Medicare+Choice
Selected Program Requirements and Other Entities' Standards for HMOs Gao ID: GAO-03-180 October 31, 2002Since the early 1980s, health maintenance organizations (HMO) have entered into risk-based contracts with Medicare and offered beneficiaries an alternative to the traditional fee-for-service (FFS) program. By 1997, 5.2 million Medicare beneficiaries were enrolled in an HMO. Although Medicare HMOs were available in most urban areas, they were often unavailable in rural areas. Medicare+Choice (M+C) has HMO requirements pertaining to benefit package proposals, the beneficiary enrollment process, marketing and enrollee communication materials, and quality improvement, among other areas. An HMO must annually submit a benefit package proposal to the Centers for Medicare and Medicaid Services (CMS) for each M+C health plan that the HMO intends to offer. M+C requirements for the beneficiary enrollment process specify the information that an HMO must include in its enrollment application and the checks that it must perform to ensure that beneficiaries who submit applications are eligible to enroll in the HMO's health plan. M+C marketing requirements prohibit HMOs from using inaccurate or misleading language in advertisements or materials distributed to enrollees. M+C requirements for quality improvements specify that HMOs must undertake multiyear projects intended to improve the quality of health care and must routinely gather and report performance data to CMS.
GAO-03-180, Medicare+Choice: Selected Program Requirements and Other Entities' Standards for HMOs
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Report to the Chairman, Subcommittee on Health, Committee on Ways and
Means, House of Representatives:
October 2002:
Medicare+Choice:
Selected Program Requirements and Other Entities‘ Standards for HMOs:
GAO-03-180:
Contents:
Letter:
Results in Brief:
Background:
Selected M+C Requirements for HMOs:
Selected FEHBP Requirements for HMOs:
Selected NAIC, JCAHO, and NCQA Requirements for HMOs:
Comments from CMS and the Other Entities:
Appendixes:
Appendix I: Benefit Package Proposals:
Appendix II: Beneficiary Enrollment:
Health Plan Enrollment Opportunities for M+C and FEHBP Beneficiaries:
Appendix III: Marketing and Enrollee Communication Materials:
Appendix IV: Quality Improvement:
Appendix V: Coments from the Centers for Medicare & Medicaid Services:
Tables:
Table 1: Selected Requirements for Benefit Package Proposals, M+C and
FEHBP:
Table 2: Selected Requirements for Beneficiary Enrollment in HMOs, M+C
and FEHBP:
Table 3: Opportunities for Medicare Beneficiaries to Enroll in an M+C
Health Plan or Make Health Plan Changes Under M+C‘s Lock-in Provision:
Table 4: Opportunities for FEHBP Beneficiaries to Enroll in a Health
Plan or Make Health Plan Changes:
Table 5: Selected Requirements for Marketing and Enrollee Communication
Materials, M+C, FEHBP, NAIC, JCAHO, and NCQA:
Table 6: Selected Requirements for Quality Improvement for M+C, FEHBP,
NAIC, JCAHO, and NCQA:
Figures:
Figure 1: Timeline for Submission, Review, and Approval of HMOs‘
Benefit
Package Proposals for Benefit Year 2001:
Figure 2: Timeline for Submission, Review, and Approval of HMOs‘
Benefit
Package Proposals for Benefit Years 2003 Through 2005:
Abbreviations:
AAAHC: Accreditation Association for Ambulatory Health Care, Inc.
ACR: adjusted community rate:
ACRP: adjusted community rate proposal:
BBA: Balanced Budget Act of 1997:
BBRA: Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999:
BIPA: Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000:
CAHPS: Consumer Assessment of Health Plans:
CHCD: clinical health care disparities:
CLAS: culturally and linguistically appropriate services:
CMS: Centers for Medicare & Medicaid Services:
EGHP: employer group health plan:
ESRD: end-stage renal disease:
FAR: Federal Acquisition Regulation:
FEHBP: Federal Employees Health Benefits Program:
FFS: fee-for-service:
HCFA: Health Care Financing Administration:
HEDIS: Health Plan Employer Data and Information Set:
HHS: Department of Health and Human Services:
HMO: health maintenance organization:
HOS: Health Outcomes Survey:
JCAHO: Joint Commission on Accreditation of Healthcare Organizations:
M+C: Medicare+Choice:
M+CQRO: Medicare+Choice quality review organization:
NAIC: National Association of Insurance Commissioners:
NCQA: National Committee for Quality Assurance:
OIG: Office of Inspector General:
OPM: Office of Personnel Management:
PBP: plan benefit package:
PFFS: private fee-for-service:
PPO: preferred provider organization:
QAPI: quality assessment and performance improvement:
QI: quality improvement:
QIO: quality improvement organization:
QISMC: quality improvement system for managed care:
SSSG: similarly sized subscriber groups:
VAIS: value-added items and services:
Letter:
October 31, 2002:
The Honorable Nancy L. Johnson
Chairman
Subcommittee on Health
Committee on Ways and Means
House of Representatives:
Dear Madam Chairman:
Since the early 1980s, health maintenance organizations (HMO) have
entered into risk-based contracts with Medicare and offered
beneficiaries an alternative to the traditional fee-for-service (FFS)
program.[Footnote 1] By 1997, approximately 5.2 million Medicare
beneficiaries (14 percent) were enrolled in an HMO.[Footnote 2]
Although Medicare HMOs were available in most urban areas, they were
often unavailable in rural areas. The Medicare+Choice (M+C) program,
established by the Balanced Budget Act of 1997[Footnote 3] (BBA), was
designed to expand beneficiaries‘ health plan choices by encouraging
the wider availability of HMOs and permitting Medicare to contract with
organizations offering other types of health plans, such as preferred
provider organization (PPO) plans and private fee-for-service (PFFS)
plans.
In practice, however, virtually all M+C health plans in 2002 are
offered by HMOs and the number of health plan choices has decreased in
each of the last 4 years.[Footnote 4] From 1998 to 2002, the number of
Medicare contracts with HMOs declined from about 340 to 147, and the
percentage of beneficiaries with access to at least one HMO in the area
where they lived declined from 74 to 61 percent.[Footnote 5] Enrollment
in Medicare HMOs, which had reached 6.3 million in 1999, had fallen to
less than 5 million (12 percent of all Medicare beneficiaries) as of
July 2002.
Representatives of the managed care industry have stated that declining
HMO participation in Medicare is largely due to inadequate M+C payment
rates and excessive administrative requirements. The Medicare,
Medicaid, and SCHIP Balanced Budget Refinement Act of 1999[Footnote 6]
(BBRA) and the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000[Footnote 7] (BIPA) increased payment rates and
made other changes to help address the industry‘s concerns. But these
legislative changes have not halted the decline in HMO
participation.[Footnote 8] To encourage health plans to participate in
M+C, legislative proposals have been made to further increase M+C
payment rates and streamline the program‘s administrative requirements.
To assist in your consideration of potential M+C reforms, you asked us
to summarize the program‘s HMO requirements in four areas: (1) the
annual benefit package proposals that HMOs submit, (2) the beneficiary
enrollment process, (3) marketing materials and enrollee
communications, and (4) quality improvement.[Footnote 9] To provide
benchmarks that could be used when examining M+C requirements, you
asked us to summarize parallel requirements for HMOs that participate
in the Federal Employees Health Benefits Program (FEHBP), another large
purchaser of health care. You also asked us to describe the HMO
requirements established by other entities in one or more of the four
M+C areas we reviewed. In consultation with your office, we selected
three entities that are not health care purchasers but that do set
requirements for HMOs: the National Association of Insurance
Commissioners (NAIC), the Joint Commission on Accreditation of
Healthcare Organizations (JCAHO), and the National Committee for
Quality Assurance (NCQA).[Footnote 10] NAIC, a nonprofit
organization for state regulators, drafts and publishes model acts and
regulations that set standards for insurers that any state may adopt in
whole or in part.[Footnote 11] JCAHO and NCQA, both nongovernmental and
nonprofit organizations, operate nationally recognized accreditation
programs for HMOs.[Footnote 12]
To conduct our work, we summarized the applicable M+C requirements in
federal statutes and regulations, M+C operational guidance to HMOs, and
other materials prepared by the Centers for Medicare & Medicaid
Services (CMS), the agency within the Department of Health and Human
Services (HHS) that administers Medicare.[Footnote 13] We obtained
additional information from CMS officials. We gathered and summarized
FEHBP requirements in federal statutes and regulations and FEHBP
operational guidance to HMOs, various NAIC model requirements, and
relevant standards from the current JCAHO and NCQA accreditation
manuals.[Footnote 14] We also interviewed officials from the Office of
Personnel Management (OPM), the agency that administers FEHBP, and
representatives of NAIC, JCAHO, and NCQA. Because M+C requirements are
broadly similar to the requirements set by other entities, but may be
different in specific details, we compiled our work into summary tables
that provide information on the key details of each entity‘s
requirements (see appendixes I through IV). Our work was performed from
June 2001 through September 2002 in accordance with generally accepted
government auditing standards.
Results in Brief:
M+C has HMO requirements pertaining to benefit package proposals, the
beneficiary enrollment process, marketing and enrollee communication
materials, and quality improvement, among other areas. An HMO must
annually submit a benefit package proposal to CMS for each M+C health
plan that the HMO intends to offer.[Footnote 15] In its proposal, the
HMO must include its projected Medicare revenues, detailed cost
estimates by service category, and other information to demonstrate
compliance with M+C requirements, such as those that limit a health
plan‘s cost-sharing requirements for Medicare-covered services. M+C
requirements for the beneficiary enrollment process specify the
information that an HMO must include in its enrollment application and
the checks that it must perform to ensure that beneficiaries who submit
applications are eligible to enroll in the HMO‘s health plan. M+C
marketing requirements prohibit HMOs from using inaccurate or
misleading language in advertisements or materials distributed to
enrollees. To ensure that advertisements and enrollee materials comply
with M+C requirements, HMOs must submit advance copies to CMS for
review and approval. M+C requirements for quality improvement specify
that HMOs must undertake multiyear projects intended to improve the
quality of health care and must routinely gather and report performance
data to CMS.
FEHBP, another large purchaser of health care, has requirements for
HMOs in all four areas we examined. For example, FEHBP requires HMOs to
annually submit benefit package proposals to OPM for review. An HMO
must include information to show that its proposed FEHBP premium is no
higher than the premium it would charge to similarly sized commercial
customers for the same package of benefits. FEHBP has relatively few
requirements for HMOs regarding the beneficiary enrollment process
because most of this function is performed by OPM or delegated to other
federal agencies. FEHBP‘s marketing requirements specify that HMOs must
produce comprehensive annual benefit brochures and obtain OPM approval
before distributing the brochures to potential enrollees. Finally,
FEHBP has set certain quality standards and requires HMOs to submit
performance data to OPM.
Although NAIC, JCAHO, and NCQA do not purchase health care, each has
established HMO requirements in two of the four areas we reviewed: 1)
marketing and enrollee communication materials and 2) quality
improvement. All three entities require HMOs to produce complete
information, although JCAHO‘s standards do not apply to marketing
materials given to prospective members. The three entities also require
HMOs to design, implement, and evaluate quality improvement projects.
