National Academies Press: OpenBook

Improving the Medicare Market: Adding Choice and Protections (1996)

Chapter: D Commissioned Papers

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Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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D

Commissioned Papers

''The Structure and Accountability for Medicare Health Plans: Government, the Market, and Professionalism," by Lynn Etheredge

"Best Practices for Structuring and Facilitating Consumer Choice of Health Plans," by Elizabeth W. Hoy, Elliot K. Wicks, and Rolfe A. Forland

"Medicare Managed Care: Issues for Vulnerable Populations," by Joyce Dubow

"Reaching and Educating Beneficiaries about Choice," by Carol Cronin

"What Information Do Consumers Want and Need: What Do We Know About How They Judge Quality and Accountability?" by Susan Edgman-Levitan and Paul D. Cleary

"Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction," by Patricia A. Butler

"Medicare Managed Care: Current Requirements and Practices to Ensure Accountability," by Judith D. Moore

"What Should Be the Basic Ground Rules for Plans Being Able to Participate in the Medicare Managed Care Market? Case Study: The California Public Employees' Retirement System," by Tom J. Elkin

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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Celeste Newcomb, MS

Analyst

Office of Managed Care

Health Care Financing Administration

Baltimore, Maryland


Trish Newman

Program Officer

Henry J. Kaiser Family Foundation

Washington, D.C.


Susana Perry

AARP/Andrus Foundation Intern

National Council on the Aging

Washington, D.C.


Richard Price, MA

Health Policy Analyst

Congressional Research Service

Library of Congress

Washington, D.C.


Sandra K. Robinson

Coordinator

Consumer Initiative

Agency for Health Care Policy and Research

Rockville, Maryland


Marc A. Rodwin, JD, Ph.D.

Associate Professor of Law and Public Policy

School of Public and Environmental Affairs

Indiana University

Bloomington, Indiana


William J. Scanlon, Ph.D.

Director, Health Systems

U.S. General Accounting Office

Washington, D.C.


Anne Schwartz, Ph.D.

Senior Analyst

Physician Payment Review Commission

Washington, D.C.


Mary Beth Semkewicz, JD

Legislative Counsel for Health Policy

National Association of Insurance Commissioners

Washington, D.C.


Cary Sennett, MD, Ph.D.

Vice President

National Committee for Quality Assurance

Washington, D.C.


Ellen R. Shaffer

Bethesda, Maryland


Janet L. Shikles, MSW

Assistant Comptroller General

U.S. General Accounting Office

Washington, D.C.


Walter A. Zelman, Ph.D.

Health Care Analyst

McLean, Virginia

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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Michael E. Gluck, Ph.D., MPP

Health Policy Associate

National Academy of Social Insurance

Washington, D.C.


Marsha Gold, ScD

Senior Fellow

Mathematica Policy Research

Washington, D.C.


Sarah C. Gotbaum, Ph.D.

Director, Managed Care Project

United Seniors Health Cooperative

USHC Development Corporation, Inc.

Washington, D.C.


Leslie Greenwald

Office of Research and Demonstration

Health Care Financing Administration

Baltimore, Maryland


John F. Hoadley, Ph.D.

Principal Policy Analyst

Physician Payment Review Commission

Washington, D.C.


Lucy Johns, MPH

Health Care Planning and Policy

San Francisco, California


Judith Miller Jones

Director

National Health Policy Forum

Washington, D.C.


Janet Kline

Acting Coordinator of Research

Education and Public Welfare Division

Congressional Research Service

Library of Congress

Washington, D.C.


Kala Ladenheim, MSPH

Senior Research Scientist

Intergovernmental Health Policy Project

George Washington University

Washington, D.C.


Debra J. Lipson

Associate Director

Alpha Center

Washington, D.C.


Kathleen E. Means

Majority Staff Member

Subcommittee on Health

Committee on Ways and Means

U.S. House of Representatives

Washington, D.C.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Judy Berek

Senior Advisor to the Administrator

Health Care Financing Administration

Washington, D.C.


Peter Bouxsein

Acting Director

Office of Managed Care

Health Care Financing Administration

Baltimore, Maryland


Craig Caplan

National Academy of Social Insurance

Washington, D.C.


Nancy Chockley, MBA

Executive Director

National Institute for Health Care Management

Washington, D.C.


Sophia R. Christie

Research Fellow-The Harkness Fellowships

Health Policy Analysis Program

University of Washington

Seattle, Washington


Kenneth R. Cohen, MHSA, MPP

Investigator, Minority Staff

U.S. Senate Special Committee on Aging

Washington, D.C.


Barbara Cooper

Acting Director

Office of Research and Demonstration

Health Care Financing Administration

Baltimore, Maryland


Linda K. Demlo, Ph.D.

Acting Director

Center for Quality Measurement and Improvement

Agency for Health Care Policy and Research

Rockville, Maryland


Kathleen M. Eyre, JD

Senior Director of Policy and Research

National Institute for Health Care Management

Washington, D.C.


Theresa M. Forster

Minority Staff Director

U.S. Senate Special Committee on Aging

Washington, D.C.


Beth C. Fuchs, Ph.D.

Specialist, Social Legislation

Education and Public Welfare Division

Congressional Research Service

Washington, D.C.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Peter D. Fox

PDF, Incorporated

Chevy Chase, Maryland


Priscilla S. Itscoitz, MA

Manager, Health Insurance Counseling Program

United Seniors Health Cooperative

USHC Development Corporation, Inc.

Washington, D.C.


David B. Kendall

Senior Analyst for Health Policy

Progressive Policy Institute

Washington, D.C.


Kathleen M. King

Special Assistant to the Administrator

Health Care Financing Administration

Washington, D.C.


Marcia A. Laleman, MSW

Director, Medicare Programs

Keystone Health Plan East

Philadelphia, Pennsylvania


Dixon F. Larkin, MD, JD

Deputy Insurance Commissioner

State of Utah

Salt Lake City, Utah


L. Gregory Pawlson, MD, MPH

Professor and Chair

Department of Health Care

Sciences

George Washington University Medical Center

Washington, D.C.


Lynn Shapiro Snyder, JD

Partner

Epstein Becker & Green, P.C.

Washington, D.C.


Shoshanna Sofaer, DrPH

Associate Professor of Health Care Sciences

Division of Research Programs

George Washington University Medical Center

Washington, D.C.

Resource Experts

Sue Anderson

Health Insurance Counseling Program

George Washington University Law School

Washington, D.C.


William F. Benson

Deputy Assistant Secretary

Administration on Aging

Department of Health and Human Services

Washington, D.C.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

C

Symposium Participants

Responding Perspectives

Diane Archer, JD

Executive Director

Medicare Beneficiaries Defense Fund

New York, New York


Robert Berenson, MD, FACP

Associate Clinical Professor of Medicine

Georgetown University School of Medicine

Washington, D.C.


Kathleen P. Burek

Manager, Employee Insurance Division

Minnesota Department of Employee Relations

St. Paul, Minnesota


Garry Carneal, JD

Vice President

Group Health Association of America/AMCRA

(now American Association of Health Plans)

Washington, D.C.


Richard E. Curtis

President

Institute for Health Policy Solutions

Washington, D.C.


Barbara L. Decker

Manager, Health Policy and Planning

Southern California Edison

(now Edison International)

Rosemead, California

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Paper Author:

Judy Moore

Independent Health Care Consultant (former Senior Advisor to the Administrator, HCFA)

McLean, Virginia

Paper Author:

Tom J. Elkin

Independent Health Care Consultant (former Director of Operations, CalPERS Health Benefits Program)

Sacramento, California

11:00 a.m.-12:00 p.m.

A Review of Relevant Provisions in Current Legislative Proposals

David B. Kendall

Senior Analyst, Health Policy

Progressive Policy Institute Washington, D.C.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Friday, February 2, 1996

8:15 a.m.-9:30 a.m.

Choice and Managed Care: Enrollee Satisfaction and Consumer Protections / The States' Role in Holding Plans Accountable

Moderator:

Lynn Shapiro Snyder

Partner

Epstein Becker & Green, P.C. Washington, D.C.

Paper Author:

Patricia A. Butler

Health Care Consultant

Boulder, Colorado

Responding Perspectives:

Dixon F. Larkin

Deputy Insurance Commissioner

State of Utah

Salt Lake City, Utah

 

Robert Berenson

Associate Clinical Professor of Medicine

Georgetown University School of Medicine Washington, D.C.

 

Garry Carneal

Vice President

American Association of Health Plans Washington, D.C.

9:30 a.m.-10:45 a.m.

Assuring Public Accountability and Informed Purchasing: Case Studies of Medicare and CalPERS

Moderator:

Stanley B. Jones

Director

George Washington University Health Insurance Reform Project Washington, D.C.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

3:15 p.m.-3:30 p.m.

Break

3:30 p.m.-5:15 p.m.

What Information Do Consumers Want and Need

Paper Author:

Susan Edgman-Levitan

Executive Director

Picker Institute for Patient-Centered Care Boston, Massachusetts

 

Communicating Information Effectively

Paper Author:

Carol Cronin

Senior Vice President

Health Pages Annapolis, Maryland

Responding Perspectives:

Diane Archer

Executive Director

Medicare Beneficiary Defense Fund New York, New York

 

Priscilla Itscoitz

Manager, Health Insurance Counseling Program

United Seniors Health Cooperative Washington, D.C.

 

Marcia A. Laleman

Director, Medicare Programs

Keystone Health Plan East Philadelphia, Pennsylvania

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

12:15 p.m.-1:30 p.m.

Assuring Informed Choice and Public Accountability: A Report on Activities at HCFA

Kathleen M. King Special Assistant to the Administrator

Health Care Financing Administration Washington, D.C.

1:45 p.m.-3:15 p.m.

Afternoon Moderator:

Shoshanna Sofaer

Associate Professor and Associate Chair for Research

Department of Health Care Sciences

The George Washington University Medical Center Washington, D.C.

 

Who Is the Medicare Consumer: One Size Does Not Fit All, Special Issues for Vulnerable Populations

Paper Author:

Joyce Dubow

Senior Analyst

Public Policy Institute

American Association of Retired Persons Washington, D.C.

Responding Perspectives:

L. Gregory Pawlson

Professor and Chair

Department of Health Care Sciences

The George Washington University Washington, D.C.

 

Peter Fox

PDF, Incorporated

Chevy Chase, Maryland

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

 

Developing a Structure for Consumer Choice: Looking at the Continuum of Options for Assuring Public Accountability

Paper Author:

Lynn Etheredge

Private Consultant

Washington, D.C.

10:15 a.m.-10:30 a.m.

Break

10:30 a.m.-12:00 p.m.

The Content and Process of Informed Choice: Reviewing the State-of-the-Art from the Corporate Community and Other Purchasing Alliances

Paper Author:

Elizabeth Hoy

Director, Health Systems Management Issues

Institute for Health Policy Solutions Washington, D.C.

Responding Perspectives:

Kathleen P. Burek

Manager, Employee Insurance Division

Minnesota Department of Employee Relations

St. Paul, Minnesota

 

Richard E. Curtis

President

Institute for Health Policy Solutions Washington, D.C.

 

Barbara Decker

Division Manager, Health Policy and Planning

Edison International Rosemead, California

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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B

Invitational Symposium Agenda

Thursday, February 1, 1996

8:30 a.m.-9:00 a.m.

Welcome and Summary of Committee Charge

Karen Hein

Executive Officer

Institute of Medicine

and

Stanley B. Jones,

Committee Chair

Director

George Washington University Health Insurance Reform Project Washington, D.C.

9:00 a.m.-10:15 a.m.

Morning Moderator:

Stanley B. Jones, Committee Chair

Director George Washington University Health Insurance Reform Project Washington, D.C.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Third, what standards will these organizations use to select plans. What is to stop a Choice Facilitating Organization from selecting the poorest quality plans because they provide the highest payment for enrollment of members?

Fourth, these plans may well add a new layer of marketing on top of the massive marketing of plans to Medicare beneficiaries occurring in a number of communities. Medicare beneficiaries may be tempted to join a Choice Facilitating Organization because of sophisticated marketing techniques, not because they have carefully selected plans.

For these reasons, I think extra caution is in order. Perhaps HCFA could establish a demonstration project to assess the effectiveness of Choice Facilitating Organizations. At a minimum, some standards should be established for these organizations.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

A

Additional Commentary Regarding Choice Facilitating Organizations

One committee member raised some additional concerns about the committee's recommendations on Choice Facilitating Organizations and wanted the following comments to be included in this report.

I can see many advantages to organizations that will assist beneficiaries with making informed choices by evaluating, prescreening, and selecting plans that the organization's members might choose.

However, I am concerned about a number of potential problems with these organizations. First these organizations could segment the Medicare market by including in their membership younger and healthier Medicare beneficiaries and steering those members to selected plans.

Second, no standards exist for these organizations. What are they and who will they represent? How will they be funded: by their membership? by the managed care plans (who will provide them an enrollment fee for all members signed up through the organization)? Without some standards for the types of entities that can become Choice Facilitating Organizations, we could see a new type of fraud perpetrated on Medicare beneficiaries.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
This page in the original is blank.
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Tompkins, C. P., S. S. Wallack, J. A. Chilingerian, S. Bhalotra, M. P. V. Glavin, G. A. Ritter, and D. Hodgkin. 1995. Bringing Managed Care Incentives to Qualified Physician Organizations. Prepared for Office of Research and Demonstrations, Health Care Financing Administration, U.S. Department of Health and Human Services. Waltham, Mass.: Brandeis University.


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Vibbert, S., J. Reichard, and B. Rosenthal, eds. 1996. The 1996 Health Network and Alliance Sourcebook. New York: Faulkner & Gray.


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Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

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Saucier, P., and T. Riley. 1994. Managing Care for Older Beneficiaries of Medicaid and Medicare: Prospects and Pitfalls. Portland, Maine: Center for Health Policy Development/National Academy for State Health Policy.

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Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Davis, M. H., and S. T. Burner. 1995. Data Watch. Three decades of Medicare: What the numbers tell us. Health Affairs 14(4):231-243.

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Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

References Consulted*

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*  

These references, although not directly cited in the body of the report, provided key background information

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

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Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

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Rossiter, L.F., K. Langwell, T. T. H. Wan, and M. Rivnyak. 1989. Patient satisfaction among elderly enrollees and disenrollees in Medicare health maintenance organizations. JAMA 262:57-63.


Shaughnessy, P. W., R. E. Schlenker, and D. F. Hittle. 1994. Home health care outcomes under capitated and fee-for-service payment. Health Care Financing Rev. 16:187-222.

Sofaer, S.1993. Informing and protecting consumers under managed competition. Health Affairs 12 (Suppl.):76-86.


U.S. General Accounting Office. 1995a. Medicare: Adapting Private Sector Techniques Could Curb Losses to Fraud and Abuse. Testimony before the Subcommittee on Oversight and Investigations and the Subcommittee on Health and Environment, Committee on Commerce, U.S. House of Representatives. GAO/T-HEHS-95-211. Washington, D.C.

U.S. General Accounting Office. 1995b. Medicare: Increased HMO Oversight Could Improve Quality and Access to Care. Report to the Special Committee on Aging, U.S. Senate. GAO/HEHS-95-155. Washington, D.C.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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Iglehart, J.1992. The American health care system. Medicare. N. Engl. J. Med. 327:1467-1472.

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Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

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Clement, D. G., S. M. Retchin, R. S. Brown, and M. H. Stegall. 1994. Access and outcomes of elderly patients enrolled in managed care. JAMA 271:1487-1492.

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Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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    • Review developments in the health insurance marketplace and refine the standard benefit description, pricing, and marketing requirements.
    • Review risk selection in the traditional Medicare program and health plans and develop procedures or recommendations to the U.S. Congress for controlling or adjusting for adverse and favorable selection.
  • Evaluation and improvement of multiple choice in Medicare
    • Review the workings of the multiple choice market for Medicare beneficiaries and report to the U.S. Congress on the extent to which beneficiaries are able to make informed choices, the extent to which government and beneficiaries are succeeding in holding plans accountable for ensuring quality of care and containing costs, and ways to improve the system's performance.
    • Review traditional Medicare and health plan costs and performance to determine whether the amount and form of the federal government's contribution to costs (e.g., premium payment) yields the government and its beneficiaries both containment of costs and assurance of quality.
    • Report and recommend changes to the U.S. Congress to better hold plans accountable to these ends.

In conducting each of its responsibilities, it would adhere to rigorous conflict-of-interest standards.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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proposed new entity on the health care economy and the wellbeing of 37 million beneficiaries, the committee recommends that the U.S. Congress commission a study on what functions should be included in any new entity and what functions should stay with the present organizational structure, the roles and experience of federal agencies with a comparable mix of functions, the rationale for their structure, their organizational placement (including their relationship to the U.S. Congress and the executive branch) to better assess the advantages and potential shortcomings of moving in this direction.

In recommending the consideration of a new function such as a Medicare Market Board, the committee was cognizant of the fact that even a new entity will be limited or circumscribed by the realities of the political and fiscal environments in which it must operate and be accountable.

