Medicare Advantage
Relationship between Benefit Package Designs and Plans' Average Beneficiary Health Status Gao ID: GAO-10-403 April 30, 2010Nearly 11 million Medicare beneficiaries are enrolled in Medicare Advantage (MA), Medicare's private health insurance option. Benefits vary by MA plan and may include coverage for services not available in traditional Medicare. To ensure MA plan benefit package designs do not discriminate against beneficiaries in poor health with high expected health care costs, the Centers for Medicare & Medicaid Services (CMS) reviews and approves all benefit packages yearly. GAO examined (1) MA plan benefit packages by average health status of plans' enrolled beneficiaries, (2) distribution and characteristics of MA plans by average beneficiary health status, and (3) CMS's process for ensuring that benefit packages do not discriminate with respect to health status. Using 2008 data on beneficiaries' expected health care costs, the most recent data available, GAO sorted 2,899 plans enrolling 7.5 million beneficiaries into three groups: good health (below-average expected costs), average health, and poor health (above-average expected costs). GAO then analyzed MA plan benefit packages by health group and reviewed CMS documentation and interviewed agency officials on CMS's benefit package review process. GAO did not determine whether plans structured benefit packages in response to enrolled beneficiaries' health status or beneficiaries in particular health groups chose plans because of the benefits.
In 2008, plans in the good health group generally had lower premiums, higher cost sharing for certain services, and fewer additional benefits than plans in the poor health group. Almost half of the plans in the good health group did not have an MA premium for medical or drug coverage, while about one-fifth of plans in the poor health group had no MA premium. Plans in the good health group had higher cost sharing, weighted by enrollment, for inpatient hospital care, skilled nursing facility stays, and renal dialysis than plans in the poor health group. Plans in the good health group were more likely to have an out-of-pocket (OOP) maximum, but the average OOP maximum for plans in that group, weighted by enrollment, was 55 percent higher than that for plans in the poor health group. Comprehensive dental and hearing aid benefits were more likely to be included in the benefit packages for beneficiaries in the poor health group of plans whereas fitness benefits were more likely to be included in the benefit packages for beneficiaries in the good health group of plans. Forty-three percent of plans were in the good health group, 37 percent in the average health group, and 20 percent in the poor health group. Twenty-nine percent of MA beneficiaries were in plans in the good health group, 55 percent in plans in the average health group, and 16 percent in plans in the poor health group. Among the five largest companies sponsoring MA plans, beneficiary health varied: one sponsor had 17 percent of its beneficiaries in plans in the good health group and 17 percent in plans in the poor health group; another sponsor had 49 percent of beneficiaries in plans in the good health group and less than 1 percent in plans in the poor health group. Average beneficiary health status also varied by other factors, such as plan type and plan size. CMS has revised its process for reviewing MA plans for the likelihood of discrimination. It developed a new methodology for setting cost-sharing thresholds--criteria used to identify benefit packages likely to discriminate against certain beneficiaries. For contract year 2010, CMS contacted all MA plans with benefit packages identified as likely to discriminate, and all plans subsequently met cost-sharing thresholds. The new methodology for setting cost-sharing thresholds allowed higher cost sharing for some services relative to 2009. For example, among plans without an OOP maximum or one above $3,400 for 2010, allowed cost sharing for a typical inpatient mental health stay doubled, from $61 per day to $130 per day, and allowed cost sharing for a typical skilled nursing facility stay increased from $53 to $70 per day, compared to 2009. In comments on a draft of this report, CMS noted that GAO's findings are consistent with the agency's experience. CMS also stated that, prior to contract year 2010, it targeted for cost-sharing reductions plans with the most egregious cost sharing and often reduced cost-sharing amounts, but to amounts that were still above the thresholds.
GAO-10-403, Medicare Advantage: Relationship between Benefit Package Designs and Plans' Average Beneficiary Health Status
This is the accessible text file for GAO report number GAO-10-403
entitled 'Medicare Advantage: Relationship between Benefit Package
Designs and Plans' Average Beneficiary Health Status' which was
released on June 1, 2010.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as
part of a longer term project to improve GAO products' accessibility.
Every attempt has been made to maintain the structural and data
integrity of the original printed product. Accessibility features,
such as text descriptions of tables, consecutively numbered footnotes
placed at the end of the file, and the text of agency comment letters,
are provided but may not exactly duplicate the presentation or format
of the printed version. The portable document format (PDF) file is an
exact electronic replica of the printed version. We welcome your
feedback. Please E-mail your comments regarding the contents or
accessibility features of this document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
April 2010:
Medicare Advantage:
Relationship between Benefit Package Designs and Plans' Average
Beneficiary Health Status:
GAO-10-403:
GAO Highlights:
Highlights of GAO-10-403, a report to congressional requesters.
Why GAO Did This Study:
Nearly 11 million Medicare beneficiaries are enrolled in Medicare
Advantage (MA), Medicare‘s private health insurance option. Benefits
vary by MA plan and may include coverage for services not available in
traditional Medicare. To ensure do not
discriminate against beneficiaries in poor health with high expected
health care costs, the Centers for Medicare & Medicaid Services (CMS)
reviews and approves all benefit packages yearly.
GAO examined (1) MA plan benefit packages by average health status of
plans‘ enrolled beneficiaries, (2) distribution and characteristics of
MA plans by average beneficiary health status, and (3) CMS‘s process
for ensuring that benefit packages do not discriminate with respect to
health status. Using 2008 data on beneficiaries‘ expected health care
costs, the most recent data available, GAO sorted 2,899 plans
enrolling 7.5 million beneficiaries into three groups: good health
(below-average expected costs), average health, and poor health (above-
average expected costs). GAO then analyzed MA plan benefit packages by
health group and reviewed CMS documentation and interviewed agency
officials on CMS‘s benefit package review process. GAO did not
determine whether plans structured benefit packages in response to
enrolled beneficiaries‘ health status or beneficiaries in particular
health groups chose plans because of the benefits.
What GAO Found:
In 2008, plans in the good health group generally had lower premiums,
higher cost sharing for certain services, and fewer additional
benefits than plans in the poor health group. Almost half of the plans
in the good health group did not have an MA premium for medical or
drug coverage, while about one-fifth of plans in the poor health group
had no MA premium. Plans in the good health group had higher cost
sharing, weighted by enrollment, for inpatient hospital care, skilled
nursing facility stays, and renal dialysis than plans in the poor
health group. Plans in the good health group were more likely to have
an out-of-pocket (OOP) maximum, but the average OOP maximum for plans
in that group, weighted by enrollment, was 55 percent higher than that
for plans in the poor health group. Comprehensive dental and hearing
aid benefits were more likely to be included in the benefit packages
for beneficiaries in the poor health group of plans whereas fitness
benefits were more likely to be included in the benefit packages for
beneficiaries in the good health group of plans.
Forty-three percent of plans were in the good health group, 37 percent
in the average health group, and 20 percent in the poor health group.
Twenty-nine percent of MA beneficiaries were in plans in the good
health group, 55 percent in plans in the average health group, and 16
percent in plans in the poor health group. Among the five largest
companies sponsoring MA plans, beneficiary health varied: one sponsor
had 17 percent of its beneficiaries in plans in the good health group
and 17 percent in plans in the poor health group; another sponsor had
49 percent of beneficiaries in plans in the good health group and less
than 1 percent in plans in the poor health group. Average beneficiary
health status also varied by other factors, such as plan type and plan
size.
CMS has revised its process for reviewing MA plans for the likelihood
of discrimination. It developed a new methodology for setting cost-
sharing thresholds”criteria used to identify benefit packages likely
to discriminate against certain beneficiaries. For contract year 2010,
CMS contacted all MA plans with benefit packages identified as likely
to discriminate, and all plans subsequently met cost-sharing
thresholds. The new methodology for setting cost-sharing thresholds
allowed higher cost sharing for some services relative to 2009. For
example, among plans without an OOP maximum or one above $3,400 for
2010, allowed cost sharing for a typical inpatient mental health stay
doubled, from $61 per day to $130 per day, and allowed cost sharing
for a typical skilled nursing facility stay increased from $53 to $70
per day, compared to 2009.
In comments on a draft of this report, CMS noted that GAO‘s findings
are consistent with the agency‘s experience. CMS also stated that,
prior to contract year 2010, it targeted for cost-sharing reductions
plans with the most egregious cost sharing and often reduced cost-
sharing amounts, but to amounts that were still above the thresholds.
View [hyperlink, http://www.gao.gov/products/GAO-10-403] or key
components. For more information, contact James C. Cosgrove at (202)
512-7114 or cosgrovej@gao.gov.
[End of section]
Contents:
Letter:
Background:
The Good Health Group of Plans Generally Charged Lower Premiums and
Higher Cost Sharing for Certain Benefits, and Offered Fewer Additional
Benefits:
More MA Plans and Beneficiaries Were in the Good Health Group than in
the Poor Health Group of Plans:
CMS Recently Revised Its Process for Ensuring That MA Plan Benefit
Packages Do Not Discriminate against Beneficiaries in Poor Health:
Agency and Other External Comments and Our Evaluation:
Appendix I: Medicare Advantage Plans and Beneficiaries by Average
Indexed Risk Score and Health Group, 2008:
Appendix II: Comments from the Centers for Medicare & Medicaid
Services:
Appendix III: GAO Contact and Staff Acknowledgments:
Table:
Table 1: Percentage of MA Plans that Exceeded CMS Cost-Sharing
Thresholds, Contract Years 2008 and 2009:
Figures:
Figure 1: Average Combined, Part C, and Part D MA Plan Premiums by
Health Group, 2008:
Figure 2: Average MA Plan Cost Sharing for Selected Services by Health
Group, 2008:
Figure 3: Percentage of Beneficiaries in MA Plans with Selected
Additional Benefits by Health Group, 2008:
Figure 4: MA Plans According to Health Group, 2008:
Figure 5: MA Beneficiaries According to Plan Health Group, 2008:
Figure 6: Percentage of Beneficiaries in MA Plans, by Plan Health
Group, for the Five Largest MA Organizations, 2008:
Figure 7: Percentage of Beneficiaries in MA Plans, by Plan Health
Group and Plan Type, 2008:
Figure 8: Percentage of MA Plans, by Plan Health Group and Plan Size
(excluding SNPs), 2008:
Figure 9: Percentage of SNPs, by Plan Health Group and Plan Size, 2008:
Figure 10: CMS's Process for Identifying Plans with Cost Sharing
Likely to Be Discriminatory and Contacting Plans for Cost-Sharing
Reductions, Contract Year 2010:
Figure 11: CMS's Process for Identifying Plans with Cost Sharing
Likely to be Discriminatory and Selecting Plans for Cost-Sharing
Reductions, Contract Years 2008 and 2009:
Figure 12: Number of Medicare Advantage Plans by Average Indexed Risk
Score and Health Group, 2008:
Figure 13: Percentage of Medicare Advantage Beneficiaries by MA Plans'
Average Indexed Risk Score and Health Group, 2008:
Abbreviations:
AHIP: America's Health Insurance Plans:
CMS: Centers for Medicare & Medicaid Services:
DME: durable medical equipment:
FFS: fee-for-service:
HMO: health maintenance organization:
MA: Medicare Advantage:
MAO: Medicare Advantage organization:
MedPAC: Medicare Payment Advisory Commission:
PBP: plan benefit package:
PFFS: private fee-for-service:
PPO: preferred provider organization:
OOP: out-of-pocket:
SNF: skilled nursing facility:
SNP: special needs plan:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
April 30, 2010:
Congressional Requesters:
Nearly one out of every four Medicare beneficiaries is enrolled in a
Medicare Advantage (MA) plan--an alternative to original Medicare fee-
for-service (FFS)--in which private insurance plans offer health care
coverage to Medicare beneficiaries. As of December 2009, nearly 11
million Medicare beneficiaries were enrolled in approximately 4,700
plans offered by 188 MA organizations (MAO).[Footnote 1] Medicare
payments to MA plans were approximately $109.7 billion in fiscal year
2009.[Footnote 2] In addition to covering services paid for under
Medicare FFS, many MA plans offer additional benefits, such as vision,
hearing, or dental care and MA plans typically have premiums lower
than those of Medicare supplemental policies purchased by FFS
beneficiaries (known as Medigap).[Footnote 3] MA beneficiaries
generally have an array of plans to choose from, each with different
coverage, premiums, and cost sharing--the portion of medical expenses
that the beneficiary is responsible for paying out-of-pocket (OOP).
