Medicare Advantage
Characteristics, Financial Risks, and Disenrollment Rates of Beneficiaries in Private Fee-for-Service Plans Gao ID: GAO-09-25 December 15, 2008Medicare Advantage (MA) plans are an alternative to the original Medicare fee-for-service (FFS) program. Private fee-for-service (PFFS) plans--one type of MA plan--give beneficiaries an option that is more like Medicare FFS than other MA plans, with a wider choice of providers and less plan management of services and providers. PFFS enrollment increased from about 35,000 beneficiaries in June 2004 to about 2.3 million in June 2008. This report compares PFFS plans to other MA plans and Medicare FFS in three areas: (1) characteristics of beneficiaries, (2) financial risks for beneficiaries who do not contact their plans before receiving services, and (3) disenrollment rates. To do this work, GAO reviewed materials from a selected sample of nine PFFS plan sponsors, analyzed Medicare data, and interviewed officials from CMS, which administers the Medicare program, and other organizations.
In April 2007, beneficiaries in PFFS plans tended to be healthier and generally younger than beneficiaries in other MA plans and Medicare FFS. Specifically, projected health care expenditures for PFFS beneficiaries were 7 percent less than the projected average for beneficiaries in other MA plans and 10 percent less than the projected average for beneficiaries in Medicare FFS. Beneficiaries in PFFS plans also generally were more likely than beneficiaries in other MA plans and Medicare FFS to reside in rural areas where fewer other MA plans were available. In addition, about 81 percent of beneficiaries who were new enrollees in PFFS plans were in Medicare FFS before enrolling in their plan, compared to 65 percent in other MA plans. PFFS beneficiaries may have faced certain financial risks if they did not contact their plan before receiving services. These risks were generally not assumed by beneficiaries in other MA plans and Medicare FFS. Specifically, if beneficiaries or their providers did not contact their PFFS plans before obtaining a service to make sure it would be covered, beneficiaries unexpectedly may have had to pay for the entire cost of the service if coverage was later denied by their plan. CMS officials told GAO they did not have data on the extent to which PFFS beneficiaries were faced with such costs. Furthermore, some beneficiaries likely experienced higher out-of-pocket costs for covered services if they did not contact their plan before obtaining the services. For example, one sponsor of PFFS plans increased the share of the cost for which beneficiaries were responsible from 30 percent to 70 percent if the beneficiaries did not contact the plan before obtaining certain durable equipment. GAO found that some PFFS plans were inappropriately using the term prior authorization, which can involve denying service coverage if prior plan approval is not obtained, in their informational materials. CMS officials stated that PFFS plans should not have used this term because these plans were not permitted to deny service coverage due to lack of prior plan approval. However, CMS guidance on this issue has been inconsistent and sometimes incorrect. From January through April 2007, beneficiaries in PFFS plans disenrolled at an average rate of 21 percent compared to 9 percent for other MA plans, and GAO concludes that CMS has not complied with statutory requirements to mail disenrollment rates to Medicare beneficiaries. Disenrollment rates can reflect factors such as beneficiary satisfaction and CMS is required by law to mail this information to Medicare beneficiaries to help them compare available MA plans in their area. Although CMS has not mailed disenrollment rates to beneficiaries since 2000, the agency did provide disenrollment rates through Medicare's Web site. However, this information was based on disenrollment in 2004 and 2005 and, given the enrollment growth since then, may not accurately reflect plans available to beneficiaries in 2008.
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Director: Team: Phone:GAO-09-25, Medicare Advantage: Characteristics, Financial Risks, and Disenrollment Rates of Beneficiaries in Private Fee-for-Service Plans
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
December 2008:
Medicare Advantage:
Characteristics, Financial Risks, and Disenrollment Rates of
Beneficiaries in Private Fee-for-Service Plans:
GAO-09-25:
GAO Highlights:
Highlights of GAO-09-25, a report to congressional requesters.
Why GAO Did This Study:
Medicare Advantage (MA) plans are an alternative to the original
Medicare fee-for-service (FFS) program. Private fee-for-service (PFFS)
plans”one type of MA plan”give beneficiaries an option that is more
like Medicare FFS than other MA plans, with a wider choice of providers
and less plan management of services and providers. PFFS enrollment
increased from about 35,000 beneficiaries in June 2004 to about 2.3
million in June 2008. This report compares PFFS plans to other MA plans
and Medicare FFS in three areas: (1) characteristics of beneficiaries,
(2) financial risks for beneficiaries who do not contact their plans
before receiving services, and (3) disenrollment rates. To do this
work, GAO reviewed materials from a selected sample of nine PFFS plan
sponsors, analyzed Medicare data, and interviewed officials from CMS,
which administers the Medicare program, and other organizations.
What GAO Found:
In April 2007, beneficiaries in PFFS plans tended to be healthier and
generally younger than beneficiaries in other MA plans and Medicare
FFS. Specifically, projected health care expenditures for PFFS
beneficiaries were 7 percent less than the projected average for
beneficiaries in other MA plans and 10 percent less than the projected
average for beneficiaries in Medicare FFS. Beneficiaries in PFFS plans
also generally were more likely than beneficiaries in other MA plans
and Medicare FFS to reside in rural areas where fewer other MA plans
were available. In addition, about 81 percent of beneficiaries who were
new enrollees in PFFS plans were in Medicare FFS before enrolling in
their plan, compared to 65 percent in other MA plans.
PFFS beneficiaries may have faced certain financial risks if they did
not contact their plan before receiving services. These risks were
generally not assumed by beneficiaries in other MA plans and Medicare
FFS. Specifically, if beneficiaries or their providers did not contact
their PFFS plans before obtaining a service to make sure it would be
covered, beneficiaries unexpectedly may have had to pay for the entire
cost of the service if coverage was later denied by their plan. CMS
officials told GAO they did not have data on the extent to which PFFS
beneficiaries were faced with such costs. Furthermore, some
beneficiaries likely experienced higher out-of-pocket costs for covered
services if they did not contact their plan before obtaining the
services. For example, one sponsor of PFFS plans increased the share of
the cost for which beneficiaries were responsible from 30 percent to 70
percent if the beneficiaries did not contact the plan before obtaining
certain durable equipment. GAO found that some PFFS plans were
inappropriately using the term prior authorization, which can involve
denying service coverage if prior plan approval is not obtained, in
their informational materials. CMS officials stated that PFFS plans
should not have used this term because these plans were not permitted
to deny service coverage due to lack of prior plan approval. However,
CMS guidance on this issue has been inconsistent and sometimes
incorrect.
From January through April 2007, beneficiaries in PFFS plans
disenrolled at an average rate of 21 percent compared to 9 percent for
other MA plans, and GAO concludes that CMS has not complied with
statutory requirements to mail disenrollment rates to Medicare
beneficiaries. Disenrollment rates can reflect factors such as
beneficiary satisfaction and CMS is required by law to mail this
information to Medicare beneficiaries to help them compare available MA
plans in their area. Although CMS has not mailed disenrollment rates to
beneficiaries since 2000, the agency did provide disenrollment rates
through Medicare‘s Web site. However, this information was based on
disenrollment in 2004 and 2005 and, given the enrollment growth since
then, may not accurately reflect plans available to beneficiaries in
2008.
What GAO Recommends:
GAO recommends that CMS (1) investigate the extent to which PFFS
beneficiaries face unexpected costs for not contacting their plan
before receiving care, (2) ensure that CMS guidance on prior
authorization reflects CMS policy, and (3) mail MA plan disenrollment
rates to beneficiaries, as required by statute, and update rates on
Medicare‘s Web site. CMS outlined the steps it was taking to respond to
all three recommendations, but did not address how it would distribute
disenrollment rates.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-25]. For more
information, contact James Cosgrove at (202) 512-7114 or
cosgrovej@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Beneficiaries in PFFS Plans Were Healthier and Younger Than
Beneficiaries in Other MA Plans and Medicare FFS and Differed in Other
Ways:
PFFS Beneficiaries May Have Faced Certain Financial Risks Generally Not
Assumed by Beneficiaries in Other MA Plans and Medicare FFS:
PFFS Plans Had Relatively High Beneficiary Disenrollment Rates and CMS
Did Not Comply with Statutory Requirements to Mail Current Rates:
Conclusions:
Recommendations for Executive Action:
Agency and Other External Comments:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Beneficiary Age, Gender, and Residence by Type of Medicare
Coverage, 2007:
Table 2: Type of Medicare Coverage before Enrollment for New Enrollees
in PFFS or Other MA Plans, April 2007:
Table 3: Examples of Cost Sharing with and without Prenotification In
PFFS Plans Offered by Four Different Sponsors, 2008:
Table 4: Disenrollment Rates for PFFS and Other MA Plans by Beneficiary
Characteristic, for January through April 2007:
Figure:
Figure 1: Disenrollment Rates of PFFS and Other MA Plans for January
through April 2007:
Abbreviations:
AHIP: America's Health Insurance Plans:
CBO: Congressional Budget Office:
CMS: Centers for Medicare & Medicaid Services:
CRS: Congressional Research Service:
FFS: fee-for-service:
HHS: Department of Health and Human Services:
HMO: Health Maintenance Organization:
MA: Medicare Advantage:
MedPAC: Medicare Payment Advisory Commission:
MIIR: Management Information Integrated Repository:
MIPPA: Medicare Improvements for Patients and Providers Act of 2008:
MOC: Medicare Options Compare:
PBP: Plan Benefit Package:
PFFS: private fee-for-service:
PPO: Preferred Provider Organization:
PSO: Provider-Sponsored Organization:
SNP: Special Needs Plan:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
December 15, 2008:
Congressional Requesters:
Medicare Advantage (MA) plans are an alternative to original Medicare
fee-for-service (FFS) in which private plans provide Medicare benefits
to enrolled beneficiaries.[Footnote 1] Enrollment in MA plans has grown
substantially in recent years from about 4.7 million beneficiaries in
June 2004 to 9.6 million--about 1 out of every 5 Medicare
beneficiaries--as of June 2008. This increase in enrollment followed
the enactment of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003,[Footnote 2] which among other things,
resulted in increased payments to MA plans. MA plans are able to use
the increased payments to offer more benefits and reduce beneficiary
cost sharing relative to Medicare FFS. In addition, the increased
payments allowed MA plans to expand into geographic areas where
previously plan options had been very limited, resulting in more plan
choices for beneficiaries.
Nearly half of the recent growth in MA enrollment, about 45 percent,
occurred in one type of plan--private fee-for-service (PFFS) plans.
[Footnote 3] Enrollment in these plans increased from about 35,000
beneficiaries in June 2004 to about 2.3 million beneficiaries in June
2008. About one-quarter of beneficiaries enrolled in MA plans in June
2008 were enrolled in a PFFS plan, and 99 percent of Medicare
beneficiaries in 2008 had access to a PFFS plan--up from 41 percent in
2005. The Congressional Budget Office (CBO) projects continued growth
in PFFS and other MA plans through 2013, though at a slower pace.