The committee envisions any proposed entity to have general responsibilities in the following areas:

  • Data collection, data publication, consumer education, and support
    • Contract with a Customer Service and Enrollment Center for these functions and augment the Center's services by using Choice Facilitating Organizations.
  • Health plan standards
    • Consult experts and conduct research and demonstrations to refine the conditions of participation by health plans on an ongoing basis to reflect the service and quality that the government expects for Medicare beneficiaries, regardless of the plan that they choose. The conditions would be set on a national basis and would be measurable and subject to an annual evaluation of compliance. To the greatest extent possible they would be consistent with standards used by the private sector to minimize duplication.
    • Invoke specific sanctions in the event that the standards of a plan fall below the set standards.
  • Benefits, quality, and fair payment to health plans
    • Continually review clinical developments and services pertaining to what constitutes quality or appropriate care and refine the definitions of benefits under Medicare Part A and Part B.
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
  • The functions call for different organizational and corporate cultures, one operating a stable traditional public indemnity insurance program and the other a purchaser- and customer-oriented program that is required to be responsive to a diverse group of private programs in a rapidly changing and dynamic marketplace.
  • A faster response to changing market conditions and opportunities is required for the effective management of competing plans to provide the best options for beneficiaries. Such responsiveness may be hard to achieve with the regulatory constraints of HCFA.
  • The committee believes that these strengthened and new responsibilities for managing the choice of plans must be supported by adequate organizational, financial, and staffing resources, which are needed to effectively and efficiently accomplish the mission described here.
Subrecommendations

The committee believes that these growing choice management functions would benefit from an organizational identity with the stature to facilitate recruitment of the needed leadership and staff and to build public trust. For that reason the committee recommends that serious consideration be given to establishing a new function along the lines of a Medicare Market Board, Commission, or Council that would include an advisory committee with key stakeholders (i.e., purchasers, providers, and consumers).

The committee was not able to research adequately the question of where this function should be located in government. The committee is aware of current initiatives to simplify and streamline government regulations as well as the efforts being made by HCFA to address some of the committee's concerns. The committee's discussions included the option of incorporating the new Medicare Market Board entity within HCFA, but with dedicated management and resources; establishing a Federal Reserve Board type of agency that has greater flexibility in rule making; establishing a PPRC- or ProPAC-type entity reporting to the Congress; as well as other possibilities.

With that in mind and given the potential impact of the

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

socioeconomic, cultural, and language groups and for underserved areas and populations. Elderly beneficiaries particularly value care that is respectful, personalized, and culturally sensitive. When warranted and documented (i.e., when access is demonstrably inadequate), the federal government should require the plans in an area to improve their contracting with community-based providers who meet quality-of-care standards as a condition of participation.

Recommendation 7

Serious consideration should be given and a study should be commissioned for establishing a new function along the lines of a Medicare Market Board, Commission, or Council to administer the Medicare choices process and hold all Medicare choices accountable. The proposed entity would include an advisory committee composed of key stakeholders, including purchasers, providers, and consumers.

Medicare Market Board and HCFA

Findings

Bearing in mind the recommendations that the committee has made regarding ensuring public accountability and informed purchasing for beneficiaries in an environment of choice, the committee had a number of concerns as it relates to the choice management capabilities of HCFA, as it is currently structured, to effectively manage Medicare choices. The committee spent considerable time discussing the challenges and complexities of effectively managing two very different and potentially competing programs. For example:

  • The administration of the multiple choice program and the management of the traditional Medicare programs involve very different missions and orientations.
  • The two functions require different types of management, staff expertise, backgrounds, and knowledge. The committee is concerned that staff and senior managers with extensive experience in managing various aspects of multiple choice in the private sector be recruited and employed for this effort.
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

The committee heard again and again that elderly individuals place key importance on their ability to have access to "their" traditional providers with whom they have developed a personal relationship.

The importance of considering the effect of personal and cultural factors on access is heightened by the changing demographics of the U.S. population. The committee heard that certain Medicare beneficiaries (particularly low-income and minority groups) may be at significantly higher risk of not being able to continue to be seen by their traditional network of providers in an environment of managed care. Because of the lower socioeconomic status of many individuals who are members of minority groups, a managed care plan may be the only delivery option that is affordable.

As managed care plans continue to develop they will have an increased responsibility to improve access for underserved populations. The committee believes that health plans should be held responsible for serving their entire service area without compromising access or quality of care. The committee found that some providers who have served their communities for many years or who are part of essential community provider networks, have not obtained the credentials required by some managed care organizations either because of institutional racism or common practice within their specialty to forego board certification. It is important that health plans develop several measures of clinical competence that are sensitive, valid, and reliable in their ability to assess clinical competence through both outcome and process indicators. The committee heard testimony that managed care plans often do not disclose their credentialing standards and policies. At the very least, such disclosure should be required. The committee lauds the efforts under way in HCFA, PPRC, a number of health foundations and other groups to track and address key issues that could arise in monitoring access to care under a restructured Medicare program.

Subrecommendations

Broad access for Medicare beneficiaries is key. The committee recommends that the federal government ensure that there is adequate access and choice of plans for individuals in all

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

quality of health plans. When the standards and processes of private credentialing agencies meet or exceed those of the federal government, private organizations should be used to reduce duplication in the market. The federal government might well foster competition and innovation among private credentialing agencies for different aspects of this function.

Communication with beneficiaries about the quality of a health plan and traditional Medicare plans should be done by the Medicare Customer Service and Enrollment Center by using the latest information available from credentialing processes and the latest techniques for communicating plan performance. In this vein the federal government should give priority to research and demonstrations on communicating quality performance information to beneficiaries.

The committee recommends the development of common definitions for reporting quality for use by individual plans and for auditing plans against their own published reports to the federal government.

Managed Care and Underserved Populations

Findings

The committee is concerned about ensuring access to health plans and their services for all beneficiaries, including those in vulnerable populations and underserved areas. Although the average Medicare beneficiary has been shown to have good access to care, certain groups who have been identified as vulnerable in traditional Medicare may be at risk for access problems in Medicare managed care. These groups have been identified by PPRC to include African-American beneficiaries and those who live in Health Professional Shortage Areas or urban and rural poverty areas. Evidence indicates that managed care arrangements have been slow to include underserved populations, especially those in rural areas (Institute of Medicine, 1996).

At the workshop and through the commissioned papers the committee was made aware of the special value that elderly individuals place on having easy access to their physicians, and the importance that they place on being treated by their providers in a respectful and a socially and culturally sensitive way.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

BOX 3-2
Conditions of Participation

The committee recommends that all Medicare choices meet the following minimum standards:

  • participate in the annual open season and sell policies to Medicare beneficiaries during that open season or on certain other occasions, such as when a beneficiary first becomes eligible;
  • offer open enrollment, guaranteed renewal, and no clauses precluding enrollment because of a preexisting condition for newly eligible beneficiaries and for beneficiaries changing plans;
  • offer Part A and B benefits (except for Medigap policies) and meet other Medicare benefits requirements;
  • provide information specified by the federal government to ensure informed choice by beneficiaries;
  • meet quality certification requirements comparable to those already in use and in development by recognized national private accrediting entities and require appropriate progress and improvement against such standards over time;
  • have resources, including appropriate mixes of specialists and referral resources, to provide benefits throughout service areas to a reasonable degree defined by the federal government so as not to divide metropolitan areas or counties except when natural barriers or other conditions divide service areas;
  • provide a user-friendly, well-communicated, and responsive appeals and grievance process and allow retroactive disenrollment of beneficiaries who are determined by a fair and appropriate process to have misunderstood the implications of their choice and who have suffered serious financial or other consequences;
  • meet fair marketing standards; * meet specified fiscal solvency and financial disclosure requirements, allow compliance audits of financial and quality assurance operations, agree to use federal government-promulgated terms for describing coverages, and agree to accept enrollees without prejudice in all circumstances and particularly when the beneficiary has been enrolled in a plan that has gone out of business or become insolvent within the prior 60 days;
  • not discourage providers from advising patients regarding their treatment options and plan coverages;
  • provide such data to the federal government as required for it to test the plan's performance and compliance; and
  • provide such information as it may require to the Medicare Customer Service and Enrollment Center.
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

take into account the evolution of higher standards and new systems and structures for ensuring informed choice and public accountability of Medicare choices. (See Box 3-2.)

Quality Assurance and Outcomes

Findings

The availability of Medicare choices introduces a potential for competition among plans on the basis of improvements in quality of care. To capitalize on this potential, the quality of service provided by health plans must be measurable and must be communicated to beneficiaries in a way that is relevant to them so that quality can be taken into account and so that a beneficiary can make an informed choice. Choice in health care, as in any environment, also introduces incentives to restrict the provision of or payment for services to remain competitive. This can produce effective and needed economies by reducing inappropriate or noncovered services. It may also, however, reduce the amount of appropriate care provided. Quality measures, monitoring, and meaningful ways of disclosing and communicating findings are needed so that the federal government and beneficiaries can hold plans accountable for reaching an appropriate balance between restricting inappropriate care and providing appropriate care.

The committee finds that quality measurement and communication are still in the early stages of development, especially quality measurements based on outcomes. Important initial efforts are under way by private credentialing agencies, such as NCQA's HEDIS, JCAHO, the Foundation for Accountability, and others, to develop reporting systems and measures of health plan quality. These efforts, however, reduce but do not eliminate the risk of poor quality.

Subrecommendations

To best ensure quality, all Medicare choices should be subjected to comparable state-of-the-art standards and monitoring for quality. The federal government should use the best of the currently available technology to set standards and monitor the

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Conditions of Participation for Medicare Choices

Findings

Some private and public employers have administered choice programs for many years and have developed and are continuing to improve the conditions of participation of health plans for ensuring that beneficiaries can make informed choices and for ensuring accountability on the part of the health plans. The very nature of accountability for Medicare health plans suggests that minimum standards should be established for health plans in areas where beneficiaries cannot reasonably be expected to make informed choices or where they might be easily confused or misled. This process of informed choice should be facilitated so that plans compete to exceed those minimum standards.

The committee finds that managed care plans not only pay for the services of providers but that they also use contractual arrangements to establish incentives for and place controls on providers' services. Thus, a beneficiary's choice of health plan can affect not only whether services are covered but also how they are provided. To further the responsiveness of plan management and providers to the special needs and demands of Medicare beneficiaries, the committee suggests that plans actively and meaningfully include beneficiaries in their governance and board activities and otherwise integrate the consumer voice into the plan's management and decision making structure.

This said, the committee acknowledges that performance and disclosure requirements cannot compensate for limits on monetary resources for coverage. No amount or type of oversight and regulation can offset the intrinsic limitations on quality and access that necessarily follow from low levels of funding by the political process or the inability or unwillingness of beneficiaries to pay additional fees for health services.

Subrecommendations

The committee recommends that the federal government be given the flexibility to adjust the conditions of participation to

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
Subrecommendations

The committee recommends that neither the Medicare choices' payment incentives nor their coverage and treatment protocol policies motivate providers to evade their ethical responsibility to provide patients with complete information about their illness and treatment options (such as referrals to a specialist), what to the best of the provider's knowledge the patient's plan covers, and which health plans in the provider's experience provide the broadest range of services to the patient in question.

Competition among Medicare choices is likely to restrict the definitions of inappropriate services by refining the definitions of medical necessity and appropriate services to contain costs and ensure quality. The committee finds that it is important for beneficiaries to have access to the unbiased judgments of their practicing physicians regarding their health needs in the context of plan procedures and protocols so that they, as patients, can make informed choices and thereby shape this new understanding of "appropriate."

Within the scope of its responsibilities, the federal government should identify practices that inhibit open communication between a provider and a patient in any setting and either prohibit them as conditions of participation of plans or require the plan to disclose such practices to potential enrollees. The committee recommends that the federal government require plans to disclose to plan enrollees how physicians get paid, whether they are rewarded for withholding referrals, and any other restrictions affecting how physicians can inform or treat plan enrollees. Similarly, educational materials should make clear the incentives in traditional Medicare and Medigap insurance to provide unnecessary care and the risks of these incentives.

Recommendation 6

The federal government should hold Medicare choices accountable by requiring them to meet comparable conditions of participation as a Medicare option and by monitoring and reporting on their compliance with these conditions.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

those of state governments to ensure consistency between these benefit packages and those of Medigap insurance.

Recommendation 5

The committee is concerned about the increasing restrictions on physicians (and the potential conflict of interest of physicians) when they act in their professional role as advocates for their patients and carry out their contractual responsibilities and receive economic incentives as health plan providers. The committee favors the abolition of payment incentives or other practices that may motivate providers to evade their ethical responsibility to provide complete information to their patients about their illness, treatment options, and plan coverages. So-called anticriticism clauses or gag rules should be prohibited as a condition of plan participation.

Physicians and Professionalism

Findings

The committee recognizes that physicians' advice to beneficiaries is a quintessential part of ensuring informed choice. Because of the inherently personal nature of the physician-patient relationship and its special importance to elderly patients, the committee is concerned about the increasing restrictions on physicians (and the potential conflict of interest of physicians) when they act in their professional role as advocates for their patients and carry out their contractual responsibilities and receive economic incentives as health plan providers. The committee is particularly concerned about reported contractual restrictions (such as anticriticism clauses) on physicians acting in their professional role as a source of advice to their patients. Physicians must maintain their freedom to talk to their patients with full honesty about the clinical aspects of their care and treatment options.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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among health plans. More research is needed on the types of information that beneficiaries want and need to exercise informed choice and how best to present that information.

Subrecommendations

The committee wants to preserve the general approach taken by the law governing Medigap insurance without restricting choice to the same extent. It believes that health plans should be moved toward standardized packaging, pricing, and marketing of selected benefit packages to allow beneficiaries to more easily compare the benefits offered by different plans. The committee recommends all plans be required to offer and price a basic benefit package (current Medicare Part A and Part B services) and have the option of offering and pricing two other popular benefit packages defined by the federal government and included in basic comparisons promulgated by the federal government. These popular benefit packages should include added benefits shown by market sales and surveys to be of special interest to the elderly (services such as pharmacy, eye care, and foot care) and ones that are popular given the cost. Health plans would be free to offer and price benefit packages other than these two that add to the basic benefit, but these other packages must be clearly identified as nonstandard, must offer substantial differences from the basic benefit package, and would not be included in the Medicare Customer Service and Enrollment Center's standard published comparisons. The federal government should commission the Medicare Customer Service and Enrollment Center to develop and use formats that allow beneficiaries to make easy and clear comparisons of benefits and other information on Medicare choices, drawing on the best practices used by employers and private and public organizations. The federal government should also suggest questions that Medicare beneficiaries should ask about nonstandard packages.

To make this process even easier, the federal government should promulgate common terminology related to benefits. All Medicare choices should use this terminology to describe the benefits of each of their offerings.

The federal government should coordinate its activities with

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
Subrecommendations

It is within this context that the committee recommends that the selection of Medicare choices be coordinated. All three types of plans should be offered during open enrollment periods and under the same conditions of participation (see page 104).5

The federal government should work with state governments to coordinate the federal requirements surrounding Medicare choices with existing state regulations for Medigap insurance and private insurance. The U.S. Congress should consider what policy-making and enforcement activities are most appropriately and effectively conducted by the federal government and which can be delegated to state governments to ensure consistency and economy.

Standardized Packaging, Pricing, and Marketing of Benefits

Findings

Through the course of its deliberations, the committee found that although standardized benefits might simplify the choice process for elderly individuals, standardization is likely to dampen innovation and responsiveness to a broader range of consumer desires and preferences. However, the committee also appreciates the advantage for the beneficiary of the current standard benefit categories under Medigap insurance, which facilitate comparisons of the benefits and costs of different benefit options and comparisons of different insurers providing the same option. The committee acknowledges that many employers and private organizations have developed formats that allow the benefits of competing health plans to be clearly displayed and compared. It would be relatively simple for Medicare to do the same.

Terminology relating to the benefits offered by health plans varies greatly and makes it difficult to make clear comparisons

5  

The Physician Payment Review Commission's 1996 Annual Report to Congress provides a worthwhile discussion of the pros and cons of annual versus continuous open enrollment seasons.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

beneficiaries of their health plan choices. The Informed Choice Fund would be used to fund the operations of the Medicare Customer Service and Enrollment Center. Demonstration grants to Choice Facilitating Organizations could be made from this Fund, as desired by the federal government, after the operations of the Medicare Customer Service and Enrollment Center are funded.

The Informed Choice Fund would derive its income from a predictable revenue source, such as a fixed amount from each Medicare beneficiary or a flat amount or a percentage of the monthly Medicare premiums.

Recommendation 4

The federal government should require all Medicare choices to be marketed during the same open season to promote comparability and to enable beneficiaries to adequately assess and compare the benefits and prices of the various options.

Coordination of Traditional Medicare, Medigap Insurance and Health Plans: Medicare Choices

Findings

Comparing the prices and benefits of the various Medicare choices is difficult at present because they are not marketed at the same time or under the same ground rules. For example, the beneficiary may not see the high cost (frequently $1,000 or more) of the traditional Medicare program with Medigap insurance relative to the cost of a managed care plan. In addition, beneficiaries who leave Medicare and their Medigap policy for a managed care plan may find that they cannot repurchase their Medigap policy because of a preexisting condition.

The committee finds that the division of responsibility for enforcing the rules of participation in and compliance with these programs between state and federal government complicates the process of informed choice, grievance and complaint resolution, and plan accountability and fragments the offering of health plans across state lines.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

whose major purpose is to facilitate choice for Medicare beneficiaries, including groups that offer preselected panels of health plans. Although the committee believes that such organizations should be limited to groups that do not have a vested financial interest in the choices that are made, at a minimum, these organizations should be required to fully disclose their sources of funding and potential biases that might result from these financial arrangements. One committee member raised some additional concerns about these organizations which are outlined in Appendix A.

To help make the Choice Facilitating Organizations as useful to beneficiaries as possible, the federal government should require health plans and the traditional Medicare program to make available appropriate information to such organizations that have a legitimate interest in that information, such as the data behind quality or accreditation scores.

The committee advocates that public and private entities experiment with such organizations, including providing funding from the Informed Choice Fund (see below) to those that meet the criteria of independence and objectivity to augment the work of the Medicare Customer Service and Enrollment Center. Choice Facilitating Organizations may be particularly useful during the early phase of Medicare choice development.

The Informed Choice Fund

Findings

The provision of information on Medicare choices to Medicare consumers is in its infancy stage. Most of the information about quality and performance that has been developed and collected has been for large purchasers, plan administrators, or clinicians, not as part of an effort to educate and inform individual consumers.

