Medicare + Choice: New Standards Could Improve Accuracy and Usefulness of Plan Literature

Published by the Government Accountability Office on 1999-04-12.

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

                 United States General Accounting Office

GAO              Report to Congressional Requesters

April 1999
                 New Standards Could
                 Improve Accuracy and
                 Usefulness of Plan

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division


      April 12, 1999

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

      The Honorable Jack Reed
      United States Senate

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

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

       A plan is a package of specific health benefits, out-of-pocket costs, and terms of coverage. An MCO is
      an entity that offers one or more plans. The Medicare+Choice program also allows non-MCO plans,
      such as private fee-for-service plans and medical savings account plans, to participate. However, as of
      Mar. 1999, no non-MCO plans had joined the program.
       “Member literature” includes benefit summary brochures, policy booklets, member handbooks, and
      plan letters regarding benefit changes.

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

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

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

                   Although HCFA had reviewed and approved the materials we examined, all
Results in Brief   16 MCOs in our sample from four HCFA regions had distributed materials
                   containing inaccurate or incomplete benefit information. Almost half of
                   the organizations distributed materials that incorrectly described benefit
                   coverage and the need for provider referrals. For example, materials from
                   five MCOs stated that beneficiaries needed a physician’s referral to obtain
                   an annual screening mammogram. In fact, Medicare policy explicitly
                   prohibits MCOs from requiring a referral for this service. In addition, one
                   MCO marketed (and provided) a prescription drug benefit that was
                   substantially less generous than the plan had agreed to provide in its
                   Medicare contract. Moreover, some MCOs did not furnish complete
                   information on plan benefits and restrictions until after a beneficiary had
                   enrolled. Other MCOs never provided full descriptions of plan benefits and
                   restrictions. Although not fully disclosing benefit coverage may hamper
                   beneficiaries’ decision-making, neither practice violates HCFA policy.
                   Finally, as we have reported previously,4 it was difficult to compare
                   available options using member literature because each MCO independently
                   chose the format and terms it used to describe its plan’s benefit package.
                   In contrast, the Federal Employees Health Benefits Program’s (FEHBP)

                    “Marketing materials” include any material managed care plans distribute to Medicare beneficiaries.
                   In addition to member literature, these materials include radio, newspaper, and television
                    Medicare: HCFA Should Release Data to Aid Consumers, Prompt Better HMO Performance
                   (GAO/HEHS-97-23, Oct. 22, 1996).

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

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

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

                         Medicare is the national health insurance program for those aged 65 and
Background               older and certain disabled individuals. In 1998, Medicare insured
                         approximately 39 million people. All beneficiaries can receive health care
                         through Medicare’s traditional fee-for-service arrangement, and many
                         beneficiaries live in areas where they also have the option of receiving
                         their health care through a managed care plan. Of the almost 7 million
                         Medicare beneficiaries enrolled in managed care as of March 1999, nearly
                         all were enrolled in plans whose MCOs receive a fixed monthly fee from
                         Medicare for each beneficiary they serve. Total Medicare spending is
                         expected to reach about $216 billion in fiscal year 1999, with managed
                         care’s portion reaching approximately $37 billion.

Balanced Budget Act      The Balanced Budget Act of 19975 (BBA) established the Medicare+Choice
Required Major Program   program as a replacement for Medicare’s previous managed care program.
Changes                  Medicare+Choice was intended to expand beneficiaries’ health plan
                         options by permitting new types of plans, such as preferred provider
                         organizations and provider-sponsored organizations, to participate in

                          P.L. 105-33.

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

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

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

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

                            Individuals may enroll in a Medicare+Choice plan when they first become eligible for Medicare
                           regardless of the time of year.
                            Beneficiaries will have 6 months in 2002 and 3 months thereafter to change their enrollment choices.
                           Exceptions to these limitations will be made if an organization materially misrepresents the plan or
                           substantially violates a material provision of its contract.
                            HCFA approves plan benefit packages through a process formally known as the adjusted community
                           rate proposal process, which is intended to ensure that Medicare does not pay MCOs more than a
                           commercial purchaser would pay for the same benefits, after adjusting for differences in Medicare
                           beneficiaries’ health status and use of services. If Medicare’s payment is higher, the MCO typically
                           adds benefits to offset the difference. MCOs cannot charge fees—in the form of monthly premiums,
                           copayments, or other cost-sharing—that are higher than what a beneficiary would likely pay under
                           traditional Medicare.

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

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

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

 42 CFR, part 422.80.

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

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

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

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

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

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

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

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

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

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

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

Figure 2: Plan Information Available to Medicare Beneficiaries

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

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

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

Beneficiaries Were Not   We found significant errors and omissions in the plans’ member literature
Assured Accurate Plan    that MCOs distributed to beneficiaries. For example, effective January 1998,
                         HCFA required organizations to cover annual screening mammograms and
                         to permit beneficiaries to obtain this service without a physician’s referral.
                         Also, MCOs were required to notify beneficiaries of this new Medicare
                         benefit.12 Materials from five MCOs, however, explicitly stated that
                         beneficiaries must obtain physician referrals to obtain screening
                         mammograms. (See fig. 3 for three examples.) Member literature from five
                         other organizations failed to inform beneficiaries of their right to self-refer
                         for this service.

