Developing an Information Infrastructure for the Medicare+Choice Program

Letter Report to the Administrator of the
Health Care Financing Administration on
Developing an Information Infrastructure
for the Medicare+Choice Program

Committee on Choice and Managed Care
Office of Health Policy Programs and Fellowships
Institute of Medicine

June 22, 1998

Nancy-Ann Min DeParle
Administrator
Health Care Financing Administration
200 Independence Avenue, SW
Room 314G
Washington, DC 20201

Dear Ms. Min DeParle:

In March 1998, the Institute of Medicine (IOM) Committee on Choice and Managed Care (see the attached list of members), held a one-and-one-half-day workshop on "Developing an Information Infrastructure for Medicare Beneficiaries." This workshop followed in the footsteps of the Committee's 1996 report, Improving the Medicare Market: Adding Choice and Protections. One of the 1996 report's seven major recommendations was the following:

The Committee recommends that special and major efforts be directed to building the needed consumer-oriented information infrastructure for Medicare beneficiaries. This resource should be developed at the national, state, and local levels, with an emphasis on coordination and partnerships. Information and customer service techniques and protocols developed in the private sector should be used to guide this effort, and the best technologies currently available or projected to be available in the near term should be used. (p. 89)

The March workshop focused on the information and dissemination requirements established in the Balanced Budget Act of 1997 (BBA), as they pertain to instituting an open-season enrollment process by the year 2002 for Medicare beneficiaries and implementing the Medicare+Choice (Part C) program. As part of the BBA mandate, HCFA is required to mail an announcement of the new Medicare+Choice options to all 39 million Medicare recipients by November 1998. Approximately 50 people from the public and private sectors were invited to the workshop. They were selected for their special expertise on information needs and information technologies as they relate to exercising health plan choice in a competitive, managed care environment, especially among senior citizens.

We want to share some of the committee's findings and recommendations based on the presentations and discussions at the workshop, and on the committee's 1996 report. The committee supports the major provisions of the BBA pertaining to increasing Medicare beneficiaries' health plan choices and providing beneficiaries with better information about the options available to them. However, the committee would like to underscore the following findings and concerns:

• The introduction of Medicare+Choice brings with it new rules and procedures that will be totally unfamiliar to most beneficiaries. In addition, the scope and speed of the proposed changes are likely to cause confusion and anxiety among many elderly beneficiaries.

Medicare beneficiaries have had much less exposure to managed care than have people who are insured through their employers. While managed care enrollment for the over-65 population is increasing rapidly, according to May 1998 HCFA data only about 16 percent of people eligible for Medicare are enrolled in a managed care plan, compared to over 70 percent in the under-65 insured population. In addition, unlike most employed people—particularly those working in larger firms—whose employers help screen and evaluate their health plan options, most Medicare beneficiaries must rely on their own knowledge and judgment to select a plan wisely. In its 1996 report, the committee noted that the elderly need more time and require more outside help to make health care decisions. In addition, findings of a study presented at the workshop indicate that the information processing tasks that would be required of Medicare beneficiaries under the BBA are highly cognitive and would be difficult for any population to address successfully (Hibbard et al., 1997).

• The new system scheduled to be introduced by November 1998 will give many elderly people a broader array of health plan options from which to choose. However, although HCFA will present comparative information about the plans in a standardized format, most of the marketing materials available from individual plans themselves will not be standardized or presented in a way that would be conducive to helping elderly people make informed decisions they could feel comfortable with.

The 1996 IOM study and experts at the workshop addressed the value of standardized packaging, pricing, and marketing of benefit options to allow beneficiaries to more easily compare the benefits offered by different plans. Representatives from the plans, however, told the committee that the current trend in private-sector marketing is to move toward "mass customization," whereby materials are tailored to an individual's demographic characteristics, socioeconomic status, neighborhood, ethnic group, language, and religious belief. To help decrease confusion and to make it easier for beneficiaries to make informed choices, the committee refers to the findings of its 1996 report to underscore the advisability of the government developing a common terminology that would be used by all plans to describe their benefits, as well as common formats for presenting the information; both efforts should draw on the best practices used by employers and by private and public organizations.

• Many beneficiaries do not understand how basic Medicare and Medigap coverage works. Far fewer elderly persons have even a rudimentary understanding of how managed care works or of how to choose among managed care plans, traditional Medicare, and Medigap.