[Footnote 4]
The growth in enrollment and availability of MA plans has financial
implications for the Medicare program because the program pays more for
beneficiaries in these plans than it would if they were in Medicare
FFS. The federal government is projected to spend about $91 billion on
the MA program in 2008.[Footnote 5] According to the Medicare Payment
Advisory Commission (MedPAC), in 2008, Medicare is projected to pay
about 13 percent more for beneficiaries in MA plans overall and 17
percent more for beneficiaries in PFFS plans than what the program
would have paid for these beneficiaries under Medicare FFS.[Footnote 6]
PFFS plans are designed to offer beneficiaries an MA option that is
more like Medicare FFS. Compared to other MA plans, PFFS plans
generally offer a wider choice of providers and impose less plan
management of health care services and providers. Unlike other types of
MA plans, such as Health Maintenance Organizations (HMO) and Preferred
Provider Organizations (PPO),[Footnote 7] PFFS plans are not required
to have networks of contracted providers if they pay providers Medicare
FFS rates or higher.[Footnote 8] Further, providers can agree to accept
a PFFS beneficiary on a service-by-service basis. Almost all PFFS plans
operate without networks.[Footnote 9] Paying providers at Medicare FFS
rates or higher suggests that beneficiaries in PFFS plans will have
access to those providers who accept beneficiaries from Medicare's FFS
program. However, there have been reports that, in some areas, it may
be more difficult for beneficiaries to obtain care while in PFFS plans
than it would be if they were in Medicare FFS.[Footnote 10]
Under federal law, PFFS plans may not place providers at financial risk
or restrict beneficiary access to providers.[Footnote 11] The Centers
for Medicare & Medicaid Services (CMS), the agency that administers the
Medicare program,[Footnote 12] prohibits PFFS plans--but not other
types of MA plans--from requiring that providers or beneficiaries
obtain plan approval before a service is furnished as a condition of
coverage, a process known as prior authorization. However, sponsors of
PFFS plans, like sponsors of other MA plans, must provide an advance
coverage determination, should beneficiaries or their providers request
one.[Footnote 13] An advance coverage determination informs
beneficiaries before they receive services whether the services will be
covered and the amount that the beneficiary must pay with respect to
such services. In finalizing regulations in 1998 for the MA program
(then called the Medicare+Choice program), CMS considered requiring
PFFS plan sponsors to mandate that providers who serve PFFS plan
beneficiaries assume the responsibility for acquiring advance coverage
determinations or risk being unable to charge beneficiaries if the plan
later denied payments for the services.[Footnote 14] CMS, however,
determined that this beneficiary protection would be inconsistent with
federal statutory provisions that prohibit PFFS plans from placing
their providers at financial risk.
The rapid growth in PFFS plan enrollment highlights the need for more
information about who is enrolling in, and disenrolling from, these
plans. Specifically, if healthier beneficiaries are enrolling and
staying in PFFS plans, this could leave other MA plans or the Medicare
FFS program with sicker and potentially more costly beneficiaries.
Also, if PFFS plans have high disenrollment rates compared to other MA
plans, this could be an indicator of beneficiary dissatisfaction with
access or quality of care or could indicate that other plans with more
attractive benefit packages are available. In order to help Medicare
beneficiaries compare and select MA plans, CMS is required by law to
mail certain information to beneficiaries annually, including MA plan
disenrollment rates for the previous 2 years to the extent that these
disenrollment rates are available.[Footnote 15]
Certain features of PFFS plans will change as a result of the Medicare
Improvements for Patients and Providers Act of 2008 (MIPPA).[Footnote
16] Beginning in 2011, PFFS plans will be required to form contracted
networks of providers in areas that have at least two available network-
based plans (such as HMOs or PPOs).[Footnote 17] In areas with fewer
than two network-based plans, most PFFS plans will continue to have the
option of operating without networks if they pay providers at Medicare
FFS rates or higher.[Footnote 18] In addition, beginning in 2010, PFFS
plan sponsors will be required to have quality improvement programs for
each plan and report related quality information to CMS.[Footnote 19]
Given the uniqueness of PFFS plans and their rapid enrollment growth,
you asked us to examine the characteristics of beneficiaries in these
plans, PFFS plan features, and beneficiary disenrollment patterns. Our
report addresses the following objectives: (1) compare the
characteristics of beneficiaries in PFFS plans to the characteristics
of beneficiaries in other MA plans and Medicare FFS; (2) describe the
financial risks that beneficiaries in PFFS plans face, compared to
beneficiaries in other MA plans and Medicare FFS, if they do not
contact their plan prior to receiving services; and (3) compare the
rates at which beneficiaries in PFFS plans disenroll to the rates for
other MA plans and evaluate whether CMS met statutory requirements to
mail disenrollment rates to beneficiaries.
To compare the characteristics of beneficiaries in PFFS plans,
specifically age, gender, and residential location, to the
characteristics of beneficiaries in other MA plans and Medicare FFS, we
analyzed Medicare enrollment data for April 2007. We restricted our
analysis to five types of MA plans that accounted for more than 99
percent of the approximately 7.8 million beneficiaries in MA plans at
that time--PFFS plans, HMOs, local PPOs, regional PPOs, and Provider-
Sponsored Organizations (PSO). After excluding plans that restrict
enrollment and certain beneficiaries from our analysis, we analyzed
data as of April 2007 for about 5.8 million beneficiaries in 1,998 MA
plans and about 31.7 million beneficiaries in Medicare FFS.[Footnote
20] To compare the health status of PFFS and other Medicare
beneficiaries, we obtained plan-level risk scores from CMS, which are
based on projected health care expenditures of plan beneficiaries and
provide an indicator of the health status of the plans' beneficiaries.
We also examined the type of Medicare coverage that MA beneficiaries
held previously. For this analysis, we identified beneficiaries who
were new to an MA plan type in April 2007 and examined their Medicare
coverage in December 2006. MA plans that beneficiaries selected for
2007 generally took effect from January through April 2007.
To describe the financial risks that beneficiaries in PFFS plans face,
compared to beneficiaries in other MA plans and Medicare FFS, if they
do not contact their plan prior to receiving services, we reviewed
relevant laws, regulations, documentation from CMS, and materials from
nine PFFS plan sponsors interviewed that accounted for about 81 percent
of PFFS enrollment in July 2007.[Footnote 21] We reviewed 2008 plan
benefit information provided to beneficiaries as well as provider terms
and conditions of payment for 30 PFFS plans, accounting for more than
half of each sponsor's total enrollment in PFFS plans. We reviewed 2008
plan benefit information provided to beneficiaries for 33 HMO or PPO
plans operated by the same nine plan sponsors, accounting for more than
half of each sponsor's total enrollment in other MA plans. We also
interviewed officials from CMS and the plan sponsors. Information
gathered from our review of the benefit information provided to
beneficiaries for PFFS and other MA plans may not be representative of,
or generalizable to, other MA plans offered by these and other plan
sponsors that were not in our sample.
To compare the rates at which beneficiaries in PFFS plans disenroll to
the rates for other MA plans, we used Medicare enrollment data for
beneficiaries in PFFS and other MA plans in December 2006 and April
2007 to identify beneficiaries whose disenrollment took effect from
January through April 2007.[Footnote 22] We calculated disenrollment
rates for each MA contract, which covered one or more MA plans of the
same plan type.[Footnote 23] To compare the health status of
disenrollees to beneficiaries overall in PFFS and other MA plans, we
used risk scores for 2006 as a proxy for health status. To evaluate
whether CMS met statutory requirements to mail disenrollment rates to
beneficiaries, we interviewed CMS officials, analyzed relevant federal
laws and regulations, and reviewed disenrollment information CMS
provided to Medicare beneficiaries through, for example, Medicare
Options Compare (MOC) on Medicare's Web site.[Footnote 24] MOC is a
source of information through which beneficiaries can compare the
quality, benefits, and premiums of MA plans.
We conducted interviews with CMS officials on the reliability of the
CMS data used in our analysis. We also reviewed data documentation and
performed certain data checks to ensure the data were reasonable and
consistent. We determined that the data were sufficiently reliable for
our purposes. We conducted our work from July 2007 through October 2008
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. See appendix I for more
details on our scope and methodology.
Results in Brief:
Beneficiaries in PFFS plans in April 2007 tended to be healthier and
generally younger than beneficiaries in other MA plans and Medicare
FFS, and were more likely to reside in rural areas where fewer other MA
plan options were available. Specifically, beneficiaries in PFFS plans
had projected health care expenditures--an indicator of health status-
-that were 7 percent less than the average for beneficiaries in other
MA plans and 10 percent less than the average for beneficiaries in
Medicare FFS. Beneficiaries in PFFS plans were less likely to be age 85
or older, and were more likely to reside in rural areas where, on
average, beneficiaries had access to about 12 different PFFS plans but
only about 4 other MA plans. In addition, about 81 percent of new
enrollees in PFFS plans had been enrolled in Medicare FFS before
enrolling in their plan, compared to about 65 percent of new enrollees
in other MA plans.
If beneficiaries in PFFS plans did not contact their plans before
obtaining services, they may have faced certain financial risks. These
risks were generally not assumed by beneficiaries in other MA plans and
Medicare FFS. Specifically, if beneficiaries in PFFS plans or their
providers did not request an advance coverage determination from their
plan before obtaining a service to ensure the service would be covered,
beneficiaries unexpectedly may have had to pay for the entire cost of
the service if coverage was later denied. However, beneficiaries in
other MA plans and Medicare FFS generally had certain protections from
this financial risk. CMS officials told us that they thought it was
rare for PFFS beneficiaries to face unexpected costs of denied claims,
but the agency did not have data on the extent to which this occurred.
In addition, even when plans covered certain services, some PFFS
beneficiaries likely experienced higher cost sharing if they or their
providers did not notify their plans before receiving these services--
a process called prenotification. For example, the coinsurance rate for
certain durable medical equipment for one PFFS plan changed from 30
percent to 70 percent if beneficiaries or their providers did not
prenotify their plan. In contrast, the other MA plans we reviewed did
not have prenotification requirements, and Medicare FFS also had no
such requirements. Furthermore, some PFFS plans' inappropriate use of
the term prior authorization in their informational materials to
describe beneficiary responsibilities for contacting their plan before
receiving services may have confused beneficiaries and providers.
According to CMS officials, PFFS plans should not have used the term
prior authorization because PFFS plans cannot deny service coverage for
lack of prior approval. However, CMS has provided inconsistent and
sometimes incorrect guidance related to prior authorization for PFFS
plans.
From January through April 2007, beneficiaries in PFFS plans
disenrolled at an average rate of 21 percent compared to 9 percent for
other MA plans, and we conclude that CMS did not comply with statutory
requirements to mail information on MA plan disenrollment rates to
beneficiaries. Beneficiaries who disenrolled from PFFS plans, on
average, were sicker compared to all beneficiaries in PFFS plans, with
projected health care expenditures that were about 6 percent higher
than the average for all beneficiaries in these plans. The same pattern
existed for other MA plans, though the difference was less pronounced.
