Medicare Managed Care
Observations about Medicare Cost Plans Gao ID: GAO-10-185 December 28, 2009Medicare cost plans--managed care plans paid based on the reasonable costs of delivering Medicare-covered services--enroll a small number of beneficiaries compared to Medicare Advantage (MA), Medicare's managed care program in which the plans accept financial risk if their costs exceed fixed payments received for each enrolled beneficiary. Despite the small enrollment, industry representatives stated that cost plans provide a managed care option in areas that traditionally had few or no MA plans. Current law allows existing cost plans to continue operating unless specific MA plans of sufficient enrollment serve the same area. In such cases, the cost plan must discontinue serving that area beginning in 2011. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required the Government Accountability Office (GAO) to examine issues related to the conversion of Medicare cost plans to MA plans. In response, GAO (1) determined the MA options available to beneficiaries in cost plans, (2) described key differences for beneficiaries between cost plans, MA plans, and Medicare fee-for-service (FFS); (3) determined the extent to which organizations offering cost plans also offer MA plans; and (4) described concerns cost plans have about converting to MA plans. GAO analyzed data from the Centers for Medicare & Medicaid Services (CMS), the agency that administers Medicare. GAO also reviewed requirements for Medicare managed care plans and interviewed officials from all Medicare cost plans and CMS.
All Medicare beneficiaries enrolled in the 22 cost plans had multiple MA options available to them. Nearly all beneficiaries enrolled in cost plans had at least 5 MA plans serving their county in June 2009, and more than 57 percent had a choice of 15 or more MA plans. Some of the differences between cost plans and MA plans that affect beneficiaries are out-of-network coverage, enrollment periods, and prescription drug coverage. Cost plans' quality scores, on average, were higher than the average of competing MA plans' scores in the county with the cost plan's highest enrollment. Estimated out-of-pocket costs varied between cost plans and other options depending on the self-reported health status of the beneficiary. In general, beneficiaries reporting poor health had lower estimated average out-of-pocket costs in most cost plans compared to competitor MA plans and FFS, while beneficiaries reporting good or excellent health had relatively higher estimated costs in most cost plans compared to MA plans and FFS. Half of the 18 organizations offering cost plans also offered at least one MA plan in some or all of their cost plans' service area. These 9 organizations operated a total of 12 cost plans. In general, organizations that offer cost plans and MA plans in the same service area must close their cost plan to enrollment. Officials from organizations that offered cost plans cited potential future changes to MA payments and difficulty assuming financial risk as concerns about converting cost plans to MA plans. Unlike cost plans, MA plans assume financial risk if payments from CMS do not cover their costs. Officials from 13 of the 18 organizations offering cost plans identified past and the potential for future payment changes in the MA program as reasons the decision to convert was difficult, though 6 of these organizations offered an MA plan in some or all of their cost plan's service area in 2009. Additionally, officials from 5 organizations said that their enrollment was insufficient to manage the financial risk plans would need to accept in the MA program. Officials from more than half of the organizations that offered cost plans also expressed concerns about the potential disruption to beneficiaries caused by transferring beneficiaries from cost plans to MA plans. GAO provided a draft of this report to CMS. CMS provided GAO with technical comments, which were incorporated as appropriate.
GAO-10-185, Medicare Managed Care: Observations about Medicare Cost Plans
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
December 2009:
Medicare Managed Care:
Observations about Medicare Cost Plans:
GAO-10-185:
GAO Highlights:
Highlights of GAO-10-185, a report to congressional committees.
Why GAO Did This Study:
Medicare cost plans”managed care plans paid based on the reasonable
costs of delivering Medicare-covered services”enroll a small number of
beneficiaries compared to Medicare Advantage (MA), Medicare‘s managed
care program in which the plans accept financial risk if their costs
exceed fixed payments received for each enrolled beneficiary. Despite
the small enrollment, industry representatives stated that cost plans
provide a managed care option in areas that traditionally had few or no
MA plans. Current law allows existing cost plans to continue operating
unless specific MA plans of sufficient enrollment serve the same area.
In such cases, the cost plan must discontinue serving that area
beginning in 2011. The Medicare Improvements for Patients and Providers
Act of 2008 (MIPPA) required GAO to examine issues related to the
conversion of Medicare cost plans to MA plans. In response, GAO (1)
determined the MA options available to beneficiaries in cost plans, (2)
described key differences for beneficiaries between cost plans, MA
plans, and Medicare fee-for-service (FFS); (3) determined the extent to
which organizations offering cost plans also offer MA plans; and (4)
described concerns cost plans have about converting to MA plans. GAO
analyzed data from the Centers for Medicare & Medicaid Services (CMS),
the agency that administers Medicare. GAO also reviewed requirements
for Medicare managed care plans and interviewed officials from all
Medicare cost plans and CMS.
What GAO Found:
All Medicare beneficiaries enrolled in the 22 cost plans had multiple
MA options available to them. Nearly all beneficiaries enrolled in cost
plans had at least 5 MA plans serving their county in June 2009, and
more than 57 percent had a choice of 15 or more MA plans.
Some of the differences between cost plans and MA plans that affect
beneficiaries are out-of-network coverage, enrollment periods, and
prescription drug coverage. Cost plans‘ quality scores, on average,
were higher than the average of competing MA plans‘ scores in the
county with the cost plan‘s highest enrollment. Estimated out-of-pocket
costs varied between cost plans and other options depending on the self-
reported health status of the beneficiary. In general, beneficiaries
reporting poor health had lower estimated average out-of-pocket costs
in most cost plans compared to competitor MA plans and FFS, while
beneficiaries reporting good or excellent health had relatively higher
estimated costs in most cost plans compared to MA plans and FFS.
Half of the 18 organizations offering cost plans also offered at least
one MA plan in some or all of their cost plans‘ service area. These 9
organizations operated a total of 12 cost plans. In general,
organizations that offer cost plans and MA plans in the same service
area must close their cost plan to enrollment.
Officials from organizations that offered cost plans cited potential
future changes to MA payments and difficulty assuming financial risk as
concerns about converting cost plans to MA plans. Unlike cost plans, MA
plans assume financial risk if payments from CMS do not cover their
costs. Officials from 13 of the 18 organizations offering cost plans
identified past and the potential for future payment changes in the MA
program as reasons the decision to convert was difficult, though 6 of
these organizations offered an MA plan in some or all of their cost
plan‘s service area in 2009. Additionally, officials from 5
organizations said that their enrollment was insufficient to manage the
financial risk plans would need to accept in the MA program. Officials
from more than half of the organizations that offered cost plans also
expressed concerns about the potential disruption to beneficiaries
caused by transferring beneficiaries from cost plans to MA plans.
GAO provided a draft of this report to CMS. CMS provided GAO with
technical comments, which were incorporated as appropriate.
View [hyperlink, http://www.gao.gov/products/GAO-10-185] or key
components. For more information, contact James C. Cosgrove at (202)
512-7114 and cosgrovej@gao.gov.
