Medicare+Choice: Selected Program Requirements and Other	 
Entities' Standards for HMOs (31-OCT-02, GAO-03-180).		 
                                                                 
Since the early 1980s, health maintenance organizations (HMO)	 
have entered into risk-based contracts with Medicare and offered 
beneficiaries an alternative to the traditional fee-for-service  
(FFS) program. By 1997, 5.2 million Medicare beneficiaries were  
enrolled in an HMO. Although Medicare HMOs were available in most
urban areas, they were often unavailable in rural areas.	 
Medicare+Choice (M+C) has HMO requirements pertaining to benefit 
package proposals, the beneficiary enrollment process, marketing 
and enrollee communication materials, and quality improvement,	 
among other areas. An HMO must annually submit a benefit package 
proposal to the Centers for Medicare and Medicaid Services (CMS) 
for each M+C health plan that the HMO intends to offer. M+C	 
requirements for the beneficiary enrollment process specify the  
information that an HMO must include in its enrollment		 
application and the checks that it must perform to ensure that	 
beneficiaries who submit applications are eligible to enroll in  
the HMO's health plan. M+C marketing requirements prohibit HMOs  
from using inaccurate or misleading language in advertisements or
materials distributed to enrollees. M+C requirements for quality 
improvements specify that HMOs must undertake multiyear projects 
intended to improve the quality of health care and must routinely
gather and report performance data to CMS.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-180 					        
    ACCNO:   A05445						        
  TITLE:     Medicare+Choice: Selected Program Requirements and Other 
Entities' Standards for HMOs					 
     DATE:   10/31/2002 
  SUBJECT:   Beneficiaries					 
	     Health care programs				 
	     Managed health care				 
	     Health maintenance organizations			 
	     Federal Employees Health Benefits			 
	     Program						 
                                                                 
	     Medicare Choice Program				 

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GAO-03-180

                                       A

Report to the Chairman, Subcommittee on Health, Committee on Ways and
Means, House of Representatives

October 2002 MEDICARE+ CHOICE Selected Program Requirements and Other
Entities* Standards for HMOs

GAO- 03- 180

Letter 1 Results in Brief 4 Background 5 Selected M+ C Requirements for
HMOs 10 Selected FEHBP Requirements for HMOs 13 Selected NAIC, JCAHO, and
NCQA Requirements for HMOs 15 Comments from CMS and the Other Entities 16

Appendixes

Appendix I: Benefit Package Proposals 18

Appendix II: Beneficiary Enrollment 28 Health Plan Enrollment
Opportunities for M+ C and FEHBP

Beneficiaries 34

Appendix III: Marketing and Enrollee Communication Materials 37

Appendix IV: Quality Improvement 54

Appendix V: Comments from the Centers for Medicare & Medicaid Services 77

Tables Table 1: Selected Requirements for Benefit Package Proposals, M+ C
and FEHBP 20

Table 2: Selected Requirements for Beneficiary Enrollment in HMOs, M+ C
and FEHBP 29 Table 3: Opportunities for Medicare Beneficiaries to Enroll
in an

M+ C Health Plan or Make Health Plan Changes Under M+ C*s Lock- in
Provision 35 Table 4: Opportunities for FEHBP Beneficiaries to Enroll in a

Health Plan or Make Health Plan Changes 36 Table 5: Selected Requirements
for Marketing and Enrollee Communication Materials, M+ C, FEHBP, NAIC,
JCAHO,

and NCQA 39 Table 6: Selected Requirements for Quality Improvement for M+
C,

FEHBP, NAIC, JCAHO, and NCQA 57 Figures Figure 1: Timeline for Submission,
Review, and Approval of HMOs* Benefit Package Proposals for Benefit Year
2001 26

Figure 2: Timeline for Submission, Review, and Approval of HMOs* Benefit
Package Proposals for Benefit Years 2003 Through 2005 27

Abbreviations

AAAHC Accreditation Association for Ambulatory Health Care, Inc. ACR
adjusted community rate ACRP adjusted community rate proposal BBA Balanced
Budget Act of 1997 BBRA Medicare, Medicaid, and SCHIP Balanced Budget
Refinement Act of 1999

BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 CAHPS Consumer Assessment of Health Plans CHCD clinical health
care disparities CLAS culturally and linguistically appropriate services
CMS Centers for Medicare & Medicaid Services EGHP employer group health
plan ESRD end- stage renal disease FAR Federal Acquisition Regulation
FEHBP Federal Employees Health Benefits Program FFS fee- for- service HCFA
Health Care Financing Administration HEDIS Health Plan Employer Data and
Information Set HHS Department of Health and Human Services HMO health
maintenance organization HOS Health Outcomes Survey JCAHO Joint Commission
on Accreditation of Healthcare Organizations M+ C Medicare+ Choice M+ CQRO
Medicare+ Choice quality review organization NAIC National Association of
Insurance Commissioners NCQA National Committee for Quality Assurance OIG
Office of Inspector General OPM Office of Personnel Management PBP plan
benefit package PFFS private fee- for- service PPO preferred provider
organization QAPI quality assessment and performance improvement QI
quality improvement QIO quality improvement organization QISMC quality
improvement system for managed care SSSG similarly sized subscriber groups
VAIS value- added items and services

Lett er

October 31, 2002 The Honorable Nancy L. Johnson Chairman Subcommittee on
Health Committee on Ways and Means House of Representatives

Dear Madam Chairman: Since the early 1980s, health maintenance
organizations (HMO) have entered into risk- based contracts with Medicare
and offered beneficiaries an alternative to the traditional fee- for-
service (FFS) program. 1 By 1997,

approximately 5.2 million Medicare beneficiaries (14 percent) were
enrolled in an HMO. 2 Although Medicare HMOs were available in most urban
areas, they were often unavailable in rural areas. The Medicare+ Choice
(M+ C) program, established by the Balanced Budget Act of 1997 3 (BBA),
was designed to expand beneficiaries* health plan choices by encouraging
the wider availability of HMOs and permitting Medicare to contract with
organizations offering other types of health plans, such as preferred
provider organization (PPO) plans and private fee- for- service

(PFFS) plans. In practice, however, virtually all M+ C health plans in
2002 are offered by HMOs and the number of health plan choices has
decreased in each of the last 4 years. 4 From 1998 to 2002, the number of
Medicare contracts with

HMOs declined from about 340 to 147, and the percentage of beneficiaries
with access to at least one HMO in the area where they lived declined from
74 to 61 percent. 5 Enrollment in Medicare HMOs, which had reached 6. 3

1 Under a risk- based contract, an HMO receives from Medicare a fixed
monthly amount per enrollee and is at financial risk for the cost of
providing covered services. Some Medicare HMOs are paid under different
financial arrangements. 2 Figures for HMOs throughout this report exclude
organizations that receive payments based on their costs or operate under
a Medicare demonstration program. 3 Pub. L. No. 105- 33, S:4001, 111 Stat.
251, 275.

4 As of July 2002, approximately 23, 000 beneficiaries were enrolled in
two PFFS plans. Unlike HMOs, these plans do not restrict beneficiary
choice of provider. 5 Approximately 75 percent of beneficiaries have
access to a Medicare HMO or PFFS plan in 2002.

million in 1999, had fallen to less than 5 million (12 percent of all
Medicare beneficiaries) as of July 2002. Representatives of the managed
care industry have stated that declining HMO participation in Medicare is
largely due to inadequate M+ C payment rates and excessive administrative
requirements. The Medicare, Medicaid,

and SCHIP Balanced Budget Refinement Act of 1999 6 (BBRA) and the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of
2000 7 (BIPA) increased payment rates and made other changes to help
address the industry*s concerns. But these legislative changes have not
halted the decline in HMO participation. 8 To encourage health plans to
participate in M+ C, legislative proposals have been made to further

increase M+ C payment rates and streamline the program*s administrative
requirements.

To assist in your consideration of potential M+ C reforms, you asked us to
summarize the program*s HMO requirements in four areas: (1) the annual
benefit package proposals that HMOs submit, (2) the beneficiary enrollment
process, (3) marketing materials and enrollee communications, and (4)
quality improvement. 9 To provide benchmarks that could be used when
examining M+ C requirements, you asked us to summarize parallel
requirements for HMOs that participate in the Federal Employees Health
Benefits Program (FEHBP), another large purchaser of health care. You also
asked us to describe the HMO requirements established by other entities in
one or more of the four M+ C areas we reviewed. In consultation with your
office, we selected three entities that are not health care purchasers but
that do set requirements for HMOs: the National Association of Insurance
Commissioners (NAIC), the Joint Commission on Accreditation of Healthcare
Organizations (JCAHO), and the National

6 Pub. L. No. 106- 113, Appendix F, Title V, 113 Stat. 1501A- 321, 1501A-
378- 394. 7 Pub. L. No. 106- 554, Appendix F, Title VI, 114 Stat. 2763A-
463, 2763A- 554- 569. 8 U. S. General Accounting Office, Medicare+ Choice:
Recent Payment Increases Had Little Effect on Benefits or Plan
Availability in 2001, GAO- 02- 202 (Washington, D. C.: Nov. 21, 2001). 9
M+ C requirements may be different for other types of M+ C arrangements,
such as PFFS or PPO plans.

Committee for Quality Assurance (NCQA). 10 NAIC, a nonprofit organization
for state regulators, drafts and publishes model acts and regulations that
set standards for insurers that any state may adopt in whole or in part.
11 JCAHO and NCQA, both nongovernmental and nonprofit organizations,
operate nationally recognized accreditation programs for HMOs. 12 To
conduct our work, we summarized the applicable M+ C requirements in

federal statutes and regulations, M+ C operational guidance to HMOs, and
other materials prepared by the Centers for Medicare & Medicaid Services
(CMS), the agency within the Department of Health and Human Services (HHS)
that administers Medicare. 13 We obtained additional information

from CMS officials. We gathered and summarized FEHBP requirements in
federal statutes and regulations and FEHBP operational guidance to HMOs,
various NAIC model requirements, and relevant standards from the current
JCAHO and NCQA accreditation manuals. 14 We also interviewed officials
from the Office of Personnel Management (OPM), the agency that administers
FEHBP, and representatives of NAIC, JCAHO, and NCQA.

Because M+ C requirements are broadly similar to the requirements set by
other entities, but may be different in specific details, we compiled our
work into summary tables that provide information on the key details of
each entity*s requirements (see appendixes I through IV). Our work was 10
The entities vary from one another in the term each one uses to refer to
an HMO. For

consistency, we use *HMO* throughout the report to mean an organization
that generally requires its enrollees to receive care from a network of
providers and is paid a fixed monthly amount per enrollee to provide all
services. We use the term *health plan* to refer to a package of benefits
an HMO offers in a specific geographic area. 11 In this report, the
provisions in NAIC model acts and regulations are referred to as model
requirements. 12 Although their HMO standards are not discussed in this
report, other organizations, such as the Accreditation Association for
Ambulatory Health Care, Inc. (AAAHC) or

URAC/ American Accreditation HealthCare Commission, offer national
accreditation programs for HMOs.

13 CMS was previously named the Health Care Financing Administration
(HCFA). We use the term HCFA to refer to the agency prior to its renaming
as of July 1, 2001, and CMS for references to the agency after that date.
14 JCAHO*s standards for HMO accreditation are effective January 1, 2001,
through December 31, 2002. NCQA*s standards for HMO accreditation are
effective July 1, 2001, through June 30, 2003.

performed from June 2001 through September 2002 in accordance with
generally accepted government auditing standards. Results in Brief M+ C
has HMO requirements pertaining to benefit package proposals, the

beneficiary enrollment process, marketing and enrollee communication
materials, and quality improvement, among other areas. An HMO must
annually submit a benefit package proposal to CMS for each M+ C health
plan that the HMO intends to offer. 15 In its proposal, the HMO must
include

its projected Medicare revenues, detailed cost estimates by service
category, and other information to demonstrate compliance with M+ C
requirements, such as those that limit a health plan*s cost- sharing
requirements for Medicare- covered services. M+ C requirements for the
beneficiary enrollment process specify the information that an HMO must
include in its enrollment application and the checks that it must perform
to ensure that beneficiaries who submit applications are eligible to
enroll in the HMO*s health plan. M+ C marketing requirements prohibit HMOs
from

using inaccurate or misleading language in advertisements or materials
distributed to enrollees. To ensure that advertisements and enrollee
materials comply with M+ C requirements, HMOs must submit advance copies
to CMS for review and approval. M+ C requirements for quality improvement
specify that HMOs must undertake multiyear projects intended to improve
the quality of health care and must routinely gather and report
performance data to CMS. FEHBP, another large purchaser of health care,
has requirements for HMOs

in all four areas we examined. For example, FEHBP requires HMOs to
annually submit benefit package proposals to OPM for review. An HMO must
include information to show that its proposed FEHBP premium is no higher
than the premium it would charge to similarly sized commercial customers
for the same package of benefits. FEHBP has relatively few

requirements for HMOs regarding the beneficiary enrollment process because
most of this function is performed by OPM or delegated to other federal
agencies. FEHBP*s marketing requirements specify that HMOs must produce
comprehensive annual benefit brochures and obtain OPM

approval before distributing the brochures to potential enrollees.
Finally, FEHBP has set certain quality standards and requires HMOs to
submit performance data to OPM. 15 An HMO may offer multiple health plans
to Medicare beneficiaries. For each health plan, the HMO must specify the
benefits offered and the geographic area served.

Although NAIC, JCAHO, and NCQA do not purchase health care, each has
established HMO requirements in two of the four areas we reviewed: 1)
marketing and enrollee communication materials and 2) quality improvement.
All three entities require HMOs to produce complete information, although
JCAHO*s standards do not apply to marketing

materials given to prospective members. The three entities also require
HMOs to design, implement, and evaluate quality improvement projects.
NAIC*s model requirements pertain to all HMOs in states that set HMO

licensing and operating standards based on NAIC*s recommendations. JCAHO*s
and NCQA*s standards represent requirements that must be met by all HMOs
that want to be accredited by JCAHO or NCQA. The requirements established
by NAIC, JCAHO, and NCQA are not specifically focused on HMOs that serve
Medicare beneficiaries.

In commenting on a draft of this report, CMS stated that it generally
agreed with our observations. We also provided a draft of the report to
OPM, NAIC, JCAHO, and NCQA and incorporated the technical comments we
received from those organizations and from CMS as appropriate.

Background M+ C and FEHBP both represent large health care purchasing
programs that contract with HMOs and other types of health care
organizations to provide services. NAIC, JCAHO, and NCQA are not
purchasers of health care, but they play important roles in establishing
certain HMO requirements.

M+ C M+ C is a component of Medicare, the federal entitlement program for
adults age 65 and older and some individuals who are disabled or have
endstage

renal disease (ESRD). 16 Medicare beneficiaries can choose to receive
covered services through the FFS program or through an M+ C health plan if
one is offered in the area where they live. 17 HMOs and other types of

16 Approximately 85 percent of Medicare*s 40 million beneficiaries are
over age 65; the remaining 15 percent are under age 65 and disabled or
have ESRD. 17 In general, beneficiaries who have ESRD may not enroll in an
M+ C HMO. However, beneficiaries who develop ESRD while enrolled in an M+
C HMO may continue their enrollment in that M+ C HMO.

health care organizations contract with CMS to offer M+ C health plans. 18
HMOs participating in M+ C receive fixed monthly payments for enrolled
beneficiaries, regardless of what their enrollees* care actually costs, in
return for providing all Medicare- covered benefits, except hospice care,
and complying with all M+ C requirements. CMS monitors each HMO and

periodically conducts an on- site review to determine whether the HMO is
complying with program requirements. The agency also requires HMOs to
regularly submit certain information, such as enrollment and other data
used to compute HMO payments. In creating M+ C, BBA included many
requirements from the previous riskcontract program. For example, the M+ C
requirement that HMOs submit marketing and enrollee communications for
agency approval was a

requirement of the risk- contract program. BBA also included requirements
that were modifications of previous ones and others that were new. For
example, BBA included quality assurance requirements* such as those
pertaining to the collection, analysis, and reporting of health outcomes
and member satisfaction* that were more comprehensive than

previous requirements. BBA required that M+ C payments to an HMO be
adjusted to reflect the relative health status of that HMO*s enrollees
beginning in 2000. The law directed the Secretary of HHS to require HMOs
to submit data on their enrollees* use of inpatient hospital services and
data on other services as the Secretary deemed necessary. In addition to
the

inpatient hospital data requirement, the Secretary required HMOs, in 1998,
to collect data on the use of physician and hospital outpatient services.
BBA also limited, effective January 1, 2002, the number of opportunities

beneficiaries had each year to enroll or change enrollment in a M+ C
health plan.