MA disenrollment rates varied depending on beneficiaries' age and
location. For example, older beneficiaries in PFFS plans, such as those
who were age 85 and older, disenrolled at higher rates, but this was
not the case for other MA plans. PFFS beneficiaries in urban areas
disenrolled at higher rates than beneficiaries in rural areas, while in
other MA plans, beneficiaries in urban areas disenrolled at slightly
lower rates. MA plan disenrollment rates can reflect differences across
plans because of factors such as beneficiary satisfaction with care and
out-of-pocket costs. CMS is required by law to mail disenrollment rates
for the previous 2 years, to the extent available, to Medicare
beneficiaries at least 15 days prior to each year's annual coordinated
election period. CMS officials informed us that they had not mailed
disenrollment rates to all Medicare beneficiaries since the fall of
2000. As these disenrollment rates were available to CMS, we conclude
that CMS has not complied with statutory requirements to mail Medicare
beneficiaries disenrollment rates for MA plans in their areas. CMS
provided information on disenrollment rates and reasons for
disenrollment to beneficiaries through MOC as of August 2008, but this
information was based on data for 2004 and 2005.
We recommend that the Acting Administrator of CMS (1) investigate the
extent to which beneficiaries in PFFS plans are faced with unexpected
out-of-pocket costs due to the denial of coverage when they did not
obtain an advance coverage determination from their plan; (2) ensure
that CMS guidance on prior authorization accurately reflects CMS policy
and that PFFS plan materials conform to CMS requirements; and (3) mail
to Medicare beneficiaries MA plan disenrollment rates for the previous
2 years for MA plans that are or will be available in their areas, as
required by statute, and update disenrollment rates provided to
Medicare beneficiaries through MOC.
In commenting on a draft of this report, CMS described the steps it
would take to address each of our three recommendations. In response to
our recommendation that CMS investigate the extent to which
beneficiaries in PFFS plans are faced with out-of-pocket costs due to
the denial of coverage from their plan, CMS noted that it is examining
coverage denials and complaints. In response to our recommendation that
CMS correct its guidance related to prior authorization, CMS described
several steps it has taken and plans to take, including issuing new
guidance. In response to our recommendation that the agency mail
disenrollment rates to beneficiaries and update the rates on its Web
site, the agency commented that it had recently awarded a contract to
obtain disenrollment rates and other performance metrics by late 2009.
However, the agency did not indicate how it would provide disenrollment
rate information to beneficiaries. We also obtained comments from
representatives of America's Health Insurance Plans (AHIP), a national
association that represents private health plans, who raised certain
points they thought the report should have emphasized and made several
other observations.
Background:
Medicare is the federal government's health insurance program that
covers more than 44 million people age 65 and older and certain
individuals who are disabled or have end-stage renal disease. Most
Medicare beneficiaries can choose to receive covered services through
Medicare FFS or through an MA plan if one is offered where they live.
[Footnote 25] Beneficiaries in Medicare FFS and in MA plans, including
PFFS plans, pay monthly premiums and are responsible for cost sharing,
which can be in the form of coinsurance (a percentage payment for a
given service that a beneficiary must pay), a copayment (a standard
amount a beneficiary must pay for a medical service), or a deductible
(the amount a beneficiary must pay before Medicare FFS or an MA plan
begins to pay). MA plans operate under annual contracts between MA plan
sponsors and CMS and provide Medicare benefits in exchange for a
monthly payment from CMS for each beneficiary enrolled in the plan.
[Footnote 26]
Beneficiaries can disenroll from MA plans during the annual coordinated
election period, from November 15 through December 31 of a given year
by enrolling in another plan or in Medicare FFS. Changes made during
the annual coordinated election period take effect on January 1 of the
following year. Beneficiaries can also disenroll from MA plans once
during the open enrollment period, from January 1 through March 31 of a
given year.[Footnote 27] Changes made during this time period take
effect on the first day of the month following the plan's receipt of
the beneficiary's request.
Beneficiaries in PFFS Plans Were Healthier and Younger Than
Beneficiaries in Other MA Plans and Medicare FFS and Differed in Other
Ways:
Relative to beneficiaries in other MA plans and Medicare FFS in April
2007, beneficiaries in PFFS plans were healthier, generally younger,
and more likely to live in rural areas with fewer MA options.
Specifically, beneficiaries in PFFS plans had projected health care
expenditures--an indicator of health status--that were lower, on
average, than those of beneficiaries in other MA plans and Medicare
FFS. Beneficiaries in PFFS plans had projected health care expenditures
that were 7 percent less than those of beneficiaries in other MA plans
and 10 percent less than beneficiaries in Medicare FFS.
Beneficiaries in PFFS plans were generally more likely to be younger
and reside in rural areas than beneficiaries in other MA plans and
Medicare FFS (see table 1). PFFS plans had a smaller percentage of
beneficiaries age 85 or older compared to other MA plans and Medicare
FFS. Approximately 14 percent of PFFS beneficiaries lived in rural
areas compared to 1 percent of beneficiaries in other MA plans and 10
percent of beneficiaries in Medicare FFS. Medicare beneficiaries in
rural areas, on average, had access to about 12 different PFFS plan
options, but only about 4 other MA plan options. In contrast, Medicare
beneficiaries in urban areas had access to an average of about 13 PFFS
plan options and about 12 other MA plan options. As a result,
beneficiaries in rural areas might have been more likely to enroll in a
PFFS plan because there were fewer other MA options available in those
areas.
Table 1: Beneficiary Age, Gender, and Residence by Type of Medicare
Coverage, 2007:
Age: Under 65;
PFFS (percentage): 16;
Other MA plans[A](percentage): 9;
Medicare FFS (percentage): 17.
Age: 65-74;
PFFS (percentage): 52;
Other MA plans[A](percentage): 45;
Medicare FFS (percentage): 41.
Age: 75-84;
PFFS (percentage): 26;
Other MA plans[A](percentage): 34;
Medicare FFS (percentage): 30.
Age: 85+;
PFFS (percentage): 6;
Other MA plans[A](percentage): 11;
Medicare FFS (percentage): 12.
Gender: Male;
PFFS (percentage): 45;
Other MA plans[A](percentage): 42;
Medicare FFS (percentage): 44.
Gender: Female;
PFFS (percentage): 55;
Other MA plans[A](percentage): 58;
Medicare FFS (percentage): 56.
Residence: Urban[B];
PFFS (percentage): 86;
Other MA plans[A](percentage): 99;
Medicare FFS (percentage): 89.
Residence: Rural[C];
PFFS (percentage): 14;
Other MA plans[A](percentage): 1;
Medicare FFS (percentage): 10.
Sources: GAO analysis of CMS data and the Health Resources and Services
Administration's Area Resource File.
Notes: Percentages may not sum to 100 due to rounding. Results are
based on Medicare enrollment data as of April 2007 for 431 PFFS plans
in which 1,304,288 beneficiaries were enrolled and 1,567 other MA plans
in which 4,535,881 beneficiaries were enrolled.
[A] Other MA plans include HMOs, local PPOs, regional PPOs, and PSOs.
[B] Urban areas are defined as those areas that are classified either
as Metropolitan Statistical Areas or Micropolitan Statistical Areas.
Metropolitan Statistical Areas have at least one urbanized area with a
population of 50,000 or more, plus adjacent territory that has a high
degree of social and economic integration with the core as measured by
commuting ties. Micropolitan Statistical Areas have at least one urban
cluster with a population of at least 10,000 but less than 50,000, plus
adjacent territory that has a high degree of social and economic
integration with the core as measured by commuting ties.
[C] Rural areas are defined as those areas that are neither
Metropolitan Statistical nor Micropolitan Statistical Areas and are not
unknown.
[End of table]
New enrollees in PFFS plans as of April 2007 were more likely than new
enrollees in other MA plans to have been in Medicare FFS prior to
enrollment but less likely to have been new to Medicare altogether or
previously in a different type of plan. About 81 percent of new
enrollees in PFFS plans were in Medicare FFS prior to joining their
plan, compared to 65 percent of new enrollees in other MA plans (see
table 2). About 6 percent of new PFFS enrollees were new Medicare
beneficiaries prior to joining their plan, compared to about 13 percent
of new enrollees in other MA plans. About 13 percent of new enrollees
in PFFS plans were in a different type of plan before enrolling in
their current plan, compared to 23 percent of new enrollees in other MA
plans.
Table 2: Type of Medicare Coverage before Enrollment for New Enrollees
in PFFS or Other MA Plans, April 2007:
Medicare coverage before enrollment: Medicare FFS;
New enrollees in PFFS plans: Number: 467,458;
New enrollees in PFFS plans: Percentage: 81;
New enrollees in other MA plans[B]: Number: 309,572;
New enrollees in other MA plans[B]: Percentage: 65.
Medicare coverage before enrollment: New to Medicare;
New enrollees in PFFS plans: Number: 34,645;
New enrollees in PFFS plans: Percentage: 6;
New enrollees in other MA plans[B]: Number: 61,909;
New enrollees in other MA plans[B]: Percentage: 13.
Medicare coverage before enrollment: Other[A];
New enrollees in PFFS plans: Number: 78,103;
New enrollees in PFFS plans: Percentage: 13;
New enrollees in other MA plans[B]: Number: 108,135;
New enrollees in other MA plans[B]: Percentage: 23.
Medicare coverage before enrollment: Total;
New enrollees in PFFS plans: Number: 580,206;
New enrollees in other MA plans[B]: Number: 479,616.
Sources: GAO analysis of CMS data.
Notes: Percentages may not sum to 100 due to rounding. New enrollees in
PFFS and other MA plans were defined as beneficiaries who were in a
given MA plan type (i.e., PFFS, HMO, local PPO, regional PPO, PSO) in
April 2007 but who were not in that same plan type in December 2006.
[A] Includes enrollment in any type of Medicare private plan in which a
beneficiary was enrolled in December 2006 that was different than their
type of plan in April 2007.
[B] Other MA plans include HMOs, local PPOs, regional PPOs, and PSOs.
[End of table]
PFFS Beneficiaries May Have Faced Certain Financial Risks Generally Not
Assumed by Beneficiaries in Other MA Plans and Medicare FFS:
In contrast to most beneficiaries in other MA plans and Medicare FFS,
beneficiaries in PFFS plans may have faced certain financial risks if
they or their providers did not contact their plan before receiving
services. Specifically, if PFFS beneficiaries or their providers did
not obtain advance coverage determinations, which specified whether
services would be covered and how much beneficiaries would have to pay,
beneficiaries unexpectedly may have been responsible for the entire
cost of the service if coverage was later denied by their PFFS plans as
not medically necessary.[Footnote 28] In addition, even if PFFS plans
covered the services as medically necessary, some PFFS beneficiaries
may have experienced substantially higher cost sharing if they or their
providers did not contact their plans before receiving certain
services. PFFS plans sometimes used the term prior authorization
inappropriately to describe beneficiary or provider responsibilities
for contacting their plans. CMS officials stated that PFFS plans should
not have used this term because PFFS plans are not permitted to deny
coverage for services when prior plan approval was not obtained.
However, CMS guidance for PFFS plans related to prior authorization has
been inconsistent and sometimes incorrect.