[End of section]
Contents:
Letter:
Background:
Beneficiaries in Cost Plans Had Multiple MA Options:
Cost Plan Quality Scores Higher Than MA Plans While Estimated Out-of-
Pocket Costs Vary by Health Status:
Half of Organizations Offering Cost Plans Also Offered MA Plans:
Financial and Beneficiary Transition Issues Cited as Concerns Regarding
Conversion to MA Plans:
Agency and Other External Comments:
Appendix I: Organizations That Offer Medicare Cost Plans:
Appendix II: Organizations That Would Likely Be Affected by Medicare
Improvements for Patients and Providers Act of 2008 Provision:
Appendix III: Structural Differences among Cost Plans, MA Plans, and
Medicare FFS for Beneficiaries:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Percentage of Beneficiaries Enrolled in Cost Plans Who Have
Access to Medicare Advantage (MA) Plans, by MA Plan Type, June 2009:
Table 2: Organizations That Offered Cost Plans and MA Plans, June 2009:
Table 3: Types of MA Plans Offered by Organizations That Offer Cost
Plans and MA Plans, June 2009:
Table 4: Organizations That Offer Medicare Cost Plans:
Table 5: Preliminary Centers for Medicare & Medicaid Services (CMS)
Estimates of the Cost Plans and Percentage of Cost Plan Enrollment
Likely Affected by MIPPA Provision:
Figures:
Figure 1: Counties Served by Medicare Cost Plans, 2009:
Figure 2: Time Line of Legislation Related to Medicare Cost Plans:
Figure 3: Number of MA Plans Available to Beneficiaries Enrolled in
Cost Plans, as of June 2009:
Figure 4: 2007 Plan Summary Scores for Cost Plans Compared with Those
for MA Competitors:
Figure 5: Number of Cost Plans with Quality Scores Higher, the Same, or
Lower than Competitors:
Figure 6: Number of Cost Plans with Higher or Lower Estimated Out-of-
Pocket Costs for 80-to 84-Year-Old Beneficiaries Reporting Poor Health,
Compared with Competing MA Plans and Medicare FFS, 2009:
Figure 7: Number of Cost Plans with Higher or Lower Estimated Out-of-
Pocket Costs for 80-to 84-Year-Old Beneficiaries Reporting Good and
Excellent Health, Compared with Competing MA Plans and Medicare FFS,
2009:
Abbreviations:
AEP: annual election period:
BBA: Balanced Budget Act of 1997:
CAHPS: Consumer Assessment of Healthcare Providers and Systems:
CCP: coordinated care plan:
CMS: Centers for Medicare & Medicaid Services:
FFS: fee-for-service:
HEDIS: Health Effectiveness Data and Information Set:
HMO: health maintenance organization:
MA: Medicare Advantage:
M+C: Medicare+Choice:
MIPPA: Medicare Improvements for Patients and Providers Act of 2008:
MMA: Medicare Prescription Drug, Improvement, and Modernization Act of
2003:
MSA: metropolitan statistical area:
NAIC: National Association of Insurance Commissioners:
OEP: open enrollment period:
PDP: prescription drug plan:
PFFS: private fee-for-service:
PPO: preferred provider organization:
PSO: provider sponsored organization:
RBC: risk-based capital:
SEP: special enrollment period:
TEFRA: Tax Equity and Fiscal Responsibility Act of 1982:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
December 28, 2009:
The Honorable Max Baucus:
Chairman:
The Honorable Chuck Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
The Honorable Henry A. Waxman:
Chairman:
The Honorable Joe Barton:
Ranking Member:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Charles B. Rangel:
Chairman:
The Honorable Dave Camp:
Ranking Member:
Committee on Ways and Means:
House of Representatives:
Medicare cost plans--managed care plans paid based on their reasonable
costs incurred delivering Medicare-covered services--enroll a small
number of Medicare beneficiaries compared with the number enrolled in
Medicare Advantage (MA), Medicare's managed care program that pays
health plans on a risk basis.[Footnote 1] Risk-based plans are paid a
fixed monthly payment per beneficiary enrolled in the plan to furnish
Medicare-covered services, and the health plans bear financial risk if
their costs exceed Medicare payments.[Footnote 2]
As of June 2009, 22 Medicare cost plans enrolled approximately 288,000
Medicare beneficiaries, compared to 633 MA plans that served
approximately 10.7 million Medicare beneficiaries. Despite their
relatively small enrollment, industry representatives stated that cost
plans fill a unique niche by providing a Medicare managed care option
in rural and other areas that traditionally had few or no MA plans.
Congress acted to curtail the expansion of cost plans multiple times.
In 1997 Congress passed legislation prohibiting new cost plans from
entering the Medicare market and prohibiting existing cost plans from
being renewed or extended beyond 2002. Subsequent legislation extended
the authorization of existing cost plans and, most recently, the
Medicare Improvements for Patients and Providers Act of 2008 (MIPPA)
allowed existing Medicare cost plans to continue to operate except
where MA plans of sufficient enrollment served a cost plan's service
area for the previous year.[Footnote 3] In such cases, the cost plan
must discontinue serving that area beginning January 1, 2011.
MIPPA also required GAO to report, by December 31, 2009, on issues
related to the conversion of Medicare cost plans to MA plans. To
respond to the mandate, we (1) determined the MA options available to
beneficiaries enrolled in Medicare cost plans; (2) described the key
differences for beneficiaries between cost plans, MA plans, and
Medicare fee-for-service (FFS); (3) determined the extent to which
organizations offering cost plans also offer MA plans; and (4)
described concerns cost plans have about converting to MA plans.
To determine the MA options available to beneficiaries enrolled in
Medicare cost plans, we analyzed June 2009 MA and cost plan service
area and enrollment data at the contract level from the Centers for
Medicare & Medicaid Services (CMS), the agency that administers the
Medicare program.[Footnote 4]
To describe the key differences for beneficiaries between cost plans,
MA plans, and Medicare FFS, we reviewed CMS requirements for Medicare
cost plans, MA plans, and Medicare FFS. We examined quality data for
cost plans and MA plans.[Footnote 5] We limited our quality analysis to
the county in each cost plan's service area with the highest cost plan
enrollment because the MA competitor plans for a cost plan may differ
depending on the county within the service area. If a cost plan was
missing a quality score, we did not report a comparison.[Footnote 6] We
also analyzed CMS data that estimate total monthly out-of-pocket costs
for beneficiaries in different managed care benefit packages and
Medicare FFS. CMS reports the estimated out-of-pocket costs according
to self-reported health status within a range of age groups, for
example, among 80 to 84 year olds reporting good health.[Footnote 7]
For our analysis, we compared enrollment-weighted averages of estimated
out-of-pocket costs for each cost plan benefit package to enrollment-
weighted estimates for MA benefit packages in the same service area. We
separated the analysis according to whether the benefit package
included Part D, Medicare's prescription drug benefit.[Footnote 8]
Similarly, because the FFS-only estimate does not include Part D
coverage, we compared the estimated out-of-pocket costs for
beneficiaries enrolled in non-Part D cost plan benefit packages to the
out-of-pocket costs for beneficiaries in Medicare FFS. We presented the
results for beneficiaries that reported themselves as 80 to 84 years
old and in poor, good, and excellent health; we used results for this
age group because officials from the industry and CMS told us that
beneficiaries in cost plans are generally older than the average MA
beneficiary.
To determine the extent to which organizations that offer cost plans
also offer MA plans, we analyzed CMS service area and enrollment data
to identify organizations offering both. We interviewed officials from
each organization that offers a cost plan to verify the CMS data. We
then compared the service areas of the MA plans with those of the cost
plans offered by the same organizations.
To describe the concerns that cost plans have about converting to MA
plans, we interviewed officials from each organization that offers a
cost plan, the CMS office responsible for oversight of Medicare's
managed care programs, the Medicare Cost Contractors Alliance, which is
an alliance of cost plans that advocates for cost plans in Congress and
with CMS, and the National Association of Insurance Commissioners
(NAIC), which is the organization of state insurance regulators.
To determine the reliability of the data, we reviewed documentation for
all the data sets we used. We conducted tests to look for obvious
errors in the data and compared results to other published sources for
CMS data on cost plan and MA plan service areas and enrollment. We
interviewed CMS officials regarding the reliability of the out-of-
pocket cost data and the quality ratings data. We determined that all
data were sufficiently reliable for our purposes.
We conducted our work from February 2009 to November 2009 in accordance
with all sections of GAO's Quality Assurance Framework that are
relevant to our objectives. The framework requires that we plan and
perform the engagement to obtain sufficient and appropriate evidence to
meet our stated objectives and to discuss any limitations in our work.
We believe that the information and data obtained, and the analysis
conducted, provide a reasonable basis for any findings and conclusions
in this product.
Background:
Medicare began contracting with managed care plans on a cost-
reimbursement basis in the 1970s. In 1982, Congress passed the Tax
Equity and Fiscal Responsibility Act (TEFRA), which created the first
Medicare risk contracting program for managed care plans beginning in
1985. The Medicare risk program evolved into today's MA program. TEFRA
also retained and authorized Medicare cost plans as an option if an
organization did not have the capacity to bear the risk of potential
losses, had an insufficient number of members to be eligible for a risk-
sharing contract, or the organization elected to offer a cost plan
rather than a risk plan.
Evolution of Medicare Advantage:
Enrollment in the Medicare risk program grew from nearly 498,000 in
1985 to about 5.2 million beneficiaries by 1997, primarily concentrated
in urban counties. The Balanced Budget Act of 1997 (BBA) phased out the
existing risk program and created a new risk program called
Medicare+Choice (M+C). Under the M+C program, the method used to pay
participating plans was revised significantly, and, due in part to
these payment changes, by 2000 many health plans began to withdraw from
the program. Enrollment fell from 6.3 million in 1999 to 4.6 million by
2003. The Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (MMA) renamed the M+C program Medicare Advantage and
provided increases to MA plan payment rates and other program changes.
MA enrollment increased steadily from 2003 to 2009.
The MA program includes several types of plans:
* Local coordinated care plans (CCP) consist of:
- Health maintenance organizations (HMO), which have defined provider
networks and primary care gatekeepers. Beneficiaries enrolled in HMOs
generally are required to obtain services from hospitals and doctors in
the plan's network, but some HMOs offer a point-of-service option under
which a beneficiary may elect to obtain services from a non-network
provider, though at a higher out-of-pocket cost.
- Preferred provider organizations (PPO), which have defined provider
networks and no requirement that beneficiaries obtain referrals for
care. Beneficiaries enrolled in PPOs can use non-network providers, but
at a higher out-of-pocket cost than in-network providers.
- Provider sponsored organizations (PSO), which doctors, hospitals, or
other Medicare providers operate rather than a health insurance
company. The providers that operate the PSO furnish the majority of the
health care and share in the financial risk of providing the health
care to the beneficiaries enrolled in the plan.