NAIC‘s model requirements pertain to all HMOs in states that set HMO
licensing and operating standards based on NAIC‘s recommendations.
JCAHO‘s and NCQA‘s standards represent requirements that must be met by
all HMOs that want to be accredited by JCAHO or NCQA. The requirements
established by NAIC, JCAHO, and NCQA are not specifically focused on
HMOs that serve Medicare beneficiaries.
In commenting on a draft of this report, CMS stated that it generally
agreed with our observations. We also provided a draft of the report to
OPM, NAIC, JCAHO, and NCQA and incorporated the technical comments we
received from those organizations and from CMS as appropriate.
Background:
M+C and FEHBP both represent large health care purchasing programs that
contract with HMOs and other types of health care organizations to
provide services. NAIC, JCAHO, and NCQA are not purchasers of health
care, but they play important roles in establishing certain HMO
requirements.
M+C:
M+C is a component of Medicare, the federal entitlement program for
adults age 65 and older and some individuals who are disabled or have
end-stage renal disease (ESRD).[Footnote 16] Medicare beneficiaries can
choose to receive covered services through the FFS program or through
an M+C health plan if one is offered in the area where they
live.[Footnote 17] HMOs and other types of health care organizations
contract with CMS to offer M+C health plans.[Footnote 18] HMOs
participating in M+C receive fixed monthly payments for enrolled
beneficiaries, regardless of what their enrollees‘ care actually costs,
in return for providing all Medicare-covered benefits, except hospice
care, and complying with all M+C requirements. CMS monitors each HMO
and periodically conducts an on-site review to determine whether the
HMO is complying with program requirements. The agency also requires
HMOs to regularly submit certain information, such as enrollment and
other data used to compute HMO payments.
In creating M+C, BBA included many requirements from the previous risk-
contract program. For example, the M+C requirement that HMOs submit
marketing and enrollee communications for agency approval was a
requirement of the risk-contract program. BBA also included
requirements that were modifications of previous ones and others that
were new. For example, BBA included quality assurance requirements--
such as those pertaining to the collection, analysis, and reporting of
health outcomes and member satisfaction--that were more comprehensive
than previous requirements. BBA required that M+C payments to an HMO be
adjusted to reflect the relative health status of that HMO‘s enrollees
beginning in 2000. The law directed the Secretary of HHS to require
HMOs to submit data on their enrollees‘ use of inpatient hospital
services and data on other services as the Secretary deemed necessary.
In addition to the inpatient hospital data requirement, the Secretary
required HMOs, in 1998, to collect data on the use of physician and
hospital outpatient services. BBA also limited, effective January 1,
2002, the number of opportunities beneficiaries had each year to enroll
or change enrollment in a M+C health plan.
M+C‘s requirements have continued to evolve since BBA, partly as a
result of subsequent legislation. Some legislative changes addressed
HMOs‘ concerns about BBA‘s initial implementation. For example, BBRA
increased the amount of time that HMOs have each year to develop their
benefit package proposals by moving the annual submission deadline from
May 1 to July 1. To reduce the administrative burden on HMOs that are
monitored by both a private accreditation organization and the agency,
BBRA increased the number of topical areas where HMOs may fulfill M+C
requirements by receiving accreditation from an organization that has
standards, as well as a process for ensuring compliance with those
standards, which are determined by CMS to meet or exceed M+C
requirements. BBA allowed accreditation standards to be applied for
quality assurance and confidentiality of records requirements. BBRA
expanded this list to include antidiscrimination, access to services,
advance directives,[Footnote 19] and provider participation
requirements. Under BIPA, CMS must expedite review of HMO marketing
materials that use agency-specified language without modification. BIPA
also required HMOs to expand their quality improvement activities to
include a separate focus on racial and ethnic minorities. The Public
Health Security and Bioterrorism Preparedness and Response Act of
2002[Footnote 20] (Bioterrorism Act) made temporary modifications to
M+C requirements. It enabled Medicare to reinstate, through 2004,
beneficiaries‘ opportunities to change enrollment into any M+C health
plan accepting new enrollments or switch to the FFS program on a
monthly basis. It also moved the annual submission deadline for HMOs‘
benefit package proposals to the second Monday in September for benefit
years 2003 through 2005.
CMS has also modified certain M+C requirements, in some instances to
reduce the administrative burden on participating HMOs. In 2001, for
example, the agency postponed the date by which HMOs would have to
begin submitting data on beneficiaries‘ use of physician and hospital
outpatient services. In 2002, CMS gave HMOs more flexibility in
advertising plan benefits not available in the FFS program. For
example, HMOs were allowed to describe their health plans‘ pharmacy
discounts in the standard summary of benefits distributed to
beneficiaries. CMS has also made changes to address shortcomings that
agency staff or outside groups identified. The process for reviewing
and approving HMOs‘ marketing materials was revised, in part, to
correct problems we identified in 1999.[Footnote 21]
Since BBA was enacted, CMS has issued Federal Register notices and
other written instructions to inform HMOs about program changes. During
2001, CMS began releasing chapters of a new Medicare managed care
manual intended to inform HMOs about program requirements.[Footnote 22]
As of July 11, 2002, the agency had released 9 of a planned 20
chapters.[Footnote 23] No release dates have been announced for the
remaining chapters.
FEHBP:
FEHBP is the largest employer-sponsored group health insurance program
in the United States. In 2002, FEHBP covers approximately 8.28 million
individuals, consisting of 2.19 million federal employees, 1.86 million
federal retirees, and 4.23 million dependents.[Footnote 24] Like most
Medicare beneficiaries, FEHBP beneficiaries may select from among
available health plans during an annual open enrollment period. OPM
contracts with HMOs and other types of health care organizations to
offer health plans to FEHBP beneficiaries. The number of HMOs
participating in FEHBP has declined in recent years, from 476 HMOs in
1996 to about 200 HMOs in 2002. In 2002, about 2.42 million FEHBP
beneficiaries (29 percent) are enrolled in HMOs. The remaining 5.86
million beneficiaries (71 percent) are enrolled in other types of
health plans, such as PPOs.
NAIC:
NAIC is a nonprofit association of the insurance regulators of the 50
states, the District of Columbia, and 4 United States territories. Its
mission includes promoting consistent health insurance
regulations.[Footnote 25] To help achieve this objective, NAIC prepares
model requirements that any state may adopt, in whole or in part, to
regulate HMOs operating in the state. NAIC‘s model requirements are
largely written in general terms to provide a framework that states can
tailor to meet local needs. According to NAIC, approximately 30 states
have passed legislation based on the requirements in NAIC‘s Model HMO
Act, which provides a legal framework for the organization and
functioning of HMOs and a regulatory framework for state oversight.
JCAHO and NCQA:
JCAHO and NCQA provide accreditation programs for HMOs and other health
care entities that contract with public and private employers to serve
their employees and retirees, with state governments to serve Medicaid
beneficiaries, or with the federal government to serve Medicare
beneficiaries. JCAHO‘s and NCQA‘s accreditation standards focus on the
HMO operations that affect the quality of care delivered and
interactions with members, rather than on all the requirements that a
purchaser would typically specify for an HMO, such as the benefits
offered and the cost of providing those benefits. HMOs may seek
accreditation from a nationally recognized organization, such as JCAHO
or NCQA, to signal their commitment to quality and to help attract
business. Some potential purchasers consider an HMO‘s accreditation
status when deciding whether to contract with the HMO.[Footnote 26] An
HMO‘s accreditation status may also be an important consideration for
some potential enrollees. For that reason, OPM lists the accreditation
status of participating HMOs in the annual guide made available to
FEHBP beneficiaries. In addition, HMOs with M+C health plans that have
received full accreditation from JCAHO or NCQA, and have been
determined by one of those organizations to have met certain additional
standards, are considered by CMS to have met the M+C quality
requirements discussed in this report.[Footnote 27]
Selected M+C Requirements for HMOs:
An HMO that contracts to serve Medicare beneficiaries must meet M+C
program requirements specified by CMS regarding benefit package
proposals, the beneficiary enrollment process, marketing and enrollee
communications, and quality improvement. Requirements pertaining to
benefit package proposals specify the information that HMOs must
annually submit to CMS and set coverage parameters, such as limits on
beneficiary cost sharing. Beneficiary enrollment process requirements
establish how HMOs must collect and process applications, conduct
beneficiary eligibility checks, transmit information to CMS, and
reconcile data discrepancies. Communication requirements, which cover
both general advertising and specific communications to enrollees, set
standards for the information that HMOs distribute to beneficiaries and
establish CMS‘s review and approval process for these materials.
Requirements for quality improvement specify that HMOs have the
capacity to undertake projects designed to improve the quality of
health care and annually measure their clinical and administrative
performance and the satisfaction of current and former enrollees.
Benefit Package Proposals:
For each M+C health plan that it intends to offer, an HMO must annually
submit a benefit package proposal for CMS review and approval. BBRA
specified that proposals are due at the beginning of July--6 months
before the start of the benefit year. The Bioterrorism Act temporarily
changes the benefit package proposal submission deadline to the second
Monday in September for 2002 through 2004.[Footnote 28] The proposals,
formally known as adjusted community rate proposals (ACRP), specify the
health plan‘s covered benefits, beneficiary cost sharing, and
beneficiary premiums. An HMO must cover all services available in the
FFS program except hospice. An HMO may also offer additional services,
such as outpatient prescription drugs, and charge beneficiaries for
these services. If Medicare‘s payments to an HMO are expected to exceed
its cost of providing Medicare-covered services plus the amount of
profit or additional revenue that the HMO would normally earn on non-
Medicare contracts, the HMO must use the additional money to cover
additional items or services, reduce beneficiary cost sharing, or
contribute to a benefit stabilization fund--an escrow-like account that
can be drawn upon in future years to help maintain benefit levels--or a
combination of these. The HMO‘s benefit package proposal describes the
extent to which these options will be used.[Footnote 29]
CMS reviews HMOs‘ benefit package proposals and approves them if they
comply with M+C requirements. For example, an HMO may set beneficiary
cost-sharing requirements on individual services that differ from those
in the FFS program, but the sum of the actuarial value of its cost-
sharing requirements--the total amount that the average beneficiary
would be expected to pay in deductibles, coinsurance, and copayments--
and the health plan premium may not exceed the actuarial value of cost
sharing in the FFS program. The agency has generally approved the
proposals before the start of Medicare‘s annual enrollment period in
November. BIPA requires the agency‘s Chief Actuary to review all
benefit package proposals submitted on or after May 1, 2001, to
determine whether the data values and underlying assumptions in the
proposals are reasonable. According to CMS officials, actuary reviews
will begin with benefit package proposals submitted in 2002. BBA
requires CMS each year to audit the benefit package proposals from at
least one-third of the participating M+C HMOs.[Footnote 30] CMS uses a
risk-based approach to select some of the HMOs to audit, but the
majority of audited HMOs are randomly selected.
