula have
caused this instability, as annual payment increases have not kept pace
with medical cost growth in many areas.
In our view, this situation has been exacerbated by problems
contracting with physicians, health care professionals, hospitals, and
other providers. In many markets, hospital systems increasingly prefer
to participate exclusively in Medicare fee-for-service because it
offers higher payment and no third party involvement. In some markets,
hospital systems have terminated their relationship with us mid-year,
inconveniencing enrollees who often have to find new providers. While
we have sought to remain in the Medicare+Choice program, this problem
has been a major factor causing us to exit some areas. As we've made
these difficult decisions, the quality of care that we can offer our
customers has been our paramount concern.
Earlier this year, the Administration called upon health plans to
remain in the market in 2002 and restated their commitment to work with
Congress to enact comprehensive Medicare reform. We heeded this call to
stay in the market, consistent with our long-term commitment to be a
major partner with the Federal Government in providing quality health
plan choices to beneficiaries. We stayed in as many markets as we
could, despite the financial pressures. Ultimately, we reluctantly
concluded that we had to discontinue service in 11 of 64 counties,
affecting 57,000, or 16% of our enrollees. As of January 1, we will
continue to provide coverage to over 300,000 enrollees in 53 counties
nationwide.
In order to stay in the market, we had to reduce some benefits and
increase beneficiary cost sharing in order to remain financially
viable. In the absence of either short or long-term reforms, we are
faced with a Hobson's choice--we can either stay in markets by reducing
benefits, or exit and lose the chance to serve Medicare beneficiaries.
No one wants to make this choice. We want the Medicare+Choice system to
work. We believe that it is possible to reform the system to include
adequate resources combined with quality and accountability measures
that health plans must meet to reinvigorate and stabilize the program.
And we hope this hearing will allow all of us to begin discussions
aimed at injecting more innovation, more choice, and more stability
into this important program for seniors and people with disabilities.
Our experience in Wisconsin is an example of the problems faced by
Medicare+Choice plans nationwide. We have offered a Medicare+Choice
plan in Wisconsin since 1995. Medical cost inflation has exceeded 20
percent per year over the last few years, and has caused mounting
financial losses. In fact, the other health plan in the Milwaukee area
will leave the market at the end of this year, and two others left
previously. In order to stay in the market for one more year, we
increased beneficiary cost sharing, including imposing a copayment on
inpatient hospital and other services.
This was a difficult decision for us. These are not the levels of
benefits we would ideally want to offer, such as the benefits we were
able to offer in the late 1990's. As a result of our ongoing
discussions with CMS, we recently altered the benefit package we
originally filed to lower the inpatient hospital copayment to $295 per
day. Although the difference between fee-for-service and this set of
benefits is not as great as in years past, we believe a comparison of
the overall benefits and costs of traditional Medicare, Medigap, and
our Medicare+Choice plan shows that we still provide seniors in
Wisconsin with a choice that many will value.
For example, in fee-for-service Medicare, there is no limit on the
out-of-pocket expenses a beneficiary may incur each year--expenses like
inpatient hospital visits, stays in a skilled nursing facility,
diagnostic tests, durable medical equipment and supplies, outpatient
services, and emergency room care. For seriously ill Medicare
beneficiaries, these costs can quickly add up to tens of thousands of
dollars.
Under our Wisconsin Medicare+Choice plan, there is $4,800 cap on
the amount of out-of-pocket expenses that our members would pay in any
one year. This is not simply a limit on hospital co-payments. It is a
total and complete limit on out-of-pocket costs such as those I
outlined above: hospital costs, inpatient hospital costs, costs of
stays in a skilled nursing facility, diagnostic tests, durable medical
equipment and supplies, outpatient services, emergency and urgent care,
and more. This limit, combined with the clinical and preventive
services described earlier, make this plan especially attractive to
people with serious illnesses who have high service utilization during
the year. Our plan is the only Medicare+Choice product that offers such
a benefit, anywhere in the country.
We are well aware that even with this cap on out-of-pocket costs,
our Wisconsin plan will be quite different next year than the one we
currently offer or would like to offer. We are continuing to work with
CMS on a demonstration in Wisconsin that would improve benefits and
share financial risk between UnitedHealth Group and CMS. And we know
that even under the best of circumstances, making decisions about
healthcare is not easy for many seniors, given the complicated set of
options around Medicare fee-for-service, Medicare+Choice, and Medigap
policies.
There has been particular confusion over these changes in
Wisconsin. We want our enrollees to be knowledgeable and comfortable
with the health plan choices they make. And we are committed to take
whatever actions we can to support these choices. For example, we run a
toll-free number in Wisconsin that allows seniors to ask questions
about our Medicare+Choice plan. As required by the Centers for Medicare
and Medicaid Services, we mailed a detailed explanation of our benefit
changes to all of our enrollees. We will continue to review our benefit
offerings during the year and want to work with CMS to explore ways to
continue to improve our offerings in Wisconsin and across the country.
Conclusion
We appreciate the recent focus of this Subcommittee and the
Administration on improving the Medicare+Choice program. We believe, as
you do, that the program must undergo fundamental reform to provide
beneficiaries broad choices of coverage that best meet their needs and
the kind of coverage they will be able to enjoy and count on for years
to come.
Three points deserve special consideration. As others have
testified, fundamental reform of the reimbursement system is necessary
to address the many moving parts of the payment system and ensure long-
term stability and viability of the program. A fair, competitive
payment approach that is more closely aligned with current medical cost
trend and factors in cost variability in rural and urban markets is an
important short-term goal.
Congress should also explore the increasing difficulties with
hospital and physician participation in Medicare+Choice, focusing
particularly on Medicare+Choice plans' limited provider payment
leverage in some areas.
Reform must recognize the evolutionary nature of the health care
system, developing a range of program options that allows for change as
the system warrants. We encourage Congress and CMS to adopt successful
contracting arrangements in the employer sector and non-risk-based
alternatives as the basis for its own contracts with private health
plans. Other options include disease management, care coordination, and
specialized plans for frail elderly and dual eligible beneficiaries. We
are encouraged by CMS's recent effort to encourage demonstrations in
this area and want to continue to work together to develop innovative
alternatives to traditional fee-for-service and HMO coverage.
Medicare+Choice has much to offer. As Congress and the
Administration begin to discuss adding a prescription drug benefit to
Medicare and other reforms, we urge you to consider changes to
Medicare+Choice as part of the discussion. UnitedHealth Group is
willing to go the extra mile to work with Congress and the
Administration to help develop innovative solutions. Working together
to address many of the items raised today, we can help to develop a
renewed Medicare program that meets the needs of beneficiaries both
today and in the future. The problems with the program are very real,
but there is a great opportunity for positive change.
Thank you for the opportunity to share our thoughts. I would be
happy to answer any questions you might have.
Chairman Johnson. Thank you very much, Mr. Jones. Welcome
Ms. Stein. It is a pleasure to have you.
STATEMENT OF STEPHANIE SUE STEIN, DIRECTOR, MILWAUKEE COUNTY
DEPARTMENT ON AGING, AREA AGENCY ON AGING FOR MILWAUKEE COUNTY,
WISCONSIN
Ms. Stein. Thank you, Madam Chairwoman, Representative
Stark, members of the Committee. It is my honor to appear here
today to testify about the status of Medicare+Choice and to
tell you about the urgent need for consumer protections in that
program. I am the director of the Milwaukee County Department
on Aging, and one of the things that we do is answer about
40,000 phone calls a year from seniors about all of their
questions. We also receive money under the Senior Health
Insurance Information Program. And we give that money to Legal
Action of Wisconsin, which has a benefit hotline for people.
In January 1999, there were five Medicare+Choice plans
offered in Milwaukee County and other parts of southeastern
Wisconsin. Three of them had zero premium, they had very
limited co-pays, and so forth. By 2001, Blue Cross/Blue Shield
of Wisconsin and Prime Care Gold, the UnitedHealthcare product,
were the only products left available to seniors. They still
had a very reasonable monthly payment and very low copayments
when you saw a physician.
Earlier this year we learned that Blue Cross/Blue Shield
would pull out of Milwaukee, leaving 10,000 people without that
option in Medicare+Choice, but clearly those 10,000 people had
other options and there was lots of time to inform them. We,
Legal Action, our Medigap hotline, the State of Wisconsin, were
able to mail to and talk to those 10,000 Blue Cross people to
talk to them about what their options were. We had lost three
other plans. We knew the drill. We knew what to do. We knew how
to get to people.
In October, we were not prepared for what happened in
Milwaukee when 16,000 beneficiaries of the UnitedHealthcare
product received a letter that talked to them about what that
product would look like in 2002. It began very nicely saying
that their monthly premium would go down from $65 to $55 a
month, and it said it would change its name to Medicare
Complete, and then it said please read the following pages to
see the list of benefit changes, and as has been pointed out
today, those benefit changes included going from zero dollars a
day to $350 a day deductible for inpatient hospital services,
$150 up from zero for rehab in a nursing home, and a 20 percent
copayment for every time you went to dialysis.
A friend of mine brought this letter to show to me one
night after work, and his mother is on dialysis and he and she
could not believe that a product like this had anything to do
with Medicare. After the 16,000 people received this letter,
our phones, the Medigap hotline, Senior Action of Wisconsin and
the State of Wisconsin Health Insurance Program have done
nothing else but talk to people about what their choices are in
this product. The calls on all of those hotlines have exploded.
We are not able to counsel people about any other benefits or
to talk to them about any other programs because this has
dominated what has gone on, and we are not just talking to
people individually. We have held joint informational sessions
with people.
On November 13, a very cold and rainy day in Milwaukee, and
we have only had a few those this fall, 1,800 people showed up
at two sessions because they knew that this plan no longer had
benefit for them, and they wanted to know what to do. We have
also petitioned our congressional delegation, my congressman,
Jerry Kleczka, has been extraordinarily involved in trying to
do something about this. We have written to UnitedHealthcare.
We have asked Administrator Scully to do something about this
plan and we found out on Friday that this plan now only has a
$295 deductible still with the $4,800 cap, and that people do
now have guaranteed issue and we are very glad that they are
going to know about that, because once more they are going to
be very confused, once more they are going to be getting very
different information.
Some people have already made decisions and they made
decisions based on the old information. This is not just
happening in Wisconsin as has been pointed out here, this is
happening in Connecticut. This is happening in California.
People are being severely affected by this. I really urge you
to support the bill put forth before you that Representative
Kleczka, Stark, and Thurman are supporting that would eliminate
the lock-in for next year when there is so much confusion how
can we lock people into these plans, that would extend the
Medicare protections for guaranteed issue to people whose plans
changed drastically, and would prohibit Medicare+Choice from
charging larger premiums than traditional Medicare does.
There are thousands and thousands of stories from Milwaukee
of people who don't know what to do, who are going to be
severely limited from using the health care system because of
what has happened in this plan and what has happened in
Medicare+Choice after all.
My plea to you would be to offer Medicare recipients
protections. My plea to you would be to return to what I think
are the crowning values of Medicare, fairness and
dependability, and this new principle of choice that has never
been realized very well in Wisconsin is really not there for
hundreds of thousands of people now. Thank you very much.
[The prepared statement of Ms. Stein follows:]
Statement of Stephanie Sue Stein, Director, Milwaukee County Department
on Aging, Area Agency on Aging for Milwaukee County, Wisconsin
Thank you for the opportunity to appear today to testify about the
necessity and urgency of Medicare+Choice consumer protections. I speak
today as the Director of the Milwaukee County Department on Aging, the
Area Agency on Aging for Milwaukee County, Wisconsin. Our agency has
two functions which give us direct contact with Medicare+Choice
participants in Milwaukee County. First, we operate an Information and
Assistance line for older people, which handles approximately 40,000
phone calls per year. Second, we are the grantee of the Senior Health
Insurance Information Program (SHIIP) funds for Milwaukee County. These
funds are subcontracted to Legal Action of Wisconsin, which provides
in-person and phone consultation for Medicare recipients in need of
insurance counseling.
I will begin today by telling you about the fate of 16,000
Medicare+Choice consumers in Milwaukee County who are in dire need of
protection. These seniors are not alone, however, and counselors from
other parts of the country would like me to remind you of the gravity
and universality of this situation. Finally, I will ask you to enact
much-needed protections on behalf of seniors in Milwaukee County who
are desperate for your help.
