Medicare+Choice: HCFA Actions Could Improve Plan Benefit and Appeal Information

Published by the Government Accountability Office on 1999-04-13.

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

                          United States General Accounting Office

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

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

                          HCFA Actions Could
                          Improve Plan Benefit and
                          Appeal Information
                          Statement of William J. Scanlon, Director
                          Health Financing and Public Health Issues
                          Health, Education, and Human Services Division

Medicare+Choice: HCFA Actions Could
Improve Plan Benefit and Appeal
             Mr. Chairman and Members of the Committee:

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

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

             The importance of plan information will grow as the Medicare+Choice
             program, created by BBA, generates an expanded array of health plan
             alternatives to the traditional fee-for-service arrangement and attracts
             more and more beneficiaries to those options. In just the last 3 years,
             Medicare managed care enrollment has nearly doubled. Approximately
             7 million of Medicare’s 39 million beneficiaries (more than 17 percent) are

              A plan is a package of specific health benefits, fees, and terms of coverage. An MCO is an entity that
             offers one or more plans.
              Plans may charge other fees in addition to a monthly premium. However, plans cannot charge
             fees—in the form of monthly premiums, copayments, or other cost sharing—that are higher than what
             a beneficiary would likely pay under traditional Medicare.

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Medicare+Choice: HCFA Actions Could
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currently enrolled in managed care plans. Informed choices will be
particularly important as BBA phases out the opportunity for beneficiaries
to disenroll from a plan on a monthly basis and moves toward the private
sector practice of annual reconsideration of plan choice.

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

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

In our study of the appeals process, we found that when MCOs deny plan
services or payment, they do not always inform beneficiaries of their
appeal rights. Sometimes MCOs issue denial notices that do not contain all
the information that HCFA requires. We also found that some MCOs delay
issuing denial notices until the day before discontinuing services, such as

 Medicare+Choice: New Standards Could Improve Accuracy and Usefulness of Plan Literature
(GAO/HEHS-99-92, Apr. 12, 1999), and Medicare Managed Care: Greater Oversight Needed to Protect
Beneficiary Rights (GAO/HEHS-99-68 Apr. 12, 1999).
 We examined the membership literature for 26 plans offered by 16 MCOs in four HCFA regions. We
focused our review on three benefits: ambulance services, routine mammograms, and outpatient
prescription drug benefits. A complete description of our scope and methodology is contained in
 FEHBP is administered by the Office of Personnel Management (OPM).

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                           Medicare+Choice: HCFA Actions Could
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                           skilled nursing care. This delay can increase a beneficiary’s potential
                           financial liability should the beneficiary appeal the plan’s decision and

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

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

BBA Sought to Widen        In enacting BBA, the Congress sought to widen beneficiaries’ health plan
Health Plan Choices and    options. BBA permitted new types of organizations—such as
Increase Availability of   provider-sponsored organizations and preferred provider
                           organizations—to participate in Medicare. It also changed Medicare’s
Comparable Information     payment formula to encourage the wider availability of health plans.

                           BBA also mandated that HCFA make available certain information to
                           increase beneficiaries’ awareness of their health plan options. The law
                           directed HCFA to provide beneficiaries with general information about
                           managed care plans through a variety of means, including a toll-free
                           telephone number to answer general questions and an Internet site to

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                          Medicare+Choice: HCFA Actions Could
                          Improve Plan Benefit and Appeal

                          provide some basic comparative information about the various health care
                          options available. HCFA is also required to mail basic comparative and
                          other information to all beneficiaries. However, for detailed information
                          about specific managed care plans, all of these resources direct
                          beneficiaries to the MCOs that offer those plans—the only source for
                          specific plan information.

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

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

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

                          A beneficiary first appeals to his or her health plan’s MCO by asking it to
                          reconsider its initial decision. If the MCO’s reconsidered decision is not
                          fully favorable to the beneficiary, the case is automatically turned over to
                          the Center for Health Dispute Resolution (CHDR)—a HCFA contractor that
                          reviews the decision and may overturn or uphold it. Beneficiaries who are

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                              Medicare+Choice: HCFA Actions Could
                              Improve Plan Benefit and Appeal

                              dissatisfied with CHDR’s decision have additional appeal options, provided
                              certain requirements are met. A member who loses an appeal is
                              responsible for the cost of any disputed health care services that were
                              obtained. HCFA reviews each MCO’s plan appeals process as part of its
                              biennial evaluation of each organization’s compliance with HCFA

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

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

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                                        Medicare+Choice: HCFA Actions Could
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Figure 1: Examples of Plan Referral Requirements for Screening Mammogram Contradicting Medicare Coverage

                                        Note: Sources as indicated in figure. Emphasis added.

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

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

Some MCOs Did Not          Some MCOs did not disclose important plan information, including
Provide Complete Benefit   information about Medicare required benefits, in documents designed to
Information                provide detailed plan information. For example, most MCOs we reviewed
                           did not provide detailed information about ambulance services—a
                           Medicare-required benefit. One MCO did not mention ambulance service
                           coverage at all in any of the documents we reviewed. Three MCOs stated
                           that ambulance services were covered “per Medicare regulations” but did
                           not explain Medicare’s coverage. Most of the other MCOs’ documents

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

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Medicare+Choice: HCFA Actions Could
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provided general descriptions of their plans’ ambulance coverage but did
not explain the extent of the coverage.

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

constitutes only a summary of the [plan]. . . . The contract between HCFA and the [MCO] must
be consulted to determine the exact terms and conditions of coverage.

