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Testimony on Medicare+Choice Implementation by Michael Hash
Deputy Administrator
Health Care Financing Administration
U.S. Department of Health and Human Services

Before the Senate Finance Committee
July 30, 1998

Chairman Roth, Senator Moynihan, Committee members, thank you for inviting us here today to talk about our efforts to implement the Medicare+Choice program and educate beneficiaries about the many new options that will be available to them. This marks the greatest change in Medicare in the program's 33 year history, and we are eager to proceed in a thoughtful and responsible manner.

We have made substantial progress in implementing the Medicare+Choice program and the many other changes enacted through the Balanced Budget Act of 1997. We have completed 189 of this historic law's more than 300 individual provisions affecting our programs. Since our new administrator was confirmed last November, we have published 64 regulations, including major Balanced Budget Act provisions such as the Medicare+Choice regulation. We have approved Children's Health Insurance Plans to cover a projected two million additional children for nearly half the states. We have issued 65 program guidance letters to state Medicaid and child health officials, 49 of which are related to the Balanced Budget Act.

In addition to our Balanced Budget Act efforts, we have been working closely with state insurance regulators in monitoring enforcement of important Health Insurance Portability and Accountability Act provisions. We delivered 10 official Reports to Congress. We have made major strides in improving program integrity. And we made essential progress in aggressively addressing the Year 2000 issue for Medicare and Medicaid information systems.

The Medicare+Choice program provides important new opportunities for beneficiaries. They will have more options than ever before. They can receive care through plans run by providers rather than insurers. They can choose plans that cover prescriptions and other services not included in traditional Medicare. They can be offered the entire range of options in the private sector today, and choose a plan that matches their own personal values. This is an historic step forward for the Medicare program. We take our responsibility to help both plans and beneficiaries understand these new opportunities very seriously.

We have accomplished a great deal to implement the Medicare+Choice program, including publication of all Balanced Budget Act-mandated Medicare+Choice regulations.

• In September 1997 we issued 1998 plan payment rates based on the new methodology in the Balanced Budget Act which breaks the previous link to local fee-for-service spending, and establishes a minimum payment amount. This new methodology applies to existing Medicare HMOs as well as to the new types of Medicare+Choice plans. In March we issued the 1999 plan payment rates.
  
  
• In April we published a regulation establishing the definition of a Provider Sponsored Organization.
  
• In May we published a regulation identifying the solvency standards for Provider Sponsored Organizations, which had been developed through a careful and well balanced negotiated rule making process with broad representation from interested parties.
  
  
• In May we published details of how Provider Sponsored Organizations can obtain a federal waiver from state licensure requirements to participate as a Medicare+Choice plan.
  
  
• In May we held the first meeting of the Medicare Competitive Pricing Advisory Commission, chaired by General Motors Health Care Initiative Executive Director James Cubbin. This Commission will recommend key design features of a Medicare managed care competitive pricing initiative.
  
  
• In June we published the remaining Medicare+Choice regulations which detail requirements for plans and incorporate important new protections for beneficiaries and providers. New types of plans, including Provider Sponsored Organizations (PSOs), Preferred Provider Organizations (PPOs), and Private Fee-For-Service plans (PFFS). Plans can now submit applications to participate in the Medicare+Choice program.
  
  
• In July we began a "train-the-trainers" program for 700 individuals across the country in our education partner organizations. The goal is for them to teach others in their organizations and communities how to help beneficiaries understand their new options.
  
  
• We have launched a consumer-friendly Internet site, Medicare.gov, where beneficiaries can find direct comparisons of the benefits and costs of plans available in their community.
  
  

We have several additional steps scheduled, as well.

• This November we will conduct the first open enrollment period for Medical Savings Account plans.
  
  
• Also this November, we will begin mailing information, running a toll-free call center, and providing other educational services to beneficiaries to help them understand the changes in the program.
  
  
• Medicare+Choice plans.
  
  
• By March 1999 we expect to report to Congress our plans for "risk adjusting" plan payment rates. Risk adjustment will help account for the health status of individual beneficiaries and curb any incentive to avoid enrolling those with chronic or high-cost care needs.
  