Milwaukee County
In January of 1999, there were five Medicare+Choice plans--three
with zero premiums--being offered in Milwaukee County. Unlike plans in
other parts of the country, none of these plans ever offered a
prescription drug benefit, eyeglasses, or other added benefits. (I am
sure that the insurance industry will, and has, told you how the
disparity in the AAPCC rates leads to the difference in plans
nationwide.) These plans had either $0 or $10 deductibles for physician
office visits and $40 deductibles for emergency room visits. In 1999,
then-Medicare recipients could shop for a +Choice plan that used their
physicians and hospitals and was very affordable.
By 2001, Milwaukee County was left with only two Medicare+Choice
plans--Medicare Blue, operated by Blue Cross/Blue Shield of Wisconsin,
and PrimeCare Gold, sold by UnitedHealthcare of Wisconsin, located in
Minnetonka, Minnesota. Although the monthly premiums and co-payments on
these plans had risen ($65 to $70 per month and $20 co-payments), they
were still affordable options for senior citizens.
In July of 2001, we learned that Blue Cross/Blue Shield of
Wisconsin would withdraw its Medicare+Choice plan offering for 2002.
The State of Wisconsin Board on Aging and Long Term Care, which runs
our Medigap hotline, the Bureau on Aging and Long Term Care Resources,
which oversees the State SHIIP program, and we, planned our educational
and informational strategies to deal with this withdrawal. The 10,000
holders of this plan were informed, first by Blue Cross/Blue Shield,
and then by us, that they had options. They could return to basic
Medicare. They could purchase a Medigap Supplemental plan with
``guarantee issue,'' or they could join the remaining Medicare+Choice
Plan, PrimeCare Gold.
As this was the fourth plan to withdraw, we knew the drill. Ten
thousand people would be affected, but we would help them with their
protected options. We were prepared. But we did not know what was
coming.
During the week of October 15th, the 16,000 members of PrimeCare
Gold received a letter from UnitedHealthcare. This letter was hand-
delivered to me by a friend after work on Friday, October 19th. It
begins well--``Dear Customer.'' Beginning January 1, 2002, your monthly
premium will decrease from $65 to $55. In addition, the name of the
plan will be changed to Medicare Complete. Also enclosed is a list of
benefit--BENEFIT--changes. If you have questions, you can call customer
service, which we later learned was located in Birmingham, Alabama. The
letter was signed by Glenn J. Reinhardt, Chief Operating Officer of
UnitedHealthcare of Wisconsin.
The benefit changes attached to the letter were, at first,
unbelievable--and then horrifying. For instance:
------------------------------------------------------------------------
PrimeCare Gold Medicare Complete
(Service) 2001 2002
------------------------------------------------------------------------
Inpatient Hospital Services..... You pay $0 per day You pay $350 per
day.
Inpatient Psychiatric Services.. You pay $0 per day You pay $150 per
day.
Skilled Nursing Facility........ You pay $0 per day You pay $150 per
day.
Renal Dialysis.................. You pay zero...... You pay 20% per
outpatient visit.
Diabetes Self-Monitoring You pay zero...... You pay 20%.
Training and Supplies. Syringes and
alcohol swabs are
not covered.
------------------------------------------------------------------------
There is a $4,800 out-of-pocket limit on inpatient and most
outpatient services.
Since my friend's mother receives dialysis three times a week, he
and his family were stunned by this letter. They were sure there was a
mistake. They were sure that ``Medicare'' would not allow this to
happen. They were sure that, if this were the real plan being offered,
that someone--I, the State, or the Congress--would be able to do
something about it.
On Monday, October 22nd, our phones began ringing and they have not
stopped. All of our local and State benefit systems learned of this
situation and began to try and deal with it. The Medigap Hotline, our
toll free insurance counseling number operated by the Board on Aging
and Long Term Care, reports an average of 350 to 400 calls per day, up
from the usual 150. George Potaracke, the Board's Director, reports
that more callers are trying to get through, but that the system can
only accommodate so many calls and that the Board's voice mail system
completely backs up and shuts down every day. Callers are now waiting
six to seven business days for a counseling session, up from a normal
one to two day wait. The Board on Aging is mailing 1,200 to 1,500
pieces of printed material a week to recipients and their families, up
from 400. Any callers, other than those facing Medicare+Choice issues,
are being deferred.
Our Benefit Specialists at SeniorLaw of Wisconsin report 50 to 200
calls per day. They have had to set aside all non-emergency work and to
pull all staff from every other project to deal with what they call the
``Blue/Gold'' issue.
In order to reach people in a more efficient manner, our
Department, Legal Action, and the State of Wisconsin held joint
information sessions on November 13th in Milwaukee and Waukesha
Counties. On that rainy, cold, and nasty day, 1,800 seniors showed up--
1,200 in the morning at Serb Hall on Milwaukee's South Side and 600 in
the afternoon at Luther Manor on Milwaukee's Northwest Side. No one
knows how many people tried to get into the sessions as people were
parking a mile and more away. Three more sessions are planned.
But we have a dilemma. What are we to tell the holders of the
UnitedHealthcare policy? What choice do they have? They have no
guaranteed issue of a Medigap Policy. They have no other +Choice
option. In many cases, traditional Medicare will leave them with
unaffordable out-of-pocket expenses. What are we to counsel them to do?
Where are their options and protections?
We, the Milwaukee County Department on Aging, legal services, the
State of Wisconsin Bureau on Aging and Long Term Care Resources, and
the Coalition of Wisconsin Aging Groups have agreed that this plan does
not offer benefit to seniors and, if possible, they should get out.
But seniors expect more from us than individual counseling. They
expect that we will advocate on their behalf to find solutions to their
problems.
Senior advocacy groups in Wisconsin have petitioned our
Congressional delegation to intervene with CMS, asking that they use
their regulatory powers to assure that this plan is drastically revised
or rejected as any choice for Medicare beneficiaries. I am honored that
my Representative, Congressman Jerry Kleczka, immediately understood
the plight of his constituents and tried to halt the approval of this
plan.
We, together with State officials, wrote directly to Secretary
Thompson and to Administrator Scully to urge them to re-examine and re-
negotiate this plan. We also asked them not to approve it.
We wrote to UnitedHealthcare of Wisconsin and its parent company,
the United Health Group, and asked that they withdraw their plan so
that our seniors would have guaranteed issue.
Both Richard Jones, President of Medicare services for United
Health Group and William McGuire, Chairman and Chief Executive Officer
of United Health Group, wrote to inform me that they were working with
the Federal Government and the Congress to enact changes that will
offer better benefits. In other words, they want more money. It is
unfortunate that 16,000 older people find themselves in the middle of
these negotiations.
We understand that the UnitedHealthcare plan is now approved by CMS
with the only change being a $295 per day hospital co-payment rather
than $350. Beneficiaries will still be expected to pay up to $4,800
out-of-pocket in addition to the $55 monthly premium for United's
coverage and the $54 monthly premium for Medicare Part B. The excessive
cost-sharing proposed by United raises questions about the value of
this so-called insurance. It is now clear that many of the 16,000
seniors who have previously relied on UnitedHealthcare to provide
access to affordable health care can no longer do so. It looks to us as
though the benefit changes for 2002 are designed to discourage
enrollment of beneficiaries who have health needs.
We, in Wisconsin and Milwaukee County, are furious at this outcome.
We have spent thousands of dollars and thousands of hours trying to
help people for whom there is today no consumer protection.
We have met with and asked Wisconsin's Commissioner of Insurance to
intervene, using emergency powers to order guarantee issue, but we have
been told she has no legal standing to do so.
My friend's mother has threatened to stop her dialysis. How many
other people--alone and poor--will have no choice but to do so?
How will our hospitals collect the $295 daily deductibles, and will
they then re-admit people with outstanding bills?
There is no way for seniors to budget for this lack of benefit--any
flare-up of a chronic illness, any sudden onset of disease, or need for
rehabilitation will mean the need for large sums of cash. Isn't
insurance supposed to protect people from exactly that? Isn't insurance
supposed to provide peace of mind when dealing with illness?
UnitedHealthcare and Medicare Complete have wreaked havoc in the lives
of 16,000 people and their families.
Nationwide
We in Wisconsin are not alone. The Medicare+Choice promise--more
health insurance options and benefits, better-controlled health care
costs--has never been fulfilled in Wisconsin. But what about elsewhere?
According to Weiss ratings, 536,000 seniors will be dropped from HMOs
this year, on top of the 1.6 million who have been dropped since 1998.
Those plans that drop coverage entirely leave seniors confused and
betrayed, but those seniors are able to re-enter the Medigap market
with the protection of guaranteed issue.
This is not the case with beneficiaries in plans that are
drastically altered. In Connecticut, four companies terminated their
coverage in 2000, dropping 52,000 beneficiaries. This year, two more
plans, ConnectiCare and MedSpan, will terminate, affecting 39,000
beneficiaries. Only two managed care plans will remain, and they will
cover only three counties.
Health Net, formerly known as Physician Health Services, will
remain. Their plan will drop the use of the three main hospitals in the
area. Inpatient hospital co-payments will rise from $0 to $500 per
admission. Co-payments will be added for outpatient and inpatient
surgery, radiology, diabetic, and dialysis benefits. And the co-payment
for prescription drugs will increase $3 per prescription.
The California Health Advocates report that seven HMOs will drop
their Medicare+Choice plans. In addition, there will be twelve service
area reductions in parts of eleven counties. And, in the plans that
will remain, premiums and co-payments are increasing and prescription
drug coverage is decreasing.
One hundred thousand Medicare recipients in California will be
affected by plans dropping coverage areas, raising premiums and co-
payments and reducing drug benefits. The premium charged by Kaiser in
Santa Clara County is going from $30 to $80 per month. PacifiCare's
Secure Horizons is reducing the amount and type of prescription drugs
covered and will only cover generic drugs. In other PacifiCare plans,
patients will be charged $400 for each hospital admission and a $50 co-
payment for dialysis. Health Net will have a hospital deductible of
$750 and has dropped all prescription drug coverage.
Claire Smith of California Health Advocates related to me many
stories. One involves a Medicare cancer patient enrolled in Secure
Horizons. She has been on chemotherapy since 1998. She is on her fifty-
first treatment, but is alive, active, and a vital member of her
community. Secure Horizons informed her that her chemo treatments, now
free, will cost $250 per visit in 2002. In addition, they will charge
$250 per radiation visit. She does not have the money to continue these
treatments and cannot buy a Medigap policy. Another participant in
Secure Horizons HMO of Pacific Health Care reports that his new 2002,
$8,000 co-payment for dialysis, as opposed to a zero payment in 2001,
is a ``slow death sentence'' for dialysis patients on fixed incomes.
A Plea for Consumer Protection
Medicare beneficiaries in Wisconsin, Connecticut, California, and
many other states are asking the same questions. How can this new
benefit package charge me more deductibles and co-payments than
traditional Medicare? Why do I have such a short time to make a new
choice, and why must I live with that choice for a year if it turns out
to be wrong, or I didn't understand it? Why can't I be guaranteed the
sale of a Medigap policy that I can afford and that will cover my
health care needs when my plan changes so drastically?
These Medicare+Choice policies are not the same ones people bought
when they took advantage of what they perceived to be the value-added
benefits sold to them as Medicare+Choice. In fact, they are left with
Medicare minus protection, Medicare minus the ability to buy a Medigap
policy, Medicare minus the ability to choose different insurance.
I am pleased that Representatives Kleczka, Stark, Cardin, and
Thurman on the Subcommittee and others have immediately recognized
these real problems facing beneficiaries and introduced a simple, small
bill--the Medicare+Choice Consumer Protection Act of 2001 (H.R. 3267)--
that would cost the government nothing but provide real protections for
Medicare beneficiaries stuck in positions like seniors in Milwaukee.
This legislation would: (1) Eliminate the Medicare ``lock-in''
provision that forbids seniors to enroll and disenroll from
Medicare+Choice plans on their own timetable in 2002; (2) Extend the
existing Medigap guarantee issue protections that apply to people whose
Medicare+Choice plan withdraws from the program to anyone whose
Medicare+Choice plan changes benefits, increases cost-sharing, or whose
doctor or hospital leaves the plan; and, (3) Prohibit Medicare+Choice
plans from charging higher cost-sharing for a service than Medicare
charges in the fee-for-service program.
I hope that this Committee will seek to enact H.R. 3267--or
something similar to it--quickly so beneficiaries would have some
protections when caught in these traps.
These plans now call themselves new things--complete and secure and
healthy--but they are not complete or secure or healthy. They are
radically different, reminiscent of illegal bait and switch products
offered in retail sales. The hundreds of thousands of Medicare
recipients affected by these changes need guaranteed issue protections
so that they can get out and buy an affordable Medigap plan. And, the
new lock-in rules are a real recipe for disaster. We, in Wisconsin,
cannot possibly counsel and find help for the 16,000 UnitedHealthcare
enrollees and also warn other seniors of the lock-in provisions.