Subrecommendations

The committee recommends that an Informed Choice Fund be developed for use by the federal government for the purpose of strengthening the infrastructure used to inform Medicare

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

niques, to provide information about plans and the process of choice that is as detailed as possible.

The Center's national, regional, and area activities would be funded by the federal government through the Informed Choice Fund (see below).

Choice Facilitating Organizations

Findings

The committee finds that many independent private organizations that already exist or that might well develop can assist beneficiaries with making informed choices among the options available through the Medicare program. These facilitating or mediating organizations offer services ranging from providing objective additional information on plans and choices beyond what the Center offers, to evaluating plans by additional objective criteria, to prescreening and selecting plans that the organization's customers or members might choose, to bargaining for better value from the plans. In fact, many employers are offering such services to their Medicare-eligible retirees, making Medicare HMOs or Medigap policies, or both, available to them during their annual open seasons.

These Choice Facilitating Organizations do raise some concerns. Insurance brokers or other parties with financial interests may misuse these opportunities to market products rather than provide objective advice. Also, even well-functioning organizations could divert feedback on the services offered by a plan from the Center and its regional agents and dilute the effectiveness of the Center's national reporting. The committee leans toward limiting the establishment of these organizations to groups that do not have a vested financial interest in the choices that consumers make or, at a minimum, requiring such organizations to adequately disclose their sources of funding and potential biases that might result from these financial interests.

Subrecommendations

The committee recommends that nothing in law or regulation should inhibit the development of private organizations

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

nology to better ensure informed choice by beneficiaries and accountability by health plans.

Furthermore, regional and local variations in health plans and health care, coupled with the strong desire among beneficiaries for one-to-one communication, suggest that additional information and service activities be carried out by ombudspersons or agencies at the regional and area levels. Models for such activities exist in information, counseling, and assistance (ICA) programs, which are funded primarily by HCFA.

Subrecommendations

To further these objectives, the committee recommends that the federal government contract with and oversee a private, nonprofit agency to develop a state-of-the-art Medicare Customer Service and Enrollment Center that would (1) administer a Medicare customer services answer center; (2) develop, collect, and distribute open enrollment materials and enrollment data; (3) reconcile enrollment data and payments to plans, including monthly changes and related transactions; (4) provide an evaluation component for the purpose of continual improvement and plan feedback; and (5) contract for regular customer service satisfaction surveys.

The Center would strive to offer Medicare beneficiaries national and regional or local access to the types of services provided by the benefits departments of the nation's large employers, building on the regional-area work of organizations such as ICA programs.

The Center will provide education, counseling, and legal assistance and will process complaints, grievances, and appeals from plan members through regional and local agents such as ICA programs. It will install a tracking system to report all complaints, grievances, and appeals, and will report this information to beneficiaries annually and to health plan chief executive officers monthly.

In carrying out this effort, the Center will take advantage of the most effective and efficient methods of electronic communication, including toll-free telephone communication, on-line communications, town meetings, newsletters, and multimedia tech-

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
  • access measures, including
    • the percentage of referrals denied or unavailable,
    • the average waiting time to obtain a referral,
    • average times to obtain an appointment once a referral has been made,
    • ease of phone access and average waiting times in a physician's office, and
    • physician turnover rates; and
  • satisfaction measures (specifying those with chronic conditions or disabilities), including
    • disenrollment information, including the percentage of persons who disenroll within 3 months of enrollment,
    • appeals and grievance information, including the numbers, reasons, and resolutions of grievances and appeals per Medicare choices organization,
    • access and quality findings from HCFA monitoring surveys and relevant state regulatory reports, and
    • findings from surveys commissioned by the organization on satisfaction with physicians and hospital care, access to specialists, and other factors found to be important to beneficiaries.
  1. A clear description of the details of each plan and the Medigap policy, including
  • in- and out-of-network access and costs;
  • how referrals are made (e.g., who makes the referral decisions and on what basis);
  • appeals and grievance systems;
  • up-to-date listings of all providers by type and specialty, credentials, and whether an individual provider is accepting new patients from the plan;
  • financial and contractual arrangements between plans and providers that may influence their decisions regarding services in the judgment of the federal government;
  • financial and solvency status; and
  • use of out-of-area specialty centers.

On request, policies or protocols for covering or providing specific services (such as a prescription drug) or services for specific conditions (such as chronic obstructive pulmonary disease, congestive heart failure, diabetes, and joint replacement) should be provided.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

BOX 3-1
Medicare Choices: Information for Beneficiaries

To provide the necessary information for informed purchasing, the committee recommends that the federal government make available to beneficiaries, directly or through health plans, the following types of information on Medicare choices:

  1. The enrollment and disenrollment rules, the choice process, and the range of services available from the health plans.
  2. How traditional Medicare and Medigap insurance, in comparison with alternative health plans, pay and contract with providers, for example, choice of providers and portability.
  3. Comparative benefits, including
  • emergency and out-of-plan urgent care;
  • hospital services (including access to centers of excellence);
  • nursing home, home health, and hospice services;
  • prescription benefits;
  • physician services, including the availability of specialists;
  • foot care, dental care, and mental health care; and
  • services of alternative providers such as chiropractors.
  1. Comparative costs, including premiums, cost-sharing, and balance billing, with examples of comparative costs for different classes of beneficiaries, for example, the well elderly; disabled, institutionalized, and chronically ill people; and individuals with major illness episodes while on Medicare. Medigap insurance premiums should be shown to be in addition to the Part B premium.
  2. Comparative performance on clinical, structural, and satisfaction benchmarks:
  • scientifically valid process and outcome measures in a form salient and relevant to beneficiaries, including the
    • percentage of beneficiaries with diabetes who receive an annual eye examination,
    • percentage of female Medicare beneficiaries who receive an annual or biannual mammogram and Pap smear,
    • percentage of males who receive a prostate examination,
    • percentage of beneficiaries who receive preventive services, such as hypertension screening and influenza and pneumococcal vaccinations, and
    • recidivism rate for various diagnoses;
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

validate and publish summaries of performance data and make more technical backup data available to beneficiaries and others who have a reasonable right to know. Beneficiary surveys should be standardized across plans, they should be audited, they should include a representative sample of those who are covered (including by ethnicity), and they should oversample beneficiaries with chronic or disabling conditions. Materials should be adapted for use by those with special physical limitations, such as poor vision and hearing.

To keep its information as complete and current as possible, this organization should obtain expert advice from national quality and service accreditation organizations in the continuing development of data needs, comparative reports, and surveys for the purposes described above.

Medicare Customer Service and Enrollment Center

Findings

There exists a critical need to increase understanding of and trust in the restructured Medicare program by the public. Medicare beneficiaries and the general public need to be provided with a broad and objective education about the coverages, costs, and purposes of Medicare and the new health plan choices.

Objective and responsive information on all aspects of Medicare choices is also needed to hold the health system and plans accountable. An increase in the amount of this type of information will augment Medicare beneficiaries' trust in the Medicare program and the choice process.

The committee finds that the private sector's information and communication technologies for assembling, cataloging, and making available information on various health plan features to consumers have advanced well beyond those currently being used to serve Medicare beneficiaries. An example cited frequently at the symposium and in the commissioned papers is the notion of customer service centers that allow telephone access to representatives with on-line support. The central availability of the federal government's access to standard data from participating health plans, the traditional Medicare program, and Medigap insurance offers an opportunity to use this tech-

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
  • people of the same age, health, sex, ethnicity, and cultural background) seeking care under the various Medicare choices;
  • how patients have access to and are treated by their doctors (both primary care and specialist physicians) under the various options;
  • the accessibility of the services that they are likely to need, especially hospital and ancillary services, as well as the accessibility to cutting-edge care and where it is provided;
  • an indication that the information is accurate, timely, reliable, and trustworthy (beneficiaries are savvy in discerning the quality and inherent biases of the information); and
  • how participating physicians are paid.

Some groups of beneficiaries, especially those with chronic conditions, desire more specific information, such as protocols for treatment or whether a particular prescription drug is provided in their Medicare choice.

Medicare beneficiaries appear to be active users of media of all types, older adults are particularly oriented toward one-to-one communications with another individual. Furthermore, the committee is pleased with the progress being made by private credentialing organizations like NCQA and the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) to develop data sets that can be used to certify plans and inform consumers, such as HEDIS.

Subrecommendations

In efforts to communicate the information in Box 3-1, ''Medicare Choices: Information for Beneficiaries," to Medicare beneficiaries, a broad range of mass media and other forms of communication should be used. Emphasis should be placed on providing beneficiaries with easy telephone access to individuals who can guide them on the use of the materials providing comparisons of health plans and who can provide additional clarification and information on plans and providers. To the degree possible, health plans will be asked to submit information in a format that will allow beneficiaries or their families to access the information via the Internet.

To establish trust, a private, nonprofit organization should

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

The committee recommends that the federal government define the basic requirements of any marketing presentation by a health plan or Medigap insurance provider, including such items as providing a copy of a brochure or pamphlet that clearly compared standard health plans, a description of the lock-in provision and a discussion of the availability of the beneficiaries' providers under the plan, and marketing materials in the primary language of the buyer. The federal government should also collaborate with states to ensure consistency in these requirements and should be able to effectively sanction health plans and Medigap insurance providers that break the marketing rules.

Recommendation 3

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.

Beneficiary Information Needs for Informed Choice

Findings

Many Medicare beneficiaries do not understand the Medicare choices. Many are fearful of any change in Medicare and distrust the new choices of health plans. A wide range of unbiased information about Medicare choices may increase the level of trust. The committee has found that Medicare beneficiaries want and need standardized, unbiased, clearly understandable information, including the following:

  • how the different Medicare choices actually work;
  • the out-of-pocket costs of the various plans;
  • the experiences of people similar to themselves (e.g.,
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Health insurance is also complex, and it is difficult for beneficiaries to compare the benefits offered by competing health plans. It will likely remain so for most Medicare consumers. Many Medicare beneficiaries are particularly vulnerable in their need and desire for adequate health care coverage and have been found to have low levels of understanding of Medicare choices.

All of these factors that make elderly beneficiaries especially susceptible to improper marketing practices are underscored by the fact that elderly people have a preference for and rely on one-to-one interactions as a way of learning about their health plan options.

Subrecommendations

To promote comparable levels of accountability, the committee recommends that serious consideration be given to having a new entity approve in advance the public information and marketing materials used by health plans and by the traditional Medicare program (see p. 107). Additionally, the federal government should work with state governments to oversee the marketing of Medigap policies to individuals in the framework of the new requirement for a single open season and conditions of participation.

The committee recommends that the agents and marketers of health plans and Medigap policies be required to inform Medicare beneficiaries up front of their commission for the sale of the policy. Unsolicited door-to-door marketing and outbound telephone marketing should be prohibited. Rigorous marketing rules of conduct should be required to protect beneficiaries. For example,

  • retroactive disenrollment should be permitted if enrollment takes place as a result of misleading marketing,
  • compensation to marketing agents should be tied to retention of the enrollee in the health plan, and
  • retention rates should be reported to potential enrollees by the health plan and by agents.
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

need more services. This could prompt plans to be less responsive to the grievances of sicker Medicare enrollees.

Subrecommendations

The committee recommends that the existing appeals process be strengthened, streamlined, and better publicized.

Furthermore, the committee recommends that the federal government make available an expedited review and resolution process for Medicare choices (by an agency independent of the health plan and the traditional Medicare program) to review emergency conditions, such as the following: (1) when a situation is life-threatening, (2) when the time involved to review the appeal under the usual process would result in a loss of function or a significant worsening of a condition or would render the treatment ineffective, or (3) when advanced directives or end-of-life preferences are involved.

The federal government should carry out this expedited review through an independent private nonprofit agency in each area of the country. The agency should review any negative findings with the health plan involved and report to the federal government any recommended changes to improve the plan's performance. The cost of this independent, expedited review process should be covered by the Informed Choice Fund (for a more detailed description of this fund, see below). The federal government should be able to assess the costs of these reviews on the health plans when the number of such reviews and negative findings becomes excessive.

Health Plan, Medigap Insurance, and Traditional Medicare Marketing Practices

Findings

Past experience with Medigap policy sales has demonstrated the potential for widespread abuse. Federal and state regulatory mechanisms have been put into place to deal with these abuses. However, greater incentives for abuse exist with the sale of alternative health plans. The commission on a single sale can be a significant portion of an agent's compensation.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
Subrecommendations

Given the findings presented above, the committee recommends a transition period of 2 years from the time that legislation is implemented during which the federal government would continue the current option of permitting monthly changes of enrollment by Medicare beneficiaries. After this transition period, enrollees should be locked into the plan that they have selected for 1 year, with the following exceptions. All enrollees will have 90 days from the time of enrollment in a health plan to disenroll and enroll in traditional Medicare, and newly entitled beneficiaries and beneficiaries who have never before chosen a health plan (i.e., those who have been enrolled in the traditional Medicare program) should have the prerogative of changing plans or rejoining the traditional Medicare program within 90 days. Beneficiaries should be allowed to return to their previous Medigap policy with no additional premium costs and with no restrictions placed on preexisting conditions if they disenroll from a health plan within 90 days and return to the traditional Medicare program.

The committee would like to see the federal government encourage plans to offer adequate out-of-area coverage for their enrollees who reside out of the plan's service area for more than 3 months. This can be achieved through interplan reciprocity or point-of-service options.

Grievance and Appeals Procedures

Findings

The current Medicare appeals process has been shown to be slow and not adequately advertised by HCFA or health plans. Furthermore, the current appeals process is tailored more to reviewing whether a service should be reimbursed by Medicare or a health plan and less on the important issue of whether a needed service was denied.

In a competitive environment, to attain better risk selection, health plans have the incentive to encourage healthier people to enroll in the plan and to discourage from enrollment those who

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
  • Medicare beneficiaries are apprehensive about managed care, the concept of risk, the choice process, and lock-in provisions that would prevent beneficiaries from leaving a plan with which they become dissatisfied after enrollment.
  • Many Medicare beneficiaries are poorly informed about traditional health insurance in general and are even more poorly informed about their Medicare choices and the choice process. A considerable amount of beneficiary dissatisfaction, especially among those beneficiaries who are new to managed care, appears to be related to misunderstandings of the basic structure, payment and care practices, and the choice process.
  • Some beneficiaries unknowingly lose their Medigap insurance coverage or face a premium increase if they join a managed care plan and later return to Medicare.
  • Managed care uses practice protocols and definitions of what constitutes medical necessity and appropriate care that vary from those used by the traditional Medicare program. These differences can result in various types and levels of service for specific illnesses and conditions. It is often difficult for beneficiaries to understand these protocols and their implications for the specific services offered by various plans before enrolling in a plan.
  • Many Medicare beneficiaries are disadvantaged in the choice process by physical or mental frailty or by poor vision or hearing.
  • Some Medicare beneficiaries who receive their care from HMOs now must enroll in and disenroll from plans as they move between summer and winter residences. The portability of a managed care plan may be further hindered by annual open enrollment policies and lock-in provisions.
  • Beneficiaries can be negatively affected by health plan changes beyond their control, such as when their provider ceases to contract with the plan.
  • Beneficiaries who make misinformed choices can be hurt financially or clinically, or both. The committee is most concerned with minimizing adverse clinical outcomes, but would err on the side of greater leniency in allowing beneficiaries to leave a plan with which they are dissatisfied.
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Risk Selection

Findings

It was beyond the scope of the present study to address problems of risk selection among the multiple Medicare choices and to recommend steps to correct for those problems. During its deliberations, however, the committee found that mechanisms to prevent or correct for risk selection are critical to the ultimate success of any system offering multiple health plan choices and that the existing Medicare AAPCC cannot be relied on to achieve success in this area.

The number and range of health plan choices being proposed for Medicare beneficiaries and variations in benefits, premiums, and marketing are likely to greatly increase the potential for risk selection among those offering the various Medicare choices. Since risk selection can seriously undermine the viabilities of the traditional Medicare program and individual plans, it is important that this problem be addressed and controlled.

Ultimately, the committee is concerned about incentives and the capability of physicians with a direct financial interest in a plan to recruit (or avoid) subscribers on the basis of whether that individual is a high- or low-level user of health services.

Recommendation 2

Enrollment and disenrollment guidelines, appeals and grievance procedures, and marketing rules should reflect Medicare beneficiaries' vulnerability and lack of understanding of traditional Medicare and Medigap insurance and their current lack of trust in important aspects of alternative health plans.

Beneficiary Enrollment and Disenrollment

Findings

The committee found that numerous factors make it critical to facilitate the Medicare enrollment and disenrollment process in an environment of market competition and broader choice:

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

miums, their noncompetitive benefits, and adverse risk selection. Within this environment, special challenges exist for the future viability of the traditional Medicare program. Constraints on Medicare spending are adding new urgency to managing the costs of care delivered in the traditional Medicare program. Maintaining traditional Medicare as an option is likely to be difficult and could require additional costs to government.

The committee was not able, within the time frame and scope of its task, to make the difficult estimates of these potential costs to government or their wider social implications. The committee is mindful, however, of efforts by the National Academy of Social Insurance, the Prospective Payment Assessment Commission (ProPAC), PPRC, and others to explore ways in which Medicare's fee-for-service program can be shaped in the future to make it more efficient and to improve its management and delivery of care.

Subrecommendations

In the framework of the findings presented above, the committee recommends that HCFA, under its demonstration authorities, accelerate its efforts to identify private sector purchasing and management techniques that can be adopted appropriately for use by the traditional Medicare program as an alternative to price reductions and, when possible, to offer additional benefits to maintain the program's value. HCFA's current development of "centers of excellence" for high-technology procedures seems an example of such an adaptation.

As indicated elsewhere, it is also critical that risk selection measurement and adjustment technologies be improved for use by traditional Medicare and health plans. As improved technology for measuring risk selection is developed, HCFA should study the traditional Medicare program's risk pool relative to those of other health plans and assess whether program funding fairly reflects Medicare's risk profile to enable it to offer a product of competitive value to beneficiaries. The federal government should also study and pilot test ways to pay health plans more fairly for chronically ill beneficiaries to encourage health plans to invest in and market to those beneficiaries.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

quality systems of care. All Medicare choices should have to meet common conditions of participation.