  
• We will work with beneficiaries and health plans to standardize the format and language used in plan summaries of benefits.
  
  
• In November 1999 we will conduct the first annual coordinated open enrollment period into all Medicare+Choice plans.

OUTREACH TO PLANS

There is substantial interest among health plans in participating in the Medicare+Choice program. We have scheduled a series of outreach sessions for existing plans and those interested in offering Medicare+Choice plans.

• An outreach session held July 13-14 in Baltimore had approximately 350 attendees.
  
  
• An outreach session held July 21-22 in Chicago had more than 400 attendees.
  
  
• An outreach session held July 28-29 in Los Angeles had more than 400 attendees.
  
  
• A special outreach session held July 15 for those interested in offering Medical Savings Account plans was attended by representatives from 11 organizations.
  
  
• Another special outreach session on Medicare+Choice quality improvement requirements is scheduled for August 3-4 in Baltimore with 400 attendees expected.

Also, on July 17, we issued the first federal waiver for a Provider Sponsored Organization so that it can apply to participate in Medicare+Choice without a state license. .

RIGHTS AND PROTECTIONS

The Medicare+Choice regulation incorporates important rights and protections for beneficiaries, as well as providers. They address the most common consumer complaints about health plans.

• Appeal rights: Time frames are significantly tightened for decisions on appeals of decisions to deny care. Plans must issue initial decisions within 14 days, down from a previous maximum of 60 days. If a beneficiary appeals the initial decision, the plan must issue a ruling within 30 days, also down from 60 days. Plans must rule within 72 hours on denial-of-care decisions, including terminations of care, that could jeopardize the life, health or ability of the enrollee to regain maximum function. For all service-related decisions, extensions of up to 14 days may be permitted if the enrollee asks or the organization justifies a need and explains how the delay is in the enrollee's interest. The rules also sets the same 72 hour and 30 day limits on Medicare's independent appeal body, where appeals are automatically forwarded when a plan denies a beneficiary request.
  
  
• Protections from Gag Rules: Plans are prohibited from limiting what providers can tell patients about treatment options.
  
  
• Protections in the Emergency Room: Plans can charge no more than $50 copayments for emergency room visits. They must cover emergency room visits for situations that a "prudent layperson" would consider an emergency. And they must pay for any services needed to stabilize a patient until discharge, a plan physician arrives, or an emergency room physician agrees with a plan physician on transfer of the patient to another facility. They must return emergency room calls seeking care authorizations for post-stabilization care within one hour.
  
  
• Protections for Women: Women are guaranteed access without primary care referrals to women's health specialists in plan networks for women's routine and preventive care, such as Pap smears and breast exams.
  
  
• Protections for Preexisting Conditions: Plans may not discourage enrollment or deny, limit or condition the coverage because of medical history, genetic information, mental or physical illness, disability, or prior use of services.
  
  
• Protections for Serious, Complex Conditions: Patients with complex or serious medical problems are guaranteed direct access to specialists without a new primary care referral for each consultation in a given treatment plan.
  
  
• Protections for Cultural Differences and the Disabled: Plans must accommodate those with disabilities, diverse cultural backgrounds, and limited English or reading skills.
  
  
• Protections for Privacy: Plans must protect patient confidentiality, disclose records to patients, and may not sell enrollee names or addresses for any purpose.
  
  
• Protections from Fraud: Plan executives are required to certify that data they submit about enrollees and their health care usage are accurate. This helps ensure that adjustments in payment to plans based on enrollee health are accurate.
  
  
• Protections for Providers: Plans must explain decisions to cancel or refuse to sign contracts with physicians, and let physicians appeal decisions to remove them from networks. Plans also are prohibited from discriminating against any class of providers.
  
  
• Rights to Financial Information: Plans must provide beneficiaries, on request, data on their financial condition and on how they pay physicians.

MEDICARE+CHOICE BENEFICIARY EDUCATION

Among the most important facets in implementing the Medicare+Choice program is helping beneficiaries understand their options so they can make informed decisions. The Institute of Medicine held a conference of experts to examine this task and make recommendations on how we should proceed. I have attached to my testimony a letter from them outlining their recommendations. The IOM strongly recommended that we stagger mailings to allow for market testing, and that we emphasize to beneficiaries that they do not have to make any change.