M+ C*s requirements have continued to evolve since BBA, partly as a result
of subsequent legislation. Some legislative changes addressed HMOs*
concerns about BBA*s initial implementation. For example, BBRA increased
the amount of time that HMOs have each year to develop their benefit
package proposals by moving the annual submission deadline from May 1 to
July 1. To reduce the administrative burden on HMOs that are monitored by
both a private accreditation organization and the agency, BBRA increased
the number of topical areas where HMOs may fulfill M+ C requirements by
receiving accreditation from an organization that has 18 Some
beneficiaries currently have access to HMOs reimbursed on a cost basis.
This arrangement is not part of the M+ C program and is scheduled to end
after 2004.

standards, as well as a process for ensuring compliance with those
standards, which are determined by CMS to meet or exceed M+ C
requirements. BBA allowed accreditation standards to be applied for
quality assurance and confidentiality of records requirements. BBRA

expanded this list to include antidiscrimination, access to services,
advance directives, 19 and provider participation requirements. Under
BIPA, CMS must expedite review of HMO marketing materials that use
agencyspecified language without modification. BIPA also required HMOs to
expand their quality improvement activities to include a separate focus on

racial and ethnic minorities. The Public Health Security and Bioterrorism
Preparedness and Response Act of 2002 20 (Bioterrorism Act) made temporary
modifications to M+ C requirements. It enabled Medicare to reinstate,
through 2004, beneficiaries* opportunities to change enrollment

into any M+ C health plan accepting new enrollments or switch to the FFS
program on a monthly basis. It also moved the annual submission deadline
for HMOs* benefit package proposals to the second Monday in September for
benefit years 2003 through 2005.

CMS has also modified certain M+ C requirements, in some instances to
reduce the administrative burden on participating HMOs. In 2001, for
example, the agency postponed the date by which HMOs would have to begin
submitting data on beneficiaries* use of physician and hospital outpatient
services. In 2002, CMS gave HMOs more flexibility in

advertising plan benefits not available in the FFS program. For example,
HMOs were allowed to describe their health plans* pharmacy discounts in
the standard summary of benefits distributed to beneficiaries. CMS has
also made changes to address shortcomings that agency staff or outside
groups identified. The process for reviewing and approving HMOs* marketing
materials was revised, in part, to correct problems we identified in 1999.
21 Since BBA was enacted, CMS has issued Federal Register notices and
other written instructions to inform HMOs about program changes. During
2001,

19 An advance directive documents a beneficiary*s health care preferences
and instructs providers if the beneficiary cannot otherwise communicate.
20 Public Health Security and Bioterrorism Preparedness and Response Act
of 2002 (Bioterrorism Act), Pub. L. No. 107- 188, S:532, 116 Stat. 594,
696.

21 U. S. General Accounting Office, Medicare+ Choice: New Standards Could
Improve Accuracy and Usefulness of Plan Literature, GAO/ HEHS- 99- 92
(Washington, D. C.: Apr. 12, 1999).

CMS began releasing chapters of a new Medicare managed care manual
intended to inform HMOs about program requirements. 22 As of July 11,
2002, the agency had released 9 of a planned 20 chapters. 23 No release
dates have been announced for the remaining chapters.

FEHBP FEHBP is the largest employer- sponsored group health insurance
program in the United States. In 2002, FEHBP covers approximately 8.28
million individuals, consisting of 2.19 million federal employees, 1.86
million federal retirees, and 4.23 million dependents. 24 Like most
Medicare beneficiaries, FEHBP beneficiaries may select from among
available health plans during an annual open enrollment period. OPM
contracts with HMOs

and other types of health care organizations to offer health plans to
FEHBP beneficiaries. The number of HMOs participating in FEHBP has
declined in recent years, from 476 HMOs in 1996 to about 200 HMOs in 2002.
In 2002, about 2.42 million FEHBP beneficiaries (29 percent) are enrolled
in HMOs. The remaining 5.86 million beneficiaries (71 percent) are
enrolled in other types of health plans, such as PPOs. NAIC NAIC is a
nonprofit association of the insurance regulators of the 50 states,

the District of Columbia, and 4 United States territories. Its mission
includes promoting consistent health insurance regulations. 25 To hel p
achieve this objective, NAIC prepares model requirements that any state

may adopt, in whole or in part, to regulate HMOs operating in the state.
NAIC*s model requirements are largely written in general terms to provide
a framework that states can tailor to meet local needs. According to NAIC,

22 Completed chapters are available electronically through the CMS Web
site. CMS intends to update released chapters quarterly. 23 The nine
released chapters cover enrollment and disenrollment, marketing, quality
assurance, risk- based payments, organization compliance with state law
and preemption by federal law, contracts, effect of change in ownership or
leasing of facilities during term of contract, cost- based payments, and
procedures for handling contract disputes. 24 OPM enrollment estimates as
of July 11, 2002. 25 All HMOs, including those in M+ C, must comply with
requirements set by the states in which they operate. However, federal law
specifically preempts state laws or standards

pertaining to M+ C in the areas of benefits (including cost sharing),
inclusion and treatment of providers, coverage determinations (including
grievances and appeals), and marketing materials and benefit summaries.

approximately 30 states have passed legislation based on the requirements
in NAIC*s Model HMO Act, which provides a legal framework for the
organization and functioning of HMOs and a regulatory framework for state
oversight. JCAHO and NCQA JCAHO and NCQA provide accreditation programs
for HMOs and other health care entities that contract with public and
private employers to

serve their employees and retirees, with state governments to serve
Medicaid beneficiaries, or with the federal government to serve Medicare
beneficiaries. JCAHO*s and NCQA*s accreditation standards focus on the HMO
operations that affect the quality of care delivered and interactions with
members, rather than on all the requirements that a purchaser would

typically specify for an HMO, such as the benefits offered and the cost of
providing those benefits. HMOs may seek accreditation from a nationally
recognized organization, such as JCAHO or NCQA, to signal their commitment
to quality and to help attract business. Some potential purchasers
consider an HMO*s accreditation status when deciding whether to contract
with the HMO. 26 An HMO*s accreditation status may also be an important
consideration for some potential enrollees. For that reason, OPM lists the
accreditation status of participating HMOs in the annual guide made
available to FEHBP beneficiaries. In addition, HMOs with M+ C health plans
that have received full accreditation from JCAHO or NCQA, and have been
determined by one of those organizations to have met certain additional
standards, are considered by CMS to have met the M+ C quality requirements
discussed in this report. 27

26 A February 2002 survey conducted by NCQA found that 153 Fortune 500
companies, 42 percent of which are Fortune 100 companies, relied on NCQA
accreditation when making their health plan purchasing decisions. 27 HMOs
may also satisfy M+ C quality requirements by receiving full accreditation
from AAAHC and meeting certain additional standards. The accreditation
standards of AAAHC, JCAHO, and NCQA do not address every M+ C quality
requirement specified by CMS. These organizations agreed to implement and
enforce standards specifically for M+ C HMOs. For instance, as part of
their M+ C accreditation processes, AAAHC and JCAHO agreed to require M+ C
HMOs to evaluate annually the effectiveness of their quality assurance and
performance improvement program strategies.

Selected M+ C An HMO that contracts to serve Medicare beneficiaries must
meet M+ C

Requirements for program requirements specified by CMS regarding benefit
package

proposals, the beneficiary enrollment process, marketing and enrollee HMOs

communications, and quality improvement. Requirements pertaining to
benefit package proposals specify the information that HMOs must annually
submit to CMS and set coverage parameters, such as limits on beneficiary
cost sharing. Beneficiary enrollment process requirements establish how
HMOs must collect and process applications, conduct beneficiary
eligibility checks, transmit information to CMS, and reconcile

data discrepancies. Communication requirements, which cover both general
advertising and specific communications to enrollees, set standards for
the information that HMOs distribute to beneficiaries and establish CMS*s
review and approval process for these materials. Requirements for quality
improvement specify that HMOs have the

capacity to undertake projects designed to improve the quality of health
care and annually measure their clinical and administrative performance
and the satisfaction of current and former enrollees.

Benefit Package Proposals For each M+ C health plan that it intends to
offer, an HMO must annually submit a benefit package proposal for CMS
review and approval. BBRA specified that proposals are due at the
beginning of July* 6 months before the start of the benefit year. The
Bioterrorism Act temporarily changes the benefit package proposal
submission deadline to the second Monday in September for 2002 through
2004. 28 The proposals, formally known as adjusted community rate
proposals (ACRP), specify the health plan*s

covered benefits, beneficiary cost sharing, and beneficiary premiums. An
HMO must cover all services available in the FFS program except hospice.
An HMO may also offer additional services, such as outpatient prescription

drugs, and charge beneficiaries for these services. If Medicare*s payments
to an HMO are expected to exceed its cost of providing Medicare- covered
services plus the amount of profit or additional revenue that the HMO
would normally earn on non- Medicare contracts, the HMO must use the
additional money to cover additional items or services, reduce beneficiary

cost sharing, or contribute to a benefit stabilization fund* an escrow-
like account that can be drawn upon in future years to help maintain
benefit 28 Bioterrorism Act, S:532( b), 116 Stat. 696.

levels* or a combination of these. The HMO*s benefit package proposal
describes the extent to which these options will be used. 29 CMS reviews
HMOs* benefit package proposals and approves them if they comply with M+ C
requirements. For example, an HMO may set beneficiary cost- sharing
requirements on individual services that differ from those in the FFS
program, but the sum of the actuarial value of its cost- sharing
requirements* the total amount that the average beneficiary would be
expected to pay in deductibles, coinsurance, and copayments* and the
health plan premium may not exceed the actuarial value of cost sharing in
the FFS program. The agency has generally approved the proposals before
the start of Medicare*s annual enrollment period in November. BIPA
requires the agency*s Chief Actuary to review all benefit package
proposals

submitted on or after May 1, 2001, to determine whether the data values
and underlying assumptions in the proposals are reasonable. According to
CMS officials, actuary reviews will begin with benefit package proposals
submitted in 2002. BBA requires CMS each year to audit the benefit package
proposals from at least one- third of the participating M+ C HMOs. 30 CMS
uses a risk- based approach to select some of the HMOs to audit, but

the majority of audited HMOs are randomly selected. Beneficiary Enrollment

HMOs are required to play a major role in the beneficiary enrollment
Process process. A beneficiary who wants to enroll in a health plan
submits an application to the HMO, which then must make a preliminary
determination about whether the beneficiary lives in the geographic area
served by the health plan and is otherwise eligible to enroll. The HMO
then

forwards the beneficiary*s information to CMS. After CMS confirms
enrollment eligibility, the HMO must determine the date that coverage will
begin and notify the beneficiary. Through December 31, 2004, beneficiaries
are allowed to join or leave health plans each month. After that date,
beneficiaries will have fewer opportunities each year to make health plan
changes.

29 GAO- 02- 202. 30 For a review of the first year*s audits, see U. S.
General Accounting Office,

Medicare+ Choice Audits: Lack of Audit Follow- up Limits Usefulness, GAO-
02- 33 (Washington, D. C.: Oct. 9, 2001).

Marketing and Enrollee HMOs must provide accurate and complete information
to prospective Communication Materials

beneficiaries and current enrollees. CMS*s requirements cover the
advertising and marketing materials that HMOs distribute to prospective
beneficiaries and the communications between HMOs and their enrollees,
such as explanations of benefits or coverage denials. For some materials,
such as the summary document that each HMO must produce to describe its
health plan*s benefits, CMS requires HMOs to use templates with
standardized language and formats. Prior to distribution, HMOs must submit
all of their marketing and most of their enrollee communication

materials to CMS for review and approval. Quality Improvement HMOs must
meet M+ C requirements designed to improve the quality of care and
services they deliver. Every year, an HMO must begin a multiyear

quality improvement project that focuses on a topic specified by CMS (the
national quality improvement project). For example, in 2002, CMS requires
HMOs to participate in the national quality improvement project designed

to improve breast cancer screening rates. An HMO must also demonstrate
that its previous quality improvement projects have resulted in
demonstrable performance improvements and sustain those improvements for
at least 1 year. 31 HMOs must participate in annual CMS- sponsored

standardized satisfaction surveys of current enrollees and recent
disenrollees and provide clinical and administrative data to CMS.

Recently, CMS determined that AAAHC*s, JCAHO*s, and NCQA*s standards, and
their processes for ensuring compliance with those standards, meet or
exceed M+ C requirements for quality improvement. As a result, an HMO that
has received full accreditation from AAAHC, JCAHO, or NCQA may now choose
to have the accreditation organization, instead of CMS, monitor its
compliance with M+ C quality improvement requirements.

31 Before 2002, an HMO also had to initiate a multiyear quality
improvement project on a topic that the HMO selected. In 2002, CMS
eliminated this requirement. An HMO must report on the improvements
achieved from projects begun in 1999 and 2000, but does not have to
maintain them. An HMO must report the topic and baseline data for the
project it began in 2001, but does not have to maintain the project.

Selected FEHBP FEHBP has requirements for HMOs in all four areas we
examined: benefit Requirements for package proposals, the beneficiary
enrollment process, marketing

materials and enrollee communications, and quality improvement. HMOs
Although FEHBP and Medicare both function as purchasers and are broadly
similar in terms of offering a choice of plans to beneficiaries, there are
key differences in how the two programs operate, which may account for
some of the variation in requirements. For example, market forces
determine HMO payment rates in FEHBP. In contrast, a statutory formula

specifies HMO payment rates in M+ C. 32 The difference in rate- setting
methodologies affects the type of information that OPM and CMS require
HMOs to include in their benefit package proposals. The programs also
differ in size and beneficiary characteristics. FEHBP covers about one-
fifth as many individuals as Medicare does. Moreover, FEHBP beneficiaries
tend to be younger and to use fewer health care services than Medicare

beneficiaries. Benefit Package Proposals HMOs that intend to participate
in FEHBP must annually submit benefit package proposals to OPM for each
health plan they offer. The proposals

are due in May, at least 7 months before the start of the benefit year. In
general, the FEHBP benefit package that an HMO offers in a geographic area
provides the same coverage that the HMO offers to most enrollees in the
same area. Each proposal includes the proposed health plan premium, which
must be based on the lowest community- rated premium that the

HMO charges to commercial customers for a similar number of covered lives.
33 OPM actuaries evaluate an HMO*s supporting documentation for the
proposed premium. The benefits to be covered by a health plan and its cost
to the government and to enrollees may be affected by subsequent
discussions between OPM and the HMO. For example, OPM may question
specific cost estimates submitted by an HMO if they are much higher than
other HMOs* estimates. In such a situation, according to OPM, the agency
will not agree to a rate unless these higher costs are adequately
justified. Negotiations are generally concluded in August, at least 2
months before the start of FEHBP*s annual enrollment period in November.

32 BBA, S:4001, 111 Stat. 299. 33 Community- rated premiums reflect the
average actual or anticipated cost of all enrollees in a specific
geographic area.

FEHBP HMOs are subject to audits by OPM*s Office of Inspector General
(OIG). If an HMO is found to have overcharged the government, the HMO must
repay the amount of the overcharge plus interest. The OPM OIG has a goal
of auditing every HMO at least once every 7 years. However, its audit
strategy is risk based and concentrates resources on HMOs where problems
are thought most likely to be found.

Beneficiary Enrollment While FEHBP has some enrollment process
requirements for HMOs, they

Process are limited because OPM and agencies that employ federal workers
are responsible for most enrollment activities. FEHBP HMOs* primary

enrollment responsibility is to confirm that applicants live in, or in
some cases work in, the geographic area served by their health plan. HMOs
must also quarterly reconcile enrollments with agencies. Beneficiaries who
are active workers enroll through the federal agencies that employ them,
either in writing or through an automated telephone system or a dedicated
Web site. The agencies determine eligibility and coverage start dates.
Retirees enroll through an automated telephone system or a dedicated Web
site. Agencies conduct tentative eligibility determinations for retirees
that OPM then confirms. In general, FEHBP allows beneficiaries to switch
health

plans once a year, during the annual open season. Marketing and Enrollee
FEHBP requires HMOs to produce annual brochures in a standard format
Communication Materials

using standard language. The brochure must completely describe the covered
benefits, limitations, and exclusions. According to OPM officials, the
brochures represent a contractual document between HMOs and OPM. OPM must
approve HMOs* brochures before they can be distributed. HMOs must conform
to OPM and NAIC guidelines in preparing materials that supplement the
brochure and marketing materials, such as descriptive circulars and
leaflets. According to OPM representatives, the agency focuses its review
efforts on the annual brochures, but may selectively review other
marketing materials distributed by HMOs.