The Centers for Medicare & Medicaid Services (CMS)--the agency that
administers the Medicare program--pays MA plans a fixed amount to
cover each beneficiary and oversees plan benefit designs. CMS adjusts
payments to plans using risk scores, which estimate the expected
health care costs of the beneficiaries enrolled in a plan.[Footnote 4]
Risk scores are developed from data on individuals' demographics and
diagnoses. As a result, MA plans receive relatively lower payments for
beneficiaries who are healthier than average, and relatively higher
payments for beneficiaries who are sicker than average.
The Medicare Payment Advisory Commission (MedPAC) reported that
Medicare's risk-adjustment methodology may tend to set payments too
low for beneficiaries in poor health, who tend to have high expected
health care costs, and set payments too high for the healthiest
beneficiaries who tend to have low expected health care costs.
[Footnote 5] As a result, MAOs may have a financial incentive to
discourage new or continued enrollment of beneficiaries in poor
health. It is possible that some MAOs could do this through the design
of their plan benefit packages. For example, a plan that charges
relatively high cost-sharing amounts for certain services commonly
used by beneficiaries in poor health may prove particularly
undesirable to them. MA plans have flexibility in designing their
benefit packages, but (1) they must provide all Medicare-covered
services except hospice care, (2) their overall cost-sharing
requirements must be actuarially equivalent or lower than those under
Medicare FFS,[Footnote 6] and (3) they cannot discriminate on the
basis of health status. By law, CMS may not approve MA plan benefit
packages if their designs are likely to substantially discourage
enrollment of certain beneficiaries.[Footnote 7] To determine whether
an MA plan benefit package is likely to substantially discourage
enrollment of certain beneficiaries, CMS reviews cost sharing for
certain services for which excessively high cost sharing could be
considered discriminatory.
We reported in 2008 that 2007 cost sharing for certain services, such
as home health and inpatient hospital stays, was higher in some MA
plans than in Medicare FFS.[Footnote 8] However, we have not
previously examined how plan benefit design varied among MA plans by
average beneficiary health status. Therefore, you asked that we review
MA plan benefit designs, enrollment patterns, and related CMS
oversight. This report examines (1) benefit packages of MA plans by
average health status of plans' enrolled beneficiaries, (2) the
distribution and characteristics of MA plans by average beneficiary
health status, and (3) CMS's process for ensuring that MA plan benefit
packages are not discriminatory with respect to health status.
To address these issues, we focused on four types of MA plans that
together accounted for nearly all of MA enrollment in 2009--health
maintenance organizations (HMO), private fee-for-service (PFFS) plans,
local preferred provider organizations (PPO), and regional PPOs.
[Footnote 9] We included special needs plans (SNP), which are allowed
to limit enrollment to a targeted beneficiary population; SNPs can be
HMOs, local PPOs, or regional PPOs.[Footnote 10] After certain
exclusions, we analyzed data for 2,899 plans (including 621 SNPs),
offered by 192 MAOs that enrolled 74 percent of all MA beneficiaries--
7.5 million--as of July 2008.[Footnote 11] Of the 973,923
beneficiaries enrolled in SNPs, over two-thirds were in plans that
targeted enrollment to dual-eligible beneficiaries--those entitled to
both Medicare and Medicaid. In some of our analyses, we reported our
results for SNPs separately in order to highlight the distinct
characteristics of such plans.
Using CMS's 2008 plan-level risk score data by county, the most recent
data available, we categorized the average health status of MA plans
as good, average, or poor in the areas that they served. Risk scores
are based on beneficiaries' projected health care costs, which CMS
develops using demographic information and diagnosis codes.[Footnote
12] At the plan level, risk scores indicate the average health status
of the plans' beneficiaries. Because the overall Medicare population
may be healthier in some geographic areas than in others, we
calculated an indexed (relative) health risk score for each plan as
the ratio of an MA plan's risk score to the overall Medicare average
risk score in each county. We then averaged each plan's indexed risk
score across the counties that comprised the plan's service area,
weighted by July 2008 enrollment. With 1.00 as the average risk score
for all Medicare beneficiaries--in FFS and MA--we placed the MA plans
in one of three groups.
* Good health group: MA plans with an average indexed risk score less
than 0.90, meaning the projected health care costs for the average
beneficiary in the plan were at least 10 percent lower than those for
an average Medicare beneficiary living in the plan's service area.
* Average health group: MA plans with an average indexed risk score
between 0.90 and 1.10, meaning the projected health care costs for the
average beneficiary in the plan were within 10 percent of those for an
average Medicare beneficiary living in the plan's service area.
* Poor health group: MA plans with an average indexed risk score
greater than 1.10, meaning the projected health care costs for the
average beneficiary in the plan were at least 10 percent higher than
those for an average Medicare beneficiary living in the plan's service
area.
To compare the benefit packages of MA plans by the average health
status of plans' enrolled beneficiaries, we analyzed CMS plan benefit
package (PBP) data for contract year 2008 (as the risk score data used
in our analysis is based on MA plan enrollment as of July 2008). CMS's
PBP data contain each MA plan's premiums, cost-sharing requirements,
and additional benefits. We analyzed cost sharing for eight services
for which CMS considers high cost sharing to be potentially
discriminatory because these services typically are used by Medicare
beneficiaries in poor health and are usually associated with acute and
chronic conditions, high utilization, and high cost.[Footnote 13] For
several services, we simulated beneficiary OOP costs using average
beneficiary utilization profiles developed by CMS and accounted for
plans that charged service-specific deductibles or had service-
specific OOP maximums--dollar limits on the amount a beneficiary must
pay in cost sharing in a period of coverage (typically 1 year).
[Footnote 14] We also determined whether MA plans provided additional
coverage for dental, vision, or hearing services; and fitness
benefits.[Footnote 15] We did not determine whether MAOs structured
their plan benefit packages in response to enrolled beneficiaries'
health status or whether beneficiaries of a given health status chose
certain MA plans specifically because of their benefit package designs.
To examine the distribution and characteristics of MA plans by
beneficiary health status, we analyzed 2008 MA plan-level risk score
data, the most recent data available, and calculated the number of MA
plans and the percentage of plan beneficiaries in each health group.
We further examined the differences across the health groups (1) among
the five largest MAOs, (2) by plan type, (3) by plan size, (4) and by
the percentage difference between the MA payment benchmarks and
estimated FFS spending across a plan's service area.
To describe CMS's process for ensuring that MA plan benefit packages
are not discriminatory with respect to health status, we interviewed
CMS officials, including staff responsible for reviewing and approving
plan benefit packages; and reviewed relevant laws and regulations, CMS
standard operating procedures, and other agency documentation on the
review process. We determined the outcome of CMS's review process by
analyzing data for contract years 2008 and 2009 on MA plans that CMS
initially identified as having potentially discriminatory cost sharing
and data on MA plans' final cost-sharing requirements for contract
years 2008 through 2010.
We interviewed CMS officials about 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.
For example, we compared the results of our cost sharing analysis
using PBP data with information from the Medicare Options Compare Web
site.[Footnote 16] We determined that the data were sufficiently
reliable for our purposes. We conducted our work from April 2009
through April 2010 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 based on our audit objectives. We
believe that the evidence obtained provides a reasonable basis for our
findings.
Background:
Most Medicare beneficiaries can choose to receive covered services
through Medicare FFS or through an MA plan--which operates under
Medicare Part C--if one is offered where they live.[Footnote 17] MAOs
are allowed flexibility in designing their plan benefit packages and
cost sharing for certain services can vary widely by MA plan.
Medicare Advantage Coverage and Payment:
MA plans operate under annual contracts between MAOs and CMS and must
offer benefits that are covered under Medicare FFS.[Footnote 18] These
benefits consist of Part A hospital insurance, which covers inpatient
stays, care in skilled nursing facilities, and some home health care;
and Part B medical insurance, which covers certain physician,
outpatient hospital, and laboratory services, among other services.
All beneficiaries enrolled in Part B are charged a Part B premium. In
general, in order to enroll in a MA plan, beneficiaries must be
entitled to benefits under Part A and enrolled in Part B.
Regardless of their source of coverage, all Medicare beneficiaries
have the option of receiving prescription drug coverage through
Medicare Part D. Medicare FFS beneficiaries can enroll in stand-alone
prescription drug plans, which are operated by private plan sponsors,
and they generally must pay an additional premium to receive Part D
coverage. MA beneficiaries who also want prescription drug coverage
generally receive that coverage through their MA plans, which may or
may not charge an additional premium for Part D coverage.