PFFS Beneficiaries Who Did Not Contact Their Plans to Determine Service
Coverage before Receiving Services May Have Faced Unexpected Costs:
If PFFS beneficiaries or their providers did not contact their plan
before receiving a service to obtain an advance coverage determination,
beneficiaries may have been responsible for the entire cost of the
service if coverage for it was later denied by the plan because it was
not medically necessary. Beneficiaries may have learned, from the
information they received from their PFFS plan, whether a particular
type of service would be covered, subject to a determination of medical
necessity.[Footnote 29] However, from that information, the beneficiary
would not know whether the plan would determine a service to be
medically necessary in a specific instance. To ascertain before a
specific service was received whether it would be covered,
beneficiaries or their providers may request an advance coverage
determination from the PFFS plan.[Footnote 30] CMS officials told us
that they thought it was rare for beneficiaries in PFFS plans to face
unexpected costs of denied claims, but they did not have data on the
extent to which this occurs.[Footnote 31]
Beneficiaries in other MA plans, such as HMOs and PPOs, generally had
certain protections from unexpected costs when receiving services from
network providers.[Footnote 32] Pursuant to CMS policy, when
beneficiaries in other MA plans seek care from network providers and
these providers are required to fulfill plan procedures to ensure
coverage of services, such as obtaining a referral or prior
authorization, beneficiaries are held harmless financially when
providers fail to take these steps.[Footnote 33] In this circumstance,
if beneficiaries in other MA plans reasonably believe that services
would be covered, they would only be liable for their plan's cost
sharing for the services, even if their plan later denies coverage. In
addition, when these beneficiaries are responsible for taking steps to
ensure coverage of services they receive from network providers,
providers are required to inform beneficiaries of their
responsibilities before providing these services. If the providers fail
to do so, beneficiaries are responsible only for their plans' cost
sharing for the services even if their plans later deny coverage.
Because virtually all PFFS plans did not have provider networks, they
did not provide these beneficiary protections.
Beneficiaries in Medicare FFS also had protection from the unexpected
costs of claims that were denied when services provided were
subsequently determined to be not medically necessary. Specifically,
beneficiaries in Medicare FFS generally are protected from incurring
financial liability if they do not receive an advance beneficiary
notice notifying them when Medicare is expected to deny coverage for a
given service because it was not medically necessary.
Some PFFS plans--plans administered by four of the nine PFFS plan
sponsors we reviewed--required their providers, under the terms and
conditions of the plans, to inform beneficiaries if a specific service
was likely to be denied by the plan. However, these terms and
conditions did not specify the penalty, if any, for not complying with
this requirement. The terms and conditions of the remaining five plan
sponsors did not require that providers notify beneficiaries if a
service was likely to be denied by the plan.
Even When Certain Services Were Covered, Some PFFS Beneficiaries Likely
Experienced Higher Cost Sharing If They Did Not Contact Their Plans
before Receiving Such Services:
Beneficiaries in some PFFS plans were responsible for higher cost-
sharing amounts if they (or their health care providers) did not
contact their plans in advance (a process called prenotification)
before obtaining certain covered services. Under CMS policy, PFFS plans
can vary cost sharing depending on whether beneficiaries (or their
providers) have notified the plan before receiving certain services.
Four of the nine PFFS plan sponsors in our review offered plans that
charged higher cost sharing if prenotification did not occur for
certain services, such as inpatient hospital stays, durable medical
equipment, inpatient mental health services, and skilled nursing
services. The specific services subject to prenotification requirements
and the amount of additional cost sharing varied by PFFS plan and could
have been substantial (see table 3), as the following examples
illustrate.
* Three PFFS plan sponsors offered plans that required prenotification
for inpatient hospital stays. Plans offered by two of the three PPFS
plan sponsors increased required cost sharing by $100 to $150 per
inpatient hospital admission without prenotification, while plans
offered by the third sponsor required an additional $50 per day up to a
maximum of $500 per admission.
* Four PFFS plan sponsors offered plans that required prenotification
for durable medical equipment, and doubled, or more than doubled,
beneficiary coinsurance rates if prenotification did not occur. One
plan increased the coinsurance rate for durable medical equipment and
prosthetic devices from 30 percent to 70 percent for items that cost
more than $750 if beneficiaries or their providers did not prenotify.
In these plans, for example, cost sharing for beneficiaries who
purchased a power wheelchair for approximately $4,000 could increase
from about $1,200 if they notified their plan to about $2,800 if they
did not.
* Three PFFS plan sponsors offered plans that required prenotification
for inpatient mental health stays and increased cost sharing in amounts
ranging from $100 per admission to $50 per day up to a maximum of $500
if prenotification did not occur.
* One PFFS plan sponsor offered plans that required prenotification for
skilled nursing facility stays and increased cost sharing by $50 per
day up to a maximum of $500 if prenotification did not occur.
Table 3: Examples of Cost Sharing with and without Prenotification In
PFFS Plans Offered by Four Different Sponsors, 2008:
Plan A: Inpatient hospital care[A];
Cost sharing with prenotification: Days 1-5: $150 copayment per day;
Days 6+: $0 copayment per day;
Cost sharing without prenotification: Additional $50 per day up to $500
in additional payments.
Plan A: Durable medical equipment and prosthetic devices;
Cost sharing with prenotification: 30 percent coinsurance;
Cost sharing without prenotification: 70 percent coinsurance for
equipment or a device that costs more than $750.
Plan A: Inpatient mental health;
Cost sharing with prenotification: $500 copayment per hospital
admission;
Cost sharing without prenotification: Additional $50 per day up to $500
in additional payments.
Plan A: Skilled nursing facility;
Cost sharing with prenotification: Days 1-20: $0 copayment per day;
Days 21-100: $50 copayment per day;
Cost sharing without prenotification: Additional $50 per day up to $500
in additional payments.
Plan B: Inpatient hospital care[A];
Cost sharing with prenotification: $195 copayment per hospital
admission;
Cost sharing without prenotification: Additional $150 per hospital
admission.
Plan B: Durable medical equipment and prosthetic devices;
Cost sharing with prenotification: 20 percent coinsurance;
Cost sharing without prenotification: 50 percent coinsurance for
purchases of equipment or a device over $750.
Plan B: Inpatient mental health;
Cost sharing with prenotification: Days 1-5: $95 copayment per day;
Days 6-90: $0 copayment per day;
Cost sharing without prenotification: Additional $50 each day up to
$250 in additional payments.
Plan B: Skilled nursing facility;
Cost sharing with prenotification: Days 1-20: $0 copayment per day;
Days 21-100: $100 copayment per day;
Cost sharing without prenotification: NA--Prenotification not required.
Plan C: Inpatient hospital care[A];
Cost sharing with prenotification: $200 copayment per hospital
admission;
Cost sharing without prenotification: Additional $100 per hospital
admission.
Plan C: Durable medical equipment;
Cost sharing with prenotification: 20 percent coinsurance;
Cost sharing without prenotification: 40 percent coinsurance for
equipment that costs over $500.
Plan C: Inpatient mental health;
Cost sharing with prenotification: $200 copayment per hospital
admission;
Cost sharing without prenotification: Additional $100 per admission.
Plan C: Skilled nursing facility;
Cost sharing with prenotification: Days 1-15: $0 copayment per day;
Days 16-100: $80 copayment per day;
Cost sharing without prenotification: NA--Prenotification not required.
Plan D: Inpatient hospital care[A];
Cost sharing with prenotification: Days 1-5: $100 copayment per day;
Days 6+: $0 copayment per day;
Cost sharing without prenotification: NA--Prenotification not required.
Plan D: Durable medical equipment and prosthetic devices;
Cost sharing with prenotification: 20 percent coinsurance;
Cost sharing without prenotification: 50 percent coinsurance for
equipment or a device over $750.
Plan D: Inpatient mental health;
Cost sharing with prenotification: Days 1-5: $100 copayment per day;
Days 6+: $0 copayment per day;
Cost sharing without prenotification: NA--Prenotification not required.
Plan D: Skilled nursing facility;
Cost sharing with prenotification: Days 1-10: $0 copayment per day;
Days 11-100: $30 copayment per day;
Cost sharing without prenotification: NA--Prenotification not required.
Sources: PFFS plan sponsors.
[A] Includes substance abuse and rehabilitation services.
[End of table]
In contrast to PFFS plans, the other MA plans we reviewed did not
appear to have prenotification requirements for services received from
network providers. CMS officials noted that prenotification was
generally unnecessary in HMOs, which accounted for about 89 percent of
beneficiaries in other MA plans in April 2007, because HMOs typically
had a primary care physician who authorized care for the beneficiary.
[Footnote 34] CMS officials also confirmed that Medicare FFS does not
have prenotification requirements.
Administrators from one of the four plan sponsors that required
prenotification told us that they did so for inpatient hospital stays
and other services in order to help them identify beneficiaries for
case and disease management and for discharge planning.[Footnote 35]
Administrators from another plan sponsor stated that they decided to
require prenotificiation for durable medical equipment because the
benefit typically had a high likelihood of abuse. A representative from
another plan sponsor said that when the plan was prenotified it
determined whether the equipment was medically necessary and informed
the beneficiary of the potential financial liability that would be
associated with the use or purchase of the durable medical equipment.
The same representative noted that durable medical equipment was often
determined to be not medically necessary.
Some PFFS plans we reviewed inappropriately used the term prior
authorization rather than prenotification in the informational
materials they distributed to beneficiaries, which may have caused
confusion about beneficiaries' financial risks. CMS officials stated
that PFFS plans should not have used the term prior authorization
because PFFS plans are not permitted to deny service coverage due to
lack of prior plan approval.
Inconsistent information that CMS provided to PFFS plans may have
contributed to some PFFS plans' inappropriate use of the term prior
authorization. One source of CMS guidance--a CMS manual--incorrectly
stated that PFFS plans' terms and conditions were required to indicate
"whether the provider must obtain advance authorization from the PFFS
organization before furnishing a particular service."[Footnote 36] CMS
officials acknowledged when we interviewed them in April 2008 that this
statement was incorrect and should be deleted from its manual; however,
as of August 2008 it had not been deleted.
Another source of inconsistent guidance from CMS was the data system
that the agency used to obtain benefits information from PFFS and other
MA plans. CMS officials explained that, prior to our inquiries, they
did not realize that the Plan Benefit Package (PBP) software, which
PFFS plans used to specify their benefits, did not allow plans to enter
their prenotification information, but did allow plans to specify
whether they had prior authorization requirements. As a result, some
PFFS plans' summaries of benefits incorrectly indicated that these
plans had prior authorization requirements. CMS officials said that
they would update the PBP software for contract year 2010 to ensure
that PFFS plans would be unable to specify prior authorization
requirements and would make available a screen where PFFS plans could
enter their prenotification information for specific services.
Following our inquiries on prior authorization and prenotification, CMS
issued guidance to all PFFS plan sponsors in May 2008 through an
operational policy memorandum to clarify its policy in these areas.
[Footnote 37] This policy memorandum reiterated that PFFS plans could
not require prior authorization from providers or beneficiaries as a
condition of coverage. Regarding prenotification, the policy memorandum
clarified that PFFS plans could not impose penalties, but that they
were permitted to offer cost-sharing reductions for complying with
voluntary prenotification protocols.
