Medicare Plus Choice: HCFA Actions Could Improve Plan Benefit and Appeal
Information (Testimony, 04/13/99, GAO/T-HEHS-99-108).

Pursuant to a congressional request, GAO discussed the: (1) accuracy,
completeness, and usefulness of the information Medicare managed care
organizations (MCO) distribute about their plans' benefit packages; (2)
extent to which MCOs inform beneficiaries of their plan appeal rights
and the appeals process; and (3) Health Care Financing Administration's
(HCFA) review, approval, and oversight of the plan information that MCOs
distribute.

GAO noted that: (1) it found problems with the benefit information
distributed by all of the 16 MCOs it reviewed; (2) although HCFA had
reviewed and approved all of the information GAO examined, some MCOs
misstated the coverage they were required by Medicare or their contracts
to offer; (3) one MCO advertised a substantially less generous
prescription drug benefit than it had specified in its Medicare
contract; (4) some MCOs provided complete benefit information only after
a beneficiary enrolled; (5) others never provided full descriptions of
benefits and restrictions; (6) as GAO has reported previously, it is
difficult to compare available options using literature provided to
beneficiaries because MCOs use different formats and terminology to
describe the benefit packages being offered; (7) the variation in
Medicare plan literature contrasts sharply with the uniformity of plan
information distributed by MCOs that participate in the Federal
Employees Health Benefits Program (FEHBP); (8) MCOs participating in
FEHBP are required to provide prospective enrollees with a single,
comprehensive, and comparable brochure to facilitate informed choice;
(9) in GAO's study of the appeals process, GAO found that when MCOs deny
plan services or payment, they do not always inform beneficiaries of
their appeal rights; (10) sometimes MCOs issue denial notices that do
not contain all the information that HCFA requires; (11) GAO also found
that some MCOs delay issuing denial notices until the day before
discontinuing services, such as skilled nursing care; (12) this delay
can increase a beneficiary's potential financial liability should the
beneficiary appeal the plan's decision and lose; (13) many of the
information problems GAO identified regarding plan benefit packages and
beneficiaries' appeal rights went uncorrected because of shortcomings in
HCFA's review practices; (14) in addition, HCFA has not exercised its
authority to require MCOs to distribute plan information that is more
complete, timely, and comparable; (15) agency officials recognize many
of the shortcomings GAO identified and are beginning efforts to address
them; and (16) however, GAO believes that the agency could do more.

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

 REPORTNUM:  T-HEHS-99-108
     TITLE:  Medicare Plus Choice: HCFA Actions Could Improve Plan 
             Benefit and Appeal Information
      DATE:  04/13/99
   SUBJECT:  Comparative analysis
             Health insurance
             Marketing
             Consumer protection
             Information disclosure
             Health services administration
             Beneficiaries
             Dispute settlement
             Managed health care
             Standards and standardization
IDENTIFIER:  Federal Employees Health Benefits Program
             Medicare Program
             Medicare Choice Program
             
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Cover
================================================================ COVER


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

For Release on Delivery
Expected at 2:30 p.m.
Tuesday, April 13, 1999

MEDICARE+CHOICE - HCFA ACTIONS
COULD IMPROVE PLAN BENEFIT AND
APPEAL INFORMATION

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

GAO/T-HEHS-99-108

GAO/HEHS-99-108T


(101803)


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

  BBA - test
  CHDR - test
  FEHBP - test
  HCFA - test
  MCO - test
  OIG - test
  OPM - test
  SNF - test

MEDICARE+CHOICE:  HCFA ACTIONS
COULD IMPROVE PLAN BENEFIT AND
APPEAL INFORMATION
============================================================ Chapter 0

Mr.  Chairman and Members of the Committee: 

I am pleased to be here today as you discuss the quality of
information that Medicare managed care organizations (MCO) distribute
to beneficiaries and steps that the Health Care Financing
Administration (HCFA) could take to ensure that this information is
reliable, complete, and useful.  HCFA's leadership in this area is
important.  The agency is responsible for approving all of the
information that MCOs distribute and has the authority to set
standards for that information.  By successfully fulfilling this
responsibility, HCFA can help make certain that MCOs provide the
information that beneficiaries need to make informed health plan
choices and understand their rights under Medicare managed care. 