* Regional PPOs, which have a service area comprising 1 or more of 26
state-level or multistate-level CMS-defined regions. Regional PPOs are
also CCPs.
* Special needs plans exclusively or disproportionately enroll special
needs individuals. Special needs individuals are beneficiaries who are
institutionalized, eligible for both Medicare and Medicaid, or have a
disability or chronic condition.[Footnote 9] Special needs plans can be
any type of CCP.
* Private fee-for-service (PFFS) plans, which are local plans that are
not required to have a contracted provider network as long as they pay
willing providers at least the Medicare FFS rate.[Footnote 10]
MA benefit packages may include Medicare Part D coverage; however, all
CCPs must offer at least one benefit package with Part D coverage.
Medicare Cost Plans:
CMS pays cost plans the reasonable cost of the Medicare-covered
services they furnish directly to, or arrange for, Medicare
beneficiaries enrolled in their plan, less the value of the deductible
and coinsurance.[Footnote 11] In addition to the costs directly related
to the provision of health services, CMS also pays reasonable costs
associated with operating a health plan, such as marketing, enrollment,
and membership expenses. Cost plans receive an advance interim payment
per member per month based on the cost plan's estimated reimbursable
costs. CMS and the cost plans make adjustments after the contract
period to align the payments with the actual costs incurred following
the plan's submission of an independently certified cost report that
details cost, utilization, and enrollment data for the entire contract
period.
As of December 2009, 18 organizations operated 22 cost plans, with
enrollments ranging from 50 to 74,190. Of the 22 cost plans, 15 were
open to enrollment. Nonprofit organizations operated 17 of the 22 cost
plans. (See appendix I for a list of the organizations that offer cost
plans.) Eight cost plans offered Part D coverage in 2009.[Footnote 12]
Cost plans served at least one county in 16 states and the District of
Columbia in 2009.[Footnote 13] Cost plans were most prevalent in
Minnesota, where 3 cost plans operated across most of the
state.[Footnote 14] (See figure 1.)
Figure 1: Counties Served by Medicare Cost Plans, 2009:
[Refer to PDF for image: U.S. map]
The map depicts counties served in the following categories:
No cost plans;
One cost plan;
Two cost plans;
Three cost plans.
Source: GAO analysis of CMS data.
[End of figure]
Congress acted to curtail the expansion of cost plans multiple times.
The BBA provided that upon enactment, with few exceptions, the
Secretary of Health and Human Services could not enter into any new
cost plan contracts and could not extend or renew a cost plan contract
beyond December 31, 2002.[Footnote 15] Subsequent laws modified the
circumstances under which existing cost plans could continue to
operate. The MMA, for example, allowed existing cost plans to be
extended indefinitely, with the exception that, beginning January 1,
2008, the Secretary could no longer renew or extend contracts for cost
plans serving an area that for the previous year was also served by two
or more regional CCPs or two or more local CCPs and that also met
specified enrollment thresholds.[Footnote 16] A cost plan would only be
required to leave the counties within its service area that were also
served by the CCPs. Most recently, MIPPA extended the exception
provision to January 1, 2010, meaning cost plans affected by this
provision would close at the beginning of calendar year 2011. MIPPA
also requires that the qualifying CCPs used to determine whether the
cost plan must close must be offered by more than one organization (see
figure 2). Separately, CMS requires organizations operating cost plans
to close their cost plans to new enrollment if they open an MA plan in
the same service area.
Figure 2: Time Line of Legislation Related to Medicare Cost Plans:
[Refer to PDF for image: line graph and time line]
1982:
Cost plan program begins, as authorized by the Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA).
Balanced Budget Act of 1997:
With few exceptions, no new cost contracts are allowed. Existing cost
plans cannot be extended or renewed beyond December 31, 2002.
Medicare, Medicaid, and State Children‘s Health Insurance Program
Balanced Budget Refinement Act of 1999:
Existing cost plans are provided an extension to December 31, 2004.
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000:
Existing cost plans not allowed to expand their service area after
September 1, 2003.
Medicare Prescription Drug, Improvement, and Modernization Act of 2003:
Authorized extensions and renewals of cost plans indefinitely, but,
beginning January 1, 2008, cost plans cannot be extended or renewed if
two or more regional or local MA plans of sufficient size served that
service area.
Medicare, Medicaid, and SCHIP Extension Act of 2007:
Cost plans can not be extended or renewed on or after January 1, 2009,
if sufficient MA competition exists in the service area.Medicare
Improvements for Patients and Providers Act of 2008: Cost plans can not
be extended or renewed after January 1, 2010, if sufficient MA
competition exists in the service area.
Year: 1985;
Cost plan enrollment: 136,654.
Year: 1986;
Cost plan enrollment: 105,867.
Year: 1987;
Cost plan enrollment: 128,983.
Year: 1988;
Cost plan enrollment: 131,925.
Year: 1989;
Cost plan enrollment: 129,915.
Year: 1990;
Cost plan enrollment: 140,527.
Year: 1991;
Cost plan enrollment: 136,200.
Year: 1992;
Cost plan enrollment: 136,550.
Year: 1993;
Cost plan enrollment: 157,243.
Year: 1994;
Cost plan enrollment: 173,886.
Year: 1995;
Cost plan enrollment: 182,846.
Year: 1996;
Cost plan enrollment: 195,758.
Year: 1997;
Cost plan enrollment: 205,368.
Year: 1998;
Cost plan enrollment: 224,741.
Year: 1999;
Cost plan enrollment: 341,022.
Year: 2000;
Cost plan enrollment: 297,727.
Year: 2001;
Cost plan enrollment: 294,232.
Year: 2002;
Cost plan enrollment: 289,554.
Year: 2003;
Cost plan enrollment: 334,378.
Year: 2004;
Cost plan enrollment: 330,665.
Year: 2005;
Cost plan enrollment: 358,141.
Year: 2006;
Cost plan enrollment: 318,274.
Year: 2007;
Cost plan enrollment: 309,778.
Year: 2008;
Cost plan enrollment: 277,245.
Year: 2009;
Cost plan enrollment: 287,796.
Source: GAO analysis.
Note: TEFRA authorized Section 1876 cost plans, which we refer to as
cost plans. Medicare began contracting with health plans on a cost-
reimbursement basis in the 1970s.
[End of figure]
Based on 2009 enrollment information through December, CMS's
preliminary estimates were that 7 of the 22 cost plans would need to
withdraw from some or all of their 2009 service area in 2011.[Footnote
17] Three of the 7 cost plans would need to withdraw from their entire
service area. All 3 of these plans already were closed to new
enrollment in 2009. In total, CMS estimated that approximately 8,000
beneficiaries enrolled in cost plans, or about 3 percent of total cost
plan enrollment, are in counties where their cost plan must discontinue
service in 2011. (See appendix II for a list of the cost plans that
would likely be affected by the MIPPA provision.)
Beneficiaries in Cost Plans Had Multiple MA Options:
All beneficiaries enrolled in cost plans had multiple MA options
available to them. Nearly 100 percent of beneficiaries enrolled in cost
plans had at least 5 MA plans serving their county in June 2009, and
more than 57 percent had a choice of 15 or more MA plans (see figure
3). About 10 percent of beneficiaries enrolled in cost plans had no
local CCPs in their county, which is the MA plan type with the highest
enrollment. Two cost plans, located in Colorado and Texas, enrolled
about 90 percent of the beneficiaries without a local CCP plan option.
Figure 3: Number of MA Plans Available to Beneficiaries Enrolled in
Cost Plans, as of June 2009:
[Refer to PDF for image: pie-chart]
15+ plans: 57.3%;
10-14 plans: 32.1%;
5-9 plans: 10.5%;
1-4 plans: 0.1%.
Source: GAO analysis of CMS data.
Note: We conducted this analysis at the contract level. Within each
contract, an organization may offer one or more benefit packages. The
number of options would be greater if we conducted the analysis at the
benefit package level.
[End of figure]
About 10 percent of beneficiaries in cost plans were in counties
without an HMO, about 62 percent were in counties without a local PPO,
and about 8 percent were in counties without a regional PPO.
Approximately 42 percent of beneficiaries enrolled in a cost plan were
in counties with five or more MA HMOs. All beneficiaries enrolled in a
cost plan could enroll in a PFFS plan in June 2009. (See table 1.)
Table 1: Percentage of Beneficiaries Enrolled in Cost Plans Who Have
Access to Medicare Advantage (MA) Plans, by MA Plan Type, June 2009:
Percentage of beneficiaries enrolled in cost plans:
Number of MA options within plan type: 0;
HMOs available: 10.2%;
PPOs available: 62.3%;
PSOs available: 100.0%;
Regional PPOs available: 7.9%;
PFFS plans available: 0.0.
Number of MA options within plan type: 1-4;
HMOs available: 47.5%;
PPOs available: 31.3%;
PSOs available: 0.0;
Regional PPOs available: 92.2%;
PFFS plans available: 4.4%.