It is still not possible to get accurate and complete information
on the CMS website about all of the plan choices. We have heard only
through the press that UnitedHealthcare will change its hospital co-pay
from $350 to $295, but beneficiaries have yet to be notified.
In a recent study conducted by the Medicare Rights Center (MRC), 80
percent of Medicare HMOs contacted (16 out of 20) gave incorrect
information about the rights of people with Medicare to enroll and
disenroll from a Medicare HMO in 2002. How will we in Wisconsin
possibly provide counseling and help?
How can we expect older people to be wise consumers when the
product they are buying can change dramatically every twelve months?
How can we expect older people living on fixed incomes to meet the co-
payments imposed by these plans? How can we lock them in with
inaccurate and incomplete information?
Wisconsin Seniors
The people from Wisconsin would like answers to these questions,
and remedy from you in the form of consumer protections. Our Medigap
Hotline, benefit specialists, and Information and Assistance operators
share stories daily about our seniors who need help.
Stories of persons with severe health conditions
such as cancer or end-stage renal disease who cannot afford
Medicare Complete and cannot buy a supplemental policy.
People who feel betrayed and taken advantage of for
joining a policy on what they believe was false information.
People who have been able to find a Medigap policy,
but cannot afford it.
People who will stay with Medicare Complete but who
have resolved not to use it--not to seek health care.
My mother's friend, Dolly, thought she had an answer because she
knew me. Of course, I would have a solution for her. Dolly is 75 but
appears to be 55. A hairdresser all her life, she lives on a Social
Security income of $700 per month. She lives in subsidized housing,
gets energy assistance and some help with Medicare Part B. Of course,
the wise health care decision for her was PrimeCare Gold--a $0 premium
plus $10 deductibles for physicians' visits when she enrolled. Dolly
has severe and crippling arthritis. She has had two strokes. She spends
$150 per month on prescription drugs. With the new co-payments of
UnitedHealthcare's Medicare Complete, she cannot afford to get sick--
ever again. Without guaranteed issue it is doubtful we can find her an
affordable Medigap policy.
What is she to do? I am supposed to have answers for people like
Dolly. I am here today because there are no answers. I am here today to
ask for your support for consumer protections for Medicare+Choice. It
cannot be possible that the promise of Medicare will be reduced to the
horror of health care uncertainty every year when the new plans are
announced. It cannot be possible that we will abandon our seniors when
they ask for help. It cannot be possible that we will leave our
Medicare+Choice seniors without protection. They deserve better than
that.
Thank you for the opportunity to speak on behalf of seniors of this
nation.
Chairman Johnson. I thank the panel for their input and
certainly, Ms. Stein, I do want to see fairness and
dependability restored to the choice plans, dependability
particularly. Seniors need to know, and the plans need to know
what are going to be the terms this year, next year, and the
year after, and that was our intent in establishing the Choice
plans. For a lot of reasons a little vignette of all this is
after the plans were established, the preceding administration
about 6 months later put out 700 pages of regulations. This is
hardly dependability and predictability, and that has been the
history of this plan, regulatory change constant,
reorganization of the Department so regulation was split up,
the fact that there is today not one place a plan can go to
find out what the integrated rules and regulations are that
cover them, and we are changing a lot of that.
But unfortunately, the statutory treatment of the Choice
plans has lead to this mess. Even the reimbursement that we
would say we are going to give you 2 percent or the national
blend, but not if it is over a certain amount of money. So I
think you picked up today that we have treated Medicare fee-
for-service far better in term of reimbursements than we have
treated the Choice plans, and we have to deal with those
problems. So my goal is dependability and reliability and
choice and improvement of fee-for-service in its ability to
deliver also some of the disease management options.
I read your testimony in detail. It was very eloquent. It
is awful what is happening out there, but I would have to say--
I was very pleased with the administrator's comments that they
can now get into Medigap. That is a problem that we have to
deal with that seamless issue of choice, and we will, today on
the floor, eliminate lock-in for 1 year, and then if we can get
the Senate to agree, we will eliminate that. We will also give
the plans better data before they say whether they are going to
be in or out. They should allow more to stay. So if we address
the regulatory issues and the funding issues and allow plans to
make that decision at a rational time, we should be able to
restore predictability and steadiness to this plan.
What is remarkable and I think we are not paying enough
attention to, is that these plans are beloved because they are
better than Medicare. They offer more services. And I think
when we have not been able to offer annual physicals and we
have tried for years, it took us 5 years to do mammograms, one
of the advantages of these plans is that they are not limited
by our benefit package, although they have to cover it all.
So I have really just two questions I wanted to mention,
and I will just say what they both are as we go forward so that
you can both comment on them, but I am very impressed with the
various--and I appreciate the rundown, Mr. Haytaian. Am I
saying that right?
Mr. Haytaian. It is Haytaian.
Chairman Johnson. Haytaian. Armenian?
Mr. Haytaian. Yeah.
Chairman Johnson. Your rundown of the history of your plans
and that the Medigap comparable benefits would be $3,000. Now,
when you look at that and you look at what United is trying to
do, which is to say we will limit everything, not just hospital
costs. Hospital costs, inpatient hospital costs--sorry--nursing
stays, diagnostic tests, durable medical equipment and
supplies, outpatient services, emergency and urgent care and
more to $4,800 when a Medigap plan will cost somebody $600 plus
they will have costs, when Medicare has no cap on costs. The
heartbreaking example you give of the dialysis, the renal
dialysis benefit, what they are being thrown back on is
Medicare's benefit. Medicare's benefit is that same 20 percent.
So that shows you why people don't want to go back into
Medicare anymore. They can't afford it. So at least United is
saying yes, you will be back into the Medicare-type benefit for
renal dialysis, but at least we will cap it. So I don't think
we have a right to eliminate options that exchange a higher
exposure for individual incidents for a cap because that is
just one of the things, the options, that we are going to have
to make sure is out there.
We want lots more options out there but given the funding
irregularities, I do think that United has made a contribution
by looking at how, even under the limited funding constraints
they face, they have found a way to preserve a lot of their
benefits and trade off the risk. After all, many won't be in
the hospital at all. They won't end up being exposed to that,
but they will have in the back of their minds this catastrophic
limit, and I just wonder how you see that catastrophic limit as
part of the structure of security that is of value to a senior.
Ms. Stein. Madam Chairwoman, it is not so much how I see
it, and I don't see it as a very good benefit, but it is really
how older people see it. Older people see it as if I get sick,
$4,800 is going to come out of my pocket, not over a year that
I can budget for, not something that I can save for. I will
need $4,800 to pay for my health care costs.
I don't see how that is a benefit. It is frightening to
older people. And let us not forget that the plan that they
have now in 2001 has a zero copayment for dialysis, a zero
copayment for hospital stays, a zero copayment for rehab in a
skilled nursing facility. To go from zero with all of those
copayments to a $4,800 cap is a $4,800 increase in medical
payments that those people will have to pay.
For lots of people returning to fee-for-service Medicare
without a Medigap policy is not a good option because of the
copayments under fee-for-service without Medigap. But now that
we have the ability to do guaranteed issue, we can work with
the 80 licensed insurance companies in Wisconsin who are going
to be just as surprised that they are now going to have to
offer guaranteed issue as we were to find some reasonable plans
that will at least meet these deductibles and copayments. And
we, too, will be working with the Medigap hotline in the State
of Wisconsin and our benefit specialists to try and help people
now make these choices.
Chairman Johnson. I think it will be helpful for all of us.
And I think the education should be very evenhanded, because I
don't think either you or I are in a position to judge. And it
will vary tremendously from senior to senior as to whether a
$4,800 cap is an advantage or disadvantage. I am coupled with
very high health care costs because they both have so many
chronic problems for whom that would be a tremendous benefit.
So it depends a lot on the configuration of your health care
needs as to whether the catastrophic benefit is more important
than premiums that also carry with them a varied bundle of
benefits.
If either of you would like to comment on this issue, the
plan design and choices for seniors, I would be happy to have
you do so.
Mr. Jones. We believe that we were faced with the choice of
creating a benefit option or exiting the market.
Chairman Johnson. Or exiting the market?
Mr. Jones. In Wisconsin, as we talked specifically about
Wisconsin. I would--we would never want to be a limiting factor
to choice, and that would not be our intent. We would always
want to be an added choice for senior beneficiaries. And we,
too, are glad that the mandatory--no underwriting mandatory
issue has been instituted. As we look at that, a number of the
competitors across the country have a number of days co-pay,
and they limit it for inpatient only. And we see that as we
looked at that, there were too many situations that came up,
therapy and other modalities of care, where there was no limit.
Representative Thurman just pointed out that on the fee-for-
service, the limit is over $6,000 if they were hospitalized for
an extended stay. Under the pure calculation of the benefits
that we issue, they would be very high, but it stops at $4,800.
At that point there are no additional co-pays for any service
at that point. So it is a change in benefits. It is a program
that we hope is a choice for many seniors and adds to choice,
not reduces choice.
Chairman Johnson. And what are the rest of your benefits,
for instance, physician co-pay and--under this new plan, what
is your physician co-pay?
Mr. Jones. The physician co-pay is $20 per visit.
Chairman Johnson. Are there any other benefits you should
point out, as we have been focusing primarily on
hospitalization and psychiatric, nursing home and dialysis?
Mr. Jones. I would indicate as in Medicare+Choice plans,
that preventive care is covered. There is, as I outline--and I
went through that very quickly--there are a number of programs,
Care Coordination, the nurse line, that also help to organize
the program for the seniors once they fragmented the health
care delivery system.
Chairman Johnson. How about annual physicals?
Mr. Jones. It is covered.
Chairman Johnson. And do you have any information about the
cost of cancer treatments under Medicare versus under your
$4,800 threshold?
Mr. Jones. The chemotherapy would be subject to a 20
percent copayment or coinsurance, and under this that would be
captured in that $4,800. And in many of those procedures,
according to where they are delivered, there is either a $30
co-pay, and they are all captured in the $4,800 out-of-pocket
cap--the catastrophic protection.
Chairman Johnson. Thank you. Mr. Stark.
Mr. Stark. Thank you, Madam Chair.
Ms. Stein, how nice to see you here. Tell me--I just want
to compare some numbers in Milwaukee. What does a J Medigap
policy roughly cost in Milwaukee County?
Ms. Stein. If you are 65, you can probably get one for $70
a month.
Mr. Stark. That low? Let me give you some numbers here and
tell me what I am missing. I am correct in assuming that United
doesn't offer a drug benefit?
Ms. Stein. That is correct. It never has.
Mr. Stark. I don't know why anybody would be dumb enough to
sign up for it. Look at this. They are going to charge $660
next year, right?
Ms. Stein. Right.
Mr. Stark. And you get the $4,800 out of pocket, and they
will pick up everything over that. So you are really going to
be, if you get really sick, $5,400 out of your pocket, and that
doesn't include drugs, right?
Ms. Stein. Right.
Mr. Stark. Stay in fee-for-service, regular Medicare, buy a
J option, and I am going to say--I mean, you are telling me it
is only less than $1,000. So for $1,000, then you have $2,400,
because you have to pay 50 percent of the drug benefit, you are
still not up to the $4,800 these guys are going to take out of
your pocket, and you get a pharmaceutical benefit that is worth
something on top of it, plus you could--if you didn't want to
go to St. Luke's or if you didn't want to go to Frederick, you
could go to Minnesota where Mr. Jones probably goes to--what is
that fancy place--Mayo Clinic. If you got the bus fare, he
isn't going to let you go to Mayo Clinic under his insurance
plan, but under Medicare you could.
So tell me why anybody who could qualify to get into
Riverside High School could possibly, in a thousand years, want
to sign up for a cockamamie plan that is going to gouge its
folks $5,400 when you can go buy Medigap and have fee-for-
service? Do they give you free beer on Fridays?
Ms. Stein. They are just offering new counseling sessions.
The last ones they held in hospitals and clinics and kicked our
counselors out, by the way. They are now holding them in
restaurants, and you have to have a--all in suburban Milwaukee
County, and you have to have a reservation before you get
there. But I don't know why anyone would sign up.
But, Representative Stark, I have to tell you I misspoke.
There are no J plans being offered in Wisconsin. No Medigap
plans, no Plus Choice offer any drug coverage to any people in
Wisconsin at all.
Mr. Stark. So we should have a Federal drug benefit then?