This policy may result in the marketing of plans with limited appeal and small numbers of Medicare beneficiary enrollees over time. The committee recommends that these kinds of plans be tracked over time and evaluated for their potential impacts on risk selection3 and administrative costs and the extent to which they cause confusion among beneficiaries.

The Traditional Medicare Program

Findings

Given how little is known about ensuring informed choice and holding health plans accountable for providing quality care to Medicare beneficiaries and given the consequent risks for the beneficiaries, the committee believes that traditional Medicare must remain an option and a safe harbor for beneficiaries4 This option should be at least as good as the existing Medicare program in terms of benefits, beneficiary cost-sharing, choice of providers, geographic access, and other factors.

The committee believes that maintaining traditional Medicare as a choice is critical for allowing large numbers and a wide range of plans to be offered to Medicare beneficiaries. Without the ability to retain the traditional Medicare program as an option and safe harbor, particularly for beneficiaries who are physically and mentally frail, the committee would not recommend widening the Medicare marketplace to the extent that is advocated in this report.

The committee is aware that traditional indemnity plans are becoming a relic for the market under age 65; many fee-for-service plans have been discontinued because of their high pre-

3  

As in other sections of the report, the committee understands the inadequacy and limitations of current risk adjustment methods and recommends that further research be supported in this critical area. In the meantime, however, practical requirements necessitate that available techniques be used to make best-judgment decisions.

4  

The committee defines safe harbor as a program that is financially stable and that remains an option for the foreseeable future.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

broaden the number and range of alternative health plans offered.

For most Medicare beneficiaries the range of options and the responsibility for choosing among those options are likely to be significantly greater than those currently available to a large percentage of the working population. Unlike private employers, which have the power to limit the number and types of plans offered, current Medicare practice and proposed reforms would allow any plan that meets specified conditions of participation to sell coverage to Medicare beneficiaries.

Although the committee was cautioned that a large number of choices may increase the confusion for Medicare beneficiaries, it may also increase the ability of Medicare beneficiaries to find a plan that they like, for example, a plan that includes their chosen doctor, that offers valued additional coverage, or that provides convenient access to services. The fear of not being able to continue to see a chosen caregiver has been shown to be a major reason why elderly individuals are reluctant to move into managed care arrangements. Competition among a larger number of health plans will likely produce more innovation on the part of health plans to find ways to be more responsive to the wants and needs of beneficiaries.

The committee also was concerned that limiting the numbers of plans, beyond requiring them to meet benchmark2 conditions of participation, would raise policy and political issues, given the size of the Medicare program and the proportion of total U.S. health care revenues that it represents. Setting limits would have a vast impact on competitors and the market as a whole.

Subrecommendations

The committee recommends that all Medicare choices that meet the benchmark conditions of participation be offered to beneficiaries. Conditions of participation should be carefully constructed to bear the burden of assuring informed choice by beneficiaries and accountability by health plans for access to

2  

Benchmark is defined as a floor, with the expectation that participating plans would exceed this level.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

3
Findings and Recommendations

Recommendation 1

All Medicare choices1 that meet the standard conditions of participation and that are available in a local market should be offered to Medicare beneficiaries to increase the likelihood that beneficiaries can find a plan of value. Traditional Medicare should be maintained as an option and as an acceptable "safe harbor" for beneficiaries, especially those who are physically or mentally frail.

Number and Type of Health Plans to Be Offered

Findings

Medicare beneficiaries are currently offered traditional Medicare, Medigap policies, and, in many areas of the country, a growing number of alternative health plans. New initiatives in Medicare and proposed reforms of the Medicare program would

1  

For the purpose of this chapter, the term Medicare choices is an umbrella term for traditional Medicare, Medigap insurance, and alternative health plans (including managed care).

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

engaged in decision making with an emphasis on reliable, comparable, and objective information. The "communications" and "education" provisions of the bill rely heavily on marketing as a vehicle for getting information to beneficiaries and not enough on building an infrastructure for helping consumers to make informed, responsible choices. Second, the bill does not demand sufficient requirements for disclosure on how financial and coverage decisions are made by individual health plans. This issue has particular importance for beneficiaries, many of whom suffer from chronic conditions. Third, the legislation falls short in setting standards for competition based on quality and performance rather than on costs.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

savings accounts or private fee-for-service plans to be offered. In addition, both proposals rely on the market, not the government, to develop a public education strategy to familiarize beneficiaries with the opportunity and responsibility for informed decision making. The proposals rely on the plans to disclose financial incentives to providers and methods for making coverage and utilization decisions, issues that may be of special relevance for those with major or chronic illnesses.

Both proposals use government policy to correct market deficiencies in the enrollment process. They would structure enrollment to discourage beneficiaries from switching between levels of coverage based on anticipated health costs, a problem known as adverse selection. Congress would phase in over 2 years an annual open enrollment period with a 12-month lock-in to prevent continuous enrollment and disenrollment. (New enrollees in managed care plans would have a 90-day grace period for disenrollment.) The Clinton administration's proposal would shift the responsibility for enrollment from the health plans to the Office of the Secretary of the U.S. Department of Health and Human Services to discourage adverse selection and "cherry-picking" caused by direct selling. Both proposals would correct market deficiencies as well in the area of consumer information. They both contain a number of rules and requirements regarding information on benefits, premiums, and quality indicators that would allow Medicare beneficiaries to make comparisons.

The overall "scores" from the report cards on each proposal's philosophical approach (as indicated in Tables 2-3 and 2-4) are remarkably similar despite the sharp rhetoric from each side on their differences. The difference in scores is attributable only to the inclusion of medical savings accounts and private fee-for-service plans in the legislation passed by Congress and vetoed by the President. Although much rhetoric has been sounded regarding letting the market prevail, the legislation preserves a significant role for government in most aspects of the Medicare reform provisions.

In keeping with the "report card" theme, three areas of the Congressional legislation were identified as "needing improvement." First, the Balance Budget Act's provisions provide little enlightened thinking about getting consumers more actively

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

TABLE 2-4 Medicare Legislation Report Card: The Clinton Administration's Proposal

Issue

Government Knows Best

Leave It to the Market

Government Policy Is to Correct Market Deficiencies

Benefits/plan type

X

 

 

Licensing

X

 

 

Enrollment

 

 

X

Consumer

 

 

 

Information

X

 

 

Purchasing style

X

 

 

Plan payments

X

 

 

Communications/ education strategy

 

X

 

Chronic care/ disclosure

 

X

 

Total (%)

50

25

25

vice, be fiscally solvent, and adhere to internal as well as external quality assurance requirements. Similarly, payments to plans are not based on competitive bidding or contracting, but continue to use government-set payments, based on modifications to the current AAPCC system and, in the case of the congressional legislation, based on further national per capita growth limits.46

With regard to purchasing style, both proposals support the FEHBP approach in which the federal government offers all plans that meet the conditions of participation and do not permit more selective and active purchasing based on performance, a strategy used by many employers to ensure accountability and value.

Both proposals would generally let the market prevail in the range of plan choices to be offered to beneficiaries. The Clinton administration's proposal, however, would not allow medical

46  

HCFA is currently testing a number of competitive pricing approaches under its demonstration authority.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Clinton administration's proposal for reform: (1) benefits/plan types, (2) licensing (regulatory oversight), (3) enrollment, (4) consumer information, (5) purchasing style, (6) plan payments, (7) communications/education strategy, and (8) chronic care/disclosure. Kendall assessed each of these areas from the perspective of whether the legislation had adopted one of three approaches: government knows best, leave it to the market, or government policy is to correct market deficiencies. In the process of developing the report card Kendall used prior focus groups (with other audiences), together with the commissioned papers and conference presentations to identify the eight key issues required for informed policy making. The results are listed in Tables 2-3 and 2-4.

According to the report cards, the U.S. Congress and the Clinton administration have taken a regulatory (government knows best) approach to setting the conditions of participation. This approach requires plans to comply with a hefty range of rules and regulations regarding access, provide adequate ser-

TABLE 2-3 Medicare Legislation Report Card: Medicare Reform Provisions of the Balanced Budget Act of 1995 (H.R. 2491)

Issue

Government Knows Best

Leave It to the Market

Government Policy Is to Correct Market Deficiencies

Benefits/plan type

 

X

 

Licensing

X

 

 

Enrollment

 

 

X

Consumer

 

 

 

Information

 

 

X

Purchasing style

X

 

 

Plan payments

X

 

 

Communications/ education strategy

 

X

 

Chronic care/ disclosure

 

X

 

Total (%)

37

37

25

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

and protections must be put into place to ensure accountability for different groups with different requirements-elderly, chronically ill, and poor individuals-not to mention rules and regulations for the new managed care entities that continue to evolve. Efforts must be made to ensure that all of these new regulations achieve the desired result and do not become duplicative, too complex, and too burdensome.

Another presenter reminded the symposium that one size does not fit all when it comes to regulations.45 For example, Utah's population, infrastructure, and political culture are very different from those of Florida. In many parts of the country the federal government is viewed as ''Mean Joe Green, where you gather up the whole back field and throw them out until you find the guy with the ball." Another way this approach has been described relates to the old grandmother who yells out to her grandchildren, "Put on your coat, I'm cold." In defining the role of government, one needs to assess who should be protected and what they need to be protected against.

Proposed Legislative Changes to the Medicare Risk Program: A "Report Card"

From the perspective of Medicare beneficiaries and with a focus on issues of accountability and informed purchasing, the committee asked David Kendall to reflect on the various themes and findings that had been highlighted during the symposium and how those related to the Medicare reform provisions introduced as part of the Balanced Budget Act of 1995 and the Clinton administration's proposal. How much of what had been said and suggested during the symposium was reflected in the various provisions? What were the areas of concordance, and where were there substantial differences? What areas or issues, if any, were highlighted at the symposium but not addressed in the various proposals?

To fulfill his assignment, David Kendall presented a report card on eight major aspects of the Congressional Medicare reform provisions of the Balanced Budget Act of 1995 and the

45  

Material presented by Dixon F. Larkin.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

making those data available to consumers and has also been reluctant to use those data to sanction plans that were not performing satisfactorily (U.S. General Accounting Office, 1995b). Although HCFA does have the authority to freeze enrollment or to discontinue a contract, it is difficult to take action when a plan may be serving thousands of enrollees. Nevertheless, HCFA could benefit from transitioning to a more efficient administrative model.43

The collection of information on quality, such as HEDIS and performance measures, is one way to hold plans accountable. In negotiating contracts, purchasing organizations are able to build certain quality and performance measures standards into the contracts. Measuring quality is a new science, however, and there are questions as to whether the current quality measurements are the most appropriate ones. How such measures will need to be translated and modified to be truly useful to consumers in exercising choice is also an issue. For example, low-birth-weight measurements on report cards can be affected by socioeconomics, education, and nutrition, not just the care that is received through a health plan. But in the absence of any other measurements, symposium participants agreed that HEDIS and the quality measurements offered by NCQA represent a promising start.

State-Federal Partnerships

The entire oversight role, however, does not need to fall to HCFA. Although the federal government sets standards for federally qualified HMOs, competitive medical plans, Medicare risk contracts, and Medicaid HMOs, states also have as part of their insurance regulations laws that require minimum operating standards for managed care firms.

However, one symposium presenter challenged the notion of federal-state partnerships in this arena, preferring to use the analogy of two different train tracks that sometimes run in parallel lines but that often cross each other.44 The original HMO act was directed to the general population, and now new laws

43  

Comment by Garry Carneal.

44  

Comment by Lynn Shapiro Snyder.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

beneficiaries as their primary customers. The agency is in the process of revising its Medicare handbook and establishing an on-line help service for beneficiaries. The Office of Managed Care is also working on charts comparing both managed care and fee-for-service Medicare. The charts, which have been tested with focus groups, will be issued in three phases, with the first phase comparing benefits.42

Symposium participants indicated that HCFA could take a number of steps to help safeguard the interests of Medicare beneficiaries, including the establishment of uniform, national standards for plans, in addition to requiring external reviews of quality. HCFA could also take on greater quality assurance responsibilities.

HCFA currently conducts primarily paper reviews of the organizations with which it has contracts, in addition to biannual, on-site reviews of every managed care organization. As part of this process HCFA reviews the operational areas of a plan, including enrollment and disenrollment, information systems, quality assurance, appeals, and provider payments. This review process has not been able to stop problems. Often, what is written on paper is not necessarily accurate. For example, in the 1980s abuses occurred when plans signed enrollees, yet no providers were available to provide care.

HCFA is also paying greater attention to quality indicators and is working with NCQA to modify HEDIS to incorporate measures more germane to the Medicare population. As part of that project, HCFA plans to provide side-by-side comparisons using basic administrative data, consumer satisfaction data, and eventually, quality data. The information will be published and available on the Internet.

In another major initiative to improve the accountability of HMOs, HCFA, along with the U.S. Department of Defense and FEHBP, has joined a group of large employers through the Foundation for Accountability to develop performance measures that will assist purchasers and consumers in choosing health plans.

Historically, HCFA has been successful at obtaining and analyzing volumes of data, but it has been less successful at

42  

Material presented by Kathleen M. King.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

der Medicare when they are deemed medically necessary or will improve a person's functional status. Disputes may arise if an HMO has a more narrow definition of medical necessity.

In the case of managed care, expedited grievance and appeals procedures are important. Under the fee-for-service system, grievances and disputes generally occur after a service has been rendered and the health plan is refusing to cover the service. Under the managed care system, the dispute generally occurs before a service or specialty referral is rendered. In some instances a denial of care could prove to be life-threatening. In some cases by the time that an appeal is decided in favor of an enrollee, a service such as short-term rehabilitation may no longer be of benefit to the patient.

Medicare beneficiaries need to be informed about their appeal and grievance options before they enroll in a health plan. They should understand the different classifications of and processes for (1) an information request, (2) registering a complaint, (3) filing a grievance, and (4) making an appeal. A 1994 survey of Medicare risk plans showed that 25 percent of beneficiaries did not know that they had the right to appeal their HMO's denial to provide or pay for services (Office of the Inspector General, U.S. Department of Health and Human Services, 1995b).

The Changing Role of HCFA41

Medicare has traditionally acted more as a bill payer than a private sector purchaser. In the past HCFA has made little effort to inform Medicare enrollees of their choices regarding health care providers, treatment options, or competing private health plans. There have been several exceptions, including the disclosure of nursing home inspections, public listing of high-mortality hospitals, mailings containing preventive care information, and some use of centers of excellence arrangements. HCFA is taking a more active role in trying to expand consumer choice by focusing on information needs and treating

41  

Unless otherwise noted, this section is based on a presentation by Judith D. Moore.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Banning all undesirable marketing practices might not be feasible because of First Amendment issues. There are ways to mitigate potential problems, however. Some voluntary purchasing cooperatives use agents and brokers to address the small group and individual markets. They train and certify the agents and brokers who are licensed to sell their product before they are permitted to sell the product. The purchasing cooperative provides the information that the agents and the brokers use, and the information is bound together so that agents or brokers cannot pull out only the information that they would like the consumer to see. This packet of information outlines all the health plan options that a consumer has.40

The purchasing cooperatives also review and approve any marketing materials that participating plans wish to distribute. Furthermore, the compensation for agents is structured so that an agent's commission does not vary according to which plan a consumer chooses. The amount of the commission also is disclosed to the payer.

To ensure that Medicare beneficiaries are not dependent on the information provided through marketing, it is important that they have access to other sources of unbiased information. Competing against the marketing resources of commercial companies, however, may prove to be an issue. Although HCFA may spend $10 million on consumer education and all of the states combined may spend the same amount, health plans devote far greater amounts to marketing activities.

Grievance and Appeals Procedures

The majority of appeals filed with HCFA by Medicare beneficiaries are over disputes over payment for services provided by nonplan providers and emergency care (Network Design Group, 1995). Studies have documented problems with access to rehabilitative services, especially following hospitalization. HMOs may deny authorization for short-term skilled nursing facility services, home health care, and physical, speech, or occupational therapy, even though these services are covered un-

40  

Material presented by Richard E. Curtis.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

insurance program in 1990 by creating a system of standardizing plans, labeled A through J, approved for marketing to Medicare beneficiaries. This reduced major disreputable marketing practices but brought about a hodgepodge of clumsily written plans whose features were virtually impossible for Medicare beneficiaries to comprehend (Kramer et al., 1992). Since the managed care market for Medicare beneficiaries is growing rapidly, there is potential for confusion, especially since managed care itself is also changing and more plans are offering variations, such as point-of-service options. One symposium participant suggested that national standards for Medicare—whether fee-for-service or managed care plans—would ensure that the care that Medicare beneficiaries receive from state to state does not vary. This would also ensure that they receive the same standard of care as they enter Medicare from a private system and if they move from a fee-for-service system to a managed care system.39

Marketing

Marketing and education should be viewed as two separate functions. The purpose of marketing is to get people to enroll in a plan, and the purpose of consumer education is to give consumers the information they need to make a choice. Although marketing may provide some useful information, the fundamental intent of marketing is different from that of unbiased education. Since Medicare beneficiaries lack knowledge about Medicare and the choices available to them, it is important to safeguard Medicare beneficiaries against potential marketing abuses.

Although Medigap insurance currently allows door-to-door marketing, symposium participants expressed concern that door-to-door marketing by Medicare managed care plans should not be allowed since the elderly, more than any other group, rely on personal, one-on-one interactions for most of their information. The potential for providing misleading information can be great in a private setting, as indicated by past door-to-door marketing experiences with the Medicaid program.