Beneficiary Enrollment Process:
HMOs are required to play a major role in the beneficiary enrollment
process. A beneficiary who wants to enroll in a health plan submits an
application to the HMO, which then must make a preliminary
determination about whether the beneficiary lives in the geographic
area served by the health plan and is otherwise eligible to enroll. The
HMO then forwards the beneficiary‘s information to CMS. After CMS
confirms enrollment eligibility, the HMO must determine the date that
coverage will begin and notify the beneficiary. Through December 31,
2004, beneficiaries are allowed to join or leave health plans each
month. After that date, beneficiaries will have fewer opportunities
each year to make health plan changes.
Marketing and Enrollee Communication Materials:
HMOs must provide accurate and complete information to prospective
beneficiaries and current enrollees. CMS‘s requirements cover the
advertising and marketing materials that HMOs distribute to prospective
beneficiaries and the communications between HMOs and their enrollees,
such as explanations of benefits or coverage denials. For some
materials, such as the summary document that each HMO must produce to
describe its health plan‘s benefits, CMS requires HMOs to use templates
with standardized language and formats. Prior to distribution, HMOs
must submit all of their marketing and most of their enrollee
communication materials to CMS for review and approval.
Quality Improvement:
HMOs must meet M+C requirements designed to improve the quality of care
and services they deliver. Every year, an HMO must begin a multiyear
quality improvement project that focuses on a topic specified by CMS
(the national quality improvement project). For example, in 2002, CMS
requires HMOs to participate in the national quality improvement
project designed to improve breast cancer screening rates. An HMO must
also demonstrate that its previous quality improvement projects have
resulted in demonstrable performance improvements and sustain those
improvements for at least 1 year.[Footnote 31] HMOs must participate in
annual CMS-sponsored standardized satisfaction surveys of current
enrollees and recent disenrollees and provide clinical and
administrative data to CMS.
Recently, CMS determined that AAAHC‘s, JCAHO‘s, and NCQA‘s standards,
and their processes for ensuring compliance with those standards, meet
or exceed M+C requirements for quality improvement. As a result, an HMO
that has received full accreditation from AAAHC, JCAHO, or NCQA may now
choose to have the accreditation organization, instead of CMS, monitor
its compliance with M+C quality improvement requirements.
Selected FEHBP Requirements for HMOs:
FEHBP has requirements for HMOs in all four areas we examined: benefit
package proposals, the beneficiary enrollment process, marketing
materials and enrollee communications, and quality improvement.
Although FEHBP and Medicare both function as purchasers and are broadly
similar in terms of offering a choice of plans to beneficiaries, there
are key differences in how the two programs operate, which may account
for some of the variation in requirements. For example, market forces
determine HMO payment rates in FEHBP. In contrast, a statutory formula
specifies HMO payment rates in M+C.[Footnote 32] The difference in
rate-setting methodologies affects the type of information that OPM and
CMS require HMOs to include in their benefit package proposals. The
programs also differ in size and beneficiary characteristics. FEHBP
covers about one-fifth as many individuals as Medicare does. Moreover,
FEHBP beneficiaries tend to be younger and to use fewer health care
services than Medicare beneficiaries.
Benefit Package Proposals:
HMOs that intend to participate in FEHBP must annually submit benefit
package proposals to OPM for each health plan they offer. The proposals
are due in May, at least 7 months before the start of the benefit year.
In general, the FEHBP benefit package that an HMO offers in a
geographic area provides the same coverage that the HMO offers to most
enrollees in the same area. Each proposal includes the proposed health
plan premium, which must be based on the lowest community-rated premium
that the HMO charges to commercial customers for a similar number of
covered lives.[Footnote 33] OPM actuaries evaluate an HMO‘s supporting
documentation for the proposed premium. The benefits to be covered by a
health plan and its cost to the government and to enrollees may be
affected by subsequent discussions between OPM and the HMO. For
example, OPM may question specific cost estimates submitted by an HMO
if they are much higher than other HMOs‘ estimates. In such a
situation, according to OPM, the agency will not agree to a rate unless
these higher costs are adequately justified. Negotiations are generally
concluded in August, at least 2 months before the start of FEHBP‘s
annual enrollment period in November.
FEHBP HMOs are subject to audits by OPM‘s Office of Inspector General
(OIG). If an HMO is found to have overcharged the government, the HMO
must repay the amount of the overcharge plus interest. The OPM OIG has
a goal of auditing every HMO at least once every 7 years. However, its
audit strategy is risk based and concentrates resources on HMOs where
problems are thought most likely to be found.
Beneficiary Enrollment Process:
While FEHBP has some enrollment process requirements for HMOs, they are
limited because OPM and agencies that employ federal workers are
responsible for most enrollment activities. FEHBP HMOs‘ primary
enrollment responsibility is to confirm that applicants live in, or in
some cases work in, the geographic area served by their health plan.
HMOs must also quarterly reconcile enrollments with agencies.
Beneficiaries who are active workers enroll through the federal
agencies that employ them, either in writing or through an automated
telephone system or a dedicated Web site. The agencies determine
eligibility and coverage start dates. Retirees enroll through an
automated telephone system or a dedicated Web site. Agencies conduct
tentative eligibility determinations for retirees that OPM then
confirms. In general, FEHBP allows beneficiaries to switch health plans
once a year, during the annual open season.
Marketing and Enrollee Communication Materials:
FEHBP requires HMOs to produce annual brochures in a standard format
using standard language. The brochure must completely describe the
covered benefits, limitations, and exclusions. According to OPM
officials, the brochures represent a contractual document between HMOs
and OPM. OPM must approve HMOs‘ brochures before they can be
distributed. HMOs must conform to OPM and NAIC guidelines in preparing
materials that supplement the brochure and marketing materials, such as
descriptive circulars and leaflets. According to OPM representatives,
the agency focuses its review efforts on the annual brochures, but may
selectively review other marketing materials distributed by HMOs.
Quality Improvement:
HMOs must meet performance standards specified in their FEHBP
contracts. These standards cover such areas as timeliness of telephone
responses and wait times for appointments. FEHBP HMOs must annually
conduct a standardized enrollee satisfaction survey and provide
clinical and administrative performance data to OPM. FEHBP HMOs
currently do not have to conduct quality improvement projects. However,
in 2001, HMOs had to submit their business plans and timelines for
attaining accreditation from an approved external accreditation
organization; OPM currently recognizes JCAHO, NCQA, and URAC/American
Accreditation HealthCare Commission. To achieve accreditation from such
an organization, HMOs have to undertake quality improvement projects.
Selected NAIC, JCAHO, and NCQA Requirements for HMOs:
NAIC, JCAHO, and NCQA have established standards for HMOs in two of the
areas we examined: 1) marketing and enrollee communication materials
and 2) quality improvement. NAIC, JCAHO, and NCQA have not set
standards for either benefit package proposals or beneficiary
enrollment--two areas that health care purchasers must address. The
three entities tend to establish standards that are less specific than
parallel M+C requirements and that may be modified or interpreted to
fit local circumstances.
Marketing and Enrollee Communication Materials:
NAIC‘s model requirements for marketing materials specify that an HMO
must produce advertising that is clear, complete, and does not mislead
beneficiaries. HMOs may be required to annually certify that their
marketing materials comply with a state‘s insurance laws and
regulations or to submit their marketing materials to a state insurance
commissioner prior to distribution. NAIC‘s model requirements for
enrollee communications focus on HMO contract documents and specify
that state insurance commissioners can require HMOs to file these
documents for approval by the state prior to issuance. NAIC‘s model
requirements pertain to the general contents of contract documents, but
not the use of standardized formats or language.
JCAHO‘s and NCQA‘s accreditation standards require HMOs to provide
complete information to their enrollees. NCQA‘s accreditation standards
also apply to marketing materials intended for prospective members.
Both organizations have general content requirements and review
marketing materials during their on-site accreditation visits. NCQA
requires that HMOs have a systematic and ongoing process for assessing
how clearly new enrollees understand HMO policies and procedures.
Quality Improvement:
NAIC‘s model requirements specify that HMOs must have a quality
improvement program to improve care delivery and health outcomes and to
collect and analyze information specific to their enrollees, such as
satisfaction with the HMO. However, NAIC does not specify the types of
quality improvement projects that HMOs must conduct or require the use
of standardized satisfaction surveys or standardized performance
measures.
Both JCAHO‘s and NCQA‘s accreditation standards require HMOs to design
and conduct quality improvement projects in clinical and administrative
areas that achieve meaningful, sustainable performance improvements
affecting a significant percentage of their enrollees. JCAHO and NCQA
evaluate quality improvement project results during their accreditation
site visits. Both organizations also require HMOs to measure enrollee
satisfaction and submit administrative and clinical performance data.
Comments from CMS and the Other Entities:
In written comments on a draft of this report, CMS stated that it
generally agreed with our observations and that the tables contained in
the appendixes effectively contrast M+C‘s, FEHBP‘s, and the other
entities‘ HMO requirements. (App. V contains the full text of CMS‘s
comments.) CMS suggested that an expanded analysis of the differences
between M+C and FEHBP programs, and a more detailed discussion of M+C‘s
legislative history, could help readers understand why M+C‘s HMO
requirements may be more stringent.
We recognize that there are fundamental differences between Medicare--
a large public entitlement program--and FEHBP--an employer-sponsored
health insurance program--and that an HMO requirement that is
appropriate in one program may not be appropriate in the other. In this
report, we provide background information on M+C, FEHBP, and the other
entities to help provide context for their HMO requirements. We also
understand that behind M+C‘s current set of requirements lies a complex
legislative history and a series of administrative decisions. The
report highlights important Medicare HMO requirement changes introduced
by BBA and subsequent actions taken by CMS and the Congress to improve
M+C for beneficiaries and encourage participation by HMOs. However, the
report‘s focus is on the requirements that M+C HMOs face today. By
displaying these requirements with the HMO requirements established by
other entities, the summary tables may facilitate comparisons and
inform discussions about particular M+C requirements and how they
contribute to the program‘s objectives.
We also provided a draft of the report to OPM, NAIC, JCAHO, and NCQA
and incorporated the technical comments we received from those
organizations and from CMS as appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution of it until 30
days from the date of this report. We will then send copies of this
report to the Administrator of CMS, the Director of OPM, NAIC, JCAHO,
NCQA, and other interested parties. We will also make copies available
to others upon request. In addition, the report will be available at no
charge on the GAO Web site at http://www.gao.gov.
If you or your staff have questions about this report, please contact
me at (202) 512-7119 or James Cosgrove at (202) 512-7029. Other
contributors to this report include Jennifer Podulka, Lisa Rogers, and
Yorick F. Uzes.
Sincerely yours,
Signed by Laura A. Dummit:
Laura A. Dummit
Director, Health Care--Medicare Payment Issues:
[End of section]
Appendixes:
Appendix I: Benefit Package Proposals:
M+C and FEHBP have HMO requirements that pertain to benefit package
proposals. Our summary of those requirements is organized as follows.