Number of MA options within plan type: 5-9;
HMOs available: 17.5%;
PPOs available: 6.4%;
PSOs available: 0.0;
Regional PPOs available: 0.0;
PFFS plans available: 87.9%.
Number of MA options within plan type: 10-14;
HMOs available: 24.1%;
PPOs available: 0.0;
PSOs available: 0.0;
Regional PPOs available: 0.0;
PFFS plans available: 7.7%.
Number of MA options within plan type: 15+;
HMOs available: 0.7%;
PPOs available: 0.0;
PSOs available: 0.0;
Regional PPOs available: 0.0;
PFFS plans available: 0.0.
Number of MA options within plan type: Total;
HMOs available: 100.0%;
PPOs available: 100.0%;
PSOs available: 100.0%;
Regional PPOs available: 100.0%;
PFFS plans available: 100.0%.
Source: GAO analysis of CMS data.
Note: Some percentages may not add to 100 because of rounding. We
conducted this analysis at the contract level. Within each contract, an
organization may offer one or more benefit packages. The number of
options would be greater if we conducted the analysis at the benefit
package level.
[End of table]
Cost Plan Quality Scores Higher Than MA Plans While Estimated Out-of-
Pocket Costs Vary by Health Status:
Some of the differences between cost plans and MA plans that affect
beneficiaries involve out-of-network coverage, enrollment periods, and
prescription drug coverage. Cost plans generally scored higher than
competing MA plans on the quality scores CMS reports, and their
estimated out-of-pocket costs compared to competing MA plans and FFS
varied by health status.
Cost Plan Structure Differs from MA Plans and Medicare FFS:
Cost plans differ structurally from MA plans and Medicare FFS in
several ways, including enrollment periods, out-of-network coverage,
and prescription drug coverage. For example, cost plans that are open
to enrollment must have an open enrollment period of at least 30
consecutive days annually, and some cost plans choose to allow new
enrollment all year. Beneficiaries enrolled in cost plans may disenroll
at any time. In contrast, beneficiaries enrolled in an MA plan can
join, switch, or drop plans, or join FFS, only during certain specified
enrollment periods.
Beneficiaries enrolled in cost plans who receive Medicare-covered
services out of network are covered by Medicare FFS. These services are
therefore subject to Medicare FFS coinsurance and deductibles. Out-of-
network coverage varies among MA plans according to plan type, but if
offered, it is covered by the MA plan, not Medicare FFS. Medicare FFS
beneficiaries can receive services from any provider that accepts
Medicare.
Beneficiaries enrolled in cost plans may obtain Medicare prescription
drug coverage by enrolling in any stand-alone Part D plan or a Part D
plan offered by the cost plan sponsor. Beneficiaries enrolled in MA
plans must choose a Part D plan offered by the MA plan sponsor.
Beneficiaries enrolled in PFFS plans also must choose a Part D plan
offered by the PFFS sponsor, unless the sponsor does not offer one, in
which case beneficiaries can choose any Part D Plan. Beneficiaries
enrolled in FFS may choose any Part D plan. For additional information
about structural differences between cost plans, MA plans, and Medicare
FFS, see appendix III.
Cost Plan Quality Scores Generally Higher Than Competitor MA Plans:
Our analysis of CMS quality scores found that cost plans' quality
scores, on average, were higher than the average of competing MA plans.
All 12 of the cost plans with plan summary scores, based on a scale of
1 (poor quality) to 5 (excellent quality), were rated higher than or
the same as their MA competitors in the county with the cost plan's
highest enrollment.[Footnote 18] These 12 cost plans enrolled about
202,500 beneficiaries, or about 70 percent of the total cost plan
enrollment nationwide. (See figure 4.)
Figure 4: 2007 Plan Summary Scores for Cost Plans Compared with Those
for MA Competitors:
[Refer to PDF for image: vertical bar graph]
Contract: Plan 1;
Cost plan score: 3.5;
Enrollment-weighted MA competitor‘s average score: 2.2.
Contract: Plan 2;
Cost plan score: 3.5;
Enrollment-weighted MA competitor‘s average score: 3.5.
Contract: Plan 3;
Cost plan score: 3.5;
Enrollment-weighted MA competitor‘s average score: 2.5.
Contract: Plan 4;
Cost plan score: 4.5;
Enrollment-weighted MA competitor‘s average score: 2.3.
Contract: Plan 5;
Cost plan score: 4.5;
Enrollment-weighted MA competitor‘s average score: 3.2.
Contract: Plan 6;
Cost plan score: 4;
Enrollment-weighted MA competitor‘s average score: 2.2.
Contract: Plan 7;
Cost plan score: 4;
Enrollment-weighted MA competitor‘s average score: 3.6.
Contract: Plan 8;
Cost plan score: 4;
Enrollment-weighted MA competitor‘s average score: 3.6.
Contract: Plan 9;
Cost plan score: 4;
Enrollment-weighted MA competitor‘s average score: 2.9.
Contract: Plan 10;
Cost plan score: 3.5;
Enrollment-weighted MA competitor‘s average score: 2.4.
Contract: Plan 11;
Cost plan score: 4;
Enrollment-weighted MA competitor‘s average score: 2.3.
Contract: Plan 12;
Cost plan score: 4.5;
Enrollment-weighted MA competitor‘s average score: 2.4.
Source: GAO analysis of CMS data.
Note: Cost plan and competitor scores are based on the counties with
the cost plan's highest enrollment. CMS computes these scores at the
contract level based on reported information from the Health
Effectiveness Data and Information Set (HEDIS), a tool that is used by
health plans to measure performance on dimensions of care; the Consumer
Assessment of Healthcare Providers and Systems (CAHPS), which is a
group of surveys that asks consumers and patients to report on and
evaluate their experiences with healthcare; and appeals data. Ratings
for competitors are an enrollment-weighted average. CMS only reports
data for managed care plans that have been operational for a full year
and meet minimum enrollment criteria. Therefore, not all cost plans and
competitor plans have a plan summary score. Plans without plan summary
scores were excluded from the analysis. Data for 2007 were the most
recent available.
[End of figure]
The majority of cost plans had higher scores than their MA competitors
in each of the five quality dimensions that make up the plan summary
score. For example, 15 of the 18 cost plans with a score for the
dimension "Ratings of Health Plans Responsiveness and Care," which
includes ratings of beneficiary satisfaction with the plan, were rated
higher than their MA competitors. Similarly, 17 of the 20 cost plans
with a score for the dimension "Staying Healthy," which includes how
often beneficiaries got various screening tests, vaccines, and other
check-ups, were rated higher than their competitors. The majority of
cost plans also rated higher than their competitors in the other three
quality dimensions reported by CMS. (See figure 5.)
Figure 5: Number of Cost Plans with Quality Scores Higher, the Same, or
Lower than Competitors:
[Refer to PDF for image: stacked horizontal bar graph]
Quality dimension scores: How well and quickly health plans handled
appeals[A];
Plans that scored lower than competitors: 2;
Plans that scored same as competitors: 0;
Plans that scored higher than competitors: 5.
Quality dimension scores: Managing chronic (long-lasting)
conditions[B];
Plans that scored lower than competitors: 3;
Plans that scored same as competitors: 1;
Plans that scored higher than competitors: 12.
Quality dimension scores: Ratings of health plan responsiveness and
care[C];
Plans that scored lower than competitors: 3;
Plans that scored same as competitors: 0;
Plans that scored higher than competitors: 15.
Quality dimension scores: Getting timely care from doctors and
specialists[D];
Plans that scored lower than competitors: 7;
Plans that scored same as competitors: 0;
Plans that scored higher than competitors: 11.
Quality dimension scores: Staying healthy: screenings, tests, and
vaccines[E];
Plans that scored lower than competitors: 2;
Plans that scored same as competitors: 1;
Plans that scored higher than competitors: 17.
Quality dimension scores: Plan summary score[F];
Plans that scored lower than competitors: 0;
Plans that scored same as competitors: 1;
Plans that scored higher than competitors: 11.
Source: GAO analysis of CMS data.
Note: Cost plan and competitor scores are based on the counties with
the cost plan's highest enrollment. CMS computes these scores at the
contract level based on reported information from the Health
Effectiveness Data and Information Set (HEDIS), a tool that is used by
health plans to measure performance on dimensions of care; the Consumer
Assessment of Healthcare Providers and Systems (CAHPS), which is a
group of surveys that asks consumers and patients to report on and
evaluate their experiences with healthcare; and appeals data. Scores
for competitors are an enrollment-weighted average. CMS only reports
data for managed care plans that have been operational for a full year
and meet minimum enrollment criteria or, in cases where an individual
quality score reports on a subpopulation, a minimum number of
beneficiaries within that subpopulation. Consequently, not all plans
had scores for each quality dimension or plan summary scores. If the
score for the cost plan was missing, we did not report a comparison.
[A] CMS calculates the score for this dimension by using individual
measures regarding the plan's ability to make timely decisions about
appeals and their review of appeals decisions.