39  

Point made by Ellen R. Shaffer.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

informed choices about managed care. There is also evidence that information does make a difference.37

Beyond that, safeguards can be established in several areas, including the setting of standards that address marketing, grievance and appeals procedures, disenrollment allowances, definitions of emergency care, geographic access, and referral processes. Standards such as the 50-50 rule already incorporated in the Medicare program are one form of protection.

Standards

Many states already apply licensure and standards requirements, yet licensure requirements have not necessarily been found to guarantee quality or afford consumers protection. HCFA officials, however, point to the effectiveness of standards at helping to improve quality of care, citing the standards that are now applied to nursing homes. Symposium participants indicated that standards and regulations, such as those applied to the nursing home industry, might be necessary in the Medicare managed care market to avoid abuses. If standards are set too low or if oversight and enforcement actions are weak, abuses and scandals such as those in Florida with Medicare managed care could arise.38

Standardization may help consumers to make better choices in a complex and increasingly competitive health care market. As an example, the federal government overhauled the Medigap

37  

At the symposium, Shoshanna Sofaer referred to a study that she conducted in 1986, the Health Insurance Decision Project. The project provided Medicare beneficiaries with information to help them compare traditional Medicare, a variety of Medigap policies, and Medicare HMOs. The information provided in the study led those participating to drop duplicative coverage—which was a large problem in the Medigap market at that time—to spend less on premiums and led more of them to join managed care organizations. The project demonstrated that information can make a difference in behavior.

38  

In 1992 and 1993, the General Accounting Office found serious quality problems (i.e., delay in treatment, treatment not competent or timely, denial of access) in many of the risk contract HMOs in the Florida Medicare market. The Florida market contains 19 percent of all Medicare HMO enrollees (U.S. General Accounting Office, 1995b).

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
  • not liking the choice of primary HMO doctors,
  • premiums and copayments were too expensive,
  • dislike of going through the preliminary HMO doctor to get medical services, and
  • desire to use the doctor that the beneficiary had before joining the HMO (Office of the Inspector General, U.S. Department of Health and Human Services, 1995b).

According to the report of the Office of the Inspector General, beneficiaries who are more likely to disenroll perceive that an HMO is more interested in containing costs than providing the best possible care. Those more likely to disenroll also reported problems obtaining access to care.

A 1989 study comparing Medicare HMO enrollees with enrollees in fee-for-service plans found that about 18 percent of the Medicare HMO enrollees disenrolled within a year and a half. More than a quarter of those who disenrolled within 3 months misunderstood the nature and limitations of the HMO. About half of those disenrolling expressed dissatisfaction with the care and the lack of physician continuity (Rossiter et al., 1989).

There is evidence that some dissatisfied enrollees do not leave HMOs simply because they cannot afford to. A recent Office of the Inspector General report found that although 84 percent of enrollees had no plans to leave their HMOs, 16 percent (an estimated 150,000 beneficiaries) either planned to leave or wanted to leave but felt that they could not. They cited the following reasons: the HMO was the only way to afford the health care that they needed, medicine was too expensive outside the HMO, they could not afford non-HMO doctors, they could not afford private health insurance, and they were not eligible for Medicaid (Office of the Inspector General, U.S. Department of Health and Human Services, 1995b).

Consumer Protections

The potential for quality coordinated care for the Medicare population is good if a variety of safeguards can be established for consumer protection. A critical safeguard is supplying consumers with trustworthy information that enables them to make

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

time he or she had to spend in a waiting room. This detailed information allows for greater comparisons rather than simply providing information on whether one person's personal expectations were met.36

The Agency for Health Care Policy and Research through its Consumer Assessment of Health Plans Study is working to identify the different types of consumer satisfaction information that should be made available and how that information should be distributed. The project's goal is to develop appropriate consumer satisfaction instruments and then to make certain that the information collected is comparable across health plans. The project will consider what literacy level the information should be targeted to and the level of cognitive skills people need to process the comparative information.

From another perspective, in 1994 the PPRC undertook a survey using data from the Medicare Current Beneficiary Survey to look at Medicare beneficiaries' general perceptions of access to and satisfaction with care. The study and its supplements address beneficiary perceptions of access to care and include information on utilization of services, health insurance coverage, access to health care services, satisfaction with care, expenditures, and demographic data, among other issues (Physician Payment Review Commission, 1996). As a follow-up to the study, PPRC has contracted with Mathematica Policy Research, Inc. to develop and conduct a survey to monitor beneficiary access to and satisfaction with services in the Medicare managed care program.

Disenrollment

Current evidence indicates that the disenrollment rate among Medicare beneficiaries in Medicare risk contracts is about 5 percent. A 1993 survey conducted by the Office of the Inspector General of the U.S. Department of Health and Human Services showed that Medicare beneficiaries most often cited the following four reasons for leaving an HMO:

36  

Material presented by Susan Edgman-Levitan.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Approximately 20 percent of those who participate in satisfaction surveys report being dissatisfied.35 A number of separate studies not focused specifically on the Medicare population indicate that people who are chronically ill or who have poor health status are more likely to report dissatisfaction with their HMOs, indicating that they have trouble obtaining services and getting referrals to specialists (The Robert Wood Johnson Foundation, 1995). People who were disabled or who have end-stage renal disease have also reported being much less satisfied with their ability to obtain access to needed services and specialists (Office of Inspector General, U.S. Department of Health and Human Services, 1995a). They also reported that they waited longer for appointments than they did when they were in fee-for-service plans and that their physicians were less likely than physicians in fee-for-service plans to explain what they were doing. Enrollees in managed care plans have expressed a variety of concerns about obtaining access on the telephone, long waiting times for appointments, and physicians who do not spend enough time with patients and who do not appear to be sympathetic.

Surveys of managed care plan enrollees indicate that dissatisfaction with plans often arises from a lack of understanding about how the plan operates or the services that it covers. The most common areas for confusion involve the limits of the network, such as restrictions on out-of-plan use, requirements for obtaining referrals, and payment for services from nonplan providers as well as emergency care that is obtained out-of-plan.

Satisfaction ratings are subjective, however, and are of limited value. Focus group studies conducted by the Picker Institute indicate that many consumers are not interested in overall satisfaction information, because they do not know how to interpret it or what biases it reflects. Ratings would be more useful if they were combined with reports on care, in which the person describes the actual care received or notes exactly how much

35  

According to Medicare data for 1994, 90 percent of those who chose an HMO remained enrolled in HMOs. Six percent left for reasons not related to quality or satisfaction (e.g., moving outside the plan's service areas). Only 4 percent changed to fee-for-service coverage.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

eligibility for Medicaid and other public programs. Program staff are also trained to help participants complete claims forms and file appeals. Currently, all states have ICA programs, which are staffed through a combination of paid staff and volunteers.

Funding for these organizations, however, has always been limited and is an area of concern. Communications programs require substantial resources. One potential source of funding for these centers or similar counseling programs would be the Medicare program itself, in which consumer education funds could be deemed a priority.

Nonprofit Counseling Organizations

Other organizations, such as the United Seniors Health Cooperative, operate counseling programs to educate seniors about their health care options. The health insurance counseling program for United Seniors receives calls and letters from seniors all over the country. 33

Enrollee Satisfaction and Consumer Protections34

National surveys on consumer satisfaction in Medicare HMOs have been conducted, but the information they offer is limited, and there are concerns that they are not useful indicators of the quality of care that an HMO provides.

An early study comparing the satisfaction of Medicare beneficiaries in HMOs with that of beneficiaries in traditional fee-for-service plans showed that a high percentage—about 80 percent—of both groups were "very satisfied" with their health care overall (Rossiter et al., 1989). In general, satisfaction surveys of HMO members indicate that they are more satisfied than their counterparts in fee-for-service plans with the out-of-pocket expenses and the reduced paperwork in managed care plans. They are less satisfied with access to care, referrals to specialists, and physician choice.

33  

Material presented by Priscilla Itzcoitz.

34  

Unless otherwise noted, the material in this section is based on a presentation by Patricia Butler.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

another series of focus groups, participants indicated that they would like to be able to call a toll-free telephone number to obtain answers to their questions by a knowledgeable operator (Mellman, Lazarus & Lake, 1994). Although Medicare beneficiaries trust and turn to family and friends for information, this group wants unbiased information from all other sources. Studies have found that seniors overwhelmingly express interest in obtaining information about health plans through one-on-one counseling, personal presentations, or group presentations where they would have the opportunity to ask questions afterward (Research Triangle Institute, 1995).

Given that health plans often are the source for much of the information that beneficiaries receive regarding these plans, a distinction needs to be made between marketing and education. There needs to be a place where a Medicare beneficiary can go for unbiased, objective information, preferably where a beneficiary can talk to someone in person or via the telephone.

Role for Information Facilitating Organizations

Since Medicare beneficiaries expressed a preference for receiving unbiased information through sources other than the health plans themselves or even through employers or government, symposium participants indicated the usefulness of third-party organizations. These third-party organizations could include organizations that focus solely on education or groups that combine an education function with their selected purchasing power, such as voluntary purchasing cooperatives.

Information, Counseling, and Assistance Programs32

Since 1992 HCFA has funded ICA programs to help Medicare beneficiaries obtain unbiased information about public and private health insurance alternatives. Through individual counseling, group seminars, and written materials, the programs provide information about Medicare, supplemental insurance products, long-term-care insurance, managed care plans, and

32  

Material provided by Diane Archer.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

How Do You Get the Information Out Effectively?31

A thorough review of the literature indicates that Medicare beneficiaries use all types of media and do so often. Television is the most widely used medium among adults age 55 and older. Eighty-four percent of adults over age 50 read a newspaper daily, and 70 percent are magazine readers. Perhaps one of the least-used media is radio, with just 20 to 25 percent of the adult radio-listening audience consisting of those over age 55.

The Medicare population is not homogeneous, however, and should not be stereotyped. Education, age, income, and living arrangements all affect the types of media that people use. Someone with more education is more likely to use a variety of media than someone who did not complete high school.

In marketing, focus groups have determined the value of segmenting messages according to groups of people who demonstrate consistent attitudes, values, and behaviors. Among Medicare enrollees, focus groups have identified four different groups: proactive adults who seek information, faithful patients who do what the doctor tells them, optimists who think they will never get sick, and the disillusioned who do not trust anyone.

In addition to media, there are myriad other sources of information: handbooks and guides produced by public agencies such as HCFA; libraries; information kiosks; videotapes; on-line computer services such as SeniorNet or Retirement Living Forum; community meetings; information, counseling, and assistance (ICA) programs; nonprofit organizations such as AARP; one-on-one counselors; private organizations; employers; and physicians.

It has been found that forums in which Medicare beneficiaries can have one-on-one personal contact carry the most weight and influence with this group. A series of 15 focus groups conducted in the fall of 1993 for the Kaiser Family Foundation found that the biggest problems with Medicare had to do with communication and coverage (Frederick/Schneiders, 1995). In

31  

Unless otherwise noted, the material in this section is based on a presentation by Carol Cronin.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

sumers regarding quality. Without information regarding quality it is difficult for consumers to determine the value of their benefits. Several participants observed, however, that quality may be assessed differently by consumers than by clinicians and purchasers and that more work needs to be done to develop indicators that are particularly relevant and useful to individual elderly consumers.

Information regarding disenrollment rates, appeals and reversal rates, board certification, the training and experience of a plan's doctors, and a detailed participating provider list are also important. Provider lists can be misleading, however. Often, lists include physicians whose panel of patients may be closed or who can accommodate only a few new patients. Some providers are dropped from plans after open enrollment periods end. Some plans may list certain centers as participating providers, but they may only cover such services as open heart surgery at one of these centers and nothing else. This is referred to as the marquee effect.

Beneficiaries and advocates for the elderly express concern that physicians in managed care plans may be in a conflict-of-interest situation in which they are wearing two hats: patient adviser and manager of care and costs. Given the increasing numbers of physicians taking on this dual role and the fact that many Medicare beneficiaries rely on their physicians for advice and protection, Medicare beneficiaries may need to know of noncriticism clauses or "gag rules" between plans and providers. So-called gag rules prevent physicians from criticizing or questioning a plan's rulings. There is concern that physicians may not advise their patients about procedures if those procedures or treatments are not covered by the plan.30

30  

U.S. Healthcare as well as a number of other health plans recently have dropped provisions in their physician contracts that relate to limitations to speak freely with patients. At least six states have enacted legislation preventing health plans from utilizing "gag rules," or anticriticism provisions, which prevent a physician from disclosing financial incentives that may affect patient care. In addition, a bill has been introduced in Congress, H.R. 2976, the "Patient Right to Know Act" that bars restrictions on physician-patient communication in HMO contracts. As of the third week of July, 1996, the bill had nearly 100 cosponsors.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

"report cards," to the incentives driving doctors within health plans, to financial solvency information involving a plan, to disenrollment rates in a given area. Beneficiaries need to understand a plan's responsibilities and their rights as members—not only their rights to appeal decisions but also their rights to access to quality care in a timely manner.

Furthermore, although plans may provide a wide range of information, they may not be providing comprehensive information. In other words, they may not elaborate on areas that are often open for interpretation by the consumer. For example, in the California marketplace, officials are concerned that plans are not providing enough information to members regarding what exactly constitutes emergency care, how much coverage enrollees can expect when they seek care outside of an area covered by their plan (if they need care when traveling), and under what circumstances enrollees can negotiate referrals to specialists. 28

There are questions regarding just how much information consumers need. Some consumer advocates argue for the provision of data on the satisfaction of people who have been involved in a grievance process or the satisfaction rates for those who suffered major medical illnesses. Others argue for consumer information on profits or compensation for chief executive officers. Although some say that this level of information could be irrelevant and overwhelming for the consumer, others argue that interested consumers are capable of processing this kind of information (Rodwin, 1996). Medicare consumers want, need, and have a right to a variety of information. If consumers do not understand some of the information provided, insurance counseling groups, such as the ones operated by United Seniors Health Cooperative, can help them understand and interpret it.29

Other areas of disclosure involve the performance of a health plan in terms of both quality and service. Although plans generally provide extensive information on covered benefits, costs, and required copayments, little information is available to con-

28  

Comment by Lucy Johns.

29  

Comment by Priscilla Itzcoitz.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

vided. Several areas of specific concern include prescription drug coverage, foot care, home care, and long-term-care issues and what happens to their coverage when they, for example, move to Florida for the winter.

More importantly, however, the Medicare population wants to know how others like themselves—with the same conditions and of the same socioeconomic status—fare within a given health plan. For example, they want to know the quality of care that someone with arthritis can expect within a certain plan and will likely not be as concerned with that plan's outcomes in obstetrics.

Full Disclosure27

Although Medicare beneficiaries may express interest only in the specific information that they deem relevant to their current health conditions or service preferences, there is a great deal of information that they may not know exists and that could have an impact on their decisions when choosing between fee-for-service and managed care plans or when choosing a particular managed care plan.

To ensure informed choice there is a certain level of information that should be made available to all consumers, whether or not they have expressed an interest in obtaining such information. This information runs the spectrum from quality-of-care

27  

Point made by Lucy Johns.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

TABLE 2-2 Typology of Information Likely to Be of Interest to Medicare Beneficiaries

Structural Information

 

  • Premiums and copayments
  • Ratings of the hassle factor associated with paperwork
  • Brief summary of contractual arrangements with providers: incentives to reduce utilization
  • Medical/loss ratio of plan
  • Comparable information for fee-for-service plans
  • Description of grievance and disenrollment process Benefit Package
  • Description of standard benefit package
  • Coverage for special concerns of the elderly: prescriptions, foot care, home care, long-term care, other supplemental coverage Quality
  • Accreditation status
  • Percentage of board-certified physicians
  • Patient reports and ratings of care for all members and for members over age 65

 

  • Member services, including member support, choice of doctor and hospital, prior approval process, restrictions on referrals for specialty care
  • Access: appointment waiting times, visit waiting times
  • Access to and choice of primary care physicians and specialists
  • Communication/interpersonal skills
  • Coordination of care
  • Information and education
  • Respect for patient preferences
  • Emotional support

 

  • HEDIS and other technical measures appropriate for a Medicare population: mammography rates, cholesterol screening

 

SOURCE: Susan Edgman-Levitan and Paul D. Cleary. "What Information Do Consumers Want and Need: What Do We Know About How They Judge Quality and Accountability." Paper prepared for the IOM study Choice and Managed Care: Assuring Public Accountability and Information for Informed Purchasing by and on Behalf of Medicare Beneficiaries.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Understanding how this new paradigm works will also help Medicare enrollees understand that their current fee-for-service primary care physician may operate differently in a managed care network. They may not get the same degree of individual attention from their customary physician working in a network. The incentives for the physician under a fee-for-service system are different from those for the physician under an HMO, in which the goal of the HMO is to make certain not only that coordinated, appropriate care is given but also that costs are controlled.25

Information That Interests Medicare Enrollees: Specific Plan Information 26

In general, Medicare beneficiaries are most interested in information about how their plan works, how much it will cost them, if their physician is in the plan, and what benefits are covered. As shown in Table 2-2, the types of information in which Medicare enrollees are interested range from information on quality, to service, to accessibility and choice. In terms of hospital care, they want to know if their preferences will be respected, how much information they will be given, how well their care will be coordinated, if they will receive emotional support, how their physical comfort needs will be met, and what will happen to them when they leave the hospital and return home.

In terms of ambulatory care, their concerns are centered around issues of access. Will they have access to the physician whom they choose or to specialists when needed? Will they be able to afford that physician's services? How long does it take someone to answer the phone, and how long does it take to get an appointment? They also want to know what will happen when they get to the doctor's office. How much information will they receive? What will the testing procedure be? And what follow-up activity can be expected?

Medicare beneficiaries are also interested in the overall quality of care and how satisfied they will be with the services pro-

25  

Point made by Diane Archer.

26  

Material presented by Susan Edgman-Levitan.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

are less aware of infrequently used services like hospital and nursing home care.