In addition to monthly premiums, beneficiaries in Medicare FFS or in
MA plans typically are responsible for cost sharing, which can be in
the form of a deductible, coinsurance, or a copayment.[Footnote 19] To
help provide financial protection to beneficiaries who might otherwise
have high cost-sharing expenses for Part A and Part B services, MAOs
may voluntarily establish OOP maximums, or dollar limits on the amount
a beneficiary must pay in cost sharing in a period of coverage
(typically 1 year).[Footnote 20] For contract year 2010, CMS sought to
allow MA plans with an OOP maximum at or below $3,400 greater
flexibility in establishing cost-sharing amounts.[Footnote 21]
For each MA beneficiary, CMS pays MA plans a monthly amount determined
by the plan bid--the plan's estimated cost of providing Medicare Part
A and Part B benefits--in relation to a benchmark, which is the
maximum amount the Medicare program will pay MA plans in a given
locality. If a plan's bid is less than the benchmark, the difference
is partially rebated to the MA plan and must be used to reduce
premiums, reduce cost sharing, or provide additional benefits for plan
beneficiaries. If a plan's bid exceeds the benchmark, the plan will
charge each of its beneficiaries an additional premium to make up the
difference. MA plans offering prescription drug coverage have a
separate payment benchmark for Part D prescription drug benefits. CMS
risk-adjusts the monthly payments to MA plans to take into account the
health status of the plan's beneficiaries.
:
As previously reported, cost sharing can vary widely among MA plans
for particular categories of services as a result of the flexibility
given MAOs in designing their plan benefit packages.[Footnote 22] For
example, in 2007, 9 percent of beneficiaries were enrolled in MA plans
that had no cost sharing for inpatient services, whereas 16 percent of
beneficiaries were enrolled in MA plans with cost sharing for
inpatient services that was higher than that of Medicare FFS.
Similarly, an AARP study reported that in 2008 the average MA
beneficiary with a 10-day inpatient hospital stay would incur $823 in
cost sharing, less than the $1,068 incurred for beneficiaries in
Medicare FFS, but 12 percent of beneficiaries would incur cost sharing
of $2,000 or more.[Footnote 23]
The Secretary of Health and Human Services is obliged by statute to
not contract with a MAO if its plan benefit design is likely to
substantially discourage enrollment in the MA plan by certain
individuals.[Footnote 24] To implement this provision of the statute,
CMS identified in the Medicare Managed Care Manual certain services
for which high cost sharing could be considered potentially
discriminatory and provides further guidance in its annual MA Call
Letter to MA plans on how it will review benefit packages for the
likelihood of discrimination. CMS has never barred a plan from
participation in the MA program because of cost sharing that was
likely to substantially discourage enrollment.
Certain aspects of MA cost-sharing requirements and payment will
change as a result of the Patient Protection and Affordable Care Act.
Beginning with bids submitted for contract year 2011, the Secretary of
Health and Human Services has the authority to not contract with an
MAO if it proposes significant increases in cost sharing or decreases
benefits offered by a plan.[Footnote 25] In addition, for plan years
beginning January 1, 2011, the cost sharing required for chemotherapy
services, renal dialysis, skilled nursing care, and any other service
that the Secretary determines appropriate can be no more than the cost
sharing required in Medicare FFS.[Footnote 26]
The Good Health Group of Plans Generally Charged Lower Premiums and
Higher Cost Sharing for Certain Benefits, and Offered Fewer Additional
Benefits:
The good health group of plans--MA plans in which the average
beneficiary had projected health care costs at least 10 percent below
those for an average Medicare beneficiary within the plan's service
area--generally charged lower premiums and had higher cost sharing for
certain services compared with the poor health group of plans. Plans
in the good health group also were less likely to include additional
benefits, such as vision and dental care coverage.
The Good Health Group of Plans Generally Charged Lower Premiums or
None at All:
The good health group of plans generally charged lower premiums
relative to the poor health group of plans. (See figure 1.) For
example, in 2008,
* almost half of the good health group of plans--46 percent--did not
have a premium for Part C (medical) or Part D (prescription drug)
coverage, while about one-fifth of the poor health group of plans had
no premium.
* for MA plans that included prescription drug coverage as part of
their benefit package, the combined (Part C and Part D) monthly
premium for the good health group of plans--$24--was lower than that
for the poor health group, which was $31.
* taken separately, Part C and Part D premiums for the good health
group of plans also were lower than the corresponding premiums for the
poor health group.
Figure 1: Average Combined, Part C, and Part D MA Plan Premiums by
Health Group, 2008:
[Refer to PDF for image: illustrated table]
Premium: Part C and Part D[A];
Good health group: $24;
Average health group: $37;
Poor health group: $31.
Premium: Part C;
Good health group: $12;
Average health group: $24;
Poor health group: $19.
Premium: Part D;
Good health group: $10;
Average health group: $11;
Poor health group: $14.
Source: GAO analysis of 2008 CMS Plan Benefit Package data.
Notes: Dollar amounts are weighted by July 2008 enrollment and include
zero-premium MA plans. Using CMS's 2008 plan-level risk score data by
county, we categorized the health status of MA plans as good, average,
or poor based on the average health status of their enrolled
beneficiaries in the areas that they served. This analysis included
2,899 MA plans that enrolled a total of 7,553,600 beneficiaries.
[A] The combined Part C and D premium reflects the premium for plans
that included the Part D prescription drug coverage as part of their
MA plan benefit package.
[End of figure]
In 2008, 12 percent of plans in the good health group reduced
beneficiaries' Part B premium, while 4 percent of plans in the poor
health group did so. Among plans that reduced the Part B premium,
plans in the good health group reduced it by a larger amount than
plans in the poor health group--averaging $48 and $36, respectively.
[Footnote 27]
The Good Health Group of Plans Generally Had Higher Cost Sharing for
Certain Services:
The good health group of plans tended to have higher cost sharing for
the services we reviewed--which included inpatient hospital acute
stays, inpatient mental health stays, skilled nursing facility (SNF)
stays, and renal dialysis--than the poor health group of plans.
[Footnote 28] (See figure 2.) For example, in 2008,
* the average plan in the good health group charged about $100 more in
cost sharing for a typical inpatient hospital stay (6 days)[Footnote
29] and about $150 more for a typical inpatient mental health stay (21
days)[Footnote 30] than the average plan in the poor health group.
* the average plan in the good health group charged about $500 more in
cost sharing for a typical SNF stay (35 days) than the average plan in
the poor health group.[Footnote 31]
* the average plan in the good health group charged over $300 more in
cost sharing for a year of renal dialysis (156 sessions)[Footnote 32]
than the average plan in the poor health group.
Figure 2: Average MA Plan Cost Sharing for Selected Services by Health
Group, 2008:
[Refer to PDF for image: illustrated table]
Inpatient hospital stay (6 days):
Good health group: $701;
Average health group: $604;
Poor health group: $601.
Skilled nursing facility stay (35 days):
Good health group: $1,545;
Average health group: $1,485;
Poor health group: $1,026.
Inpatient mental health stay[A]:
Good health group: $895;
Average health group: $881;
Poor health group: $746.
Renal dialysis (156 sessions):
Good health group: $2,118;
Average health group: $1,798;
Poor health group: $1,802.
Source: GAO analysis of 2008 CMS Plan Benefit Package data.
Notes: Dollar amounts are weighted by July 2008 enrollment and include
MA plans that did not charge cost sharing for the indicated services.
Using CMS's 2008 plan-level risk score data by county, we categorized
the health status of MA plans as good, average, or poor based on the
average health status of their enrolled beneficiaries in the areas
that they served. This analysis included 2,899 MA plans that enrolled
7,553,600 beneficiaries.
[A] CMS does not calculate an average cost per day for an inpatient
mental health stay. As a result, we were only able to estimate the
average OOP cost for a 21-day inpatient mental health stay for plans
that charged a copayment. Of the 2,899 plans in our analysis,
approximately 90 percent indicated that they charged a copayment for
an inpatient mental health stay.
[End of figure]
The good health group of plans had similar cost sharing for Part B
chemotherapy drugs, other Part B drugs, DME, and home health compared
with the poor health group of plans.[Footnote 33] For example, in 2008,
* an average plan in both the good health group and the poor health
group charged 20 percent coinsurance for Part B chemotherapy drugs and
charged 20 and 19 percent coinsurance, respectively, for other Part B
drugs.
* an average plan in the good health group charged 23 percent
coinsurance for DME, compared with 21 percent for the average plan in
the poor health group.
* for the relatively small share of plans that charged cost sharing
for home health care, an average plan in the good health group charged
$568 for 27 home health visits compared to $597 for the average plan
in the poor health group.
In 2008, a greater share of plans in the good health group had an OOP
maximum that limited their beneficiaries' overall financial risk
compared to plans in the poor health group--63 percent compared with
40 percent, respectively.[Footnote 34] However, the OOP maximum for
the good health group of plans averaged 55 percent higher than the OOP
maximum for the poor health group ($3,515 compared with $2,262).
[Footnote 35] In designing their benefit packages, some plans
excluded cost sharing incurred for certain services from expenses that
counted toward the OOP maximum.[Footnote 36] Approximately 14 percent
of plans in the good health group had an OOP maximum and excluded one
or more services for which they required cost sharing, compared with
13 percent of plans in the average health and poor health groups.
[Footnote 37] Plans were most likely to exclude Part B drugs (15
percent of plans), renal dialysis (6 percent of plans), and DME (6
percent of plans) from their OOP maximum.[Footnote 38]
The Good Health Group of Plans Generally Had Fewer Additional Benefits:
Plans in the good health group were less likely to include certain
additional benefits in their benefit packages, such as vision and
dental care coverage, but were more likely to include a fitness
benefit than plans in the poor health group.[Footnote 39] (See figure
3.) For example, in 2008,
* seventy-three percent of plans in the good health group included
coverage for eye exams and 60 percent included coverage for eyewear
compared with 78 percent and 74 percent, respectively, of plans that
covered these benefits in the poor health group.
* twenty-three percent of plans in the good health group included
coverage for comprehensive dental benefits compared with 33 percent of
plans in the poor health group.[Footnote 40]
* while plans in the good health group were more likely to cover
hearing tests, they were less likely than plans in the poor health
group to cover hearing aids--36 percent versus 48 percent.
* the percentage of plans in the good health group that included
fitness benefits was approximately twice that of plans in the poor
health group--55 percent compared with 28 percent.
Figure 3: Percentage of Beneficiaries in MA Plans with Selected
Additional Benefits by Health Group, 2008:
[Refer to PDF for image: illustrated table]
Vision eye exams:
Good health group: 73%;
Average health group: 76%;
Poor health group: 78%.
Vision eye wear:
Good health group: 60%;
Average health group: 64%;
Poor health group: 74%.