Our own work with some 30 beneficiary focus group sessions, conducted by an outside contractor, Barents Group/Westat/Project HOPE/Sutton Social Marketing, also counsels against immediate nationwide mailing of detailed information to all beneficiaries. Based on this advice and experience, we have revised plans for the special information campaign called for in the Balanced Budget Act [1851(e)(3)(D)] for November 1998. This will allow us to refine our efforts before November 1999, when the first full-scale education campaign and mailing mandated by the Balanced Budget Act [1851(d)(2)] will occur.

We have an eight-point plan beginning this summer that includes:

1. beneficiary mailings;
2. toll-free telephone services;
3. internet activities;
4. a national train-the-trainer program;
5. a national publicity campaign;
6. state and community-based publicity and outreach campaigns;
7. enhanced beneficiary counseling from State Health Insurance Assistance Programs; and
8. targeted and comprehensive assessment of our education efforts.

We will first test the whole system, including the comprehensive handbooks and the toll free call center, in five states -- Arizona, Florida, Ohio, Oregon and Washington.

The handbooks will include detailed information on Medicare+Choice options, and be tailored to each market with side-by-side comparisons of costs and benefits for local plans. The call center will have personnel to answer questions about specific options. We plan to phase in call center access to another 25 percent of beneficiaries every three months, with full nationwide service by August 1999.

Outside the five pilot states we will send beneficiaries a bulletin outlining Medicare+Choice options and other useful information. It will stress that beneficiaries do not have to make any change. It will discuss assistance for low-income beneficiaries, new preventive benefits, and other changes. And it will tell how to obtain comparison data on plans in local markets.

The American Association of Retired Persons endorses this strategy. A July 2, 1998 letter, attached to my testimony, calls the decision "the right course of action under the circumstances."

EDUCATION CAMPAIGN COSTS

Our phased education campaign allows us to make wise use of scarce resources. As you know, $200 million was authorized for the first year of this education campaign, but only $95 million was appropriated by Congress. We are supplementing those funds with $19.2 million in funds from HCFA's program management and peer review organization budgets.

For FY 1998, the first year of the education campaign, we expect to spend:

• $30.2 million on printing and mailing materials to beneficiaries and outreach partners. We will spend $9.3 million of this to produce and mail the comprehensive booklet with localized plan comparison charts in the five test states, $13 million to mail the Medicare bulletin to beneficiaries in other states, $4 million to provide an initial enrollment package to new beneficiaries, and $3.9 million on materials for training outreach partners.
  
  
• $50.2 million on the toll-free call center. The call center operation will cost $38.2 million. Mailing printed comparison information on Medicare+Choice options in local markets to those who request them as the call center is phased into other states will cost $12 million.
  
  
• $22.3 million on program development. Evaluation of the education program will cost $2 million, fielding the Consumer Assessment of Health Plans survey will total $6.8 million, grants to State Health Insurance Assistance Programs will total $5 million, training outreach partners will cost $2.75 million. The rest will cover such activities as project integration and management and business requirements analysis.
  
  
• $9.9 million on community-based outreach activities, including health fairs.
  
  
• $1.5 million on the Internet site.

For the second year, FY 1999, an effective education campaign will cost $173 million. We propose to finance it by a combination of the full $150 million in user fees authorized in the Balanced Budget Act, plus $23 million from other agency accounts. We project spending:

• $50 million for printing and mailing the handbook and other materials;
  
  
• $68 million for the toll-free Call Center;
  
  
• $39 million for program evaluation, development and technology investments;
  
  
• $2 million for the Internet site,
  
  
• $14 million for health fairs and other community-based outreach.