In addition to not fully understanding Medicare, most people—not just Medicare beneficiaries—do not understand the concept of managed care and all of its variations. It is difficult to make decisions about managed care when consumers do not know the difference between their managed care options and their fee-for-service options.

Comparisons between the two systems are even more difficult given that little information about care in the fee-for-service system is available to consumers. Under the fee-for-service system, the consumer (patient) selects a physician or service. If that consumer is not happy with the choice or if the physician provides less than satisfactory care, it falls to the consumer to take appropriate action. In the case of a growing number of HMOs, there are concerted efforts to assess quality and to help enrollees understand the meaning of quality by presenting report cards on measures particularly relevant to elderly beneficiaries. This information and other indicators that consumers find useful in evaluating health plans would be just as helpful to them in evaluating physicians in the fee-for-service system. 23

The Importance of Comparability

Without a clear picture of how managed care works there is great potential for dissatisfaction with managed care.24 Managed care represents a new paradigm for doing business, and consumers need to be educated about the potential benefits of this new system. It has to be made clear that managed care should not be regarded as the current fee-for-service system but with a richer benefit package and the same freedoms. The simplified paperwork, added benefits including prescription drug coverage, and reduced out-of-pocket costs come at a price. In exchange for these benefits, enrollees may be limited as to the physicians whom they can see or the services that will be covered.

23  

Point made by Marcia A. Laleman.

24  

Point made by Marcia A. Laleman.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

What Information Do Medicare Beneficiaries Want and Need?22

Before Medicare beneficiaries can make an educated decision regarding managed care, they first must understand the Medicare fee-for-service program. Then they need to know how managed care works. Without a clear understanding of how both of these delivery systems operate, Medicare beneficiaries will be ill-equipped to make informed decisions about their own health care. Once they understand the various benefits or characteristics of each program, they can move to the task of choosing among the myriad plans and benefit packages available to them.

Numerous studies indicate that adults of all ages have a poor understanding of their health insurance coverage until the time that they become ill and need services (Mechanic, 1989; Pemberton, 1990). Many elderly beneficiaries do not know that Medicare is a program run by the federal government, and many are not aware that managed care is an option. HCFA currently mails each Medicare beneficiary a brochure approximately 3 months before the new enrollee's 65th birthday. The brochure explains the Medicare program, Medigap insurance, managed care options, and other private insurance coverage that might be available to the beneficiary. Anyone interested in more information on managed care can also request a copy of the Medicare Handbook and another HCFA brochure entitled "Medicare Managed Care Plans," which discusses how managed care works, enrollment issues, how to select doctors and hospitals, the advantages and disadvantages of HMOs, and disenrollment and appeals procedures (Cronin, 1996). Beneficiaries can also call a toll-free telephone number to see if an HMO exists in their area.

Despite these sources of information, many people still are not clear on how the program operates. Several studies indicate that Medicare beneficiaries have a limited understanding of their benefits. They are more aware of the services most often used, such as physician care and prescription drug coverage, but

22  

Unless otherwise noted, the material in this section is based on presentations by Susan Edgman-Levitan, Shoshanna Sofaer, and Lucy Johns.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

plan's responsibilities and the members' rights need to be fully outlined in terms that are easily understood. For example, it has been proven that any written information is most effective if it is at a sixth-grade reading level.17 This education process needs to occur before an enrollee joins a specific health plan. Studies indicate that the plans with the lowest rates of rapid disenrollment spend a great deal of time educating potential new enrollees up front. 18

According to analysts, high disenrollment rates indicate a likely misunderstanding of a plan's features (Rossiter et al., 1989). If a misunderstanding has occurred, HCFA now permits retroactive disenrollment for people who misunderstood the HMO lock-in requirements and received needed care from an out-of-plan provider. Retroactive disenrollment, especially in cases involving beneficiaries with cognitive impairments, can be an especially important feature. In this case HCFA will pay the charges for services provided during the unintentional HMO enrollment. HCFA is also in the process of creating a system that would allow Medicare beneficiaries to disenroll through an on-line HCFA computer service instead of having to go through the HMO.19 There have been reports that consumers have into difficulty or delays when trying to process their disenrollment with the plans themselves (U.S. Senate Special Committee on Aging, 1995).

According to a speaker at the symposium, health plans have strong incentives to educate new enrollees as much as possible. The cost of marketing is so high that plans cannot afford a high rate of disenrollment. The average cost of acquiring one new member can be in excess of $500.20 HMOs are also keenly aware of the fact that the best advertising is word of mouth and personal recommendations, so they would want to avoid any negative impressions caused by too many disenrollments. Consumer choice and competition are meaningless if the consumer is confused.21

17  

Point made by Elizabeth Hoy.

18  

Point made by Helen Darling.

19  

Material presented by Kathleen M. King.

20  

Point made by Peter D. Fox.

21  

Point made by Shoshanna Sofaer.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

population. There may be a need to identify and carve out populations with special needs within the larger Medicare managed care infrastructure. 15

Steep Learning Curve and Disenrollment

Despite a lack of clear evidence as to the effectiveness of managed care in dealing with the Medicare population, it is clear that enrollment in Medicare managed care plans is growing, and there is no evidence that this growth is going to subside. In this area, the Medicare program is on a steep learning curve. As experience with managed care grows and the learning curve begins to flatten out, current problems may be worked through. However, new problems may arise if the pressure to reduce overall Medicare program costs leads to rationing or significantly affects plan and provider behavior.16

Until there is more documented experience, the Medicare population needs to be assured that they can disenroll from a managed care plan if they are not satisfied. The freedom to disenroll is especially important for the members of this population since they are unfamiliar with managed care and do not have experience dealing with this system. In the long run, such assurances of easy and rapid disenrollment may not be necessary since many new Medicare enrollees will already have had experience with managed care.

Although Medicare enrollees can now disenroll from any plan on a monthly basis, there is still concern on the part of some beneficiaries that they cannot see another doctor at all (or only with an additional charge) or leave a plan immediately if they are dissatisfied. Furthermore, there is now discussion of changing the provision to call for an annual lock-in period.

One way to curb disenrollments is to focus on providing enrollees with as much information as possible up front so that enrollees understand how the plan works, what their expected costs will be, the benefit structure, how out-of-plan care is handled, and what situations constitute an emergency. The

15  

Point made by L. Gregory Pawlson.

16  

Point made by L. Gregory Pawlson.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

more satisfied with costs in managed care plans compared to indemnity plans (Miller and Luft, 1994). Take the following example of joint pain and chronic arthritis, which are common conditions for many Medicare beneficiaries. A study comparing Medicare beneficiaries with chest and joint pain in risk HMOs with their counterparts in fee-for-service plans found that those in the HMO were less likely to be referred to a specialist and less likely to receive follow-up care. Although the outcomes were similar, the HMO enrollees experienced less alleviation of joint pain (Clement et al., 1994).

Other studies indicate that HMOs are not as proficient in some areas. A study conducted by Shaughnessy et al. in 1994 found that most home health care outcomes for individuals in fee-for-service plans were better than those for individuals in HMOs. HMO costs for home health care were significantly lower than the home health care costs incurred by fee-for-service plans. The approach taken by many HMOs was one of maintenance as opposed to rehabilitation or restoration.

Several studies, however, indicate that HMOs do some things very well. For example, the Group Health Cooperative of Puget Sound practices population-based medicine, an approach to providing clinical care, especially for patients with chronic conditions. The plan identifies enrollees by such characteristics as age, sex, health status, health complaints, and disease diagnoses. Once the subgroups have been identified, specific services and programs are developed for them.

Most of the studies assessing how Medicare enrollees have fared in managed care plans have involved staff and group model HMOs, which are different from the current and emerging independent practice associations, PPOs, and provider service networks. Several key studies have looked at a variety of HMOs, however (Miller and Luft, 1994; Brown et al., 1993b). The managed care environment and health care delivery models will continue to change and evolve. Given this, the fact that managed care has had little experience with the elderly, and the fact that there is little conclusive evidence on how managed care organizations manage and coordinate care for the frail elderly, there may be a need for studies to determine areas in which managed care does result in real improvements for the elderly

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

is covered. This makes new entry within the 50-50 requirement very difficult.12

HMOs with large numbers of Medicare beneficiaries are concentrated in a few geographic areas, a trend that is changing. Of the 10 percent of Medicare beneficiaries who have enrolled in managed care plans, more than 50 percent have been enrolled in risk-based HMOs in just two states, California and Florida. Another 11 percent are enrolled in HMOs in Arizona and New York. Within the total Medicare population, 16 percent reside in California and Florida combined and 8.5 percent live in New York and Arizona combined (unpublished data provided by the Office of the Actuary, Health Care Financing Administration, May 30, 1996).

The studies that have investigated how well vulnerable populations fare in managed care plans have produced mixed conclusions. Most of the discussion around this particular topic continues to take place in a "fact-free" environment.13

HMOs differ significantly in their ability to meet the needs of the elderly. Some do not differentiate between elderly and nonelderly enrollees in terms of service delivery. Others have implemented services specifically targeted toward seniors. These include screening for frailty, geriatric assessment, specialized case management, and enhanced primary care for long-term nursing home populations. Some managed care plans offer additional services and benefits not covered by traditional Medicare such as respite care, home inspections, physical adaptations for the home, relationships with community-based social service programs, support programs for people who are newly widowed, and group clinics for people with chronic illnesses.

Several studies have found that whereas overall satisfaction and outcomes for beneficiaries in fee-for-service plans and HMOs are similar, HMO enrollees appear to be relatively less satisfied with quality of care14 and physician-patient interactions and

12  

Point made by Peter D. Fox.

13  

Point made by Peter D. Fox.

14  

The Institute of Medicine's 1991 report Medicare: New Directions in Quality Assurance defines quality of care as, "the degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge."

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

The Medicare population is also diverse in terms of its experience with and expectations of managed care. Particularly for older beneficiaries (ages 75 to 85), in most markets managed care is a foreign concept, a system that they have never dealt with and may not understand. Medicare beneficiaries in their 60s, however, are more likely to have had experience with the managed care system through their workplace. That level of experience will continue to grow since managed care is now the dominant mode of delivery of health care services for the population age 65 and under.

How Medicare Enrollees Have Fared in HMOs

Given the different needs of the Medicare population, the question is: How have Medicare beneficiaries fared so far in the managed care delivery system? Since the incentives that exist in managed care differ from those in the fee-for-service system, there are concerns that managed care organizations may be more focused on efficiency and profits than on developing a system of care that meets the needs of the elderly. In general, HMOs save money by reducing the use and intensity of health care services. Some researchers note that the use of managed care systems may be the best way to ensure coordinated care for this population.

To date managed care organizations have had little experience providing services to the Medicare population or treating older and sicker patients: just 10 percent of Medicare beneficiaries are enrolled in managed care risk plans. That is beginning to change, however. From 1995 to 1996 the number of Medicare beneficiaries enrolled in managed care risk plans grew by 26 percent. Each month close to 70,000 new Medicare beneficiaries enroll in a managed care plan. It is a market in which HMOs are beginning to concentrate their resources. As of February 1996, 189 plans nationwide had Medicare risk contracts, and approvals for another 48 plans were pending before HCFA. Eliminating the 50-50 rule and the requirement that there be 5,000 commercial enrollees before a plan can get a Medicare risk contract would spur further growth. Most employers these days are not very interested in contracting with new HMOs, and when they do, they want to make sure that a broad market area

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

Retirees are frequent users of health care. The status of their health and health care in general are major focuses in their lives. For many, medical care is part of a social experience. Given this, they require that a great deal of time explaining and reviewing these issues be devoted to them.

Issues of cost are a major factor in exercising choice for the Medicare population. A survey of retirees in Minnesota found that retirees were not willing to make any changes in their insurance coverage if it meant an increase in costs. At the same time they did not want any benefits reductions.

Are Medicare Beneficiaries Different?10

Medicare beneficiaries are extremely diverse. They include the ''young old," who are vibrant and healthy, and those who are in greater need of health care services, many of whom suffer from chronic diseases. Although the members of this population are diverse, in general they can be classified as "vulnerable" for a variety of reasons, including their greater need for health care services and the higher health care costs that they incur.11

The needs of the Medicare population are different from the needs of many of those already enrolled in managed care organizations. Although managed care organizations traditionally have focused on prevention and acute-care services—targeted to a relatively healthy membership—the elderly are more often in need of chronic care or services for the disabled. In 1989 the most prevalent chronic conditions for people over age 65 were arthritis, hypertension, hearing impairment, heart disease, cataracts, deformity or orthopedic impairment, chronic sinusitis, diabetes, visual impairment, and varicose veins (U.S. Senate Special Committee on Aging et al., 1991).

10  

Unless otherwise noted, the material in this section is based on presentations by Joyce Dubow, Peter Fox, and L. Gregory Pawlson.

11  

There are different interpretations of vulnerability in the Medicare population. The definition highlighted in the text is based on views by Joyce Dubow. The National Academy of Aging identifies vulnerable groups to include frail elders, older women, minorities, rural elders, and the growing numbers of oldest old individuals (National Academy on Aging, 1995).

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
  • verifying provider access, to ensure that there are adequate numbers of providers to serve members of specific geographic areas;
  • requiring a standard benefit design that uses a standard definition for each benefit;
  • collecting and publishing performance and cost data in quality report cards, incorporating Health Plan Employer Data and Information Set (HEDIS) data;
  • managing and monitoring customer service through an ombudsperson program; and
  • monitoring and tracking complaints and grievances and how they are resolved.

This information enabled CalPERS to provide comparisons among plans and to negotiate better premiums. It also put the agency in a position to determine which plans it wished to continue doing business with in the future.

Evidence from Minnesota and Edison International on Structuring Choice for Retirees9

Evidence from Minnesota and Edison International demonstrates that factors other than comparability of health plan benefits must be considered when structuring choice for retirees. Experience in these areas indicates that any entity dealing with this population must be prepared to devote considerably more time and resources to providing this group with information. For example, materials must be tailored to retirees to ensure that they can understand the information being conveyed. This includes printing materials in larger type and often targeting written materials to the appropriate reading level.

Multiple communications vehicles are necessary for this group, including open enrollment sessions, videotapes, toll-free telephone numbers, mailings, presentations, and one-on-one meetings. Other tools such as up-to-date directories listing the primary care physicians participating in a plan and plan options are also helpful.

9  

The material in this section is based on remarks by Kathleen P. Burek and Barbara L. Decker.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

These organizations also try to create a level playing field by providing enrollees with an objective source of information, such as a customer service center, structuring an open enrollment process, and providing comprehensive information on which people can base their choices. Finally, they hold health plans accountable for their performance, often by establishing certain standards or performance criteria during the contracting process. The plans must submit data and information to the purchasing organization or the employer, and that information is used to evaluate a plan's performance. Often, an independent party is hired to evaluate consumer satisfaction and to review grievances.

Case Study of CalPERS8

The California Public Employees' Retirement System (CalPERS) has close to 1 million members and offers an example of a government agency that has been able to take a strong purchasing role while ensuring quality. When CalPERS first began the process of negotiating with health plans, CalPERS considered restricting the number of plans that would be available to its members. The theory was that a multitude of health plans was not necessary if four or five could do the job. Upon further assessment, however, all legally licensed plans that met the standards set forth for quality and fiscal solvency were invited to participate.

CalPERS decided not to use its power in the marketplace to set tight controls on the market. Instead, CalPERS set high standards, focused on providing information to consumers, and let the health plans in the market compete. The agency uses a number of proactive procedures and checks and balances to ensure accountability by:

  • requiring all health plans to be licensed to do business by the California Department of Corporations;
  • gathering data from the plans on cost, performance and service, as well as externally driven data;

8  

Material provided by Tom J. Elkin.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

addition to managed care alternatives. If an organization chooses only to offer managed care plans to its members, it may offer plans with different options and benefit levels. These organizations also differ greatly in the degree to which they negotiate price.

However, evidence from a variety of these leading purchasers and purchasing alliances—such as Xerox, Edison International, the Health Insurance Plan of California, the Connecticut Business and Industry Association, and the Cooperative for Health Insurance Purchasing in Denver, Colorado—demonstrates that they all place importance on the practice of creating a level field on which individuals can compare health plans. The comparable information provided by these organizations usually includes details on plans' benefit designs and features, the different types of plans that are being offered, the geographic areas they cover, and other specific information.

The information provided can be either extensive, as in the case of Xerox, in which the company provides a report card about participating plans, to minimal, as in the case of the Cooperative for Health Insurance Purchasing in Denver, which offers a single trifold brochure with comparative charts. Some organizations go as far as providing superdirectories that list and describe every provider in the community and the plans in which they participate, together with such information as the languages spoken in the office and board certification of a plan's physicians.

Even with the best information on price, plan performance, and benefits covered, however, consumers can still find it difficult to compare plans and coverage. This is why many purchasing organizations have adopted standardized benefit designs for plans.

Many purchasers set a basis for the comparison of plans' benefit design that can be either broad or specific. For example, some organizations define different copayment levels and detail the inclusions and exclusions in various health plans. On the other side of the spectrum, Xerox, for example, does not define, line for line, the covered services in their plans' benefit designs, but requires that participating plans cover all medically necessary services. The company provides criteria for the range of services, facilities, and treatments that should be available.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

cians willing to provide services to them. In that environment physicians themselves are in a position to risk select since they can determine which patients may fit better in a risk arrangement or a traditional Medicare fee-for-service plan.

To avoid adverse risk selection, attention needs to be given to better risk adjusters, and an even greater focus must be placed on educating Medicare beneficiaries about their choices. HCFA currently has at least a dozen risk adjuster projects in development, including predictive and concurrent models.

Structuring Choice: a Look at Model Programs7

An assessment of the leading purchasers that currently offer their employees a choice of health plans shows that these organizations take a variety of approaches to how they structure choice for their workers and the processes that they put in place to facilitate choice. The thresholds of participation that they set for health plans also vary a great deal. In some instances many plans in the marketplace may meet the threshold criteria, and in other instances only a very few may be able to meet the criteria.