Determination of Costs, Benefits, and Government and Beneficiary
Contributions:
* Purpose of benefit package proposals:
* Determination of HMO costs or rates:
* Covered benefits:
* Government contribution:
* Beneficiary contribution:
* Limits on premiums and required cost sharing:
Submission, Review, and Approval of Benefit Package Proposals:
* Call for proposals:
* Number of proposals submitted:
* Contents of proposals:
* Transmission of proposals:
* Proposal submission deadline:
* Deadline for informing CMS/OPM that existing health plan will not
renew:
* Review process:
* Schedule for approving proposals:
* Reconciliation process:
Benefit Package Proposal Audits:
* Entities that conduct audits:
* Selection criteria for audits and number of HMOs audited annually:
* Information subject to audit:
* Timing of audits:
* Contents of audit reports:
* Consequences of audit findings:
Table 1 summarizes selected M+C and FEHBP requirements for HMOs‘
benefit package proposals. Figure 1 depicts the 2001 benefit-year
timeline for activities associated with the submission, review, and
approval of HMOs‘ benefit packages.[Footnote 34] The timing of these
activities for M+C will be altered for benefit years 2003 through 2005.
Figure 2 depicts the M+C and FEHBP timeline for benefit package
proposal activities for those benefit years.
Table 1: Selected Requirements for Benefit Package Proposals, M+C and
FEHBP:
Topic: Determination of costs, benefits, and government and beneficiary
contribution.
Topic: Purpose of benefit package proposals; M+C requirements:
Determination of costs, benefits, and government and beneficiary
contribution: HMO must submit, for CMS approval, benefit package
proposals, called adjusted community rate proposals (ACRP), that are
used to determine covered benefits and beneficiary premiums and cost
sharing.; FEHBP requirements: Determination of costs, benefits, and
government and beneficiary contribution: HMO must submit, for OPM
approval, benefit package proposals that are used to determine covered
benefits, the government contribution, and beneficiary premiums and
cost sharing..
Topic: Determination of HMO costs or rates; M+C requirements:
Determination of costs, benefits, and government and beneficiary
contribution: HMO must, for each health plan it intends to offer,
estimate its per enrollee direct medical cost of providing Medicare-
covered benefits. The HMO must also list the payments per enrollee it
requires to cover administrative costs and provide other additional
revenue, for such items as profits or contribution to reserve for
nonprofit HMOs. (The profit included in the proposal must be comparable
to the profits the HMO normally earns on other contracts.) The HMO must
follow the same methodology to estimate its cost and revenue of
providing benefits not covered by Medicare. The sum of all direct
medical and administrative costs and additional revenue per enrollee,
known as the adjusted community rate (ACR), must be based on the amount
the HMO would charge a commercial or other customer to provide
benefits, adjusted for differences in the utilization characteristics
of the HMO‘s expected Medicare enrollees.; FEHBP requirements:
Determination of costs, benefits, and government and beneficiary
contribution: HMO must, for each health plan it intends to offer,
develop its FEHBP premium rates using the same methodology it uses for
other purchasers. Each HMO must identify two purchasers in the FEHBP
contract area with enrollments closest to the number of its FEHBP
enrollees in that area. These purchasers are referred to as similarly
sized subscriber groups (SSSG). The HMO must apply the same
methodologies it used to calculate premium rates for its SSSGs and
select the method that yields the lowest premium rate for FEHBP.; ; The
premium rate may be adjusted to incorporate findings from rate
reconciliation audits..
Topic: Covered benefits; M+C requirements: Determination of costs,
benefits, and government and beneficiary contribution: HMO must provide
all Medicare-covered benefits except hospice care. HMO may enhance
Medicare‘s benefit package by reducing beneficiary cost-sharing
requirements or providing coverage for additional benefits, such as
prescription drugs. If projected Medicare payments exceed the HMO‘s
ACR, the HMO must use the excess by enhancing benefits or contributing
to a benefit stabilization fund that it can draw on in future years to
help finance the cost of covered benefits, or a combination of these.;
; Beginning in 2003, HMO may pay all or part of a beneficiary‘s
Medicare part B premium.[A]; FEHBP requirements: Determination of
costs, benefits, and government and beneficiary contribution: In
general, an HMO‘s FEHBP benefit package is expected to be based on the
benefit package it provides to the most enrollees in the community. OPM
may require HMOs to provide coverage for certain benefits, such as
prescription drugs or child immunizations, or may establish coverage
parameters, such as minimum copayments or parity for mental health
benefits. OPM may restrict benefits, such as dental coverage, that
might result in an HMO attracting a disproportionate number of healthy
beneficiaries, a phenomenon known as favorable selection..
Topic: Government contribution; M+C requirements: Determination of
costs, benefits, and government and beneficiary contribution: CMS
follows a formula specified in law to establish the government
contribution to an M+C HMO in each geographic payment area (generally a
county).[B]; ; ; ; ; ; ; ; ; M+C payment rates are adjusted, up or
down, to better reflect the likely health care costs associated with
certain beneficiary characteristics such as age, sex, Medicaid
enrollment status, and prior hospitalizations for selected conditions.;
FEHBP requirements: Determination of costs, benefits, and government
and beneficiary contribution: OPM follows a formula specified in law to
establish the government premium contribution.[C] For each enrollee,
the government pays the HMO the lesser of:; ; 1. 72 percent of the
weighted average premium of all health plans offered to government
employees (average premium weighted by the number of FEHBP enrollees in
each health plan), or; 2. 75 percent of the health plan‘s premium.
; OPM does not adjust payments for the characteristics of individual
enrollees..
Topic: Beneficiary contribution; M+C requirements: Determination of
costs, benefits, and government and beneficiary contribution:
Beneficiary premium is established in conjunction with the health
plan‘s cost-sharing requirements. In general, beneficiaries are
expected to pay, in premiums and cost sharing, the difference between
the health plan‘s ACR for its entire benefit package and the portion of
Medicare‘s payment used by the health plan for current benefits.[D];
FEHBP requirements: Determination of costs, benefits, and government
and beneficiary contribution: Beneficiary pays the difference between
health plan‘s premium and the government contribution per enrollee.
Beneficiary must pay a minimum of 25 percent of the health plan‘s
premium. In addition, beneficiary must pay any required cost sharing..
Topic: Limits on premiums and required cost sharing; M+C requirements:
Determination of costs, benefits, and government and beneficiary
contribution: No minimum premiums or required cost sharing.; ; For
Medicare-covered benefits as a whole, the expected premiums and cost
sharing per beneficiary cannot exceed a nationally established amount
representing the actuarial value of FFS‘s deductibles and coinsurance.
CMS may limit cost sharing for individual items and services if it
determines that the health plan‘s proposed cost sharing would, for
example, discriminate or discourage enrollment of severely ill or
chronically ill beneficiaries.; ; For benefits not covered by Medicare,
the expected revenue per beneficiary cannot exceed the health plan‘s
ACR for the group of benefits.; FEHBP requirements: Determination of
costs, benefits, and government and beneficiary contribution: No
maximum premiums or required cost sharing.; ; OPM sets some minimum
copayment amounts..
Topic: Submission, review, and approval of benefit package proposals.
Topic: Call for proposals; M+C requirements: Determination of costs,
benefits, and government and beneficiary contribution: No later than
March 1 of each year, which has been temporarily changed to no later
than the second Monday in May in 2004 and 2005, CMS announces the M+C
payment rates for each geographic payment area that will be in effect
during the next calendar year.[E] (M+C benefit year coincides with the
calendar year.); FEHBP requirements: Determination of costs, benefits,
and government and beneficiary contribution: In March or early April,
OPM sends out a ’call letter“ asking HMOs to submit their benefit
package proposals for the next benefit year. The call letter contains
information on any program changes that could affect an HMO‘s rates..
Topic: Number of proposals submitted; M+C requirements: Determination
of costs, benefits, and government and beneficiary contribution: CMS
received about 650 ACRPs in 2001.[F]; FEHBP requirements: Determination
of costs, benefits, and government and beneficiary contribution: OPM
received about 300 benefit package proposals in 2001..
Topic: Contents of proposals; M+C requirements: Determination of costs,
benefits, and government and beneficiary contribution: An HMO must
submit an ACRP for each heath plan it intends to offer. The ACRP
consists of two
parts--(1) a set of six standardized spreadsheets that support the
health plan‘s ACR and (2) a standardized list, known as the plan
benefit package (PBP), that details all the benefits the HMO will
offer.; ; The six ACR spreadsheets ask for the following information.;
; * Summary projections of enrollment, Medicare‘s average payment rate,
and revenue collected from beneficiaries.; * Base-year actual costs and
revenues. (HMO uses recent historical costs and revenues as a basis to
project benefit-year costs and revenues. The base year is the period
when historical costs and revenues are measured. Base-year costs are
adjusted for expected trends and other factors to project benefit-year
costs and revenues.); * HMO financial information.; * Premiums and
cost-sharing details for various categories of services.; * Expected
variation in costs and revenues by health care service category.; *
Calculation comparing the ACR to Medicare‘s projected average payment
rate.; FEHBP requirements: Determination of costs, benefits, and
government and beneficiary contribution: An HMO must submit, for each
health plan it intends to offer, information that describes how it
developed rates for its SSSGs and shows that it used the same
methodology to develop its FEHBP rates.; ; HMO submits OPM-required
forms and supporting documentation for each of its health plans. OPM
forms primarily consist of a series of questions. Many questions have
multiple-choice answers; others ask for a narrative description of the
HMO‘s rate development methodology. The supporting documentation can be
submitted in any form that is convenient for the HMO and supplies the
necessary information. The number of forms and amount of documentation
required vary according to whether the health plan serves more or less
than 1,500 FEHBP enrollees and whether total income from FEHBP is less
than or more than $500,000.[G].
Topic: Transmission of proposals; M+C requirements: Determination of
costs, benefits, and government and beneficiary contribution: HMO
submits ACRPs electronically and mails a paper copy of the ACR to CMS
along with narrative descriptions that may contain additional
explanations or cost justifications.; FEHBP requirements:
Determination of costs, benefits, and government and beneficiary
contribution: HMO mails two paper copies of benefit package proposals
or other required documentation to OPM..
Topic: Proposal submission deadline; M+C requirements: Determination of
costs, benefits, and government and beneficiary contribution: July 1
before the start of the benefit year. For benefit years 2003 through
2005 only, the deadline is the second Monday in September.[H]; FEHBP
requirements: Determination of costs, benefits, and government and
beneficiary contribution: May 31 before the start of the benefit year..
Topic: Deadline for informing CMS/OPM that existing health plan will
not be renewed; M+C requirements: Determination of costs, benefits, and
government and beneficiary contribution: July 1 before the start of the
benefit year. For benefit years 2003 through 2005 only, the deadline is
the second Monday in September.; FEHBP requirements: Determination of
costs, benefits, and government and beneficiary contribution: May 31
before the start of the benefit year. If OPM does not receive a benefit
package proposal for an existing health plan by that date, the agency
regards the health plan as one that will not be renewed..