Ms. Stein. Without a doubt.
Mr. Stark. Let me ask, Mr. Jones, in your third quarter
earnings statement, Mr. Jones, I can't quite figure this out.
You talk about your strong financial performance and your Dr.
Woods--is that the head guy--whoever---
Mr. Jones. Are you referring to Dr. McGuire?
Mr. Stark. He wrote this. And he said he attributes part of
this strong financial performance to an accelerated shift to
our overall mix of business, to fee-based products and services
and away from risk-based products. That is not just in
Medicare, but in all your markets. Now, what do you mean by a
fee-based product? Why are you switching to that? Don't you
know how to manage medical care risks?
Mr. Jones. As a course and choice of the way that insurance
has been delivered in the traditional managed care environment,
approximately a year and a half ago, 2 years ago, United
embraced a program called Care Coordination. In that program,
the patient-physician relationship is honored. In that program,
there is not a, if you will--a gatekeeper intervention. If a
patient and a physician decide on a course of care, and it is--
we do not use the medical appropriateness denials any longer--
--
Mr. Stark. That is a fee-based service?
Mr. Jones. Rather than operating in a risk base where you
capitate and pass all risks to the physicians, the
reimbursement now correlates to that care coordination, that
physicians and patients make a choice and the reimbursement
follows the care that is delivered, versus a risk-sharing,
which is much more of the historical approach. I believe I am
addressing your question.
Mr. Stark. That is right. So you are suggesting that by
getting away from putting the physicians at risk and paying
them on a fee base, you are able to make more profit?
Mr. Jones. We believe that--first off, that the members are
better served by not having an interference with the patient.
Mr. Stark. Wait a minute. This is in your earnings
statement. You are talking to the shareholders now. Let us
leave the poor beneficiaries out of this. When you are talking
to the shareholders, you are telling them that you made more
profit due to an accelerated shift toward fee-based product and
services. From what I recall, that tends to fly in the face of
what Oxford would tell you, that when you are trying to beat
down the docs, you are much better capitating them than giving
them unlimited fee-for-service. Wouldn't you agree, Mr.
Haytaian?
Mr. Haytaian. No. Actually we are not predominantly
capitating doctors in our business. We pay them on a fee-for-
service basis as well.
Mr. Stark. Do you save money that way?
Mr. Haytaian. We don't believe in that way of administering
care. We have always had a fee-for-service model, and we never
had a capitating arrangement. With provider groups and
Medicare, though, we do have some capitating models.
Mr. Jones. The acceleration, I believe, also has to deal
with choice, that many more patients, beneficiaries, employers
like--choose that delivery of care versus the capitated
gatekeeper type of intervention that had been in the past.
Mr. Stark. I would think so. I am interested and somewhat
surprised that you attribute that to being more efficient, if
you understand, more profitable. And I always thought
capitating or putting the physicians at risk would save you
money in a managed care plan as opposed to paying basically
unlimited fee-for-service, but you say no.
Mr. Jones. Representative Stark, the cost of putting all
the administration around that type of program is not
inexpensive. And also, it was not a favored way to give care to
interact with the physician and the patient.
Mr. Stark. So you would advise us then, based on the
private sector model, that in dealing with fee-for-service
administration for that part of the Medicare plan, we should be
more comfortable than worrying about spending a lot of money
administering whether there is overutilization and just trust
the normal relationship between the doctor and the patient?
Mr. Jones. I believe this has to go hand in hand with a
great deal of information that is shared with physicians in
terms of the quality outcomes and the feedback that goes with
that.
Mr. Stark. I don't mean to intrude on the Chair's
generosity with time, but I do, because I do question to Mrs.
Stein why paying $5,400 with your $4,800 cap--so if there is no
J, I guess the next best thing would be, what, H or one of
those plans that would pay almost all the co-pays. Why aren't I
better off--if you care to answer that, if not, the Chair can
shut me up--why aren't I better off getting a Medigap policy
and using Medicare fee-for-service than I would be under your
plan where I have to eat up $4,800 and I would have high co-
pays? How would you advise me if I were a salesman for your
company?
Mr. Jones. Well, I don't presume to understand how all
seniors make decisions, but I would say that there are any
number of situations where a beneficiary--beneficiaries are not
all alike. They find themselves in different stages of need for
health care and different ways that they receive health care. I
will just use two examples that may not be salient to the
question, but we could find a Medicare beneficiary who is a 30-
year-old with MS, or Multiple Sclerosis, and is not in need of
hospital care, but yet the coordination of their DME, the
coordination of how they interact with the variety of cares
that they need is very well managed in this program.
If you found that there was a beneficiary who expected to
be hospitalized for an extended period of time during the year,
and they looked at the total cost under Medigap and fee-for-
service, and they were receiving care that was in other
modalities as well, this would be a good plan for them.
There has to be enough education for them to evaluate their
own circumstances and to make informed choices around that.
Mr. Stark. But try that if I can, and then I will shut up,
Madam Chair, on just a common garden variety geezer like me,
who doesn't anticipate any more than a flu shot and whatever
else. Why would I, in my Medicare--suppose I don't have my
Federal plan, which is much more generous--moving back to
Milwaukee, why would I choose to pay the $55 to you and know I
got to have $4,800 in the sock for extra co-pays and stuff, as
opposed to laying out $100 and whatever for a thorough or the
richest Medigap policy I can find, and I could probably still
go to the same doctors that serve your beneficiaries? That is
why--help me with that. That is what I don't understand.
Mr. Jones. The expectation is that either you are in a very
intense course of care and you want to limit the total cost,
and you would be able to peg that. You would know what that
number is.
Mr. Stark. So that is when I would come to you.
Mr. Jones. That is one of the alternatives that would
legitimately be considered in this, that if somebody is in a
very intense course of care, this is a valid choice. And I
would actually recommend that they pursue it because of all the
other services that are rendered in the coordination of care
with the nurse line, with the 24-hour access to advice.
Chairman Johnson. Thank you, Mr. Stark. Mr. McCrery.
Mr. McCrery. Mr. Jones, is United the only Medicare+Choice
plan in the Milwaukee area?
Mr. Jones. Yes, sir, it is.
Mr. McCrery. And I believe we heard testimony earlier that
there used to be several plans, but that they are all gone
except for United; is that correct?
Mr. Jones. The Blue plan is exiting at the end of this
year.
Mr. McCrery. So obviously, with the reimbursement level
what it is in the Milwaukee area, it is difficult for
Medicare+Choice plan to make it. Wouldn't that be a logical
conclusion?
Mr. Jones. That certainly is our experience, yes.
Mr. McCrery. And I believe you testified that you all--that
United wanted to stay in Milwaukee so that they would have a
choice, and that is when you did your pencil work and changed
your benefit structure and came out with this new plan?
Mr. Jones. Yes, sir. That is correct.
Mr. McCrery. And I think that is certainly logical and
wouldn't quarrel with that; however, I do question how many
people are going to choose this option. How many people do you
have enrolled right now in your plan?
Mr. Jones. Sixteen thousand.
Mr. McCrery. And when must they make a decision to either
stay in your plan or go to fee-for-service?
Mr. Jones. There are a couple of answers to that. Were it
not for lock-in, each month they could make a choice to leave.
If they want to have access to a guaranteed issue Medigap, they
would leave on the exit of a plan. So if a plan leaves, they
have 60 days--63 days to make a guaranteed issue choice.
Without lock-in, they could make a choice every month. With
lock-in, they would have to make that choice in the next
month--or before March 4, excuse me.
Mr. McCrery. Before what?
Mr. Jones. March 4.
Mr. McCrery. Before March 4 they must make a decision
whether to stay or exit under the fee-for-service. And you have
16,000 beneficiaries right now?
Mr. Jones. Yes, sir.
Mr. McCrery. Have you calculated how many of those 16,000
will remain in your plan?
Mr. Jones. We don't have a calculation of what--I am not
sure there is a calculation of how many will stay in the plan.
They will all make choices as they begin to enter the new year.
Mr. McCrery. How do you make a business plan if you don't
make some assumption as to how many enrollees you are going to
have? Don't you have some assumptions?
Mr. Jones. We don't make assumptions.
Mr. McCrery. What is your assumption?
Mr. Jones. I don't have that here, but we do expect that
there would be fewer participants than there are today.
Mr. McCrery. Yeah. I mean, just at first blush, that would
be my expectation, too. I gather you have the same plan in
Florida--same structure, same benefit structure in your
Medicare+Choice plan in Florida?
Mr. Jones. We have a number of the same benefits across our
entire program, yes, but vary somewhat.
Mr. McCrery. Is this generally across the Nation, your new
benefit structure for Medicare+Choice, or do you have different
plans in different locations?
Mr. Jones. We have different plans in different locations.
Mr. McCrery. Dramatically different? Do you have plans that
look like your old Milwaukee plan?
Mr. Jones. There are very few locations where we are able
to sustain a program that looks like the old Milwaukee program.
We did institute the out-of-pocket max, the catastrophic
protection in all locations.
Mr. McCrery. Even with your low-deductible plans?
Mr. Jones. Right. We fundamentally believe it is a good
safety net, a good benefit to provide for all beneficiaries
that work with United.
Mr. McCrery. Mr. Haytaian, you talked about your essential
plan, which is the plan you described would be great for low-
income folks who are looking for zero deductible and so forth.
Do you offer that plan everywhere that you offer
Medicare+Choice?
Mr. Haytaian. We offer it in the five boroughs in New York.
We are only in one county in Connecticut, New Haven County. And
2002, we will only be in one county in New Jersey, Hudson
County. And we are not able to offer those products in
Connecticut and New Jersey, but we do in all the boroughs in
New York City.
Mr. McCrery. Why are you not able to offer that product in
Connecticut?
Mr. Haytaian. Because of the core issues we talked about
today regarding reimbursement, and how fundamentally different
reimbursements are in Connecticut and New Jersey versus New
York, and how medical cost trends and actually unit costs are
very similar to what we are experiencing in New York. We are
not financially in a position to be able to do it.
Mr. McCrery. Thank you, Madam Chair. I may want to do some
more questioning if we have a second round.
Chairman Johnson. Mr. Kleczka.
Mr. Kleczka. Madam Chair, you indicated to Ms. Stein that
part of the problem with the Medicare Program is the
uncertainty. While I agree with you in part, I think the bigger
problem is that we are dealing with sick people, and when you
do that, you are going to find costs. And that begs the
question whether or not the private insurance market, which
didn't want these folks 40 years ago, are able to handle them
and pay for their health care today. And when we get to the
point where the Medicare Choice is going to be reimbursing at a
much higher rate than fee-for-service, at that point I think
the Congress should seriously look at increasing the fee-for-
service program and expanding some of those benefits for annual
physicals and some of the other things we talked about today,
because we are going to be paying for it anyway.
Now, Mr. Jones--first of all, Ms. Stein, I heard reports in
the market where some of your counselors and other agency
counselors have been excluded from meetings.
Ms. Stein. That is correct.
Mr. Kleczka. What is the situation there?
Ms. Stein. United Healthcare's first rounds of meetings
that they announced in the market and to all of their
beneficiaries were all in public places and hospitals and big,
large community clinics. And we and Legal Action of Wisconsin
sent counselors to all of those meetings because we had upset
people--very upset people, and we wanted them to know that
maybe they would be eligible for the SLMB, Special Low Income
Medicare Beneficiary Program. We wanted to try to help them. We
were asked to leave those meetings. Mr. Jones was gracious
enough to write me a letter of apology, but unfortunately the
next day we were asked to leave again.
Mr. Kleczka. What is the current policy? Is there going to
be an exclusion of people other than planholders from any
future meetings, be it a restaurant or a public building?
Mr. Jones. No. Again, I will restate my apology that---
Mr. Kleczka. The policy has been changed, so I don't think
we have to dwell on it, and these people will be permitted.
Thank you for the change.
Quick question. You have been in the program since 1995.
What has been your medical loss ratio from 1996 to 2001?
Mr. Jones. I cannot go back--I don't have the information
to go back quite that far.
Mr. Kleczka. Were you making money on the program in 1996,
1997, 1998?
Mr. Jones. I would potentially misquote that, but for the
last 2 years, our medical loss ratio has been in excess of 90
percent.
Mr. Kleczka. In excess of 90. That is 9 to 10 percent or---
Mr. Jones. Pardon?
Mr. Kleczka. There has been a profit in the program?
Mr. Jones. We have basically been break even.
Mr. Kleczka. For how many years?
Mr. Jones. For the last 2.