Quality Improvement HMOs must meet performance standards specified in
their FEHBP contracts. These standards cover such areas as timeliness of
telephone

responses and wait times for appointments. FEHBP HMOs must annually
conduct a standardized enrollee satisfaction survey and provide clinical
and administrative performance data to OPM. FEHBP HMOs currently do

not have to conduct quality improvement projects. However, in 2001,

HMOs had to submit their business plans and timelines for attaining
accreditation from an approved external accreditation organization; OPM
currently recognizes JCAHO, NCQA, and URAC/ American Accreditation
HealthCare Commission. To achieve accreditation from such an organization,
HMOs have to undertake quality improvement projects.

Selected NAIC, NAIC, JCAHO, and NCQA have established standards for HMOs
in two of JCAHO, and NCQA

the areas we examined: 1) marketing and enrollee communication materials
and 2) quality improvement. NAIC, JCAHO, and NCQA have not Requirements
for set standards for either benefit package proposals or beneficiary

HMOs enrollment* two areas that health care purchasers must address. The

three entities tend to establish standards that are less specific than
parallel M+ C requirements and that may be modified or interpreted to fit
local circumstances. Marketing and Enrollee NAIC*s model requirements for
marketing materials specify that an HMO Communication Materials

must produce advertising that is clear, complete, and does not mislead
beneficiaries. HMOs may be required to annually certify that their
marketing materials comply with a state*s insurance laws and regulations
or to submit their marketing materials to a state insurance commissioner

prior to distribution. NAIC*s model requirements for enrollee
communications focus on HMO contract documents and specify that state
insurance commissioners can require HMOs to file these documents for
approval by the state prior to issuance. NAIC*s model requirements pertain
to the general contents of contract documents, but not the use of
standardized formats or language.

JCAHO*s and NCQA*s accreditation standards require HMOs to provide
complete information to their enrollees. NCQA*s accreditation standards
also apply to marketing materials intended for prospective members. Both

organizations have general content requirements and review marketing
materials during their on- site accreditation visits. NCQA requires that
HMOs have a systematic and ongoing process for assessing how clearly new
enrollees understand HMO policies and procedures. Quality Improvement
NAIC*s model requirements specify that HMOs must have a quality
improvement program to improve care delivery and health outcomes and to
collect and analyze information specific to their enrollees, such as

satisfaction with the HMO. However, NAIC does not specify the types of
quality improvement projects that HMOs must conduct or require the use of
standardized satisfaction surveys or standardized performance measures.

Both JCAHO*s and NCQA*s accreditation standards require HMOs to design and
conduct quality improvement projects in clinical and administrative areas
that achieve meaningful, sustainable performance improvements

affecting a significant percentage of their enrollees. JCAHO and NCQA
evaluate quality improvement project results during their accreditation
site visits. Both organizations also require HMOs to measure enrollee

satisfaction and submit administrative and clinical performance data.
Comments from CMS

In written comments on a draft of this report, CMS stated that it
generally and the Other Entities

agreed with our observations and that the tables contained in the
appendixes effectively contrast M+ C*s, FEHBP*s, and the other entities*
HMO requirements. (App. V contains the full text of CMS*s comments.) CMS
suggested that an expanded analysis of the differences between M+ C

and FEHBP programs, and a more detailed discussion of M+ C*s legislative
history, could help readers understand why M+ C*s HMO requirements may be
more stringent. We recognize that there are fundamental differences
between Medicare* a

large public entitlement program* and FEHBP* an employer- sponsored health
insurance program* and that an HMO requirement that is appropriate in one
program may not be appropriate in the other. In this report, we provide
background information on M+ C, FEHBP, and the other entities to help
provide context for their HMO requirements. We also understand that behind
M+ C*s current set of requirements lies a complex

legislative history and a series of administrative decisions. The report
highlights important Medicare HMO requirement changes introduced by BBA
and subsequent actions taken by CMS and the Congress to improve M+ C for
beneficiaries and encourage participation by HMOs. However, the report*s
focus is on the requirements that M+ C HMOs face today. By displaying
these requirements with the HMO requirements established by other
entities, the summary tables may facilitate comparisons and inform
discussions about particular M+ C requirements and how they contribute to

the program*s objectives.

We also provided a draft of the report to OPM, NAIC, JCAHO, and NCQA and
incorporated the technical comments we received from those organizations
and from CMS as appropriate. As agreed with your office, unless you
publicly announce the contents of this report earlier, we plan no further
distribution of it until 30 days from the date of this report. We will
then send copies of this report to the Administrator of CMS, the Director
of OPM, NAIC, JCAHO, NCQA, and other interested parties. We will also make
copies available to others upon request. In addition, the report will be
available at no charge on the GAO Web si te at http:// www. gao. gov.

If you or your staff have questions about this report, please contact me
at (202) 512- 7119 or James Cosgrove at (202) 512- 7029. Other
contributors to this report include Jennifer Podulka, Lisa Rogers, and
Yorick F. Uzes. Sincerely yours,

Laura A. Dummit Director, Health Care* Medicare Payment Issues

Appendi Appendi xes x I

Benefit Package Proposals M+ C and FEHBP have HMO requirements that
pertain to benefit package proposals. Our summary of those requirements is
organized as follows.

Determination of Costs, Benefits, and Government and Beneficiary
Contributions

 Purpose of benefit package proposals

 Determination of HMO costs or rates  Covered benefits

 Government contribution

 Beneficiary contribution

 Limits on premiums and required cost sharing

Submission, Review, and Approval of Benefit Package Proposals

 Call for proposals

 Number of proposals submitted

 Contents of proposals

 Transmission of proposals

 Proposal submission deadline

 Deadline for informing CMS/ OPM that existing health plan will not renew

 Review process

 Schedule for approving proposals

 Reconciliation process

Benefit Package Proposal Audits  Entities that conduct audits

 Selection criteria for audits and number of HMOs audited annually

 Information subject to audit

 Timing of audits

 Contents of audit reports

 Consequences of audit findings Table 1 summarizes selected M+ C and
FEHBP requirements for HMOs* benefit package proposals. Figure 1 depicts
the 2001 benefit- year timeline for activities associated with the
submission, review, and approval of

HMOs* benefit packages. 34 The timing of these activities for M+ C will be
altered for benefit years 2003 through 2005. Figure 2 depicts the M+ C and
FEHBP timeline for benefit package proposal activities for those benefit

years. 34 For benefit year 2002, CMS allowed M+ C HMOs to submit benefit
package proposals as late as September 17, 2001, and extended the annual
enrollment period through December 31, 2001.

Table 1: Selected Requirements for Benefit Package Proposals, M+ C and
FEHBP Topic M+ C requirements FEHBP requirements Determination of costs,
benefits, and government and beneficiary contribution

Purpose of benefit package HMO must submit, for CMS approval, benefit HMO
must submit, for OPM approval, benefit proposals package proposals, called
adjusted community rate

package proposals that are used to determine proposals (ACRP), that are
used to determine covered benefits, the government contribution, and
covered benefits and beneficiary premiums and cost

beneficiary premiums and cost sharing. sharing.

Determination of HMO costs HMO must, for each health plan it intends to
offer, HMO must, for each health plan it intends to offer, or rates
estimate its per enrollee direct medical cost of develop its FEHBP premium
rates using the same providing Medicare- covered benefits. The HMO
methodology it uses for other purchasers. Each must also list the payments
per enrollee it requires to

HMO must identify two purchasers in the FEHBP cover administrative costs
and provide other

contract area with enrollments closest to the number additional revenue,
for such items as profits or of its FEHBP enrollees in that area. These
contribution to reserve for nonprofit HMOs. (The

purchasers are referred to as similarly sized profit included in the
proposal must be comparable

subscriber groups (SSSG). The HMO must apply to the profits the HMO
normally earns on other the same methodologies it used to calculate
contracts.) The HMO must follow the same premium rates for its SSSGs and
select the method methodology to estimate its cost and revenue of that
yields the lowest premium rate for FEHBP.

providing benefits not covered by Medicare. The sum of all direct medical
and administrative costs The premium rate may be adjusted to incorporate
and additional revenue per enrollee, known as the

findings from rate reconciliation audits. adjusted community rate (ACR),
must be based on the amount the HMO would charge a commercial or other
customer to provide benefits, adjusted for

differences in the utilization characteristics of the HMO*s expected
Medicare enrollees. Covered benefits HMO must provide all Medicare-
covered benefits

In general, an HMO*s FEHBP benefit package is except hospice care. HMO may
enhance expected to be based on the benefit package it Medicare*s benefit
package by reducing beneficiary provides to the most enrollees in the
community. cost- sharing requirements or providing coverage for

OPM may require HMOs to provide coverage for additional benefits, such as
prescription drugs. If

certain benefits, such as prescription drugs or child projected Medicare
payments exceed the HMO*s immunizations, or may establish coverage ACR,
the HMO must use the excess by enhancing

parameters, such as minimum copayments or parity benefits or contributing
to a benefit stabilization fund for mental health benefits. OPM may
restrict that it can draw on in future years to help finance the benefits,
such as dental coverage, that might result cost of covered benefits, or a
combination of these.

in an HMO attracting a disproportionate number of healthy beneficiaries, a
phenomenon known as Beginning in 2003, HMO may pay all or part of a
favorable selection. beneficiary*s Medicare part B premium. a

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Government contribution CMS follows a formula specified in law to
establish OPM follows a formula specified in law to establish

the government contribution to an M+ C HMO in the government premium
contribution. c For each each geographic payment area (generally a
enrollee, the government pays the HMO the lesser county). b

of: 1. 72 percent of the weighted average premium of

all health plans offered to government employees (average premium weighted
by the number of FEHBP enrollees in each health plan), or 2. 75 percent of
the health plan*s premium. M+ C payment rates are adjusted, up or down, to

OPM does not adjust payments for the better reflect the likely health care
costs associated characteristics of individual enrollees. with certain
beneficiary characteristics such as age, sex, Medicaid enrollment status,
and prior

hospitalizations for selected conditions. Beneficiary contribution
Beneficiary premium is established in conjunction Beneficiary pays the
difference between health with the health plan*s cost- sharing
requirements. In plan*s premium and the government contribution per

general, beneficiaries are expected to pay, in enrollee. Beneficiary must
pay a minimum of 25 premiums and cost sharing, the difference between
percent of the health plan*s premium. In addition, the health plan*s ACR
for its entire benefit package beneficiary must pay any required cost
sharing. and the portion of Medicare*s payment used by the health plan for
current benefits. d

Limits on premiums and No minimum premiums or required cost sharing.

No maximum premiums or required cost sharing. required cost sharing For
Medicare- covered benefits as a whole, the

OPM sets some minimum copayment amounts. expected premiums and cost
sharing per beneficiary cannot exceed a nationally established amount
representing the actuarial value of FFS*s deductibles and coinsurance. CMS
may limit cost sharing for

individual items and services if it determines that the health plan*s
proposed cost sharing would, for example, discriminate or discourage
enrollment of severely ill or chronically ill beneficiaries.

For benefits not covered by Medicare, the expected revenue per beneficiary
cannot exceed the health plan*s ACR for the group of benefits. Submission,
review, and approval of benefit package proposals

Call for proposals No later than March 1 of each year, which has been In
March or early April, OPM sends out a *call letter* temporarily changed to
no later than the second asking HMOs to submit their benefit package
Monday in May in 2004 and 2005, CMS announces proposals for the next
benefit year. The call letter

the M+ C payment rates for each geographic contains information on any
program changes that

payment area that will be in effect during the next could affect an HMO*s
rates.

calendar year. e (M+ C benefit year coincides with the calendar year.)
Number of proposals CMS received about 650 ACRPs in 2001. f OPM received
about 300 benefit package proposals submitted in 2001.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Contents of proposals An HMO must submit an ACRP for each heath plan An
HMO must submit, for each health plan it intends

it intends to offer. The ACRP consists of two to offer, information that
describes how it developed parts*( 1) a set of six standardized
spreadsheets rates for its SSSGs and shows that it used the same that
support the health plan*s ACR and (2) a methodology to develop its FEHBP
rates.

standardized list, known as the plan benefit package (PBP), that details
all the benefits the HMO will offer. HMO submits OPM- required forms and
supporting documentation for each of its health plans. OPM

The six ACR spreadsheets ask for the following forms primarily consist of
a series of questions. information. Many questions have multiple- choice
answers; others ask for a narrative description of the HMO*s

 Summary projections of enrollment, Medicare*s rate development
methodology. The supporting average payment rate, and revenue collected
from documentation can be submitted in any form that is beneficiaries.

convenient for the HMO and supplies the necessary  Base- year actual
costs and revenues. (HMO uses information. The number of forms and amount
of recent historical costs and revenues as a basis to documentation
required vary according to whether project benefit- year costs and
revenues. The base the health plan serves more or less than 1,500 year is
the period when historical costs and

FEHBP enrollees and whether total income from revenues are measured. Base-
year costs are FEHBP is less than or more than $500,000. g adjusted for
expected trends and other factors to project benefit- year costs and
revenues.)

 HMO financial information.

 Premiums and cost- sharing details for various categories of services.

 Expected variation in costs and revenues by health care service
category.

 Calculation comparing the ACR to Medicare*s projected average payment
rate.

Transmission of proposals HMO submits ACRPs electronically and mails a HMO
mails two paper copies of benefit package paper copy of the ACR to CMS
along with narrative proposals or other required documentation to OPM.
descriptions that may contain additional explanations or cost
justifications. Proposal submission

July 1 before the start of the benefit year. For benefit May 31 before the
start of the benefit year. deadline years 2003 through 2005 only, the
deadline is the

second Monday in September. h Deadline for informing

July 1 before the start of the benefit year. For benefit May 31 before the
start of the benefit year. If OPM CMS/ OPM that existing years 2003
through 2005 only, the deadline is the

does not receive a benefit package proposal for an health plan will not be
second Monday in September. existing health plan by that date, the agency
regards renewed the health plan as one that will not be renewed.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Review process CMS electronically reviews each ACRP, primarily to OPM uses
a two- stage process to review HMOs* check that all required fields are
completed. CMS

benefit package proposals and begin negotiations. and CMS*s contractors
conduct a desk review of the First, OPM*s Office of Insurance Programs
reviews ACRP. The desk review includes verifying that any each proposed
benefit package. OPM may projected Medicare average payment rate in excess
negotiate to have the HMO alter its proposed benefit

of the HMO*s ACR is used to offer additional package. Second, OPM*s Office
of the Actuary benefits, to reduce premiums or cost sharing, or is reviews
the proposed premium rate and the data placed in the stabilization fund;
that benefits detailed

and methodology the HMO used to develop the rate. in the PBP are included
in the ACR; and that all

(These two stages do not necessarily occur in strict values in the ACR
appear reasonable and are sequence and OPM may continue benefit supported
by adequate documentation. negotiations while reviewing the HMO*s premium
rates.) BIPA requires Medicare*s Chief Actuary to review all

OPM*s Office of the Actuary focuses review efforts ACRs submitted on or
after May 1, 2001, and on benefit package proposals that cover more than
determine the appropriateness of both the actuarial 1, 500 FEHBP
enrollees. assumptions and the data used by HMOs. i CMS officials have
stated that actuarial reviews will begin

For benefit package proposals covering 1,500 or with ACRs submitted in
2002.

more FEHBP enrollees, OPM checks that the HMO used the same methodology
for its SSSG as for FEHBP. About 160 benefit package proposals were
subject to this detailed review in 2001.