Appropriation of only $95 million in user fees in FY 1999 would result in an inadequate education campaign. That would thwart Congressional intent to bring market forces to bear since we would not be able to provide Medicare beneficiaries with all the tools they need to make truly informed choices. We would have to scale back a number of activities including: toll free call center service, funding to State Health Insurance Assistance Programs, local community outreach, and beneficiary satisfaction surveys. We would also have to postpone investments in technology needed to make it easier for beneficiaries to access comparative plan information. The costs of beneficiary education are ongoing. The authorization provided in the Balanced Budget Act, however, declines from $150 million to $100 million in user fees for fiscal years 2000 and beyond. Due to the uncertainty about the demands for Medicare+Choice information, we may need to revise these funding levels to ensure that all activities are funded.

ENSURING QUALITY

Among the most important provisions in the Medicare+Choice program are those that address the quality of care and services. These help make sure beneficiaries have meaningful information so they can compare plans. They also help ensure that coordinated care plans improve quality, and that Medicare will use its market leverage to promote quality and be a prudent purchaser.

All plans must report objective, standardized measurements of how well they provide care and services. They will use HEDIS, the Health Plan Employer Data and Information Set. HEDIS is the industry standard for measuring health plan performance, and it has been tailored specifically for the Medicare program. Medicare+Choice plans must have HEDIS data audited before submission to ensure accuracy. We also will use CAHPS, the Consumer Assessment of Health Plans Survey, to objectively measure beneficiary satisfaction with plan care and service. The results of both HEDIS and CAHPS will be translated into plain English and arranged in charts so beneficiaries can make direct, apples-to-apples comparisons among their plan options.

Plans with provider networks must conduct performance improvement projects and over time achieve demonstrable and sustained improvement. Eventually these plans, except for network-based Medical Savings Account plans, will have to meet minimum performance standards. Establishing minimum performance standards is important because data now starting to come in from the objective HEDIS performance measures show wide variation in how well plans provide care. For example, according to HEDIS data from existing Medicare managed care plans, 90 percent of women in some plans get yearly mammograms, while in one plan only 15 percent get this essential screening service.

Plans that do not have defined provider networks, such as non-network MSA plans and private fee-for-service plans, must report the same standardized performance measures as all other plans. These non-network plans also must evaluate the continuity and coordination of care that enrollees receive. However, they do not have to meet the quality improvement requirements because they lack the ability to influence provider behavior.

Appropriate flexibility will be provided so plans with networks that are less rigid than networks in traditional HMOs, such as preferred provider organizations (PPOs), can meet quality improvement requirements. The regulation preamble makes clear that we are not adopting a "one size fits all" approach for all types of Medicare+Choice plans. Our quality improvement systems will be sensitive to different plan structures and their different abilities to affect provider behavior. However, while there is flexibility in quality improvement standards, all plans must report standardized data. Collecting information from PPOs is feasible, according to a General Accounting Office investigation. In a July 16, 1998 letter to Senate Finance Committee member John Chafee and others, the GAO reports that "several large purchasers already collect quality-related information from PPOs."

PROVIDER SPONSORED ORGANIZATIONS

Appropriate flexibility is also provided for Provider Sponsored Organizations (PSOs). The Medicare+Choice regulations establish standards that, while similar to the time-tested HMO standards, reflect the unique characteristics of these provider-based plans. The PSO solvency standards are the result of a negotiated rulemaking process that included a broad range of interested parties. The standards are designed to assure that these plans are financially sound.

The PSO regulations require that affiliated providers own and maintain control of at least 51 percent of the PSO. These plans must demonstrate that each affiliated provider shares in the financial risk. The statute requires that affiliated providers furnish a "substantial proportion" of the services delivered to Medicare enrollees. The regulations establish that the "substantial proportion" of services that providers must furnish directly, rather than through contracts with unaffiliated providers, is 70 percent for most PSOs, and 60 percent for rural PSOs. This ensures that many types of providers work together to coordinate care and share risk.

PSOs that meet these standards may obtain waivers to participate in Medicare without state licenses, so long as they meet all other Medicare+Choice standards, including state standards on quality and consumer protection. Federal waivers are non-renewable, state-specific, limited to 36 months and cannot be granted after Nov. 1, 2002. We have already approved one such PSO waiver, for the St. Joseph Healthcare PSO in Albuquerque, New Mexico.

CONCLUSION