Medicare Managed Care: HCFA Missing Opportunities to Provide Consumer
Information (Testimony, 04/10/97, GAO/T-HEHS-97-109).

GAO discussed: (1) Medicare beneficiaries' need for comparative
information on health maintenance organizations (HMO); and (2) steps the
Health Care Financing Administration (HCFA) could take to meet that need
promptly.

GAO noted that: (1) HCFA does not distribute to beneficiaries
comparative consumer guides such as those the federal government and
many employer-based health insurance programs routinely distribute to
their employees and retirees; (2) without these guides, beneficiaries
cannot easily compare HMOs; (3) marketing materials distributed by HMOs
are of little help because HMOs describe their benefits and costs using
different terms and formats; (4) although beneficiaries lack information
on HMOs, HCFA does not; (5) HCFA amasses volumes of information that
could be summarized, packaged, and distributed to help beneficiaries
choose among competing Medicare HMOs; (6) for example, HCFA compiles
information that can be used to construct HMO benefit comparison charts;
(7) HCFA also routinely collects other information, such as
disenrollment rates, beneficiary complaints about HMOs, and the results
of HCFA's HMO monitoring visits, that could be provided to
beneficiaries; (8) because some plans do a better job of retaining
Medicare beneficiaries than others, disenrollment rates, an indicator of
beneficiary satisfaction, may be especially useful in helping
beneficiaries distinguish among competing HMOs; (9) for example, GAO's
analysis of HCFA's data showed that 1995 annual disenrollment rates
ranged from 4 to 42 percent among Los Angeles HMOs and from 12 to 37
percent among Miami HMOs; (10) HCFA has initiatives, planned or under
way, that will make some comparative HMO information available to
beneficiaries; (11) although these initiatives are steps in the right
direction, they are very small steps; and (12) with little additional
time and effort, HCFA could do much more to help Medicare beneficiaries
make informed selections among available HMOs.

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

 REPORTNUM:  T-HEHS-97-109
     TITLE:  Medicare Managed Care: HCFA Missing Opportunities to 
             Provide Consumer Information
      DATE:  04/10/97
   SUBJECT:  Health maintenance organizations
             Health care programs
             Consumer education
             Insurance premiums
             Government information dissemination
             Health services administration
             Managed health care
             Marketing
             Health care costs
             Surveys
IDENTIFIER:  Medicare Health Maintenance Organizations Program
             HCFA Information, Counseling, and Assistance Program
             HCFA National National Marketing Guidelines Initiative
             HCFA Consumer Assessments of Health Plans Study
             NCQA Health Plan Employer Data and Information Set
             Federal Employees Health Benefits Program
             Los Angeles (CA)
             Miami (FL)
             
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Cover
================================================================ COVER


Before the Special Committee on Aging, U.S.  Senate

For Release on Delivery
Expected at 9:30 a.m.
Thursday April 10, 1997

MEDICARE MANAGED CARE - HCFA
MISSING OPPORTUNITIES TO PROVIDE
CONSUMER INFORMATION

Statement of William J.  Scanlon, Director
Health Financing and Systems Issues
Health, Education, and Human Services Division

GAO/T-HEHS-97-109

GAO/HEHS-97-109T


(101537)


Abbreviations
=============================================================== ABBREV

  HCFA - Health Care Financing Administration
  HEDIS - Health Plan Employer Data and Information
  HMO - health maintenance organization
  ICA - Information, Counseling, and Assistance

MEDICARE MANAGED CARE:  HCFA
MISSING OPPORTUNITIES TO PROVIDE
CONSUMER INFORMATION
============================================================ Chapter 0

Mr.  Chairman and Members of the Committee: 

We are pleased to be here today to discuss Medicare beneficiaries'
need for comparative information on health maintenance organizations
(HMO) and steps the Health Care Financing Administration (HCFA) could
take to meet that need promptly.  Such information would be useful
not only to the more than 4 million Medicare beneficiaries enrolled
in HMOs, but also to the millions of beneficiaries expected to enroll
in a managed care plan during the next several years.  Although
Medicare HMOs must cover all the benefits available under traditional
fee-for-service Medicare, they differ from one another in additional
benefits provided, required premiums, networks of providers, and
ability to satisfy members.  Because of these differences,
beneficiaries need information to pick the plan that is right for
them. 

