oversight

Medicare HMOs: Setting Payment Rates Through Competitive Bidding

Published by the Government Accountability Office on 1997-06-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
GAO   General Accounting  Office
      Washington, D.C. 20648

      Health,   Education   and Human Services Division

      B-277148

      June 12, 1997

      The Honorable John B. Breaux
      Ranking Minority Member
      Special Committee on Aging
      United States Senate

      Subject:      Medicare HMOs: Setting Pavment Rates Through
                    Competitive Bidding

      Dear Senator Breaux:

      Managed care is an increasingly popular option among Medicare beneficiaries.
      Nearly 5 million beneficiaries are now enrolled in health maintenance
      organizations (HMO) that operate under a Medicare risk contract. The
      Congressional Budget Office estimates that Medicare will spend $24.2 billion on
      risk HMOs this fiscal year. This amount is expected to grow to over $71 billion
      in fiscal year 2002. Risk contract HMOs have the potential to be advantageous
      for two reasons. First, the payment of a capitated rate for all services needed
      by each enrollee gives these plans a financial incentive to hold down costs In
      addition, risk contract HMOs often provide Medicare enrollees additional
      benefits at lower out-of-pocket costs than Medicare fee-for-service.
      Nevertheless, there is widespread concern that Medicare’s current payment
      methodology prevents the program from actually realizing any cost savings
      from managed care.

      In January of this year, the Health Care Financing Administration (HCFA)
      announced it would test competitive bidding as an alternative method for
      setting Medicare HMO payment rates in the Denver, Colorado, area. The
      announcement followed several years of HCFA-sponsored research on
      competitive bidding design and an earlier attempt to launch a similar
      demonstration in Baltimore, Maryland.’ The test planned for the Denver area is


      ‘HCFA’s competitive bidding demonstration in Baltimore was originally
      scheduled to begin in 1997. Because of local opposition, HCFA officials
      decided not to implement the demonstration in Baltimore. (See enc. I for a
      time line of HCFA’s research on HMO payment alternatives and implementation
      of the demonstration.)
                             GAO/HEHS-97-154X             Medicare   HMO Competitive   Bidding
B-277148

part of a 3-year demonstration that will also evaluate new HMO enrollment
procedures, the use of third-party counselors, and the provision of better
information to beneficiaries on health coverage options.

After soliciting input from local HMOs and modifying certain aspects of the
demonstration’s design in response to their comments, HCFA issued a formal
call for bids on April 1, 1997. HMOs raised a number of objections to the
demonstration, however. On May 12, 1997-3 days before the bids were due-the
American Association of Health Plans (AAHP) as well as various HMOs and
other groups sued to enjoin HCFA from carrying out the demonstration. A
federal district court issued a temporary restraining order preventing HCFA
from proceeding with the bidding process until the case is resolved on its
merits. Consequently, the demonstration may not begin as scheduled.

This letter responds to your request that we (1) discuss the potential
advantages of competitive bidding in the Medicare HMO program, (2) describe
the main features of HCFA’s planned demonstration in Denver, and (3) outline
HMOs’ key objections to it. To address these objectives, we reviewed literature
on competitive bidding and drew on our prior work on that subject as well as
on Medicare managed care. We also interviewed HCFA and AAHP officials.

SETTING SOME HMO PAYMENTS THROUGH COMPETITIVE
BIDDING MIGHT PRODUCE SAVINGS FOR MEDICARE

Because of flaws in the current payment system, managed care is not producing
savings for the Medicare program. In fact, the government spends more money
to serve HMO enrollees than it would if those same individuals received care
through Medicare’s traditional fee-for-service system. Although HMOs do
compete for market share, this form of competition tends primarily to benefit
HMO enrollees, who receive additional benefits or pay lower premiums.

GAO has long recommended that Medicare consider alternative payment
strategies so that the program can realize the promise of managed care savings.
Competitive bidding is one such alternative that may be feasible in certain
areas with well developed HMO markets2 In 1995, the Physician Payment
Review Commission (PPRC) outlined a possible Medicare competitive bidding
system. Competitive bidding systems have been successfully implemented



 20ther alternatives include reforms of the current methodology used to
 calculate HMO rates.