PFFS Plans Had Relatively High Beneficiary Disenrollment Rates and CMS
Did Not Comply with Statutory Requirements to Mail Current Rates:
From January through April 2007, beneficiaries in PFFS plans
disenrolled at an average rate that was more than twice that of other
MA plans, and we conclude that CMS did not comply with statutory
requirements to mail disenrollment rates to Medicare beneficiaries for
the previous 2 years for MA plans in their area. Furthermore,
information CMS has provided to beneficiaries on MA plan disenrollment
rates and reasons for disenrollment is outdated.
Beneficiaries Disenrolled from PFFS Plans at a Higher Rate Than from
Other MA Plans:
Beneficiaries in PFFS plans were more than twice as likely to disenroll
as beneficiaries in other MA plans from January through April 2007.
PFFS beneficiaries disenrolled at an average rate of about 21 percent,
compared to about 9 percent for beneficiaries in other MA plans.
Disenrollment rates varied by plan, which could reflect plan-level
differences in factors such as beneficiary satisfaction with care,
service, and out-of-pocket costs. The range of disenrollment rates for
PFFS plans--about 4 percent to 59 percent--was similar to the range of
rates for other MA plans--about 2 percent to 54 percent.[Footnote 38]
However, PFFS beneficiaries were more likely than other MA
beneficiaries to be in a plan with high disenrollment rates. For
example, about 19 percent of PFFS beneficiaries were in plans that
experienced disenrollment rates of 30 percent or more. In contrast,
only 3 percent of other MA beneficiaries were in plans that experienced
such high disenrollment rates. Approximately 15 percent of PFFS
beneficiaries, but about 65 percent of other MA beneficiaries, were in
plans that had disenrollment rates below 10 percent. (See figure 1.)
Figure 1: Disenrollment Rates of PFFS and Other MA Plans for January
through April 2007:
[Refer to PDF for image]
This figure is a multiple vertical bar graph depicting the following
data:
Disenrollment Rates of PFFS and Other MA Plans for January through
April 2007:
Plan disenrollment rate: less than 10%;
Percentage of beneficiaries, PFFS plans: 15;
Percentage of beneficiaries, Other MA plans: 65.
Plan disenrollment rate: 10 to 19%;
Percentage of beneficiaries, PFFS plans: 66;
Percentage of beneficiaries, Other MA plans: 26.
Plan disenrollment rate: 20 to 29%;
Percentage of beneficiaries, PFFS plans: 1;
Percentage of beneficiaries, Other MA plans: 6.
Plan disenrollment rate: 30% or more;
Percentage of beneficiaries, PFFS plans: 19;
Percentage of beneficiaries, Other MA plans: 3.
Notes: Percentages may not sum to 100 due to rounding. Results are
based on disenrollment that occurred from January through April 2007
for 158 PFFS plans in which 805,734 beneficiaries were enrolled and
1,410 other MA plans in which 4,488,653 beneficiaries were enrolled in
December 2006. The disenrollment rate for a given MA contract applies
to all plans under that contract. Other MA plans include HMOs, local
PPOs, regional PPOs, and PSOs.
[End of figure]
On average, disenrollees from PFFS plans were generally sicker compared
to the average for all beneficiaries in PFFS plans. This pattern was
also evident in other MA plans, although the average health status
difference between disenrollees and all beneficiaries in these plans
was less pronounced. Beneficiaries' risk scores indicated that the
projected health care expenditures, on average, of disenrollees from
PFFS plans were estimated to be about 6 percent higher than the average
for all PFFS beneficiaries.[Footnote 39] Similarly, beneficiaries who
disenrolled from other MA plans had projected health care expenditures
that were, on average, estimated to be about 3 percent higher compared
to average projected health care expenditures for all beneficiaries in
other MA plans.[Footnote 40]
PFFS disenrollment rates differed depending on beneficiaries' age group
and location (see table 4). Older beneficiaries in PFFS plans tended to
disenroll at higher rates. For example, PFFS beneficiaries age 85 and
older had the highest disenrollment rate (about 25 percent) while
beneficiaries younger than age 65 had the lowest disenrollment rate
(about 18 percent). In contrast, there was no such relationship between
age and disenrollment rates for other MA plans. Also, beneficiaries in
PFFS plans who resided in urban areas were more likely than rural
beneficiaries to disenroll, but this was not the case for other MA
plans.
Table 4: Disenrollment Rates for PFFS and Other MA Plans by Beneficiary
Characteristic, for January through April 2007:
Beneficiaries overall:
PFFS plans: 21.3;
Other MA plans[A]: 8.9.
Age: Under 65;
PFFS plans: 18.2;
Other MA plans[A]: 9.8.
Age: 65 to 74;
PFFS plans: 20.3;
Other MA plans[A]: 9.1.
Age: 75 to 84;
PFFS plans: 24.1;
Other MA plans[A]: 8.3.
Age: 85+;
PFFS plans: 24.9;
Other MA plans[A]: 9.3.
Residence: Urban;
PFFS plans: 22.0;
Other MA plans[A]: 8.9.
Residence: Rural;
PFFS plans: 17.2;
Other MA plans[A]: 10.6.
Sources: GAO analysis of Medicare enrollment data for December 2006 and
April 2007 and the Health Resources and Services Administration's Area
Resource File.
Note: Results are based on disenrollment that occurred from January
through April 2007 for 158 PFFS plans in which 805,734 beneficiaries
were enrolled and 1,410 other MA plans in which 4,488,653 beneficiaries
were enrolled in December 2006.
[A] Other MA plans include HMOs, local PPOs, regional PPOs, and PSOs.
[End of table]
CMS Did Not Comply with Statutory Requirements to Mail Current
Disenrollment Rates to Medicare Beneficiaries:
We conclude that CMS did not comply with statutory requirements to mail
disenrollment rates to Medicare beneficiaries prior to the annual
coordinated election period.[Footnote 41] In creating the MA program
(previously called the Medicare+Choice program), Congress required CMS
to annually mail information to beneficiaries comparing MA plans,
including PFFS plans.[Footnote 42] The mailings were required to
contain information about each MA plan available in a beneficiary's
area, including beneficiary disenrollment rates for the previous 2
years, to the extent that these data were available.[Footnote 43]
CMS officials informed us that they had not mailed disenrollment rate
information to all Medicare beneficiaries since the Medicare & You 2001
handbook was sent in fall 2000, but more recent data were available. MA
plan sponsors are required to provide CMS with disenrollment rates for
beneficiaries who had been enrolled in their plans.[Footnote 44]
Although CMS did not respond to our questions about whether MA plan
sponsors complied with requirements to provide CMS with disenrollment
rates, CMS does have the information needed to calculate current
disenrollment rates by using Medicare enrollment data. We used Medicare
enrollment data from CMS to calculate disenrollment rates presented in
this report for January through April 2007 and also in previous reports
in 1996 and 1998.[Footnote 45]
In response to our inquiries, CMS officials stated that there is no
requirement to mail disenrollment rates to Medicare beneficiaries, but
did not provide any explanation for the agency's position. We, however,
disagree as under federal law, prior to each annual coordinated
election period, CMS is required to provide to Medicare beneficiaries
disenrollment rates for plans in their area to the extent these rates
are available. Because we concluded that disenrollment rates for MA
plans were available, CMS was required to include relevant
disenrollment rates in annual mailings to Medicare beneficiaries to
enable them to make informed choices about their Medicare coverage.
CMS published disenrollment rates and reasons for disenrollment through
MOC on Medicare's Web site. As of August 2008, this information was
available through MOC based on data for 2004 and 2005. However, given
the recent growth in PFFS plans, from about 109,000 beneficiaries in
June 2005 to about 2.3 million beneficiaries in June 2008,
disenrollment rates and reasons for disenrollment based on
disenrollment in 2004 and 2005 may not accurately represent the
experience of PFFS plans available to beneficiaries in 2008. CMS
officials stated that information on beneficiaries' reasons for
disenrollment is necessary to understand the underlying differences in
disenrollment rates across plans. Nonetheless, CMS officials said that
the disenrollment reasons survey was discontinued after 2005 due to
budget constraints. A CMS official also noted that providing
disenrollment rates without reasons for disenrollment would be
misleading because one would not know the extent to which beneficiaries
left a plan, for example, because another plan was less expensive or
due to poor quality care. We disagree with CMS's position. Although it
would be useful to know the reasons behind beneficiaries' disenrollment
decisions, disenrollment rates alone can provide useful relative
information about MA plans and prompt beneficiaries to investigate
plans further.
Conclusions:
The substantial enrollment growth in PFFS plans shows that these plans
are an attractive option for Medicare beneficiaries. Yet, beneficiaries
in these plans may have faced unexpected out-of-pocket costs if plans
denied coverage for services for which beneficiaries or their providers
had not obtained an advance coverage determination. While officials
from CMS did not believe that PFFS plans often denied services
unexpectedly for not being medically necessary, it is important to
determine the extent to which such denials occur. Having this knowledge
would inform CMS and policy makers about whether additional protective
measures or beneficiary educational efforts are warranted. It is also
important that beneficiaries have accurate and current information
about MA plans' policies and procedures. As such, ensuring that prior
authorization guidance is accurate will help beneficiaries and
providers better understand the obligations and financial risks
associated with PFFS plans. Similarly, providing beneficiaries with
current information about MA plan disenrollment rates would help them
make more informed choices when considering enrolling in an MA plan.
Recommendations for Executive Action:
We recommend that the Acting Administrator of CMS take the following
three actions:
* investigate the extent to which beneficiaries in PFFS plans are faced
with unexpected out-of-pocket costs due to the denial of coverage when
they did not obtain an advance coverage determination from their plan;
* ensure that CMS guidance on prior authorization accurately reflects
CMS policy and that PFFS plan materials conform to CMS requirements;
and:
* mail to Medicare beneficiaries MA plan disenrollment rates for the
previous 2 years for MA plans that are or will be available in their
areas, as required by statute, and update disenrollment rates provided
to Medicare beneficiaries through MOC.
Agency and Other External Comments:
We provided a draft of this report to CMS and AHIP for comment. CMS
provided us with written comments that are reprinted in appendix II,
and representatives from AHIP provided us with oral comments.
CMS Comments:
CMS stated that beneficiaries may have more certainty that a particular
service will be covered if that service is obtained from a provider in
a plan's network. As a consequence, CMS stated that it is important for
beneficiaries in non-network plans (such as virtually all PFFS plans)
to understand their rights and obligations. CMS advised that
beneficiaries in non-network plans may want to consider obtaining
advance determinations from their plans in appropriate circumstances.
CMS said that it would continue to work closely with Congress, GAO,
beneficiary advocacy groups, and other interested parties to ensure
that beneficiaries receive appropriate health care and do not incur
unexpected financial risks.