Topic: Review process; M+C requirements: Determination of costs,
benefits, and government and beneficiary contribution: CMS
electronically reviews each ACRP, primarily to check that all required
fields are completed. CMS and CMS‘s contractors conduct a desk review
of the ACRP. The desk review includes verifying that any projected
Medicare average payment rate in excess of the HMO‘s ACR is used to
offer additional benefits, to reduce premiums or cost sharing, or is
placed in the stabilization fund; that benefits detailed in the PBP are
included in the ACR; and that all values in the ACR appear reasonable
and are supported by adequate documentation.; ; ; BIPA requires
Medicare‘s Chief Actuary to review all ACRs submitted on or after May
1, 2001, and determine the appropriateness of both the actuarial
assumptions and the data used by HMOs.[I] CMS officials have stated
that actuarial reviews will begin with ACRs submitted in 2002.; FEHBP
requirements: Determination of costs, benefits, and government and
beneficiary contribution: OPM uses a two-stage process to review HMOs‘
benefit package proposals and begin negotiations. First, OPM‘s Office
of Insurance Programs reviews each proposed benefit package. OPM may
negotiate to have the HMO alter its proposed benefit package. Second,
OPM‘s Office of the Actuary reviews the proposed premium rate and the
data and methodology the HMO used to develop the rate. (These two
stages do not necessarily occur in strict sequence and OPM may continue
benefit negotiations while reviewing the HMO‘s premium rates.); ; OPM‘s
Office of the Actuary focuses review efforts on benefit package
proposals that cover more than 1,500 FEHBP enrollees.; ; For benefit
package proposals covering 1,500 or more FEHBP enrollees, OPM checks
that the HMO used the same methodology for its SSSG as for FEHBP. About
160 benefit package proposals were subject to this detailed review in
2001.; ; For benefit package proposals covering fewer than 1,500 FEHBP
enrollees, OPM determines whether the proposed rates appear to be
reasonable (for example, by comparing the rates with those submitted by
similar HMOs)..
Topic: Schedule for approving proposals; M+C requirements:
Determination of costs, benefits, and government and beneficiary
contribution: CMS generally completes its review of ACRPs and approves
them before the start of Medicare‘s annual enrollment period in
November.[J]; FEHBP requirements: Determination of costs, benefits, and
government and beneficiary contribution: OPM tries to finish all
negotiations by mid-August--approximately 10 weeks before the start of
FEHBP‘s open season that begins in November..
Topic: Reconciliation process; M+C requirements: Determination of
costs, benefits, and government and beneficiary contribution: No
applicable requirements.; FEHBP requirements: Determination of costs,
benefits, and government and beneficiary contribution: In early March
of the benefit year, each HMO must tell OPM what rate it actually
negotiated with its SSSGs. (The HMO may have signed contracts with its
SSSGs after submitting its FEHBP rate proposal.) If the lowest SSSG
rate differs from the one listed in the HMO‘s FEHBP rate proposal, OPM
reconciles the difference and determines whether the HMO undercharged
or overcharged FEHBP. The reconciliation process is also used to make
adjustments for FEHB program changes announced after benefit package
proposals were finalized and approved. An HMO cannot use the
reconciliation process to update its estimates of beneficiary use of
services.; ; OPM maintains a contingency reserve fund for HMOs, and may
charge an HMO up to 3 percent of its health plan‘s premium to establish
and maintain the fund..
FEHBP requirements: Determination of costs, benefits, and government
and beneficiary contribution: M+C requirements Topic : : Funds are paid
out of the health plan‘s contingency reserve to: compensate a health
plan if its rate at the time of reconciliation (late spring, early
summer) is higher than that agreed to in rate negotiations; reduce the
rate otherwise applicable for a year if the contingency reserve is
projected to exceed the minimum balance; and reimburse the Federal
Employees Health Benefits Fund for audit findings against a health
plan..
Topic: Benefit package proposal audits.
Topic: Entities that conduct audits; M+C requirements: Determination of
costs, benefits, and government and beneficiary contribution: For
audits of benefit year 2000 ACRPs, CMS contracted with three private
certified public accounting firms and HHS‘s Office of Inspector General
(OIG). For audits of benefit year 2001 ACRPs, CMS contracted with only
private firms.; FEHBP requirements: Determination of costs, benefits,
and government and beneficiary contribution: OPM OIG..
Topic: Information subject to audit; M+C requirements: Determination of
costs, benefits, and government and beneficiary contribution: BBA
grants the Secretary of HHS the right to audit and inspect any books
and records of the HMO that pertain to the ability of the organization
to bear the risk of potential financial losses, or to services
performed or determinations of amounts payable under the contract.; ;
Audits analyze each of the six ACR worksheets, but primarily focus on
two aspects of the ACR-the actual costs incurred in the base year, and
the methodology the HMO used to project benefit-year costs from base-
year costs.; FEHBP requirements: Determination of costs, benefits, and
government and beneficiary contribution: OPM OIG conducts two types of
audits: rate reconciliation audits of benefit package proposals for the
current benefit year, and historical audits that generally review
benefit package proposals from 5 previous benefit years.; ; Audits
determine whether the HMO‘s rate was developed according to the
contract, the Federal Acquisition Regulation (FAR), which contains
generic procurement rules contractors follow in doing business with the
federal government, and the Federal Employees Health Benefits
Acquisition Regulation, which tailors FAR to FEHBP..
Topic: Selection criteria for audits and number of HMOs audited
annually; M+C requirements: Determination of costs, benefits, and
government and beneficiary contribution: CMS is required to audit at
least one-third of the participating HMOs annually.[K]; ; CMS selected
every third HMO contract from those filing ACRPs for 2000. CMS then
used a risk-based approach to eliminate or add HMO contracts based on
the desk reviews and prior experience with particular HMO contracts.; ;
CMS audited 80 of the 238 M+C contracts for the 2000 benefit year.
CMS‘s goal is to audit all M+C contracts over a 3-year period.; FEHBP
requirements: Determination of costs, benefits, and government and
beneficiary contribution: The FEHB Act permits, but does not require,
audits of HMOs. OPM OIG performs a risk analysis by assigning all of an
HMO‘s health plans a numerical value for criteria such as nature of
previous findings, size of health plan, dollar volume, and time elapsed
since last audit. Aggregate score for each HMO is computed, and HMOs
with the highest risk scores are audited.; ; In 2001, OPM OIG performed
20 rate reconciliation audits and 23 historical audits of HMOs. OPM
tries to audit each HMO at least once every 7 years..
Topic: Timing of audits; M+C requirements: Determination of costs,
benefits, and government and beneficiary contribution: Audits of ACRPs
for benefit year 2000 were conducted from May through November 2000.
(HMOs had originally submitted these ACRPs in July 1999.); FEHBP
requirements: Determination of costs, benefits, and government and
beneficiary contribution: Rate reconciliation audits of benefit package
proposals are conducted from May through August of the benefit year
covered by the proposal. Historical audits are conducted from August
through May..
Topic: Contents of audit reports; M+C requirements: Determination of
costs, benefits, and government and beneficiary contribution: CMS‘s
contract for benefit year 2000 required that the audit reports contain
a discussion of each audit finding, a revised ACRP showing the
estimated dollar effect of each audit finding, and a conclusion about
the reasonableness of the audited ACRP.; FEHBP requirements:
Determination of costs, benefits, and government and beneficiary
contribution: Audit reports contain a discussion of each audit finding
and the dollar effect of each audit finding..
Topic: Consequences of audit findings; M+C requirements: Determination
of costs, benefits, and government and beneficiary contribution:
Depending on the audit findings accepted by CMS, an HMO could be
subject to administrative sanctions, civil money penalties, and be
required to return double the excess amount charged in violation. The
excess amount charged is deducted from the penalty and returned to the
Medicare enrollee(s) concerned.; ; CMS has provided copies of the 2000
benefit-year audit reports to HMOs. The agency is considering the
actions it will take to address the audit findings.; FEHBP
requirements: Determination of costs, benefits, and government and
beneficiary contribution: If OPM OIG determines that rates equivalent
to the SSSGs‘ rates were not applied to the FEHBP, it can return a
finding of defective pricing. FEHBP is then entitled to a downward rate
adjustment to compensate for any overcharges and interest on
overcharges..
[A] Part A of Medicare provides coverage for inpatient hospital,
skilled nursing facility, hospice, and certain home health care
services, for which beneficiaries do not pay a premium. To receive
coverage for physician and other services provided under part B of
Medicare, beneficiaries must pay a monthly premium to Medicare. In
general, a beneficiary enrolled in an M+C health plan must pay
Medicare‘s part B premium in addition to any premium charged by the
health plan.
[B] Balanced Budget Act of 1997 (BBA), Pub. L. No. 105-33, §4001, 111
Stat. 251, 299 (classified to 42 U.S.C. 1395w-23).
[C] 5 U.S.C, §8906.
[D] Under certain circumstances, an HMO may contribute a portion of its
Medicare payment to a benefit stabilization fund to finance benefits in
future years, or draw on its previous contributions to finance current
benefits.
[E] Public Health Security and Bioterrorism Preparedness and Response
Act of 2002 (Bioterrorism Act), Pub. L. No. 107-188, §532(d), 116 Stat.
594, 696.
[F] This reflects the number of revised ACRPs filed following the
enactment of BIPA, which required HMOs to submit revised ACRPs to cover
the portion of the 2001 contract year--March through December--when
BIPA specified increased payment rates would be in effect.
[G] OPM measures enrollment for this purpose in terms of numbers of
contracts between an FEHBP health plan and federal employees, retirees,
or surviving dependents. Thus, the number of contracts is less than the
number of covered lives, which includes covered spouses and dependent
children.
[H] Bioterrorism Act, §532(b), 116 Stat. 696.
[I] Medicare, Medicaid, and SCHIP Benefit Improvement and Protection
Act of 2000 (BIPA), Pub. L. No. 106-554, Appendix, F, §622, 114 Stat.
2763A-463, 2763A-566.
[J] The Bioterrorism Act temporarily changes the date of the annual
enrollment period that occurs before the start of each benefit year
(§532(c), 116 Stat. 696). BBA specified the month of November as the
annual enrollment period (BBA, §4001, 111 Stat. 282). For benefit years
2003 through 2005, the Bioterrorism Act delays the start of the annual
enrollment period to November 15 and extends its conclusion to December
31 during the years 2002 through 2004 (§532(c), 116 Stat. 696). For the
2003 benefit year, CMS intends to complete its review of submitted
ACRPs by November 1, 2002, approximately 2 weeks prior to the start of
Medicare‘s open enrollment period.
[K] BBA, §4001, 111 Stat. 320. Audits were first conducted for benefit
year 2000 ACRPs.
Source: GAO summary of information provided by CMS and OPM, including
applicable federal statutes, operational guidance, and other agency
materials pertaining to HMOs, and interviews with officials. :
[End of table]
Figure 1: Timeline for Submission, Review, and Approval of HMOs‘
Benefit Package Proposals for Benefit Year 2001:
[See PDF for image]
Source: GAO summary of information provided by CMS and OPM, including
applicable federal statutes and regulations, operational guidance and
other agency materials pertaining to HMOs, and interviews with
officials.
[End of figure]
Figure 2: Timeline for Submission, Review, and Approval of HMOs‘
Benefit Package Proposals for Benefit Years 2003 Through 2005:
[See PDF for image]
Note: For benefit years after 2005, schedule of M+C activities will
revert to the schedule shown in
fig. 1.
[A] CMS announced payment rates for benefit year 2003 in March 2002.
Source: GAO summary of information provided by CMS and OPM, including
applicable federal statutes and regulations, operational guidance and
other agency materials pertaining to HMOs, and interviews with
officials.