 2                GAO/HEHS-97-154R       Medicare   HMO Competitive       Bidding
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elsewhere. For example, the Arizona Medicaid program uses competitive
bidding to set HMO cap&&ion rates.

Medicare Rate-Setting Svstem
Based on Fee-for-Service Suending
Generates Excess HMO Pavments

Medicare law ties HMO payment rates to local spending in the traditional fee-
for-service program. Every year, HCFA estimates average per-beneficiary
spending in each county’s fee-for-service sector, an amount known as the
adjusted average per capita cost (A4PCC).3 Base HMO payment rates, or
“county rates,” are then set at 95 percent of the AAPCC.4 To arrive at the
capitation rate paid for each HMO enrollee, HCFA applies a risk-adjustment
factor to the county rate that is intended to align the rate with how much an
enrollees’s expected costs differ from the average beneficiary’s cost.’

Although Medicare’s risk contract HMO program was designed to save the
program 5 percent of the costs for beneficiaries who enrolled in HMOs, a
decade of research has found that this program instead costs Medicare money.
The research shows that Medicare’s rate-setting method produces excess
payments to HMOs. Recently, PPRC estimated that annual excess payments to
HMOs nationwide could total $2 billion. On the basis of our analysis of 1995
payments to California HMOs, we reported that Medicare may have overpaid
that state’s HMOs by $1 billion during the year.6




31ndetermining each county’s AAPCC, HCFA also includes a projection of
national program spending increases.
4There is substantial geographic variation in HMO monthly payment rates-from
a low of $221 in Arthur County, Nebraska, to a high of $767 in Richmond
County, New York-because differences in medical prices and in beneficiaries’
use of services cause fee-for-service spending to vary widely among counties.
Some of the variation in the use of services-both high and low-may reflect
inappropriate levels of care.

50ur work has shown that, even after HCFA’s risk adjustments, the capitation
rate is only weakly related to a beneficiary’s expected fee-for-service costs.
‘Medicare HMOs: HCFA Can Promutlv Eliminate Hundreds of Millions in
Excess Payments (GAOHEHS-97-16, Apr. 25, 1997).

3                 GAO/HEHS-97-154R       Medicare   HMO Competitive      Bidding
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Current Form of HMO Competition
Benefits Enrollees, Not Taxnavers

In many urban areas, several HMOs compete against one another for shares of
the Medicare managed care market. About 25 percent of all beneficiaries live
in areas served by two to four Medicare HMOs and another 25 percent live in
areas served by five or more HMOs. However, current Medicare rules
encourage a form of competition that benefits HMO enrollees, but not
taxpayers.

If competition forces HMOs to become more efficient and find ways to reduce
costs, these “savings” typically are passed on to enrollees, not shared with the
government. Medicare does not permit HMOs to earn profits on their risk
contracts that are higher than those on their commercial business.
Consequently, if HCFA estimates that-given the HMO’s estimated costs-
Medicare capitation payments would result in an HMO earning excess profits,
the plan must reduce premiums (or other beneficiary out-of-pocket expenses),
offer additional benefits, or return money to the program. Virtually all HMOs in
this situation decide to reduce premiums or offer additional benefits7

Competition and the quest for increased market share encourage many HMOs
to charge a premium lower than the one approved by HCFA or offer additional
benefits. For example, Health Options, Inc., operating in the competitive South
Florida market, is permitted by HCFA to charge a monthly premium of $94 for
the package of benefits it offers. However, Health Options has waived this
premium, and beneficiaries pay no monthly fee to the plan.’

Comnetitive Bidding Previouslv
Pronosed for Medicare and
Studied bv HCFA

The idea of using competitive bidding to set Medicare HMO payment rates is
not new. In 1994, we recommended that HCFA conduct preliminary research




7Medicare Managed Care: HMO Rates. Other Factors Create Uneven Availabilitv
of Benefits (GAO/T-HEHS-97-133, May 19, 1997).
 ‘All HMO enrollees must continue to pay their monthly part B premium to
 Medicare.