Last October, at the request of the Chairman, the Ranking Minority
Member, and other members of the Senate Special Committee on Aging,
we reported\1 on the marketing, education, and enrollment practices
of Medicare risk HMOs.\2 We also reviewed HCFA's performance in
providing beneficiaries information about Medicare HMOs and the
usefulness of readily available HCFA data to caution beneficiaries
about poorly performing HMOs.  To develop this information, we
interviewed representatives from HCFA, large health care purchasing
organizations, HMOs, and beneficiary advocacy groups; reviewed
beneficiary case files; studied HMO marketing materials; and analyzed
HMO data available to HCFA.  In our report, we recommended several
steps that the Secretary of Health and Human Services should take
promptly to help Medicare beneficiaries make informed health care
decisions.  Today, I will discuss both our report's findings and
HCFA's plans to provide beneficiaries with more information about
HMOs. 

In summary, we found that HCFA does not distribute to beneficiaries
comparative consumer guides such as those the federal government and
many employer-based health insurance programs routinely distribute to
their employees and retirees.  Without these guides, beneficiaries
cannot easily compare HMOs.  Marketing materials distributed by HMOs
are of little help because HMOs describe their benefits and costs
using different terms and formats. 

Although beneficiaries lack information on HMOs, HCFA does not.  HCFA
amasses volumes of information that could be summarized, packaged,
and distributed to help beneficiaries choose among competing Medicare
HMOs.  For example, HCFA compiles information that can be used to
construct HMO benefit comparison charts.  HCFA also routinely
collects other information--
such as disenrollment rates, beneficiary complaints about HMOs, and
the results of HCFA's HMO monitoring visits--that could be provided
to beneficiaries.  Because some plans do a better job of retaining
Medicare beneficiaries than others, disenrollment rates--an indicator
of beneficiary satisfaction--may be especially useful in helping
beneficiaries distinguish among competing HMOs.  For example, our
analysis of HCFA's data showed that 1995 annual disenrollment rates
ranged from 4 to 42 percent among Los Angeles HMOs and from 12 to 37
percent among Miami HMOs. 

HCFA has initiatives, planned or under way, that will make some
comparative HMO information available to beneficiaries.  Although
these initiatives are steps in the right direction, they are very
small steps.  With little additional time or effort, HCFA could do
much more to help Medicare beneficiaries make informed selections
among available HMOs.  Specifically, HCFA should adopt the
recommendations in our report by

  -- requiring standard formats and terminology in HMOs'
     informational materials;

  -- producing benefit and cost comparison charts with all Medicare
     HMO options available for each market area and ensuring that
     interested beneficiaries are notified of the charts'
     availability; and

  -- analyzing and widely distributing data it already collects--such
     as HMO disenrollment rates, complaint rates, and the results of
     HMO monitoring visits--that can help beneficiaries distinguish
     among competing HMOs. 


--------------------
\1 Medicare:  HCFA Should Release Data to Aid Consumers, Prompt
Better HMO Performance (GAO/HEHS-97-23, Oct.  22, 1996). 

\2 Risk HMOs assume the financial risk of providing care for the
monthly capitated amount Medicare pays. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:1

Most beneficiaries live in areas where they can choose to receive
Medicare benefits either through an HMO or through a traditional
fee-for-service arrangement.  HMOs are required to cover all Medicare
benefits, but many also provide additional services, such as
outpatient prescription drugs, routine physical exams, and hearing
aids, that are not covered under traditional Medicare.  Enrollees'
cost varies as well; some HMOs charge a monthly premium but others do
not.\3 In return for the advantages offered by HMOs, beneficiaries
give up their freedom to choose any provider.  If a beneficiary
enrolled in an HMO seeks nonemergency care from providers other than
those designated by the HMO, or seeks care without following the
HMO's referral policy, the beneficiary is liable for the full cost of
that care. 

Because of the additional benefits offered by HMOs and the relatively
low out-of-pocket costs, growing numbers of Medicare beneficiaries
are leaving Medicare fee-for-service and joining managed care plans. 
In fact, Medicare HMO enrollment is growing by about 85,000
beneficiaries per month.  More than 11 percent, or 4.4 million, of
the 38 million Medicare beneficiaries are now enrolled in "risk
contract" HMOs.  The Congressional Budget Office estimates that
nearly 15 million beneficiaries will be enrolled in a risk HMO by the
year 2007. 


--------------------
\3 Beneficiaries must continue to pay a monthly premium to Medicare
for part B (currently, $43.80 per month). 


   MEDICARE DOES NOT DISTRIBUTE
   HEALTH PLAN INFORMATION TO
   BENEFICIARIES
---------------------------------------------------------- Chapter 0:2

Medicare currently lags behind other large purchasers in helping
beneficiaries choose among plans.  The Federal Employees Health
Benefits Program, the California Public Employees' Retirement System,
Xerox Corporation, and Southern California Edison are all large
health care purchasers that provide enrollees with comparative
information such as premium rates, benefits, out-of-pocket costs, and
member satisfaction survey results for available plans.  By contrast,
HCFA does not routinely provide beneficiaries comparative information
about the Medicare HMOs available in their area. 