Research over the past 12 years has documented how poorly Medicare beneficiaries understand the differences between traditional and managed care Medicare (Cunningham and Williams, 1997; Davidson, 1988; Hibbard et al., 1997; McCall et al., 1986; and Sofaer, 1993). Beneficiaries now face the daunting challenge of having to choose between two systems they do not understand, and, for many elderly persons, having to compare and to select from among many more plan options than employed populations face. In an examination of current survey research, the committee heard evidence at the workshop that 30 percent of beneficiaries in high-penetration managed care markets "know nothing" about managed care organizations, even though half of this group is currently enrolled in a managed care plan (Hibbard and Jewett, 1998).

• Despite HCFA's best efforts, a fall health plan marketing campaign is likely to produce, at the very least, a high level of confusion and anxiety among Medicare recipients—perhaps a backlash—and a host of questions about the impending changes.

Several presenters at the workshop commented that the increased range of health plan choices available to Medicare recipients under Medicare+Choice will likely spawn a great deal of anxiety and confusion among those unaccustomed to having to make such choices. The 1996 IOM report and testimony given at the March workshop spoke to the benefits of allowing sufficient time for beneficiaries to learn about and understand the new system. The potentially daunting scope and speed of the transition to what, for most beneficiaries, remain uncharted waters underscores the need for building trust and familiarity in this arena. Trust and confidence can be greatly enhanced through the development and dissemination of reliable, objective, and understandable information. Efforts to build trust and a level of comfort with Medicare Part C are particularly important given the ongoing negative public perception and attitude about managed care in general.

• Compounding the likelihood of raised anxiety and confusion among the elderly will be a concurrent flood of mailings marketing existing plans as well as a number of new Medicare products. Despite current rules designed to monitor and control marketing materials sent to Medicare beneficiaries, such mailings can too easily include misleading or incomplete information. Most materials sent to the elderly lack a clear, understandable explanation of what it means to be part of a managed care plan and what coverage or cost trade-offs need to be considered by beneficiaries in order to make a good health plan choice. Such information must be part of the marketing materials to minimize dissatisfaction among beneficiaries that could subsequently lead to excessive, costly rates of plan disenrollment.

Many health plans understand the importance of spending time with Medicare beneficiaries up front to provide them with reliable information about the plan and how it differs from traditional Medicare. The committee, however, heard ample evidence that plans tend to interpret and relay information differently from each other. Experts who work with beneficiaries provided extensive evidence at the workshop that all too frequently, the information that plans provide is incomplete and confusing. A recent report published by the Kaiser Family Foundation also points to evidence that HMOs, particularly those using aggressive sales tactics, rarely include explanations of how they differ from traditional Medicare or detailed explanations of their benefits and coverage limits (Frederick Schneiders Research, 1998).

• Whereas HCFA is making Herculean efforts to prepare for Medicare+Choice, the information infrastructure and resources available for this daunting task appear inadequate, particularly in terms of the capacity to answer both the volume and content of the inquiries that will surely result from HCFA's mailing and from the marketing materials sent out by the health plans themselves. A major upsurge in the number of constituent calls to members of Congress should be anticipated as one consequence of the sweeping nature of implementing Medicare+Choice as it is now scheduled.

At its March workshop, the committee invited a representative of General Electric to discuss that company's Answer Center as a model for handling large volumes of toll-free telephone calls. The GE representative noted that out of a 6-million person customer base, the Answer Center receive 8 million calls annually. He also informed the committee that GE places a high value on recruiting and training its Answer Center employees and prefers to employ college graduates rather than less well-educated clerks. The committee also received testimony from the California Public Employees' Retirement System (CalPERS), which reported that during its annual 1-month open-enrollment period, about 15 percent of their over 1 million members call its customer service center (Stanley, 1997). The timing of HCFA's fall mass mailing, as outlined in the BBA, will roughly coincide with the congressional elections. Presenters and congressional health staff members at the workshop both indicated that any likely surge in telephone calls would thus take place during a time when many members of Congress are in their home districts campaigning for reelection.

• If the current timetable and choice process hold, many elderly people are likely to make ill-considered choices that will ultimately undermine Congress' efforts to restructure Medicare.

Congress is moving the major federal entitlement programs that deal with health (Medicare and Medicaid) into managed care with the purported goal of saving money. This committee has previously found that "[b]eneficiaries who make misinformed choices can be hurt financially or clinically, or both" (Institute of Medicine, 1996, p. 85). Speakers at the workshop cautioned that any political rhetoric emanating from the beneficiaries' confusion may complicate Congress' long-term efforts in the managed care arena.