Dental prevention:
Good health group: 46%;
Average health group: 48%;
Poor health group: 51%.
Dental comprehensive:
Good health group: 23%;
Average health group: 28%;
Poor health group: 33%.
Hearing exams:
Good health group: 78%;
Average health group: 76%;
Poor health group: 67%.
Hearing aids:
Good health group: 36%;
Average health group: 40%;
Poor health group: 48%.
Fitness benefits:
Good health group: 55%;
Average health group: 49%;
Poor health group: 28%.
Source: GAO analysis of 2008 CMS Plan Benefit Package data.
Notes: Percentages are weighed by July 2008 enrollment. Results
include MA plans that provided dental, vision, hearing, and fitness
benefits as mandatory supplemental benefits. Using CMS's 2008 plan-
level risk score data by county, we categorized the health status of
MA plans as good, average, or poor based on the average health status
of their enrolled beneficiaries in the areas that they served. This
analysis included 2,899 MA plans that enrolled 7,553,600 beneficiaries.
[End of figure]
More MA Plans and Beneficiaries Were in the Good Health Group than in
the Poor Health Group of Plans:
In 2008, the plans in the good health group differed with those in the
poor health group by plan type, plan size, and, for HMOs, by the
difference between MA payment benchmarks and estimated FFS spending.
Our analysis of MA plans' average indexed risk scores, including SNPs,
by health group showed that 1,254 plans (43 percent) were in the good
health group, 1,068 plans (37 percent) were in the average health
group, and 577 plans (20 percent) were in the poor health
group.[Footnote 41] (See figure 4.) Across all 2,899 MA plans in our
review, the average indexed risk scores--adjusted for geographic
variations in the average health of all Medicare beneficiaries--ranged
from 0.38 to 2.65.
Figure 4: MA Plans According to Health Group, 2008:
[Refer to PDF for image: pie-chart]
Good health (non-SNP): 1,218;
Good health (SNP): 36;
Good health total: 43%;
Average health (non-SNP): 891;
Average health (SNP): 177;
Average health total: 37%;
Poor health (non-SNP): 169;
Poor health (SNP): 408;
Poor health total: 20%.
Source: GAO analysis of 2008 CMS risk score data.
Notes: Using CMS's 2008 plan-level risk score data by county, we
categorized the health status of MA plans as good, average, or poor
based on the average health status of their enrolled beneficiaries in
the areas that they served. This analysis included 2,899 MA plans, of
which 621 were SNPs that are allowed to limit enrollment to a targeted
beneficiary population.
[End of figure]
Our analysis of the percentage of beneficiaries, including those
enrolled in SNPs, by health group showed that 29 percent were in the
good health group of plans, 55 percent in the average health group of
plans, and 16 percent in the poor health group of plans. (See figure
5.)
Figure 5: MA Beneficiaries According to Plan Health Group, 2008:
[Refer to PDF for image: pie-chart]
Good health (non-SNP): 29%;
Good health (SNP): less than 1%;
Good health total: 29%;
Average health (non-SNP): 51%;
Average health (SNP): 4%;
Average health total: 55%;
Poor health (non-SNP): 7%;
Poor health (SNP): 9%;
Poor health total: 16%.
Source: GAO analysis of 2008 CMS risk score data.
Notes: Using CMS's 2008 plan-level risk score data by county, we
categorized the health status of MA plans as good, average, or poor
based on the average health status of their enrolled beneficiaries in
the areas that they served. This analysis included 7,553,600 MA
beneficiaries, of which 973,923 were enrolled in SNPs as of July 2008.
SNPs are allowed to limit enrollment to a targeted beneficiary
population.
[End of figure]
Average indexed risk scores ranged from 0.90 to 1.03 for the five
largest organizations in the MA program, which together accounted for
nearly 50 percent of MA enrollment in 2008. The five MAOs varied in
the extent to which their plans fell into the good, average, and poor
beneficiary health status groups. (See figure 6.) For example, one MAO
had 17 percent of its beneficiaries in plans in the good health group
and 17 percent in plans in the poor health group, while another had 49
percent of its beneficiaries in plans in the good health group and
less than 1 percent in plans in the poor health group.
Figure 6: Percentage of Beneficiaries in MA Plans, by Plan Health
Group, for the Five Largest MA Organizations, 2008:
[Refer to PDF for image: stacked vertical bar graph]
Percentage of Beneficiaries:
Organization A:
Good health: 17.4%;
Average health: 66.1%;
Poor health: 16.5%.
Organization B:
Good health: 21.2%;
Average health: 64.2%;
Poor health: 14.6%.
Organization C:
Good health: 24.0%;
Average health: 55.6%;
Poor health: 20.4%.
Organization D:
Good health: 38.0%;
Average health: 49.0%;
Poor health: 13.0%.
Organization E:
Good health: 48.5%;
Average health: 51.4%;
Poor health: 0.1%.
Source: GAO analysis of 2008 CMS risk score data.
Notes: Using CMS's 2008 plan-level risk score data by county, we
categorized the health status of MA plans as good, average, or poor
based on the average health status of their enrolled beneficiaries in
the areas that they served. These five MA organizations accounted for
48 percent (3,656,396 beneficiaries) of MA enrollment, including
enrollment in SNPs, as of July 2008. SNPs are allowed to limit
enrollment to a targeted beneficiary population.
[End of figure]
The four types of plans we reviewed differed as to the average health
status of their beneficiaries. Excluding SNPs, regional PPOs and local
PPOs had the largest percentage of beneficiaries in plans in the good
health group--95 percent and 66 percent, respectively. Regional PPOs
did not have any beneficiaries in the poor health group of plans and
local PPOs had 1 percent of their beneficiaries in the poor health
group of plans. HMOs and PFFS plans had the largest share of
beneficiaries in the average health group of plans--68 percent and 48
percent of beneficiaries, respectively--and each had less than 10
percent of their beneficiaries in the poor health group of plans.
[Footnote 42] (See figure 7.) SNPs, by definition, had the largest
percentage of beneficiaries (71 percent) in the poor health group of
plans and had nearly all of their remaining beneficiaries in the
average health group of plans.
Figure 7: Percentage of Beneficiaries in MA Plans, by Plan Health
Group and Plan Type, 2008:
[Refer to PDF for image: stacked vertical bar graph]
HMO:
Beneficiaries: 4,254,320;
Good health: 22.4%;
Average health: 68.1%;
Poor health: 9.4%.
PFFS:
Beneficiaries: 1,651,221;
Good health: 45.7%;
Average health: 47.8%;
Poor health: 6.5%.
Local PPO:
Beneficiaries: 469,891;
Good health: 65.7%;
Average health: 33.0%;
Poor health: 1.3%.
Regional PPO:
Beneficiaries: 204,245;
Good health: 94.8%;
Average health: 5.2%;
Poor health: 0%.
SNP:
Beneficiaries: 973,923
Good health: 1.3%;
Average health: 27.6%;
Poor health: 71.1%.
Source: GAO analysis of 2008 CMS risk score data.
Notes: Results are based on MA enrollment as of July 2008. Using CMS's
2008 plan-level risk score data by county, we categorized the health
status of MA plans as good, average, or poor based on the average
health status of their enrolled beneficiaries in the areas that they
served. SNPs are allowed to limit enrollment to a targeted beneficiary
population.
[End of figure]
Excluding SNPs, MA plans with lower enrollment were more likely to be
in the good health group than plans with higher enrollment. (See
figure 8.) About two-thirds of MA plans with 10 to 75 beneficiaries
were in the good health group of plans, while roughly one-third of MA
plans with the largest enrollment (2,863 to 92,950 beneficiaries) were
in the good health group.
Figure 8: Percentage of MA Plans, by Plan Health Group and Plan Size
(excluding SNPs), 2008:
[Refer to PDF for image: vertical bar graph]
Quintile 1 (10-75 beneficiaries):
Good health: 64.5%;
Average health: 26.8%;
Poor health: 8.8%.
Quintile 2 (76-277 beneficiaries):
Good health: 60.0%;
Average health: 31.9%;
Poor health: 8.1%.
Quintile 3 (278-879 beneficiaries):
Good health: 55.6%;
Average health: 39.3%;
Poor health: 5.1%.
Quintile 4 (880-2,862 beneficiaries):
Good health: 50.4%;
Average health: 43.2%;
Poor health: 6.4%.
Quintile 5 (2,863-92,950 beneficiaries):
Good health: 36.7%;
Average health: 54.5%;
Poor health: 8.8%.
Source: GAO analysis of 2008 CMS risk score data.
Notes: Results are based on MA enrollment as of July 2008. Using CMS's
2008 plan-level risk score data by county, we categorized the health
status of MA plans as good, average, or poor based on the average
health status of their enrolled beneficiaries in the areas that they
served. SNPs are allowed to limit enrollment to a targeted beneficiary
population.
[End of figure]
While SNPs of any plan size were most likely to have beneficiaries in
the poor health group, 58 percent of the smallest SNPs were in the
poor health group and 73 percent of the largest SNPs were in the poor
health group. (See figure 9)
Figure 9: Percentage of SNPs, by Plan Health Group and Plan Size, 2008:
[Refer to PDF for image: vertical bar graph]
Quintile 1 (10-75 beneficiaries):
Good health: 13.5%;
Average health: 28.6%;
Poor health: 57.9%.
Quintile 2 (76-277 beneficiaries):
Good health: 5.7%;
Average health: 35.0%;
Poor health: 59.3%.
Quintile 3 (278-879 beneficiaries):
Good health: 4.0%;
Average health: 29.0%;
Poor health: 66.9%.
Quintile 4 (880-2,862 beneficiaries):
Good health: 4.0%;
Average health: 24.2%;
Poor health: 71.8%.
Quintile 5 (2,863-92,950 beneficiaries):
Good health: 1.6%;
Average health: 25.8%;
Poor health: 72.6%.
Source: GAO analysis of 2008 CMS risk score data.
Notes: Results are based on MA enrollment as of July 2008. Using CMS's
2008 plan-level risk score data by county, we categorized the health
status of MA plans as good, average, or poor based on the average
health status of their enrolled beneficiaries in the areas that they
served. SNPs are allowed to limit enrollment to a targeted beneficiary
population.
[End of figure]
HMOs, including SNPs, in the good health group of plans tended to be
located in areas where the percentage difference between the 2008 MA
payment benchmarks and estimated 2008 FFS spending was smaller.