Mr. Kleczka. So at some point you were profitable? You made
money writing these policies?
Mr. Jones. In Wisconsin--I would be happy to get you that
information in a written format. I don't have that with me.
[The information follows:]
UnitedHealth Group
Minnetonka, Minnesota 55343
December 21, 2001
Hon. Jerry Kleczka
2301 Rayburn House Office Building
Washington, DC 20515
Dear Congressman Kleczka:
There has been considerable conversation about the changes in the
benefits of the Medicare + Choice plans generally. Specifically, we
have discussed the benefits in Wisconsin.
I have included an attachment per your request which summarizes
United's Wisconsin operating results for Medicare for 1996 through
2000.
I am available and invite the opportunity to discuss these and
other issues you may want to discuss.
Sincerely,
Richard H. Jones
President, Government Programs
______
The table below indicates the statutory operating results of
UnitedHealthcare's Medicare + Choice product in Wisconsin named Prime
Gold. These values are from the annual OCI filings. In 1996 and 1997,
United was basically at breakeven or at a small profit in each of those
years. However, in 1998, 1999 and 2000, it has incurred losses.
----------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
----------------------------------------------------------------------------------------------------------------
Revenue........................................ $10,579,489 $36,262,944 $70,657,909 $85,508,419 $79,775,048
Medical........................................ $8,904,572 $32,178,135 $66,135,084 $82,363,790 $75,601,419
Gross Margin................................... $1,674,917 $4,084,809 $4,522,825 $3,144,629 $4,173,629
BCR............................................ 84.2% 88.7% 93.6% 96.3% 94.8%
Administrative................................. $8,391,483 $8,431,872 $5,842,295
--------------------------------------
Pretax Loss.................................... (3,868,658) (5,287,243) (1,668,666)
----------------------------------------------------------------------------------------------------------------
Mr. Kleczka. In other States where you write Medicare
Choice, do you have any that are comparable in the per day co-
pay for hospitalization, inpatient hospital, of $295?
Mr. Jones. Yes, sir.
Mr. Kleczka. Do you have any policies in the counties in
Florida?
Mr. Jones. Where it is $295 per day? Yes, sir, we do.
Mr. Kleczka. We are told that because of the fact we are
not reimbursing you in States like Wisconsin, that you are in
this predicament. However, on average in the State of Florida,
we find that the per capita reimbursement is much, much higher
than Wisconsin's $554 per person, right? So to make the
argument that Wisconsin is lax in the reimbursement doesn't
prove the case when you are talking about the co-pays in a high
reimbursement State like Florida.
Mr. Jones. The average that you had referred to for Florida
is inclusive of Dade County and other high reimbursement
counties. There are rural counties in Florida where the
reimbursement is likewise not nearly as high as it is in some
of those very urban areas.
Mr. Kleczka. Based on the dramatic increases in the market
area with your Choice plan, what is the anticipated medical
loss ratio after these deducts and co-pays are put into place?
What do you envision the medical loss ratio is for 2002?
Mr. Jones. Our anticipation is it will remain around 90
percent.
Mr. Kleczka. And today you are at what?
Mr. Jones. Ninety-one.
Mr. Kleczka. So Mr. Scully was in error indicating that
your exposure for either 2000 or 2001 was 99.
Mr. Jones. When you add the administrative cost, it is
higher than that. That is just the medical cost.
Mr. Kleczka. Even with the high deductibles and co-pays,
you are still going to remain the same as far as medical loss
ratio?
Mr. Jones. Yes, sir. The medical inflation in that market
has been over 20 percent for the last 2 years.
Mr. Kleczka. OK. Quickly, Madam Chair, if I might. You
indicated that you are going to notify all the current plan
beneficiaries of the change, especially the Friday notice from
CMS relative to the special enrollment period?
Mr. Jones. Yes, sir.
Mr. Kleczka. You are going to tell your policyholders that
they can get out?
Chairman Johnson. Isn't that the point we already made?
Mr. Kleczka. Well, no, because my question is, you
indicated that it is your hope that you hope CMS would expedite
this mailing. I was under the impression you were going to do a
mailing, and hopefully CMS was also.
Mr. Jones. Any communication that we are--that we send to a
beneficiary has to be approved by CMS. We have been in contact
with them, and they have been very cooperative to expedite that
review so it can go out very quickly. What I referred to was
their review of that communication.
Mr. Kleczka. Is the list of 16,000 beneficiaries, is that
covered under the Privacy Act? My further question will be,
would it be possible for the company to either share that list
with, say, the Marquette County Department on Aging to also get
the word out, because none of us know specifically who these
people are. And my fear is that even though CMS might do a
mailing, you might have the ad in the Marquette Journal. In
this holiday season with all the mail, with the mail scare, a
lot of people aren't--even though we are trying our darnedest--
aren't going to be aware of the fact that they have between now
and the end of the year to go back to fee-for-service and would
be eligible for a Medigap policy. And to make sure people don't
fall between the cracks in trying to maximize the
notification--you know, I could do one from my office.
Chairman Johnson. I appreciate the importance of your
question. I think Mr. Jones is referring to the company's
mailing, not CMS's mailing. And CMS is thinking about doing
their own mailing. But it was clear from Mr. Scully that this
issue of how do we make sure people get notified is not yet
resolved. Mr. Jones is only referring to their own company's
mailing. As to whether or not any company wants to share the
list of their participants is a decision that companies will
make.
Mr. Kleczka. Would the company be willing to share that
list, say, with the county aging department?
Mr. Jones. We would be happy to have participants
communicate with us to our beneficiaries. We want them to be
well informed about any decision. I would have to ask our legal
counsel relative to the policy around that, and I would be
happy to get back to you in writing on that very quickly.
[The information follows:]
UnitedHealth Group
Minnetonka, Minnesota 55343
January 28, 2002
Mr. Bill Covey
1102 Longworth House Office Building
Washington, DC 20515
Dear Clerk Covey:
In response to the request for the release of the names and
addresses of the 16,000 beneficiaries of our Wisconsin Medicare+Choice
program, we must decline to release this information to the Milwaukee
County Department of Aging in order to protect the privacy of our
members.
It is the company's policy to protect the confidentiality of
information that identifies individuals. We have provided the requested
information concerning the profitability of the UnitedHealthcare
Medicare + Choice product in Wisconsin from 1996 through 2000 to
Representative Kleczka's office.
In summary, during 1996 and 1997, United was at breakeven or at a
small profit in each of those years. However, in 1998, 1999 and 2000,
it incurred losses. The product's benefit cost ratio ranged from 84.2%
and 88.7% in 1998 and 1999, to 93.6%, 96.3% and 94.8% in 1998, 1999 and
2000 respectively.''
Sincerely,
Richard H. Jones
President, Government Programs
Chairman Johnson. I do want to make the point because this
is a big problem as we talk to each other about these issues.
It is true that Florida in some counties offers a very much
higher reimbursement rate than Wisconsin gets, but to conclude
from that that, therefore, any company shouldn't be offering
the same kind of incentives to constrain spending or to make
their policies affordable is not a legitimate conclusion,
because along with that higher rate ---in fact, the higher rate
reflects a higher fee-for-service cost by Medicare, which in
turn reflects a different pattern of practice or may reflect a
different level of illness. We actually don't know that. So
those higher levels that are allowed for managed care Plus
Choice reflect the level of fee-for-service spending in that
area, which does, now we do know, reflect very different
patterns of practice.
So it is a complicated issue, and you just can't jump to
the conclusion that because they are getting $800 someplace
else, that means they are making a profit.
Mr. Kleczka. I could beg to differ with you for a slight
moment.
Chairman Johnson. Unfortunately, let us have everyone
discuss, and then we can get back to that discussion. Mr. Ryan,
would you like to comment?
Mr. Ryan. I appreciate you including me even though I am
not a member of the Subcommittee, but on the full Committee. I
feel like I am experiencing deja vu all over again.
And, Ms. Stein, you are probably familiar with the problems
we have had in Racine County. We worked with your counterparts
down there. Blue is leaving now. We had Primary Care leave 3
years ago. So this is the exact same thing we had happen. And
what I find is interesting is the fact that you have in
Milwaukee County five providers a number of years ago giving a
fairly comprehensive benefit that seniors really enjoyed. In
Racine, we had it 3 years ago. It was wonderful. People enjoyed
it because they didn't have to go out and buy this Medigap
plan, which was very costly. They are much more costly than
$100 or $200 in Medigap in Wisconsin. So it at one time
provided a very comprehensive benefit filling in the gaps that
Medicare normally doesn't cover and giving especially low-
income and sick seniors protection.
That protection is leaving. We now see that the costs--that
the reimbursement rate relative to the cost is not keeping in
pace, and so we see these huge withdrawals. So now you can
understand, and I think, Ms. Stein, you put it very well in
your testimony, how a senior feels. They don't see this as, oh,
gosh, it is still a better benefit than Medigap. They see this
as an incredible burden relative to their condition last year
or a couple years before.
So now we see what the promise of Medicare+Choice could be
but isn't today. And so we see our seniors having this
incredible uncertainty in their lives which is extremely
disrupting. So if there is anything that we learn from this
hearing, this Committee has got to learn to make this work and
put certainty back into their lives.
We know that Medicare is an outdated program, that it is
giving basically people 1965 health care, and they have to go
out and pay for the rest essentially, whether it is Medigap or
a Plus Choice program where in some States it works and not in
Wisconsin.
But I had a different line of questioning, but Mr. Kleczka
was going down an issue I would like to follow up on, which is
the letters you send to constituents. It was our experience in
dealing with Blue in my neck of the woods that we could
negotiate the language of your letters to our constituents so
that they had all the information, meaning you would put the
800 number in for the County Aging Department, you would put
our phone numbers, like Mr. Kleczka's phone number, in there.
In your letter that you negotiate the language with CMS,
isn't it true you work with the County Department of Aging, the
Congressmen from that area, to get all of the information that
we all believe the citizens need so that they can make the most
informed choice? And, Mr. Jones, would you be willing to work
with these parties to get that language in your letter to these
constituents so that we can make sure that everybody gets the
information they need?
Mr. Jones. We would be happy to. Barring the meetings that
we had in common, we have worked--that we had the difficulty
with, we have worked, I believe, fairly well with the agency
and certainly would intend to--any information that would be
helpful to the member to get more information, to get access to
more information, to independent opinions on what the coverages
should be, we would be very agreeable to having that included.
Mr. Ryan. You are planning another mailing, correct?
Mr. Jones. Yes.
Mr. Ryan. And you have to send that language to CMS before
you send it out?
Mr. Jones. That is right.
Mr. Ryan. And you now would be willing to work with the
Department of Aging and the Congressman to put the language
together so that we all can be assured that 16,000 seniors who
right now are very, you know, confused get that information and
get multiple sources of people they can contact to get
counseling? So you would be willing to work on that?
Mr. Jones. Yes.
Mr. Ryan. Because as has been mentioned here, everybody has
a different situation. And if you are chronically ill and
definitely on dialysis, maybe this is still a decent deal
because of the cap. Maybe it isn't. But we at least need to get
these people some information and access to multiple sources of
counseling so they can make their own decision.
I will yield the rest of my time, and I won't go on the
track that I was planning on going other than to say that we
have been going back and forth on this issue for years. I am
new to this Committee, but if it hasn't happened in your State,
it is going to happen before too long. So we have to fix the
basic premise--Plus Choice is a good one. You get comprehensive
benefits that catch up with today's needs of health care.
So I thank you for agreeing to share that language and
preapprove to negotiate with CMS. I yield.
Chairman Johnson. Mr. Lewis.
Mr. Lewis. Thank you very much, Madam Chair. I would like
to thank members of the panel for being here.
Ms. Stein, I would like to thank you for being here. You
are really on the front line. You are out there trying to do
what you can in providing health care for our seniors, making
Medicare work. But as director of the Milwaukee County
Department on Aging, you have a number of responsibilities.
Could you tell members of the Committee how long you have been
the director?
Ms. Stein. I have been the director since March 1, 1993, so
9 years.
Mr. Lewis. You not only get involved with efforts dealing
with Medicare, Social Security, but you deal with all of the
aging concerns and issues, retired senior volunteers, foster
grandparents, senior companions.
Ms. Stein. Elderly nutrition program. All of the long-term
care programs in the State.
Mr. Lewis. So you know a great deal about what seniors like
and what seniors dislike.
Ms. Stein. I hear a great deal and try to absorb it.
Mr. Lewis. And you are very close to the needs and concerns
of seniors?
Ms. Stein. I certainly try to be. It is not just my job,
but it is my mission and my passion, yes.
