Medicare + Choice: New Standards Could Improve Accuracy and Usefulness of
Plan Literature (Letter Report, 04/12/99, GAO/HEHS-99-92).

Pursuant to a congressional request, GAO provided information on the
Medicare Choice program, focusing on: (1) the extent to which managed
care organizations' (MCO) member literature provides beneficiaries with
accurate and useful plan information; and (2) whether the Health Care
Financing Administration's (HCFA) review process ensures that
beneficiaries can rely on MCOs' member literature to make informed
enrollment decisions.

GAO noted that: (1) although HCFA had reviewed and approved the
materials GAO examined, all 16 MCOs in GAO's sample from four HCFA
regions had distributed materials containing inaccurate or incomplete
benefit information; (2) almost half of the organizations distributed
materials that incorrectly described benefit coverage and the need for
provider referrals; (3) one MCO marketed (and provided) a prescription
drug benefit that was substantially less generous than the plan had
agreed to provide in its Medicare contract; (4) moreover, some MCOs did
not furnish complete information on plan benefits and restrictions until
after a beneficiary had enrolled; (5) other MCOs never provided full
descriptions of plan benefits and restrictions; (6) although not fully
disclosing benefit coverage may hamper beneficiaries' decisionmaking,
neither practice violates HCFA policy; (7) as GAO has reported
previously, it was difficult to compare available options using member
literature because each MCO independently chose the format and terms it
used to describe its plan's benefit package; (8) in contrast, the
Federal Employees Health Benefits Program's (FEHBP) plans are required
to provide prospective enrollees with a single comprehensive and
comparable brochure to facilitate informed enrollment choices; (9) the
errors GAO identified in MCO's member literature went uncorrected
because of weaknesses in three major elements of HCFA's review process;
(10) limitations in the benefit information form (BIF), the contract
form that HCFA reviewers use to determine whether plan materials are
accurate, led some reviewers to rely on the MCOs themselves to help
verify the accuracy of plan materials; (11) additionally, HCFA's lack of
required format, terminology, and content standards for member
literature created opportunities for inconsistent review practices; (12)
according to some regional office staff, the lack of standards also
increased the amount of time needed to review materials, which
contributed to the likelihood that errors could slip through undetected;
(13) HCFA's failure to ensure that MCOs corrected errors identified
during the review process caused some beneficiaries to receive
inaccurate information; and (14) HCFA is working to revise the BIF and
develop a standard summary of benefits for plans to use--steps that will
likely improve the agency's ability to review member literature and
other marketing materials--but other steps could be taken to improve the
usefulness and accuracy of plan information.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-99-92
     TITLE:  Medicare + Choice: New Standards Could Improve Accuracy
	     and Usefulness of Plan Literature
      DATE:  04/12/99
   SUBJECT:  Managed health care
	     Health care services
	     Health insurance
	     Health services administration
	     Comparative analysis
	     Information disclosure
	     Marketing
	     Consumer protection
	     Beneficiaries
	     Standards and standardization
IDENTIFIER:  Medicare Choice Program
	     Federal Employees Health Benefits Program

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MEDICARE+CHOICE: New Standards Could Improve Accuracy and
Usefulness of Plan Literature GAO/HEHS-99-92 United States General
Accounting Office

GAO Report to Congressional Requesters

April 1999 MEDICARE+ CHOICE New Standards Could Improve Accuracy
and Usefulness of Plan Literature

GAO/HEHS-99-92

  GAO/HEHS-99-92

GAO United States General Accounting Office

Washington, D. C. 20548 Health, Education, and Human Services
Division

B-282193 April 12, 1999 The Honorable Charles E. Grassley Chairman
The Honorable John B. Breaux Ranking Minority Member Special
Committee on Aging United States Senate

The Honorable Jack Reed United States Senate

Today, almost 7 million Medicare beneficiaries are enrolled in
health plans offered by managed care organizations (MCO) that
participate in the Medicare+ Choice program, Medicare's
alternative to its fee- for- service program. 1 Although Medicare
managed care enrollment has nearly doubled in the last 3 years,
approximately 32 million beneficiaries (83 percent) remain covered
under fee- for- service. Many health care analysts believe that
competition among MCOs can lead to enhanced benefit packages and
lower out- of- pocket fees for Medicare beneficiaries. Analysts
further believe that increased managed care enrollment may yield
savings for the Medicare program. The potential of Medicare+
Choice cannot be realized, however, unless beneficiaries are well-
informed about their enrollment options.

Recently, the Health Care Financing Administration (HCFA), the
agency responsible for administering the Medicare program, took
steps to increase beneficiaries' awareness of their health care
options. Beneficiaries can now obtain names of available plans and
a summary of their benefit packages by calling a toll- free
telephone number or logging onto HCFA's Internet Web site. The
agency intends to include some of this information in the Medicare
handbooks it will mail to all beneficiaries in October 1999. In
spite of these new resources, however, MCOs' sales agents and
member literature will remain beneficiaries' only source of
detailed information about plans' benefits and out- of- pocket
fees. 2 HCFA, therefore, continues to review and approve all
member literature and other

1 A plan is a package of specific health benefits, out- of- pocket
costs, and terms of coverage. An MCO is an entity that offers one
or more plans. The Medicare+ Choice program also allows non- MCO
plans, such as private fee- for- service plans and medical savings
account plans, to participate. However, as of Mar. 1999, no non-
MCO plans had joined the program.

2 Member literature includes benefit summary brochures, policy
booklets, member handbooks, and plan letters regarding benefit
changes.