[Footnote 43] MA payment benchmarks averaged 13 percent higher than
estimated FFS spending in areas where HMOs in the good health group of
plans were located, but benchmarks were 16 percent higher where HMOs
in the poor health group were located.[Footnote 44]
CMS Recently Revised Its Process for Ensuring That MA Plan Benefit
Packages Do Not Discriminate against Beneficiaries in Poor Health:
For contract year 2010, CMS modified the process it used to ensure MA
plan benefit packages do not discriminate against beneficiaries in
poor health. The agency revised the way it determines cost-sharing
thresholds used to identify benefit packages that are likely
discriminatory, and as a result, some of the thresholds used in
contract year 2010 reviews allowed higher cost-sharing amounts than in
previous years. CMS also revised its process for contacting plans for
benefit package modifications by contacting all, instead of a
selection of, MA plans found to have cost sharing that exceeded CMS
thresholds. For contract year 2010, all plans met cost-sharing
thresholds after discussions with CMS, but if contract year 2009
thresholds were applied to the approved contract year 2010 plans,
approximately 38 percent of the plans we examined would have exceeded
cost-sharing thresholds.
CMS Revised the Way It Identifies Benefit Packages Likely to be
Discriminatory, and Some New Review Thresholds Allowed Higher Cost
Sharing:
For contract year 2010, CMS modified the benefit package review
process used in previous years. CMS developed a new methodology to
determine cost-sharing thresholds and included actuarial equivalence
tests as part of the review process. Under the new process for
reviewing MA plans for the likelihood of discrimination, CMS examined
plans' 2010 OOP maximums and identified MA plans with comparatively
high cost-sharing amounts. Plans' OOP maximums determined the level of
scrutiny the benefit packages received, with greater scrutiny given to
plans with no OOP maximum or with an OOP maximum above CMS's OOP
maximum threshold.[Footnote 45] For selected services--those typically
used by sicker beneficiaries--CMS compared plans' cost-sharing amounts
with threshold amounts set relative to cost sharing for all MA plans.
Benefit packages were considered likely to be discriminatory if the
cost sharing for one or more of the selected services exceeded the
threshold and was higher than cost sharing for Medicare FFS.[Footnote
46] For contract year 2010, the process was as follows.
* If a plan had an OOP maximum at or below the amount specified in the
annual Call Letter ($3,400 for 2010),[Footnote 47] CMS limited its
benefit package review to cost sharing for five selected services:
renal dialysis (156 sessions), Part B drugs, home health (37 visits),
inpatient mental health stays (15 days), and SNF stays (42 days). MA
plans were considered likely to discriminate if their cost sharing for
any of these services was at or above the 95th percentile relative to
the other MA plans and was greater than the cost sharing under
Medicare FFS.[Footnote 48]
* If a plan did not have an OOP maximum or if the OOP maximum exceeded
the amount specified in the Call Letter, CMS reviewed cost sharing for
14 selected services: the 5 listed above plus inpatient hospital stays
(10 days), inpatient hospital catastrophic stays (90 days), physician
mental health visits, Part B chemotherapy drugs, Part B radiology, and
4 DME services--equipment, prosthetics, supplies, and diabetes tests.
MA plans were considered likely to discriminate if cost sharing for
any of the 14 services was at or above the 75th percentile relative to
other MA plans and was greater than the cost sharing under Medicare
FFS.[Footnote 49]
As part of the revised review process, in addition to determining
whether MA plans' benefit packages were actuarially equivalent to
Medicare FFS, CMS began reviewing MA plans' pricing data for the
likelihood of discriminatory cost sharing. CMS reviewed MA plans' cost
sharing for five selected services. For inpatient hospital care
(including mental health), SNF stays, home health visits, DME, and
Part B drugs, CMS calculated the difference between the plans' cost
sharing and an amount that was actuarially equivalent to cost sharing
under Medicare FFS. If the difference was higher than a tolerance
amount--the greater of 50 cents or 5 percent of FFS cost sharing--the
benefit package was identified as likely to be discriminatory and
plans were instructed to modify the cost sharing in the bid pricing
tool submitted to CMS.
The 2010 contract year process differs from the process for previous
years in key ways. For contract years 2008 and 2009, a plan with cost
sharing that exceeded CMS thresholds for one or more selected services
but with an OOP maximum at or below the amount specified in CMS's Call
Letter was not considered likely to be discriminatory because the OOP
maximum would limit beneficiaries' OOP costs. If a plan had cost
sharing for one or more selected services that exceeded the CMS
thresholds and did not have an OOP maximum or if the OOP maximum was
above the amount specified in the Call Letter, CMS considered the plan
likely to be discriminatory.[Footnote 50] In contract years 2008 and
2009, CMS generally set thresholds based on cost sharing under
Medicare FFS, not at amounts that were relative to all MA plans' cost-
sharing amounts. For example, for contract year 2008 CMS set the MA
cost-sharing threshold for Part B drugs at 20 percent coinsurance,
equivalent to that under Medicare FFS.
The methodology CMS used in contract year 2010 resulted in thresholds
that allowed higher cost-sharing amounts for some services than those
applicable in contract year 2009. For example, among plans without an
OOP maximum or one above the amount specified in the 2010 Call Letter,
the copayment allowed for a typical inpatient mental health stay
doubled from $61 to $130 per day and the copayment allowed for a
typical SNF stay increased from $53 to $70 per day. For other services
that CMS reviewed for discriminatory cost sharing, new thresholds
allowed cost-sharing amounts in contract year 2010 that were
comparable or lower than those in contract year 2009.[Footnote 51] For
example, the copayment allowed for a typical inpatient hospital stay
was reduced from $213 to $175 per day and the cost sharing allowed for
home health visits was reduced to zero.
CMS Revised How It Selects Plans to Contact for Benefit Package
Modifications; All Plans Met New Cost-Sharing Thresholds:
Under the revised process, for contract year 2010 CMS contacted all MA
plans identified as having benefit packages likely to be
discriminatory--those that exceeded agency thresholds. In addition,
all plans contacted subsequently reduced cost-sharing amounts to at or
below agency thresholds. In contrast, in previous years, CMS did not
contact all plans exceeding the thresholds and not all plans contacted
reduced their cost-sharing amounts to equal to or below agency
thresholds. In previous years, CMS's policy did not require
disapproval of a plan benefit package if cost sharing was above CMS's
cost-sharing thresholds.
CMS's new selection process is intended to ensure that all MA plans
identified as likely to be discriminatory are contacted regarding
lowering their cost sharing to meet the new thresholds. According to
agency officials, of the 2,930 MA plan benefit packages submitted for
contract year 2010, about 40 percent were identified as likely to be
discriminatory. CMS staff contacted all of those plans about complying
with cost-sharing thresholds, and all plans subsequently reduced cost-
sharing amounts to at or below the new thresholds.[Footnote 52]
However, if CMS had applied the contract year 2009 review methodology--
with its lower thresholds for certain services--to the plans submitted
for contract year 2010, approximately 38 percent of the plans in our
analysis would have exceeded cost-sharing thresholds.[Footnote 53]
In previous years, CMS approved some MA plans that did not meet its
cost-sharing thresholds. For contract years 2008 and 2009, over one in
four and nearly one in three plans, respectively, had cost sharing
that exceeded one or more CMS thresholds. (See table 1.) Our analysis
indicated that the percentage of plans initially exceeding and
remaining above one or more cost-sharing thresholds in those 2 years
varied by plans' average beneficiary health status, as follows:
* Among the good health group of plans reviewed for contract year
2008, 39 percent were initially identified as having cost sharing that
exceeded CMS's cost-sharing thresholds and 33 percent were approved
with cost sharing that exceeded CMS's cost-sharing thresholds, a
decrease of 6 percentage points. The percentage of plans in the poor
health group that exceeded CMS's thresholds prior to and after plans
were approved also decreased by 6 percentage points, from 20 percent
to 14 percent.
* Among the good health group of plans reviewed for contract year
2009, 35 percent were initially identified as having cost sharing that
exceeded CMS's cost-sharing thresholds and 29 percent were approved
with cost sharing that exceeded CMS's cost-sharing thresholds, a
decrease of 6 percentage points. The percentage of plans in the poor
health group that exceeded CMS's thresholds prior to and after plans
were approved decreased by 1 percentage point, from 38 percent to 37
percent.
Table 1: Percentage of MA Plans that Exceeded CMS Cost-Sharing
Thresholds, Contract Years 2008 and 2009:
Contract year 2008: All plans (n=2,899);
Percentage of plans that initially exceeded one or more CMS
thresholds: 34;
Percentage of approved plans that exceeded one or more CMS thresholds:
28.
Contract year 2008: Good health plans (n=1,254);
Percentage of plans that initially exceeded one or more CMS
thresholds: 39;
Percentage of approved plans that exceeded one or more CMS thresholds:
33.
Contract year 2008: Average health plans (n=1,068);
Percentage of plans that initially exceeded one or more CMS
thresholds: 35;
Percentage of approved plans that exceeded one or more CMS thresholds:
30.
Contract year 2008: Poor health plans (n=577);
Percentage of plans that initially exceeded one or more CMS
thresholds: 20;
Percentage of approved plans that exceeded one or more CMS thresholds:
14.
Contract year 2009: All plans (n=2,482);
Percentage of plans that initially exceeded one or more CMS
thresholds: 37;
Percentage of approved plans that exceeded one or more CMS thresholds:
30.
Contract year 2009: Good health plans (n=1,050);
Percentage of plans that initially exceeded one or more CMS
thresholds: 35;
Percentage of approved plans that exceeded one or more CMS thresholds:
29.
Contract year 2009: Average health plans (n=912);
Percentage of plans that initially exceeded one or more CMS
thresholds: 38;
Percentage of approved plans that exceeded one or more CMS thresholds:
29.
Contract year 2009: Poor health plans (n=520);
Percentage of plans that initially exceeded one or more CMS
thresholds: 38;
Percentage of approved plans that exceeded one or more CMS thresholds:
37.
Source: GAO analysis of CMS data.
Notes: Using CMS's 2008 plan-level risk score data by county, we
categorized the health status of MA plans as good, average, or poor
based on the average health status of their enrolled beneficiaries in
the areas that they served. The services we analyzed for contract
years 2008 and 2009 included inpatient hospital stays, inpatient
mental health stays, SNF stays, home health visits, renal dialysis,
Part B drugs, Part B chemotherapy drugs, Part C premium, and Part C
deductible. This analysis included 2,899 MA plans that were offered in
2008 and 2,482 MA plans that were offered again in 2009 and we
maintained plans in their 2008 health groups.