[B] CMS calculates the score for this dimension by using individual
measures that include rates of osteoporosis management, diabetes care,
and rheumatoid arthritis management.
[C] CMS calculates the score for this dimension by using individual
measures that include beneficiary reports of their ability to get
appointments and care quickly, overall health care quality, and
doctors' communication.
[D] CMS calculates the score for this dimension by using individual
measures that include follow-up visit rates following hospital stays
for mental illness, doctor follow up for depression, and beneficiary
reports of their ability to get needed care without delays.
[E] CMS calculates the score for this dimension by using individual
measures that include breast and colorectal cancer screening rates,
diabetes care, osteoporosis testing, and administration of the annual
flu vaccine.
[F] CMS calculates the plan summary score by averaging the individual
measures and the five quality dimensions, as well as applying an
integration factor that rewards plans for consistently high scores.
[End of figure]
Cost Plans' Estimated Average Out-of-Pocket Costs Generally Lower for
Beneficiaries Reporting Poor Health, Higher for Beneficiaries Reporting
Good and Excellent Health:
In 2009, estimated average out-of-pocket costs in cost plans, MA plans,
and Medicare FFS varied by the health status of beneficiaries. In
general, beneficiaries 80 to 84 years old reporting poor health had
lower estimated average out-of-pocket costs in cost plans compared to
competitor MA plans and Medicare FFS, while beneficiaries in the same
age group in cost plans reporting good or excellent health had higher
estimated average out-of-pocket costs.[Footnote 19] Specifically, we
found estimated out-of-pocket costs for beneficiaries reporting poor
health in 11 of the 12 cost plans without drug coverage to be lower
than other MA options, on average, ranging from 69 to 99 percent of the
competitor MA plans.[Footnote 20] Similarly, beneficiaries reporting
poor health in all of the cost plans without drug coverage had out-of-
pocket costs that ranged from 67 to 92 percent of Medicare FFS. We also
found out-of-pocket costs to be lower by similar amounts for
beneficiaries in poor health in 4 of the 8 cost plans with drug
coverage compared to other MA plans with drug coverage.[Footnote 21]
(See figure 6.)
Figure 6: Number of Cost Plans with Higher or Lower Estimated Out-of-
Pocket Costs for 80-to 84-Year-Old Beneficiaries Reporting Poor Health,
Compared with Competing MA Plans and Medicare FFS, 2009:
[Refer to PDF for image: stacked vertical bar graph]
Plans with drug coverage: MA;
Cost plan‘s out-of-pocket costs lower: 4;
Cost plan‘s out-of-pocket costs higher: 4.
Plans without drug coverage: MA;
Cost plan‘s out-of-pocket costs lower: 11;
Cost plan‘s out-of-pocket costs higher: 1.
Plans without drug coverage: FFS;
Cost plan‘s out-of-pocket costs lower: 12;
Cost plan‘s out-of-pocket costs higher: 0.
Source: GAO analysis of CMS data.
Note: We compared the estimates for cost plan benefit packages without
Part D coverage to competitor MA benefit packages without Part D
coverage and to Medicare FFS for beneficiaries 80 to 84 years old
reporting poor health. Out-of-pocket cost data are available for six
different age groups. We chose the 80 to 84 age group because industry
representatives and CMS officials told us that beneficiaries enrolled
in cost plans tend to be older than the average MA beneficiary. We did
not compare the estimates for cost plan benefit packages with Part D to
FFS because the FFS estimate assumes no drug coverage. We weighted
estimates for both cost plans and MA plans according to their
enrollment throughout the cost plan's service area. Eight cost plans
did not submit plan benefit package information through CMS's plan
benefit package submission module and are therefore not included in
this analysis. Of the remaining 14 plans, as of May 2009, 6 had
enrollment only in benefit packages without Part D, 2 had enrollment
only in benefit packages with Part D, and 6 had enrollment in benefit
packages both with and without Part D.
[End of figure]
For 80-to 84-year-old beneficiaries reporting good and excellent health
in 8 of the 12 cost plans without drug coverage, we found estimated out-
of-pocket costs, on average, that were 5 to 37 percent higher than in
competing MA plans without drug coverage. Beneficiaries in the same age
category reporting good health in 6 of the 12 cost plans without drug
coverage had, on average, higher out-of-pocket costs than FFS, and
beneficiaries reporting excellent health in 11 of the 12 cost plans had
higher estimated out-of-pocket costs than FFS. Similarly, for
beneficiaries reporting good and excellent health in 7 of the 8 cost
plans with drug coverage, the estimated out-of-pocket costs were 6 to
36 percent higher than competitor MA plans with drug coverage.
Figure 7: Number of Cost Plans with Higher or Lower Estimated Out-of-
Pocket Costs for 80-to 84-Year-Old Beneficiaries Reporting Good and
Excellent Health, Compared with Competing MA Plans and Medicare FFS,
2009:
[Refer to PDF for image: 2 stacked vertical bar graphs]
Beneficiaries reporting good health:
Plans with drug coverage: MA;
Cost plan‘s out-of-pocket costs lower: 1;
Cost plan‘s out-of-pocket cost the same: 0;
Cost plan‘s out-of-pocket costs higher: 7.
Plans without drug coverage: MA;
Cost plan‘s out-of-pocket costs lower: 4;
Cost plan‘s out-of-pocket cost the same: 0;
Cost plan‘s out-of-pocket costs higher: 8.
Plans without drug coverage: FFS;
Cost plan‘s out-of-pocket costs lower: 4;
Cost plan‘s out-of-pocket cost the same: 2;
Cost plan‘s out-of-pocket costs higher: 6.
Beneficiaries reporting excellent health:
Plans with drug coverage: MA;
Cost plan‘s out-of-pocket costs lower: 1;
Cost plan‘s out-of-pocket cost the same: 0;
Cost plan‘s out-of-pocket costs higher: 7.
Plans without drug coverage: MA;
Cost plan‘s out-of-pocket costs lower: 4;
Cost plan‘s out-of-pocket cost the same: 0;
Cost plan‘s out-of-pocket costs higher: 8.
Plans without drug coverage: FFS;
Cost plan‘s out-of-pocket costs lower: 1;
Cost plan‘s out-of-pocket cost the same: 0;
Cost plan‘s out-of-pocket costs higher: 11.
Source: GAO analysis of CMS data.
Note: We compared the estimates for cost plan benefit packages without
Part D Coverage to competitor MA benefit packages without Part D
coverage and to Medicare FFS for beneficiaries 80 to 84 years old
reporting good and excellent health. Out-of-pocket cost data are
available for six different age groups. We chose the 80 to 84 age group
because industry representatives and CMS officials told us that
beneficiaries enrolled in cost plans tend to be older than the average
MA beneficiary. We did not compare the estimates for cost plan benefit
packages with Part D to FFS because the FFS estimate assumes no drug
coverage. We weighted estimates for both cost plans and MA plans
according to their enrollment throughout the cost plan's service area.
Eight cost plans did not submit plan benefit package information
through CMS's plan benefit package submission module and are therefore
not included in this analysis. Of the remaining 14 plans, as of May
2009, 6 had enrollment only in benefit packages without Part D, 2 had
enrollment only in benefit packages with Part D, and 6 had enrollment
in benefit packages both with and without Part D.
[End of figure]
Half of Organizations Offering Cost Plans Also Offered MA Plans:
In June 2009, 9 of the 18 organizations offering cost plans also
offered MA plans in some or all of their cost plans' service area,
which demonstrates that these organizations were capable of bearing
financial risk. (See table 2.) These 9 organizations operated a total
of 12 cost plans. The combined enrollment in these 12 cost plans in
June 2009 was 124,467, or 43 percent of all beneficiaries in cost
plans. Seven of the 12 cost plans enrolled fewer than 2,000
beneficiaries, and 2 of the plans enrolled more than 30,000
beneficiaries. Of the 9 organizations that offered both cost plans and
MA plans, 1 organization's only MA plan was a special needs plan.
Special needs plans exclusively or disproportionately enroll special
needs individuals, so these plans may not be an appropriate option for
the beneficiaries enrolled in this organization's cost plan.
Table 2: Organizations That Offered Cost Plans and MA Plans, June 2009:
Organization offered a cost plan and also offered: No MA plan;
Number of organizations: 9;
Percentage of organizations with cost plan: 50;
Percentage of total beneficiaries enrolled in cost plans: 57.
Organization offered a cost plan and also offered: 1 or more MA
plan(s);
Number of organizations: 9;
Percentage of organizations with cost plan: 50;
Percentage of total beneficiaries enrolled in cost plans: 43.
Organization offered a cost plan and also offered: Total;
Number of organizations: 18;
Percentage of organizations with cost plan: 100;
Percentage of total beneficiaries enrolled in cost plans: 100.
Source: GAO analysis of CMS data.
Note: For this analysis, we counted all the MA plans (local HMOs, local
PPOs, local PSOs, regional PPOs, PFFS plans, and MA special needs
plans) under each organization. In some situations we also counted the
MA plans under each parent organization. This determination of whether
to count MA plans offered by the parent organization was based on the
information provided by cost plan representatives we interviewed and
verified by CMS reports and the organizations' Web sites.