 4                GAO/HEHS-97-154R       Medicare   HMO Competitive     Bidding
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on alternative HMO payment methods-including competitive bidding.g In 1995,
PPRC recommended that payment rates for Medicare HMOS be set through
competitive bidding in markets with a sufficient number of HMOs bidding to
achieve price competition. PPRC has also endorsed the concept of Medicare
competitive bidding.

In PPRC’s 1995 Annual Report to Congress,” the Commission described how a
competitive bidding system might be set up for Medicare. PPRC identified two
elements that were essential to obtaining bids at or close to the costs of
efficient HMOs:

      active price competition in bidding among multiple bidders and

      a financial penalty for bidders that bid higher than the price that
      ultimately is established.

A financial penalty for high bidders could take many forms. PPRC suggested
that Medicare require high bidders to charge beneficiaries a monthly premium.
The amount of the premium would be equal to the difference between the
HMO’s bid and the “winning” bid as determined by HCFA. By not excluding
any HMO, this approach maximizes the options available to beneficiaries,
However, HMOs would still have an incentive to submit low bids because low
bidders-who do not have to charge a premium-would find it easier to attract
enrollees and gain market share.

PPRC recommended that HCFA adopt a flexible approach to determining the
“winning” bid-that is, the bid amount above which HMOs would have to charge
beneficiaries a premium. According to PPRC, HCFA should, for example,
consider any capacity constraints of low bidders. If the winning bid would
result in many beneficiaries being shut out of no-premium plans, then HCFA
should select a higher bid as the winning bid. A flexible approach could also
help prevent HMOs from gaming the bidding system.”


‘Medicare. Changes to HMO Rate Setting Method Are Needed to Reduce
Program Costs (GAOLHEHS-94-119,Sept. 2, 1994).
“Washington, D.C.: PPRC, 1995.
“For example, in some markets, one HMO enrolls a large portion of the
Medicare beneficiaries. If, instead of using a flexible approach, HCFA used a
rigid, mechanical rule-say, one that selected the average bid, weighted by
enrollment, as the winning bid-the large HMO would have an advantage. The

5                GAOMEHS-97-154R         Medicare   HMO Competitive         Bidding
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For the past few years, HCFA has actively considered how best to design a
Medicare managed care bidding demonstration. (See the time line in enc. I.)
The agency funded a demonstration design report written by nationally
recognized experts in competitive bidding. HCFA awarded a grant to an
external contractor responsible for beneficiary enrollment issues and the
preparation of beneficiary educational materials. HCFA also assembled
technical expert panels of nationally recognized experts in Medicare managed
care, health economics, beneficiary education, and other relevant areas that
provided input on the demonstration’s design. (Enc. II lists the HCFA
contractors and consultants working on bidding design.)

Arizona Contains Medicaid Costs
Through Comnetitive Bidding

For over a decade, Arizona has used a competitive bidding process to award
managed care contracts in the state’s Medicaid program, known as the Arizona
Health Care Cost Containment System (AHCCCS).‘2 In 1995, we reported that
AHCCCS (pronounced “access”) likely saved the federal government $37 million
and the state $15 million in acute-care costs during fiscal year 1991 (at the time,
the latest year for which data were available for analysis).13

Each health plan that wishes to serve AHCCCS beneficiaries must submit a bid
(one for each geographic area the plan wants to serve) containing the
capitation rate the HMO is willing to accept and other information, such as the
extent of the HMO’s provider network. AHCCCS officials then assign a score to
each bid. A limited number of contracts are awarded in each county on the
basis of the scores. Although plan officials know the factors AHCCCS
considers, they have only a general sense of the weights assigned and do not
know exactly how the scores are derived.

Plans are not assured of winning an AHCCCS contract; consequently, they have
a strong incentive to submit the lowest bid for which they can provide the


large HMO would know-before submitting its bid-that its bid would have a
disproportional influence in the determination of the winning bid and could bid
accordingly.