For the last few years, however, HCFA's regional office in San
Francisco has produced HMO comparison charts for selected market
areas.\4 More recently, HCFA's regional office in Philadelphia has
also produced comparison charts.  The regional offices distribute
these charts, however, mainly to HMOs, some news organizations, and
federally supported insurance counselors in the Information,
Counseling, and Assistance (ICA) program.\5 Beneficiaries may request
the charts from the regional offices, but few beneficiaries know the
charts exist.  Even the ICA insurance counselors, most of whom are
volunteers, may be unaware of the charts.  When GAO staff called a
Los Angeles ICA insurance counselor and asked specifically about
Medicare HMO information, the counselor did not mention that
comparison charts were available. 


--------------------
\4 However, the regional office has not yet issued 1997 comparison
charts--even though the capitation rates Medicare pays to HMOs, and
thus their premiums and benefits, changed on January 1, 1997. 

\5 The ICA program is federally supported but state managed.  ICA
counselors can provide beneficiaries with general information about
Medicare, Medicaid, managed care plans, and various types of health
insurance available to supplement Medicare. 


      BENEFICIARIES FACE A NEARLY
      IMPOSSIBLE TASK TO COMPARE
      HMOS' COSTS AND BENEFITS
-------------------------------------------------------- Chapter 0:2.1

For beneficiaries considering Medicare managed care for the first
time or switching to a new plan, getting information on area HMOs can
be time consuming.  Beneficiaries must first find the correct
telephone number to request a list of area plans and then call each
plan and request information.  When our staff called all 14 Medicare
HMOs in Los Angeles to request their marketing materials, information
from only 10 plans was received after several weeks and many
follow-up phone calls.  Some plans were reluctant to mail the
information but offered to send it with a sales agent.  Declining
visits from sales agents, we finally received the missing brochures
by calling the HMOs' marketing directors and insisting the materials
be mailed. 

Using HMOs' marketing materials to compare HMOs' benefits and costs
is extremely difficult because each plan uses different formats and
terminology.  One Los Angeles HMO's "summary of benefits" spanned 14
pages; another had only a 1-page summary.  All together, just the
benefit summaries from the 14 Los Angeles HMOs operating in 1995
cover a 10-foot-wide wall.  Moreover, terminology differs from plan
to plan.  A beneficiary reading the marketing materials from several
HMOs may not be able to tell, for example, which HMO provides better
prescription drug coverage.  Most HMOs that offer a drug benefit
place an annual limit or cap on the dollar amount covered.  Two HMOs
with seemingly identical $1,000 annual drug limits may not offer
equivalent benefits, however.  One HMO may count its actual drug
costs, including any discounts it receives, in computing its limit,
while the other HMO may use generally higher manufacturers' list
prices in computing its limit.  Furthermore, HMO brochures make
comparisons difficult by using a variety of terms--such as "preferred
drugs," "covered drugs," "formulary drugs," "legend drugs," and
"authorized drugs"--in describing their prescription drug benefit
limits. 


   HCFA COULD PACKAGE AND
   DISTRIBUTE AVAILABLE
   INFORMATION ON HMOS
---------------------------------------------------------- Chapter 0:3

HCFA has a wealth of data collected for program administration and
contract oversight purposes that can indicate beneficiaries' relative
satisfaction with individual HMOs.  These indicators include
statistics on beneficiary disenrollment and complaint rates.  In
addition, HCFA collects other HMO-specific information, including
plans' financial data and reports from monitoring visits to HMOs. 
However, HCFA does not routinely distribute this potentially useful
information. 


      PUBLISHING DISENROLLMENT
      RATES COULD HELP
      BENEFICIARIES COMPARE
      COMPETING HMOS
-------------------------------------------------------- Chapter 0:3.1

Because Medicare beneficiaries enrolled in HMOs can vote with their
feet each month--switching plans or returning to fee-for-service--a
comparison of HMOs' disenrollment rates can suggest beneficiaries'
relative satisfaction with plans' service, benefits, out-of-pocket
costs, and quality.  If beneficiaries are about equally satisfied
with HMOs in a market, these HMOs' disenrollment rates should be
about the same.  Despite the potential value of such information,
however, HCFA neither routinely nor systematically compares HMO
disenrollment rates.  Thus, HCFA misses an opportunity to inform
beneficiaries of plans with good records of retaining Medicare
enrollees. 