Mr. Lewis. You spoke with passion. I read your testimony. I
listened to everything you said. I don't want to put you on the
spot, and you may not care to respond to this question, but do
you think the United plan in Milwaukee is a good option for
low-income citizens?
Ms. Stein. For low-income citizens? I think it is
absolutely not an option at all for low-income individuals.
They will have to defer any health care--how can you as an
older person plan for a flare-up of a chronic illness or a
sudden accident? And if you are low income, and those things
happen to you, and you have this health plan, you are going to
have to come up with cash. And I think low-income means I don't
have access to a lot of cash. I need to budget what I am doing.
I need to get the best value for my money. So I think that this
plan offers almost no value at all.
Mr. Lewis. So, in essence, this plan, this proposal, would
discriminate against people because of their level or income or
their ability or capacity to pay? So that is not a sense of
fairness, is it?
Ms. Stein. I think it is not fair to low-income Medicare
beneficiaries. I do not believe it is fair.
Mr. Lewis. So you wouldn't recommend the Milwaukee plan to
other urban centers like Atlanta, Chicago, New York or
wherever?
Ms. Stein. No. No, Representative Lewis. I don't believe
that I would recommend this plan to any other urban areas or
any other areas in the United States.
Mr. Lewis. Thank you, Ms. Stein. Thank you for being here.
Chairman Johnson. Mrs. Thurman.
Mrs. Thurman. Thank you, Madam Chairman, and thank our
guests here for being here.
Mr. Jones, I just need to tell you, since this came up, but
we went out on the Web site and whatever they are called these
days, Mr. Scully's group, CMS, first of all, you need to know
there is nothing in here that talks about the catastrophic part
of this.
Mr. Jones. We are aware of that. We have asked CMS to
address that. We believe---
Mrs. Thurman. You are saying that is a State-by-State
benefit that does not change anyplace throughout the country?
Mr. Jones. Right. There is not a place to put that on the
Web site.
Mrs. Thurman. Second, you also need to know when you are
asking them to make changes--I just called the 1-800 number to
see if I could get information about the catastrophic part of
it. It has been disconnected. So they need to change the phone
number on here.
Mr. Jones. Eight hundred number for CMS?
Mrs. Thurman. I don't know. I think it is a United number,
and it is 1-800-973-6461. And I just called it, and they just
said it has been disconnected. So that might be some good
information to make sure that that is also available.
Mr. Jones. I will follow up on that immediately. Thank you.
Mrs. Thurman. The other thing that I would like to ask, and
particularly on the reimbursement issue, because it keeps being
brought up here, and we have got several documents that show
the different reimbursements and different States and New
Jersey versus Florida versus Connecticut. And one of them, I
think, Madam Chairman, there was about a $23 difference between
your State and one of my counties.
Chairman Johnson. In the AAPCC or in the Medicare
reimbursement rate, Plus Choice rate?
Mrs. Thurman. Right. And tell me how do you say your name
again?
Mr. Haytaian. Haytaian.
Mrs. Thurman. Last year we gave some money back into
reimbursement, or what we thought was some reimbursement. I
want you to talk to me a little bit, though, because what I
have found over the years, it is not just about reimbursement,
and yet that seems to be the thing that everybody comes tells
us because we are the cash cow up here. Aren't there other
problems going on as well? I mean, for example, networks,
doctors participating, hospitals participating who have just
chosen not to do that because of--and quite frankly, because
what we did under the BBA, they lost money or have suggested
they lost money, although we did give some give-backs over the
last couple of years as well. I think it is misleading to the
public to just say that it is just about reimbursement. Would
you agree or disagree?
Mr. Haytaian. I think you are correct, but I will address
the reimbursement issue first. I think there has to be some
reasonable relationship between the reimbursement and actual
medical costs in a specific region. If, for example, you are in
a region where actual medical costs, fee-for-service costs, are
15, 20, 25 percent less than what you are receiving from CMS in
the form of reimbursement, then it has to be a part of the
discussion because it is almost a virtual impossibility to be
able to offer any kind of reasonable product there. But there
are other issues. I can't speak for the rest of the country.
Mrs. Thurman. Can you give us some other ideas besides the
networks that might be a problem?
Mr. Haytaian. I do think there are network issues
throughout the country. You read about it all the time when--I
think Administrator Scully talked about it before. There are
certain places in the country where potentially managed care
will not work because there is just not enough volume there,
and there is one hospital system, and the hospital system does
not want to negotiate with a managed care organization like us.
They basically tell us to take a hike, like the Administrator
said. So that is a practical reality.
But at the end of the day, the large concentration of
seniors are in urban areas, quite frankly, and this is a viable
choice for seniors in urban areas and other places in the
country, not just urban areas. But there are--to your point--
there are areas where it may not be practical to administer a
program like this.
Mrs. Thurman. Ms. Stein, you were shaking your head, so let
me let you have an opportunity to speak on that as well.
Ms. Stein. Of course, we have seen--if you look at the
information on all of the plans around the country, you have
seen cutbacks in the use of physicians, in hospitals, in the
drug payments, which we never had to begin with, but other
places did. The cutbacks are very dramatic in Milwaukee, but
they are taking place throughout the entire Nation. And I can't
remember which one of you said this, but if you haven't
experienced it in your State yet, I bet you will.
So it is--we have a very serious problem, but I think other
people are beginning to see the erosion of that Plus Choice
promise in all of the plans.
Chairman Johnson. Will the gentlelady yield?
Mrs. Thurman. Sure.
Chairman Johnson. Would you expound a little bit on the
variations, just in a small State like Connecticut, of the
reimbursement rates under Medicare and why you are only in one
county? You used to be in more counties.
Mr. Haytaian. We used to be throughout the entire State of
Connecticut with the exception of one county.
Chairman Johnson. How many different reimbursement rates
are there in the small State of Connecticut?
Mr. Haytaian. For each county, there is a different
reimbursement rate.
Chairman Johnson. So I think the problems we face are very
serious. I really appreciate, Ms. Stein, about how passionate
your testimony was, but the cause of this is years of under-
reimbursement. They were doing fine before 1997, and then we
limited them to 2 percent just as health care costs began to
explode. So in negotiating down hard with their networks in
order to stay within the 2 percent, they gradually lost network
position.
And one of the reasons we are not getting a response in the
rural counties is that the name of the Choice plans has been
sullied because we have not given them the same increases as
fee-for-service. Fee-for-service increases have been twice the
increases in Choice plans. Now, that is irrational, and
especially when the Choice plans have been able to use the
money to provide better benefits.
Now, I think it is fair to say that anyone listening to how
United has changed its benefit package would have to agree that
it will now suit some and not others. It will be only a choice,
and we will see whether anyone chooses it. Some of us sitting
here think no one will choose it, but the company has reason to
believe some will choose it.
I think some of us tend to underestimate the number of
seniors there are that actually could be exposed to $5,000 in
costs and trade off for that any higher exposure knowing that
they are likely to be hospitalized so they are unlikely to have
any costs. So that 5,000 rolls over from year to year.
These are the difficult things about making planned
choices, but I think seniors need choice, and clearly we would
not be here if Medicare fee-for-service was an adequate choice.
It is not. That is why the Medicare Choice plans and Medigap
plans have been popular. But Medicare--Medigap premiums have
been skyrocketing as well.
So rising health care costs are impacting Medicare, and I
believe it is our responsibility to see that everyone has
access to a fair level of reimbursement so our seniors have the
best choices they could possibly have, because our ability to
modernize Medicare to keep up with the pace of medical
developments, either diagnostic or treatment, is minimal, and
the fact that it took us 5 years to provide mammogram coverage,
and only last year did we cover Pap smears is clear-cut
evidence that you need out there some plans that have greater
flexibility as to what benefits they cover and what benefits
they don't. And going through his detailed answer, Mr. Jones
didn't actually go over much of those benefits, those little
benefits that they cover that Medicare doesn't.
So seniors will look at all of those things. We are faced
with a very serious problem because we have failed to either
keep up with honest reimbursement rates or create a reasonable
regulatory environment, and so we are now seeing choices for
seniors disintegrate. Seniors need those choices because
Medicare is inadequate.
And we are going to have to come back to this subject in
much greater detail later on. I thank the panel for their
participation, and the meeting is adjourned.
[Whereupon, at 12:55 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of the Alliance to Improve Medicare
The Alliance to Improve Medicare (AIM) is the only organization
focused solely on fundamental, non-partisan modernization of the
Medicare program to ensure more health care coverage choices, better
benefits (including prescription drug benefits), and access to the
latest in innovative medical practices, treatments and technologies
through the Medicare system. AIM coalition members include
organizations representing seniors, hospitals, small and large
employers, insurance plans and providers, doctors, medical researchers
and innovators, and others.
AIM recently approved the attached recommendations on expanding
health care coverage choices for senior citizens through improving the
Medicare+Choice program. AIM's recommendations call for ensuring
adequate payment levels for plans and providers, adopting different
payment structures for different Medicare+Choice plan types, improving
Medicare's regulatory framework, and increasing availability of
Medicare beneficiary education materials.
AIM applauds Subcommittee Chairwoman Nancy Johnson and ranking
member Pete Stark for their bipartisan efforts in the discussion of
necessary regulatory reforms to the Medicare program. We hope the
Subcommittee will consider AIM's recommendations as they continue their
discussions on this issue.
______
Expanding Health Care Coverage Choices for Seniors through Improving
Medicare+Choice
AIM is a coalition of organizations representing seniors, doctors,
hospitals, small and large businesses, medical researchers and
innovators, insurance plans and providers and others dedicated to
improving and strengthening Medicare for all Americans. AIM seeks to
ensure that all senior citizens have more health care coverage choices,
better benefits (including prescription drug coverage), and access to
the latest in innovative medical practices and treatments. These
recommendations address problems specifically confronting Medicare's
managed care program, Medicare+Choice.
In the Balanced Budget Act of 1997, Congress took the important
step of creating the Medicare+Choice program as a health insurance
benefits option to Medicare beneficiaries. This option was designed to
offer more choices for beneficiaries, and to provide beneficiaries with
the ability to obtain additional benefits not covered under traditional
Medicare, such as prescription drug benefits. Many beneficiaries who
have selected Medicare+Choice plans are pleased with their ability to
select these plans, and believe they have benefitted significantly from
the comprehensive integrated benefits. Indeed, most Americans under age
65, especially those utilizing employer-provided health care, have
managed care coverage choices similar to those offered in the
Medicare+Choice program, and as more baby boomers become Medicare
eligible, they will expect those same plan choices under Medicare.
AIM believes the principles of beneficiary choice inherent in the
Medicare+Choice program can serve as a foundation for strengthening and
improving the Medicare program. Building and ensuring a strong
Medicare+Choice program requires that beneficiaries have an expanded
range of options similar to those available to Members of Congress,
federal employees and retirees, and millions of working Americans under
65 years of age who are covered by private plans. The Medicare+Choice
program was envisioned to include a variety of health maintenance
organizations, private fee-for-service plans, provider-sponsored
organizations, and preferred provider networks but has been unable to
attain that goal. Inadequate payments and excessive regulation of
private sector plans and providers participating in Medicare+Choice
have seriously constrained the ability to expand coverage areas and
have caused numerous plans to withdraw from coverage areas where
reimbursement was inadequate to cover even the costs of basic care. As
a result, millions of beneficiaries are at risk of losing their access
to these plans and the additional benefits they have offered.
(1) Ensure Adequate Payment Levels for Health Plans and Providers
Currently, Medicare pays one set fee per month for each beneficiary
enrolled in a Medicare+Choice plan based on a payment formula in the
Balanced Budget Act of 1997 and regardless of the number of services
the beneficiary may require. This payment formula has resulted in
inadequate payment levels for Medicare+Choice plans in many parts of
the country. For example, payments to health plans in many counties
have been capped at two percent (three percent in 2001) annual
increases over the past several years, despite growth rates in local
health care costs that are as much as 8 to 12 percent. This has
resulted in significant disparities between Medicare+Choice payments
and local fee-for-service costs in some areas and contributed to many
plans withdrawing from the program and reducing service areas. AIM
supports an immediate increase in funding levels in order to save the
program.
(2) Adopt Different Payment Structures for Different Plan Types
The current one-size-fits-all Medicare+Choice program payment
structure sets many plans up for failure, especially in rural areas,
and is unworkable if the program is to succeed and provide a variety of
coverage options for Medicare beneficiaries nationwide. For example,
building rural health plan and provider networks is difficult given
less conducive health care market economics. Plans in many rural areas
have difficulties negotiating payments because of higher-than-average
Medicare volumes and because the cost of bearing full risk for a
potentially small population is relatively high when plans cannot
spread costs over a larger pool of insured individuals.