[End of table]
In contract years 2008 and 2009, CMS did not contact all plans
initially found to have cost sharing that exceeded one or more
thresholds. CMS primarily selected plans to contact for cost-sharing
reductions from among those identified as likely to be discriminatory
by considering (1) the number of services for which cost sharing
exceeded the CMS threshold (2) how much the plan exceeded the cost-
sharing threshold, and (3) how the plan's cost sharing compared with
that of other MA plans within the same service area. In addition, CMS
officials told us the process used to select plans for cost-sharing
discussions in these years had the potential to be subjective;
decisions were based on individual reviewers' evaluations of cost
sharing and judgments about how much the cost sharing exceeded CMS's
thresholds. Among the plans contacted for cost-sharing reductions in
these years, CMS reported that some reduced their cost-sharing
amounts, but they remained above the thresholds. For example, for
contract year 2008, CMS reported that nearly half of the MA plans
initially identified as likely to be discriminatory reduced cost
sharing as a result of being contacted by CMS.
Figures 10 and 11 show the review process for contract year 2010 and
for contract years 2008 and 2009, respectively.
Figure 10: CMS's Process for Identifying Plans with Cost Sharing
Likely to Be Discriminatory and Contacting Plans for Cost-Sharing
Reductions, Contract Year 2010:
[Refer to PDF for image: illustration]
Does MA plan have an OOP maximum at or below $3,400?
No:
Review cost sharing for 14 services and determine whether it is below,
at, or above 75th percentile.[A]
Above 75th percentile[B]:
* Plan likely to be potentially discriminatory;
* Contact plan for cost-sharing reductions.
At or below 75th percentile[B]:
* Plan not likely to be potentially discriminatory.
Yes:
Review cost sharing for five services and determine whether it is
below, at, or above 95th percentile.[A]
Above 95th percentile[B]:
* Plan likely to be potentially discriminatory;
* Contact plan for cost-sharing reductions.
At or below 95th percentile[B]:
* Plan not likely to be potentially discriminatory.
Approve or deny plan. (For contract year 2010, all plans were approved
and all reduced their cost sharing to amounts at or below CMS‘s
thresholds.)
Does MA plan have an OOP maximum at or below $3,400? And:
For five services, calculate the difference between the plan‘s cost
sharing and an amount that is actuarially equivalent under Medicare
FFS and compare the difference to a tolerance amount (greater of 50
cents or 5 percent of FFS cost sharing).[C]
More than tolerance amount:
* Plan likely to be potentially discriminatory;
* Contact plan for cost-sharing reductions.
Less than tolerance amount:
* Plan not likely to be potentially discriminatory.
Approve or deny plan. (For contract year 2010, all plans were approved
and all reduced their cost sharing to amounts at or below CMS‘s
thresholds.)
Source: GAO analysis of CMS documents and interviews.
[A] CMS reviews cost sharing for renal dialysis, Part B drugs, home
health visits, inpatient mental health stays, and SNF stays if the
plan has an OOP maximum at or below the amount specified in the annual
Call Letter ($3,400 for contract year 2010). If the plan does not have
an OOP maximum or it is above the amount specified in the annual Call
Letter, CMS reviews cost sharing for the five services listed above
and for inpatient hospital stays, inpatient hospital catastrophic
stays, physician mental health visits, Part B chemotherapy drugs, Part
B radiology, DME equipment, DME prosthetics, DME supplies, and DME
diabetes tests.
[B] CMS does not consider an MA plan with cost sharing above the 75th
or 95th percentile, but below Medicare FFS cost sharing, as likely to
be discriminatory.
[C] CMS analyzes MA plan bid pricing data on cost sharing for
inpatient hospital care (including mental health), skilled nursing
facility, home health, DME, and Part B drugs.
[End of figure]
Figure 11: CMS's Process for Identifying Plans with Cost Sharing
Likely to be Discriminatory and Selecting Plans for Cost-Sharing
Reductions, Contract Years 2008 and 2009:
[Refer to PDF for image: illustration]
1) Does MA plan have an OOP maximum at or below $3,250 in 2008 or
$3,350 in 2009?
Yes:
Plan Not considered likely to be discriminatory;
Approve or deny plan. (For contract years 2008 and 2009, all plans
were approved, but not all reduced cost sharing to amounts at or below
CMS‘s thresholds.)
No:
2) Compare cost sharing for high-risk services against CMS‘s
thresholds;[A]
No services over threshold:
Plan Not considered likely to be discriminatory;
Approve or deny plan. (For contract years 2008 and 2009, all plans
were approved, but not all reduced cost sharing to amounts at or below
CMS‘s thresholds.)
One or more services over threshold:
Plan considered likely to be discriminatory.
3) To select a plan for negotiations, consider: (1) the number of
services for which cost sharing exceeds the CMS threshold, (2) how
much the plan exceeds the cost-sharing threshold, and (3) how the
plan‘s cost sharing compares to other MA plans;
Plan Not chosen for cost-sharing reductions:
Approve or deny plan. (For contract years 2008 and 2009, all plans
were approved, but not all reduced cost sharing to amounts at or below
CMS‘s thresholds.)
Plan chosen for cost-sharing reductions:
Contact plan for cost-sharing reductions;
Approve or deny plan. (For contract years 2008 and 2009, all plans
were approved, but not all reduced cost sharing to amounts at or below
CMS‘s thresholds.)
Source: GAO analysis of CMS documents and interviews.
[A] High-risk services where high cost sharing could be considered
likely to be discriminatory include inpatient hospital stays,
inpatient hospital catastrophic stays, inpatient mental health stays,
SNF stays, home health visits, physician mental health visits, Part B
drugs, Part B chemotherapy, renal dialysis, and DME cost sharing as
reported in the bid pricing tool.
[End of figure]
Agency and Other External Comments and Our Evaluation:
We obtained comments on a draft of this report from CMS and America's
Health Insurance Plans (AHIP), a national organization that represents
private health insurance companies, including those that participate
in the MA program. CMS provided written comments (see appendix II) and
technical comments that we incorporated where appropriate.
Representatives from AHIP provided us with oral comments.
CMS Comments:
CMS stated that the agency's general experience with beneficiaries--
that beneficiaries select MA plans based on their individual health
status--is consistent with the report's findings. CMS also noted that
the report showed that plans with, on average, beneficiaries in poor
health did not charge comparatively higher cost sharing. The agency
believes that this is a result, in part, of CMS's efforts in ensuring
that plan benefit packages are not likely to discriminate on the basis
of health status.
CMS commented that the report does not mention that the agency's
benefit package review process prior to contract year 2010, by design,
encouraged plans to establish OOP maximums by affording them
flexibility in establishing cost-sharing amounts for individual
services. We believe that the third finding of the report adequately
conveys that information. Figure 11 shows that plans with an OOP
maximum at or below the amount specified in the Call Letter were not
considered likely to be discriminatory regardless of their cost-
sharing amounts for particular services. Further, CMS pointed out that
its policy until 2009 did not require disapproval of a plan benefit
package if cost sharing was above CMS's cost-sharing thresholds. We
added this information to the report. In addition to these points, CMS
described other aspects of its previous and current benefit review
process for context.
CMS suggested a number of presentation modifications to the report.
For example, because the agency's reviews focus on protecting
vulnerable beneficiaries, CMS suggested that we present more
information on the benefit packages of plans in the average or poor
health group. The section of our report on benefit package designs
contrasted the good health group of plans with the poor health group
and the figures present information on plans in the average health
group as well.
AHIP Comments:
AHIP representatives stated that the report's analysis demonstrates
that MAOs are offering beneficiaries the types of plans that best meet
their health care needs. The findings also show that special needs
plans, which target enrollment to certain vulnerable groups of
Medicare beneficiaries that typically have higher health care costs,
are serving the types of beneficiaries that the program intended.
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 CMS
Administrator and interested congressional committees. The report will
also be available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
Should you or your staff have any questions on matters discussed in
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
members who made contributions to this report are listed in appendix
III.
Signed by:
James C. Cosgrove:
Director, Health Care:
List of Requesters:
The Honorable Henry A. Waxman:
Chairman:
The Honorable John D. Dingell:
Chairman Emeritus:
Committee on Energy and Commerce:
House of Representatives:
The Honorable Sander M. Levin:
Chairman:
Committee on Ways and Means:
House of Representatives:
The Honorable Frank 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:
The Honorable Charles B. Rangel:
House of Representatives:
[End of section]
Appendix I: Medicare Advantage Plans and Beneficiaries by Average
Indexed Risk Score and Health Group, 2008:
Figure 12: Number of Medicare Advantage Plans by Average Indexed Risk
Score and Health Group, 2008:
[Refer to PDF for image: stacked vertical bar graph]
Average indexed risk score: Less than 0.65;
Good health”MA (SNP): 1;
Good health”MA (non-SNP): 88.
Average indexed risk score: 0.65-0.70;
Good health”MA (SNP): 0;
Good health”MA (non-SNP): 98.
Average indexed risk score: 0.70-0.75;
Good health”MA (SNP): 1;
Good health”MA (non-SNP): 160.
Average indexed risk score: 0.75-0.80;
Good health”MA (SNP): 5;
Good health”MA (non-SNP): 195.
Average indexed risk score: 0.80-0.85;
Good health”MA (SNP): 7;
Good health”MA (non-SNP): 296.
Average indexed risk score: 0.85-0.90;
Good health”MA (SNP): 22;
Good health”MA (non-SNP): 381.
Average indexed risk score: 0.90-0.95;
Average health”MA (SNP): 33;
Average health”MA (non-SNP): 333.
Average indexed risk score: 0.95-1.00;
Average health”MA (SNP): 30;
Average health”MA (non-SNP): 270.
Average indexed risk score: 1.00-1.05;
Average health”MA (SNP): 56;
Average health”MA (non-SNP): 187.
All Medicare beneficiaries in plan‘s service area = 1.00,
Average indexed risk score: 1.05-1.10;
Average health”MA (SNP): 58;
Average health”MA (non-SNP): 101.
Average indexed risk score: 1.10-1.15;
Poor health”MA (SNP): 57;
Poor health”MA (non-SNP): 66.
Average indexed risk score: 1.15-1.20;
Poor health”MA (SNP): 55;
Poor health”MA (non-SNP): 42.
Average indexed risk score: 1.20-1.25;
Poor health”MA (SNP): 55;
Poor health”MA (non-SNP): 23.
Average indexed risk score: 1.25-1.30;
Poor health”MA (SNP): 48;
Poor health”MA (non-SNP): 17.
Average indexed risk score: 1.30-1.35;
Poor health”MA (SNP): 33;
Poor health”MA (non-SNP): 8.
Average indexed risk score: Greater than 1.35;
Poor health”MA (SNP): 160;
Poor health”MA (non-SNP): 13.
Source: GAO analysis of 2008 CMS risk score data.