GAO/HEHS-99-92 Oversight of Plan Information Page 1

B-282193

marketing materials distributed by MCOs to help ensure that
beneficiaries receive accurate information about their available
health plan options. 3

Because correct and useful information is vital to the success of
the Medicare+ Choice program, you asked us to assess (1) the
extent to which MCOs' member literature provides beneficiaries
with accurate and useful plan information and (2) whether HCFA's
review process ensures that beneficiaries can rely on MCOs' member
literature to make informed enrollment decisions. To address these
issues, we assessed the accuracy, timeliness, completeness, and
comparability of the member literature of 16 MCOs and studied
HCFA's requirements and practices for reviewing and approving
these materials. Our analysis focused on three benefits that vary
in complexity: annual screening mammography, outpatient
prescription drugs, and ambulance transportation. Our work was
performed from August 1998 to April 1999 in accordance with
generally accepted government auditing standards. Appendix I
contains details on our methodology.

Results in Brief Although HCFA had reviewed and approved the
materials we examined, all 16 MCOs in our sample from four HCFA
regions had distributed materials

containing inaccurate or incomplete benefit information. Almost
half of the organizations distributed materials that incorrectly
described benefit coverage and the need for provider referrals.
For example, materials from five MCOs stated that beneficiaries
needed a physician's referral to obtain an annual screening
mammogram. In fact, Medicare policy explicitly prohibits MCOs from
requiring a referral for this service. In addition, one MCO
marketed (and provided) a prescription drug benefit that was
substantially less generous than the plan had agreed to provide in
its Medicare contract. Moreover, some MCOs did not furnish
complete information on plan benefits and restrictions until after
a beneficiary had enrolled. Other MCOs never provided full
descriptions of plan benefits and restrictions. Although not fully
disclosing benefit coverage may hamper beneficiaries' decision-
making, neither practice violates HCFA policy. Finally, as we have
reported previously, 4 it was difficult to compare available
options using member literature because each MCO independently
chose the format and terms it used to describe its plan's benefit
package. In contrast, the Federal Employees Health Benefits
Program's (FEHBP)

3 Marketing materials include any material managed care plans
distribute to Medicare beneficiaries. In addition to member
literature, these materials include radio, newspaper, and
television advertisements.

4 Medicare: HCFA Should Release Data to Aid Consumers, Prompt
Better HMO Performance (GAO/HEHS-97-23, Oct. 22, 1996).

GAO/HEHS-99-92 Oversight of Plan Information Page 2

B-282193

plans are required to provide prospective enrollees with a single
comprehensive and comparable brochure to facilitate informed
enrollment choices.

The errors we identified in MCOs' member literature went
uncorrected because of weaknesses in three major elements of
HCFA's review process. Limitations in the benefit information form
(BIF), the contract form that HCFA reviewers use to determine
whether plan materials are accurate, led some reviewers to rely on
the MCOs themselves to help verify the accuracy of plan materials.
Additionally, HCFA's lack of required format, terminology, and
content standards for member literature created opportunities for
inconsistent review practices. According to some regional office
staff, the lack of standards also increased the amount of time
needed to review materials, which contributed to the likelihood
that errors could slip through undetected. Finally, the agency's
failure to ensure that MCOs corrected errors identified during the
review process caused some beneficiaries to receive inaccurate
information. HCFA is working to revise the BIF and develop a
standard summary of benefits for plans to use steps that will
likely improve the agency's ability to review member literature
and other marketing materials but other steps could be taken to
improve the usefulness and accuracy of plan information.

Background Medicare is the national health insurance program for
those aged 65 and older and certain disabled individuals. In 1998,
Medicare insured

approximately 39 million people. All beneficiaries can receive
health care through Medicare's traditional fee- for- service
arrangement, and many beneficiaries live in areas where they also
have the option of receiving their health care through a managed
care plan. Of the almost 7 million Medicare beneficiaries enrolled
in managed care as of March 1999, nearly all were enrolled in
plans whose MCOs receive a fixed monthly fee from Medicare for
each beneficiary they serve. Total Medicare spending is expected
to reach about $216 billion in fiscal year 1999, with managed
care's portion reaching approximately $37 billion.

Balanced Budget Act Required Major Program Changes

The Balanced Budget Act of 1997 5 (BBA) established the Medicare+
Choice program as a replacement for Medicare's previous managed
care program. Medicare+ Choice was intended to expand
beneficiaries' health plan options by permitting new types of
plans, such as preferred provider organizations and provider-
sponsored organizations, to participate in

5 P. L. 105- 33.

GAO/HEHS-99-92 Oversight of Plan Information Page 3

B-282193

Medicare. BBA also established an annual, coordinated enrollment
period to begin in 1999 during which beneficiaries may enroll or
change enrollment in a Medicare+ Choice plan. 6 Previously, MCOs
were required to have at least one 30- day period each year when
they accepted new members, but most MCOs accepted new members
throughout the entire year. Also, before BBA, Medicare
beneficiaries could join or leave a plan on a monthly basis.
Beginning in January 2002, Medicare beneficiaries will no longer
be able to enroll and disenroll on a monthly basis. If they
experience problems with a plan, identify a better enrollment
option, or simply have second thoughts, beneficiaries will have a
limited time each year to change the election they made during the
coordinated enrollment period. 7 Afterwards, they will be locked
into their health plan decision for the remainder of the year.

Contracting Process Establishes Plan Benefit Packages

Each plan's benefit package is defined through a contracting
process that establishes the minimum benefits a plan must offer
and the maximum fees it may charge during a calendar year. 8 After
a benefit package is approved by HCFA, a plan may not reduce
benefits or increase fees until the next contract cycle. A BIF,
which is included in an MCO's contract as an exhibit, describes in
detail the services, copayments, and monthly premiums associated
with each plan.