[End of table]
All eight organizations offering both cost plans and MA plans that were
not special needs plans operated at least one MA plan in some or all of
their cost plan's service area. Seven operated at least one MA plan in
their cost plan's entire service area and one operated at least one MA
plan in part of their cost plan's service area. CMS requires that
organizations that offer an MA plan in the same service area as their
cost plan close the cost plan to new enrollment. However, officials
from CMS stated that there are some exceptions to this requirement. For
instance, some organizations were able to keep their cost plan open to
enrollment because the units of the organization that contracted with
CMS were two distinct entities. The officials stated that they may
inspect these organizations to ensure that they do not share
beneficiary information across companies and do not route certain
beneficiaries into different plans to maximize their profits.
The Medicare managed care enrollment composition for the eight
organizations that operated both a cost plan and an MA plan that were
not special needs plans varied.[Footnote 22] All eight of these
organizations had a total enrollment, including both their cost plan
enrollment and MA enrollment, of at least 3,000 beneficiaries. Four of
the eight organizations enrolled more than 95 percent of their total
Medicare managed care enrollment in their MA plans. Another
organization's Medicare managed care enrollment was fairly evenly split
between its MA plan and cost plan. The remaining three organizations
had more than 75 percent of their Medicare managed care enrollment in
their cost plan. Six of the 11 MA plans offered by organizations that
offered both cost plans and MA plans were local HMOs (see table 3).
Table 3: Types of MA Plans Offered by Organizations That Offer Cost
Plans and MA Plans, June 2009:
Type of MA plan: Local HMOs;
Number of organizations offering each plan type: 6.
Type of MA plan: Local PSO;
Number of organizations offering each plan type: 1.
Type of MA plan: Local PPOs;
Number of organizations offering each plan type: 1.
Type of MA plan: PFFS plans;
Number of organizations offering each plan type: 2.
Type of MA plan: Regional PPOs;
Number of organizations offering each plan type: 1.
Source: GAO analysis of CMS data.
Note: Special needs plans are not included in this analysis.Three of
the organizations offered two different types of MA plans and were
counted in this table under each plan type.
[End of table]
Financial and Beneficiary Transition Issues Cited as Concerns Regarding
Conversion to MA Plans:
Officials from organizations that offered cost plans cited potential
future changes to MA payments and difficulty assuming financial risk as
concerns about converting cost plans to MA plans. Officials also
expressed concerns about the potential disruption to beneficiaries that
could be caused by transferring beneficiaries in cost plans to an MA
plan.
Organizations Cited MA Payment Rates and Financial Risk as Concerns to
Becoming MA Plans:
Officials from organizations that offered cost plans reported that
potential changes to MA payments were a significant concern in their
decision about whether to convert their cost plans to MA plans.
Officials from 13 of the 18 organizations that offered cost plans
identified past payment changes in the Medicare risk programs and the
potential for future payment changes in the MA program as making the
decision to convert difficult, though 6 of these organizations offered
an MA plan in some or all of their cost plan's service area in 2009.
For instance, officials from one organization who told us that they
would prefer to convert their cost plan to an MA plan, said they have
not done so because of concerns future MA payment changes may then
necessitate closing the plan. Recent congressional and administration
proposals have called for slowing the increase in or reducing MA
payments.
Officials from some organizations said that the size of their
enrollment was insufficient to manage the financial risk associated
with the MA program. Officials from 5 of the 18 organizations that
offered cost plans stated that their enrollment was too low to spread
financial risk. For example, an official from 1 of these 5
organizations stated that, because of the plan's location in a rural
area, its enrollment would never be large, and its cost plan could not
take on the financial risk. This official told us that a few high-cost
beneficiaries would consume the payments the plan would receive from
CMS. In June 2009, the cost plan enrollment levels for these 5
organizations ranged from fewer than 500 beneficiaries to about 37,000
beneficiaries.[Footnote 23] Despite the concerns of these 5
organizations, we found that plans of equivalent size were able to
operate in the MA program. Nationwide, 130 MA plans, or about 21
percent of all MA plans, enrolled fewer than 500 beneficiaries, and 69
percent of MA plans enrolled from 501 to 37,000 beneficiaries. Eleven
percent of MA plans enrolled more than 37,000 beneficiaries.[Footnote
24] According to CMS officials, after 3 years of operation, MA
organizations should be able to meet the agency's enrollment threshold
of 1,500 in rural areas and 5,000 in urban areas. However, these
officials noted that the total enrollment can include enrollment from
other lines of business if the enrollment is with the same legal entity
that holds the contract with CMS.
Officials from 3 of the 18 organizations that offered cost plans
expressed concern about meeting risk-based capital (RBC) requirements,
should they be required to convert to an MA plan.[Footnote 25] An
official from the Medicare Cost Contractors Alliance also expressed
concern about the ability of some organizations that offered cost plans
to raise RBC in the event of a required conversion to an MA plan. The
official noted that nonprofit organizations operate most cost plans,
and some of these organizations have reservations about their ability
to raise additional capital. NAIC officials confirmed that if an
organization converted a cost plan to an MA plan, thus assuming more
financial risk, the organization would probably need to raise more
capital, though the extent of capital needed would depend on the size
of the organization and how much of the organization's business was
dependent on Medicare enrollment. Two of the three organizations that
reported concerns about RBC did not have an MA plan in June 2009. The
third organization operated at least one MA plan, but nearly 85 percent
of the organization's Medicare managed care enrollment was in its cost
plan.
Cost Plans Cited Concerns about Transitioning Beneficiaries:
Officials from more than half of the 18 organizations with cost plans
stated they were concerned about the potential disruption to
beneficiaries if they were required to convert to a MA plan. Some of
these officials noted that the beneficiaries enrolled in their cost
plan(s) would not understand the process and would default to Medicare
FFS. Officials from two organizations with closed cost plans stated
that they have tried in the past to transfer the beneficiaries enrolled
in their cost plan into the organization's MA plan, but had trouble
convincing beneficiaries to change plans.
In general, if an organization decided to convert a cost plan to an MA
plan, the organization would need to close the cost plan and open a new
MA plan, if the organization did not already have one. Beneficiaries
who wish to enroll in an MA plan offered by the organization that
offered their cost plan must affirmatively enroll in the organization's
MA plan. Those who do not choose a plan--whether unintentionally or by
design--will be enrolled by default in Medicare FFS.
CMS does have a standard process in place to alert beneficiaries when
their MA or cost plan discontinues serving the beneficiaries' area. CMS
requires cost plans that discontinue serving an area to notify each
Medicare beneficiary enrolled in the plan by mail at least 60 days
prior to the end of the contract period and notify the general public
at least 30 days prior to the end of the contract period. CMS stated
that they would strongly suggest that the cost plans adhere to the more
stringent MA requirements regarding plan closures, which require the
organization offering the plan to notify each Medicare beneficiary
enrolled in the plan at least 90 days before it stops operating by
sending a CMS-approved notice to beneficiaries describing available
alternatives for obtaining Medicare services within the service area,
including MA plans and Medicare FFS. The organization also must publish
a notice in one or more local newspapers at least 90 days before the
end of the calendar year to alert the public.
Agency and Other External Comments:
We provided a draft of this report to CMS and the Medicare Cost
Contractors Alliance. CMS provided us with technical comments, which we
have incorporated as appropriate, and representatives from the Medicare
Cost Contractors Alliance provided us with oral comments.
Medicare Cost Contractors Alliance Comments:
Officials from the Medicare Cost Contractors Alliance stated that it
was important to know whether cost plans were open or closed to
enrollment in our discussion of competitors and the discussion of
organizations offering both cost plans and MA plans. Information on the
enrollment status of cost plans is provided in appendices I and II. The
Medicare Cost Contractors Alliance officials also stated that cost
plans have been in the Medicare managed care market significantly
longer than most MA plans and it is this experience that has led the
organizations to be weary of potential payment changes to the MA
program. In addition, the Medicare Cost Contractors Alliance officials
provided technical comments, which we incorporated as appropriate.
We are sending copies of this report to the Administrator of CMS and
other interested parties. In addition, this report 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 IV.
Signed by:
James C. Cosgrove:
Director, Health Care:
[End of section]
Appendix I: Organizations That Offer Medicare Cost Plans:
As of December 2009, 18 organizations operated 22 cost plans, with
enrollments ranging from 50 to 74,190. Of the 22 cost plans, 15 were
open to enrollment. Nonprofit organizations operated 17 of the 22 cost
plans.
Table 4: Organizations That Offer Medicare Cost Plans:
Organization: Blue Cross Blue Shield of Minnesota;
States served: MN;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 791.
Organization: Clarian Health Plans, Inc.;
States served: IN;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: For-Profit;
Total enrollment as of December 2009: 4,807.
Organization: Colorado Choice Health Plans;
States served: CO;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 547.