• Medicare+Choice is quite different from the Federal Employee Health Benefits Program, a program that many people are holding up as a model. The Medicare market consists of 39 million people, more than 3 times the size of FEHBP's membership. Further, FEHBP has involved the option to chose among plans for 35 years. Federal workers are very familiar with the options open to them, and many of them have a detailed understanding of how the various plans work. The opposite is true for Medicare beneficiaries. Furthermore, most federal workers have ready access to professional counselors in their benefits offices or to peers who can readily assist them with their questions

There are other clear distinctions between FEHBP and the Medicare program as well. Federal retirees have about 25-30 years' experience with an open-season enrollment environment. Even though the retirees may not have changed their health plan often over the past 25 or 30 years, they have had the opportunity to do so, and they have had direct interactions with health plans during this period. In addition, because they have been in this system for a number of years, the retirees already possess a great deal of knowledge about deductibles, copays, and so on. This level of familiarity and experience among beneficiaries indicate that HCFA's task will be much more complex than FEHBP's. Jim Morrison, past director of FEHBP, indicated at the March workshop that federal employees in FEHBP trust that the Office of Personnel Management has adequately screened the health plans, thus limiting the likelihood of their making a poor health plan choice. Medicare+Choice introduces several new types of plans, such as preferred provider organizations (PPO's) and provider sponsored organizations (PSO's), that do not have a performance history that HCFA or beneficiaries can evaluate.

In light of the preceding findings and concerns, and keeping in mind this committee's prior work in the areas of beneficiary information and the development of a sound information infrastructure, the committee makes the following recommendations:

• HCFA should stagger its mailings over a period of several months, both to reduce and spread out the certain upsurge in the volume of inquiries and to allow some level of market-testing of the material.

• HCFA should urgently request more time from Congress for additional educational efforts among beneficiaries and infrastructure development at the front end of the process.

• HCFA should delay the initial mailing until market-testing demonstrates that the differences among the various health plan choices and benefit packages will be presented in a standardized, easily understandable way.

• HCFA should focus on conveying a few key messages and the answers to a few select questions on topics about which the elderly most need assurance. For example: (1) Will I be able to continue seeing my current physician? (2) Will I be able to see a specialist if I think I need one? (3) Will the plan save me money, and if so, how? (4) How will my pharmacy costs be covered? (5) Can I leave the plan if I am unhappy? And (6) If I have a complaint, how will it be addressed?

• All the major groups that the elderly reach out to for help (e.g., HCFA, Congress, and local Health Insurance Counseling and Assistance Programs [HICAPs] among others) need to be enlisted in the effort and well prepared to respond to both the volume and content of the inquiries that will certainly result.

• Given that the vast majority of people eligible for Medicare have not had to change plans, and bearing in mind the anger and opposition that resulted from an earlier attempt to substantially change the program (i.e., the 1988 Medicare Catastrophic Coverage Act), beneficiaries should be reassured that: (1) They are not in any danger of losing traditional Medicare coverage if they prefer to keep it, and (2) they can delay making any choice at all indefinitely, in which case they would continue to be covered by traditional Medicare.

We appreciate your consideration of our views. We will make this letter public on June 22, 1998.

Sincerely,

Harry P. Cain II, Ph.D., Cochair
Stanley B. Jones, Cochair
Helen B. Darling, M.A.
Allen Feezor, M.A.
James P. Firman, M.B.A., Ed.D.
Sandra Harmon-Weiss, M.D.
Risa J. Lavizzo-Mourey, M.D., M.B.A.
Mark V. Pauly, Ph.D.
Shoshanna Sofaer, Dr.P.H.