The Federal Employee Health Benefit Program (FEHBP) provides an
example of flexible plan design and benefit structures. The FEHBP
allows qualifying participants to choose from among a minimum of 10
plans nationwide, varying in plan type, benefit structure, and cost.
FEHB program offerings currently include PPOs, HMOs, and indemnity
plans which do not participate in the Medicare+Choice program because
of inadequate payment levels caused by the program's inflexible payment
structure.
AIM supports Medicare+Choice program improvements that will ensure
a competitive market-based system of health plan options similar to
that available to private sector Americans and federal employees and
retirees. Congress and CMS should ensure that beneficiaries have a
choice of plan types similar to those available to FEHBP participants.
Allowing flexibility in the Medicare+Choice program payment structure
to accommodate different plan types would encourage creativity in the
market and could encourage more participation by a wider variety of
plans.
(3) Improve Medicare's Regulatory Framework
AIM members believe that excessive regulation present in the
Medicare+Choice program reduces innovation and consumer choice. AIM
believes Medicare administrators must reduce excessive program
complexity and bureaucracy caused by the more than 110,000 pages of
federal rules, regulations, guidelines and directives. AIM supports the
elimination of real fraud and abuse in Medicare but our members believe
this can be achieved without relying on unnecessarily complex and
heavy-handed regulation. Providers and plans must not be forced to
divert resources from patient care in order to respond to ever-changing
regulation.
CMS has had a fragmented approach to Medicare+Choice program
oversight in the past. AIM members are pleased that CMS Administrator
Scully has recognized this problem and begun to address it with the
announcement of the new Center for Beneficiary Choices to focus on
Medicare beneficiaries in private plans. This will allow for greater
efficiencies and streamline requirements that now may be developed
within different offices. We recognize and applaud the efforts of the
Bush administration and Congress to begin to streamline many burdensome
procedures and we encourage the administration and CMS to consider
these additional actions:
Publish Guidelines for Beneficiary Materials: End
efforts to standardize written materials for Medicare
beneficiaries. The current requirement for CMS approval of all
documents and CMS's long term objective for standardizing many
more communications is problematic. Health plans need to tailor
their communications to their own programs. CMS should provide
a checklist for plans of the information required to send to
beneficiaries and develop marketing and communications
guidelines.
Create a Medicare Office of Technology and
Innovation: Important new medical technologies and services
must go through three sequential stages of Medicare decision-
making--initial coverage, procurement code assignment, and
payment level determination--before they are available to
Medicare patients. This process has suffered from a lack of
coordination and created long delays in patient access to new
technologies.
(4) Increase Availability of Beneficiary Education Materials
In a survey of Congressional Medicare caseworkers, AIM found that
many beneficiaries are unaware of existing opportunities for assistance
from such organizations as State Health Insurance Assistance Programs
and other medical hotlines or simply lack access to opportunities such
as the Internet www.Medicare.gov and the 800 Medicare hotline.
Additionally, some beneficiaries currently have difficulty comparing
benefits available through Medicare fee-for-service with benefits
available through Medicare+Choice plans.
Medicare beneficiaries should have easy access to good information
and benefit comparisons on the types of plans available. Beneficiaries
need adequate, easy to understand information and clearly identified
customer service representatives and insurance agents who can provide
assistance by explaining coverage and benefit information and options.
CMS can assist beneficiaries by recognizing that, because some
beneficiaries desire more information on available plans, there is a
need for a range of resources varying in scope and detail. The
www.medicare.gov web site currently offers differing layers of
information not elsewhere available to beneficiaries. These materials
should be available to all beneficiaries, not just those with web
access. CMS has begun to address this problem by increasing its ability
to mail comparative information to beneficiaries who contact the
Medicare hotline but who do not have Internet access.
Beneficiaries also need additional assistance understanding
Medicare claims and appeals procedures for denial of payment for
services. CMS should expand efforts to clearly explain claims and
appeals procedures should be provided to beneficiaries and providers.
Statement of Vicki Gottlich, Center for Medicare Advocacy, Inc.
The Center for Medicare Advocacy, Inc., (the Center) submits these
written comments to be included in the record of the hearing set for
December 4, 2001, on the ``Status of the Medicare+Choice Program.'' The
Center is a non-profit organization which provides education, legal
advice and representation to elders and people with disabilities who
are unfairly denied Medicare and other health care coverage. Center
staff provide legal advice, self help materials, and representation for
elders and people with disabilities. We also provide training, support,
and technical assistance to Connecticut CHOICES, the state's health
insurance counseling program, and to Medicare advocates across the
nation. We thank the Subcommittee on Health of the Committee on Ways
and Means and its Chairman, Nancy Johnson, for holding this important
hearing on how recent changes in the Medicare+Choice (M+C) program have
adversely affected older people and people with disabilities.
CONNECTICUT SPECIFIC ISSUES
This is the fourth year in a row that M+C plans have announced
withdrawals from Connecticut.
ConnectiCare and MedSpan will withdraw from Medicare as of January
1, 2002. Only two Medicare HMOs will remain, PHS/HealthNet and Oxford.
This will leave Medicare HMOs only in Fairfield, Hartford and New Haven
counties. The Medicare managed care terminations affect approximately
39,000 Connecticut Medicare beneficiaries. In 2000, 52,000 Connecticut
Medicare beneficiaries were affected when CIGNA, Aetna US Healthcare,
and Antehm Blue Cross terminated their coverage. Health Net (then PHS)
pulled out of two counties.
But plan withdrawals are only part of the problem. I would like to
focus on one of the two remaining Connecticut plans, Health Net,
formerly known as Physician Health Services, or PHS, to demonstrate the
impact of changes made by existing HMOs on those beneficiaries who are
enrolled in the plans or who would like to enroll.
A. Enrollment caps
In announcing that Health Net would remain in Connecticut, the plan
also announced that the number of new members able to enroll in the
plan would be limited. Oxford, the other remaining Connecticut plan,
has already reached its enrollment cap and is not accepting new
enrollment.
This year, open enrollment (the annual coordinated enrollment
period) for M+C plans runs from November 1 through December 31. Older
people and people with disabilities in Connecticut who did not act
immediately upon learning that their plans were leaving may have been
foreclosed from joining another Medicare+Choice plan. One older woman
explained to a Center staff attorney in mid-November that she reviewed
the written material describing her M+C choices in Connecticut that the
Centers for Medicare & Medicaid Services (CMS) sent, but by the time
she called the remaining plan in her area the plan was only able to put
people on a waiting list.
B. Changes in provider networks
The Medicare Health Net plan for 2002 also announced that three
hospitals previously in its network will NOT be participating in 2002.
These are Hartford Hospital, Danbury Hospital, and Greenwich Hospital,
three of the major hospitals in the area. Thus, unless the individual
needs emergency or urgent care, services provided at any of these
hospitals will not be covered in 2002. Further, physicians who have
admitting practices only at these hospitals will not be able to
participate in Health Net in 2002. Thus Health Net members who use
these doctors, as a primary care physician or specialist, may have to
seek new doctors, resulting in a disruption of care. Some enrollees who
need hospital services will also have to travel longer distances to get
those services.
C. Changes in benefit structure
Health Net's Premiums for 2002 will increase by $20 per month, from
$79/month to $99/month; co-payments for doctor visits will increase by
$5 per visit, from $15/visit to $20/visit.
Health Net also is adding co-payments for services for which the
plan previously did not charge a co-payment. For example, the plan is
going from a zero co-payment for dialysis services to a 20% co-payment.
Inpatient hospital care and outpatient surgery were previously covered
in full. In 2002, this will change dramatically. Enrollees will be
responsible for a $500 co-payment per admission for inpatient hospital
care and inpatient mental health care, and a $100 co-payment per
surgery for outpatient surgery.
The co-payment for generic prescription drugs will increase $3 per
prescription, from $7/prescription to $10/prescription. Insulin will no
longer be covered.
D. Effect on Medicare beneficiaries
The following inquiry received by a Center staff member
demonstrates the adverse impact of the new cost-sharing requirements on
Medicare beneficiaries.
A woman who is enrolled in PHS/Health Net has been going to the
hospital every month for a series of immune globulin shots. She has not
had to pay anything towards the cost of this treatment. PHS has
informed the woman that the treatments involve inpatient hospital care
and that, starting January 1, the woman will need to pay the $500 co-
payment each month. The woman was concerned about the accuracy of this
information and her alternatives for obtaining treatment. She cannot
afford this new and substantial cost for her health care.
Assuming for purposes of this statement that the plan's
characterization of the immune globulin shots as an inpatient hospital
service is correct,\1\ the plan, under its new co-payment schedule, is
indeed entitled to charge a $500 co-payment each month, as each month
is a new hospital admission. The cost for the treatment through the M+C
plan, therefore, clearly exceeds the cost to a beneficiary in
traditional Medicare. If the woman disenrolled from the plan and
returned to traditional Medicare, she would be responsible for a $812
hospital deductible in January at the start of her new benefit period.
Because she would be within the same benefit period for each subsequent
month's hospitalization, and because she would not exceed 60 days of
hospital care within this benefit period, she would not have to pay
another co-payment for the treatment.\2\ Furthermore, if the woman were
in traditional Medicare, she may have a Medicare supplemental (Medigap)
policy that pays for the part A hospital deductible.\3\ Thus, she would
be able to receive the treatment she needs without any out-of-pocket
costs, just as she received the treatment cost-free in 2001 from the
M+C plan.
The simple answer seems to be that the woman should disenroll from
her M+C plan, return to traditional Medicare, and purchase a Medigap
policy. She is returning to traditional Medicare not because her M+C
plan terminated its contract with Medicare, but because the change in
her plan's benefit package makes the plan in appropriate for her health
care needs.4 This will be possible in Connecticut because
any insurance company which sells Medigap plans A through G must sell
them to any Medicare beneficiary over age 65 at any time, regardless of
age, gender, medical condition or previous health insurance claims
history. This means that insurance companies are not allowed to
medically underwrite plans A through G for any Medicare beneficiary
over the age of 65. This, however, in other states that do not have
such protective legislation, this would not be possible.
OTHER PROBLEMS
Older people and people with disabilities who live in Connecticut
are not the only Medicare beneficiaries to be adversely affected by
changes in M+C plan benefit structures and plan networks. Similar
problems are occurring around the country.
In Boston, a major provider, the Leahy Clinic, pulled out of the
Tufts Secure Horizons plan, effective November 1, 2001. Affected
beneficiaries who wanted to remain with their providers associated with
the Leahy Clinic were able to change plans effective November 1.
However, they will not have the same opportunity to change plans to
continue care with their provider next year after the ``lock-in'' takes
effect. Also in Massachusetts, Blue Cross& Blue Shield of Massachusetts
will impose a $25 per day co-pay for days 1-20 of a skilled nursing
facility stay starting January 1. No co-payment for those days is
charged in traditional Medicare.5
The Kaiser M+C plan serving Central Maryland, including counties in
the Washington, D.C.--Baltimore corridor, has also increased its
premiums by $20-$30, depending on the plan, and increased per-provider
co-payments. Like the Connecticut Health Net plans, Kaiser will be
imposing a per hospital stay co-payment--in this case $300 per stay.
Again, a beneficiary who requires several hospital stays in what would
be one spell of illness under traditional Medicare will end up paying
more out-of-pocket than if she were in traditional Medicare.
The California Council of the Alzheimer's Association reports that
many M+C plans in that state have sent letters to enrollees saying the
plans no longer have to provide beneficiaries with brand name
prescriptions and will only make generic drugs available to them.
Although some of the plans imply that the change in policy comes from
CMS, CMS staff have assured the Alzheimer's Association that they have
no such policy. The decision to limit prescription drug coverage to
generic drugs is a decision made independently by each plan.
The shift to coverage of generic drugs only has a pernicious effect
for people with Alzheimer's disease, certain cardiac conditions, and to
people who rely on insulin. There are no generic equivalents for the
name brand medicines they take. As a result, these beneficiaries are
losing prescription drug coverage, often while paying increased
premiums to the same plan.
PROPOSED SOLUTIONS
The Center for Medicare Advocacy, Inc. supports enactment of HR
3267, the Medicare+Choice Consumer Protection Act. The bill addresses
problems being encountered by beneficiaries by:
(1) eliminating the M+C lock-in scheduled to phase in
starting in January 2002;
(2) extending the existing Medigap protections that apply to
people whose M+C plan withdraws from the program to anyone
whose M+C plan changes benefits or whose doctor or hospital
leaves the plan; and
(3) prohibiting M+C plans from charging higher cost-sharing
for a service than Medicare charges in the fee-for-service
program.