Purchasing coalitions or cooperatives help expand the limited choices that are typically available to workers employed in small businesses. These alliances generally provide their members with extensive, comparable information that enables them to make informed choices. Many purchasing coalitions go a step further, however, in that they negotiate with health plans for the best premiums and options and then select a number of plans on this competitive basis, in effect eliminating the need for their members to be as discriminating as they might otherwise have to be.

Often such organizations develop additional criteria to assist them in deciding which plans they will offer to their enrollees. The objective of some organizations is to offer plans with a variety of benefit structures, including fee-for-service plans in

7  

Unless otherwise noted, the material in this section is based on presentations by Elizabeth Hoy and Richard E. Curtis.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

medicine? The role of professionalism is further challenged in today's health care marketplace by the increasing use of capitation payments, which creates incentives on the part of providers to limit the number or the cost of health care services being delivered.5

Ensuring That Traditional Medicare Remains a Viable Option

Since Medicare beneficiaries in general are apprehensive about change, steps need to be taken to ensure that the traditional Medicare fee-for-service system remains a viable option for them. The 30-year-old Medicare program could benefit from some changes so that it becomes as much a competitor as managed care organizations in the new health care system.

Symposium participants advised the committee that the Medicare fee-for-service system should be held up to the same standards as any new Medicare managed care option. In an environment where there is increasing pressure on managed care systems for accountability, there needs to be comparable accountability in fee-for-service plans. If the quality and service indicators in both fee-for-service and managed care plans are the same, then both types of plans will be comparable. This will also allow Medicare beneficiaries to make a better informed choice.

One symposium presenter expressed the view that in 10 or 20 years it is unlikely that both fee-for-service and managed care systems will be options at similar prices.6 The incentives for both of these systems are so diverse that it would be difficult to be a physician or hospital operating simultaneously in each environment. Furthermore, there is great potential for adverse risk selection. If health plans attract the healthier Medicare enrollees, the sicker, more costly population will remain in the traditional Medicare fee-for-service system. The costs within that system would escalate and beneficiaries may find themselves facing higher costs, as well as reduced numbers of physi-

5  

Material presented by Robert Berenson.

6  

Material presented by Robert Berenson.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
Trust

In recent times the public's trust in many institutions has plummeted (Washington Post, 1996). Americans have lost confidence in the federal government and virtually every other major national institution. The public does not appear to trust insurance companies, health plans, or businesses. So the following question can be asked: In an era of growing cynicism, what sector and what institutions can be relied on to maintain protections and to be accountable?

Patients as Consumers

Evidence indicates that many among the elderly and disabled populations have difficulty choosing among health plans. Questions regarding how well the elderly population is equipped to choose a health plan in today's market, as well as in the future, when the market will have been fine-tuned, will prove to be important in determining accountability. Although the next generation of elderly will be more familiar with managed care arrangements, the vast majority of current Medicare beneficiaries face a very steep learning curve.

Professionalism

Many health care analysts argue that professional judgments on medical care should be relied on to determine what care is necessary and appropriate. There is evidence, however, as suggested by Wennberg, 4 that wide variations in major medical procedures exist across the country. Given these variations and the lack of clinical evidence supporting the use of many procedures, can the public rely on members of the medical profession to tell them what a good plan is or who is practicing good

4  

The Dartmouth Atlas of Health Care in the United States, created by a team of researchers led by epidemiologist John E. Wennberg, is a comprehensive study detailing the geographic distribution of health care resources in the United States. Released in January 1995, the study indicates that wide variations in health care services, procedures, and cost reimbursements exist across the country.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

citizens' groups and counseling organizations could serve such a function.

In the case of Medicare, a network of ombudsperson offices operating in areas with significant Medicare health plan enrollments could provide assistance to Medicare beneficiaries trying to decide which health plan to enroll in and could also help those who have complaints about their health plans. The ombudsperson's duties could range from investigating patient complaints, to monitoring marketing presentations, to helping beneficiaries obtain needed services. HCFA currently supports health insurance counseling programs funded through federal grants to states. Although generally well-respected, these programs tend to be small and underfunded operations.

Strengthening Professional Influences

Along the professionalism continuum, further effectiveness and outcomes research could be encouraged and funded to bolster the scientific clinical basis for managing care and establishing guidelines that would narrow variations among procedures and practices. Other options that might be considered and reflected in proposed legislation are requirements that health plans meet high government standards in order to be accredited organizations for participation as a Medicare health plan. Another option would be for Medicare to develop best-practice benchmarks and other management purchasing techniques that promote high standards for competing health care plans.

Three Key Issues

Three areas will affect the debate on where to place accountability:

  1. What agencies do elderly citizens trust to protect their interests and to hold the system accountable?
  2. How strong is the information base and how adequate are consumer skills?
  3. In the new environment, can professionalism continue to be relied on to help the elderly exercise choice wisely and appropriately?
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

beneficiaries the greatest protections. The farther government moves along the continuum of tightening controls and acting as a purchasing agent, however, the greater the likelihood of loss of flexibility and competitiveness in the market, and thereby a reduction in the number and types of health plan choices.

In discussing the role of government in holding the system accountable, a fundamental question that arises is whether this is government purchasing or, in fact, purchasing by elderly beneficiaries. For example, is the government a patron allowing some choice on the part of its clients, or is the government effectively providing people with vouchers and providing beneficiaries with the freedom to decide how to use those vouchers?3

The unique leverage of a $180 billion program such as Medicare needs to be considered, however. By virtue of its sheer size and as a public purchaser, the federal government has the power to profoundly influence the market and to drive health plans from the market by setting conditions of participation extremely high and then deciding the plans with which it wants to do business. Historically, government has not acted in this capacity.

Strengthening the Role of Consumers

Strengthening the role of consumers would require providing them with sufficient relevant information about health plans to help them decide whether to join a managed care plan and, if so, how to choose a plan that meets their needs. To provide better information, one must understand what information consumers want, how they want to obtain that information, and what kinds of information they should know.

Here, opportunity may lie in strengthening ombudsperson-type organizations. Today, many employee benefits offices serve an ombudsperson function in which they assist employees with complaints or other health plan issues that may arise. Senior

3  

At the symposium, Mark Pauly indicated that the level of choice afforded Medicare beneficiaries is affected by whether or not Medicare beneficiaries are viewed as owning the benefits awarded to them.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

More Active Government Role

Options for a more active government role in helping Medicare enrollees include raising the standards for entry into the Medicare health plan market. As the regulator of Medicare managed care, HCFA currently institutes fairly tight health plan entry requirements and other specific rules to ensure that "bad actors" do not enter the HMO risk market, such as the 5050 rule, which ensures that a plan already has experience providing services.2 Medicare also requires that for a risk-based contract, at least 5,000 of the plan's prepaid capitated members must be enrollees from the private sector. The minimum requirement drops to 1,500 for rural HMOs. Some Medicare reform proposals have sought to reduce these minimum requirements to increase the number of plans that would be available to enter the Medicare market.

As an alternative, under the Federal Employees Health Benefit Plan (FEHBP) the federal government contracts with all health care plans that meet participation requirements, and consumers make their own coverage decisions (Butler and Moffitt, 1995). This more inclusive purchaser approach may cause confusion among some beneficiaries, since they have had little experience with managed care plans and there is evidence that they may need assistance evaluating information. To alleviate some confusion and anxiety, the federal government could consider another option, that of assuming a more active purchasing role. As a large purchaser, the federal government could adopt some of the best practices of current large employers or purchasing alliances, which often negotiate actively with plans and require certain quality and service performance guarantees. In this capacity government could force competition among plans and then choose a subset of plans that offer the best choices for enrollees. This approach would afford Medicare

2  

The 50-50 rule requires that for all HMOs in which Medicare beneficiaries enroll, at least half of the members must consist of non-Medicare and non-Medicaid beneficiaries. This is meant to provide assurance that Medicare HMOs do not constitute a perhaps second class of care for the elderly and disabled populations. A number of analysts believe the HMO accreditation requirements developed by NCQA may make the 50-50 rule less essential.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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TABLE 2-1 Health Plan Choices for Private Sector Employees, 1993

Number of Health Plans Offered per Establishment

Weighted by Number of Establishments (%)

Weighted by Number of Employees (%)

1

76

48

2

16

23

3

5

12

4

2

6

5 or more

1

11

 

SOURCE: Preliminary tabulations from the 1993 Robert Wood Johnson Foundation Employer Health Insurance Survey conducted by the RAND Corporation (courtesy of Stephen Long).

kets. In this new system, government attempts to structure the market by encouraging competition, consumers have an array of health care options to choose from, and health plans share responsibility for accountability with the government. This accountability is reinforced by the power of the consumer to choose and to change plans. In the Medicare-restructuring proposals developed by the 104th Congress and the Clinton Administration, elderly beneficiaries would have choices beyond the current fee-for-service, traditional Medigap, and risk-based HMO options. These choices will include preferred provider organizations (PPOs), unrestricted fee-for-service health plans, and high deductible plans combined with medical savings accounts. Under the new paradigm most Medicare beneficiaries would have more health plan choices than the majority of today's private sector employees (Table 2-1).

To ensure accountability and informed purchasing for beneficiaries in a restructured Medicare program, a continuum of structural and oversight options can be considered. These range from (1) a more active government role, to (2) strengthening the role of the consumers so that they are better equipped to exercise choice, to (3) strengthening professional influences and advancing the science base for clinical effectiveness and outcomes. Each of these directions involves trade-offs.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

2
Symposium Summary

Structuring Accountability for Medicare: Looking at a Continuum of Options1

One of the federal government's major reasons for encouraging growth in Medicare managed care is to give Medicare beneficiaries a choice of health plans that people in the private sector already enjoy. Widening choice for Medicare beneficiaries, however, involves oversight and protection trade-offs. The challenge is how to develop a structure for accountability and consumer choice in a changing health care market.

The health care market emerging today is significantly different from that of the fee-for-service system with which most Medicare beneficiaries are familiar. In the fee-for-service system, consumers have relied to an extent on the professionalism of providers and on government standards in making their choices. Premium costs generally have not played a key role in the elderly's health care purchasing decisions.

A new paradigm is forming, however, in which efforts are being made to restructure the Medicare program around mar-

1  

Unless otherwise noted, the material in this section is based on a presentation by Lynn Etheredge.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
  1. U.S. General Accounting Office to be in the range of 10 percent of Medicare health care costs, are a significant problem in the Medicare program, they were outside the mandate of the present study.
  2. The committee focused much of its work on learning from model programs and major purchasers in the private sector, with the full realization that Medicare as a government social insurance program requires, in many important respects, a different response. The committee also heard considerable testimony from public purchasers including state-based organizations and HCFA.
  3. In defining parameters and vehicles to promote public accountability and informed purchasing, the committee recognizes the importance of maintaining the necessary flexibility in order to respond in a timely, appropriate fashion to a dynamic and evolving marketplace.

The committee's major charge and responsibility was to provide direction and guidance on how to promote public accountability and informed purchasing by and on behalf of Medicare beneficiaries in a new market-oriented environment characterized by choice and managed care. The committee was cognizant that in the new health care marketplace, Medicare beneficiaries as consumers or customers will be given both greater freedom and more responsibility for choosing their health plans and for making many of the important decisions associated with purchasing their health care and judging its value, adequacy, and responsiveness. Given the breadth and scope of its charge, the committee recognizes that many of the issues and topics that it addressed will benefit from additional review and analysis as better data and research findings become available.

It should also be noted that the committee was carefully formulated to reflect a balance of expertise particularly relevant to its charge. It included two experts from health plans, two individuals from the world of large purchasers-one public and one private, two consumer advocates with special expertise in elderly consumers in the health care marketplace, an expert on state insurance laws and regulations, a geriatrician, and an economist who has written extensively on the issue of opening choice and the structure of choice under market conditions.

Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
  1. availability of information for informed purchasing, the committee's major focus was the consumer (Medicare beneficiary) rather than plans, clinicians, or group purchasers. Much of the current information relating to performance and quality has been developed for these groups and may not be useful or relevant to the Medicare population.
  2. The committee was asked to focus its attention on the issue of choice and the number and range of health plans, not the inherent merit or value of individual types or forms of plans to be offered (i.e., preferred provider organizations [PPOs] versus medical savings accounts versus unrestricted fee-for-service indemnity coverage).
  3. Although the committee recognizes the great diversity of the Medicare population, this report focuses primarily on the ''mainstream" Medicare beneficiary. The committee realizes that severely disabled individuals and dually eligible beneficiaries (individuals who enrolled in both Medicare and Medicaid) may need different and additional protections with regard to public accountability and informed purchasing. It was not possible within the scope of this particular study to reflect adequately on the special and additional information and accountability requirements that may be needed by the disabled and the dually eligible as they enter a more market-oriented delivery environment.
  4. Many of today's elderly are particularly apprehensive about managed care and are concerned about their ability to make informed choices among health plan options. The committee heard evidence that the move to a choice paradigm with an emphasis on managed care represents greater challenges and problems for the current generation of Medicare beneficiaries, particularly the older cohort. With the increasing role of managed care, there is every expectation that future Medicare beneficiaries will have had considerable experience with this new delivery structure and therefore will be better informed and more comfortable consumers of managed care.
  5. The committee did not focus on the issue of risk selection, although it acknowledges that it is a major problem that must be addressed.
  6. Although the issues of fraud and abuse, estimated by the
Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
    • purchasing in a competitive environment on the basis of performance and consumer satisfaction measures.
    • The symposium agenda, a list of the participants, and a list of the commissioned papers are provided in Appendixes B, C, and D, respectively. The symposium was organized as an expert hearing with an emphasis on fact finding from the perspective of published research, current practices, and well-regarded firsthand expertise from the field.

    In considering its work and statement of task, the committee had to be mindful of the relatively short time frame within which this report had to be completed and the limited resources available to support the commissioned papers/research syntheses and the symposium activity. Given the committee's broad charge and the many issues that potentially fall under the rubric of ensuring public accountability and informed purchasing in an environment of choice and managed care, the committee believed that it was important and essential to set some priorities, parameters, and caveats regarding its work agenda. They are as follows:

    1. The task of the committee was not to judge the value of managed care as a vehicle for providing more appropriate, cost-effective care to Medicare beneficiaries or to reducing the rate of escalation in the costs of the Medicare program over time. The committee operated under the assumption that managed care plans will continue to grow and develop and to be made available to the Medicare population. Several members of the committee, however, expressed concern that any balanced appraisal by the elderly population of the potential of managed care to provide better care may be made more difficult for two important reasons. One, current proposals to restructure Medicare are being viewed by many elderly as a means of financing deficit reduction and achieving other political objectives. Two, in the case of all areas of health in which fundamental changes are being proposed, the media tends to focus on areas of discord and contention, contributing perhaps to additional anxieties among the already risk-averse elderly population.
    2. In looking at the issue of public accountability and the
    Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
    ×
      • model), letting government decide what is best (directed model), or providing a larger role for the market but leaving to government the responsibility of weeding out the bad apples (assisted model). Each model requires a different matrix of accountability and informed purchasing.
      • A paper by Elizabeth Hoy, Elliott Wicks, and Rolfe Faland reviews current best practices for structuring and facilitating consumer choice of health plans, looking at model programs developed by leading private and public purchasers.
      • A third paper, by Joyce Dubow, focuses particularly on the special considerations required to move Medicare beneficiaries as a more vulnerable cohort into managed care arrangements.
      • A paper by Susan Edgman-Levitan and Paul Cleary reviews the literature on what information consumers want and need and their ability to assess issues of quality and accountability.
      • Carol Cronin's paper summarizes what is known about how to most successfully reach and educate beneficiaries about choice.
      • A paper by Patricia Butler focuses on the effectiveness of current federal and state regulatory activities designed to satisfy and protect consumers in managed care plans.
      • Two case studies were also commissioned. The committee was aware of several U.S. General Accounting Office studies indicating that HCFA needed to improve its HMO monitoring processes and, furthermore, that as currently staffed and organized, HCFA may not be well structured to respond to the complex, rapidly changing health care system and would need to develop a new set of tools and authorities to operate as an effective purchaser of risk contracts (Cunningham, 1996; U.S. General Accounting Office, 1995a-f; Special Committee on Aging, U.S. Senate, 1995). The committee commissioned a paper to summarize HCFA's recent efforts directed at improving and streamlining its data collection and performance monitoring as well as to review HCFA's recent investments in beneficiary and customer communications. A case study of the California Public Employees' Retirement System (CalPERS) was also commissioned. CalPERS is frequently referred to as a model of group
      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×
      • The science-based and peer-reviewed literature on public accountability and informed purchasing for Medicare beneficiaries under a market-oriented choice paradigm is sparse since the field is young and continues to evolve at an unprecedented pace. The state-of-the-art information in this arena resides primarily among a number of large private and public purchasers that currently define the field and various other organizations and agencies such as the National Committee on Quality Assurance (NCQA), HCFA, the U.S. General Accounting Office, the Physician Payment Review Commission (PPRC), the Foundation for Accountability, and the Agency for Health Care Policy and Research, which have a major interest in and programs directed to this area. With that in mind, the committee developed a symposium primarily around real-world experts who could comment on and respond to the commissioned papers, to other relevant and available research findings, and to the Medicare reform proposals from their well-recognized experiences.
      • The committee was primarily interested in learning about current best practices in the public and private sectors as they relate to public accountability, informed purchasing, and competition based on excellence. There was a caution that the term best practices should be reserved for interventions that had been tested and evaluated on the basis of quality and cost-effectiveness and that the term promising interventions or models might be more accurate.
      • The committee was fortunate to be able to commission eight papers—including five literature reviews and two case studies that review the state-of-the-art and consider a continuum of organizational and policy options for assuring public accountability and informed purchasing-written by national experts. These papers cover the most critical aspects of ensuring public accountability and informed purchasing for Medicare beneficiaries in an environment of choice.
        • To frame the symposium dialogue and the committee's later deliberations, the committee asked Lynn Etheredge to write a paper proposing a conceptual framework for ensuring public accountability and informed choice from the perspective of beneficiaries by looking at how and where the various loci of responsibilities would be placed in the continuum of three alternative potential models: letting the market prevail (market
      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      some manner. This has implications for how the information infrastructure is developed and disseminated for this group.