HCFA Reviews All Marketing Materials

HCFA's central and regional offices are involved in reviewing
plans' marketing materials, which include member literature. The
central office negotiates contracts and establishes national
policy regarding marketing material review. HCFA's regional
offices review marketing materials when submitted throughout the
year and require MCOs to change the materials when they omit
required information or are inaccurate, misleading, or unclear.
While some regional offices may review materials that certain
organizations distribute nationwide, generally each regional
office is responsible for reviewing the materials to be
distributed within its

6 Individuals may enroll in a Medicare+ Choice plan when they
first become eligible for Medicare regardless of the time of year.
7 Beneficiaries will have 6 months in 2002 and 3 months thereafter
to change their enrollment choices. Exceptions to these
limitations will be made if an organization materially
misrepresents the plan or substantially violates a material
provision of its contract.

8 HCFA approves plan benefit packages through a process formally
known as the adjusted community rate proposal process, which is
intended to ensure that Medicare does not pay MCOs more than a
commercial purchaser would pay for the same benefits, after
adjusting for differences in Medicare beneficiaries' health status
and use of services. If Medicare's payment is higher, the MCO
typically adds benefits to offset the difference. MCOs cannot
charge fees in the form of monthly premiums, copayments, or other
cost- sharing that are higher than what a beneficiary would likely
pay under traditional Medicare.

GAO/HEHS-99-92 Oversight of Plan Information Page 4

B-282193

geographic jurisdiction. To verify the accuracy of benefit
information, regional staff are instructed to check plan materials
against the BIF. HCFA staff also verify that MCOs have included
certain information in their materials, such as explanations of
provider restrictions and beneficiary appeal rights. HCFA provides
guidance for both developing and reviewing marketing materials
through its contract manual, marketing guidelines, and operational
policy letters. Despite HCFA's authority to do so, the agency does
not require MCOs to use standard formats or terminology in their
marketing materials.

According to HCFA regulations, if HCFA staff do not disapprove
submitted materials within 45 days, the materials are deemed
approved, and MCOs may distribute the materials to beneficiaries.
9 Review procedures established by several regional offices allow
contingent approval; that is, the materials are approved on the
condition that the MCOs make specific corrections. When contingent
approval is given, procedures in three regions call for HCFA staff
to verify that the MCOs have made the required corrections before
the materials are published and distributed to beneficiaries. (See
fig. 1.)

9 42 CFR, part 422.80.

GAO/HEHS-99-92 Oversight of Plan Information Page 5

B-282193

Figure 1: HCFA's Process for Reviewing and Approving Marketing
Materials

Source: GAO analysis of HCFA's review policies and practices.

Plan Information Is Necessary for Informed Choice

Historically, HCFA has done little to address beneficiaries' need
for comparable and unbiased information about Medicare managed
care plans. In 1996, we reported that beneficiaries received
little or no comparable information on Medicare health maintenance
organizations and that the lack of information standards made it
difficult for beneficiaries to compare plans' member literature.
10 At that time, we

10 GAO/HEHS-97-23, Oct. 22, 1996.

GAO/HEHS-99-92 Oversight of Plan Information Page 6

B-282193

recommended that HCFA produce plan comparison charts and require
plans to use standard formats and terminology in key aspects of
their marketing materials.

BBA mandated that HCFA undertake a number of activities to provide
Medicare beneficiaries with information about their health plan
options. Beginning in November 1998, HCFA was required to provide
an annual national educational and publicity campaign to inform
beneficiaries about the availability of Medicare+ Choice plans and
the enrollment process. Also, each fall starting in 1999, HCFA
must distribute to beneficiaries an array of general information
about the traditional Medicare program, supplemental insurance,
appeal and other rights, the process for enrolling in a Medicare+
Choice plan, and the potential for Medicare+ Choice contract
termination. At the same time, HCFA must provide each Medicare
beneficiary with a list of available Medicare+ Choice plans and a
comparison of plan options. All of these activities are designed
to coincide with and support the coordinated open enrollment
period slated to occur each November starting in 1999.

HCFA's goal is to make beneficiaries aware of their health plan
options and to provide some summary information to help
beneficiaries compare those options. According to HCFA officials,
in 1999 each beneficiary will receive a Medicare handbook that
contains some comparable information about available health plans.
11 Beneficiaries who want more information may call HCFA's toll-
free telephone number (1- 800- MEDICAR) or log onto the Internet
Web site (www. medicare. gov). All of these resources the Medicare
handbook, toll- free telephone number, and Web site are designed
to help beneficiaries identify enrollment options and compare
selected aspects of benefits. To obtain detailed information about
specific plans, however, beneficiaries must continue to rely on
MCOs' sales agents and member materials. (See fig. 2.)

11 During the fall of 1998, HCFA included this information in the
Medicare handbook distributed to beneficiaries in five states.

GAO/HEHS-99-92 Oversight of Plan Information Page 7

B-282193

Figure 2: Plan Information Available to Medicare Beneficiaries

Sources: For general information, HCFA; for summary information,
HCFA and MCOs; for detailed information, various MCOs' marketing
materials.

GAO/HEHS-99-92 Oversight of Plan Information Page 8

B-282193

Member Literature Frequently Was Not Accurate, Timely, Complete,
or Comparable

Our investigation of 16 MCOs uncovered flaws in their plans'
member literature, beneficiaries' only source of detailed benefit
information. Much of the MCOs' plan literature contained errors or
omissions about mammography and prescription drug benefits,
ranging from minor oversights to major discrepancies. While we
found no errors about ambulance services, some MCOs' member
literature omitted information about the benefit. Moreover,
beneficiaries frequently did not receive important information
until after enrollment. Even then, beneficiaries in some plans
received member literature that was incomplete and did not fully
disclose plan benefits, exclusions, and fees. The lack of full
disclosure in member literature leaves the beneficiary vulnerable
to unexpected service denials and additional out- of- pocket fees.
Making comparisons among health plans' benefits remains
challenging because of the use of nonstandard formats and
terminology. In contrast, FEHBP participants received plan
brochures that contained relatively complete benefit descriptions
presented in a standard format.