For benefit package proposals covering fewer than 1, 500 FEHBP enrollees,
OPM determines whether the proposed rates appear to be reasonable (for
example, by comparing the rates with those submitted by similar HMOs).
Schedule for approving

CMS generally completes its review of ACRPs and OPM tries to finish all
negotiations by mid- August*

proposals approves them before the start of Medicare*s annual
approximately 10 weeks before the start of FEHBP*s enrollment period in
November. j

open season that begins in November. Reconciliation process No applicable
requirements. In early March of the benefit year, each HMO must tell OPM
what rate it actually negotiated with its SSSGs. (The HMO may have signed
contracts with

its SSSGs after submitting its FEHBP rate proposal.) If the lowest SSSG
rate differs from the one listed in the HMO*s FEHBP rate proposal, OPM
reconciles the difference and determines whether the HMO

undercharged or overcharged FEHBP. The reconciliation process is also used
to make adjustments for FEHB program changes announced after benefit
package proposals were finalized and

approved. An HMO cannot use the reconciliation process to update its
estimates of beneficiary use of services.

OPM maintains a contingency reserve fund for HMOs, and may charge an HMO
up to 3 percent of its health plan*s premium to establish and maintain the
fund.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Funds are paid out of the health plan*s contingency reserve to: compensate
a health plan if its rate at the time of reconciliation (late spring,
early summer) is higher than that agreed to in rate negotiations; reduce
the rate otherwise applicable for a year if the contingency reserve is
projected to exceed the minimum balance; and reimburse the Federal
Employees Health Benefits Fund for audit findings against a health plan.

Benefit package proposal audits

Entities that conduct audits For audits of benefit year 2000 ACRPs, CMS
OPM OIG.

contracted with three private certified public accounting firms and HHS*s
Office of Inspector General (OIG). For audits of benefit year 2001 ACRPs,
CMS contracted with only private firms. Information subject to audit BBA
grants the Secretary of HHS the right to audit

OPM OIG conducts two types of audits: rate and inspect any books and
records of the HMO that reconciliation audits of benefit package proposals
for pertain to the ability of the organization to bear the

the current benefit year, and historical audits that risk of potential
financial losses, or to services generally review benefit package
proposals from 5 performed or determinations of amounts payable

previous benefit years. under the contract.

Audits determine whether the HMO*s rate was Audits analyze each of the six
ACR worksheets, but developed according to the contract, the Federal
primarily focus on two aspects of the ACR* the Acquisition Regulation
(FAR), which contains actual costs incurred in the base year, and the

generic procurement rules contractors follow in methodology the HMO used
to project benefit- year doing business with the federal government, and
the costs from base- year costs.

Federal Employees Health Benefits Acquisition Regulation, which tailors
FAR to FEHBP. Selection criteria for audits CMS is required to audit at
least one- third of the The FEHB Act permits, but does not require, audits
and number of HMOs participating HMOs annually. k of HMOs. OPM OIG
performs a risk analysis by audited annually assigning all of an HMO*s
health plans a numerical CMS selected every third HMO contract from those

value for criteria such as nature of previous findings, filing ACRPs for
2000. CMS then used a risk- based

size of health plan, dollar volume, and time elapsed approach to eliminate
or add HMO contracts based

since last audit. Aggregate score for each HMO is on the desk reviews and
prior experience with computed, and HMOs with the highest risk scores
particular HMO contracts. are audited.

CMS audited 80 of the 238 M+ C contracts for the In 2001, OPM OIG
performed 20 rate reconciliation

2000 benefit year. CMS*s goal is to audit all M+ C audits and 23
historical audits of HMOs. OPM tries contracts over a 3- year period. to
audit each HMO at least once every 7 years.

Timing of audits Audits of ACRPs for benefit year 2000 were Rate
reconciliation audits of benefit package

conducted from May through November 2000. proposals are conducted from May
through August

(HMOs had originally submitted these ACRPs in July of the benefit year
covered by the proposal. 1999.)

Historical audits are conducted from August through May.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Contents of audit reports CMS*s contract for benefit year 2000 required
that Audit reports contain a discussion of each audit

the audit reports contain a discussion of each audit finding and the
dollar effect of each audit finding.

finding, a revised ACRP showing the estimated dollar effect of each audit
finding, and a conclusion about the reasonableness of the audited ACRP.

Consequences of audit Depending on the audit findings accepted by CMS, If
OPM OIG determines that rates equivalent to the

findings an HMO could be subject to administrative SSSGs* rates were not
applied to the FEHBP, it can sanctions, civil money penalties, and be
required to

return a finding of defective pricing. FEHBP is then return double the
excess amount charged in entitled to a downward rate adjustment to
violation. The excess amount charged is deducted compensate for any
overcharges and interest on from the penalty and returned to the Medicare
overcharges. enrollee( s) concerned.

CMS has provided copies of the 2000 benefit- year audit reports to HMOs.
The agency is considering the actions it will take to address the audit
findings.

a Part A of Medicare provides coverage for inpatient hospital, skilled
nursing facility, hospice, and certain home health care services, for
which beneficiaries do not pay a premium. To receive coverage for
physician and other services provided under part B of Medicare,
beneficiaries must pay a monthly premium to Medicare. In general, a
beneficiary enrolled in an M+ C health plan must pay Medicare*s part B
premium in addition to any premium charged by the health plan. b Balanced
Budget Act of 1997 (BBA), Pub. L. No. 105- 33, S:4001, 111 Stat. 251, 299
(classified to 42

U. S. C. 1395w- 23). c 5 U. S. C, S:8906.

d Under certain circumstances, an HMO may contribute a portion of its
Medicare payment to a benefit stabilization fund to finance benefits in
future years, or draw on its previous contributions to finance current
benefits. e Public Health Security and Bioterrorism Preparedness and
Response Act of 2002 (Bioterrorism Act), Pub. L. No. 107- 188, S:532( d),
116 Stat. 594, 696.

f This reflects the number of revised ACRPs filed following the enactment
of BIPA, which required HMOs to submit revised ACRPs to cover the portion
of the 2001 contract year* March through December* when BIPA specified
increased payment rates would be in effect. g OPM measures enrollment for
this purpose in terms of numbers of contracts between an FEHBP health plan
and federal employees, retirees, or surviving dependents. Thus, the number
of contracts is

less than the number of covered lives, which includes covered spouses and
dependent children. h Bioterrorism Act, S:532( b), 116 Stat. 696.

i Medicare, Medicaid, and SCHIP Benefit Improvement and Protection Act of
2000 (BIPA), Pub. L. No. 106- 554, Appendix, F, S:622, 114 Stat. 2763A-
463, 2763A- 566. j The Bioterrorism Act temporarily changes the date of
the annual enrollment period that occurs before the start of each benefit
year (S: 532( c), 116 Stat. 696). BBA specified the month of November as
the annual enrollment period (BBA, S:4001, 111 Stat. 282). For benefit
years 2003 through 2005, the Bioterrorism Act delays the start of the
annual enrollment period to November 15 and extends its conclusion to
December 31 during the years 2002 through 2004 (S: 532( c), 116 Stat.
696). For the 2003

benefit year, CMS intends to complete its review of submitted ACRPs by
November 1, 2002, approximately 2 weeks prior to the start of Medicare*s
open enrollment period. k BBA, S:4001, 111 Stat. 320. Audits were first
conducted for benefit year 2000 ACRPs. Source: GAO summary of information
provided by CMS and OPM, including applicable federal statutes,
operational guidance, and other agency materials pertaining to HMOs, and
interviews with officials.

Figure 1: Timeline for Submission, Review, and Approval of HMOs* Benefit
Package Proposals for Benefit Year 2001

M+ C

Benefit package proposals due

CMS approves benefit CMS reviews

packages CMS announces

benefit package Annual

rates for next benefit year proposals

enrollment Benefit year period begins

2000 2001

February March April May June July August September October November
December January OPM issues

OPM approves Benefit year call letter for

benefit packages begins

next benefit OPM reviews

Annual year

benefit package enrollment proposals and

period negotiates with HMOs

Benefit package proposals due

FEHBP

Source: GAO summary of information provided by CMS and OPM, including
applicable federal statutes and regulations, operational guidance and
other agency materials pertaining to HMOs, and interviews with officials.

Figure 2: Timeline for Submission, Review, and Approval of HMOs* Benefit
Package Proposals for Benefit Years 2003 Through 2005

M+ C

Benefit package proposals due

CMS approves benefit packages CMS reviews

CMS announces benefit package

rates for next benefit proposals

Annual year a

enrollment Benefit year period

begins February March April May June July August September October
November December January

OPM approves Benefit year OPM issues

OPM reviews benefit benefit packages

begins package proposals and

Annual call letter for next

enrollment benefit year

negotiates with HMOs period

Benefit package proposals due

FEHBP

Note: For benefit years after 2005, schedule of M+ C activities will
revert to the schedule shown in fig. 1. a CMS announced payment rates for
benefit year 2003 in March 2002. Source: GAO summary of information
provided by CMS and OPM, including applicable federal

statutes and regulations, operational guidance and other agency materials
pertaining to HMOs, and interviews with officials.

Appendi x II

Beneficiary Enrollment M+ C and FEHBP have HMO requirements that pertain
to beneficiary enrollment. Our summary of those requirements is organized
as follows.

Enrollment Process

 Enrollment application

 Eligibility determination

 Transmission of enrollment information to HMOs

 Reconciliation of data between HMO and administering agency

Timing of Enrollment Changes

 Opportunities to enroll or change enrollment

 Requirements for health plans to accept new enrollees

 Determination of effective coverage dates Enrollment and Disenrollment
Forms and Notices

 Enrollment forms

 Notifications for other enrollment- related situations

 Forms and notifications for voluntary disenrollment

 Notifications for other disenrollment- related situations Table 2
summarizes selected M+ C and FEHBP requirements pertaining to beneficiary
enrollment. Table 3 summarizes the annual opportunities for Medicare
beneficiaries to enroll in an M+ C health plan, change M+ C health plans,
or switch to FFS under M+ C*s enrollment *lock- in* provision. This
provision was in effect during the first half of 2002 and will be
implemented again as of January 1, 2005. Until that date, Medicare
beneficiaries may make enrollment changes every month. Table 4 summarizes
the annual opportunities for FEHBP beneficiaries to make health plan
enrollment changes.

Table 2: Selected Requirements for Beneficiary Enrollment in HMOs, M+ C
and FEHBP Topic M+ C requirements FEHBP requirements Enrollment process

Enrollment application Medicare beneficiaries apply in writing to HMO.
Employees: During open season, agencies may HMO must accept mailed and
faxed enrollment

permit or require their employees to submit forms and those presented in
person. applications to OPM via an automated telephone system or Web site.
Employees who do not use the automated systems apply in writing to their
agency's human resources office.

Retirees: During open season, retirees may change enrollment via an
automated telephone system or Web site provided by OPM. Outside of open
season activities, retirees make enrollment changes by using a toll- free
telephone number provided by OPM. Eligibility determination HMO must
verify completion of enrollment

HMO plays a limited role in the eligibility forms and perform initial
checks to verify determination process. Agencies must determine
eligibility for M+ C. Eligibility determination eligibility for employees.
For retirees, agencies must requires, but is not limited to, verification
of conduct initial determinations, then submit the enrollment in Medicare
parts A and B and

results of those determinations to OPM for residence in the health plan's
service area.

confirmation. HMO*s responsibility is to confirm that HMO may access CMS
data to verify applicants are eligible for its particular health plan or
enrollment in Medicare parts A and B.

health plans. For example, if an HMO offers a health plan only in a
designated service area, it must HMO must electronically submit new
confirm that applicants reside in that service area.

enrollments to CMS monthly. CMS performs final eligibility checks. HMO can
electronically review the results of CMS reports to confirm eligibility
for new enrollees. a Transmission of enrollment

HMO receives enrollment forms directly from Employees: Excluding open
season activities, information to HMOs beneficiary. agencies send copies
of the enrollment forms directly to HMO. The copies must be forwarded at

least every week. Several agencies send changes indirectly through OPM's
enrollment processing center in Macon, Georgia. During open season,

OPM sends enrollments received electronically to HMO via its enrollment
processing center. These transactions occur weekly. Retirees: HMO receives
non- open season enrollment changes directly from OPM. During open season,
enrollment changes are made via an automated telephone system or a Web
site provided by OPM. OPM sends these changes to the HMO electronically
through its enrollment processing center.

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Topic M+ C requirements FEHBP requirements

Reconciliation of Enrollment data are electronically reconciled Enrollment
data are reconciled in writing between data between HMO and

between HMO and CMS monthly. HMO can the HMO and agency personnel and
payroll offices administering agency electronically view reports with
results of CMS

quarterly. eligibility confirmation. Timing of enrollment changes

Opportunities to enroll or change During the first 6 months of 2002,
Medicare OPM requirements delineate specific opportunities enrollment
beneficiaries were subject to a lock- in provision

to enroll or change enrollment in FEHBP health that limited the number of
opportunities they plans. FEHBP eligibles enroll in their first health
plan had each year to enroll or change enrollment in and are then locked
into that health plan until the

M+ C health plans. HMOs were required to track annual open season, unless
special circumstances a beneficiary*s enrollment changes to ensure

arise. compliance with those limits. On June 12, 2002, the lock- in
requirement was temporarily Employees and retirees enrolled in FEHBP
generally dropped until January 1, 2005. Through

may only change health plans during the annual December 31, 2004, Medicare
beneficiaries open season. can enroll, on a monthly basis, into any M+ C
health plan accepting new enrollments or

FEHBP enrollees in certain circumstances have switch to the FFS program.
(See table 3 for other opportunities to change enrollment. For
beneficiaries* opportunities to make health plan example, they may change
health plans if their changes under the lock- in provision.)

employment status or family status changes. (See table 4 for specific
FEHBP enrollment opportunities.)

Requirements for health plans to In general, unless an HMO*s health plan
has HMO must accept all eligible applicants. accept new enrollees reached
its CMS- approved capacity limit, it must accept beneficiaries who apply.
HMO may not screen beneficiaries prior to

HMO may not reject applications due to preexisting enrollment. HMO may not
reject beneficiaries conditions. who have preexisting conditions, other
than end- stage renal disease.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Determination of effective HMO must determine effective coverage dates

Agency personnel offices must determine effective coverage dates based on
the election period.

coverage dates based on the election period.  Elections made during the 3
months prior to  Elections cannot be made prior to the first date of
beneficiary*s entitlement to Medicare parts A eligibility. Generally,
elections made within the 60day and B are effective the first date of

window posteligibility are effective the first day entitlement. of the
first pay period after the agency personnel office receives the enrollment
request and follows a

period during which the enrollee was in pay status.

 Elections made during the annual election  Employees: Initial
enrollments made during the period are effective January 1.

annual open season are effective the first day of the first pay period
that begins in the following year and that follows a pay period during any
part of

which the enrollee was in pay status. Changes in enrollments made during
the annual open season are effective the first day of the first pay period
that begins the following year.

 Retirees: Enrollments made during open season are effective January 1.

 At other times, the effective date is the first

 Effective dates vary for employees and retirees day of the month after
HMO receives the enrolling during special circumstances, such as complete
enrollment form. when a health plan terminates its participation in FEHBP.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements Enrollment and disenrollment
forms and notifications

Enrollment forms Beneficiaries must submit enrollment forms to FEHBP
employees submit enrollment forms to the HMO.

agencies. HMO is not required to use a standard

Employees: Employees must complete a standard enrollment form. CMS
provides three model form to enroll or change enrollment to another health
enrollment forms that HMO may choose to use:

plan.

 the individual enrollment form, Retirees: Retirees must use an automated
telephone

 the employer group health plan (EGHP) system or Web site to change
enrollment to another enrollment form, or

health plan.

 the short enrollment form (for beneficiaries switching health plans
within an HMO).