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

Some MCOs we reviewed provided detailed benefit information only after
beneficiaries had enrolled. The information packages distributed by
several MCOs we reviewed stated that beneficiaries would receive
additional, detailed descriptions of plan benefits, costs, and restrictions
following enrollment. In addition, four MCOs did not provide 1998 benefit
details until several months after the new benefits took effect.7 In fact, one
MCO did not distribute its detailed benefit information until August—8
months after the benefit changes had taken effect.

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

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                           Medicare+Choice: HCFA Actions Could
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Plan Benefit Information   The membership literature we reviewed varied considerably in
Was Not Readily            terminology, depth of detail, and format. These variations are similar to
Comparable                 those that we encountered in previous reviews undertaken for this
                           Committee and greatly complicated benefit package comparisons.8 The
                           lack of clear and uniform benefit information likely impedes informed
                           decisionmaking. HCFA officials in almost every region noted that a standard
                           format for key membership literature, along with clear and standard
                           terminology, would help beneficiaries compare their health plan options.

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

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

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                                         Medicare+Choice: HCFA Actions Could
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Figure 2: Multiple Plan Documents Needed to Answer Basic Drug Benefit Questions

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

                                         Source: GAO analysis of MCO plan membership literature.

                                         It was also not easy to know where to look for the information. For
                                         example, the answer to our question about whether a plan used a drug
                                         formulary was found in Plan A’s summary of benefits, in Plan B’s Medicare
                                         prescription drug rider, and in Plan C’s contract amendment. Plan C’s
                                         materials required more careful review to answer the question because the
                                         membership contract indicated the plan did not provide drug coverage.
                                         However, an amendment—included in the member contract as a loose
                                         insert—listed coverage for prescription drugs and the use of a formulary.

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                            Medicare+Choice: HCFA Actions Could
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Each FEHBP Plan             To avoid the types of problems found in Medicare MCOs’ membership
Distributes a Single,       literature, OPM requires each participating health plan to describe, in a
Standard, Comprehensive     single document, its benefit package—that is, covered benefits,
                            limitations, and exclusions—and to include a benefit summary in a
Benefit Booklet             standardized language and in OPM’s prescribed format. OPM officials update
                            the mandatory language each year to reflect changes in the FEHBP
                            requirements and to respond to organizations’ requests for improvements.
                            Finally, OPM requires health plans to distribute plan brochures prior to the
                            FEHBP annual open enrollment period so that prospective enrollees have
                            complete information on which to base their decisions. OPM officials told
                            us that all participating plans publish brochures that adhere to these

                            Plan membership literature is required to contain information on
Adequate Information        beneficiaries’ appeal rights. In addition, beneficiaries are supposed to be
About Appeals               informed of their appeal rights when they receive a plan’s written notice
Process and                 denying a service or payment. HCFA requires denial notices to contain
                            information telling beneficiaries where and how to file an appeal.
Beneficiary Rights Is       Furthermore, denial notices are required to state the specific reason for
Often Not Provided          the denial because vaguely worded notices may hinder beneficiary efforts
                            to construct compelling counterarguments. Vague notices may also leave
                            beneficiaries wondering whether they are entitled to the requested
                            services and should appeal. Finally, HCFA regulations state that whenever
                            MCOs discontinue plan services, such as skilled nursing care, they must
                            issue timely denial notices to beneficiaries.

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

Denial Notices Are          Reviews by HCFA, studies by the Department of Health and Human
Sometimes Incomplete,       Services’ Office of Inspector General (OIG), as well as studies we
Never Issued, or Do Not     conducted found numerous instances of incomplete or missing denial
                            notices. In 1997, HCFA performed monitoring visits to 90 MCOs; about
Indicate Specific Reasons   13 percent of these MCOs were cited for failing to issue denial notices. In
for the Denial              addition, nearly one-quarter of the 90 MCOs were cited for issuing denial
                            notices that did not adequately explain beneficiaries’ appeal rights. Two

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                            Medicare+Choice: HCFA Actions Could
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                            studies by the OIG, using different methodologies, provide additional
                            evidence that beneficiaries are not always informed of their appeal rights.9
                            In one study, the OIG surveyed beneficiaries who were enrolled or had
                            recently disenrolled from a managed care plan. According to the survey
                            results, 41 respondents (about 10 percent) said that their health plans had
                            denied requested services. Of these, 34 (83 percent) of the respondents
                            said that they had not received the required notice explaining the denial
                            and their appeal rights.

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

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

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

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

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

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

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

HCFA’s Monitoring          Inadequate monitoring of MCOs’ communications with beneficiaries—both
Practices Allowed          about plan benefit packages and appeal rights—allowed the problems we
Problems to Go             observed to go uncorrected. For example, we found instances where MCOs
                           agreed to make HCFA required changes, but the final printed documents did
Uncorrected                not incorporate the changes. Because HCFA staff generally do not receive

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                             copies of the printed documents, they are often unaware as to whether
                             MCOs have made the required corrections.

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

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

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

                             The lack of information standards also increased the amount of time
                             needed to review and approve plan documents and increased the
                             likelihood of undetected errors. Agency staff said that they could do a
                             better job checking plan membership literature for accuracy and
                             completeness if every MCO presented its plan information in a common
                             format and used standard terminology. Staff also said they spend a

                             Page 14                                                     GAO/T-HEHS-99-108
                          Medicare+Choice: HCFA Actions Could
                          Improve Plan Benefit and Appeal

                          considerable amount of time reviewing plan documents that could be
                          standard administrative forms—such as member enrollment
                          applications—and thus had less time to spend reviewing important
                          documents describing plan benefits.

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

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

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

                          Page 15                                                     GAO/T-HEHS-99-108
              Medicare+Choice: HCFA Actions Could
              Improve Plan Benefit and Appeal

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

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

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

(101803)      Page 16                                                     GAO/T-HEHS-99-108
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