[End of figure]
[End of section]
Appendix II: Beneficiary Enrollment:
M+C and FEHBP have HMO requirements that pertain to beneficiary
enrollment. Our summary of those requirements is organized as follows.
Enrollment Process:
* Enrollment application:
* Eligibility determination:
* Transmission of enrollment information to HMOs:
* Reconciliation of data between HMO and administering agency:
Timing of Enrollment Changes:
* Opportunities to enroll or change enrollment:
* Requirements for health plans to accept new enrollees:
* Determination of effective coverage dates:
Enrollment and Disenrollment Forms and Notices:
* Enrollment forms:
* Notifications for other enrollment-related situations:
* Forms and notifications for voluntary disenrollment:
* Notifications for other disenrollment-related situations:
Table 2 summarizes selected M+C and FEHBP requirements pertaining to
beneficiary enrollment. Table 3 summarizes the annual opportunities for
Medicare beneficiaries to enroll in an M+C health plan, change M+C
health plans, or switch to FFS under M+C‘s enrollment ’lock-in“
provision. This provision was in effect during the first half of 2002
and will be implemented again as of January 1, 2005. Until that date,
Medicare beneficiaries may make enrollment changes every month. Table 4
summarizes the annual opportunities for FEHBP beneficiaries to make
health plan enrollment changes.
Table 2: Selected Requirements for Beneficiary Enrollment in HMOs, M+C
and FEHBP:
Topic: Enrollment process.
Topic: Enrollment application; M+C requirements: Enrollment process:
Medicare beneficiaries apply in writing to HMO. HMO must accept mailed
and faxed enrollment forms and those presented in person.; FEHBP
requirements: Enrollment process: Employees: During open season,
agencies may permit or require their employees to submit applications
to OPM via an automated telephone system or Web site. Employees who do
not use the automated systems apply in writing to their agency‘s human
resources office.; ; Retirees: During open season, retirees may change
enrollment via an automated telephone system or Web site provided by
OPM. Outside of open season activities, retirees make enrollment
changes by using a toll-free telephone number provided by OPM..
Topic: Eligibility determination; M+C requirements: Enrollment
process: HMO must verify completion of enrollment forms and perform
initial checks to verify eligibility for M+C. Eligibility determination
requires, but is not limited to, verification of enrollment in Medicare
parts A and B and residence in the health plan‘s service area. HMO may
access CMS data to verify enrollment in Medicare parts A and B.; ; HMO
must electronically submit new enrollments to CMS monthly. CMS performs
final eligibility checks. HMO can electronically review the results of
CMS reports to confirm eligibility for new enrollees.[A]; FEHBP
requirements: Enrollment process: HMO plays a limited role in the
eligibility determination process. Agencies must determine eligibility
for employees. For retirees, agencies must conduct initial
determinations, then submit the results of those determinations to OPM
for confirmation. HMO‘s responsibility is to confirm that applicants
are eligible for its particular health plan or health plans. For
example, if an HMO offers a health plan only in a designated service
area, it must confirm that applicants reside in that service area..
Topic: Transmission of enrollment information to HMOs; M+C
requirements: Enrollment process: HMO receives enrollment forms
directly from beneficiary.; FEHBP requirements: Enrollment process:
Employees: Excluding open season activities, agencies send copies of
the enrollment forms directly to HMO. The copies must be forwarded at
least every week. Several agencies send changes indirectly through
OPM‘s enrollment processing center in Macon, Georgia. During open
season, OPM sends enrollments received electronically to HMO via its
enrollment processing center. These transactions occur weekly.; ;
Retirees: HMO receives non-open season enrollment changes directly from
OPM. During open season, enrollment changes are made via an automated
telephone system or a Web site provided by OPM. OPM sends these changes
to the HMO electronically through its enrollment processing center..
Topic: Reconciliation of; data between HMO and administering agency;
M+C requirements: Enrollment process: Enrollment data are
electronically reconciled between HMO and CMS monthly. HMO can
electronically view reports with results of CMS eligibility
confirmation.; FEHBP requirements: Enrollment process: Enrollment data
are reconciled in writing between the HMO and agency personnel and
payroll offices quarterly..
Topic: Timing of enrollment changes.
Topic: Opportunities to enroll or change enrollment; M+C requirements:
Enrollment process: During the first 6 months of 2002, Medicare
beneficiaries were subject to a lock-in provision that limited the
number of opportunities they had each year to enroll or change
enrollment in M+C health plans. HMOs were required to track a
beneficiary‘s enrollment changes to ensure compliance with those
limits. On June 12, 2002, the lock-in requirement was temporarily
dropped until January 1, 2005. Through December 31, 2004, Medicare
beneficiaries can enroll, on a monthly basis, into any M+C health plan
accepting new enrollments or switch to the FFS program. (See table 3
for beneficiaries‘ opportunities to make health plan changes under the
lock-in provision.); FEHBP requirements: Enrollment process: OPM
requirements delineate specific opportunities to enroll or change
enrollment in FEHBP health plans. FEHBP eligibles enroll in their first
health plan and are then locked into that health plan until the annual
open season, unless special circumstances arise.; ; Employees and
retirees enrolled in FEHBP generally may only change health plans
during the annual open season.; ; FEHBP enrollees in certain
circumstances have other opportunities to change enrollment. For
example, they may change health plans if their employment status or
family status changes. (See table 4 for specific FEHBP enrollment
opportunities.).
Topic: Requirements for health plans to accept new enrollees; M+C
requirements: Enrollment process: In general, unless an HMO‘s health
plan has reached its CMS-approved capacity limit, it must accept
beneficiaries who apply.; ; HMO may not screen beneficiaries prior to
enrollment. HMO may not reject beneficiaries who have preexisting
conditions, other than end-stage renal disease.; FEHBP requirements:
Enrollment process: HMO must accept all eligible applicants.; ; ; ; HMO
may not reject applications due to preexisting conditions..
Topic: Determination of effective coverage dates; M+C requirements:
Enrollment process: HMO must determine effective coverage dates based
on the election period.; ; * Elections made during the 3 months prior
to beneficiary‘s entitlement to Medicare parts A and B are effective
the first date of entitlement.; ; ; ; * Elections made during the
annual election period are effective January 1.; ; ; ; ; ; ; ; ; ; ; *
At other times, the effective date is the first day of the month after
HMO receives the complete enrollment form.; FEHBP requirements:
Enrollment process: Agency personnel offices must determine effective
coverage dates based on the election period.; ; * Elections cannot be
made prior to the first date of eligibility. Generally, elections made
within the 60-day window posteligibility are effective the first day of
the first pay period after the agency personnel office receives the
enrollment request and follows a period during which the enrollee was
in pay status.; ; * Employees: Initial enrollments made during the
annual open season are effective the first day of the first pay period
that begins in the following year and that follows a pay period during
any part of which the enrollee was in pay status. Changes in
enrollments made during the annual open season are effective the first
day of the first pay period that begins the following year.; ; *
Retirees: Enrollments made during open season are effective January 1.;
; * Effective dates vary for employees and retirees enrolling during
special circumstances, such as when a health plan terminates its
participation in FEHBP..
Topic: Enrollment and disenrollment forms and notifications.
Topic: Enrollment forms; M+C requirements: Enrollment process:
Beneficiaries must submit enrollment forms to HMO.; ; HMO is not
required to use a standard enrollment form. CMS provides three model
enrollment forms that HMO may choose to use:; ; * the individual
enrollment form,; * the employer group health plan (EGHP) enrollment
form, or; * the short enrollment form (for beneficiaries switching
health plans within an HMO).
; If HMO chooses to use its own enrollment form, the form must include
data elements specified by CMS. CMS also requires that certain
statements appear in the HMO enrollment form (to which the beneficiary
need agree). For example, the enrollment form must state that the
beneficiary understands that enrollment in more than one health plan
with the same effective date will cancel all enrollments.; ; CMS must
review HMO enrollment forms prior to their use. If HMO uses model
enrollment forms without modifications, CMS is required to review them
within 10 days of submission. If HMO chooses to use its own enrollment
forms, CMS is required to review them within 45 days of submission.;
FEHBP requirements: Enrollment process: FEHBP employees submit
enrollment forms to the agencies.; ; Employees: Employees must complete
a standard form to enroll or change enrollment to another health plan.;
; Retirees: Retirees must use an automated telephone system or Web site
to change enrollment to another health plan.; ; ; ; HMO may not require
completion of its own enrollment or application form. HMO‘s electronic
reproduction of enrollment form must contain the same data elements as
the standard form.; ; ; ; ; ; ; No applicable requirements..
Topic: Notifications for other enrollment-related situations; M+C
requirements: Enrollment process: CMS requires HMO to provide
notifications to applicants in certain situations. For example, HMO
must send applicants a written notice confirming receipt of a complete
enrollment form and a confirmation when CMS has made the final
determination of eligibility. Model forms are available from CMS for
these required communications. HMOs must also provide identification
cards to enrollees.; FEHBP requirements: Enrollment process: OPM
requires HMO to send identification cards to new enrollees..
Topic: Forms and notifications for voluntary disenrollment; M+C
requirements: Enrollment process: M+C enrollees disenroll from health
plans by changing to another health plan or by contacting the Social
Security Administration, a Railroad Retirement Benefits office, CMS, or
the HMO.; ; When CMS notifies HMO that a beneficiary has disenrolled
from its health plan, HMO must send its former enrollee a notice
confirming the disenrollment.; ; If HMO receives a verbal request from
an enrollee, HMO must either ask for the request in writing or send the
enrollee a disenrollment form and an accompanying letter. Once HMO
receives either a written request or the completed disenrollment form,
HMO must send a copy of the request and disenrollment letter to the
former enrollee.; ; Model forms and letters are available from CMS for
all these required communications.; FEHBP requirements: Enrollment
process: FEHBP enrollees disenroll from health plans by either changing
enrollment to another health plan or canceling enrollment in FEHBP.
Employees disenroll with the standard form or electronically. Retirees
disenroll through a toll-free telephone number or an automated system..
Topic: Notifications for other disenrollment-related situations; M+C
requirements: Enrollment process: CMS also requires HMO to provide
notification to enrollees in other disenrollment-related situations.
For example, HMO must send written notification to the enrollee upon
deciding to disenroll the enrollee due to failure to pay premiums. CMS
provides a model letter for this purpose. HMO must also send an
enrollee a written notice if it terminates or withdraws from the
enrollee‘s service area or continuation area-a CMS-approved area
outside of the HMO‘s service area where the HMO provides, or arranges
to provide, services to existing enrollees-will no longer include the
area where the enrollee lives. CMS does not provide a model
notification for this purpose.; FEHBP requirements: Enrollment process:
No applicable requirements..
[A] We use the term ’enrollee“ to refer to a Medicare beneficiary who
has already enrolled in an M+C health plan.
Source: GAO summary of information provided by CMS and OPM, including
applicable federal statutes and regulations, operational guidance and
other agency materials pertaining to HMOs, and interviews with
officials.