If HMO chooses to use its own enrollment form, HMO may not require
completion of its own the form must include data elements specified

enrollment or application form. HMO*s electronic by CMS. CMS also requires
that certain reproduction of enrollment form must contain the statements
appear in the HMO enrollment form same data elements as the standard form.
(to which the beneficiary need agree). For example, the enrollment form
must state that the beneficiary understands that enrollment in more than
one health plan with the same effective date will cancel all enrollments.
CMS must review HMO enrollment forms prior

No applicable requirements. to their use. If HMO uses model enrollment
forms without modifications, CMS is required to review them within 10 days
of submission. If

HMO chooses to use its own enrollment forms, CMS is required to review
them within 45 days of submission. Notifications for other

CMS requires HMO to provide notifications to OPM requires HMO to send
identification cards to

enrollment- related situations applicants in certain situations. For
example, new enrollees. HMO must send applicants a written notice
confirming receipt of a complete enrollment form and a confirmation when
CMS has made the final determination of eligibility. Model forms are
available from CMS for these

required communications. HMOs must also provide identification cards to
enrollees.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Forms and notifications for M+ C enrollees disenroll from health plans by
FEHBP enrollees disenroll from health plans by voluntary disenrollment
changing to another health plan or by either changing enrollment to
another health plan or

contacting the Social Security Administration, a canceling enrollment in
FEHBP. Employees disenroll

Railroad Retirement Benefits office, CMS, or with the standard form or
electronically. Retirees the HMO.

disenroll through a toll- free telephone number or an automated system.
When CMS notifies HMO that a beneficiary has disenrolled from its health
plan, HMO must send its former enrollee a notice confirming the
disenrollment.

If HMO receives a verbal request from an enrollee, HMO must either ask for
the request in writing or send the enrollee a disenrollment form and an
accompanying letter. Once HMO receives either a written request or the
completed disenrollment form, HMO must send a copy of the request and
disenrollment letter to the former enrollee.

Model forms and letters are available from CMS for all these required
communications.

Notifications for other CMS also requires HMO to provide notification No
applicable requirements.

disenrollment- related situations to enrollees in other disenrollment-
related situations. For example, HMO must send written notification to the
enrollee upon

deciding to disenroll the enrollee due to failure to pay premiums. CMS
provides a model letter for this purpose. HMO must also send an enrollee a
written notice if it terminates or withdraws from the enrollee*s service
area or continuation area* a CMS- approved area outside of the HMO*s
service area where the HMO provides, or arranges to provide, services to
existing enrollees* will no longer include the area where the enrollee
lives. CMS does not

provide a model notification for this purpose. a We use the term
*enrollee* to refer to a Medicare beneficiary who has already enrolled in
an M+ C health plan. Source: GAO summary of information provided by CMS
and OPM, including applicable federal statutes and regulations,
operational guidance and other agency materials pertaining to HMOs, and
interviews with officials.

Health Plan Enrollment Before 2002, a beneficiary in FFS or an M+ C health
plan could enroll, on a

Opportunities for M+ C monthly basis, into any M+ C health plan accepting
new enrollments or

switch from an M+ C health plan to FFS. BBA included an enrollment lockin
and FEHBP

provision, effective January 1, 2002, that limited the number of
Beneficiaries

opportunities, called election periods, for beneficiaries to make such
changes (see table 3). 35 Once a beneficiary used an election period to
enroll in a health plan, he or she was locked into that health plan until
eligible for another election period. All beneficiaries were eligible for
at

least two election periods per year* one during the annual election period
in November and a second during the first 3 months of the benefit year (6
months in 2002). However, the number of election periods each year was
higher for beneficiaries with certain characteristics. For example,

beneficiaries enrolled in a health plan on their 65 th birthday had four
election periods during their first 12 months in the program.
Institutionalized beneficiaries could change health plans an unlimited
number of times throughout the year.

On June 12, 2002, the Bioterrorism Act was signed into law. This act
temporarily lifted the enrollment lock- in provision that had been
implemented as of January 1, 2002; the lock- in provision is scheduled to
be

reinstated beginning January 1, 2005. 36 Employees and retirees enrolled
in FEHBP generally may change health plans one time each year, during the
annual open enrollment period. However, FEHBP does permit changes at other
times under certain circumstances, such as a change in family status (see
table 4).

35 BBA, Pub. L. No. 105- 33, S:4001, 111 Stat. 251, 281- 283. 36
Bioterrorism Act, Pub. L. No. 107- 108, S:532( a), 116 Stat. 594, 696.

Table 3: Opportunities for Medicare Beneficiaries to Enroll in an M+ C
Health Plan or Make Health Plan Changes Under M+ C*s Lock- in Provision
Are health plans required to be open to Election period Length of election
period new enrollment?

First year of eligibility

Initial coverage election 3 months prior to eligibility for Yes, unless at
capacity

Medicare parts A and B Open enrollment for 6 months posteligibility in
2005

No newly eligible 3 months posteligibility in 2006 and individuals; one
change beyond is allowed a

Annual election November Yes, unless at capacity Open enrollment; one

January- June in 2005 No

change is allowed January- March in 2006 and beyond Special opportunity
for 1 year following enrollment within Not applicable beneficiaries aged
65 to Medicare's initial enrollment period at return to FFS

65 th birthday

After first year of eligibility

Annual election November Yes, unless at capacity Open enrollment; one

January- June in 2005 No

change is allowed January- March in 2006 and beyond Election periods for
special circumstances

Beneficiary moves out Includes the month prior to the move, Yes, unless at
capacity

of health plan*s service the month of the move, and the month

area or continuation after the move area Beneficiary's health Varies
depending on circumstance Yes, unless at capacity plan discontinues
service

Beneficiary is living in Year- round No an institution Beneficiary's
health Varies depending on circumstance Yes, unless at capacity

plan violates contract Beneficiary enrolled in When an individual in the
EGHP Yes, unless at capacity an EGHP makes an election Exceptional
conditions Specified by CMS Yes, unless at capacity as determined by CMS a
However, in 2005 and beyond, the election period must not extend past
December 31 of the same calendar year.

Source: GAO summary of information provided by CMS, including applicable
federal statutes and regulations, operational guidance and other agency
materials pertaining to HMOs, and interviews with officials.

Table 4: Opportunities for FEHBP Beneficiaries to Enroll in a Health Plan
or Make Health Plan Changes

Are health plans required to be open to Election period Length of election
period new enrollment?

First year of eligibility

Initial opportunity to Within 60 days after becoming Yes

enroll eligible, generally after beginning federal employment a Annual
open season Designated by OPM; the open

Yes season for 2002 was conducted November 12 to December 10, 2001

After first year of eligibility

Annual open season Designated by OPM; the open Yes

season for 2002 was conducted November 12 to December 10, 2001

Election periods for special circumstances

Beneficiary, or covered Upon notifying the federal agency that Yes

family member, in an hired the beneficiary of the move or HMO moves or
change of place of employment becomes employed outside of the service

area from which the HMO accepts enrollments

Beneficiary's health During annual open season, unless Yes plan
discontinues

OPM designates a different period of service

time Other, such as:

Varies by circumstance Yes change in employment change in family status a
Agencies may allow employees to make late elections if employees
demonstrate they missed the

original deadline due to causes beyond their control. Employees make a
request to their agency, and if the request is granted, they have 60
additional days from the date the request was granted to make an election.
Source: GAO summary of information provided by OPM, including applicable
federal statutes and regulations, operational guidance and other agency
materials pertaining to HMOs, and interviews with officials.

Marketing and Enrollee Communication

Appendi x I II

Materials M+ C, FEHBP, NAIC, NCQA, and JCAHO have HMO requirements that
pertain to marketing and enrollee communication materials. Our summary of
those requirements is organized as follows.

Types of Materials Subject to Standards

 Advertising and prospective member materials

 Materials that explain HMO operations

Approach Used to Ensure that Materials Conform to Standards

 Prior approval

 Postdistribution review

 Ongoing assessment of new members* understanding of HMO operations

Standards for Documents and Information

 Preenrollment documents related to benefits and coverage

 Deadline for distributing preenrollment documents  Postenrollment
documents related to benefits and coverage

 Deadline for distributing postenrollment documents

 Standard language and formats

 Model language and formats

 Guidelines for preparing materials

 Language phrases

 Readability

 Producing materials in other languages and formats

 Telephone numbers

 References to statistical studies

 References to competitors

 References to outpatient prescription drug benefit

Standards for Marketing Activities

 Promotional activities

 Prohibited activities

 Items not covered in contract

Review of Materials

 Reviewing officials

 Frequency of review

 Timing of review

 Time frames for standard review

 Time frames for expedited review

 Final verification of beneficiary notification materials

 Annual certification of compliance in preparing marketing materials
Table 5 summarizes selected M+ C, FEHBP, NAIC, JCAHO, and NCQA
requirements for marketing and enrollee communication materials.

Table 5: Selected Requirements for Marketing and Enrollee Communication
Materials, M+ C, FEHBP, NAIC, JCAHO, and NCQA Topic M+ C requirements
FEHBP requirements Types of materials subject to standards

Advertising and prospective member Advertising and prospective member
Advertising and prospective member materials materials intended primarily
to attract or materials intended to describe an HMO*s

appeal to eligible nonenrolled beneficiaries benefits, limitations,
exclusions, and how to

and to promote membership retention, such access care, such as the
following: as the following:

 a standardized brochure produced by each

 all advertisements (print, radio, television, HMO, the FEHBP brochure,
that is a

Internet), Web site contents, outdoor complete description of the HMO*s
advertising (billboards, signs attached to

benefits, limitations, and exclusions; and transportation vehicles);

 all other materials, considered  direct mail pieces; supplemental to
the FEHBP brochure, such  summary of benefits; and as circulars and
leaflets.

 prepared sales talks or presentation flyers. Materials that explain HMO
operations Notification materials used to communicate

Materials, such as the FEHBP brochure, with the enrollee about membership
policies provider directories, and forms for selecting and procedures and
coverage, such as the a physician. evidence of coverage, the member
handbook, wallet card instructions, enrollment/ disenrollment- related
notices

and forms, claims denial notices, provider termination notices, and
provider directory.

Approach used to ensure that materials conform to standards

Prior approval Required except for employer group health Required for
HMO*s FEHBP brochure.

plan marketing materials. Postdistribution review Selective review, on a
sample basis, Selective review, on an ongoing basis, of all occurring
during monitoring compliance site

other materials that must comply with OPM visits, spot checks of media
advertisements, and NAIC guidelines. or in response to complaints. Ongoing
assessment of new enrollees* No applicable requirements. No applicable
requirements. understanding of HMO operations

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

Advertising and prospective member No applicable standards. Prospective
member materials intended to materials intended to sell insurance
policies,

describe an HMO*s benefits and such as the following: procedures, such as
the following:

 printed and published material, audiovisual  promotional brochures,
summary of material, direct mail, newspapers, benefits, provider
directories, scripts for magazines, radio and television scripts,

verbal presentations, and media Web sites and other Internet displays or

advertisements. electronic communications, billboards or similar displays;

 descriptive literature, such as circulars, leaflets, booklets,
depictions, illustrations, and form letters;

 prepared sales talks or presentations; and

 materials included with a delivered policy, renewal, or reinstatement
notices. Materials, such as an evidence of coverage Written information,
such as an overview of Materials that describe benefits and HMO or
contract, that explain the benefits to be the HMO to orient enrollees;
description of

operations, such as the member handbook, provided.

HMO and its services, components, clinical identification card, benefit
summaries, staff, and licensed independent participating provider
handbook, and practitioners; how to access HMO services; member
newsletter. how to access emergency services; and description of the scope
of benefits and the circumstances under which those benefits may be
provided. Can be required. No applicable standards. No applicable
standards.

Can be required. Required as part of on- site accreditation Required as
part of on- site accreditation survey that takes place at least once every
3

survey that takes place at least once every 3 years.

years. Surveyors review, on- site, the materials actually in use. No
applicable requirements. No applicable standards. HMO must have systematic
and ongoing

processes for assessing how clearly new enrollees understand HMO policies
and procedures, and for preventing any identified misrepresentations made
to new enrollees from occurring in the future.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements Standards for documents and
information

Preenrollment documents related to benefits Summary of benefits describes
an HMO*s The FEHBP brochure is a complete and coverage benefit package( s)
and enrollee costs, description of the HMO*s statement of

compared to fee- for- service. benefits, limitations, exclusions, and how
to

access care. Deadline for distributing preenrollment HMO had to begin
marketing 2003 benefits For 2003, HMO must send its FEHBP documents as of
September 9, 2002. Current enrollees brochure to federal agencies for
receipt no must receive the annual notice of change, later than October
14, 2002, so it could be with the summary of benefits, by October

distributed to prospective members. 30, 2002.

Postenrollment documents related to Provider directory and the evidence of

Provider directory and the FEHBP brochure, benefits and coverage coverage,
which describes the rights and

which is a complete statement of benefits, responsibilities of a Medicare
beneficiary as limitations, exclusions, and how to access an enrollee of a
Medicare HMO. care. It is part of OPM*s contractual arrangement with an
HMO. Annual notice of change describes the

specific changes in benefits, premiums, and The contents of the FEHBP
brochure are HMO rules that will be in effect for the next similar to the
combined contents of three contract year.

M+ C documents: the summary of benefits, evidence of coverage, and annual
notice of change. Deadline for distributing postenrollment

For 2003, current enrollees must receive the Each current enrollee must
receive a FEHBP documents evidence of coverage by March 1, 2003.

brochure and provider directory annually prior to start of the open
season; for 2003 Enrollees receive a provider directory at the

the open season will start November 11, time of enrollment and annually
thereafter. 2002. HMO must state in the FEHBP brochure if its provider
directory is available on its Web site.

Standard language and formats Required standard language and format for
Required standard language and format for

the summary of benefits, the notice of denial the FEHBP brochure. of
medical coverage, and notice of denial of payment. Employer group health
plans are

exempted from using a standardized summary of benefits.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

No required documents but HMO*s No required documents. No required
documents, but HMO*s

advertising materials must include the type marketing materials and
presentations must

of policy offered. include accurate descriptions of its covered

benefits, practitioner and provider HMO prohibited from expressing
limitations,

availability, pharmaceutical management exceptions or reductions, or
conditions of

procedures, and exceptions and limitations. renewability in a way that
obscures or minimizes them. HMO prohibited from using At least one
marketing piece must describe language that will cause fear or hope of the
scope of utilization management financial gain.

activities. No applicable requirements. No applicable standards. No
applicable standard, but surveyors review, on- site, the materials
actually in use to inform prospective members about the HMO. Provider
directory and evidence of List of participating licensed independent

Provider directory and instructions on how coverage, or individual
contract, which must practitioners and their qualifications and list
enrollees can request by telephone contain clear statements on various HMO
of clinical staff and their qualifications.

information on any provider professional activities and operations,
including an Enrollees should also receive written qualifications not
included in the directory, explanation of the benefits to be provided
information needed to access HMO services such as medical school attended
and under the contract and the circumstances and emergency services, the
scope of residency completed. Enrollees should also under which those
benefits may be benefits and the circumstances under which receive written
information needed to provided.

those benefits may be provided, rights and understand benefit coverage and
obtain

responsibilities, and the HMO*s care, and their rights and
responsibilities. authorization and treatment processes.

Each enrollee must receive an evidence of HMO must inform enrollees in a
*timely

Each enrollee must receive written coverage upon enrollment.

manner* (according to its own or industry information on rights and
responsibilities at

standards, or state and federal guidelines, enrollment, and when policy
changes occur. HMO must make written copies of provider

as applicable). directories available to individuals upon enrollment,
reenrollment, and at other times upon request.

Format and content of an advertisement No applicable standards. No
applicable standards.

should be sufficiently complete and clear to avoid deception or the
capacity or tendency to mislead or deceive. In advertisements,
limitations, exceptions, or reductions in benefits must be clearly
disclosed in close conjunction with the description of benefits or under
appropriate and prominent captions.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Model language and formats HMO can expedite the marketing review No
applicable requirements. process by voluntarily using CMS* model language
and formats, without modification, as these CMS materials meet the
marketing requirements. HMO is not required to use

these models. Available models of forms developed by CMS for HMO use
include:

 evidence of coverage,

 annual notice of change,

 enrollment notices,

 disenrollment notices, and

 enrollment form. Guidelines for preparing materials

Language phrases HMO must adhere to guidelines regarding HMO must include
specific phrases in

*must use,* *can use,* and *can*t use* advertising and supplemental
materials phrases. when presenting benefit or rate information outside the
context of the FEHBP brochure, and follow guidelines on how the
information is presented.

HMO must also follow NAIC guidelines. Readability HMO must, but is not
limited to, the

HMO should use the OPM Plain Language

following:

Guide for guidance in style, usage, and format, such as using common words
and  use a minimum 12- point font, with Times limiting the use of
acronyms. New Roman as the standard for measuring

font size;

 place footnotes consistently in same place; and

 in all nonnotice materials (e. g., television advertisements), make the
footnote the same size as the message designed to capture the reader*s
attention.