MCOs' Medicare plans differ from one another in the services they
cover and the fees they charge.\1 At a minimum, plans must provide
all Medicare-covered services, but many plans cover additional
services, such as outpatient prescription drugs and routine physical
examinations.  Some plans charge a monthly premium (in addition to
Medicare's part B premium), but others do not.\2 Although the
Balanced Budget Act of 1997 (BBA) required HCFA to make available
some basic comparative plan information, the membership literature
that MCOs distribute remains the only source of detailed information
that beneficiaries have about plans' fees and covered services.  This
information helps beneficiaries select a plan that fits their needs. 
Once they are enrolled, this information helps shape their
understanding of their plan's obligations to its members.  In
addition, MCOs distribute other plan information that can affect the
extent to which beneficiaries understand their rights, such as
complaints about plan care.  Consequently, it is vital that
beneficiaries trust the plan information that they receive from MCOs
and that HCFA ensures that their trust is not misplaced. 

The importance of plan information will grow as the Medicare+Choice
program, created by BBA, generates an expanded array of health plan
alternatives to the traditional fee-for-service arrangement and
attracts more and more beneficiaries to those options.  In just the
last 3 years, Medicare managed care enrollment has nearly doubled. 
Approximately 7 million of Medicare's 39 million beneficiaries (more
than 17 percent) are currently enrolled in managed care plans. 
Informed choices will be particularly important as BBA phases out the
opportunity for beneficiaries to disenroll from a plan on a monthly
basis and moves toward the private sector practice of annual
reconsideration of plan choice. 

My comments today will focus on (1) the accuracy, completeness, and
usefulness of the information Medicare MCOs distribute about their
plans' benefit packages; (2) the extent to which MCOs inform
beneficiaries of their plan appeal rights and the appeals process;
and (3) HCFA's review, approval, and oversight of the plan
information that MCOs distribute.  My remarks are based on two
recently released reports done for this Committee.\3

In brief, we found problems with the benefit information distributed
by all of the 16 MCOs we reviewed.\4 For example, although HCFA had
reviewed and approved all of the information we examined, some MCOs
misstated the coverage they were required by Medicare or their
contracts to offer.  One MCO advertised a substantially less generous
prescription drug benefit than it had specified in its Medicare
contract.  In addition, some MCOs provided complete benefit
information only after a beneficiary enrolled; others never provided
full descriptions of benefits and restrictions.  Finally, as we have
reported previously, it is difficult to compare available options
using literature provided to beneficiaries because MCOs use different
formats and terminology to describe the benefit packages being
offered.  The variation in Medicare plan literature contrasts sharply
with the uniformity of plan information distributed by MCOs that
participate in the Federal Employees Health Benefits Program
(FEHBP).\5

MCOs participating in FEHBP are required to provide prospective
enrollees with a single, comprehensive, and comparable brochure to
facilitate informed choice. 

In our study of the appeals process, we found that when MCOs deny
plan services or payment, they do not always inform beneficiaries of
their appeal rights.  Sometimes MCOs issue denial notices that do not
contain all the information that HCFA requires.  We also found that
some MCOs delay issuing denial notices until the day before
discontinuing services, such as skilled nursing care.  This delay can
increase a beneficiary's potential financial liability should the
beneficiary appeal the plan's decision and lose. 

Many of the information problems we identified regarding plan benefit
packages and beneficiaries' appeal rights went uncorrected because of
shortcomings in HCFA's review practices.  In addition, HCFA has not
exercised its authority to require MCOs to distribute plan
information that is more complete, timely, and comparable.  Agency
officials recognize many of the shortcomings we identified and are
beginning efforts to address them.  However, we believe that the
agency could do more.  In our two accompanying reports, we recommend
that HCFA undertake a variety of additional actions including (1)
following the lead of FEHBP and requiring Medicare MCOs to distribute
brochures that fully describe--using a prescribed format and
terminology--plan benefits, fees, and coverage restrictions; and (2)
setting standards for when MCOs distribute certain information and
that the agency improve the consistency and thoroughness of its
oversight practices.  In commenting on our two reports, HCFA
generally agreed with our recommendations. 


--------------------
\1 A plan is a package of specific health benefits, fees, and terms
of coverage.  An MCO is an entity that offers one or more plans. 