CMS outlined the steps that it was taking, or planned to take, in
response to each of our three recommendations. In response to our
recommendation that CMS investigate the extent to which beneficiaries
in PFFS plans are faced with out-of-pocket costs due to the denial of
coverage when they did not obtain an advance coverage determination
from their plan, CMS is examining coverage denials and complaints, and
will be collecting new information from plans and refining its
complaint tracking module to support this effort. In response to our
recommendation that CMS ensure prior authorization guidance accurately
reflects CMS policy, the agency described several steps it has already
taken and planned to take to address the inaccuracies, including
providing new guidance, modifying the PBP, and providing model terms
and conditions that PFFS plans will be required to use in 2009. In
response to our recommendation that CMS mail disenrollment rates to
Medicare beneficiaries and update disenrollment rates through MOC, the
agency commented that it had recently awarded a contract to obtain
disenrollment rates and other performance metrics by late 2009.
However, the agency was silent as to how it would distribute
information on MA plan disenrollment rates to beneficiaries.
AHIP Comments:
In general, AHIP representatives thought the report could better
highlight certain points related to prenotification, MIPPA, and case
management, and AHIP representatives made several observations about
other aspects of the report.
AHIP representatives stated that, while our presentation of
prenotification requirements was accurate, the report should have more
clearly stated that we did not know the extent to which beneficiaries
actually faced higher cost sharing as a result of not fulfilling
prenotification requirements. They also stated that our discussion of
MIPPA should have occurred earlier in the report given the potential
impact of this legislation on PFFS plans, and suggested that our
finding that all nine PFFS organizations in our study provided either
case management or disease management services should have been given
greater prominence in the report. We believe our methodology and
findings regarding prenotification are clearly presented in the report
and do not agree that clarifications are warranted. We also believe the
placement and emphasis on MIPPA and case and disease management are
appropriate given the focus and timing of our work.
AHIP representatives made several other observations they thought might
help clarify aspects of the report. They explained that prenotification
was originally intended to protect beneficiaries by providing them with
an incentive to contact their plan to determine whether a service was
covered before the service was rendered. AHIP representatives informed
us that CMS had posted standard terms and conditions on its Web site
that would help to address use of incorrect terms by the industry. They
also stated that one explanation for our finding that beneficiaries in
PFFS plans were younger on average could be that younger beneficiaries
were more likely to try new types of plans. In addition, AHIP
representatives emphasized the importance of collecting information
about beneficiary reasons for disenrollment and endorsed making this
information available to beneficiaries.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to the Acting
CMS Administrator, appropriate congressional committees and others. The
report also will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov/].
If you or your staff have any questions about this report, please
contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major contributions
to this report are listed in appendix III.
Signed by:
James C. Cosgrove:
Director, Health Care:
List of Requesters:
The Honorable John D. Dingell:
Chairman:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Henry A. Waxman:
Chairman:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Charles B. Rangel:
Chairman:
Committee on Ways and Means:
House of Representatives:
The Honorable Frank J. Pallone, Jr.
Chairman:
Subcommittee on Health:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Pete Stark:
Chairman:
Subcommittee on Health:
Committee on Ways and Means House of Representatives:
[End of section]
Appendix I: Scope and Methodology:
This appendix explains the scope and methodology that we used to
address our reporting objectives that (1) compare the characteristics
of beneficiaries in private fee-for-service (PFFS) plans to the
characteristics of beneficiaries in other MA plans and Medicare FFS;
(2) describe the financial risks that beneficiaries in PFFS plans face,
compared to beneficiaries in other Medicare Advantage (MA) plans and
Medicare fee-for-service (FFS), if they do not contact their plan prior
to receiving services; and (3) compare the rates at which beneficiaries
in PFFS plans disenroll to the rates for other MA plans and evaluate
whether the Centers for Medicare & Medicaid Services (CMS) met
statutory requirements to mail disenrollment rates to beneficiaries.
To compare the characteristics of beneficiaries in PFFS plans,
specifically age, gender, and residential location, to the
characteristics of beneficiaries in other MA plans and Medicare FFS, we
used Medicare enrollment data from CMS for April 2007 from the
Management Information Integrated Repository (MIIR) database and data
from CMS on the average risk score for each MA plan in 2007, which
provide an indicator of the health status of the plan's beneficiaries.
[Footnote 46] We focused our analysis on beneficiaries enrolled in five
types of MA plans as of April 2007 that accounted for more than 99
percent of the approximately 7.8 million beneficiaries in MA plans at
that time--PFFS plans and four other types of MA plans-- Health
Maintenance Organizations (HMO), Local Preferred Provider Organizations
(PPO), regional PPOs, and Provider-Sponsored Organizations (PSO).
[Footnote 47] Among beneficiaries in the five MA plan types in our
analysis, we excluded those (1) who were in plans that have enrollment
restrictions (i.e., employer plans, Special Needs Plans (SNP), and
plans that only cover Medicare Part B services) and (2) who live
outside the 50 states, the District of Columbia, and Puerto Rico. After
implementing these exclusions, we analyzed data as of April 2007 for
1,304,288 beneficiaries in 431 PFFS plans, 4,535,881 beneficiaries in
1,567 other MA plans, and 31,680,824 beneficiaries in Medicare FFS.
[Footnote 48] We used the Health Resources and Services
Administration's Area Resource File for 2006 to obtain data on
counties' level of urbanization.[Footnote 49] We defined new enrollees
in PFFS and other MA plans as beneficiaries who were in a given MA plan
type in April 2007, based on data from the MIIR database, but who were
not in that same plan type in December 2006. To compare the health
status of beneficiaries in PFFS plans, other MA plans, and Medicare
FFS, we used plan-level risk scores from CMS as a proxy for health
status. After excluding beneficiaries in employer plans, SNPs, and
plans that only cover certain Medicare FFS services as described above,
we analyzed risk scores for 430 PFFS plans in which 1,371,169
beneficiaries were enrolled and 1,576 other MA plans in which 4,610,368
beneficiaries were enrolled as of July 2007.
To describe the financial risks that beneficiaries in PFFS plans face,
compared to beneficiaries in other MA plans and Medicare FFS, if they
do not contact their plan prior to receiving services, we reviewed
relevant laws, regulations, documentation from CMS, and materials from
nine PFFS plan sponsors interviewed that accounted for about 81 percent
of PFFS enrollment in July 2007.[Footnote 50] We reviewed plan benefit
information for 2008 provided to beneficiaries as well as provider
terms and conditions of payment for 30 PFFS plans, accounting for more
than half of each sponsor's total PFFS plan enrollment. We reviewed
plan benefit information for 2008 provided to beneficiaries for 33 HMO
or PPO plans operated by the same nine plan sponsors, accounting for
more than half of each sponsor's total enrollment in other MA plans. If
the plan's benefit information provided to beneficiaries explicitly
stated that beneficiaries would face higher cost sharing for certain
services if they or their provider did not notify the plan before
receiving such services, we considered that plan to have a
prenotification requirement. We also interviewed officials from CMS and
the plan sponsors. Information gathered from our review of the benefit
information provided to beneficiaries for PFFS and other MA plans may
not be representative of, or generalizeable to, other types of plans
offered by these plan sponsors or to other PFFS and other MA plans that
were not in our sample.
To compare the rates at which beneficiaries in PFFS plans disenroll to
the rates for other MA plans, we used Medicare enrollment data from the
MIIR database for 6,913,780 beneficiaries in MA plans in December 2006.
Because MA plan selections for 2007 generally take effect from January
through April 2007, we identified disenrollees as beneficiaries who
were covered under a given MA contract in December 2006 but were no
longer covered under that contract in April 2007 based on Medicare
enrollment data.[Footnote 51] Because we calculated disenrollment at
the MA contract level, we did not address the extent to which
beneficiaries transferred from one plan to another within an MA
contract. We chose to calculate disenrollment rates at the MA contract
level, rather than at the MA plan level, for two reasons: (1)
transferring from one plan to another within a contract can occur for
administrative reasons and therefore may not reflect beneficiary
decisions, and (2) a beneficiary's decision to transfer, for example,
from a zero premium plan to a plan within the same MA contract that
charges a premium and has a richer benefit package does not suggest
dissatisfaction with the type of MA plan or the sponsor that
administers it. We calculated disenrollment rates for each MA contract
as the total number of beneficiaries who disenrolled from their MA
contract divided by total enrollment in that contract.[Footnote 52] The
disenrollment rate for an MA contract applies to all plans under that
contract.
We did not include beneficiaries in disenrollment rate calculations if
they disenrolled involuntarily due to factors such as death, loss of
Medicare eligibility, moving out of their MA contract's service area,
or to administrative factors such as a change in their MA contract's
service area or a termination of their MA contract or plan.[Footnote
53] After excluding beneficiaries (1) in certain plans and locations as
described above and (2) in contracts or plans that were terminated in
2006 or 2007, we analyzed data for 158 PFFS plans accounting for
805,734 beneficiaries and 169,465 disenrollees and for 1,410 other MA
plans accounting for 4,488,653 beneficiaries and 392,704 disenrollees.
We used risk scores for 2006--an indicator of projected health care
expenditures--to compare the health status of disenrollees to
beneficiaries overall in PFFS and other MA plans. To estimate average
risk scores of disenrollees from PFFS and other MA plans, we used 2006
beneficiary-level risk scores for 169,271 beneficiaries who disenrolled
from PFFS plans and for 391,126 beneficiaries who disenrolled from
other MA plans from January through April 2007. To estimate the average
risk scores of beneficiaries overall in these plans, we used 2006 plan-
level risk scores, which are based on 725,110 beneficiaries in 154 PFFS
plans and 4,421,308 beneficiaries in 1,400 other MA plans in July 2006,
and weighted each plan's risk score by its July 2006 enrollment.
According to a CMS official, MA plans' risk scores generally decline
over the course of a year, so a plan's risk score based on
beneficiaries in the plan in July 2006 could be higher than it would
have been based on beneficiaries in the plan in December 2006.[Footnote
54] As a result, the actual percentage difference between the average
projected health care expenditures for disenrollees in PFFS and other
MA plans and beneficiaries overall in these plans may be larger than
our estimates indicate. To evaluate whether CMS met statutory
requirements to mail disenrollment rates to beneficiaries, we
interviewed CMS officials, analyzed relevant federal laws and
regulations, and reviewed information CMS provided to Medicare
beneficiaries through, for example, Medicare Options Compare (MOC) on
Medicare's Web site.[Footnote 55]
[End of section]
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Department Of Health & Human Services:
Office Of The Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201:
December 1, 2008:
James Cosgrove:
Director, Health Care:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, DC 20548:
Dear Mr. Cosgrove:
Enclosed are comments on the U.S. Government Accountability Office's
(GAO) report entitled: "Medicare Advantage: Characteristics, Financial
Risks, and Disenrollment Rates of Beneficiaries in private Fee-for-
Service Plans" (GAO 09-25).
The Department appreciates the opportunity to review this report before
its publication. Sincerely,
Signed by:
Jennifer R. Luong, for:
Vincent J. Ventimiglia. Jr.
Assistant Secretary for Legislation:
Attachment:
Department Of Health & Human Services:
Centers for Medicare & Medicaid Services:
200 Independence Avenue SW:
Washington. DC 20201:
Date: November 25, 2008:
To: Vincent J. Ventimiglia. Jr.