Beneficiaries Were Not Assured Accurate Plan Materials

We found significant errors and omissions in the plans' member
literature that MCOs distributed to beneficiaries. For example,
effective January 1998, HCFA required organizations to cover
annual screening mammograms and to permit beneficiaries to obtain
this service without a physician's referral. Also, MCOs were
required to notify beneficiaries of this new Medicare benefit. 12
Materials from five MCOs, however, explicitly stated that
beneficiaries must obtain physician referrals to obtain screening
mammograms. (See fig. 3 for three examples.) Member literature
from five other organizations failed to inform beneficiaries of
their right to self- refer for this service.

12 BBA revised Medicare coverage for annual screening mammography,
ensuring that beneficiaries enrolled in managed care plans have
access to the same benefit available in Medicare fee- for-
service. HCFA Operational Policy Letter #57 implemented 42 CFR
section 422.100 (h)( 1).

GAO/HEHS-99-92 Oversight of Plan Information Page 9

B-282193

Figure 3: Plan Referral Requirements for Screening Mammography
Contradict Medicare Coverage

(Figure notes on next page)

GAO/HEHS-99-92 Oversight of Plan Information Page 10

B-282193

Note: Emphasis added. Sources: For requirements, HCFA Operational
Policy Letter #57; for examples, various MCOs' member literature.

Much of the MCOs' member literature provided incorrect or
inconsistent information about prescription drug coverage. For
example, the member literature for a large, experienced Medicare
MCO specified an annual dollar limit for prescription drugs that
was lower than the amount required by the organization's Medicare
contract. The contract required the provision of unlimited generic
drugs and coverage of at least $1,200 for brand- name drugs. This
MCO's materials, which varied by county, understated the brand-
name drug coverage, listing annual dollar limits as low as $600.
When we contacted the MCO officials, they confirmed that they were
providing the lower benefit coverage. On the basis of the MCO's
enrollment for 1998, we estimated that about 130,000 members could
have been denied part of the benefit that Medicare paid for and to
which they were entitled under the MCO's contract. Another MCO
provided conflicting information about its prescription drug
benefit. In one document, the MCO alternately described its
prescription drug benefit as having a $200 monthly limit and a
$300 monthly limit. (The correct limit was $300.) In another case,
an MCO used the same member literature for four separate plans,
emphasizing that all members were entitled to prescription drug
benefits. Actually, however, only two of the four plans offered a
prescription drug benefit.

The member literature we reviewed did not contain errors regarding
ambulance services, but the documents often omitted important
information about the benefit. One MCO did not include any
reference to the benefit in its preenrollment member literature.
Three other MCOs stated that ambulance services were covered per
Medicare regulations but did not define Medicare's coverage. Most
of the remaining MCOs provided general descriptions of their
ambulance coverage but did not give details of the extent of the
coverage, such as whether the MCOs would pay for out- of- area
ambulance service in an emergency.

GAO/HEHS-99-92 Oversight of Plan Information Page 11

B-282193

Up- to- Date Plan Information Was Not Always Available When
Beneficiaries Made Enrollment Decisions

Officials from several MCOs told us that their organizations
typically issue a member policy booklet a document that discloses
the details of a plan's benefit coverage, benefit restrictions,
and beneficiary rights after a beneficiary enrolls. Moreover, MCOs
often provided enrollees with outdated member policy documents.
For example, one MCO failed to provide enrollees with a current
member policy document until August 1998 8 months after the start
of the new benefits year.

Distributing outdated information can be misleading. HCFA allows
MCOs to use outdated plan member materials as long as the
organizations attach an addendum indicating any changes to the
benefit package. HCFA officials believe that this policy is
reasonable because beneficiaries can determine a plan's coverage
by comparing the changes cited in the addendum with the prior
year's literature. However, some MCOs distributed outdated
literature without the required addendum. When MCOs did include
the addendum, the document did not always clearly indicate that
its information superseded the information contained in other
documents. In addition, some MCOs did not provide dates on their
literature, which obscured the fact that the literature was
outdated.

Adequate preenrollment benefit information will become even more
crucial in 2001, as BBA's annual enrollment provisions begin to
take effect in 2002 and Medicare beneficiaries are no longer able
to disenroll on a monthly basis. To help beneficiaries make
informed choices, BBA requires HCFA to provide beneficiaries with
summary plan information before the annual November enrollment
period. Furthermore, new regulations now require MCOs to issue
letters by mid- October each year describing benefit changes that
will be effective January 1 of the following year. MCOs must send
these annual notification letters to all enrollees, and to any
prospective enrollees upon request. However, HCFA has not required
MCOs to provide more complete member literature prior to
enrollment. As a result, beneficiaries still might not have the
information they need to make sound enrollment choices.

Additionally, beneficiaries enrolling in plans before 2002 may be
unaware that their plans may be terminating services shortly after
the beneficiaries have enrolled. A plan must notify its members at
least 60 to 90 days before it ends services. 13 However, there is
no requirement that a terminating plan stop advertising and
enrolling new members, with the result that in 1998, some
beneficiaries unknowingly joined plans that soon exited the

13 An MCO may terminate plan services through a modification,
termination, or nonrenewal of its contract with HCFA.

GAO/HEHS-99-92 Oversight of Plan Information Page 12

B-282193

Medicare program. For example, one MCO notified its members in May
1998 of its intent to end services in several Ohio counties. The
MCO continued to advertise and enroll new beneficiaries without
informing them that plan services would end on December 31, 1998.
After inquiries from beneficiaries, the MCO ceased marketing
activities in July. Although these marketing activities angered
many beneficiaries, the MCO was operating within HCFA's
notification requirements. 14

Member Literature May Not Fully Describe Plan Benefits

Some beneficiaries do not receive important information about plan
benefits and restrictions even after they have enrolled in a plan.
Because HCFA's instructions regarding benefit disclosure are
vague, MCOs vary in the amount of information they provide to
beneficiaries. 15 Some organizations we reviewed provided
relatively complete descriptions of plan coverage in a member
policy booklet or similar document. However, other MCOs did not
disclose important restrictions in any member literature.