Notes: Using the Centers for Medicare & Medicaid Services (CMS) 2008
plan-level risk score data by county, we categorized the health status
of Medicare Advantage plans as good, average, or poor based on the
average health status of their enrolled beneficiaries in the areas
that they served. This analysis included 2,899 MA plans, of which 621
were SNPs that are allowed to limit enrollment to a targeted
beneficiary population.
[End of figure]
Figure 13: Percentage of Medicare Advantage Beneficiaries by MA Plans'
Average Indexed Risk Score and Health Group, 2008:
[Refer to PDF for image: stacked vertical bar graph]
Average indexed risk score: Less than 0.65;
Good health”MA (SNP): 0;
Good health”MA (non-SNP): 0.2%.
Average indexed risk score: 0.65-0.70;
Good health”MA (SNP): 0;
Good health”MA (non-SNP): 0.4%.
Average indexed risk score: 0.70-0.75;
Good health”MA (SNP): 0;
Good health”MA (non-SNP): 1.7%.
Average indexed risk score: 0.75-0.80;
Good health”MA (SNP): 0;
Good health”MA (non-SNP): 2.6%.
Average indexed risk score: 0.80-0.85;
Good health”MA (SNP): 0;
Good health”MA (non-SNP): 9%.
Average indexed risk score: 0.85-0.90;
Good health”MA (SNP): 0.1%;
Good health”MA (non-SNP): 15.3%.
Average indexed risk score: 0.90-0.95;
Average health”MA (SNP): 0.4%;
Average health”MA (non-SNP): 18.1%.
Average indexed risk score: 0.95-1.00;
Average health”MA (SNP): 0.3%;
Average health”MA (non-SNP): 17.2%.
Average indexed risk score: 1.00-1.05;
Average health”MA (SNP): 1.5%;
Average health”MA (non-SNP): 11.6%.
All Medicare beneficiaries in plan‘s service area = 1.00,
Average indexed risk score: 1.05-1.10;
Average health”MA (SNP): 1.3%;
Average health”MA (non-SNP): 4.1%.
Average indexed risk score: 1.10-1.15;
Poor health”MA (SNP): 1.8%;
Poor health”MA (non-SNP): 2.8%.
Average indexed risk score: 1.15-1.20;
Poor health”MA (SNP): 1.2%;
Poor health”MA (non-SNP): 2.8%.
Average indexed risk score: 1.20-1.25;
Poor health”MA (SNP): 1.3%;
Poor health”MA (non-SNP): 0.3%.
Average indexed risk score: 1.25-1.30;
Poor health”MA (SNP): 1.5%;
Poor health”MA (non-SNP): 0.6%.
Average indexed risk score: 1.30-1.35;
Poor health”MA (SNP): 0.5%;
Poor health”MA (non-SNP): 0.1%.
Average indexed risk score: Greater than 1.35;
Poor health”MA (SNP): 2.7%;
Poor health”MA (non-SNP): 0.1%.
Source: GAO analysis of 2008 CMS risk score data.
Notes: Results are based on Medicare enrollment as of July 2008. Using
CMS's 2008 plan-level risk score data by county, we categorized the
health status of MA plans as good, average, or poor based on the
average health status of their enrolled beneficiaries in the areas
that they served. This analysis included 7,553,600 MA beneficiaries,
of which 973,923 were enrolled in SNPs that are allowed to limit
enrollment to a targeted beneficiary population.
[End of figure]
[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:
April 7, 2010:
James C. 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: Relationship Between
Benefit Package Designs and Plans' Average Beneficiary Health Status"
(GA0-10-403).
The Department appreciates the opportunity to review this report
before its publication.
Sincerely,
Signed by:
Andrea Palm:
Acting Assistant Secretary for Legislation:
Enclosure:
[End of letter]
Department Of Health & Human Services:
Centers for Medicare & Medicaid Services:
Administrator:
Washington, DC 20201:
Date: April 5, 2010:
To: Andrea Palm:
Acting Assistant Secretary for Legislation:
Office of the Secretary:
From: [Signed by] Charlene Frizzera:
Acting Administrator:
Subject: Government Accountability Office (GAO) Report: "Medicare
Advantage: Relationship Between Benefit Package Designs and Plans'
Average Beneficiary Health Status" (GAO-10-403):
Thank you for the opportunity to comment on the GAO report, "Medicare
Advantage: Relationship between Benefit Package Designs and Plans'
Average Beneficiary Health Status" (GAO-10-403). The report compares
the benefit packages of Medicare Advantage (MA) organizations based on
enrollees' average risk scores: "good," "average," and "poor" and
found that, generally, those plans with enrollees in "good" health
based on their average risk scores charged lower premiums and higher
cost-sharing for certain benefits and offered fewer additional
benefits. In contrast, those plans with enrollees in "poor" health
charged higher premiums and lower cost-sharing for certain benefits.
Notably, however, the report did not determine whether MA
organizations structured their plan benefit packages in response to
enrolled beneficiaries' health status or whether beneficiaries of a
given health status chose certain MA plans specifically because of
their design. We believe that the report's findings are consistent
with our general experience with beneficiaries ” that beneficiaries
select health plans based on their individual health status, and
therefore, beneficiaries with poorer health status tend to choose
plans with higher premiums and lower cost sharing, and, conversely,
healthier beneficiaries choose to make lower premium payments in favor
of higher cost sharing.
We find promising the conclusion that plans with beneficiaries in poor
health status are not charging higher cost-sharing; we believe that
this is a result, in part, of CMS' efforts to prevent MA organizations
from designing benefit packages that discriminate against sicker
beneficiaries and discourage them from joining their plans. We have
made it a priority to protect our most vulnerable beneficiaries from
being faced with choices of MA plans that discriminate against them.
We examine benefits and cost sharing designs for situations in which
the plan offered is designed to discourage enrollment or to charge
excessively high cost-sharing after enrollment for those beneficiaries
who are in poor health and more likely to use health care services. To
that end, we would like to see more information presented in the
report about the benefit packages of plans with enrollees in "average"
and "poor" health.
Since the report describes our previous efforts to review benefits and
protect beneficiaries against discriminatory plan offerings, we would
like to provide additional context for CMS' benefit review efforts
prior to contract year (CY) 2010. While CMS' selection of plans with
possible discriminatory cost sharing was less comprehensive prior to
CY 2010, and we did not contact all plans with high cost sharing
issues, we did identify and negotiate with plans that had the most
egregious cost sharing issues in an effort to reduce cost sharing to
our target amount or as close to it as we were able to negotiate. We
used a variety of factors, in addition to cost sharing values, to
assess whether to contact plans to request changes in cost-sharing.
The report fails to mention that, by design, we encouraged plans to
establish a maximum out-of-pocket (MOOP) limit for all Medicare-
covered benefits by affording them flexibility in their cost-sharing
amounts for individual services.
Additionally, we determined that excessive charges for certain
benefits (e.g., renal dialysis and Part B prescription drugs) were the
most problematic for beneficiaries, and considered not just a plan's
cost-sharing requirements, but the amount by which the plan's cost
sharing exceeded the CMS target amount. Also, part of our decision to
negotiate cost sharing amounts was based on how a plan's cost sharing
charges compared with those of other MA plans under review in the same
service area because CMS wanted to evaluate whether higher cost
sharing was a market phenomenon or possible discrimination by a single
plan. In many cases, although CMS negotiated cost sharing
improvements, the decreases were not great enough to put plans' levels
below the CMS threshold and thus CMS' impact on reducing high cost
sharing is not obvious and is subject to understatement. It is also
important to point out that CMS' policy until 2009 did not require
disapproval of a plan benefit package if cost sharing was above the
threshold.
Finally, the report correctly points out that CMS revised its
methodology for identifying, reviewing and approving benefits packages
for Contract Year 2010. The change in methodology included the
development of standards based on outlier cost sharing analysis ”
higher allowable cost sharing standards for plans that offered a
qualified MOOP of $3,400 and more restrictive cost sharing for plans
without a qualified MOOP. The new methodology also required MA plans
to adhere to CMS' cost sharing standards in order to receive approval
of their bid. Therefore, given the significant differences between our
processes in 2009 and 2010, we suggest that the report describe the
process for these two years separately.
In addition to these thematic concerns, CMS has several general and
technical comments which are attached. 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 Rosamond Katz, Assistant
Director; Elizabeth Conklin; Ba Lin; Hillary Loeffler; Kevin Milne;
Elizabeth Morrison; and Kristal Vardaman.
[End of section]
Footnotes:
[1] MAOs may offer multiple MA plans with different combinations of
authorization requirements, non-Medicare benefits, cost sharing, and
premiums. MA plans must cover Medicare-covered benefits except hospice
care.
[2] Centers for Medicare & Medicaid Services (CMS), CMS Financial
Report Fiscal Year 2009 (Baltimore, Md.: November 2009)
[3] Medicare FFS beneficiaries can purchase Medigap insurance
policies, offered by private insurers, that help cover cost-sharing
amounts for Medicare-covered services.
[4] Medicare spending is concentrated among a small proportion of
beneficiaries. The most expensive 5 percent of Medicare beneficiaries
account for roughly half of all spending in the Medicare FFS program.
See MedPAC, Report to the Congress: New Approaches in Medicare
(Washington, D.C.: June 2004).
[5] Medicare Payment Advisory Commission (MedPAC), Report to the
Congress: Issues in a Modernized Medicare Program (Washington, D.C.:
June 2005).
[6] Actuarial equivalence is demonstrated by a qualified actuary's
certification that overall cost sharing in an MA plan is no more than
the overall cost sharing in Medicare FFS.
[7] 42 U.S.C. § 1395w-22(b)(1)(A).
[8] See GAO, Medicare Advantage: Increased Spending Relative to
Medicare Fee-for-Service May Not Always Reduce Beneficiary Out-of-
Pocket Costs, [hyperlink, http://www.gao.gov/products/GAO-08-359]
(Washington, D.C.: Feb. 22, 2008).
[9] Beneficiaries in HMOs are generally restricted to seeing providers
within a network, while PFFS beneficiaries can see any provider
authorized to provide Medicare services that accepts the plan's
payment terms. Beneficiaries in PPOs can see both in-network and out-
of-network providers but may 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.
[10] SNPs are permitted to target enrollment to (1) beneficiaries
entitled to Medicare and Medicaid (dual-eligible beneficiaries), (2)
beneficiaries with severe or disabling chronic conditions, and (3)
institutionalized beneficiaries. They may either exclusively or
disproportionately enroll beneficiaries from one of these three
categories.