Organization: Contra Costa Health Plan;
States served: CA;
Number of cost contracts: 1;
Open/closed enrollment[A]: Closed;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 578.
Organization: Dean Health Plan, Inc.;
States served: WI;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: For-Profit;
Total enrollment as of December 2009: 13,417.
Organization: Excellus Health Plans, Inc.;
States served: NY;
Number of cost contracts: 2;
Open/closed enrollment[A]: Closed;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 2,736.
Organization: Group Health, Inc. (HealthPartners, Inc.);
States served: MN, WI;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 36,676.
Organization: Hawaii Medical Service Association;
States served: HI;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 36,107.
Organization: Heart of America HMO;
States served: ND;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 454.
Organization: HIP of Greater New York;
States served: NY;
Number of cost contracts: 1;
Open/closed enrollment[A]: Closed;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 1,248.
Organization: Kaiser Foundation Health Plan of the Mid Atlantic States;
States served: DC, MD, VA;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 37,680.
Organization: Kaiser Foundation Health Plan, Inc.;
States served: CA, HI;
Number of cost contracts: 3;
Open/closed enrollment[A]: Closed;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 4,445.
Organization: Kaiser Foundation Health Plan, Inc. of Ohio;
States served: OH;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 19,680.
Organization: Medica Insurance Company;
States served: MN, ND, SD, WI;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: For-Profit;
Total enrollment as of December 2009: 74,190.
Organization: Medical Associates Clinic;
States served: IA, IL, WI;
Number of cost contracts: 2;
Open/closed enrollment[A]: Open;
Corporate status: For-Profit/Nonprofit[B];
Total enrollment as of December 2009: 10,562.
Organization: Rocky Mountain Health Maintenance Organization;
States served: CO, WY;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 21,813.
Organization: Scott and White Health Plan;
States served: TX;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: Nonprofit;
Total enrollment as of December 2009: 23,526.
Organization: Welborn Health Plan;
States served: IN;
Number of cost contracts: 1;
Open/closed enrollment[A]: Open;
Corporate status: For-Profit;
Total enrollment as of December 2009: 1,502.
Source: GAO analysis of CMS data.
[A] CMS requires organizations operating cost plans to close their cost
plans to new enrollment if they open an MA plan in the same service
area.
[B] Medical Associates Clinic operated two cost plans. The plan that
served Iowa and Illinois operated as a for-profit organization and the
plan that served Wisconsin operated as a nonprofit organization.
[End of table]
[End of section]
Appendix II: Organizations That Would Likely Be Affected by Medicare
Improvements for Patients and Providers Act of 2008 Provision:
The Medicare Improvements for Patients and Providers Act of 2008
(MIPPA) provides that, the Secretary of Health and Human Services would
not extend or renew cost plan contracts for service areas where, during
the entire previous year, two or more regional coordinated care plans
(CCP) or two or more local CCPs were offered by different
organizations, if the MA plans met specified enrollment thresholds.
Private fee-for-service plans are not CCPs.
Table 5: Preliminary Centers for Medicare & Medicaid Services (CMS)
Estimates of the Cost Plans and Percentage of Cost Plan Enrollment
Likely Affected by MIPPA Provision:
Organization: Contra Costa Health Plan;
States Served: CA;
Total enrollment in organization's cost plan as of December 2009: 578;
Percentage of total cost plan enrollment affected: 100;
Open/closed enrollment[B]: Closed.
Organization: Excellus Health Plans, Inc[A];
States Served: NY;
Total enrollment in organization's cost plan as of December 2009:
2,686;
Percentage of total cost plan enrollment affected: 100;
Open/closed enrollment[B]: Closed.
Organization: Excellus Health Plans, Inc[A];
States Served: NY;
Total enrollment in organization's cost plan as of December 2009: 50;
Percentage of total cost plan enrollment affected: 100;
Open/closed enrollment[B]: Closed.
Organization: HIP Of Greater New York;
States Served: NY;
Total enrollment in organization's cost plan as of December 2009:
1,248;
Percentage of total cost plan enrollment affected: 93;
Open/closed enrollment[B]: Closed.
Organization: Kaiser Foundation Health Plan, Inc[A];
States Served: CA;
Total enrollment in organization's cost plan as of December 2009: 958;
Percentage of total cost plan enrollment affected: 98;
Open/closed enrollment[B]: Closed.
Organization: Kaiser Foundation Health Plan, Inc[A];
States Served: CA;
Total enrollment in organization's cost plan as of December 2009:
3,224;
Percentage of total cost plan enrollment affected: 68;
Open/closed enrollment[B]: Closed.
Organization: Rocky Mountain Health Maintenance Organization;
States Served: CO, WY;
Total enrollment in organization's cost plan as of December 2009:
21,813;
Percentage of total cost plan enrollment affected: 17;
Open/closed enrollment[B]: Open.
Source: CMS.
Note: CMS excluded special needs plans and employer group health plans
that are not open to enrollment by non-employer group members from the
CCPs considered to be available MA plans for the purposes of its
analysis. CMS analyzed MA competitor enrollment at the benefit package
level to determine which cost plans would need to discontinue serving
portions of their service area in 2011. By analyzing at this level
rather than at the contract level, it is likely that fewer competitors
would have sufficient enrollment to meet the thresholds because
enrollment in a contract would be divided among the benefit packages
offered under a contract.
[A] Excellus Health Plans, Inc, and Kaiser Foundation Health Plan, Inc.
operated more than one cost plan that will likely be affected by the
MIPPA provision regarding the extension of cost plan contracts.
[B] CMS requires organizations operating cost plans to close them to
new enrollment if the organization opens an MA plan in the same service
area.
[End of table]
[End of section]
Appendix III: Structural Differences among Cost Plans, MA Plans, and
Medicare FFS for Beneficiaries:
Table 6:
Enrollment period;
Cost plan: Cost plans that are open to enrollment must have an open
enrollment period of at least 30 consecutive days annually;
Coordinated Care Plans: Medicare Advantage (MA) Preferred Provider
Organization (PPO) (Local & Regional): When beneficiary becomes
eligible for Medicare, during the Annual Election Period (AEP), the MA
Open Enrollment Period (MA OEP), or a Special Enrollment Period
(SEP)[A];
Coordinated Care Plans: MA Health Maintenance Organization (HMO): When
beneficiary becomes eligible for Medicare, during the AEP, the MA OEP,
or a SEP[A];
MA Private Fee-For-Service (PFFS) plan: When beneficiary becomes
eligible for Medicare, during the AEP, the MA OEP, or a SEP.[A];
Medicare Fee-For-Service (FFS): When beneficiary becomes eligible for
Medicare, during the general enrollment period of January 1st to March
31st of each year, or during a SEP[A].
Disenrollment;
Cost plan: Beneficiary may disenroll at any time and return to FFS;
Coordinated Care Plans: Medicare Advantage (MA) Preferred Provider
Organization (PPO) (Local & Regional): In most cases, beneficiary must
stay enrolled for the calendar year in which coverage begins[B];
Coordinated Care Plans: MA Health Maintenance Organization (HMO): In
most cases, beneficiary must stay enrolled for the calendar year in
which coverage begins[B];
MA Private Fee-For-Service (PFFS) plan: In most cases, beneficiary must
stay enrolled for the calendar year in which coverage begins[B];
Medicare Fee-For-Service (FFS): In most cases, beneficiary must stay
enrolled until next AEP or MA-OEP.
Online enrollment;
Cost plan: Not available;
Coordinated Care Plans: Medicare Advantage (MA) Preferred Provider
Organization (PPO) (Local & Regional): Available;
Coordinated Care Plans: MA Health Maintenance Organization (HMO):
Available;
MA Private Fee-For-Service (PFFS) plan: Available;
Medicare Fee-For-Service (FFS): Not applicable.
Out-of-network coverage;
Cost plan: Through Medicare FFS;
beneficiary is responsible for FFS coinsurance and deductibles[C];
Coordinated Care Plans: Medicare Advantage (MA) Preferred Provider
Organization (PPO) (Local & Regional): Services received out of network
will generally cost more, but they are covered by the plan[C];
Coordinated Care Plans: MA Health Maintenance Organization (HMO):
Beneficiary generally responsible for full cost of out-of-network
services, however some plans may cover certain services out of network
at a higher cost[C];
MA Private Fee-For-Service (PFFS) plan: Any Medicare-approved provider
that accepts the plan's terms[D];
Medicare Fee-For-Service (FFS): Any provider that accepts Medicare.
Part D coverage;
Cost plan: Any stand-alone Medicare Prescription Drug Plan (PDP) or PDP
offered by the cost plan organization;
Coordinated Care Plans: Medicare Advantage (MA) Preferred Provider
Organization (PPO) (Local & Regional): A Part D plan offered by the MA
organization;
Coordinated Care Plans: MA Health Maintenance Organization (HMO): A
Part D plan offered by the MA organization;
MA Private Fee-For-Service (PFFS) plan: A PDP offered by the PFFS
organization. If the organization does not offer a PDP plan,
beneficiaries can choose any PDP;
Medicare Fee-For-Service (FFS): Any PDP.