\2 Plans may charge other fees in addition to a monthly premium. 
However, plans 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. 

\3 Medicare+Choice:  New Standards Could Improve Accuracy and
Usefulness of Plan Literature (GAO/HEHS-99-92, Apr.  12, 1999), and
Medicare Managed Care:  Greater Oversight Needed to Protect
Beneficiary Rights (GAO/HEHS-99-68 Apr.  12, 1999). 

\4 We examined the membership literature for 26 plans offered by 16
MCOs in four HCFA regions.  We focused our review on three benefits: 
ambulance services, routine mammograms, and outpatient prescription
drug benefits.  A complete description of our scope and methodology
is contained in GAO/HEHS-99-92. 

\5 FEHBP is administered by the Office of Personnel Management (OPM). 


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

About two-thirds of all Medicare beneficiaries live in areas where
they can choose among traditional fee-for-service and one or more
managed care plans.  Although approximately 82 percent of
beneficiaries are in the fee-for-service program, the percentage of
beneficiaries enrolled in managed care plans is growing.  Over the
last 3 years, Medicare managed care enrollment has nearly doubled to
almost 7 million members, as of March 1999.  Most Medicare managed
care enrollees are members of plans that receive a fixed monthly fee
for each beneficiary they enroll. 


      BBA SOUGHT TO WIDEN HEALTH
      PLAN CHOICES AND INCREASE
      AVAILABILITY OF COMPARABLE
      INFORMATION
-------------------------------------------------------- Chapter 0:1.1

In enacting BBA, the Congress sought to widen beneficiaries' health
plan options.  BBA permitted new types of organizations--such as
provider-sponsored organizations and preferred provider
organizations--to participate in Medicare.  It also changed
Medicare's payment formula to encourage the wider availability of
health plans. 

BBA also mandated that HCFA make available certain information to
increase beneficiaries' awareness of their health plan options.  The
law directed HCFA to provide beneficiaries with general information
about managed care plans through a variety of means, including a
toll-free telephone number to answer general questions and an
Internet site to provide some basic comparative information about the
various health care options available.  HCFA is also required to mail
basic comparative and other information to all beneficiaries. 
However, for detailed information about specific managed care plans,
all of these resources direct beneficiaries to the MCOs that offer
those plans--the only source for specific plan information. 


      HCFA REVIEWS PLAN BENEFIT
      INFORMATION AND OTHER
      MATERIALS DISTRIBUTED TO
      BENEFICIARIES
-------------------------------------------------------- Chapter 0:1.2

To inform Medicare beneficiaries--both those interested in enrolling
and those already enrolled--about plan-specific information, MCOs
distribute membership literature-- packets of information that
describe plan benefits, fees, and coverage restrictions.  Membership
literature may be mailed to interested beneficiaries or distributed
directly by sales agents who work for the MCO. 

HCFA requires MCOs to include certain explanations in their member
materials, such as provider restrictions; but otherwise, MCOs have
wide latitude in what information is included and how it is
presented.  However, HCFA reviews all materials that MCOs distribute
to beneficiaries.  In addition to membership literature, HCFA reviews
enrollment forms; administrative letters, such as those notifying
beneficiaries of benefit changes; all advertising; and other
informational materials.  The review process is intended to help
ensure that the information is correct and conforms to Medicare
requirements.  MCOs must submit these materials to HCFA, which has 45
days to conduct its review.  If the agency does not disapprove of the
materials within that period, the MCOs can distribute them. 


      MCOS MUST INFORM
      BENEFICIARIES OF THEIR
      APPEAL RIGHTS
-------------------------------------------------------- Chapter 0:1.3

Medicare beneficiaries enrolled in a managed care plan have the right
to appeal if their plan's MCO refuses to provide health services or
pay for services already obtained.  If an MCO denies a beneficiary's
request for services--such as skilled nursing care or a referral to a
specialist--it must issue a written notice that explains the reason
for the denial and the beneficiary's appeal rights.  Such notices
must also tell beneficiaries where and when the appeal must be filed
and that they can submit written information to support the appeal. 