In fact, MCOs that adopt HCFA's suggested disclosure language will
send beneficiaries to an information dead end. In the guidelines
it provides to MCOs, HCFA suggests that a plan's evidence of
coverage, a document frequently referred to as a member policy
booklet, direct beneficiaries to the MCO's Medicare contract to
obtain full details on the benefit package. According to HCFA, a
member policy booklet should state that [ it] constitutes only a
summary of the [plan] . . . . The contract between HCFA and the
[MCO] must be consulted to determine the exact terms and
conditions of coverage. HCFA officials responsible for Medicare
contracts, however, said that if a beneficiary requested a
contract, the agency would not provide it because of the
proprietary information included in an MCO's adjusted community
rate proposal. Furthermore, an MCO is not required, according to
HCFA officials, to provide beneficiaries with copies of its
Medicare contract. MCO officials we spoke with differed on whether
their organization would distribute copies of its contract to
beneficiaries. By establishing an MCO's Medicare contract a
document that is not usually available to beneficiaries as the
only document required to fully explain the plan's benefit
coverage, HCFA cannot ensure that beneficiaries are aware of the
benefits to which they are entitled.

14 Until Jan. 2002, MCOs may market to and enroll beneficiaries
throughout the year. Beginning in Nov. 2001, however,
beneficiaries will have to select a plan during the open
enrollment season. Consequently, primarily those individuals who
become eligible on or after Jan. 1, 2002, may be affected by mid-
year marketing.

15 HCFA advises MCOs to provide information sufficient for
beneficiaries to make informed enrollment choices.

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B-282193

Vague or incomplete benefit descriptions leave beneficiaries
vulnerable to unexpected service denials. For example, disputes
sometimes arise when beneficiaries are told they do not have the
coverage they believed they would have when they enrolled. An
official from the Center for Health Dispute Resolution (CHDR),
HCFA's contractor that adjudicates managed care appeal cases, told
us that CHDR uses the information in MCOs' member literature to
determine whether plan members are entitled to specific benefits
that are not covered by Medicare fee- for- service. When an MCO's
literature is vague, CHDR allows the MCO to submit internal plan
memorandums that clarify its benefit coverage. But beneficiaries
generally do not receive these internal memorandums. Consequently,
beneficiaries who must rely on incomplete member literature and
sales agents' verbal interpretations of this literature are likely
to be unaware of important benefit limitations or restrictions.

Meaningful Plan Comparisons Were Difficult to Achieve

Inconsistent formats and terminology made comparisons among plans'
benefit packages difficult. We generally had to read multiple
documents to determine each plan's benefit coverage for
mammography, prescription drugs, and ambulance services. Answering
a set of basic questions about three plans' prescription drug
benefits, for example, required a detailed review of twelve
documents: two from plan A, five from plan B, and five from plan C
(see fig. 4). It was not easy to know where to look for the
information. For example, we found the answer to the question of
whether a plan used a formulary in plan A's summary of benefits,
plan B's Medicare prescription drug rider, and plan C's contract
amendment. 16 Plan C's materials required more careful review to
answer the question because the membership contract indicated the
plan did not provide drug coverage. However, an amendment included
in the member contract as a loose insert indicated coverage for
prescription drugs and the use of a formulary.

16 In general, a formulary is a list of drugs that MCOs prefer
their physicians to use in prescribing drugs for enrollees. The
formulary includes drugs that MCOs have determined to be effective
and that suppliers may have favorably priced for the MCO. Any drug
not included on a formulary is considered a nonformulary drug,
which may cost the beneficiary more or may not be covered at all.

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Figure 4: Multiple Plan Documents Needed to Answer Basic Drug
Benefit Questions

a Plan documents contradict each other regarding covering
nonformulary drugs. Source: GAO analysis of MCO member literature.

As in previous studies, we found plans' materials did not use
comparable terms or formats. 17 For example, it was difficult to
determine whether the three plans offered by one MCO covered
nonemergency ambulance transportation, because each plan's
materials used different terms to describe the benefit. The lack
of clear and uniform benefit information almost certainly impedes
informed decision- making. HCFA officials in almost every region
noted that a standard format for key member literature, along with
clear and standard terminology, would help beneficiaries compare
their health plan options.

17 GAO/HEHS-97-23, Oct. 22, 1996, and Medicare Managed Care:
Information Standards Would Help Beneficiaries Make More Informed
Health Plan Choices (GAO/T-HEHS-98-162, May 6, 1998).

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Each FEHBP Plan Distributes a Single, Complete Member Policy
Brochure

FEHBP, administered by the Office of Personnel Management (OPM),
is similar to the new Medicare+ Choice program in that it serves a
large and diverse population, allows participation of different
types of health care organizations, and allows plans' benefit
packages to vary. Unlike HCFA, however, OPM requires FEHBP plan
materials to follow standard formats and terms. OPM officials
believe this requirement helps FEHBP members make informed
decisions. FEHBP health care organizations produce a single,
standard brochure for each plan that is the contractual document
between the member and the organization. This brochure is a
complete description of the plan's benefits, limitations, and
exclusions. The 1999 FEHBP brochure explicitly states the
following objective: This brochure is the official statement of
benefits on which you can rely. A person enrolled in the Plan is
entitled to the benefits stated in this brochure.