Initial appeals[E];
Cost plan: Subject to cost plan's internal appeal process;
Coordinated Care Plans: Medicare Advantage (MA) Preferred Provider
Organization (PPO) (Local & Regional): Subject to MA plan's internal
appeal process;
Coordinated Care Plans: MA Health Maintenance Organization (HMO):
Subject to MA plan's internal appeal process;
MA Private Fee-For-Service (PFFS) plan: Subject to MA plan's internal
appeal process;
Medicare Fee-For-Service (FFS): Subject to Medicare appeals process.
Source: GAO.
[A] The Annual Election Period (AEP) is from November 15th to December
31st, the MA Open Enrollment Period (MA OEP) is from January 1st to
March 31st, and Special Enrollment Periods (SEP) apply whenever a
beneficiary meets certain criteria, such as moving out of their current
plan's service area.
[B] If the beneficiary moves out of the plan's service area, has both
Medicare and Medicaid, qualifies for the Part D low-income subsidy, or
lives in an institution, they may be able to drop their plans at other
times.
[C] The plan is responsible for certain services provided out of
network, including emergency services.
[D] Beginning in 2011, all employer-or union-sponsored PFFS plans, and
all nonemployer-or union-sponsored PFFS plans in areas that have at
least two available network-based plans, (such as an HMO or PPO) must
form contracted networks of providers. In areas with fewer than two
network-based plans, PFFS plans not sponsored by employer or union
groups will continue to have the option of operating without networks
if they pay providers at Medicare FFS rates or higher.
[E] Beneficiaries have the right to appeal coverage decisions. This
chart relates to the first of the five levels of appeals.
[End of table]
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
James C. Cosgrove, (202) 512-7114 or cosgrovej@gao.gov:
Staff Acknowledgments:
In addition to the contact above, Christine Brudevold, Assistant
Director; Lori Achman; Julianne Flowers; Hannah Marston; Sarah
Marshall; Elizabeth T. Morrison; and Amanda Pusey made key
contributions to this report.
[End of section]
Footnotes:
[1] We use the term Medicare cost plans to refer to Section 1876
Medicare cost contracts. Section 1876 refers to the section of the
Social Security Act that authorizes the operation of cost plans.
[2] Medicare Parts A and B are known as original Medicare or Medicare
fee-for-service (FFS). Medicare Part A covers hospital and other
inpatient stays. Medicare Part B is optional insurance, and covers
hospital outpatient, physician, and other services. MA plans must cover
services covered under Parts A and B, except for hospice care.
[3] A cost plan's service area generally comprises one or more
counties.
[4] Agreements between CMS and an organization to provide one or more
benefit packages of the same type in a specified geographic region are
referred to as contracts. Benefit packages can have different monthly
premiums or beneficiary cost-sharing requirements. For this report, we
use the term plan to refer to the agreement at the contract level.
Organizations may have more than one contract with CMS.
[5] CMS quality scores are based on information from the Health
Effectiveness Data and Information Set (HEDIS), a tool developed and
maintained by the National Committee for Quality Assurance that is used
by health plans to measure performance on dimensions of care; the
Consumer Assessment of Healthcare Providers and Systems (CAHPS), a
group of surveys that asks consumers and patients to report on and
evaluate their experiences with healthcare; and appeals data. CMS
reports the data using a rating system, where 1 is the lowest possible
score and 5 is the highest possible score. We present information on
the five quality dimensions that CMS reports and the plan summary
score. CMS calculates the dimension scores by averaging individual
quality measures in a given topic area. For example, the quality
dimension for "Managing Chronic Conditions" uses individual measures of
osteoporosis management, diabetes care, and rheumatoid arthritis
management. CMS then calculates the plan summary score by averaging the
individual quality measures and the dimension scores, as well as
applying an integration factor that rewards plans for consistent high
scores.
[6] CMS reports quality scores for managed care plans that have been
operational for a full year and meet minimum enrollment criteria.
[7] The estimates of out-of-pocket costs are based on the reported
utilization patterns of Medicare FFS beneficiaries who participated in
the Medicare Current Beneficiary Survey, which is a CMS-sponsored,
continuing survey of a nationally representative sample of aged,
disabled, and institutionalized Medicare beneficiaries. These
utilization patterns are combined with price data and benefit package
information to estimate beneficiary out-of-pocket costs for
beneficiaries in six age ranges (under 65, 65-69, 70-74, 75-79, 80-84,
and 85 and above) and five self-reported health statuses (excellent,
very good, good, fair, and poor).
[8] We excluded from the cost-sharing analysis 8 of 22 cost plans
because they did not have estimated out-of-pocket cost data.
[9] Medicaid is a joint federal-state program that finances health care
for certain categories of low-income individuals, including children,
families, persons with disabilities, and persons who are elderly.
[10] 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 an HMO or PPO). In areas with fewer than two
network-based plans, PFFS plans not sponsored by employers or union
groups will continue to have the option of operating without networks
if they pay providers at Medicare FFS rates or higher. A network-based
plan is defined as (1) an MA plan that is a CCP, (2) a cost plan, or
(3) a network-based Medical Savings Account plan. 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. A network-based plan
does not include regional PPOs that do not meet provider access
standards through written contracts.
[11] The cost plan may charge Medicare enrollees for these costs in the
form of premiums, copayments, or similar charges.
[12] Cost plans may, but are not required to, offer Part D coverage.
[13] Throughout the rest of this report, we will use the term states as
inclusive of the District of Columbia.
[14] Minnesota cost plan enrollment in June 2009 accounted for about 36
percent of cost plan enrollment nationwide.
[15] Balanced Budget Act of 1997, Pub. L. No. 105-33, § 4002(b), 111
Stat. 251, 328-329. Section 1833 health care prepayment plans, which
are employer-or union-sponsored Medicare managed care plans that
provide or arrange for some or all Medicare Part B benefits on a
prepayment basis, were allowed to convert to a Medicare cost plan.
[16] To be considered a CCP with sufficient enrollment, the CCP must,
with respect to any portion of the area involved that is within a MSA
with a population of more than 250,000 and counties contiguous to such
MSA, enroll at least 5,000 individuals. MIPPA further provides that if
the service area includes a portion in more than one MSA with a
population of more than 250,000, the minimum enrollment determination
shall be made with respect to each MSA. With respect to any other
portion of such service area, the CCP must enroll at least 1,500
individuals. PFFS plans are not CCPs.
[17] CMS excluded special needs plans and employer group health plans
that are not open to enrollment by non-employer group members from the
CCPs considered to be available MA plans for the purposes of its
analysis. CMS analyzed MA competitor enrollment at the benefit package
level to determine which cost plans would need to discontinue serving
portions of their service area in 2011.
[18] CMS only reports data for managed care plans that have operated
for a full year and meet minimum enrollment criteria. Therefore, not
all cost plans and competitor plans have a plan summary score. We did
not report comparisons for cost plans without a plan summary score, and
we excluded competitor plans without plan summary scores from our
analysis.
[19] The estimates of out-of-pocket costs are based on the reported
utilization patterns of Medicare FFS beneficiaries who participated in
the Medicare Current Beneficiary Survey. These utilization patterns are
combined with price data and benefit package information to estimate
beneficiary out-of-pocket costs in different age groups and self-
reported health categories. We compared data for the 80-84 age group
because industry representatives and CMS officials told us that
beneficiaries enrolled in cost plans tend to be older than the average
MA beneficiary. We excluded special needs plans from this analysis
because their benefit packages may be tailored to the specific special
needs population that each plan serves and may not be an appropriate
alternative to beneficiaries in cost plans.
[20] Eight cost plans did not submit plan benefit package information
through CMS's plan benefit package submission module and are therefore
not included in this analysis. Of the remaining 14 plans, as of May
2009, 6 had enrollment only in benefit packages without Part D, 2 had
enrollment only in benefit packages with Part D, and 6 had enrollment
in benefit packages both with and without Part D.
[21] As of June 2009, 65 percent of beneficiaries in cost plans had
Part D coverage through their cost plan.
[22] Medicare managed care enrollment includes local HMOs, local PSOs,
local PPOs, PFFS plans, regional PPOs, and cost plans open to
individuals.
[23] One of these five organizations also operates an MA special needs
plan. The other four do not operate any MA plans.
[24] Percentages do not equal 100 because of rounding.
[25] RBC refers to the minimum amount of capital an insurer should hold
in order to ensure that it can pay its obligations. The NAIC
established a formula to calculate RBC that takes into account the risk
profile and size of a plan. Generally, the more risk a health insurer
takes on, the more RBC the health insurer needs in reserve. Based on
NAIC's model law, if a health insurer has less than 150 percent of the
RBC required by the formula, a state insurance regulator may begin
taking action to require the insurer to raise its capital reserves.
[End of section]
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