A beneficiary first appeals to his or her health plan's MCO by asking
it to reconsider its initial decision.  If the MCO's reconsidered
decision is not fully favorable to the beneficiary, the case is
automatically turned over to the Center for Health Dispute Resolution
(CHDR)--a HCFA contractor that reviews the decision and may overturn
or uphold it.  Beneficiaries who are dissatisfied with CHDR's
decision have additional appeal options, provided certain
requirements are met.  A member who loses an appeal is responsible
for the cost of any disputed health care services that were obtained. 
HCFA reviews each MCO's plan appeals process as part of its biennial
evaluation of each organization's compliance with HCFA regulations. 


   PLAN BENEFIT INFORMATION IS NOT
   ALWAYS CORRECT, CURRENT, OR
   COMPLETE AND IS NOT READILY
   COMPARABLE
---------------------------------------------------------- Chapter 0:2

Our review of 16 Medicare MCOs found various types of flaws in the
membership literature they distributed.  The documents we examined
were used by MCOs to inform prospective enrollees and members about
covered services, fees, and restrictions.  Although HCFA had reviewed
and approved the documents, some incorrectly described plan benefit
packages.  In several instances, the information was outdated or
incomplete.  Some MCOs provided beneficiaries with detailed benefit
information only after they had enrolled in a plan.  We also found it
difficult to compare benefit packages because MCOs are not required
to follow common formats or use standard terms when describing their
benefits.  In contrast, each MCO that participates in FEHBP is
required to distribute a single, comprehensive booklet that describes
its benefit package using a standard format and standard terminology. 


      PLAN BENEFIT INFORMATION IS
      NOT ALWAYS CORRECT
-------------------------------------------------------- Chapter 0:2.1

Most MCOs' plan documents contained errors or omitted information
about the three benefits we reviewedï¿½prescription drugs, mammography,
and ambulance services.  Problems ranged from minor inaccuracies to
major errors.  For example, documents from five MCOs we reviewed
erroneously stated that beneficiaries needed a referral to obtain a
routine annual mammogram--a Medicare-covered service.  HCFA policy
clearly states that plans cannot require a referral for annual
mammograms and must inform beneficiaries of this policy.  (See fig. 
1 for HCFA policy and excerpts from Medicare plan materials.)

   Figure 1:  Examples of Plan
   Referral Requirements for
   Screening Mammogram
   Contradicting Medicare Coverage

   (See figure in printed
   edition.)

Note:  Sources as indicated in figure.  Emphasis added. 

We also found serious problems with plan information regarding
coverage for outpatient prescription drugsï¿½a benefit that attracts
many beneficiaries to Medicare managed care plans.  For example, a
large, experienced MCO specified in its Medicare contract that its
plan would provide brand name drug coverage of at least $1,200 per
year.  However, the plan's membership literature indicated lower
coverage limitsï¿½in some areas as low as $600 per year.  Based on 1998
enrollment data, we estimate that over 130,000 plan members may have
been denied part of the benefit to which they were entitled and for
which Medicare paid.  Another MCO, which used the same documents to
promote its four plans, stated in its handbook that all plan members
were entitled to prescription drug coverage.  However, only two of
the MCO's four plans provided such coverage.  A third MCO provided
conflicting information about its drug coverage.  Some documents
stated that the plan would pay for nonformulary drugs,\6 while other
documents said it would not. 


--------------------
\6 A drug formulary is, in general, 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 to the MCO.  Any drug
not included on a formulary is considered a nonformulary drug. 


      SOME PLAN BENEFIT
      INFORMATION IS OUTDATED
-------------------------------------------------------- Chapter 0:2.2

Some MCOs distributed outdated information, which could be
misleading.  HCFA allows this practice if MCOs attach an addendum
updating the information.  HCFA officials believe this policy is
reasonable because beneficiaries can figure out a plan's coverage by
comparing the changes cited in the addendum with the outdated
literature.  However, we found that some MCOs distributed outdated
literature without the required addendum and that when MCOs included
the addendum, it often did not clearly indicate that the addendum
superseded the information contained in other documents.  In
addition, some MCOs did not put dates on the literature they
distributed, which obscured the fact that the literature was no
longer current. 