Assistant Secretary for Legislation:
Department of Health and Human Services:
From: [Signed by] Kerry Weems:
Acting Administrator:
Subject: Government Accountability Office (GAO) Draft Report: "Medicare
Advantage: Characteristics, Financial Risks, and Disenrollment Rates of
Beneficiaries in Private Fee-for-Service Plans" (GAO-09-25):
Thank you for the opportunity to review and comment on the GAO Draft
Report titled "Medicare Advantage: Characteristics. Financial Risks,
and Disenrollment Rates of Beneficiaries in Private Fee-for-Service
Plans" (GAO-09-25). The Centers for Medicare & Medicaid Services (CMS)
is committed to ensuring that Medicare beneficiaries receive
appropriate health care services.
There are certain important elements that beneficiaries in a health
plan offering coverage through non-network providers must consider. The
report highlights one of those elements that using network providers
may provide a greater degree of certainty that all procedural claims
rules will be followed and a particular service will in fact be covered
by the plan. Thus. it is important for beneficiaries in non-network
plans to understand their rights and obligations. and they may want to
consider obtaining advance determinations from their plans in
appropriate circumstances.
Consistent with GAO's recommendations, CMS is reviewing the adequacy of
information that Medicare Advantage (MA) private fee-for-service (PFFS)
plans have provided with respect to advance coverage determinations and
notices. CMS has also clarified and is monitoring compliance with our
rules that prohibit prior authorization for covered services.
The CMS will continue to work closely with Congress. GAO, beneficiary
advocacy groups. and other interested parties to ensure that
beneficiaries receive appropriate health care and do not incur
unexpected financial risks.
GAO Recommendation:
The GAO recommends CMS investigate the extent to which beneficiaries in
PFFS plans are faced with unexpected out-of-pocket costs due to the
denial of coverage where they did not obtain an advance coverage
determination from their plan.
CMS Response:
We are looking at coverage denials and complaints to determine whether
there may be a problem with the adequacy of communication between plans
and members. and whether it suggests that beneficiaries are not
sufficiently taking advantage of their rights to receive an advance
coverage determination.
On October 3, 2008, CMS published a summary of proposed data collection
requirements for Medicare Advantage organizations (MAOs) in the Federal
Register. CMS proposed to collect organization determinations and
reconsiderations data from PFFS plans as well as other MA plans to
ensure that PFFS plans are not inappropriately denying plan-covered
services. CMS will monitor the number of denial of coverage cases
generated by PFFS plans on a quarterly basis, and will release the
final data collection requirements in December 2008.
The CMS is also refining its process for prioritizing beneficiary
complaints to ensure that access to care complaints entered into the
complaint tracking module (CTM) receive first priority. We believe a
systematic monitoring of complaints will enable CMS to identify those
PFFS plans as well as other MA plans that are inappropriately denying
their enrollees health care services.
In cases of denied coverage of plan-covered services, the beneficiary
has recourse to a comprehensive and well established appeals process
that furnishes enrollees access to an independent review entity and
additionally an administrative law judge (see 42 CFR Subpart M). Also,
the plan is obligated to provide the beneficiary with a Notice of
Denial of Medical Coverage, which explains the beneficiary's appeal
rights and why the service was denied coverage.
PFFS plans must cover all medically necessary services covered by
Original Medicare, in addition to any supplemental services covered by
the plan. PFFS plans must use Medicare's coverage rules to decide what
services are medically necessary. If a service is medically necessary
under Original Medicare, then the PFFS plan must cover the service.
PFFS plans must ensure there is no difference in access to covered
services between beneficiaries enrolled in a PFFS plan and
beneficiaries enrolled in Original Medicare.
GAO Recommendation:
The GAO recommends CMS ensure guidance regarding prior authorization
accurately reflects CMS policy and that PFFS plan materials conform to
CMS requirements.
CMS Response:
We concur with the GAO's recommendation and have already taken several
steps to ensure that guidance to plans accurately reflects CMS' policy
that PFFS Plans cannot require prior authorization as a condition of
coverage and PFFS plan materials conform to CMS requirements.
* In the 2009 Call Letter released on March 17, 2008, CMS described its
policy that PFFS plans may not require enrollees or providers to obtain
prior authorization from the plan as a condition of coverage. CMS
reiterated this policy in a memorandum to PFFS plans that was released
on May 29, 2008.
* CMS modified the Plan Benefit Package (PBP) for contract year 2010 so
that PFFS plans are no longer able to indicate that they have prior
authorization requirements.
* On September 12, 2008. CMS released a memorandum to PFFS plans titled
"Instructions For Model Private Fee-For-Service Terms And Conditions of
Payment". This memorandum provided PFFS plans with a model terms and
conditions of payment, which reiterated CMS' policy that prior
authorization cannot be required as a condition of coverage when
medically necessary, plan-covered services are furnished to enrollees.
CMS also indicated in this memorandum that, effective January 1, 2009,
it expects all PFFS plans to have implemented the mode] terms and
conditions of payment.
* We are currently in the process of revising the Medicare Managed Care
Manual to accurately reflect our policy on prior authorization for PFFS
plans.
* CMS will also review plan materials to ensure plan materials
accurately describe CMS' prior authorization requirements.
GAO Recommendation:
The GAO recommends CMS comply with statutory requirements to mail to
Medicare beneficiaries MA plan disenrollment rates for the previous two
years for MA plans that are or will be available in their areas, and
update disenrollment rates provided to Medicare beneficiaries through
MOC.
CMS Response:
The CMS has recently awarded a contract to develop performance metrics
for Medicare Advantage plans, including PFFS plans. CMS will have
information on PFFS disenrollment rates from this contract by late
2009.
Again, we thank you for the opportunity to review and comment on this
draft report.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
Contact:
James C. Cosgrove, (202) 512-7114 or cosgrovej@gao.gov:
Acknowledgments:
Other contributors to this report include Christine Brudevold,
Assistant Director; Jennie Apter; William Black; Daniel Lee; Ba Lin;
Hillary Loeffler; and Hemi Tewarson.
[End of section]
Footnotes:
[1] Medicare is the federally financed health insurance program for
persons age 65 and older, certain individuals with disabilities, and
individuals with end-stage renal disease. Medicare Part A covers
hospital and other inpatient stays. Medicare Part B is optional
insurance, and covers hospital outpatient, physician, and other
services. Medicare Parts A and B are known as Medicare FFS.
[2] Medicare Prescription Drug, Improvement, and Modernization Act of
2003, Pub. L. No. 108-173, §§ 211, et seq., 117 Stat. 2066, 2176-2207
(2003) (codified, as amended, at 42 U.S.C. §§ 1395w-21, et seq.)
[3] PFFS plans were first authorized for Medicare beneficiaries under
the Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4001, 111 Stat.
251, 275-327 (1997) (codified, as amended, at 42 U.S.C. §§ 1395w-21, et
seq.)
[4] CBO, Cost Estimate, Medicare Improvements for Patients and
Providers Act of 2008 (July 23, 2008).
[5] CBO, The Medicare Advantage Program: Trends and Options, Testimony
of Peter R. Orszag before the Subcommittee on Health, Committee on Ways
and Means, U.S. House of Representatives (Mar. 21, 2007).
[6] Medicare Payment Advisory Commission (MedPAC), Report to the
Congress: Medicare Payment Policy (Washington, D.C.: March 2008).
[7] We use the term other MA plans to refer to network-based HMOs,
PPOs, and Provider-Sponsored Organizations (PSO). Beneficiaries in HMOs
are generally restricted to seeing providers within a network.
Beneficiaries in regional and local PPOs can see both in-network and
out-of-network providers but usually must pay higher cost-sharing
amounts if they use out-of-network services. A regional PPO serves an
entire state or multiple states, whereas local PPOs may serve a county,
partial county, or multiple counties. PSOs are operated by a provider
or a group of affiliated providers where a substantial proportion of
health care services are provided directly through the provider or
providers.
[8] A PFFS plan sponsor must demonstrate to the Secretary of Health and
Human Services that it has a sufficient number and range of providers
willing to furnish services under the plan by either (1) the plan
establishing provider payment rates that are not less than the rates
that apply under Medicare FFS, (2) the plan establishing contracts or
agreements with a sufficient number and range of providers to furnish
the services covered under the PFFS plan, or (3) a combination of the
two options. 42 U.S.C. § 1395w-22(d)(4). Hereafter in this report, we
refer to organizations offering MA plans, including PFFS plans, as plan
sponsors.
[9] PFFS plans may treat providers as if they have a written contract
with the plan if before rendering covered services, the provider has
been informed of the beneficiary's enrollment in the plan and knows of,
or had a reasonable opportunity to obtain, the terms and conditions of
the plan. 42 U.S.C. § 1395w-22(j)(6).
[10] Congressional Research Service (CRS), CRS Report for Congress:
Private Fee for Service (PFFS) Plans - How They Differ From Other
Medicare Advantage Plans (Washington, D.C.: 2007).
[11] PFFS plans must pay providers at a rate determined by the plan on
a fee-for-service basis without placing the provider at financial risk.
The plans also may not vary the rates for a provider based on the
utilization of that provider's services nor restrict enrollees' choices
among providers who are lawfully authorized to provide services and
agree to accept the plan's terms and conditions of payment. 42 U.S.C. §
1395w-28(b)(2).
[12] CMS is an agency within the Department of Health and Human
Services (HHS), to which HHS has delegated the responsibility for
administering the Medicare program.
[13] MA plan sponsors must have procedures for making timely
determinations on whether a beneficiary is entitled to receive a
service and the amount, if any, the beneficiary must pay for the
service. 42 U.S.C. § 1395w-22(g)(1).
[14] Medicare Program: Establishment of the Medicare+Choice Program, 63
Fed. Reg. 34968, 35042-43 (June 26, 1998).
[15] At least 15 days prior to each year's annual coordinated election
period, the Secretary of Health and Human Services is required to mail
to each Medicare beneficiary information comparing MA plans that are or
will become available in the beneficiary's area including, to the
extent available, disenrollment rates for the previous 2 years
(excluding disenrollment due to death or moving outside the plan's
service area). The Secretary must also mail this same information, to
the extent practicable, to newly eligible Medicare beneficiaries at
least 30 days prior to the beginning of the individuals' initial
enrollment period under the MA program. 42 U.S.C. §§ 1395w-21(d)(2)(A),
(B).
[16] Pub. L. No. 110-275, §§ 162-163, 122 Stat. 2494 (codified, as
amended, at 42 U.S.C. § 1395w-22(d), (e)). CMS has also published an
interim final rule to implement these statutory requirements. 73 Fed.
Reg. 54226 (Sept. 18, 2008).
[17] PFFS plans will need to demonstrate that their networks meet
criteria now applicable to other MA plans, including (1) ensuring, when
medically necessary, benefits are available 24 hours a day and 7 days a
week, and (2) providing access to appropriate providers, including
specialists for medically necessary services. A network-based plan is
defined as (1) an MA plan that is a coordinated care plan, (2) a
reasonable cost reimbursement plan under section 1876 of the Social
Security Act, or (3) a network-based Medical Savings Account plan. A
network-based plan does not include regional PPOs that do not meet
provider access standards through written contracts.