OPM officials said that the brochures must describe what each
plan's coverage includes, as well as what it excludes, so that
there is less chance for misunderstanding. The benefit information
must be listed in a prescribed format and language to facilitate
members' comparisons among plan options, but OPM's standards allow
variation in some language to accommodate differences in plans'
benefits and procedures. Each plan's brochure must include a
benefit summary presented in OPM's prescribed format. OPM
officials update the mandatory brochure language every year to
reflect changes in the FEHBP's requirements and organizations'
requests for improvements to the language. Finally, OPM requires
organizations to distribute plan brochures prior to the FEHBP
annual open enrollment period so that prospective enrollees have
complete information on which to base their decisions. OPM
officials told us that all participating organizations publish
brochures that adhere to OPM's standards.

Although OPM's process for reviewing and approving member
literature is generally similar to HCFA's, it differs in important
ways. The process begins when FEHBP organizations submit benefit
coverage information to OPM in standard brochure format. OPM
contract specialists then review the brochures to verify
compliance with mandatory terminology and format requirements and
to ensure that nonstandard information is presented appropriately,
given the plans' benefit packages and organizational structures.
For example, organizations offering fee- for- service (indemnity)
plans would use different language in describing plan procedures
and restrictions than MCOs would. Organizations are then
responsible for printing and distributing the brochures. To verify
the accuracy of the final documents, OPM obtains 20 brochures from
each plan's first print run. 18

18 We did not review OPM's processes or validate the accuracy of
plan brochures.

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B-282193

According to an OPM official, if OPM contract reviewers identify
errors, they can require organizations to attach an addendum,
reprint the brochures, or pay a fine. The official said that any
errors identified are generally minor and are corrected through an
addendum attached to the brochures.

Weaknesses in HCFA's Review Process Allowed Problems in Plan
Materials to Go Uncorrected

Although HCFA approved all the member literature we reviewed,
weaknesses in three critical elements of the agency's review
process allowed errors to go uncorrected and important information
to be omitted. Our review showed that the structure of HCFA's
contracting documents has created problems in determining the
accuracy of plan materials and has resulted in the omission of
important benefit details by several organizations. Additionally,
HCFA's lack of consistent standards has contributed to
inconsistent reviews and extra work and may have increased the
chance of errors slipping through the review process undetected.
Moreover, MCOs have failed to correct plan materials as required
by HCFA staff. HCFA has begun to address some, but not all, of the
issues we have identified.

HCFA's Standard for Gauging Accuracy in Plan Materials Is Faulty

MCOs' Medicare contracts, which include the BIF, establish the
foundation for HCFA's review of marketing materials. HCFA
reviewers are instructed to use the BIF to check that plan member
literature accurately reflects the contracted benefits and member
fees. Reviewers told us, however, that the BIFs often do not
provide the required detail, and our work revealed that the BIFs
did not provide consistent or complete benefit descriptions. For
instance, the BIFs did not always specify whether a plan's
prescription drug benefit covered only specific drugs. Restricting
coverage to a list of specific drugs, or a formulary, is a common
element of plans' benefit packages. Yet of our sample of 16 MCOs,
14 used formularies in one or more of the plans they offered, but
only 8 disclosed this restriction in their BIFs.

Because BIFs are often incomplete, reviewers sometimes rely on
benefit summary sheets provided by MCOs to verify the accuracy of
plan materials. This practice is contrary to HCFA policy, which
requires an independent review of the MCOs' plan literature. The
reviewers who approved the erroneous materials cited earlier
explained that some of the errors might have occurred because the
MCOs' summary sheets incorrectly described plans' benefits. This
was the explanation given by the reviewer who approved the plan
member literature advertising a $600 annual benefit

GAO/HEHS-99-92 Oversight of Plan Information Page 17

B-282193

limit for brand- name prescription drugs instead of the contracted
$1,200 annual limit.

Lack of Standards Hampers Review of Important Member Literature

The lack of detailed standards for plans' member literature can
result in misleading comparisons and put some MCOs at a
competitive disadvantage. Without detailed standards, HCFA
reviewers have wide discretion in approving or rejecting plan
materials. The MCO representatives and HCFA officials we spoke
with said that this latitude leads to inconsistent HCFA decisions.
An MCO official told us that, while several plans in a market area
required a copayment for ambulance services if a beneficiary was
not admitted to a hospital, not all plans were required to
disclose that fact. The HCFA reviewer responsible for one plan's
materials required the plan to disclose the fee, yet different
HCFA staff in the same regional office who reviewed other plans'
materials did not require similar disclosure. These inconsistent
review practices caused one plan's benefits to appear less
generous, even though several other plans had similar benefit
restrictions.

The lack of mandatory format and terminology standards for key
member literature, such as benefit summary brochures and member
policy booklets, increases the amount of time and effort needed to
review and approve plans' member literature. Moreover, unlike many
government programs, Medicare does not require MCOs to use
standard forms for such typical administrative functions as
enrollment, disenrollment, and appeals. Instead, each organization
creates its own forms. Consequently, HCFA staff spend a great deal
of time reviewing disparate documents that could be routine forms.
Several reviewers commented that the volume and complexity of
MCOs' member literature contributed to the likelihood that errors
would pass through the review process undetected. Agency staff
said that they could spend more time reviewing important member
documents, such as member policy booklets, if HCFA required the
use of standard forms for administrative functions.

HCFA officials recognize that standardizing key documents and
terms would facilitate their review of plans' marketing materials
and reduce the administrative burden on both HCFA and MCOs. Some
agency officials expressed concern, however, that MCOs might
resist efforts to standardize the way information is presented. In
fact, many of the MCO officials we spoke with said they would
welcome some standardization because it could save them time and
money. One MCO official commented that MCOs may not be using
HCFA's current guidelines and suggested standards because they are
voluntary and use language that is legalistic and

GAO/HEHS-99-92 Oversight of Plan Information Page 18

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confusing to beneficiaries. Several MCO officials stressed that
any mandatory standards should be developed with industry input
and with the advice of professional marketing specialists.