      SOME MCOS DID NOT PROVIDE
      COMPLETE BENEFIT INFORMATION
-------------------------------------------------------- Chapter 0:2.3

Some MCOs did not disclose important plan information, including
information about Medicare required benefits, in documents designed
to provide detailed plan information.  For example, most MCOs we
reviewed did not provide detailed information about ambulance
services--a Medicare-required benefit.  One MCO did not mention
ambulance service coverage at all in any of the documents we
reviewed.  Three MCOs stated that ambulance services were covered
"per Medicare regulations" but did not explain Medicare's coverage. 
Most of the other MCOs' documents provided general descriptions of
their plans' ambulance coverage but did not explain the extent of the
coverage. 

HCFA's instructions regarding benefit disclosure are vague, only
advising MCOs to provide information sufficient for beneficiaries to
make informed enrollment decisions.  Moreover, MCOs that adopted
HCFA's suggested disclosure language may send beneficiaries to an
information dead end.  In the guidelines it provides to MCOs, HCFA
suggests that a plan's member policy booklet (or other document used
to describe a plan's benefit package) direct beneficiaries to the
MCO's Medicare contract for full details of the plan.  According to
HCFA, a member policy booklet should state that the document

     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 were to request a copy of the contract, the agency
would not provide it due to the proprietary information included in
an MCO's contract proposal.  Furthermore, an MCO is not required to
provide beneficiaries with copies of its Medicare contract.  MCO
officials with whom we spoke differed in their responses about
whether their organizations would provide beneficiaries with copies
of their Medicare contracts. 

Some MCOs we reviewed provided detailed benefit information only
after beneficiaries had enrolled.  The information packages
distributed by several MCOs we reviewed stated that beneficiaries
would receive additional, detailed descriptions of plan benefits,
costs, and restrictions following enrollment.  In addition, four MCOs
did not provide 1998 benefit details until several months after the
new benefits took effect.\7

In fact, one MCO did not distribute its detailed benefit information
until Augustï¿½8 months after the benefit changes had taken effect. 


--------------------
\7 Plan contracts, which define plans' benefit packages, generally
take effect January 1 of each year and run for 1 calendar year. 


      PLAN BENEFIT INFORMATION WAS
      NOT READILY COMPARABLE
-------------------------------------------------------- Chapter 0:2.4

The membership literature we reviewed varied considerably in
terminology, depth of detail, and format.  These variations are
similar to those that we encountered in previous reviews undertaken
for this Committee and greatly complicated benefit package
comparisons.\8 The lack of clear and uniform benefit information
likely impedes informed decisionmaking.  HCFA officials in almost
every region noted that a standard format for key membership
literature, along with clear and standard terminology, would help
beneficiaries compare their health plan options. 

To illustrate this problem, we identified the location in each MCO's
plan literature where enrollees would find answers to basic questions
regarding coverage of the three benefits we studied.  This
information was often difficult to find; enrollees would have to read
multiple documents to answer the basic coverage questions.  For
example, to understand the three plans' prescription drug benefits,
we had to review 12 different documents:  2 from Plan A, 5 from Plan
B, and 5 from Plan C.  (See fig.  2.)

   Figure 2:  Multiple Plan
   Documents Needed to Answer
   Basic Drug Benefit Questions

   (See figure in printed
   edition.)

\a Plan documents contradict one another as to whether the plan will
cover a nonformulary drug. 

Source:  GAO analysis of MCO plan membership literature. 

It was also not easy to know where to look for the information.  For
example, the answer to our question about whether a plan used a drug
formulary was found in Plan A's summary of benefits, in Plan B's
Medicare prescription drug rider, and in Plan C's contract amendment. 
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--listed coverage for prescription drugs
and the use of a formulary. 


--------------------
\8 Medicare:  HCFA Should Release Data to Aid Consumers, Prompt
Better HMO Performance (GAO/HEHS-97-23, Oct.  23, 1996); Medicare
Managed Care:  Information Standards Would Help Beneficiaries Make
More Informed Health Plan Choices (GAO/T-HEHS-98-162, May 6, 1998);
and GAO/HEHS-99-92, Apr.  12, 1999. 


      EACH FEHBP PLAN DISTRIBUTES
      A SINGLE, STANDARD,
      COMPREHENSIVE BENEFIT
      BOOKLET
-------------------------------------------------------- Chapter 0:2.5

To avoid the types of problems found in Medicare MCOs' membership
literature, OPM requires each participating health plan to describe,
in a single document, its benefit package--that is, covered benefits,
limitations, and exclusions--and to include a benefit summary in a
standardized language and in OPM's prescribed format.  OPM officials
update the mandatory language each year to reflect changes in the
FEHBP requirements and to respond to organizations' requests for
improvements.  Finally, OPM requires health plans 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 plans
publish brochures that adhere to these standards. 