Producing materials in other languages HMO must make enrollee materials
HMO, at OPM*s direction, must produce and and formats available in the
primary language( s) of major

distribute an audio cassette version of the population groups served
(groups that approved FEHBP brochure language. constitute more than 10
percent of the population in a defined geographic area).

HMO must also make enrollee materials available, except provider
directory, in large print and Braille formats or through recorded
cassettes. HMO submits to CMS the non- English or Braille version, the
English version, and a letter of attestation that all versions convey the
same information.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

No applicable requirements. No applicable standards. No applicable
standards. HMO prohibited from using certain phrases No applicable
standards. No applicable standards. that could be misleading, deceptive,
or unfair.

HMO should, but is not limited to, the No applicable standards. No
applicable standards. following:

 use a minimum 10- point font, one point leaded, except for specification
pages, schedules, and tables;

 provide a table of contents or an index for policies that exceed 3,000
words or 3 pages; and

 achieve a minimum required score on a Flesch or comparable reading ease
test. State insurance commissioner can require

HMO, and its components and other clinical HMO must operate a translation
service HMO to certify that any non- English care sites, should
demonstrate respect for

within its member services telephone language policy or form is translated
from an

its enrollees by communicating in a function based on data on the
linguistic English language policy or form that meets

language understood by the enrollee (such needs of its enrollees.

readability standards. as, verbal and written communications are

conducted in the primary language and at the level of comprehension of the
enrollee whenever possible, either directly or through translation) and
addressing the needs of the hearing and speech impaired.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Telephone numbers HMO must provide contact information in HMO must list
its telephone number, the summary of benefits, such as the HMO address,
fax number, and Web site address phone number and TTY/ TDD phone

in the FEHBP brochure. number.

HMO must list the hours of customer service each time a customer service
phone number appears.

HMO must list TTY/ TDD numbers and hours of operation, in the same font
size and style, when appearing with the HMO phone number. The font size
and style rule is required for all media with the exception of television
advertisements.

References to statistical studies HMO can reference the results of studies
or HMO must follow NAIC guidelines. statistical information about enrollee
satisfaction and quality. However, HMO must specify at a minimum the data
source, dates, sample size, and number of HMOs surveyed.

References to competitors HMO prohibited from using superlatives, HMO must
agree not to use advertising that such as highest or best, unless such is
misleading or deceptive or makes superlatives can be substantiated by
ratings.

incomplete, inappropriate, or disparaging HMO also prohibited from making
comparisons. unsubstantiated comparisons with other HMOs and directing
negative statements at

HMO prohibited from comparing benefits or other HMOs. operations to any
other HMO or listing rates of other HMOs in its supplemental materials.

HMO must also follow NAIC guidelines. References to outpatient
prescription drug If applicable, HMO must provide in its HMO*s FEHBP
brochure must explain benefit evidence of coverage whether or not it uses
prescription drug coverage and, if applicable,

drug formularies or preferred lists. If so, the key features of its drug
formularies. evidence of coverage must clearly explain key elements of the
drug formulary.

HMO*s preenrollment marketing materials must disclose whether a formulary
or preferred list is used and that the formulary or list may change during
the contract year, as well as provide a contact number that the
prospective member can call for more information.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

No applicable requirements. No applicable standards. No applicable
standards. HMO*s statistical information must reflect

No applicable standards. No applicable standards. accurately all current
and relevant facts. HMO must identify the source of any statistics. HMO
prohibited from using irrelevant facts.

HMO prohibited from using advertisements No applicable standards. No
applicable standards.

that directly or indirectly make unfair or incomplete comparisons of
policies or benefits or make comparisons using noncomparable policies of
other HMOs. HMO prohibited from disparaging competitors.

HMO*s group or individual contracts or an No applicable standards. HMO
must describe its pharmaceutical evidence of coverage filed with the
contract management processes. If coverage of must contain a clear
statement or pharmaceuticals is restricted, HMO must description of
formulary procedures for

describe: obtaining a listing of drugs on the formulary (if applicable).

 how to obtain a copy of the pharmaceutical management procedures or
check on the coverage of a specific nonformulary pharmaceutical;

 extent to which access to specific pharmaceuticals is restricted; and

 how enrollee can receive coverage for a pharmaceutical not on the
formulary.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements Standards for marketing
activities

Promotional activities HMO must follow CMS guidelines for HMO must follow
NAIC guidelines.

conducting promotional activities, including, but not limited to the
following:

 allowing gifts to prospective members or enrollees with a nominal value
of $15 or less based on retail purchase price;

 permitting HMO to conduct health fairs that must be primarily social
events where sales presentations and acceptance of

enrollment forms are prohibited (with the exception of employer group
health fairs); and

 permitting providers to advise beneficiaries regarding enrollment, but
not take enrollment applications in locations where direct medical care is
provided. Prohibited activities HMO prohibited from:

HMO must follow NAIC guidelines.

 giving cash or other monetary rebates as inducement for enrollment;

 conducting marketing activities that could mislead or confuse Medicare
beneficiaries;

 engaging in any discriminatory marketing activities, such as recruiting
upper- income Medicare beneficiaries and not low- income Medicare
beneficiaries or soliciting doorto- door; and

 using a health plan name that suggests that a health plan is not
available to all Medicare beneficiaries.

Items not covered in contract HMO can market items/ services not covered
HMO can market items and services not

in their M+ C contracts, but with such covered in their FEHBP contracts,
but with restrictions as the following.

such restrictions as the following.

 HMO must describe as value- added items  HMO*s non- FEHBP benefits must
be health and services (VAIS), not as benefits.

related.

 HMO must state that VAIS are not subject

 HMO must describe the non- FEHBP to the M+ C appeals process.

benefits in the FEHBP brochure, limited to

 HMO can also market multiple lines of one page.

business to Medicare beneficiaries, as  HMO must state that non- FEHBP
benefits long as it follows specific CMS guidelines,

are not subject to FEHBP*s disputed claims such as allowing current
enrollees to process. decline receiving such communications.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

HMO may offer an initial premium that is No applicable standards. No
applicable standards. lower than the full premium, but the lower initial
premium may not be more prominently displayed in an advertisement than the
full

premium. HMO prohibited from:

No applicable standards. No applicable standards.

 conducting marketing activities that involve knowingly making any
misleading representation or incomplete or fraudulent comparisons of
insurance policies or using high- pressure tactics;

 implying that a contract, unless it is fact, is an introductory,
initial, or special offer; is limited to a certain number of people; or is
available for a limited time;

 implying in any way that it is endorsed or affiliated with a municipal,
state, or federal government entity; and

 giving through style, arrangement, and overall appearance, undue
prominence to any portion of text, any endorsements, or riders. No
applicable requirements. HMO must inform enrollees about how to

HMO must accurately describe to obtain health care services not covered in
prospective members services not covered the HMO*s benefit package. in the
HMO*s benefit package.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements Review of materials

Reviewing officials Generally, regional CMS staff responsible Centrally
located OPM contract specialists for HMOs in a geographic area.

assigned to FEHBP HMOs. HMO with a national presence can request a
coordinated review of its materials, designating a lead regional office.
Frequency of review HMO*s materials and enrollee HMO*s FEHBP brochure
annually reviewed communications reviewed on an on- going by OPM; OPM
selectively reviews all other

basis. materials on an on- going basis.

Timing of review Review occurs prior to use. CMS may also Review occurs
prior to use of the FEHBP conduct review as part of a regularly brochure.
All other materials are reviewed on scheduled monitoring site visit;
during a spot

an as- needed basis, such as in response to check of marketing pieces used
in the

enrollee and HMO complaints. media; or in response to a complaint.

Time frames for standard review HMO must submit materials to CMS at least
OPM annually reviews and approves an 45 days prior to distribution for
approval. If HMO*s FEHBP brochure. For 2003, the

CMS has not disapproved the materials following schedule was in effect.

within the 45- day period, then the HMO*s materials are deemed approved.

 On July 2, 2002, OPM released an electronic version of the standardized
If CMS disapproves the material, another

FEHBP brochure that HMOs could modify 45- day cycle begins when the HMO to
reflect their benefits and operations. resubmits the corrected material.

 By August 8, 2002, OPM contract specialists and the HMOs had finished
negotiating benefit changes for 2003. OPM sent an electronic version of
the agreed- to FEHBP brochure text back to the HMO to put into the
standardized format.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

Insurance commissioner. A team of JCAHO surveyors performs onsite A team
of NCQA surveyors, including review; JCAHO committee makes all

physician and administrative reviewers, final accreditation decisions.

performs on- site review; NCQA committee of external senior physicians
makes all final accreditation decisions.

HMO*s advertising materials reviewed by Frequency of review varies,
depending on Frequency of review varies, depending on insurance
commissioner at regular and HMO*s accreditation status. An on- site HMO*s
accreditation score. An on- site periodic intervals. JCAHO accreditation
survey occurs at least

NCQA accreditation survey occurs at least once every 3 years. once every 3
years. Surveyors review, on site, the materials actually in use.

Review can occur prior to use, at the Review occurs after the use of
materials.

Review occurs after the use of materials. discretion of the insurance
commissioner. (This is because materials are reviewed on (This is because
materials are reviewed on site during a survey.)

site during a survey.) Insurance commissioner can require filing of

Review of materials given to enrollees Review of materials occurs on- site
during advertising pieces for review no fewer than occurs on- site during
JCAHO*s accreditation

NCQA*s accreditation survey of HMO that 30 days prior to use. survey of
HMO that occurs at least once

occurs at least once every 3 years. every 3 years. State can require one
of two options prior approval or *file and use* for review of contract
forms and evidence of coverage.

 Prior approval. HMO must file contract forms and evidence of coverage
with the insurance commissioner at least 30 days prior to delivery or
issuance, which can be

extended for an additional 30 days during the initial 30- day review
period. Contract forms and evidence of coverage deemed approved if no
action taken. At any time, after 30 days notice and for cause shown,

the insurance commissioner may withdraw approval of a form, effective at
the end of the period. If insurance commissioner disapproves a form or
withdraws approval of a form, HMO can request a hearing.

 File and use. HMO must file contract forms and evidence of coverage with
the insurance commissioner at least 30 days prior to delivery or issuance.
At any time, after its issuance and delivery and for cause shown, the
insurance commissioner may disapprove the form; this disapproval becomes
effective 30 days after HMO

receives notice from the insurance commissioner. HMO can request hearing.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Time frames for expedited review CMS has 10 days to review any materials
No applicable requirements. where an HMO follows CMS model language
without modification.

Final verification of beneficiary notification HMO*s beneficiary
notification materials are HMO*s first print run of its final FEHBP

materials subject to a final verification review process, brochures is
subject to verification of where CMS reviews the materials at the final

accuracy; OPM obtains 20 FEHBP proof stage (such as a camera- ready copy).

brochures to review. The final verification review is conducted to confirm
that the final proof version contains no changes from the initial text
version that

was approved by CMS. a

Annual certification of compliance in No applicable requirements. No
applicable requirements.

preparing marketing materials a For the 2002 and 2003 beneficiary
education/ open season campaigns, CMS has temporarily suspended final
verification of beneficiary notification materials, including the summary
of beneficiary notification materials, including the summary of benefits,
the evidence of coverage, and all other materials prepared as part of
HMO*s enrollment package( s). Source: GAO summary of information provided
by CMS and OPM, including applicable federal statutes and regulations,
operational guidance and other agency materials pertaining to HMOs, and
interviews with officials. GAO summary of information provided by NAIC,
JCAHO, and NCQA, including NAIC model requirements for HMOs, standards
from the current JCAHO and NCQA accreditation manuals for HMOs, and
interviews with NAIC, JCAHO, and NCQA officials.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

No applicable requirements. No applicable standards. No applicable
standards. No applicable requirements. No applicable standards. No
applicable standards.

HMO can be required by insurance No applicable standards. No applicable
standards. commissioner to file a certificate of compliance stating that
advertising materials disseminated during the preceding year complied or
were made to comply with

the regulations or insurance laws of the state.

Appendi x V I Quality Improvement M+ C, FEHBP, NAIC, JCAHO, and NCQA have
HMO requirements that pertain to quality improvement (QI). Our summary of
those requirements is structured along the following dimensions.

Elements of a Quality Improvement Program

 Purpose

 Performance improvement projects

 Annual performance measurement

Administration of Quality Improvement Program

 Leadership involvement

 Organizational structure

 Program documentation

 Program description

 Meeting documentation

 Annual work plan

 Evaluation report

 Provider participation

 Enrollee participation

 Accreditation

Performance Improvement Projects

 Number of projects

 Choice of project topics

 Choice of quality measures

 Required results

 Minimum performance levels and benchmarks

 Demonstrable performance improvement

 Sustained performance improvement

 Evaluation

 How HMO reports

 Who evaluates

 What is evaluated

 Potential actions based on evaluation

Annual Performance Measurement

 Clinical and administrative performance

 Who participates

 How data are externally validated

 Who pays for external validation

 When annual data are submitted

 Member satisfaction survey measures for current enrollees

 Who participates

 Who is sampled

 Who pays for survey administration

 Member satisfaction survey measures for disenrolled members

 Who participates

 Who is sampled

 Who pays for survey administration

 Member health status survey measures

 Who participates

 Who is sampled

 Who pays for survey administration Table 6 summarizes selected M+ C,
FEHBP, NAIC, JCAHO, and NCQA requirements for QI.

Table 6: Selected Requirements for Quality Improvement for M+ C, FEHBP,
NAIC, JCAHO, and NCQA Topic M+ C requirements FEHBP requirements Elements
of a quality improvement program

Purpose HMO must operate an ongoing quality HMO must operate an internal
quality

assessment and performance improvement assurance program that meets FEHBP

(QAPI) program that meets M+ C requirements. a requirements. HMO*s
internal quality assurance HMO*s QAPI program must, for example, stress
program must, for example, measure and collect health outcomes; monitor
and evaluate high

data on the quality of health care services volume and high risk services
and care of acute delivered to its enrollees; reduce medical errors; and
chronic conditions; evaluate the continuity measure enrollee satisfaction;
meet minimum and coordination of care provided to enrollees;

contractual performance standards (such as measure enrollee satisfaction;
use written timeliness of telephone responses and protocols to review
utilization; identify areas in

timeliness of appointments); and correct any which quality can be
improved; take actions to identified deficiencies. improve quality; and
assess the effectiveness of such actions through systematic follow- up.
Performance improvement projects HMO must conduct QAPI projects as part of
an HMO, as part of its internal quality assurance overall QAPI program.
HMO*s QAPI projects program, must take into account the published

implement system interventions intended to results of its annual member
satisfaction survey,

improve performance in clinical and nonclinical as well as any other
results as directed by OPM,

areas. HMO must evaluate and validate the in identifying areas for
improvement. results of the interventions and determine the need for
further action.

Annual performance measurement HMO must annually collect and report data
on HMO must annually collect and report data on performance measures
specified by CMS, performance measures specified by OPM, including
measures pertaining to a national topic

including a subset of HEDIS measures, and and the Health Plan Employer
Data and

conduct a standardized member satisfaction Information Set (HEDIS). d HMO
must also survey. conduct standardized member satisfaction and member
health status surveys.