 12Sinceits inception in 1982, Arizona has operated its Medicaid program under a
 Section 1115 demonstration waiver.
 13Arizona Medicaid: Comnetition Among Managed Care Plans Lowers Program
 Costs (GAO/HEHS96-2, Oct. 4, 1995).

 6                 GAO/HEHS-97-154R        Medicare   HMO Competitive      Bidding
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required beneficiary services and still earn a profit. AHCCCS had a 3-year
bidding cycle until recently, when it switched to a 5-year cycle. Therefore,
HMOs not awarded contracts will continue to be shut out of Arizona’s Medicaid
program for several years.

HCFA’S PLANNED DEMONSTRATION WOULD
TEST POTENTIAL OF COMPETITIVE BIDDING
TO PRODUCE SAVINGS

In January 1997, HCFA announced plans to conduct a 3-year competitive
pricing demonstration in the Denver, Colorado, area.14 Through this
demonstration, HCFA plans to test the payment implications of competitive
pricing for HMOs and the effects of improving the ability of beneficiaries to
make informed choices about their Medicare options. The demonstration,
planned to start in January 1998, has three main components: competitive
bidding by HMOs; a coordinated enrollment period and third-party insurance
counselors; and comparative information on beneficiaries’ health insurance
options.

The following briefly describes the key features of each of the three main
components.

Comnetitive Bidding Process

      Any health plan electing to participate in Medicare must submit a bid
      and offer the standard benefit package as defined by HCFA. This
      package will include “extra benefits” (not covered under Medicare fee-
      for-service) currently received by many Denver beneficiaries in managed
      care plans, including prescription drugs. Health plans may also submit
      bids for more comprehensive packages they wish to market to Medicare
      beneficiaries.

      HCFA will array the bids and then determine a new government
      contribution toward the purchase of all plans. The new amount would
      replace the current formula-based AAPCC capitation rate. In calculating
      the government contribution, HCFA will consider the potential disruption
      of current managed care enrollees. For example, HCFA will try to avoid



?I’he geographic area of the demonstration includes five counties: Adams,
Arapahoe, Denver, Douglas, and Jefferson.

7                GAOEIEHS-97-154R        Medicare   HMO Competitive     Bidding
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     setting the government contribution at a level that would require many
     beneficiaries to switch plans to avoid having to pay a monthly premium.

     Plans whose bids are below the new government contribution have the
     option of adding additional benefits equivalent in value to the difference,
     thereby making their product more attractive to beneficiaries. All plans
     with bids at or below the new government contribution will be paid the
     new government contribution.

      Plans that bid above the new government contribution can choose
      between or blend two options: (1) charge the difference between their
      bid and the government contribution as a beneficiary premium or (2)
      accept a reduced payment equal to the new government contribution
      minus the difference between the plan’s bid and the new government
      contribution.

      Plans that submit bids may opt out of participating in the demonstration.
      However, these plans, and HMOs that choose not to bid, will be
      excluded from serving Medicare beneficiaries in the Denver-area for the
      duration of the demonstration.

Coordinated Onen Enrollment and
Use of Third-Pat-W Insurance Counselors

      The demonstration will include a guaranteed open enrollment season
      during which a HCFA contractor will conduct an intensified information
      campaign. As under current law, however, plans may enroll beneficiaries
      during other times of the year as well.

      All enrollments and disenrollments will be conducted by a HCFA third-
      party contractor. Plans will not be permitted to enroll beneficiaries, as
      allowed under current regulations, but they may continue all currently
      permitted marketing and sales activities.

      Beneficiaries will continue to be permitted monthly to disenroll from an
      HMO to fee-for-service or from one HMO to another if the desired plan is
      accepting new enrollees.

Beneficiarv Information and Education

      HCFA will prepare and distribute a comprehensive set of brochures to all
      Medicare beneficiaries in the demonstration area explaining the features

 8                GAOMEHS-97-154R         Medicare   HMO Competitive     Bidding
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      of Medicare fee-for-service, Medigap, and managed care programs. The
      materials will include a chart comparing coverage under fee-for-service
      Medicare with the benefit packages and premiums for all managed care
      plan options available in the area.