   ADEQUATE INFORMATION ABOUT
   APPEALS PROCESS AND BENEFICIARY
   RIGHTS IS OFTEN NOT PROVIDED
---------------------------------------------------------- Chapter 0:3

Plan membership literature is required to contain information on
beneficiaries' appeal rights.  In addition, beneficiaries are
supposed to be informed of their appeal rights when they receive a
plan's written notice denying a service or payment.  HCFA requires
denial notices to contain information telling beneficiaries where and
how to file an appeal.  Furthermore, denial notices are required to
state the specific reason for the denial because vaguely worded
notices may hinder beneficiary efforts to construct compelling
counterarguments.  Vague notices may also leave beneficiaries
wondering whether they are entitled to the requested services and
should appeal.  Finally, HCFA regulations state that whenever MCOs
discontinue plan services, such as skilled nursing care, they must
issue timely denial notices to beneficiaries. 

Substantial evidence indicates, however, that many beneficiaries did
not receive the required information when their MCOs denied services
or payment for services.  Denial notices were frequently incomplete
or never issued, and many notices did not indicate the specific basis
for the denial.  Furthermore, beneficiaries often received little
advance notice when their MCO discontinued plan services. 


      DENIAL NOTICES ARE SOMETIMES
      INCOMPLETE, NEVER ISSUED, OR
      DO NOT INDICATE SPECIFIC
      REASONS FOR THE DENIAL
-------------------------------------------------------- Chapter 0:3.1

Reviews by HCFA, studies by the Department of Health and Human
Services' Office of Inspector General (OIG), as well as studies we
conducted found numerous instances of incomplete or missing denial
notices.  In 1997, HCFA performed monitoring visits to 90 MCOs; about
13 percent of these MCOs were cited for failing to issue denial
notices.  In addition, nearly one-quarter of the 90 MCOs were cited
for issuing denial notices that did not adequately explain
beneficiaries' appeal rights.  Two studies by the OIG, using
different methodologies, provide additional evidence that
beneficiaries are not always informed of their appeal rights.\9 In
one study, the OIG surveyed beneficiaries who were enrolled or had
recently disenrolled from a managed care plan.  According to the
survey results, 41 respondents (about 10 percent) said that their
health plans had denied requested services.  Of these, 34 (83
percent) of the respondents said that they had not received the
required notice explaining the denial and their appeal rights. 

Most notices that we reviewed contained general, rather than
specific, reasons for the denial.  In 53 of the 74 CHDR cases that
contained the required denial notices (notices were missing in 32
other cases), the notices simply said that the beneficiary did not
meet the coverage requirements or contained some other vague reason
for the denial.  Likewise, representatives from several advocacy
groups told us that in cases brought to their attention, the denial
notices were often general and did not clearly explain why the
beneficiary would not receive, or continue to receive, a specific
service. 


--------------------
\9 Department of Health and Human Services, OIG, Medicare HMO Appeal
and Grievance Processes, Review of Cases (OEI-07-94-00283, Dec. 
1996), and Medicare HMO and Grievance Processes, Beneficiaries'
Understanding (OEI-07-96-00281, Dec.  1996). 


      NOTICES OF DISCONTINUED
      COVERAGE ARE OFTEN ISSUED
      THE DAY BEFORE SERVICES ARE
      STOPPED
-------------------------------------------------------- Chapter 0:3.2

HCFA regulations state that whenever MCOs discontinue plan services,
they must issue timely denial notices to beneficiaries.  The
regulations, however, do not specify how much advance notice is
required before coverage is discontinued.  Beneficiaries who receive
little advance notice may not be able to continue to receive services
because of their potential financial liability.  If the beneficiary
appeals and loses, he or she is responsible for the cost associated
with the services received after the date specified in the denial
notice. 

In three of the MCOs we visited, the general practice was to issue
the denial notices the day before the services were discontinued.  We
found that many skilled nursing facility (SNF) discharge notices were
mailed to the beneficiary's home instead of being delivered to the
facility.  In other cases, it appeared that the beneficiary or his or
her representative received the notice a few days after the
beneficiary had been discharged from the SNF or the SNF coverage had
ended.  Ten of the 25 SNF discharge cases we reviewed at CHDR also
involved the receipt of a notice after the patient had been
discharged. 