[End of table]
Health Plan Enrollment Opportunities for M+C and FEHBP Beneficiaries:
Before 2002, a beneficiary in FFS or an M+C health plan could enroll,
on a monthly basis, into any M+C health plan accepting new enrollments
or switch from an M+C health plan to FFS. BBA included an enrollment
lock-in provision, effective January 1, 2002, that limited the number
of opportunities, called election periods, for beneficiaries to make
such changes (see table 3).[Footnote 35] Once a beneficiary used an
election period to enroll in a health plan, he or she was locked into
that health plan until eligible for another election period. All
beneficiaries were eligible for at least two election periods per year-
-one during the annual election period in November and a second during
the first 3 months of the benefit year (6 months in 2002). However, the
number of election periods each year was higher for beneficiaries with
certain characteristics. For example, beneficiaries enrolled in a
health plan on their 65THbirthday had four election periods during
their first 12 months in the program. Institutionalized beneficiaries
could change health plans an unlimited number of times throughout the
year.
On June 12, 2002, the Bioterrorism Act was signed into law. This act
temporarily lifted the enrollment lock-in provision that had been
implemented as of January 1, 2002; the lock-in provision is scheduled
to be reinstated beginning January 1, 2005.[Footnote 36]
Employees and retirees enrolled in FEHBP generally may change health
plans one time each year, during the annual open enrollment period.
However, FEHBP does permit changes at other times under certain
circumstances, such as a change in family status (see table 4).
Table 3: Opportunities for Medicare Beneficiaries to Enroll in an M+C
Health Plan or Make Health Plan Changes Under M+C‘s Lock-in Provision:
Election period: First year of eligibility: Initial coverage election;
Length of election period: First year of eligibility: 3 months prior to
eligibility for Medicare parts A and B; Are health plans required to be
open to new enrollment?: First year of eligibility: Yes, unless at
capacity.
Election period: First year of eligibility: Open enrollment for newly
eligible individuals; one change is allowed[A]; Length of election
period: First year of eligibility: 6 months posteligibility in 2005; 3
months posteligibility in 2006 and beyond; Are health plans required to
be open to new enrollment?: First year of eligibility: No.
Election period: First year of eligibility: Annual election; Length of
election period: First year of eligibility: November; Are health plans
required to be open to new enrollment?: First year of eligibility: Yes,
unless at capacity.
Election period: First year of eligibility: Open enrollment; one change
is allowed; Length of election period: First year of eligibility:
January-June in 2005; January-March in 2006 and beyond; Are health
plans required to be open to new enrollment?: First year of
eligibility: No.
Election period: First year of eligibility: Special opportunity for
beneficiaries aged 65 to return to FFS; Length of election period:
First year of eligibility: 1 year following enrollment within
Medicare‘s initial enrollment period at 65[TH] birthday; Are health
plans required to be open to new enrollment?: First year of
eligibility: Not applicable.
Election period: First year of eligibility: Annual election; Length of
election period: First year of eligibility: November; Are health plans
required to be open to new enrollment?: First year of eligibility: Yes,
unless at capacity.
Election period: First year of eligibility: Open enrollment; one change
is allowed; Length of election period: First year of eligibility:
January-June in 2005; January-March in 2006 and beyond; Are health
plans required to be open to new enrollment?: First year of
eligibility: No.
Election period: First year of eligibility: Beneficiary moves out of
health plan‘s service area or continuation area; Length of election
period: First year of eligibility: Includes the month prior to the
move, the month of the move, and the month after the move; Are health
plans required to be open to new enrollment?: First year of
eligibility: Yes, unless at capacity.
Election period: First year of eligibility: Beneficiary‘s health plan
discontinues service; Length of election period: First year of
eligibility: Varies depending on circumstance; Are health plans
required to be open to new enrollment?: First year of eligibility: Yes,
unless at capacity.
Election period: First year of eligibility: Beneficiary is living in an
institution; Length of election period: First year of eligibility:
Year-round; Are health plans required to be open to new enrollment?:
First year of eligibility: No.
Election period: First year of eligibility: Beneficiary‘s health plan
violates contract; Length of election period: First year of
eligibility: Varies depending on circumstance; Are health plans
required to be open to new enrollment?: First year of eligibility: Yes,
unless at capacity.
Election period: First year of eligibility: Beneficiary enrolled in an
EGHP; Length of election period: First year of eligibility: When an
individual in the EGHP makes an election; Are health plans required to
be open to new enrollment?: First year of eligibility: Yes, unless at
capacity.
Election period: First year of eligibility: Exceptional conditions as
determined by CMS; Length of election period: First year of
eligibility: Specified by CMS; Are health plans required to be open to
new enrollment?: First year of eligibility: Yes, unless at capacity.
[A] However, in 2005 and beyond, the election period must not extend
past December 31 of the same calendar year.
Source: GAO summary of information provided by CMS, including
applicable federal statutes and regulations, operational guidance and
other agency materials pertaining to HMOs, and interviews with
officials.
[End of table]
Table 4: Opportunities for FEHBP Beneficiaries to Enroll in a Health
Plan or Make Health Plan Changes:
[See PDF for image]
[A] Agencies may allow employees to make late elections if employees
demonstrate they missed the original deadline due to causes beyond
their control. Employees make a request to their agency, and if the
request is granted, they have 60 additional days from the date the
request was granted to make an election.
Source: GAO summary of information provided by OPM, including
applicable federal statutes and regulations, operational guidance and
other agency materials pertaining to HMOs, and interviews with
officials.
[End of table]
[End of section]
Appendix III: Marketing and Enrollee Communication Materials:
M+C, FEHBP, NAIC, NCQA, and JCAHO have HMO requirements that pertain to
marketing and enrollee communication materials. Our summary of those
requirements is organized as follows.
Types of Materials Subject to Standards:
* Advertising and prospective member materials:
* Materials that explain HMO operations:
Approach Used to Ensure that Materials Conform to Standards:
* Prior approval:
* Postdistribution review:
* Ongoing assessment of new members‘ understanding of HMO operations:
Standards for Documents and Information:
* Preenrollment documents related to benefits and coverage:
* Deadline for distributing preenrollment documents:
* Postenrollment documents related to benefits and coverage:
* Deadline for distributing postenrollment documents:
* Standard language and formats:
* Model language and formats:
* Guidelines for preparing materials:
* Language phrases:
* Readability:
* Producing materials in other languages and formats:
* Telephone numbers:
* References to statistical studies:
* References to competitors:
* References to outpatient prescription drug benefit:
Standards for Marketing Activities:
* Promotional activities:
* Prohibited activities:
* Items not covered in contract:
Review of Materials:
* Reviewing officials:
* Frequency of review:
* Timing of review:
* Time frames for standard review:
* Time frames for expedited review:
* Final verification of beneficiary notification materials:
* Annual certification of compliance in preparing marketing materials:
Table 5 summarizes selected M+C, FEHBP, NAIC, JCAHO, and NCQA
requirements for marketing and enrollee communication materials.
Table 5: Selected Requirements for Marketing and Enrollee Communication
Materials, M+C, FEHBP, NAIC, JCAHO, and NCQA:
[See PDF for image]
[A] For the 2002 and 2003 beneficiary education/open season campaigns,
CMS has temporarily suspended final verification of beneficiary
notification materials, including the summary of beneficiary
notification materials, including the summary of benefits, the evidence
of coverage, and all other materials prepared as part of HMO‘s
enrollment package(s).
Source: GAO summary of information provided by CMS and OPM, including
applicable federal statutes and regulations, operational guidance and
other agency materials pertaining to HMOs, and interviews with
officials. GAO summary of information provided by NAIC, JCAHO, and
NCQA, including NAIC model requirements for HMOs, standards from the
current JCAHO and NCQA accreditation manuals for HMOs, and interviews
with NAIC, JCAHO, and NCQA officials.
[End of figure]
[End of section]
Appendix IV Quality Improvement:
M+C, FEHBP, NAIC, JCAHO, and NCQA have HMO requirements that pertain to
quality improvement (QI). Our summary of those requirements is
structured along the following dimensions.
Elements of a Quality Improvement Program:
* Purpose:
* Performance improvement projects:
* Annual performance measurement:
Administration of Quality Improvement Program:
* Leadership involvement:
* Organizational structure:
* Program documentation:
* Program description:
* Meeting documentation:
* Annual work plan:
* Evaluation report:
* Provider participation:
* Enrollee participation:
* Accreditation:
Performance Improvement Projects:
* Number of projects:
* Choice of project topics:
* Choice of quality measures:
* Required results:
* Minimum performance levels and benchmarks:
* Demonstrable performance improvement:
* Sustained performance improvement:
* Evaluation:
* How HMO reports:
* Who evaluates:
* What is evaluated:
* Potential actions based on evaluation:
Annual Performance Measurement:
* Clinical and administrative performance:
* Who participates:
* How data are externally validated:
* Who pays for external validation:
* When annual data are submitted:
* Member satisfaction survey measures for current enrollees:
* Who participates:
* Who is sampled:
* Who pays for survey administration:
* Member satisfaction survey measures for disenrolled members:
* Who participates:
* Who is sampled:
* Who pays for survey administration:
* Member health status survey measures:
* Who participates:
* Who is sampled:
* Who pays for survey administration:
Table 6 summarizes selected M+C, FEHBP, NAIC, JCAHO, and NCQA
requirements for QI.
Table 6: Selected Requirements for Quality Improvement for M+C, FEHBP,
NAIC, JCAHO, and NCQA:
[See PDF for image]
[A] HMO must use CMS‘s Quality Improvement System for Managed Care
(QISMC) standards and guidelines to meet the requirements of Part 422,
Subpart D, Quality Assurance, of Title 42 of the Code of Federal
Regulations. Since January 1998, CMS has released three versions of
QISMC, with the most current version issued as of July 26, 2000. OMB
has approved the July 26, 2000, version of QISMC through July 31, 2002.
CMS is in the process of incorporating the QISMC standards and
guidelines into the chapters of the Medicare Managed Care Manual; once
this is accomplished, QISMC as a stand-alone document will cease to
exist for Medicare.
[B] NAIC uses the phrase QI activities rather than QI projects.
[C] JCAHO uses the phrase performance improvement activities rather
than performance improvement projects.
[D] HEDIS is a set of standardized performance measures sponsored by
NCQA. Since 1992, NCQA has collaborated with managed care
organizations, academic researchers, corporate purchasers, and
consumer representatives to create HEDIS. HEDIS includes measures that
address effectiveness of care, accessibility and availability of care,
satisfaction with the experience of care received, cost of care, health
plan stability, informed health care choices, use of services, and
health plan descriptive information.
[E] In 2002, CMS eliminated the requirement that an HMO annually
initiate a multiyear QAPI project on a topic the HMO selected.
[F] CMS contracts with QIOs, who are responsible for promoting
effective, efficient, and economical delivery of quality health care
services to Medicare beneficiaries.
[G] National topics chosen by CMS include: diabetes (1999), community-
acquired pneumonia (2000), congestive heart failure (2001), breast
cancer screening (2002), clinical health care disparities (CHCD) or
culturally and linguistically appropriate services (CLAS) (2003), and
diabetes (2004). CMS originally informed HMOs that the 2002 national
QAPI projects would be CHCD or CLAS, but postponed these projects until
2003 based on industry feedback. CMS has contracted for two CLAS
projects to produce case studies that HMOs may replicate if they choose
to do so.