Reviewers Did Not Ensure That Final Materials Incorporated
Required Corrections

MCOs are responsible for correcting errors in their marketing
materials and distributing accurate information. Some HCFA
reviewers told us that they do not approve marketing materials
until the MCO has corrected all identified errors. Other HCFA
reviewers told us that they give contingent approval that is, they
approve the material if the MCO agrees to make specific
corrections. The MCO is required to send a copy of the print-
ready document to HCFA so the reviewer can verify that the
corrections were made. Reviewers often did not have copies of the
print- ready or final documents in their files, however. Several
reviewers admitted that it was difficult to get the final
documents from MCOs and that they generally trust the
organizations to publish materials as approved or to make the
corrections outlined in approval letters. Moreover, reviewers
noted that the contingent approval practice was adopted to
expedite reviews when materials required only minor corrections.

However, MCOs did not always correct the errors HCFA identified
during the review process. We reviewed one plan's summary of
benefits that incorrectly commingled 1997 and 1998 benefit
information. The document we received from the MCO official
contained several handwritten notations correcting inaccurate
benefit information. For example, the copayment for prescription
drugs was listed as $5, but a handwritten note indicated that
there was no copayment for generic drugs. The HCFA staff member
responsible for approving the material showed us a working copy of
the document on which she had indicated the need for numerous
changes. The published document we observed, however, did not
incorporate many of these corrections. The reviewer had been
unaware that the published document contained errors because she
had never received a print- ready copy from the MCO.

New HCFA Efforts Hold Promise and Challenge

HCFA has undertaken several efforts to address some of the
problems we identified during our review. The agency is developing
a new plan benefit package (PBP) that it hopes will replace the
BIF. The PBP's new format improves upon the BIF by standardizing
the information collected from each plan. The PBP includes
detailed checklists that make it easier to obtain consistent
benefit information from plans. However, the PBP is flexible
enough to capture benefit features that do not fit neatly into a

GAO/HEHS-99-92 Oversight of Plan Information Page 19

B-282193

predetermined checklist. Using the PBP should also facilitate
efforts to standardize member literature. HCFA intends to pilot
test the PBP with a few MCOs this year for contract submissions
effective in 2000. HCFA officials estimate that the PBP proposal
will need to begin the Office of Management and Budget's clearance
process no later than August 1999 to achieve full implementation
by 2000. Otherwise, full implementation could be delayed.

Agency officials also recognize the importance of more uniform
member literature and have articulated their intent to standardize
key documents in future years. As a first step, HCFA established a
work group to develop a standard format and common language for
all plans' benefit summaries. HCFA hopes to establish the benefit
summary by May and plans to use it in the fall 1999 benefit
summary brochures. Achieving this goal will require HCFA's work
group to reach consensus on standards for clear and accurate
information and to avoid imposing burdensome requirements on MCOs.
HCFA's long- term goals include establishing standards for other
key documents, but the agency has not yet developed a coordinated
strategy for its long- term efforts or decided whether such
standards will be voluntary or mandatory.

Conclusions Beneficiaries who enrolled or considered enrolling in
the plans we reviewed were not well- served by plans' efforts to
produce member

materials or HCFA's review of them. The information that plans
distributed was often confusing and hard to compare. Some plans
distributed inaccurate or incomplete information or provided the
information after beneficiaries had made their enrollment
decisions, when it was less useful. These problems significantly
limited beneficiaries' ability to make informed decisions about
their health plan options. Moreover, some beneficiaries may have
been denied health care coverage to which they were entitled or
required to pay unexpected out- of- pocket fees. In contrast, each
FEHBP plan must provide prospective enrollees with a single,
comprehensive brochure to facilitate comparisons and informed
enrollment choices.

Revisions to HCFA's current review process and procedures could
greatly improve the quality of plans' member literature. For
example, full implementation of HCFA's new contract form for
describing plans' benefit coverage, the PBP, could help ensure
that approved member literature is accurate and fully discloses
important plan information. Similarly, standard terminology and
formats for key member literature would facilitate full disclosure
and provide beneficiaries with comparable plan

GAO/HEHS-99-92 Oversight of Plan Information Page 20

B-282193

information. Moreover, new standards for the distribution of key
member literature would enable beneficiaries to have the
information they need when they need it. The required use of
standard forms for routine administrative functions, such as
member enrollment, could reduce HCFA's workload and allow staff to
spend more time reviewing important member literature. Finally,
efforts to standardize review procedures would help ensure
consistent application of the agency's marketing material review
policy.

Recommendations to the Administrator of the Health Care Financing
Administration

In October 1996, we recommended that the Secretary of Health and
Human Services direct the HCFA Administrator to (1) require
standard formats and terminology for important aspects of MCOs'
marketing materials, including benefits descriptions, and (2)
require that all literature distributed by organizations follow
these standards. Although HCFA has taken initial steps toward this
end, significant work remains. Therefore, we are both renewing our
previous recommendations and recommending that the HCFA
Administrator take the following additional actions to help
Medicare beneficiaries make informed health care decisions and
reduce the administrative burden on agency staff and MCOs.