The fourth MCO we visited issued SNF discharge notices 3 days prior
to the discharge date.  This lead time helped ensure that a
beneficiary received the notice before the discharge date.  It also
allowed more time for the beneficiary to file an expedited appeal and
receive a decision from the plan.  Consequently, beneficiaries in
this MCO's plan who appeal and lose are less exposed to the SNF costs
incurred during the appeals process.  Officials from all the MCOs we
visited said that, in almost every instance, the decision to
discharge a beneficiary from a SNF is made days in advance and that
discharge notices could be issued several days prior to discharge. 


   WEAKNESSES IN HCFA'S REVIEW
   PROCESSES AND REQUIREMENTS
   ALLOWED PROBLEMS IN PLAN
   MATERIALS TO GO UNCORRECTED
---------------------------------------------------------- Chapter 0:4

Although HCFA reviews and approves all materials that MCOs distribute
to beneficiaries, weaknesses in the agency's review practices and
information standards allowed the plan information problems we
observed to go uncorrected.  One weakness is that HCFA reviewers must
rely on a faulty document to determine whether plan member materials
are correct.  In addition, HCFA review practices are sometimes
inadequate to detect or correct the problems we found.  Finally, HCFA
has not used its authority to require that MCOs use a common format
and terminology to describe their plans' benefit packages. 


      HCFA'S STANDARD FOR GAUGING
      ACCURACY IN PLAN MATERIALS
      IS FAULTY
-------------------------------------------------------- Chapter 0:4.1

To ensure the accuracy of membership literature, HCFA reviewers are
instructed to compare each MCO's membership literature to its
Medicare contract.  Specifically, HCFA reviewers are expected to rely
on one particular contract document--the Benefit Information
Form--which summarizes plan benefits and member fees.  Reviewers told
us, however, that this contract document often does not provide the
detail they need.  Consequently, they sometimes rely on benefit
summaries provided by the MCOs to verify the accuracy of plan
information.  This practice is contrary to HCFA policy, which
requires an independent review of MCOs' plan literature.  The
reviewer who approved the plan literature advertising a $600 annual
drug benefit, instead of the contracted $1,200 annual limit, said
that the mistake was caused by her reliance on a benefit summary
provided by the MCO. 


      HCFA'S MONITORING PRACTICES
      ALLOWED PROBLEMS TO GO
      UNCORRECTED
-------------------------------------------------------- Chapter 0:4.2

Inadequate monitoring of MCOs' communications with
beneficiaries--both about plan benefit packages and appeal
rights--allowed the problems we observed to go uncorrected.  For
example, we found instances where MCOs agreed to make HCFA required
changes, but the final printed documents did not incorporate the
changes.  Because HCFA staff generally do not receive copies of the
printed documents, they are often unaware as to whether MCOs have
made the required corrections. 

Shortcomings in HCFA's monitoring procedures also limit the agency's
ability to ensure that beneficiaries know that plans' service and
payment decisions can be appealed.  For example, to determine whether
MCOs informed beneficiaries of their appeal rights, HCFA's monitoring
protocol requires agency staff to review a sample of appeal case
files.  HCFA staff check these files to determine whether each
contains a copy of the required denial notice.  However, it seems
reasonable to assume that beneficiaries who appeal are more likely to
have been informed of their rights than those who do not appeal. 
Yet, HCFA does not generally check cases where services or payment
for services were denied but not appealed.  Furthermore, when MCOs
contract with provider groups to perform certain administrative
functions, such as issuing denial notices, HCFA staff generally do
not check to see that the delegated duties were carried out in
accordance with Medicare requirements. 


      INADEQUATE INSTRUCTIONS TO
      MCOS HAMPER HCFA'S REVIEW
      PROCESS
-------------------------------------------------------- Chapter 0:4.3

HCFA has the authority to set standards for the format, content, and
timing of the plan information that MCOs distribute to beneficiaries. 
Unlike OPM, however, HCFA has made little use of its authority. 
Instead, each MCO decides on the format--and to large extent, content
and timing--of the plan information it distributes. 