[H] CMS defines seven clinical focus areas, such as primary, secondary,
or tertiary prevention of acute conditions, high-volume services, and
high-risk services, and two nonclinical areas, such as availability,
accessibility, and cultural competency of services.
[See PDF for image]
[I] NCQA also requires HMOs to adopt or establish quantitative measures
to assess their performance and to identify and prioritize areas for
improvement for three clinical areas, including at least one behavioral
health measure. However, NCQA does not currently require an HMO to
demonstrate a meaningful performance improvement for the behavioral
health topic being measured.
[J] CMS has not established or required minimum performance levels or
benchmarks for standardized quality measures for any of the national
QAPI projects. However, CMS is exempting HMOs that achieved a breast
cancer screening rate of 80 percent or better using HEDIS 2001 or 2002
measure specifications from participating in the 2002 national QAPI
project on breast cancer screening. Based on HEDIS 2001 Medicare
results, CMS exempted 39 HMOs.
[K] Beginning in January 2002, HMO can fill out and electronically
submit its Project Completion Report through a Web-based CMS data
system.
[L] CMS regional offices evaluate the overall administration of an
HMO‘s QAPI program and health information systems, but not the QAPI
projects.
[M] CMS has not required any HMO to conduct a CMS-directed special
project.
[N] NAIC stated that the insurance commissioner may be able to take
action against an HMO not meeting applicable requirements under the
general authority to regulate HMOs, although, in some states, the
authority to regulate HMOs is done by another state agency or the
insurance commissioner shares oversight with another state agency,
usually the Department of Health.
[O] CMS excludes two HEDIS measures--Practitioner Compensation and
Arrangements with Public Health, Educational and Social Service
Organizations. The Medicare Health Outcomes Survey is included as a
HEDIS measure; we excluded the Medicare Health Outcomes Survey in
reporting the 23 Medicare HEDIS measures as the survey is discussed
separately in this table.
[P] NCQA defines two types of HEDIS compliance audits, partial or full.
A partial audit occurs when the HMO, state regulator, or purchaser
selects the HEDIS measures to be audited. A full audit occurs when a
HEDIS auditor selects a core set of measures to review and extrapolates
the core set findings to all measures reported by the HMO.
[Q] CAHPS is a standardized member satisfaction survey.
rThe CAHPS Disenrollment-Assessment survey collects information on
Medicare beneficiaries‘ experiences with their former HMO, and the
CAHPS Disenrollment-Reasons survey collects information on Medicare
beneficiaries‘ motivations for changing coverage.
[S] Medicare beneficiaries voluntarily disenrolling chose to leave
their HMO for reasons other than death, termination of Medicare parts
or part B, moving out of the service area, or HMO nonrenewals.
[T] The Medicare HOS, part of the HEDIS measurement set, is a
longitudinal survey that utilizes the HCFA Short Form-36 (SF-36), an
instrument used to collect data on physical and mental functioning and
other beneficiary characteristics.
Source: GAO summary of information provided by CMS and OPM, including
applicable federal statutes and regulations, operational guidance and
other agency materials pertaining to HMOs, and interviews with
officials. GAO summary of information provided by NAIC, JCAHO, and
NCQA, including NAIC model requirements for HMOs, standards from the
current JCAHO and NCQA accreditation manuals for HMOs, and interviews
with NAIC, JCAHO, and NCQA officials.
[End of figure]
[End of section]
Appendix V: Comments from the Centers for Medicare & Medicaid Services:
DEPARTMENT OF HEALTH & HUMAN SERVICESCenters for Medicare & Medicaid
Service:
Administrator Washington, DC 20201:
To:Laura A. Dummit:
Director, Health Care-Medicare Payment Issues General Accounting
Office:
From: Thomas A. Scully
Administrator
Centers for Medicare & Medic:
Subject:General Accounting Office (GAO) Draft Report,
’Medicare+Choice:
Selected Program Requirents and Other Entities‘ Standards for: HMOs,“
(GAO-02-905):
Thank you for the opportunity to review and comment on the above-
referenced report. The Centers for Medicare & Medicaid Services (CMS)
is committed to ensuring that Medicare beneficiaries continue to have
many health options available to them.
In general, we agree with the observations cited in the report. This
report has no recommendations or concluding observations. Rather, it
summarizes requirements on managed care organizations imposed by two
Federal programs, Medicare and the Federal Employees Health Benefits
Program, as well as, certain requirements imposed by three non-
governmental entities.
Specifically, the tables in the appendices do a good job explaining the
differences between CMS and other entities. However, the format fails
to completely explain why CMS requirements may be more stringent. The
first paragraph on page 14 offers some reasons why the Federal
Employees Health Benefit Program (FEHBP) differs from M+C, but more
detailed analysis of these differences could bring a more complete
picture of how the programs differ. We suggest that GAO discuss a more
detailed history of the BBA and the legislative changes made to the
program since 1997 in order to provide a more comprehensive view of the
CMS role as a regulator subject to Congressional enactments and a
mandated payment formula.
Again, thank you for the opportunity to review this report. We look
forward to continuing our work with you on this important issue.
FOOTNOTES
[1] Under a risk-based contract, an HMO receives from Medicare a fixed
monthly amount per enrollee and is at financial risk for the cost of
providing covered services. Some Medicare HMOs are paid under different
financial arrangements.
[2] Figures for HMOs throughout this report exclude organizations that
receive payments based on their costs or operate under a Medicare
demonstration program.
[3] Pub. L. No. 105-33, §4001, 111 Stat. 251, 275.
[4] As of July 2002, approximately 23,000 beneficiaries were enrolled
in two PFFS plans. Unlike HMOs, these plans do not restrict beneficiary
choice of provider.
[5] Approximately 75 percent of beneficiaries have access to a Medicare
HMO or PFFS plan in 2002.
[6] Pub. L. No. 106-113, Appendix F, Title V, 113 Stat. 1501A-321,
1501A-378-394.
[7] Pub. L. No. 106-554, Appendix F, Title VI, 114 Stat. 2763A-463,
2763A-554-569.
[8] U.S. General Accounting Office, Medicare+Choice: Recent Payment
Increases Had Little Effect on Benefits or Plan Availability in 2001,
GAO-02-202 (Washington, D.C.: Nov. 21, 2001).
[9] M+C requirements may be different for other types of M+C
arrangements, such as PFFS or PPO plans.
[10] The entities vary from one another in the term each one uses to
refer to an HMO. For consistency, we use ’HMO“ throughout the report to
mean an organization that generally requires its enrollees to receive
care from a network of providers and is paid a fixed monthly amount per
enrollee to provide all services. We use the term ’health plan“ to
refer to a package of benefits an HMO offers in a specific geographic
area.
[11] In this report, the provisions in NAIC model acts and regulations
are referred to as model requirements.
[12] Although their HMO standards are not discussed in this report,
other organizations, such as the Accreditation Association for
Ambulatory Health Care, Inc. (AAAHC) or URAC/American Accreditation
HealthCare Commission, offer national accreditation programs for HMOs.
[13] CMS was previously named the Health Care Financing Administration
(HCFA). We use the term HCFA to refer to the agency prior to its
renaming as of July 1, 2001, and CMS for references to the agency after
that date.
[14] JCAHO‘s standards for HMO accreditation are effective January 1,
2001, through December 31, 2002. NCQA‘s standards for HMO accreditation
are effective July 1, 2001, through June 30, 2003.
[15] An HMO may offer multiple health plans to Medicare beneficiaries.
For each health plan, the HMO must specify the benefits offered and the
geographic area served.
[16] Approximately 85 percent of Medicare‘s 40 million beneficiaries
are over age 65; the remaining 15 percent are under age 65 and disabled
or have ESRD.
[17] In general, beneficiaries who have ESRD may not enroll in an M+C
HMO. However, beneficiaries who develop ESRD while enrolled in an M+C
HMO may continue their enrollment in that M+C HMO.
[18] Some beneficiaries currently have access to HMOs reimbursed on a
cost basis. This arrangement is not part of the M+C program and is
scheduled to end after 2004.
[19] An advance directive documents a beneficiary‘s health care
preferences and instructs providers if the beneficiary cannot otherwise
communicate.
[20] Public Health Security and Bioterrorism Preparedness and Response
Act of 2002 (Bioterrorism Act), Pub. L. No. 107-188, §532, 116 Stat.
594, 696.
[21] U.S. General Accounting Office, Medicare+Choice: New Standards
Could Improve Accuracy and Usefulness of Plan Literature, GAO/HEHS-99-
92 (Washington, D.C.: Apr. 12, 1999).
[22] Completed chapters are available electronically through the CMS
Web site. CMS intends to update released chapters quarterly.
[23] The nine released chapters cover enrollment and disenrollment,
marketing, quality assurance, risk-based payments, organization
compliance with state law and preemption by federal law, contracts,
effect of change in ownership or leasing of facilities during term of
contract, cost-based payments, and procedures for handling contract
disputes.
[24] OPM enrollment estimates as of July 11, 2002.
[25] All HMOs, including those in M+C, must comply with requirements
set by the states in which they operate. However, federal law
specifically preempts state laws or standards pertaining to M+C in the
areas of benefits (including cost sharing), inclusion and treatment of
providers, coverage determinations (including grievances and appeals),
and marketing materials and benefit summaries.
[26] A February 2002 survey conducted by NCQA found that 153 Fortune
500 companies, 42 percent of which are Fortune 100 companies, relied on
NCQA accreditation when making their health plan purchasing decisions.
[27] HMOs may also satisfy M+C quality requirements by receiving full
accreditation from AAAHC and meeting certain additional standards. The
accreditation standards of AAAHC, JCAHO, and NCQA do not address every
M+C quality requirement specified by CMS. These organizations agreed to
implement and enforce standards specifically for M+C HMOs. For
instance, as part of their M+C accreditation processes, AAAHC and JCAHO
agreed to require M+C HMOs to evaluate annually the effectiveness of
their quality assurance and performance improvement program strategies.
[28] Bioterrorism Act, §532(b), 116 Stat. 696.
[29] GAO-02-202.
[30] For a review of the first year‘s audits, see U.S. General
Accounting Office, Medicare+Choice Audits: Lack of Audit Follow-up
Limits Usefulness, GAO-02-33 (Washington, D.C.: Oct. 9, 2001).
[31] Before 2002, an HMO also had to initiate a multiyear quality
improvement project on a topic that the HMO selected. In 2002, CMS
eliminated this requirement. An HMO must report on the improvements
achieved from projects begun in 1999 and 2000, but does not have to
maintain them. An HMO must report the topic and baseline data for the
project it began in 2001, but does not have to maintain the project.
[32] BBA, §4001, 111 Stat. 299.
[33] Community-rated premiums reflect the average actual or anticipated
cost of all enrollees in a specific geographic area.
[34] For benefit year 2002, CMS allowed M+C HMOs to submit benefit
package proposals as late as September 17, 2001, and extended the
annual enrollment period through December 31, 2001.
[35] BBA, Pub. L. No. 105-33, §4001, 111 Stat. 251, 281-283.
[36] Bioterrorism Act, Pub. L. No. 107-108, §532(a), 116 Stat. 594,
696.
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