To illustrate the value of disenrollment rates as an indicator, we
analyzed 1995 HCFA disenrollment data for two large managed care
markets:  Los Angeles and Miami.  We found that Medicare HMOs'
ability to retain beneficiaries varied widely among HMOs in the same
market.\6 For some HMOs, disenrollment rates were high enough to
raise questions about whether the HMO's emphasis was on providing
health care to enrollees or recruiting new enrollees to replace the
many who disenrolled. 

Annual disenrollment rates\7 varied substantially among HMOs
operating in the same market.  Among the 13 Los Angeles HMOs\8 we
analyzed, Foundation Health's 42 percent disenrollment rate was the
highest in 1995.  (See fig.  1.) Four other plans, however, had
disenrollment rates exceeding 20 percent.  In contrast, several HMOs
had disenrollment rates of 10 percent or less.  Kaiser Foundation
Health Plan had the lowest rate--4 percent.  The seven Miami HMOs
active for all of 1995 showed a similar, although slightly less
extreme pattern. 

   Figure 1:  Los Angeles Medicare
   HMOs' Annual Disenrollment
   Rates, 1995

   (See figure in printed
   edition.)

Note:  Annual disenrollment rates are the number of beneficiaries who
disenrolled--excluding members who died or lost Medicare part B
eligibility--in 1995 compared with the average number of enrollees in
1995. 

Source:  GAO analysis of HCFA disenrollment data. 

Beneficiaries who leave an HMO within a short time are more likely to
have been poorly informed about managed care in general or about the
specific HMO they joined than those who leave after a longer time. 
Consequently, rates of early disenrollment may indicate beneficiary
confusion and marketing problems.  In our early disenrollment
calculations, we included both cancellations--beneficiaries who
signed an application but canceled before the effective date--and
"rapid disenrollment"--beneficiaries who left within 3 months of
enrollment. 

Our analysis showed a wide variation in plans' early disenrollment
rates.  In 1995, Medicare HMOs in Los Angeles had early disenrollment
rates ranging from 5 to 29 percent.  (See fig.  2.) For Miami HMOs,
early disenrollment rates ranged from 9 to 30 percent.  That is,
nearly one out of three beneficiaries who signed an application with
Watts Health Foundation, Inc.  (Los Angeles) or CareFlorida (Miami)
canceled the application or left the plan shortly after the effective
date. 

   Figure 2:  Los Angeles Medicare
   HMOs' Rates of Early
   Disenrollment, 1995

   (See figure in printed
   edition.)

Source:  GAO analysis of HCFA data. 

Disenrollment rates do not indicate the reason for beneficiary
dissatisfaction.  Out-of-pocket costs, access, or quality issues can
all affect beneficiaries' decisions to disenroll.  However, we found
such large variations within market areas that, even as gross
indicators, disenrollment rates can provide valuable information to
beneficiaries trying to distinguish among seemingly identical HMOs. 
Furthermore, if disenrollment rates are published, then health plans
may begin to compete on the basis of service and member retention as
well as price and drug benefits.  In fact, at least one Medicare HMO
with low disenrollment advertises its member retention rate.  Because
beneficiaries do not know about competing plans' member retention (or
disenrollment) rates, however, they cannot use this information to
compare plans. 


--------------------
\6 We excluded from our analysis disenrollments due to beneficiary
death or loss of Medicare part B eligibility. 

\7 Annual disenrollment rates represent the percentage of an HMO's
average Medicare enrollment lost to disenrollment after excluding
disenrollments due to death or loss of Medicare part B eligibility. 

\8 One Los Angeles HMO was excluded from our analysis because it had
fewer than 100 members. 


   HCFA'S CONSUMER INFORMATION
   INITIATIVES FALL SHORT OF
   REACHABLE GOALS
---------------------------------------------------------- Chapter 0:4

HCFA has several initiatives to compile information on Medicare HMOs,
make that information available, and increase consistency among HMOs'
marketing materials.  These initiatives include

  -- making a database of HMO information available on the Internet;

  -- issuing National Marketing Guidelines for HMOs to follow when
     preparing materials distributed to beneficiaries;

  -- conducting a satisfaction survey of HMO enrollees; and

  -- compiling selected HMO performance measures from the Health Plan
     Employer Data and Information Set 3.0 (HEDIS 3.0),\9 including
     data from a longitudinal study of HMO enrollees' health status. 