cc:
The Honorable Bill Archer
The Honorable Richard K. Armey
The Honorable Jeff Bingaman
The Honorable Tom Bliley
The Honorable Barbara Boxer
The Honorable John B. Breaux
The Honorable Tom Campbell
The Honorable John H. Chafee
The Honorable Dan Coats
The Honorable Susan Collins
The Honorable Kent Conrad
The Honorable Alfonse M. D'Amato
The Honorable John D. Dingell
The Honorable Thomas Daschle
The Honorable Christopher J. Dodd
The Honorable Richard Durbin
The Honorable Mike Enzi
The Honorable William H. Frist
The Honorable Greg Ganske
The Honorable Richard Gephardt
The Honorable Newt Gingrich
The Honorable Bob Graham
The Honorable Phil Gramm
The Honorable Charles Grassley
The Honorable Judd Gregg
The Honorable Tom Harkin
The Honorable Orrin G. Hatch
The Honorable Tim Hutchinson
The Honorable Ernest J. Istook, Jr.
The Honorable James M. Jeffords
The Honorable John R. Kasich
The Honorable Edward M. Kennedy
The Honorable J. Robert Kerrey
The Honorable Jon Kyl
The Honorable Joseph Lieberman
The Honorable Trent Lott
The Honorable Connie Mack
The Honorable John McCain
The Honorable Jim McDermott
The Honorable Daniel Patrick Moynihan
The Honorable Don Nickles
The Honorable Nancy Pelosi
The Honorable John Edward Porter
The Honorable Jack Reed
The Honorable John D. Rockefeller, IV
The Honorable William V. Roth, Jr.
The Honorable Olympia J. Snowe
The Honorable Arlen Specter
The Honorable Fortney Pete Stark
The Honorable William M. Thomas
The Honorable Henry A. Waxman
The Honorable Paul D. Wellstone
The Honorable Ron Wyden

REFERENCES

Cunningham R and S Williams. 1997. Informed Consumer Choice Still a Distant and Difficult Goal. Medicine and Health: Perspectives September 8.

Davidson BN. 1988. Designing Health Insurance Information for the Medicare Beneficiary: A Policy Synthesis. Health Services Research 23(5):685-720.

Frederick Schneiders Research. 1998. Lessons from the Front Line: Focus Group Study of Medicare Insurance Counselors. Menlo Park, CA: The Henry J. Kaiser Family Foundation.

Hibbard JJ, and JJ Jewett. 1998. An Assessment of Medicare Beneficiaries' Understanding of the Differences between Traditional Medicare and HMOs. American Association of Retired Persons Report # 8805.

Hibbard JJ, Slovic P, and JJ Jewett. 1997. Informing Consumer Decisions in Health Care: Implications from Decision-Making Research. The Milbank Quarterly 75(3):395-414.

Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: National Academy Press.

McCall N, Rice T, and J Sangl. 1986. Consumer Knowledge of Medicare and Supplemental Health Insurance Benefits. Health Services Research 20:633-657.

Sofaer S. 1993. Informing and Protecting Consumers Under Managed Competition. Health Affairs 12(Suppl.):76-86.

Stanley MT. 1997. Providing Health Plan Information to Medicare Beneficiaries. Written Statement Provided to the U.S. Senate Special Committee on Aging, April 10.

* * *
CHOICE AND MANAGED CARE:
Furthering the Knowledge Base to Ensure Public Accountability and
Information for Informed Purchasing By and on Behalf of Medicare Beneficiaries

Harry P. Cain, II, Ph.D. (Co-Chair)
Executive Vice President, Business Alliances
Cross and Blue Shield Association
Chicago, IL

Stanley B. Jones (IOM Member) (Co-Chair)
Director, Health Insurance Reform Project
George Washington University
Shepherdstown,WV

Helen B. Darling, M.A.
Practice Leader for Group Benefits and Health Care
Watson Wyatt Worldwide
Stamford, CT

Allen Feezor, M.A.
Vice President for Insurance and Managed
Care Programs
East Carolina University Medical Center
Pitt County Memorial Hospital
Greenville, NC

James P. Firman, M.B.A., Ed.D.
President and Chief Executive Officer
National Council on the Aging
Washington, DC

Sandra Harmon-Weiss, M.D.
Vice President and Head of Government Programs
Aetna U.S. Healthcare
Blue Bell, PA

Risa J. Lavizzo-Mourey, M.D., M.B.A.
Director, Institute on Aging
Chief, Division of Geriatric Medicine
Associate Executive Vice President for
Health Policy and Sylvan Eisman Assoc.
Professor of Medicine and Health Care Systems
University of Pennsylvania
Philadelphia, PA

Mark V. Pauly, Ph.D. (IOM Member)
Professor of Economics
Bendheim Professor; Professor
Health Care Systems Department
The Wharton School
University of Pennsylvania
Philadelphia, PA

Shoshanna Sofaer, Dr. P.H.
Schering-Plough Professor of Health Policy
School of Public Affairs, Baruch College
City College of New York
New York, NY

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