[11] We excluded from our analysis employer plans, religious fraternal
benefit plans, Part B only plans, CMS demonstrations, programs of all-
inclusive care for the elderly, cost plans, provider sponsored
organizations (as they constituted less than 1 percent of MA
enrollment), medical savings accounts, beneficiaries with end-stage
renal disease, beneficiaries located in areas outside the 50 states
and the District of Columbia, and MA plans with fewer than 10
beneficiaries.
[12] Diagnosis codes are assigned by providers and reported for FFS
beneficiaries in Medicare claims data. MA plans are responsible for
providing CMS with the appropriate diagnosis codes for their enrolled
beneficiaries as the Medicare program does not have claims data for
these beneficiaries.
[13] Services typically used by sicker beneficiaries, for whom CMS
considers high cost sharing to be potentially discriminatory, include:
inpatient hospital acute care, inpatient mental health care, renal
dialysis, chemotherapy drugs and other part B drugs, skilled nursing
facility stays, home health visits, and durable medical equipment
(DME).
[14] A deductible is an amount (typically annual) that a beneficiary
is responsible for before an insurer will make payments.
[15] Dental, vision, hearing, and fitness benefits (which may include
gym memberships and fitness classes) are not provided under Medicare
FFS but may be offered by MA plans as mandatory or optional
supplemental benefits. Mandatory benefits must be provided for every
person enrolled in the plan, whereas optional supplemental benefits
are available to those enrollees who elect and pay for them.
[16] Medicare Options Compare (available at www.medicare.gov) provides
information, using CMS PBP data, to beneficiaries so they can find and
compare MA plans available in the area where they live.
[17] 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 move to a different MA plan if their plan is terminated.
42 U.S.C. § 1395w-21(a)(3)(B).
[18] The exception is hospice care, which FFS covers and MA plans do
not.
[19] Coinsurance is a percentage payment for a given service that a
beneficiary must pay, such as 20 percent of the total payment for Part
B drugs. A copayment is a standard amount that a beneficiary must pay
for a given service, such as $200 per day for days 1 through 6 of an
inpatient acute hospital stay.
[20] Regional PPOs are required to have OOP maximums, and Medicare FFS
has no OOP maximum. Beginning January 1, 2011, CMS will require local
MA plans to have an OOP maximum, the amount of which would be set
annually by CMS. See 75 Fed. Reg. 19678, 19709-19711 (2010).
[21] Each year CMS publishes the OOP maximum threshold in its annual
Call Letter to MA plans. This value represents the maximum amount that
85 percent of Medicare FFS beneficiaries are expected to incur in
Parts A and B deductibles and coinsurance in a given year. For
calendar years 2008 and 2009 the OOP maximum thresholds were $3,250
and $3,350, respectively.
[22] See GAO, Medicare Advantage: Increased Spending Relative to
Medicare Fee-for-Service May Not Always Reduce Beneficiary Out-of-
Pocket Costs, [hyperlink, http://www.gao.gov/products/GAO-08-359]
(Washington, D.C.: Feb. 22, 2008).
[23] Gold, M. and Hudson, M.C., Medicare Advantage Benefit Design:
What Does It Provide, What Doesn't It Provide, and Should Standards
Apply?, A report for AARP Public Policy Institute (Washington, D.C.:
March 2009).
[24] See 42 U.S.C. § 1395w-22(b)(1)(A). Regulations provide that CMS
shall review and approve MA plan benefit packages to ensure MAOs are
not designing benefits to discriminate against beneficiaries, promote
discrimination, discourage enrollment or encourage enrollment, steer
subsets of particular beneficiaries, or inhibit access to services.
See 42 CFR § 422.100(f).
[25] See Pub. L. No. 111-148, § 3209, _Stat._ (2010).
[26] See Pub. L. No. 111-148, § 3202, _Stat._ (2010).
[27] Results weighted by July 2008 enrollment.
[28] Of the 2,899 plans in our analysis, 5 percent required enrollees
to pay a deductible before plan coverage began. We considered an MA
plan to have a deductible if the plan had either an in-network
deductible or a deductible for both in-network and out-of-network
services.
[29] For a 6-day inpatient hospital stay, 15 percent of MA plans in
our analysis did not charge cost sharing.
[30] For inpatient mental health stays, CMS does not calculate an
average cost per day. As a result, we were only able to estimate the
average OOP cost for a 21-day inpatient mental health stay for plans
that charged a copayment. Approximately 14 percent of MA plans in our
analysis did not charge cost sharing for a 21-day stay.
[31] For a 35-day SNF stay, 16 percent of MA plans in our analysis did
not charge cost sharing.
[32] For 156 renal dialysis sessions, 37 percent of MA plans in our
analysis did not charge cost sharing.
[33] Among the plans in our analysis that charged cost sharing for
Part B chemotherapy drugs, other Part B drugs, and DME, 85 percent
charged coinsurance for Part B chemotherapy drugs, 84 percent charged
coinsurance for other Part B drugs, and 99 percent charged coinsurance
for DME. For 27 home health visits, 75 percent of plans in our
analysis did not charge cost sharing. Among the plans that charged
cost sharing for home health, 62 percent charged a copayment.
[34] We considered a plan to have an OOP maximum if the plan had
either an in-network OOP maximum or an OOP maximum for both in-network
and out-of-network services. If a plan had two OOP maximums--one for
in-network services and one for combined in-and out-of-network
services, then we used the in-network value for this analysis.
[35] Results were weighted by July 2008 enrollment.
[36] A plan was considered to have excluded a service category from
the OOP maximum if the OOP maximum did not cover that service category
and if the plan had no service-specific maximum for that category.
Plans that excluded a certain service category from the OOP maximum
did not necessarily exclude all services from that category.
[37] We examined whether a plan charged cost sharing and excluded the
following services from their OOP maximum: inpatient hospital acute
care, inpatient mental health care, skilled nursing facility stays,
home health visits, renal dialysis, Part B drugs, and DME.
[38] In determining whether plans charged cost sharing for services
excluded from the OOP maximum, we examined plan cost sharing for a 6-
day inpatient hospital acute stay, a 21-day inpatient mental health
stay, a 35-day skilled nursing facility stay, 27 home health visits, 1
year of dialysis (156 sessions), Part B drugs, and DME.
[39] Results include MA plans that provided dental, vision, hearing,
and fitness benefits as mandatory supplemental benefits.
[40] Comprehensive dental benefits may include restorative services
(e.g., fillings), root canals, oral surgery, extractions, and dentures.
[41] See appendix I for the number of MA plans and percentage of
beneficiaries by average indexed risk score and health group.
[42] In 2008, we reported that beneficiaries in PFFS plans tended to
be healthier 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. See GAO, Medicare
Advantage: Characteristics, Financial Risks, and Disenrollment Rates
of Beneficiaries in Private Fee-for-Service Plans, GAO-09-25
(Washington, D.C.: Dec. 15, 2008).
[43] To calculate the extent to which MA payment benchmarks exceeded
estimated FFS spending, we first projected 2008 FFS spending by county
using 2007 estimates in the 2008 MA ratebook updated by the CMS
estimate of growth in national spending for 2008. We discounted
spending related to the double payment for indirect medical education
payments made to teaching hospitals. We used the statutory benchmarks
in our analysis of regional PPOs and did not examine the competitively
set benchmark amounts.
[44] We did not find a relationship between an MA plan's average
indexed risk score and the percent difference between MA payment
benchmarks and estimated FFS spending in 2008 for the other types of
MA plans included in our analysis (local PPOs, regional PPOs, or PFFS
plans).
[45] For contract years 2011 and later, CMS will require local MA
plans to have an OOP maximum, the amount of which would be set
annually by CMS. If plans establish OOP maximums lower than the
mandatory amount, they will be allowed more flexibility in
establishing cost-sharing amounts for individual services. See Fed.
Reg. 19678, 19709-19711 (2010).
[46] CMS annually determines the length of stay or number of visits or
sessions and the cost of certain services in order to determine
whether the cost-sharing amount charged by an MA plan is potentially
discriminatory.
[47] According to CMS, if a plan with a qualifying OOP maximum
excluded any Medicare service from its OOP maximum, it was evaluated
based on more stringent standards.
[48] For 2010, beneficiaries in Medicare FFS are charged 20 percent
coinsurance for renal dialysis and Part B drugs; nothing per home
health visit; $1,100 for a 15-day inpatient mental health stay; and
$3,025 for a 42-day SNF stay.
[49] For 2010, beneficiaries in Medicare FFS are charged $1,100 for a
10-day inpatient hospital stay; $9,350 for a 90-day inpatient hospital
catastrophic stay; 45 percent coinsurance for a physician mental
health visit; and 20 percent coinsurance for Part B chemotherapy
drugs, Part B radiology, and DME (including equipment, prosthetics,
supplies, and diabetes tests).
[50] In prior years, CMS also considered MA plan stability grades that
assessed whether plan cost sharing amounts differed substantially from
one year to the next. According to CMS officials, these grades were
implemented because beneficiaries were often unaware of plan benefit
changes from one year to the next and CMS wanted to identify plans
that were making significant changes to their benefit packages.
However, CMS did not use the stability grades to determine if a plan
was likely to be discriminatory and is not using plan stability grades
in the new review process.
[51] For plan years beginning January 1, 2011, cost sharing for
chemotherapy services, renal dialysis, and skilled nursing care may be
no more than cost sharing in Medicare FFS. See Pub. L. No. 111-148, §
3202, _Stat._ (2010). The Part B chemotherapy drugs and renal dialysis
cost-sharing thresholds for contract year 2010 were equal to the cost
sharing charged in Medicare FFS. For MA plans without an OOP maximum,
or with an OOP maximum above the amount specified in the 2010 Call
Letter, the cost-sharing threshold for a 42-day SNF stay was less than
the cost sharing charged in Medicare FFS for a Part A SNF stay. For MA
plans with an OOP maximum at or below the amount specified in the 2010
Call Letter, the cost-sharing threshold for a 42-day SNF stay was $359
more than the cost sharing charged in Medicare FFS for a Part A SNF
stay.
[52] Of the 1,719 MA plans included in our analysis for contract year
2010, 35 had cost sharing that appeared to exceed CMS's thresholds.
Agency officials commented that these plans had extenuating
circumstances or other financial protections for beneficiaries
enrolled in those plans.
[53] We analyzed data for 2,899 MA plans that were offered in contract
year 2008, 2,482 MA plans that were offered again in 2009, and 1,719
MA plans that were offered again in 2010 and we maintained them in
their 2008 health groups. Some plans withdrew from the MA program,
were terminated, consolidated, or split into multiple plans between
contract years 2008, 2009, and 2010.
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO‘s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO‘s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