Administration of quality improvement program

Leadership involvement HMO*s policy- making body, such as the No
applicable requirements.

governing board or a committee of senior executives, must be involved in
the QAPI program. At a minimum, HMO*s policy- making body must approve the
initial written QAPI program description, and any subsequent changes, and
annual work plan; review the annual evaluation and take action on any
resulting recommendations; and receive and

review periodic reports on QAPI activities.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

HMO must operate an organizational QI HMO must use a systematic
performance

HMO must operate a comprehensive QI program for designing, measuring,
improvement approach to improve enrollee program to improve the quality
and safety assessing, and improving the processes and health outcomes
throughout the HMO by of clinical care and the quality of service outcomes
of health care delivered to its improving the performance of clinical,
delivered to its enrollees. enrollees.

governance, and support processes. HMO must conduct QI activities as part
of an HMO must conduct performance

HMO must conduct QI projects as part of overall QI program. b HMO*s QI
activities improvement activities as part of an overall an overall QI
program. HMO*s QI projects implement strategies intended to improve

performance improvement approach. c implement interventions to improve
quality both care delivery and health outcomes. HMO*s performance
improvement activities of care and service. HMO must evaluate HMO must
evaluate the results of its

implement changes to the HMO*s clinical, and validate the results of its
QI projects to improvement strategies to determine the governance, and
support processes that

determine the need for further action. need for further action.

improve health outcomes or reduce the risk of serious medical errors. HMO
must evaluate results to determine the need for further action. HMO must
collect and analyze information

HMO must collect data on an ongoing basis HMO must annually collect and
report data specific to its enrollees, including

and display the analysis of data in monthly on performance measures
specified by documentation of enrollee satisfaction, as data points for 30
measures it selects to NCQA, including a subset of HEDIS specified in its
written description of annual monitor. HMO must regularly, not necessarily
measures, and conduct a standardized activities.

annually, measure, assess, and use member satisfaction survey.

information about enrollee needs and satisfaction to improve member
services; HMO must determine the frequency and

detail of this data collection. HMO*s Chief Medical Officer or Clinical

HMO*s leaders must select and effectively HMO*s QI program must be
accountable to Director has primary responsibility for

use a performance improvement approach. a governing body. At a minimum,
the implementing the QI program, including HMO*s governing body must
review and approving and periodically reviewing a approve the QI program
description. written program description and, at least semiannually,
reviewing reports of QI activities undertaken.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Organizational structure A senior HMO official must administer the QAPI No
applicable requirements.

program. HMO must clearly identify individuals or organizational
components responsible for each QAPI activity and the organizational
structures in place to assure communication and coordination. HMO must
hold administrative QAPI meetings at regularly scheduled intervals

(as defined in its policies and procedures); meetings must be adequately
attended.

Program documentation HMO must have a written QAPI program No applicable
requirements; however, HMO, as description that shows the role, structure,

directed by OPM, must submit its progress in Program description staffing,
and function of each organizational

meeting specific OPM requirements, such as component, and the
interrelations among implementing a patient safety program. components for
each aspect of the QAPI program.

Meeting documentation HMO must document that it appropriately follows No
applicable requirements.

up on issues raised in QAPI meetings. Annual work plan HMO must have a
written annual QI work plan. No applicable requirements. Evaluation report
HMO, at least annually, must formally evaluate HMO must furnish to OPM
semiannual quality the effectiveness of its QAPI program strategy.
assurance reports. HMO must evaluate the timeliness of annual work plan
activities, whether additional resources need to be committed, and
potential recommendations for changes in program strategy or
administration.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

Chief Medical Officer or Clinical Director HMO*s leaders must set
performance

A designated physician and a behavioral must administer HMO*s QI program.
HMO improvement program expectations, develop health practitioner must be
substantially may use a quality committee to perform its plans, and manage
program implementation.

involved in the implementation of HMO*s QI QI activities. HMO*s
performance improvement activities program. HMO must have a QI committee
must be collaborative and involve all

to oversee, and be involved in, QI activities. appropriate HMO personnel,
clinical staff, Multiple parts of the HMO, including its and licensed
independent practitioners.

leadership, participate in the QI program. HMO must file with the
insurance

No applicable standards. HMO must have a written QI program commissioner a
written QI program description that specifies the structure and
description of the objectives, lines of content of the QI program. The
description authority and accountability, evaluation and

must specifically address behavioral health data collection tools,
performance care and activities to improve patient improvement activities,
and annual safety. It must also state the role and effectiveness review.

function of any QI committee. No applicable requirements. No applicable
standards. HMO*s QI committee must maintain contemporaneous minutes, dated
and

signed, that demonstrate meaningful review of, and advice for, QI
activities and reporting.

HMO must have a written description of QI No applicable standards. HMO
must have an annual QI work plan, or activities to be conducted, such as
the

schedule of activities, that includes: diagnoses and treatments to be
reviewed objectives, scope, and planned projects for annually.

the year; planned monitoring of previously identified issues; and planned
evaluation of the QI program.

HMO must conduct an annual evaluation of No applicable standard for
written evaluation

HMO must conduct an annual evaluation of the effectiveness of its QI
program. report. HMO must systematically aggregate its QI program and have
the evaluation and analyze performance improvement data

report approved by the accountable person on an ongoing basis and compare
its or the QI committee. The written evaluation performance over time and
with other

report must describe the completed and sources of information. HMO must
identify ongoing QI projects for the year and changes that will lead to
improved

include data trends. It must also include a performance and reduce the
risk of serious critical assessment of potential barriers to medical
errors.

achieving each QI program goal. HMO must use the evaluation to determine
whether to restructure or change its QI program for the subsequent year.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Provider participation HMO must ensure that affiliated or employed No
applicable requirements.

providers actively participate in the design and implementation of the
QAPI program. HMO must ensure that a group of clinicians actively
participate in key activities, including: selecting and prioritizing QAPI
projects, developing

measures, analyzing study results, identifying and proposing solutions to
problems, and aiding in communication of QAPI activities and results to
other providers.

Enrollee participation HMO must establish a mechanism for obtaining HMO
must take into account the published enrollee input into the priorities
for its QAPI

results of its administered member satisfaction program.

survey, as well as any other results as directed by OPM, in identifying
areas for improvement as part of its internal quality assurance program.
Accreditation HMO can meet specific M+ C requirements if it

HMO with 500 or more FEHBP enrollees, in obtains accreditation from a
private organization 2002, must begin seeking accreditation from a
approved by CMS. As of June 15, 2002, CMS nationally recognized,
independent accrediting had approved three private accreditation
organization. OPM currently recognizes organizations* AAAHC, JCAHO, and
NCQA. JCAHO, NCQA, or URAC/ American Accreditation HealthCare Commission.

Performance improvement projects

Number of projects HMO must annually participate in a QAPI project No
applicable requirements.

chosen by CMS, referred to as the national QAPI project. e Starting in
2004, an HMO can participate in a local QAPI project, such as one
initiated by a private purchaser group, a quality improvement organization
(QIO) (formerly known as a peer review organization), or a state Medicaid
agency, in place of the national QAPI project. f Choice of project topics
CMS selects the topic for the national QAPI No applicable requirements.

project. g An HMO*s local QAPI project must address one of nine focus
areas defined by CMS for both mental and physical conditions. h Within a
focus area, HMO must select local QAPI project topics

that are relevant to the Medicare population.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

HMO must ensure that participating HMO*s leaders must provide for, and HMO
must ensure that its practitioners can

providers have the opportunity to participate encourage, licensed
independent

actively participate in the QI program. in developing, implementing, and
evaluating practitioners to participate in its performance

These practitioners help educate the the QI program. HMO must make
available

improvement activities. HMO*s leaders and HMO*s other practitioners and
providers

annually to providers findings from its QI appropriate HMO personnel,
clinical staff,

about the QI program, specific QI projects, program, including information
about its and licensed independent practitioners work and the results of
these projects. progress in meeting internally established

collaboratively on an HMO- wide basis to goals and, where available,
externally design and implement the HMO*s established benchmarks.

performance improvement approach. HMO must monitor the needs,
expectations, and views of licensed independent practitioners regarding
current performance and opportunities for improvement.

HMO must provide enrollees with the HMO must continuously and
systematically HMO must obtain and act upon enrollee opportunity to
comment on its QI program.

assess enrollee expectations of, and input for the QI program by
conducting an HMO must make available annually to satisfaction with, care
and services provided

annual member satisfaction survey. enrollees findings from its QI program,

and use the information to improve services. including information about
meeting its HMO, consistent with its overall resources, internally
established goals and, where must include enrollees in developing the
available, externally established benchmarks.

services it offers. State can consider accreditation by a

No applicable standards. No applicable standards. recognized private
accrediting organization as evidence of meeting some or all of its quality
assessment and improvement

requirements. No applicable requirements. JCAHO views performance
improvement HMO must show meaningful improvement activities to be
continuous and ongoing and in at least four QI projects (two that does not
specify the number of performance

address clinical quality of care and two that improvement activities to be
conducted.

address service quality) to receive the highest accreditation score. NAIC
does not define explicit focus areas to

JCAHO does not define explicit focus areas NCQA does not define explicit
focus areas be addressed. HMO, in selecting annual

that must be addressed. HMO must collect to be addressed. HMO must conduct
topics to review, must select practices and data and monitor outcomes in
clinical and clinical and service QI projects that are diagnoses that
affect a substantial number of nonclinical areas of care. HMO*s criteria
for important and relevant to a significant

its enrollees. selecting a performance improvement portion or subset of
its enrollees. HMO may

activity must consider whether the activity consider clinical issues
identified in audited

would affect a large percentage of enrollees; HEDIS measures as relevant
for potential has the potential to place enrollees at risk if clinical QI
projects and service issues

not implemented appropriately; has been, or identified in member
satisfaction survey is likely, to be prone to problems; or has ratings as
relevant for potential service QI significant cost implications.

projects. i

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Choice of quality measures For national QAPI projects, HMO must use CMS No
applicable requirements.

specified quality measures. For a local QAPI project, HMO must use one or
more quality measures to track its performance and improvement over time.
HMO*s quality measures must be objective, clearly and

unambiguously defined, based on current clinical knowledge or health
services research, and subject to objective measurement. HMO may adopt
standard measures from outside

sources or develop its own. HMO*s local QAPI project must include some
quality measures for which data are available that allow comparison of the
HMO*s performance to similar organizations or to local, state, or national
norms. Required results

HMO must achieve required minimum HMO must meet minimum contractual
performance levels or meet required performance standards specified to
ensure Minimum performance levels and

benchmarks established by CMS on the quality of service and responsiveness
to benchmarks

standardized quality measures used in national enrollees.

QAPI projects. j

HMO must compare its performance on the local QAPI project to prevailing
standards in the community.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

HMO must use a range of appropriate HMO must use performance improvement

HMO must use explicit, defined quality methods to analyze quality
consistent with

measures to determine if a process, measures that allow it to measure its
current medical research, knowledge, component, or service is performing
performance. HMO*s measures must be

standards, and practice guidelines. according to expectations and to
monitor

based on standards of care or practice that improvements in performance.
HMO may

include objective clinical criteria that are use performance improvement
measures it based on authoritative sources, such as develops or adopts
from external sources. clinical literature.

HMO*s criteria for selecting a performance improvement measure must
include such factors as: measure has documented

numerator and denominator statements; measure has defined data elements;
and measure can detect changes in performance over time.

HMO must establish its own performance HMO must establish its own
performance HMO must have an explicit, quantifiable

expectations for the performance measures expectations for the performance
measures performance goal (internally defined) or that it selects to
monitor. HMO must it monitors. HMO must compare its

benchmark (externally defined) for each compare QI program findings with
its past performance over time and with benchmarks measure. HMO may use a
benchmark from performance, as appropriate, against from up- to- date
external sources, such as the industry best practice or the best
internally established goals or, where

recent scientific, clinical, and management performance within a corporate
structure or available, externally established benchmarks. literature;
well- formulated practice guidelines

a specific geographic area. Each goal and or parameters; performance
measures; and

benchmark must be designated as a standards that are periodically reviewed
and specific rate, such as the percentage of revised. HMO must use the
comparisons to

diabetic enrollees who received a retinal determine if its performance is
unacceptable screening. HMO, as it refines its processes or excessively
variable.

for delivering care and service, must move the performance goals and
benchmarks toward optimal performance levels. HMO*s actual results from
required HEDIS clinical measures for Medicare enrollees, as well as the
results of the standardized

member satisfaction survey, are used in determining 27. 5 percent of its
accreditation score. HMO*s actual HEDIS

results are compared to national and regional benchmarks and thresholds.
HMO*s member satisfaction survey results are compared to national
benchmarks and

thresholds.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Demonstrable performance An HMO*s QAPI projects must result in a No
applicable requirements. improvement demonstrable performance improvement,

relative to preproject baseline measures. HMO must show that the
improvement is meaningful to its Medicare enrollees and that the
improvement can be reasonably attributed to the actions it has taken.
Sustained performance

Upon achieving demonstrable improvement, an No applicable requirements.
improvement HMO must sustain the performance

improvement for at least 1 year. Evaluation

HMO must submit a Project Completion Report, No applicable requirements.

developed by CMS, to report at least one quality How HMO reports

measure and performance improvement. k

In general, HMO must submit a CMS developed Project Completion Report 90
days after the QAPI project completion date.

Who evaluates HMO*s QAPI projects must be reviewed by a No applicable
requirements.

CMS contractor, known as a Medicare+ Choice Quality Review Organization
(M+ CQRO). l Review occurs off- site.

What is evaluated M+ CQRO evaluates one quality measure for No applicable
requirements.

which an improvement has been achieved per QAPI project. M+ CQRO scores
each element of the HMO*s performance against established QAPI
requirements. The overall score is a weighted average based on the
significance placed on each particular QAPI element.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

No applicable requirements. HMO must define the desired improvements. HMO
must demonstrate that an HMO must identify the measures it will use to
improvement has occurred; is relevant to determine whether a change
represents a the HMO*s population; affects a significant performance
improvement.

portion of the HMO*s population or population at risk; is likely to result
in a better health outcome for the HMO*s

population; is attributable to the strength, duration, and quality of the
HMO*s action( s) and not other confounding factors; and has an impact on
high- volume, high- risk, or high- cost conditions or services. No
applicable requirements. HMO must achieve and maintain its

HMO must demonstrate meaningful performance improvement. HMO must
improvement in 2 clinical QI projects and 2 collect data for a period of
time and service QI projects (from up to 10 frequency that permits it to
ensure that submitted for evaluation). Each of the improvement continues.

improvements must have occurred in the 3year period covered by an
accreditation survey and have been subsequently sustained.

HMO must make available annually, to JCAHO regards performance improvement
HMO can complete the Quality

providers and enrollees, findings from its QI activities as ongoing
processes and Improvement Activity form, developed by program, including
information about its therefore does not require a beginning and

NCQA, to report each completed QI progress in meeting internal goals and
end date. JCAHO surveyors review project; HMO must provide the data
external standards, as applicable. performance improvement activities on
site

requested in NCQA*s form, even if it does during an accreditation survey
that occurs at not use NCQA*s form. HMO can submit least once every 3
years. one or more measures for each QI project. HMO must submit completed
Quality Improvement Activity forms to NCQA as part its accreditation
survey application.

HMO must certify to the insurance HMO*s performance improvement activities
HMO*s QI projects must be reviewed by a

commissioner annually that its QI activities must be reviewed by a team of
JCAHO team of NCQA surveyors, including

and QI materials given to providers and surveyors during an accreditation
site visit

physicians and administrative reviewers, enrollees meet all applicable
requirements.

that occurs at least once every 3 years. during an accreditation site
visit that occurs JCAHO committee makes all final at least once every 3
years. NCQA

accreditation decisions. committee of external senior physicians makes all
final accreditation decisions.

No applicable requirements. HMO is scored on its performance against NCQA
requires that an HMO show established JCAHO standards. JCAHO

meaningful improvement on one quality determines an HMO*s total score,
based on measure per QI project. NCQA scores the each standard*s weight
and predetermined HMO*s performance against required formulas.

elements. The overall scoring is a weighted average based on the
significance placed on each particular element. HMO must meet all of
NCQA*s criteria for meaningful improvement for 4 evaluated QI projects

(2 clinical and 2 service) to attain the highest accreditation score.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Potential actions based on M+ CQRO forwards to CMS a completed Project

OPM can hold up to 1 percent of premiums for evaluation Review Report,
developed by CMS, that includes

not meeting contractual standards or can the final score of the QAPI
project and increase service charge (profit) based on recommended
corrective actions to address any meeting contractual standards, depending
on identified deficiencies. CMS then gives final how rates are set for the
HMO.

approval on any evaluation report. CMS then forwards the Project Review
Report to the HMO* HMO does not communicate directly with the M+ CQRO. CMS
could terminate its M+ C contract with an HMO if the HMO fails to
implement an acceptable QAPI program. CMS

may also specify special project topics and quality indicators if it
determines that an HMO has not achieved sufficient diversity in its QAPI

projects. m

Annual performance measurement

Clinical and administrative HMO, if it meets CMS*s participation criteria,

HMO must report a subset of HEDIS measures performance must report to NCQA
patient- level and summary applicable to commercial enrollees. HMO must
information for Medicare HEDIS measures submit to NCQA summary and
patient- level specified by CMS; for 2001, HMOs had to report data of the
HEDIS measures. OPM receives the 23 Medicare HEDIS measures to CMS. o CMS

data from NCQA. receives the data from NCQA.