In addition to making plan comparisons more difficult, the lack of
common information standards has adversely affected HCFA's review
process.  First, the lack of standards has resulted in inconsistent
review practices and misleading comparisons.  For example, one MCO
representative told us that several MCOs' plans in its market area
required a copayment for ambulance services if a beneficiary was not
admitted to a hospital, but not every MCO was required to disclose
that fact.  Consequently, although the plans had similar benefit
restrictions, the MCOs that were required to disclose the plan
restrictions appeared to offer less generous benefits than the other
MCOs' plans. 

The lack of information standards also increased the amount of time
needed to review and approve plan documents and increased the
likelihood of undetected errors.  Agency staff said that they could
do a better job checking plan membership literature for accuracy and
completeness if every MCO presented its plan information in a common
format and used standard terminology.  Staff also said they spend a
considerable amount of time reviewing plan documents that could be
standard administrative formsï¿½such as member enrollment
applicationsï¿½and thus had less time to spend reviewing important
documents describing plan benefits. 


      HCFA HAS BEGUN EFFORTS TO
      CORRECT PROBLEMS AND
      SHORTCOMINGS IN PLAN
      INFORMATION
-------------------------------------------------------- Chapter 0:4.4

HCFA is moving to address some of the problems and systemwide
shortcomings we identified during our recent reviews.  For example,
HCFA is working to revise the contract document that agency reviewers
use to verify the accuracy of plan information.  The proposed new
contract document will help ensure that HCFA collects the same
information from each plan and presents the information in a
consistent format and in greater detail than the current document. 
The agency expects to test this new document later this year and
fully implement it in 2000.  HCFA officials believe that the Office
of Management and Budget's clearance process for the proposed new
contract document must begin no later that August 1999 to meet this
timetable.  Otherwise, full implementation could be delayed. 

Agency officials recognize the importance of more uniform membership
literature and have articulated their intent to standardize key
documents in future years.  As a first step, the agency established a
work group--consisting of representatives from HCFA, MCOs, senior
citizen advocacy groups, and other relevant entities--to develop a
standard format and common language for MCOs' plan benefit summaries. 
HCFA hopes to establish these new standards by next month so MCOs'
fall 1999 benefit summary brochures can follow the new standards. 
HCFA's long-term goals involve the establishment of standards for
other key documents.  However, the agency has not yet developed a
strategy for its long-term efforts or decided whether the information
standards it sets will be voluntary or mandatory. 

HCFA officials said they have also undertaken several initiatives to
help ensure that beneficiaries are informed of their appeal rights
and the steps necessary to file an appeal.  Sometime this year, HCFA
intends to publish additional instructions regarding the content of
denial notices.  The agency will also revise its monitoring protocol
to better ensure that MCOs issue the required denial notices. 
Finally, HCFA is working to develop timeliness requirements for the
issuance of notices when MCOs reduce or discontinue services, such as
skilled nursing care, home health care, or physical therapy. 


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

As the Medicare+Choice program grows and more health plan options
become available, the need for reliable, complete, and useful
information will increase.  In our recent reviews, however, we found
major problems in the plan information that some MCOs provided to
beneficiaries.  In several instances the information was incorrect or
incomplete; in other cases, the problem was poor timingï¿½important
information was distributed long after the benefit package had
changed or only after beneficiaries had enrolled in a plan.  None of
the information was provided in a format that facilitated comparisons
among plans.  We also found that some MCOs did a poor job informing
beneficiaries about their appeal rights and the appeals process. 

HCFA has both the authority and the responsibility to ensure that
Medicare MCOs distribute information that helps beneficiaries make
informed decisions.  To date, however, its policies and practices
have fallen short of that mark.  HCFA's review of plan information
has been inadequate and has not prevented plans from distributing
incorrect and incomplete information.  Furthermore, unlike OPM, HCFA
has not set standards for plan information that could facilitate
informed decisions.  The agency is taking some steps to address the
problems we identified.  We believe, however, that these problems
will not be fully addressed until HCFA implements our past and
current recommendations by setting information standards for MCOs and
requiring them to adhere to those standards. 


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

Mr.  Chairman, this concludes my prepared statement.  I will be happy
to answer any questions you or other Members of the Committee might
have. 


*** End of document. ***