      Beneficiaries may obtain additional information from HCFA-sponsored
      counselors.

      Information provided by HCFA and HCFA-sponsored counselors will help
      Medicare beneficiaries make informed choices from among all available
      health coverage options, but will not advocate either managed care or
      fee-for-service.

HMOs OBJECT TO PARTICUL4R ASPECTS OF PLANNED
DEMONSTRATION, NOT COMPETITIVE BIDDING CONCEPT

AAHP, Denver-area HMOs, and other groups have raised objections to HCFA’s
planned demonstration in a lawsuit seeking to enjoin the agency from
implementing the demonstration project. We met with representatives of AAHP
to obtain their views on the demonstration. At our meeting, the AAHP
representatives stated that they are not opposed to the concept of competitive
bidding. In fact, AAHP is now assembling a technical work group that will
develop industry suggestions for implementing Medicare competitive bidding.
However, they raised concerns about HCFA’s authority and the process by
which HCFA is implementing the Denver demonstration

In their lawsuit and in discussions with us, AAHP officials objected to HCFA’s
intention to prohibit health plans that do not submit bids from serving Denver-
area Medicare beneficiaries. Specifically, they believe that HCFA has not
properly exercised statutory and regulatory authority by refusing to renew
contracts of health plans in the demonstration area and excluding plans from
the Medicare program for the duration of the demonstration if they choose not
to participate. These officials make several arguments in support of their view.
AAHP officials said that historically HCFA has entered into contracts with
health plans that meet statutory and regulatory criteria and has routinely
renewed those contracts. They believe that the addition of a requirement that
plans must participate in a competitive bidding demonstration as a condition of
receiving or renewing a Medicare contract amounts to a change in the current
Medicare regulations governing HMO participation that is unlawful because it is
being made outside the normal rule-making process.



9                GAO/HEHS-97-154R       Medicare   HMO Competitive      Bidding
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AAHP officials said they do not question HCFA’s authority to establish a
competitive pricing demonstration. However, they believe that the existing
demonstration authority does not relieve HCFA of its obligation to meet the
requirements of the rule-making process if the agency wishes to condition the
renewal or issuance of Medicare HMO contracts on participation in the
demonstration.

In our 1995 report, Medicare Managed Care: Growing Enrollment Adds
Urgencv to Fixing HMO Pavment Problem,15 we recognized that HCFA’s
legislative authority to conduct demonstration projects does not address ,
managed care options explicitly. In our report, we did not conclude that the
agency, as a matter of law, lacked sufficient authority to conduct a
demonstration like that planned for Denver. We did say, however, that in the
interest of facilitating such demonstrations the Congress should consider
enacting legislation to give HCFA explicit authority to mandate HMO
participation.

According to AAHP officials, HCFA did not sufficiently consult with area plans
before finalizing the design of the demonstration. HCFA did allow some time
for HMOs to comment on the demonstration’s design, and in response to their
comments, modified certain aspects of the demonstration. Regarding HCFA’s
decision to use a third-party enrollment counselor, AAHP officials expressed
concern that introducing competitive bidding and new enrollment arrangements
simultaneously would result in problems with processing new enrollees. These
officials also questioned whether HCFA would be able to isolate and assess the
independent effects of competitive bidding and the use of third-party enrollment
counselors. We have not, however, analyzed the merits of the HMO& concerns,
whether they had sufficient time to comment, or whether HCFA’s resulting
 modifications were adequate.

AAHP officials also stated that area plans did not have adequate information on
key aspects of the demonstration before the bidding deadline. Such
information, they believe, includes demographic data upon which to base the
bid price. AAHP officials said the plans also want to know which factors HCFA
intends to consider in evaluating the bids and determining the government
contribution. However, HCFA has informed plans that the agency will consider




 15GAO/HEHS-96-21,Nov. 8, 1995.