Who participates HMO, if it had HMO with 500 or more enrollees. Any HMO
reporting HEDIS data to NCQA for non- OPM  a Medicare contract as of
January 1 of the

purposes may use that HEDIS data to satisfy HEDIS measurement year (the
previous year) OPM requirements* HMO does not have to or earlier and
report separately on FEHBP enrollees only.

 enrollees as of January 1 of the measurement year or earlier and at
least 1,000 enrollees as of July 1 of the measurement year.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

No applicable requirements. n JCAHO provides HMO with an accreditation
NCQA provides HMO with a preliminary decision in its Official
Accreditation Decision Survey Report with findings and Report. HMO may
respond; if HMO recommendations but no standard responds it must do so
within a designated compliance designations. HMO may time frame. HMO may
appeal a JCAHO

respond; if HMO responds it must do so recommendation for accreditation
denial, if within a designated time frame. An NCQA done within JCAHO
guidelines. If HMO is committee reviews all relevant denied accreditation
or receives provisional documentation and issues compliance accreditation,
it can follow JCAHO guidelines designations for each standard and makes to
have its case reviewed.

an accreditation designation. NCQA forwards to HMO the final Survey
Report. HMO may request that NCQA reconsider its findings from the on-
site survey if done within NCQA guidelines. NCQA annually recalculates an
HMO*s accreditation status based on its submitted HEDIS results.

No applicable requirements. JCAHO administers ORYX, a performance HMO must
annually report a subset of

measurement initiative for HMOs with clinical HEDIS measures appropriate
for

network accreditation. For 2001, HMO had to the population it serves. HMO
serving select and monitor 30 individual measures Medicare enrollees must
have reported

that best served its strategic management eight clinical HEDIS measures to
NCQA for

goals. HMO submits the measures to accreditation in 2001. JCAHO with their
accreditation survey application. Submission does not occur

annually. JCAHO*s next phase of the ORYX initiative for HMOs includes the
identification of specific core performance measures, grouped into
measurement sets. No applicable requirements. HMO. HMO with Medicare
enrollees follows the same requirements as M+ C.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

How data are externally validated HMO must contract with an NCQA-
certified HMO not required to have HEDIS 2001 data HEDIS compliance audit
organization and externally validated; OPM will not publicly undergo a
full HEDIS audit. p CMS releases publish data. OPM will require HEDIS 2002
data summary HEDIS data in public use files.

to be audited. Who pays for external validation HMO. HMO. When annual data
are submitted HMO must comply with NCQA HEDIS

HMO must follow NCQA HEDIS submission submission dates for Medicare
enrollees and dates for commercial enrollees and submit data submit data
at the end of June.

in mid- June. Satisfaction survey measures for

HMO, if it meets CMS*s participation criteria, HMO must contract with an
NCQA- certified

current enrollees must participate in the Medicare Managed Care vendor to
field the CAHPS 2.0H adult Consumer Assessment of Health Plans commercial
survey. HMO must submit member

(CAHPS) survey. q CMS administers the level and summary- level data files
to OPM by Medicare Managed Care CAHPS survey each mid- June. Prior to
OPM*s mid- June due date,

fall to a sample of HMO*s enrollees. HMO must submit member- level data
files to

NCQA for validation and calculation of summary- level results. Who
participates HMO that had a Medicare contract in place on or

HMO with at least 500 FEHBP enrollees as of before July 1 of the previous
year, including an March 31 of the previous year. HMO terminating as of
the next contract year. Who is sampled CMS randomly surveys 600 of the
HMO*s

HMO must follow NCQA sampling protocols for enrollees, not living in an
institution, who have commercial enrollees. been enrolled continuously for
at least 6 months, as of July 1 prior to the administration of the

survey. If HMO has fewer than 600 eligible enrollees then CMS surveys all
enrollees.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

No applicable requirements. JCAHO does not audit data submitted for HMO
must contract with an NCQA- certified ORYX measures. HEDIS compliance
audit organization. All of the HEDIS measures that are scored as

part of the accreditation process must be audited. NCQA publicly releases
the benchmarks and thresholds used in scoring HEDIS and standardized
member satisfaction survey results for HMOs with commercial, Medicaid, and
Medicare enrollees. NCQA releases summary HEDIS results on its Web site
for HMOs with Medicaid enrollees. NCQA also makes available for purchase a
national database of HEDIS and standardized member

satisfaction survey results. No applicable requirements. No applicable
standards. HMO or purchaser. No applicable requirements. HMO must submit
data on ORYX measures

HMO must comply with NCQA HEDIS in conjunction with an on- site triennial
submission dates for Medicare enrollees accreditation survey. Submission
does not

and submit data at the end of June. HMO occur annually. with commercial or
Medicaid enrollees must also follow NCQA HEDIS submission dates and submit
data in mid- June.

HMO must collect and analyze information HMO must continuously and
systematically HMO with Medicare enrollees must specific to its enrollees,
including

measure enrollee expectations of and participate in the Medicare Member
documentation of enrollee satisfaction.

satisfaction with care and services provided. CAHPS survey administered by
CMS; HMO must regularly measure, assess, and

results are from the previous fall. use information about enrollee needs
and HMO with commercial or Medicaid satisfaction to improve member
services (not

enrollees must contract with an NCQA necessarily annually). HMO must
determine

certified vendor to conduct the CAHPS the appropriate detail and frequency
of data

2.0H adult survey and report the results of collection. the entire survey
to NCQA by mid- June. HMO with commercial or Medicaid enrollees must have
membership files used to generate survey sample audited as part of the
HEDIS compliance audit.

No applicable requirements. No applicable standards. HMO with Medicare
enrollees has same requirements as M+ C. No applicable requirements. No
applicable standards. HMO with Medicare enrollees has same requirements as
M+ C.

CAHPS 2. 0H sample size for HMOs with adult, commercial enrollees is 1,500
and 1,050 for adult Medicaid enrollees. These sample sizes are changing to
950 and 1,275, respectively, for HEDIS 2002.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Who pays for survey CMS. HMO must pay for an NCQA- certified vendor to
administration field the survey to its enrollees. In addition, HMO must
pay a pro rata share of OPM*s vendor*s total cost of compiling,
processing, and reporting CAHPS 2. 0H survey data to OPM. Satisfaction
survey measures for

HMO, if it meets CMS*s participation criteria, No applicable requirements.

disenrollees must participate in the annual Medicare CAHPS Disenrollment-
Assessment survey administered each fall and the quarterly Medicare CAHPS
Disenrollment- Reasons survey, administered on an ongoing basis. r

Who participates HMO must participate in the annual Medicare No applicable
requirements. CAHPS Disenrollment- Assessment survey if it had a Medicare
contract in place on or before

July 1 of the previous year. HMO must participate in the quarterly
Medicare CAHPS Disenrollment- Reasons survey if it had a Medicare contract
in place on or before January 1 of the previous year. Certain M+ C plans,
such as demonstrations, are excluded. Who is sampled CMS samples Medicare
beneficiaries voluntarily No applicable requirements.

leaving for both surveys. s For the CAHPS Disenrollment- Assessment
survey, CMS surveys Medicare beneficiaries voluntarily leaving their

HMO in May, June, or July and who were enrolled for at least 6 months
prior to disenrolling. The sample size varies by HMO but is no higher than
600 and is proportionate to the HMO*s disenrollment rate. For the CAHPS
Disenrollment- Reasons survey, CMS attempts to survey 388 enrollees for
each HMO over the four

calendar quarters. For this survey, CMS does not have a requirement for
length of enrollment. Who pays for survey CMS pays for both the quarterly
and annual

No applicable requirements. administration surveys. Health status survey
measures HMO, if eligible, must participate in the Medicare

No applicable requirements. Health Outcomes Survey (HOS). t HMO must
contract with an NCQA- certified vendor to field the survey.

Who participates HMO must participate if it had a Medicare No applicable
requirements.

contract in effect on or before January 1 of the measurement year.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

No applicable requirements. No applicable standards. CMS pays for survey
of an HMO*s Medicare enrollees. HMO must pay for an NCQA- certified vendor
to field the survey to its commercial enrollees. Some states pay for
survey of Medicaid enrollees, while others require the HMO to pay.

No applicable requirements. No applicable standards. No applicable
standards. No applicable requirements. No applicable standards. No
applicable standards.

No applicable requirements. No applicable standards. No applicable
standards. No applicable requirements. No applicable standards. No
applicable standards. HMO must include health status measures in

HMO must collect data to monitor outcomes HMO with Medicare enrollees must
its QI activities related to evaluating courses related to prevention,
physiological function, participate in HOS.

of treatment and outcomes of health care. functional status, and physical
and

psychological comfort of enrollees. HMO must determine the appropriate
detail and frequency of data collection. No applicable requirements. No
applicable standards. HMO with Medicare enrollees has same requirements as
M+ C.

(Continued From Previous Page)

Topic M+ C requirements FEHBP requirements

Who is sampled Each spring, HMO must survey 1,000 randomly No applicable
requirements.

sampled Medicare enrollees who have been continuously enrolled for at
least 6 months prior to the survey administration. HMO must also survey
again the enrollees who were surveyed 2 years earlier.

HOS results are submitted by the NCQAcertified vendors to NCQA, CMS*s
contractor for administering HOS. CMS performs analysis and also provides
reports back to the HMOs.

Who pays for survey HMO pays for the administration of the HOS No
applicable requirements.

administration survey. a HMO must use CMS*s Quality Improvement System for
Managed Care (QISMC) standards and guidelines to meet the requirements of
Part 422, Subpart D, Quality Assurance, of Title 42 of the Code of Federal
Regulations. Since January 1998, CMS has released three versions of QISMC,
with the most current version issued as of July 26, 2000. OMB has approved
the July 26, 2000, version of QISMC through July 31, 2002. CMS is in the
process of incorporating the QISMC standards and

guidelines into the chapters of the Medicare Managed Care Manual; once
this is accomplished, QISMC as a stand- alone document will cease to exist
for Medicare. b NAIC uses the phrase QI activities rather than QI
projects. c JCAHO uses the phrase performance improvement activities
rather than performance improvement projects.

d HEDIS is a set of standardized performance measures sponsored by NCQA.
Since 1992, NCQA has collaborated with managed care organizations,
academic researchers, corporate purchasers, and consumer representatives
to create HEDIS. HEDIS includes measures that address effectiveness of
care, accessibility and availability of care, satisfaction with the
experience of care received, cost of care, health plan stability, informed
health care choices, use of services, and health plan descriptive
information. e In 2002, CMS eliminated the requirement that an HMO
annually initiate a multiyear QAPI project on a topic the HMO selected. f
CMS contracts with QIOs, who are responsible for promoting effective,
efficient, and economical

delivery of quality health care services to Medicare beneficiaries. g
National topics chosen by CMS include: diabetes (1999), community-
acquired pneumonia (2000), congestive heart failure (2001), breast cancer
screening (2002), clinical health care disparities (CHCD)

or culturally and linguistically appropriate services (CLAS) (2003), and
diabetes (2004). CMS originally informed HMOs that the 2002 national QAPI
projects would be CHCD or CLAS, but postponed these projects until 2003
based on industry feedback. CMS has contracted for two CLAS projects to
produce case studies that HMOs may replicate if they choose to do so. h
CMS defines seven clinical focus areas, such as primary, secondary, or
tertiary prevention of acute

conditions, high- volume services, and high- risk services, and two
nonclinical areas, such as availability, accessibility, and cultural
competency of services.

NAIC model requirements JCAHO accreditation standards NCQA accreditation
standards

No applicable requirements. No applicable standards. HMO with Medicare
enrollees has same requirements as M+ C. NCQA certifies survey vendors to
administer HOS. HOS data are provided to NCQA by each survey vendor.

No applicable requirements. No applicable standards. HMO with Medicare
enrollees has same requirements as M+ C.

i NCQA also requires HMOs to adopt or establish quantitative measures to
assess their performance and to identify and prioritize areas for
improvement for three clinical areas, including at least one behavioral
health measure. However, NCQA does not currently require an HMO to
demonstrate a meaningful performance improvement for the behavioral health
topic being measured. j CMS has not established or required minimum
performance levels or benchmarks for standardized

quality measures for any of the national QAPI projects. However, CMS is
exempting HMOs that achieved a breast cancer screening rate of 80 percent
or better using HEDIS 2001 or 2002 measure specifications from
participating in the 2002 national QAPI project on breast cancer
screening. Based on HEDIS 2001 Medicare results, CMS exempted 39 HMOs. k
Beginning in January 2002, HMO can fill out and electronically submit its
Project Completion Report through a Web- based CMS data system.

l CMS regional offices evaluate the overall administration of an HMO*s
QAPI program and health information systems, but not the QAPI projects. m
CMS has not required any HMO to conduct a CMS- directed special project. n
NAIC stated that the insurance commissioner may be able to take action
against an HMO not meeting applicable requirements under the general
authority to regulate HMOs, although, in some states, the authority to
regulate HMOs is done by another state agency or the insurance
commissioner shares oversight with another state agency, usually the
Department of Health.

o CMS excludes two HEDIS measures* Practitioner Compensation and
Arrangements with Public Health, Educational and Social Service
Organizations. The Medicare Health Outcomes Survey is included as a HEDIS
measure; we excluded the Medicare Health Outcomes Survey in reporting the
23 Medicare HEDIS measures as the survey is discussed separately in this
table.

p NCQA defines two types of HEDIS compliance audits, partial or full. A
partial audit occurs when the HMO, state regulator, or purchaser selects
the HEDIS measures to be audited. A full audit occurs when a HEDIS auditor
selects a core set of measures to review and extrapolates the core set
findings to all measures reported by the HMO.

q CAHPS is a standardized member satisfaction survey. r The CAHPS
Disenrollment- Assessment survey collects information on Medicare
beneficiaries* experiences with their former HMO, and the CAHPS
Disenrollment- Reasons survey collects information on Medicare
beneficiaries* motivations for changing coverage. s Medicare beneficiaries
voluntarily disenrolling chose to leave their HMO for reasons other than
death, termination of Medicare parts or part B, moving out of the service
area, or HMO nonrenewals.

t The Medicare HOS, part of the HEDIS measurement set, is a longitudinal
survey that utilizes the HCFA Short Form- 36 (SF- 36), an instrument used
to collect data on physical and mental functioning and other beneficiary
characteristics.

Source: GAO summary of information provided by CMS and OPM, including
applicable federal statutes and regulations, operational guidance and
other agency materials pertaining to HMOs, and interviews with officials.
GAO summary of information provided by NAIC, JCAHO, and NCQA, including
NAIC model requirements for HMOs, standards from the current JCAHO and
NCQA accreditation manuals for HMOs, and interviews with NAIC, JCAHO, and
NCQA officials.

Comments from the Centers for Medicare &

Appendi x V

Medicaid Services (290099)

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a

GAO United States General Accounting Office

Page i GAO- 03- 180 M+ C HMO Requirements

Contents

Contents Page ii GAO- 03- 180 M+ C HMO Requirements

Page 1 GAO- 03- 180 M+ C HMO Requirements United States General Accounting
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Appendix I

Appendix I Benefit Package Proposals

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Appendix I Benefit Package Proposals

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Appendix I Benefit Package Proposals

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Appendix I Benefit Package Proposals

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Appendix I Benefit Package Proposals

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Appendix I Benefit Package Proposals

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Appendix I Benefit Package Proposals

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Appendix I Benefit Package Proposals

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Appendix I Benefit Package Proposals

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Appendix II

Appendix II Beneficiary Enrollment

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Appendix II Beneficiary Enrollment

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Appendix II Beneficiary Enrollment

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Appendix II Beneficiary Enrollment

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Appendix II Beneficiary Enrollment

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Appendix II Beneficiary Enrollment

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Appendix II Beneficiary Enrollment

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Appendix II Beneficiary Enrollment

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Appendix III

Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix III Marketing and Enrollee Communication Materials

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Appendix IV

Appendix IV Quality Improvement

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Appendix IV Quality Improvement

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Appendix IV Quality Improvement

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Appendix IV Quality Improvement

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Appendix V

United States General Accounting Office Washington, D. C. 20548- 0001

Official Business Penalty for Private Use $300

Address Service Requested Presorted Standard

Postage & Fees Paid GAO Permit No. GI00
*** End of document. ***