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

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

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

                                                                                                  (Figure notes on next page)

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

Note: Emphasis added.

Sources: For requirements, HCFA Operational Policy Letter #57; for examples, various MCOs’
member literature.

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

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

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

Up-to-Date Plan         Officials from several MCOs told us that their organizations typically issue a
Information Was Not     member policy booklet—a document that discloses the details of a plan’s
Always Available When   benefit coverage, benefit restrictions, and beneficiary rights—after a
                        beneficiary enrolls. Moreover, MCOs often provided enrollees with
Beneficiaries Made      outdated member policy documents. For example, one MCO failed to
Enrollment Decisions    provide enrollees with a current member policy document until
                        August 1998—8 months after the start of the new benefits year.

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

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

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

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

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

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

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

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

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

                          Page 13                                           GAO/HEHS-99-92 Oversight of Plan Information

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

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

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

                       Page 14                                             GAO/HEHS-99-92 Oversight of Plan Information

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

                                          Plan documents contradict each other regarding covering nonformulary drugs.

                                         Source: GAO analysis of MCO member literature.

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

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

                                         Page 15                                       GAO/HEHS-99-92 Oversight of Plan Information

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

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

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

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

                         Page 16                                          GAO/HEHS-99-92 Oversight of Plan Information

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

              Beneficiaries who enrolled or considered enrolling in the plans we
Conclusions   reviewed were not well-served by plans’ efforts to produce member
              materials or HCFA’s review of them. The information that plans distributed
              was often confusing and hard to compare. Some plans distributed
              inaccurate or incomplete information or provided the information after
              beneficiaries had made their enrollment decisions, when it was less useful.
              These problems significantly limited beneficiaries’ ability to make
              informed decisions about their health plan options. Moreover, some
              beneficiaries may have been denied health care coverage to which they
              were entitled or required to pay unexpected out-of-pocket fees. In
              contrast, each FEHBP plan must provide prospective enrollees with a single,
              comprehensive brochure to facilitate comparisons and informed
              enrollment choices.

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

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

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

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

                       •   Require MCOs to produce one standard, FEHBP-like document for each plan
                           that completely describes plan benefit coverage and limitations, and
                           require MCOs to distribute this document during sales presentations and
                           upon request.
                       •   Fully implement HCFA’s new contract form for describing plans’ benefit
                           coverage, the PBP, for the 2001 contract submissions to facilitate the
                           collection of comparable benefit information and help ensure full
                           disclosure of plans’ benefits.
                       •   Develop standard forms for appeals and enrollment.
                       •   Take steps to ensure consistent application of the agency’s marketing
                           material review policy.

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

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

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

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

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

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

William J. Scanlon
Director, Health Financing
  and Public Health Issues

Page 22                              GAO/HEHS-99-92 Oversight of Plan Information
Page 23   GAO/HEHS-99-92 Oversight of Plan Information

Letter                                                                                              1

Appendix I                                                                                         26
Scope and
Appendix II                                                                                        27
Comments From the
Health Care Financing
Figures                 Figure 1: HCFA’s Process for Reviewing and Approving                        6
                          Marketing Materials
                        Figure 2: Plan Information Available to Medicare Beneficiaries              8
                        Figure 3: Plan Referral Requirements for Screening                         10
                          Mammography Contradict Medicare Coverage
                        Figure 4: Multiple Plan Documents Needed to Answer Basic Drug              15
                          Benefit Questions


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

                        Page 24                           GAO/HEHS-99-92 Oversight of Plan Information
Page 25   GAO/HEHS-99-92 Oversight of Plan Information
Appendix I

Scope and Methodology

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

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

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

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

Comments From the Health Care Financing

              Page 27      GAO/HEHS-99-92 Oversight of Plan Information
Appendix II
Comments From the Health Care Financing

Page 28                                   GAO/HEHS-99-92 Oversight of Plan Information
Appendix II
Comments From the Health Care Financing

Page 29                                   GAO/HEHS-99-92 Oversight of Plan Information
Appendix II
Comments From the Health Care Financing

Page 30                                   GAO/HEHS-99-92 Oversight of Plan Information
                Appendix II
                Comments From the Health Care Financing

Now on p. 9.

Now on p. 11.

                Page 31                                   GAO/HEHS-99-92 Oversight of Plan Information
                Appendix II
                Comments From the Health Care Financing

Now on p. 14.

                Page 32                                   GAO/HEHS-99-92 Oversight of Plan Information
           Appendix II
           Comments From the Health Care Financing

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