 10               GAOMEHS-97-154R        Medicare   HMO Competitive     Bidding
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several factors, such as the capacity constraints of low bidders, in determining
the government contribution.‘6

Finally, AAHP officials said that in the private sector, market forces have
operated to promote cost-effective coverage and quality care when employers
have offered all coverage options--managed care and fee-for-service-under the
same rules. AAHP officials suggested that the mechanisms for promoting
competition between private health plan options and the Medicare fee-for-
service program be considered in any competitive pricing demonstration.
Inclusion of the Medicare fee-for-service program would be impractical under
Medicare’s current structure, because no single entity exists that could
represent all the fee-for-service providers. However, a description of covered
services and cost-sharing for the fee-for-service option is included in the
comparative information that HCFA will distribute in the demonstration area.

CONCLUSIONS

Medicare’s current system for setting HMO payment rates, which is based on
local fee-for-service spending, generates excess payments to some health plans.
These excess payments are substantial (perhaps $2 billion annually) and are
likely to grow as the managed care program grows. Alternative payment
mechanisms could reduce excess HMO payments and help Medicare-and
taxpayers-realize the savings potential of managed care. Competitive bidding is
one such alternative mechanism that might be successfully employed in certain
markets.

To succeed, a competitive bidding system must provide health plans an
incentive to submit bids that reflect no more than the plans’ expected costs and
a reasonable profit. Allowing plans to choose to remain outside of the
competitive bidding process and collect the AAPCC-based rate, while other area
plans submit competitive bids, would unravel the fundamental incentives of          .I
competitive bidding. Similarly, plans that bid, but bid high relative to their


“HCFA’s bid solicitation package informed plans that the level of government
contribution would “depend on many factors, including the . . . distribution of
bids, the capacity of low and high bidders, and other factors.” HCFA also told
plans that the government contribution would be set above the lowest bid, but
below the 1998 AAPCC. HCFA’s stated goal was to set a level of government
contribution “that yields some savings to the government, while maintaming the
ability of efficient health plans to offer the [demonstration’s] standard benefit
package at a low or zero premium.”

11                GAO/HEHS-97-154R        Medicare   HMO Competitive      Bidding
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competitors, must face some consequence. The mechanism proposed by HCFA
for the Denver demonstration (and recommended by PPRC) is to require high
bidders to charge beneficiaries a premium-making it harder for high bidders to
gain market share. This is a much weaker consequence than excluding high
bidders from the marketplace-as is done in the Arizona Medicaid program.
However, HCFA’s mechanism has the advantage of preserving the widest
possible choice of plans for Medicare beneficiaries.

We recognize that HCFA’s legislative authority does not explicitly address the
type of competitive bidding demonstration planned for Denver. HCFA may
already possess the necessary authority; however, in the interest of facilitating
demonstrations that test new methods of paying HMOs, including competitive
bidding, we continue to believe-as we stated in our 1995 report-that the
Congress should consider enacting legislation to give HCFA explicit authority to
mandate HMO participation in demonstration projects.

AGENCY COMMENTS

We made draft copies of this correspondence available for review by officials at
HCFA and AAHP. These officials suggested some changes, and we modified
the text accordingly. AAHP officials stated that, with their changes
incorporated, the draft accurately reflected their concerns about the
demonstration.


As agreed with your office, we will make copies of this letter available to other
interested parties.

Please call either James C. Cosgrove, Assistant Director, at (202) 512-7029 or
me at (202) 512-7114 if you or your staff have any questions concerning this
letter. Charles A. Walter and Stefanie G. Weldon also contributed to this letter.

Sincerely yours,



William J. Scanlon
Director, Health Financing and
 Systems Issues




 12                GAOLHEHS-97-154R       Medicare   HMO Competitive      Bidding
ENCLOSURE I                                                              ENCLOSURE I