 Require MCOs to produce one standard, FEHBP- like document for
each plan that completely describes plan benefit coverage and
limitations, and require MCOs to distribute this document during
sales presentations and upon request.  Fully implement HCFA's new
contract form for describing plans' benefit

coverage, the PBP, for the 2001 contract submissions to facilitate
the collection of comparable benefit information and help ensure
full disclosure of plans' benefits.  Develop standard forms for
appeals and enrollment.  Take steps to ensure consistent
application of the agency's marketing

material review policy. Agency Comments HCFA agreed with our
findings that the agency's review process and

procedures need to be strengthened in order to ensure that
beneficiaries receive accurate and useful information. The agency
also concurred with our recommendations to improve the oversight
of Medicare+ Choice organizations' marketing materials and to
require the use of standardized formats and language in plans'
member materials. HCFA has steps under way that may help correct
some of the problems we found. For example, the agency is
developing a standardized summary of benefits document

GAO/HEHS-99-92 Oversight of Plan Information Page 21

B-282193

and intends to require Medicare+ Choice organizations to use the
document beginning in November 1999.

While HCFA's efforts may standardize important aspects of plans'
materials, such as information about appeal rights, these efforts
stop short of requiring Medicare+ Choice organizations to provide
a single standard and comprehensive document that describes plan
benefits and beneficiaries' rights and responsibilities as plan
members. HCFA believes that Medicare+ Choice organizations should
retain the flexibility to develop materials that differentiate
their services from those provided by other Medicare+ Choice
organizations. We agree that MCOs should be able to differentiate
their plans. However, requiring MCOs to provide an FEHBP- like
brochure, in addition to other plan materials, would preserve the
MCOs' flexibility and provide Medicare beneficiaries with more
complete and comparable information than they may currently
receive. In fact, these standard brochures may encourage plans to
compete on real differences in plan features. The full text of
HCFA's comments appears in appendix II.

As agreed with your offices, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 1 day after the date of this letter. At that time, we will
send copies of this report to the Honorable Donna E. Shalala,
Secretary of Health and Human Services; the Honorable Jacob Lew,
Director, Office of Management and Budget; the Honorable Nancy-
Ann Min DeParle, Administrator of the Health Care Financing
Administration; and other interested parties. We will also make
copies available to others upon request.

This report was prepared under the direction of James Cosgrove,
Assistant Director, by Marie James, Keith Steck, and George
Duncan. If you or your staff have any questions about this report,
please contact Mr. Cosgrove at (202) 512- 7029 or me at (202) 512-
7114.

William J. Scanlon Director, Health Financing

and Public Health Issues

GAO/HEHS-99-92 Oversight of Plan Information Page 22

GAO/HEHS-99-92 Oversight of Plan Information Page 23

Contents Letter 1 Appendix I Scope and Methodology

26 Appendix II Comments From the Health Care Financing
Administration

27 Figures Figure 1: HCFA's Process for Reviewing and Approving

Marketing Materials 6

Figure 2: Plan Information Available to Medicare Beneficiaries 8
Figure 3: Plan Referral Requirements for Screening

Mammography Contradict Medicare Coverage 10

Figure 4: Multiple Plan Documents Needed to Answer Basic Drug
Benefit Questions

15

Abbreviations

BBA Balanced Budget Act of 1997 BIF benefit information form CHDR
Center for Health Dispute Resolution FEHBP Federal Employees
Health Benefits Program HCFA Health Care Financing Administration
MCO managed care organization OPM Office of Personnel Management
PBP plan benefit package

GAO/HEHS-99-92 Oversight of Plan Information Page 24

GAO/HEHS-99-92 Oversight of Plan Information Page 25

Appendix I Scope and Methodology

To do this work, we reviewed relevant policies and procedures at
Health Care Financing Administration (HCFA) headquarters and
regional offices. We also interviewed HCFA officials at
headquarters and at all regional offices and spoke with
representatives of industry and beneficiary groups. We visited
four regional offices (Atlanta, Chicago, Philadelphia, and San
Francisco) that cover high managed care penetration areas. In
addition, we analyzed 1998 member literature and Medicare
contracts for 16 of the 346 MCO contracts effective in 1998 (4
from each region we visited). Our sample included MCOs that varied
in enrollment levels, structure, location, and years of Medicare
experience. Because each MCO can offer more than one plan for
example, a standard option and a high option we reviewed key
materials for a total of 26 plans. We considered key member
literature to include benefit summary brochures, member policy
booklets, 19 member handbooks, and plan letters related to benefit
changes. The plans we reviewed used various combinations of these
key documents to disclose the details of their benefit packages,
including benefit restrictions and members' rights. Finally, we
compared the Federal Employees Health Benefits Program and
Medicare's standards for plans' member literature.

Our analysis focused on three benefits that vary in complexity:
ambulance transportation, annual screening mammography, and
outpatient prescription drugs. We selected ambulance
transportation and screening mammography because these benefits
must be provided by all Medicare plans and are relatively simple
to describe and understand. We selected the outpatient
prescription drug benefit because it is complex, not covered by
traditional Medicare, and an important consideration in many
beneficiaries' enrollment decisions.

19 MCOs typically use a member policy booklet as the agreement
between the plan and the beneficiary. This document may also be
referred to as a member contract, evidence of coverage, or
subscriber agreement.

GAO/HEHS-99-92 Oversight of Plan Information Page 26

Appendix II Comments From the Health Care Financing Administration

GAO/HEHS-99-92 Oversight of Plan Information Page 27

Appendix II Comments From the Health Care Financing Administration

GAO/HEHS-99-92 Oversight of Plan Information Page 28

Appendix II Comments From the Health Care Financing Administration

GAO/HEHS-99-92 Oversight of Plan Information Page 29

Appendix II Comments From the Health Care Financing Administration

GAO/HEHS-99-92 Oversight of Plan Information Page 30

Appendix II Comments From the Health Care Financing Administration

Now on p. 9. Now on p. 11.

GAO/HEHS-99-92 Oversight of Plan Information Page 31

Appendix II Comments From the Health Care Financing Administration

Now on p. 14.

GAO/HEHS-99-92 Oversight of Plan Information Page 32

Appendix II Comments From the Health Care Financing Administration

(101770) GAO/HEHS-99-92 Oversight of Plan Information Page 33

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