[18] Beginning in 2011, PFFS plans that are sponsored by employers or
unions, however, must contract with providers as part of a network
regardless of their location.
[19] Unlike other MA plan sponsors, PFFS plan sponsors are currently
exempt from the requirement to have quality improvement programs and
are, therefore, not required to report certain quality-related
information to CMS.
[20] We analyzed beneficiaries in Medicare FFS who had both Medicare
Part A and Part B. We excluded plans with certain enrollment
restrictions, such as plans that restrict enrollment to members of an
employer group, plans that cover only Medicare Part B services, and
beneficiaries in plans who live outside the 50 states, the District of
Columbia, and Puerto Rico.
[21] The nine PFFS plan sponsors in our review were Blue Cross Blue
Shield of Michigan; Coventry Health Care, Inc.; Geisinger Health
System; Humana, Inc.; Metropolitan Health Plan; Sterling Life Insurance
Company; Universal American Corporation; University of Pittsburgh
Medical Center Health Plan, Inc.; and Wellpoint, Inc. We selected the
largest five PFFS plan sponsors based on enrollment in July 2007 and
randomly selected three PFFS plan sponsors with enrollment that ranked
between the 10th and 50th percentile among all PFFS plan sponsors. We
also selected one plan sponsor that was the first to offer a PFFS plan.
[22] We excluded plans with certain enrollment restrictions and
beneficiaries in plans who live outside the 50 states, the District of
Columbia, and Puerto Rico.
[23] An MA contract is an agreement between CMS and an MA plan sponsor
that covers one or more MA plans of the same type. For example, a
contract between CMS and a plan sponsor may cover at least one PFFS
plan or possibly several PFFS plans.
[24] Medicare Options Compare is available at [hyperlink,
http://www.medicare.gov]. Beneficiaries also can call 1-800-MEDICARE
and have printed information sent to them if they do not have Internet
access, or contact their State Health Insurance Assistance Program for
help in choosing a plan.
[25] Individuals with end-stage renal disease are not eligible to
enroll in most MA plans. However, if these individuals develop the
disease while enrolled in an MA plan, they may remain enrolled in their
plan or change plans if their plan is terminated. 42 U.S.C. §1395w-
21(a)(3)(B).
[26] MA plans do not cover hospice care, a benefit that is provided
under Medicare FFS.
[27] Medicare beneficiaries enrolled in an MA Medical Savings Account
plan generally may not disenroll during the open enrollment period.
There are other circumstances when Medicare beneficiaries can disenroll
from MA plans. For example, institutionalized Medicare beneficiaries
may disenroll from MA plans and elect other plans or Medicare FFS at
any time during the year. Medicare beneficiaries may also disenroll
from MA plans during special election periods as approved by CMS.
[28] We use the term medically necessary to refer to Medicare-covered
services that are needed for the diagnosis and treatment of a
beneficiary's medical condition and meet accepted standards of medical
practice.
[29] When beneficiaries enroll in any type of MA plan, including PFFS
plans, and annually thereafter, the plan sponsor is required to furnish
them with certain information, including the services that are covered
(when medically necessary) and the associated cost-sharing obligations.
[30] MA plan sponsors and providers are also required to furnish
beneficiaries with certain written notices indicating when their
coverage in inpatient facilities will end and when the plan denies
coverage for a service. These notices include the Important Message
from Medicare About Your Rights, Notice of Medicare Non-Coverage,
Notice of Denial of Medical Coverage, and Detailed Explanation of Non-
Coverage. In addition, PFFS plans may allow certain providers who
render services to PFFS beneficiaries to receive up to 115 percent of
the contracted payment rate and bill beneficiaries the amount that
exceeds the contracted rate. In this circumstance, before rendering
services, hospitals must provide PFFS beneficiaries with an estimate of
the cost for which the beneficiaries will be responsible.
[31] All beneficiaries enrolled in MA plans, including PFFS plans, can
file an appeal if their plan will not pay for a service that a
beneficiary thinks should be covered or provided.
[32] CMS officials stated that, similar to beneficiaries in PFFS plans,
beneficiaries in PPO plans receiving services from out-of-network
providers that do not contact their plan in advance to determine
service coverage may face unexpected costs if coverage is later denied.
[33] 70 Fed. Reg. 4588, 4618 (Jan. 28, 2005); 42 C.F.R. § 422.504(g).
[34] We calculated the percentage of MA beneficiaries in HMOs after
excluding beneficiaries who (1) were in plans with certain enrollment
restrictions (i.e., employer plans, Special Needs Plans, plans that
only cover Medicare Part B services) or (2) lived outside the 50
states, the District of Columbia, and Puerto Rico.
[35] Case and disease management are designed to help coordinate and
manage beneficiaries' care. Discharge planning facilitates
beneficiaries' discharge from a hospital. Representatives from all nine
PFFS plan sponsors we interviewed stated that they offered either case
or disease management to their beneficiaries, and eight sponsors stated
that they also conducted discharge planning.
[36] CMS, Medicare Managed Care Manual, Chapter 4, Section 150.2
(Revised June 8, 2007).
[37] CMS, 2008 operational policy for PFFS plans with prior
authorization and referral requirements and 2009 PBP guidance;
Additional guidance on prior notification rules, May 29, 2008. CMS had
previously issued guidance for PFFS plans on prior authorization and
prenotification in its 2009 Call Letter, dated March 17, 2008.
[38] To calculate this range, we excluded 10 of 158 PFFS plans and 95
of 1,410 other MA plans that were under MA contracts with fewer than
250 beneficiaries.
[39] All PFFS beneficiaries include those individuals who remained
enrolled in their plans and those who subsequently disenrolled.
[40] These results may underestimate the percentage difference in
projected health care expenditures between disenrollees and
beneficiaries overall in PFFS and other MA plans. See appendix I for
more detail.
[41] See 42 U.S.C. § 1395w-21(d)(2)(A).
[42] Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4001, 111 Stat.
251, 276-286 (1997) (adding new section 1851 to the Social Security
Act) (codified, as amended, at 42 U.S.C. § 1395w-21).
[43] At least 15 days prior to each year's annual coordinated election
period, the Secretary is required to mail to each Medicare beneficiary
information comparing MA plans that are or will become available in the
beneficiary's area including, to the extent available, disenrollment
rates for the previous 2 years (excluding disenrollment due to death or
moving outside the plan's service area). 42 U.S.C. § 1395w-21(d)(2)(A);
see also Gray Panthers Project Fund, et al. v. Thompson, 273 F.Supp.2d
32 (D.D.C. 2002) (holding that the Secretary was required to comply
with statutory mandates requiring mailing of comparative information to
MA beneficiaries "even if compliance is cumbersome, burdensome, or
costly"). In addition, the Secretary must mail these disenrollment
rates, to the extent practicable, to newly eligible Medicare
beneficiaries at least 30 days prior to the beginning of the
individuals' initial enrollment period under the MA program. 42 U.S.C.
§ 1395w-21(d)(2)(B).
[44] MA plan sponsors must provide, on an annual basis, the information
necessary to enable CMS to provide current and potential Medicare
beneficiaries the information they need to make informed decisions with
respect to available choices for Medicare coverage. See 42 U.S.C. §
1395w-21(d)(7), see also 42 C.F.R. § 422.64. In addition, as required
under the contract between CMS and MA plan sponsors, plan sponsors
specifically must provide to CMS disenrollment rates for Medicare
beneficiaries for the previous 2 years. 42 C.F.R. § 422.504(f)(2).
[45] See GAO, Medicare: Many HMOs Experience High Rates of Beneficiary
Disenrollment, [hyperlink, http://www.gao.gov/products/GAO/HEHS-98-142]
(Washington, D.C.: Apr. 30, 1998); and Medicare: HCFA Should Release
Data to Aid Consumers, Prompt Better HMO Performance, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-97-23] (Washington, D.C.: Oct. 22,
1996).
[46] These risk scores were calculated for beneficiaries enrolled in
July of that year and were normalized so that the average risk score
for Medicare FFS beneficiaries was approximately 1.00.
[47] We did not include the 2,223 beneficiaries in Medical Savings
Account plans as of April 2007 in our analysis because these plans
operate differently from other MA plan types. Beneficiaries in a
Medical Savings Account plan receive annual deposits from CMS into an
interest-bearing account to help them cover their health care costs
until they have reached their plan's deductible, after which the plan
is responsible for all Medicare-covered costs.
[48] We analyzed beneficiaries in Medicare FFS who had both Part A and
Part B.
[49] We defined urban areas as those areas that are either classified
as Metropolitan Statistical Areas or Micropolitan Statistical Areas.
Metropolitan Statistical Areas have at least one urbanized area with a
population of 50,000 or more, plus adjacent territory that has a high
degree of social and economic integration with the core as measured by
commuting ties. Micropolitan Statistical Areas have at least one urban
cluster with a population of at least 10,000 but less than 50,000, plus
adjacent territory that has a high degree of social and economic
integration with the core as measured by commuting ties. We defined
rural areas as those that are neither Metropolitan Statistical nor
Micropolitan Statistical Areas and are not unknown.
[50] The nine PFFS plan sponsors in our review were Blue Cross Blue
Shield of Michigan; Coventry Health Care, Inc.; Geisinger Health
System; Humana, Inc.; Metropolitan Health Plan; Sterling Life Insurance
Company; Universal American Corporation; University of Pittsburgh
Medical Center Health Plan, Inc.; and Wellpoint, Inc. We selected the
largest five PFFS plan sponsors based on enrollment in July 2007 and
randomly selected three PFFS plan sponsors with enrollment that ranked
between the 10th and 50th percentile among all PFFS plan sponsors. We
also selected one plan sponsor that was the first to offer a PFFS plan.
[51] An MA contract is an agreement between CMS and an MA plan sponsor
that covers one or more MA plans of the same type. For example, a
contract between CMS and a plan sponsor may cover at least one PFFS
plan or possibly several PFFS plans.
[52] When calculating disenrollment rates for PFFS and other MA plans
overall, we divided the total number of disenrollees by total
enrollment in these plans.
[53] The number of beneficiaries in these plans includes 8,918
beneficiaries in PFFS plans and 79,827 beneficiaries in other MA plans
who disenrolled involuntarily and were not included in the calculation
of disenrollment rates.
[54] This official noted that the decline in a plan's risk score over
the course of a year occurs because plans generally have a higher
proportion of new Medicare beneficiaries (i.e., beneficiaries age 65 to
67 who have relatively low risk scores) at the end of the year and some
older beneficiaries die who have relatively high risk scores. A plan's
risk score, according to a CMS official, can decrease from, for
example, 1.00 for beneficiaries in the plan in January to 0.95 for
beneficiaries in the plan in December.
[55] Medicare Options Compare is available at [hyperlink,
http://www.medicare.gov]. Beneficiaries can also call 1-800-MEDICARE
and have printed information sent to them if they do not have Internet
access, or contact their State Health Insurance Assistance Program for
help in choosing a plan.
[End of section]
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