                   SELECTED PLANNING AND DESIGN EVENTS
               FOR HCFA’S COMPETITIVE PRICING DEMONSTRATION

 Time frame      Event
 1989            HCFA funds research at University of Minnesota on options for
                 HMO payment.
                        J
 1990            HCFA contractor provides research report, “Issues Regarding Health
                 Plan Payments Under Medicare and Recommendations for Reform.”
 1993            HCFA contractor provides research report, “Development of the
                 Competitive Pricing Proposal for Medicare.”
 1995
 May             HCFA’s request for proposal (RFP) solicits contractor design
                 assistance for pricing demonstration. Second RFP issued for
                 consumer information and enrollment component of demonstration.
 September       HCFA contracts with Abt Associates and University of Minnesota to
                 help develop and implement Medicare Competitive Pricing
                 Demonstration. HCFA also contracts with Benova, Inc., for
                 information design and enrollment strategy.
 December        HCFA contractor provides research report, “Alternative Models of
                 Competitive Pricing for Medicare.” ’
 1996
 January         University of Minnesota contractor provides research report,
                 “Selection of Sites for a Medicare Competitive Pricing
                 Demonstration,” proposing 16 candidate sites.
 February        Contractor’s (Abt Associates) Technical Expert Panel and HCFA
                 consultants meet to review draft competitive pricing demonstration
                 design report.
                 HCFA’s contractor, Benova, Inc., convenes panels representing
                 beneficiaries and health plans for input on information and
                 enrollment design.
 March/April     HCFA narrows possible sites and asks for suggestions from AAHP.
 May             HCFA announces Baltimore as first site for a 1997 pricing
                 demonstration.

13                        GAO/HEHS-97-154R       Medicare   HMO Competitive      Bidding
ENCLOSURE I                                                            ENCLOSURE I


 June         HMOs and state and federal legislators rake concerns about
              Baltimore demonstration.
 August       Abt Associates issues final design report, “Medicare Competitive
              Design Demonstration Design Report.”
              Benova, Inc., provides beneficiary-tested information prototypes and
              proposed enrollment process design.
 September    HCFA announces it will not pursue competitive pricing in Baltimore
              at this time.
 October      HCFA begins internal consideration of alternative demonstration
              site.
 1997




              Colorado congressional representatives, governor, and Department
                                                        ons send letters to HCFA




                                                            emporary res




14                      GAO/HEHS-97-154R       Medicare   HMO Competitive        Bidding
    ENCLOSUREII                                                                 ENCLOSURE II


           HCFA CONTRACTORS AND CONSULTANTS ON COMPETITIVE PRICING

    The contractors and consultants listed in this enclosure assisted HCFA in its research on
    competitive pricing design. Their positions and organizational affiliations were current at
    the time they were enlisted to advise.

    CONTRACTORS

    Abt Associates - Prime Contractor
    Robert Coulam - Project Director

    University of Minnesota - Subcontractor to Abt Associates
    Roger Feldman, Professor - Project Codirector
    Bryan Dowd, Professor - Project Codirector

    CONSULTANTS

    Provided input to design reports and commented on all documents given to HCFA.

    John Klein - Consultant, Health Strategies Group, Inc.

    Sheila Leatherman - Vice President, United HealthCare Corporation

    Barbara Lapwing - Vice President, Covantage Managed Benefit Solutions

    Doug Wholey - Associate Professor, Carnegie-Mellon University

    Harry Sutton - Consulting Actuary

    TECHNICAL EXPERT PANEL

    Reviewed the bidding design report and attended design meeting held February 29, 1996,
    with HCFA.

    Jon Gabel - Director of Research, Group Health Association of America (now American
    Association of Health Plans)

    Bruce Davidson - Senior Researcher, Value Health Sciences

    Joyce Dubow - Senior Analyst, American Association of Retired Persons

I




    15                          GAO/HEHS-97-154R        Medicare   HMO Competitive     Bidding
ENCLOSURE II                                                               ENCLOSURE II


Larry Levitt - Senior Analyst, Lewin-VHI

Tom Elkin* - Assistant Executive Officer, Health Benefit Services, California Public
Employees’ Retirement System

Alain Enthoven* - Professor, Stanford University

Mark Pauly* - Professor, University of Pennsylvania




 * Did not attend Technical Expert Panel meeting, but provided written comments.

 (101573)



 16                          GAOLHEHS-97-154R         Medicare   HMO Competitive       Bidding
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