A. Lock-in
When the lock-in provisions were enacted as part of the Balanced
Budget Act of 1997, Congress assumed that the M+C market would be more
stable than it is today. Congress wanted to insure that beneficiaries
would be able to continue the care they were receiving in a plan, and
to protect them if a plan wanted to discharge them because the care
they needed was too much or too costly.
Instead, plans are choosing to enter and leave M+C markets more
frequently than anticipated. Doctors and other providers, both
individually and in networks, also are choosing to join and leave M+C
plans with unexpected frequency. Medicare beneficiaries therefore need
to retain the choice they currently have to leave one M+C plan and join
another, or to leave and return to traditional Medicare, in order to
continue care under a provider or to seek other care if their current
plan no longer meets their needs.
B. Extending Medigap protections
One of the major purposes of the M+C program is to provide a
beneficiary with the choice of how she wants to receive her Medicare.
When a provider leaves a network, or a plan changes its benefit
structure dramatically, the plan no longer meets the needs of the
beneficiary in the same way as a plan that leaves the Medicare market
no longer meets the beneficiary's needs. In theory, the beneficiary has
the choice of returning to traditional Medicare and purchasing a
Medigap policy. In practice, however, the beneficiary may not be able
to exercise this choice because she may not be able to find a Medigap
insurer that will issue her a policy. By extending the Medigap
protections to beneficiaries who lose their M+C plans in the above
situation, Congress will make the choice a reality.
C. Prohibiting higher cost-sharing than in traditional Medicare
Many plans have imposed higher cost-sharing than traditional
Medicare for services needed by the sickest and neediest
beneficiaries--inpatient hospital stays, skilled nursing facility
stays, home health care, and durable medical equipment. The effect of
these co-payments is to make the plans less desirable for these
beneficiaries, and to discourage their enrollment in the plans. As a
result, plans can keep costs down by either not having to provide
services to people with acute and chronic conditions, or by shifting a
larger portion of the cost of these services onto the beneficiaries.
Though M+C plans are prohibited from discriminating against
beneficiaries on the basis of medical condition, claims experience,
receipt of health care, or medical history,6 the plans in
effect have achieved the same result as if they refused up front to
enrollment beneficiaries who need these expensive services.
Furthermore, unlike the woman in Connecticut who contacted the
Center for Medicare Advocacy, most beneficiaries do not know in advance
that they will need extensive hospital care, skilled nursing care, or
home health services. They may not review plan benefit packages for
hospital co-payments, focusing instead on doctor co-payments and
prescription drug coverage. Thus, if a need for such extensive care
arises suddenly, they may be unprepared to make the co-payments.
Further, unlike in traditional Medicare, there is no supplemental
insurance to cover the large out-of-pocket expenses. Beneficiaries who
are not wealthy enough to self-insure will be stuck with large bills,
at a time when they are already in a crisis dealing with an unexpected
health care problem. And, unfortunately, most beneficiaries do not have
access to attorneys or other proficient Medicare advocates.
D. Universal prescription drug coverage
The California example of the shift from inclusive prescription
drug coverage to generic coverage only underscores the need for a
universal prescription drug benefit that is part of the Medicare
program.
The decision by the private M+C plans to further restrict their
drug benefit is based on their needs and not on the needs of their
enrollees. As pointed out, the change has the effect of discriminating
against people with chronic conditions for which there are no generic
equivalents. These people are paying for a prescription drug benefit
that is not available to them.
Medicare beneficiaries need a uniform, affordable, accessible
benefit that is part of the Medicare program to assure that their
health care needs are met.
Statement of the Hon. Steve Israel, a Representative in Congress from
the State of New York
Good morning, Madam Chairwoman, Congressman Stark, and my
distinguished colleagues. I would like to thank you for allowing me to
speak to you this morning regarding the Medicare+Choice program and the
bipartisan bill that I have introduced with Congressman Grucci of New
York to help stabilize the Medicare+Choice program.
This fall, hundreds of thousands of seniors and other
Medicare+Choice beneficiaries have been informed that their managed
care health plans have left their communities because of inadequate
payments, and that they will have to find new coverage and possibly
spend more out of their limited incomes for the health care services
that they need. I would like to bring to light the plight of millions
of America's seniors and other Medicare+Choice beneficiaries who have
been forced back into fee-for-service Medicare because of the exit of
their health plan including thousands in my own district. In large
part, the problems generated by this underfunding can be seen as
unintended consequences of the Balanced Budget Act of 1997 (BBA).
The BBA created a new program called Medicare+Choice. At the time,
the BBA placed a strong emphasis on controlling future Medicare
spending, in private health plans as well as in fee-for-service
Medicare, as part of a broader effort to balance the Federal
Government's budget. One of the key goals of the BBA was to increase
Medicare beneficiaries' access to private health plans through
Medicare+Choice--the idea being that America's seniors deserved the
choices and expanded benefits that only health plans would deliver.
While the BBA clearly achieved its objective of limiting spending
throughout the entire Medicare program, this accomplishment has had the
unintended consequence of reducing beneficiaries' access to health
plans because of underfunding. Thus the BBA has diminished health care
choices for Medicare beneficiaries in certain areas of the country in
recent years.
Over the past three years, there has been a building consensus in
Congress that the unintended consequences of the Balanced Budget Act
(BBA) of 1997 have put severe pressure on the Medicare market as a
whole, and Medicare+Choice health plans in particular. Payment levels
in some parts of the country are so inadequate that health plans cannot
meet the cost of health care services in those markets, and, they are
having to drastically alter their benefit packages or leave these
markets altogether. As you may know, there is bipartisan support for
stabilizing the Medicare+Choice program and, in each of the past three
years, there have been numerous bills introduced in Congress to deal
with the issue of underfunding. The recognition of this larger problem
led Congress to enact the Balanced Budget Refinement Act of 1999 as
well as the Benefits Improvement and Protection Act of 2000 in a much-
needed effort to stabilize the Medicare+Choice Program.
However, the Medicare+Choice program continues to be significantly
underfunded in those areas of the country with the highest
concentration of health plan members--these are the markets where
payments to health plans for next year will increase by only two
percent. These are also the large urban and suburban areas where the
cost of medical services and inflation have been rising at up to ten
percent per year. Close to 70 percent of Medicare+Choice beneficiaries
are enrolled in these ``two percent'' counties. These are the people
who need our help immediately so that they may continue to have access
to the comprehensive benefits packages offered by health plans.
The instability of the program is especially troubling for
enrollees who will have to either change their health plan or return to
the Medicare fee-for service program next year because inadequate
funding has forced their health plans to withdraw from the program. In
January 2002, more than 530,000 seniors and other beneficiaries will
have to change their health coverage as a result of these inadequate
payments. This is in addition to the more than 1.6 million
beneficiaries that have been adversely affected since 1998. Many other
beneficiaries will face higher premiums or less comprehensive benefits
packages for next year. Although more than 60 percent of beneficiaries
enrolled in managed care plans receive some level of drug benefit this
year, that number could also continue to fall because of inadequate
funding. As a point of comparison, one need only look at 1999, when 84
percent of Medicare+Choice beneficiaries had access to some type of
drug benefit. Those beneficiaries who have prescription drug coverage,
today, are seeing tighter caps on their benefits. The percentage of
Medicare+Choice enrollees who have an annual cap of $500 or less on
their prescription drug coverage has increased from 11 percent in 1999
to 27 percent in 2001. The erosion of this much-needed benefit is one
of the most glaring results of the underfunding of Medicare+Choice.
Many of the beneficiaries affected by plan withdrawals have been
able to enroll in another Medicare+Choice plan in their area. However,
a significant number have been left with only one option--enrolling in
the Medicare fee-for-service program, which offers less comprehensive
coverage and requires higher out-of-pocket costs than the typical
Medicare+Choice plan. Millions more have experienced a reduction in
benefits or an increase in out-of-pocket costs, including premiums,
even though they were able to keep their Medicare+Choice plans.
Further evidence of the underfunding of Medicare+Choice plans is
not too hard to find. A simple comparison of the government's payments
to other parts of Medicare is the clearest reminder of the inadequacy
of payment--Medicare+Choice plans in counties with almost 70 percent of
total enrollment received a three percent increase in funding this
year, a figure that pales in comparison to the increase in the Medicare
fee-for-service rate nationwide over the same time period. The Centers
for Medicaid and Medicare Services (CMS) has projected that Medicare
fee-for-service spending, when measured on a per capita basis,
increased by 9.6 percent in 2001. As a continuing comparison to other
sectors within health care--a survey by the Kaiser Family Foundation,
based on responses from more than 1,900 employers, indicates that
premiums for employer-sponsored health coverage increased by an average
of 11 percent from spring 2000 to spring 2001. Any serious effort to
stabilize the Medicare+Choice program must directly address these
concerns by committing a significant level of additional funds to
support the health benefits of Medicare+Choice enrollees.
New York state has almost 400,000 beneficiaries enrolled in
Medicare+Choice plans, a majority of whom live in counties where plans
have been limited to a two percent annual update since the BBA of 1997.
In September of 1999, 12 HMOs offered seniors health plans in Suffolk
County. Now only two remain.
This year, CMS reports that 65 Medicare HMOs did not renew their
contracts, leaving an additional 160,000 senior citizens in America
with no Medicare HMO option. Since 1998, more than 46,500 seniors and
other Medicare+Choice beneficiaries have been affected in Suffolk
County alone.
This is intolerable. Most seniors enroll in HMOs for coverage not
provided by Medicare, but HMOs across the country are unable to renew
their contracts with the Federal Government, leaving seniors without
access to a prescription drug plan. In January 2002, 16,000 more
Medicare+Choice enrollees throughout the state of New York will be
adversely affected because of these chronic problems of underfunding.
Moving forward, I urge this Committee and all Members of Congress
to seriously consider the following remedy to the immediate funding
inadequacies in Medicare+Choice----
As you may know, I have introduced a bill that will help to prevent
further disruptions for Medicare beneficiaries in the coming year. The
``Medicare+Choice Equity and Access Act'' (H.R. 2836) is a bipartisan
bill introduced with my co-sponsor, Felix Grucci, Republican of the
First District of New York. You also may know that a bipartisan bill
was also introduced in the Senate by Senators Schumer of New York and
Santorum of Pennsylvania who are also committed to stabilizing the
Medicare+Choice program. The Israel-Grucci bill will work to bolster
payments to the Medicare+Choice program, particularly in those areas
that have not been targeted for relief by the Balanced Budget
Refinement Act of 1999 (BBRA) and Benefits Improvement and Protection
Act of 2000 (BIPA).
H.R. 2836 adds a new element to the Medicare+Choice
payment formula to allow plans to receive payments equal to 100
percent of local fee-for-service rates. Medicare+Choice plans
in many areas have received payment updates of only two or
three percent every year since the Balanced Budget Act of 1997
(BBA) was enacted. Adding a new payment element--equal to 100
percent of local fee-for-service rates--would provide more
equitable payments to plans that have received only the minimum
annual payment update in recent years when their costs have
been increasing at two or three times that rate.
H.R. 2836 eliminates the BBA's budget neutrality
requirement to allow the ``blend'' component of the
Medicare+Choice payment formula to be implemented. The BBA
established the ``blend'' in an effort to provide for a more
equitable distribution of resources in response to concerns
that Medicare managed care payments varied unfairly across
geographic regions under the old payment system. However, the
BBA's budget neutrality requirement has resulted in the
Medicare+Choice payment ``blend'' being funded in only one year
since the BBA was enacted. Eliminating this requirement would
allow Medicare+Choice plans to receive the higher ``blended''
payments that Congress originally intended.
By targeting assistance to areas that have received little or no
assistance under BBRA or BIPA, we have managed to develop a solution
that has the potential to complete the job of stabilizing the
Medicare+Choice program. An opportunity still exists, if we act
promptly, to save the Medicare+Choice program and ensure that Medicare
beneficiaries continue to have access to the wide range of high-
quality, affordable health care choices they deserve. I would like to
remind my colleagues again that the future of Medicare rests with this
Congress, and the first step in that future would be to deliver on the
promises made by this body to America's seniors and disabled
beneficiaries--we have to maintain a viable Medicare+Choice program to
ensure that we can build on it when considering future avenues in
Medicare reform.
Thank you for your time and the opportunity to testify before this
Committee.