Although these initiatives are a step in the right direction, many of
them fall short in one way or another.  For example, HCFA's planned
Internet HMO database may have limited value to beneficiaries. 
Although the information will be available, it may not reach
beneficiaries who want it.  Many beneficiaries may lack Internet
access or the computer sophistication necessary to use the database. 
HCFA realizes that relatively few Medicare beneficiaries "surf the
Web." HCFA expects that HCFA regional offices, the Aging Network,
insurance counselors, and beneficiary advocates will be the primary
users of the database and will distribute the information to
beneficiaries.  Such a system can break down, however, as we
discovered when we called the Los Angeles ICA office seeking
information on HMOs. 

HCFA's National Marketing Guidelines initiative may not ensure that
beneficiaries can readily compare HMOs using plans' marketing
materials.  As currently drafted, the guidelines will not require
HMOs to use standard formats and terminology in their marketing
materials.  Because adherence to the model formats in the guidelines
will be voluntary, plans may continue to produce and distribute very
dissimilar marketing materials--such as those we obtained from the
Los Angeles HMOs. 

The initial HMO enrollee satisfaction survey results may be of
limited value because the initial survey excludes beneficiaries who
were so dissatisfied with their health plan that they disenrolled.\10
HCFA plans to conduct the survey--known as the Consumer Assessments
of Health Plans Study--this summer and release the results in the
fall.  However, HCFA will survey only beneficiaries who have been
continuously enrolled in the same plan for 12 months or more.  In the
two markets we studied, we found that PCA, CareFlorida, Foundation,
Prudential (Los Angeles), and Watts lost more than 25 percent of
their members (excluding deaths and loss of eligibility) in 1995. 
HCFA's survey will miss these Medicare beneficiaries. 

We have similar concerns about HCFA's planned longitudinal study of
HMO enrollee health status.  HCFA plans to gather self-reported
health status data from a sample of HMO enrollees and then resurvey
those same enrollees 2 years later to determine if their health
status has improved, stayed the same, or deteriorated.  HCFA intends
to compare health outcomes in specific HMOs using the survey results. 
This survey, however, will miss beneficiaries who become ill and
leave because they are dissatisfied with the care they received in
their health plan.  Moreover, because the study is longitudinal, HCFA
does not expect these data to be available until 1999. 


--------------------
\9 HCFA's selected HEDIS 3.0 measures include effectiveness of care,
access to/availability of care, health plan stability, use of
services, cost of care, informed health care choices, and health plan
descriptive information.  HCFA helped develop and fund the National
Committee for Quality Assurance's efforts to develop
Medicare-specific clinical effectiveness measures included in HEDIS
3.0. 

\10 According to HCFA's recently published regulations on physician
incentive plans in managed care settings, HMOs with providers that
have been determined to be at substantial financial risk will be
required to conduct a survey of current and recently disenrolled
members.  Plans that are not required to do a survey under the
physician incentive regulations are not required to conduct a
disenrollment survey. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 0:5

Medicare beneficiaries need more and better information so that they
can make informed decisions when choosing a health plan.  Though
Medicare is the nation's largest purchaser of managed care services,
it lags behind other large purchasers in providing comparative
information to beneficiaries.  The need for this information grows
more urgent each month as tens of thousands of beneficiaries join the
already 4 million beneficiaries who have opted for the advantages of
Medicare managed care.  HCFA is moving in the right direction to make
information available, but we believe the agency could do much more
with relatively little expenditure of time or effort.  Requiring that
HMOs use standard terminology and formats to describe benefits,
producing comparison charts and ensuring that interested
beneficiaries know how to get such charts, and analyzing and
publishing comparative data already available (such as disenrollment
rates) would greatly enhance the ability of Medicare beneficiaries to
be wise consumers of managed care. 


-------------------------------------------------------- Chapter 0:5.1

Mr.  Chairman, this concludes my prepared statement.  I am pleased to
answer any questions you or other members of the Committee may have. 


   CONTRIBUTORS
---------------------------------------------------------- Chapter 0:6

For more information on this testimony, please call James C. 
Cosgrove, Assistant Director, Health Financing and Systems Issues, on
(202) 512-7029.  Other major contributors to this statement include
Charles A.  Walter, Marie E.  Cushing, George M.  Duncan, and Wayne
J.  Turowski. 


RELATED GAO PRODUCTS
=========================================================== Appendix 1

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

Medicare HMOs:  Rapid Enrollment Growth Concentrated in Selected
States (GAO/HEHS-96-63, Jan.  18, 1996). 

Health Care:  Employers and Individual Consumers Want Additional
Information on Quality (GAO/HEHS-95-201, Sept.  29, 1995). 

Medicare:  Increased HMO Oversight Could Improve Quality and Access
to Care (GAO/HEHS-95-155, Aug.  3, 1995). 


*** End of document. ***