      Several members of the committee noted that the term beneficiary may be inappropriate in a more market-oriented health care system. In today's competitive choice environment, beneficiaries will be regarded increasingly as consumers and customers who can vote with their feet and who will need to be satisfied. The thrust of this report focuses on identifying accountability systems, resources, and the knowledge base that will help beneficiaries to become informed and effective consumers, even as it applies to traditional Medicare.

      Study Approach

      In considering the best way to accomplish its task, the committee arrived at a number of approaches and conclusions that shaped its agenda.

      • The committee's focus was on beneficiaries/consumers (rather than plan managers, clinicians, or payers of care). The committee used the analogy of wholesale and retail information that had been well-described in a recent paper by Lynn Etheredge (Etheredge, 1995). The success of the choice paradigm will require Medicare beneficiaries to act as consumers and individual purchasers and to move from having a passive role to having an active voice, a new role and responsibility that succeeds only if information and standards of accountability that are directly relevant, meaningful, and accessible to them are developed. Until now most of the information on quality and performance has been developed for private group purchasers, managers, clinicians, and some public payers.
      • The present study was initiated with the expectation that Medicare legislation providing broader beneficiary choice would pass the U.S. Congress before the study was completed. The committee used the Medicare provisions of H.R. 2491, the Balanced Budget Act of 1995, as a template for its work agenda and for the focus and structure for its deliberations. Although, President Clinton vetoed the final bill, the committee believes that the bill's Medicare reform provisions still provide a useful and relevant framework for reform.
      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×
      • the capacity to assess and report whether contracted services are performed responsibly and effectively,
      • requirements as a public program financed by taxpayer dollars to see that the needs of individuals are balanced against the wise use of collective resources, and
      • a special level of responsibility as the purchaser of health care for elderly beneficiaries, many of whom are vulnerable.
      Informed Purchasing by and on Behalf of Beneficiaries

      If there is little dissension over the need for public accountability and informed purchasing, the question of how to ensure it is far more contentious. Some will argue that market competition and informed purchasing are the best guarantees of access to high-quality services. Others argue for a strong federal regulatory and oversight role and advocate for extensive regulations in a number of areas including marketing, access, quality, appeals and grievances, data collection, and solvency. Others propose a middle ground that would permit a greater role for the market, with its potential to be more efficient and innovative and as a better expression of consumer wants and desires, yet leave to government the role of limiting the number of market entrants to those that meet certain minimum standards of performance and that offer certain minimum protections. Each of these three models (market, directed, and assisted) results in a different matrix of accountabilities.

      Without adequate, reliable, comparable, and timely information, it is not possible to exercise informed choice. At its first meeting, the committee discussed the problem that even under the best of circumstances, some elderly people, particularly extremely frail and cognitively impaired individuals, would not be able to exercise choice on their own. The committee was struck by a report from the Alina Health Plan, a major HMO in Minnesota serving a large Medicare population, which reported that for almost half of the plan's elderly enrollees, major decisions about medical care are made not by the enrollees but by a spouse, a family member, or a caretaker (Mastry, 1995). The committee wanted the title of its activity to reflect the reality that for a significant part of the Medicare population, the responsibility of informed purchasing will need to be delegated in

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      Accountability in Health Care?" was published (Emanuel and Emanuel, 1996). The article reflects the notion that occasionally a single word comes to dominate discussions about a topic and becomes a "keyword." Such a keyword can serve as a "shorthand expression for an entire view; and persons with diverse perspectives affirm its perspective" (Emanuel and Emanuel, 1996, p. 229). In the current health policy dialogue, accountability has become a keyword.

      In health care the matrixes of accountability (the who, what, and how) have traditionally been shared by three different domains: the professional, political, and economic domains. Part of the rationale for the present IOM activity was the concern on the part of some stakeholders that under a more market-oriented Medicare program, the locus of accountability may shift markedly from the public to the largely untested private sector. Such a shift in accountability would have special relevance for elderly individuals, who in the past have relied on providers and government to provide the necessary assurances and protections.

      For the purpose of this report the committee selected to define public accountability as accountability to the public, defining public as beneficiaries in the first instance, but also the larger public as interested parties and taxpayers, and to define government as the elected representatives of the citizenry.

      Although public accountability may mean different things to different people, most would accept the basic premise that managed care (choice) plans should be held accountable to both Medicare beneficiaries and the public at large: to Medicare beneficiaries because of the contractual arrangements between managed care plans and their Medicare enrollees and to the general public because it pays (through Medicare taxes, Part B premiums, and general revenues) for the care that is provided.

      Considering the mandate of this report, the committee discussed some additional elements of public accountability and determined that these should include the following:

      • requirements for disclosure and the dissemination of relevant and useful information,
      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      Medicare and other indemnity plans, medical savings accounts, and Taft-Hartley-sponsored plans) not only managed care arrangements.

      The committee recognized that there is not a universally accepted definition of managed care. As the managed care industry continues to evolve, the boundaries between different types of plans will become increasingly blurred. Therefore, for the purpose of this report the committee selected to define managed care broadly to include the following:4

      Any product or arrangement that seeks to coordinate or control the use of health services by its enrolled members. Arrangements can involve a defined delivery system or providers with some form of contractual arrangement with the plan. Types of plans can range from simple PPOs to more tightly structured HMOs.

      Public Accountability

      A 1994 IOM study, Defining Primary Care: An Interim Report, defined the term accountability as the quality or state of being responsible or answerable. Accountability also has been defined to mean "subject to the obligation to report, explain or justify" (Random House, 1983).

      For the purpose of this report, the committee discussed the difference between "accountability" and "consumer protections" and suggested that accountability for services could be viewed as the equivalent of ensuring the safety of products through consumer protections. Consumer protections are usually mediated on a case-by-case basis, whereas accountability usually implies a broader concept to include responsibility to a group and to a larger public.

      During the committee's deliberation the article, "What is

      4  

      For purposes of comparison, the Physician Payment Review Commission, in its 1996 Annual Report to Congress, defines managed care as follows: "Any system of health service payment or delivery arrangements where the health plan attempts to control or coordinate use of health services by its enrolled members in order to contain health expenditures, improve quality, or both. Arrangements often involve a defined delivery system of providers with some form of contractual arrangement with the plan" (Physician Payment Review Commission, 1996, p. 394).

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×
      • public accountability and informed purchasing in the current Medicare program and other health plans, (2) recommend how public accountability and informed purchasing can be ensured for Medicare beneficiaries in managed care and other health plan choices, and (3) discuss options and strategies that can be used to help government and the private sector achieve the desired goals in this arena; and
      • to produce a report that will include the commissioned background papers, a summary of the symposium discussion, and recommendations on the major issues that need to be addressed to ensure public accountability and the availability of information for informed purchasing by and on behalf of Medicare beneficiaries in managed care and other health care delivery options.

      Definitions and Study Approach

      Definitions

      At its first meeting the committee spent considerable time discussing the context of its charge and establishing some working definitions of choice and managed care, public accountability, and informed purchasing by and on behalf of Medicare beneficiaries. Each of these deserves a note of clarification for the purpose of this report.

      Choice and Managed Care

      The committee's original name was, "Medicare Managed Care: Assuring Public Accountability and Informed Purchasing for Beneficiaries." At its first meeting the committee felt strongly that responsibility for public accountability and informed purchasing should not be limited to the new plans that would be offered to beneficiaries but should pertain equally to the traditional Medicare program. Although the committee acknowledged that the traditional Medicare program remains very popular among the elderly, it should not be excluded from the measures of accountability and performance that will be required of managed care plans. Choice for the purpose of this report refers to all of the health plan options (e.g., traditional

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      Medicare beneficiaries are not particularly distinguished from other consumers in their lack of understanding of their insurance coverage; such information has been shown to be not important to most people until they become sick (Mechanic, 1989; Pemberton, 1990). Older individuals, however, process information differently than young adults, finding more difficulty understanding information when it is new or complicated (Davidson, 1988). Surveys indicate that it takes more time and that it is more resource intensive to educate the elderly than younger individuals about their health care choices. Elderly beneficiaries like to have information presented to them in a variety of formats and have a particular preference for face-to-face interactions. Materials and approaches used to inform the employed population about their health care options may not be well suited to the elderly population. 3

      The Committee's Charge

      The current debate over offering Medicare beneficiaries more choice in health plans as a vehicle for reform and deficit reduction stimulated the Institute of Medicine to appoint a committee that would provide guidance to policy makers and decision makers on ensuring public accountability by and on behalf of Medicare beneficiaries in a system of expanded choice and with a growing role for managed care.

      Three tasks framed the committee's charge:

      • to commission background papers from experts and practitioners in the field that review the literature and synthesize aspects of the leading issues and current policy proposals as they pertain to ensuring public accountability and informed purchasing in a system of broadened choice;
      • to guide, develop, and convene an invitational symposium to (1) examine what is known (or not known) about ensuring

      3  

      These observations were initially detailed in a background paper prepared by Anne Schwartz of the Physician Payment Review Commission entitled, "Providing Information about Insurance Options to Medicare Beneficiaries," and were subsequently incorporated into the Commission's 1996 Annual Report.

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      cause variability in health care expenditures among elderly and disabled enrollees is far greater than those among the general population (Aaron and Reischauer, 1995). In addition, opportunities for biased selection are shaped by the rules and practices of the present market. For example, the current ability of Medicare beneficiaries to change health plans every month, unlike the typical annual open enrollment seasons for employees, enhances the opportunities for biased selection, as does the ability of an HMO to decide whether or not to enter the Medicare market and the type of contract options it will make available to beneficiaries (Miller and Luft, 1994).

      A number of studies have shown that the elderly generally suffer from a lack of understanding about basic health care coverage and therefore are not equipped to operate effectively in an environment of broader choice. Consumers are unable to make effective choices because the variation and array of coverage are confusing (McCall et al., 1986; Jost, 1994). The availability of state-of-the-art information is critical for consumer choice (and voice), but such information for the Medicare population is still in a stage of infancy.

      Information Dissemination

      Unlike the population under age 65, Medicare beneficiaries have had relatively little exposure to diverse managed care models and have been shown to be more apprehensive and concerned about managed care than their younger counterparts (The Robert Wood Johnson Foundation, 1995). Much of this concern and apprehension is linked to the possibility that beneficiaries, in joining a managed care plan, will no longer be able to stay with their current physician (Frederick/Schneiders, 1995).

      The lack of familiarity with managed care underscores the importance of providing beneficiaries with information that will enable them to make informed choices. Numerous studies, however, have shown that Medicare beneficiaries are poorly informed about what the traditional Medicare program covers and have very limited understanding of what managed care is or what the specific benefits of a particular managed care plan are (Sofaer, 1993; McCall et al., 1986; Rice, 1987; Davidson, 1988).

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      tion survey reports that 30 percent of Medicare beneficiaries rate their health as fair to poor (Henry J. Kaiser Family Foundation, 1995). Self-assessed health has been shown to be a reliable predictor of future health care utilization.

      Similar to the rest of the population, a small proportion of all Medicare beneficiaries consumes a significant share of total Medicare spending: 10 percent of the beneficiaries account for 70 percent of program expenditures. Per capita spending for the elderly, however, is roughly four times that for the rest of the population. Annual per capita Medicare spending averaged about $4,000 for beneficiaries in 1993. For the 10 percent of beneficiaries with the highest health costs, Medicare spent an average over $28,000 per beneficiary. Medicare paid no benefits on behalf of the healthiest 20 percent of beneficiaries (Henry J. Kaiser Family Foundation and Institute for Health Care Research and Policy, Georgetown University, 1995). As the Medicare market becomes more competitive, protections must be put into place to ensure that plans do not engage in practices that discriminate against high-risk patients.

      Much of the literature suggests that Medicare beneficiaries enrolled in HMOs have tended to be healthier than those enrolled in the traditional Medicare program, although a more recent study indicates that the Medicare HMO population is becoming more broadly based and that its overall health status mirrors that of the non-HMO population (Price Waterhouse LLP, 1996). Nevertheless, the concern that HMOs may limit access to necessary care remains. Although conventional fee-for-service care is thought to promote the excessive utilization of medical services, there is concern that providers may overreact to the financial incentives to limit utilization, leading to reduced access to needed services by the elderly (Clement et al., 1994).

      The potential for risk selection in Medicare health plans is a particularly serious concern. Some plans may draw beneficiaries whose health care costs are expected to be low (favorable selection); others may attract beneficiaries with complex medical problems and whose health care costs are expected to be high (adverse selection) (Physician Payment Review Commission, 1996). The problem of risk selection is greater under Medicare both because beneficiaries enroll as individuals and be-

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      FIGURE 1-4 Distribution of elderly beneficiaries, by income, 1992.

      SOURCE: Medicare Chart Book prepared by The Henry J. Kaiser Family Foundation and The Institute for Health Care Research and Policy, Georgetown University, 1995, p. 2. Reprinted with permission of the Henry J. Kaiser Family Foundation.

      or older has risen steadily in the past 20 years (Adler, 1995). Obscured in these statistics, however, are the sizable number of elderly individuals with inadequate functional literacy skills. A recent study to assess the ability of patients to perform the wide range of literacy tasks required to function in the health care environment found a higher prevalence of inadequate functional health literacy skills among elderly individuals than among individuals in younger age groups (Williams et al., 1995).

      Health Status and Risk Selection

      Data from the Medicare Current Beneficiary Survey indicate that almost half of the aged Medicare beneficiaries (45.8 percent) rate their health as excellent or very good, a proportion that is ''remarkably stable" across age groups. On the other hand, only 17 percent of the disabled rate their health as excellent or very good, whereas 57.8 percent rate their health as fair or poor (Adler, 1995, p. 175). A Henry J. Kaiser Family Founda-

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      FIGURE 1-3 Distribution of Medicare population by gender, race, and residence, 1992.

      SOURCE: Medicare Chart Book prepared by The Henry J. Kaiser Family Foundation and The Institute for Health Care Research and Policy, Georgetown University, 1995, p. 4. Reprinted with permission of the Henry J. Kaiser Family Foundation.

      $25,000, as shown in Figure 1-4. In 1992 about 83 percent of Medicare program spending was on individuals in this income group. Eighteen percent of the Medicare population have annual incomes of between $25,000 and $50,000, and 5 percent have annual incomes greater than $50,000.

      Recent reports indicate that many elderly may buy into managed care because of its lower price and affordability (U.S. General Accounting Office, 1996). Financially, they may not have any viable alternative even when they have credible grievances or are dissatisfied with managed care. This places a special burden on developing public accountability parameters to ensure adequate performance and access standards.

      Both the aged and disabled groups have relatively high levels of education, with over 50 percent of each group having graduated from high school or attended college. The median number of school years completed among the population age 65

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      health care delivery for this population: managed care. Although managed care has become the norm for the employed population, for most elderly individuals it represents uncharted waters, even with today's dramatic growth in the level of Medicare HMO enrollment.

      How is the Medicare Market Different?

      Demographics

      Although Medicare has uniform eligibility and financing requirements and all elderly beneficiaries have access to the same basic benefit package, individuals served under the program are extremely diverse in terms of sociodemographic characteristics and health needs. As a group Medicare beneficiaries are older and sicker than patients who have traditionally used managed care plans (Vladeck, 1995).

      Among the Medicare-eligible population, 46 percent are ages 65 to 74, 31 percent are ages 75 to 84, and 12 percent are ages 85 and older (Henry J. Kaiser Family Foundation, 1995). Four and a half million of the Medicare-eligible population are persons under age 65 with disabilities or individuals with end-stage renal disease. Figure 1-3 illustrates that 57 percent of Medicare beneficiaries are women, 43 percent are men, and 84 percent of beneficiaries are white. Medicare beneficiaries, like the general population, tend to reside in urban areas (74 percent for Medicare beneficiaries versus 79.7 percent for the total U.S. population) (Henry J. Kaiser Family Foundation and Institute for Health Care Research and Policy, Georgetown University, 1995; Bureau of the Census, 1995).

      The oldest old (ages 85 and over), persons under age 65 with disabilities, and individuals with end-stage renal disease have been Medicare's fastest-growing populations. The 31.2 million people in the United States over the age of 65 in 1990 is expected to grow to 52 million by the year 2020. In the same period, the very old, those age 85 and older, will more than double in size, from 3.1 million to 6.5 million people.

      Although there is a perception that Medicare beneficiaries are relatively better off than their younger counterparts, three-quarters of older people have annual incomes of less than

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      cost sharing, as long as the total cost sharing did not exceed the cost-sharing guidelines for the fee-for-service program.

      To further encourage and facilitate the move to managed care, the legislation provided for a structured enrollment process and the requirement that beneficiaries be provided with more information about their options. A coordinated annual enrollment period would occur each year, during which beneficiaries would be able to change plans if they so desired. To assist beneficiaries in executing their choices, the congressional proposals required the Secretary of the U.S. Department of Health and Human Services to ensure that beneficiaries receive adequate information about their coverage options.

      Activities at HCFA

      In 1995 HCFA announced the Medicare Choices demonstration project, which would allow non-HMO managed care plans such as provider networks and POS plans to enroll Medicare patients for the first time, using a variety of payment mechanisms. The project was intended to test beneficiaries' responses to a range of health care delivery system options and to evaluate the suitability of those options for Medicare. The request for proposals explicitly encouraged a range of organizations, in addition to traditional HMOs, to submit applications, and it solicited applications from organizations in markets where Medicare managed care participation was relatively low (Health Care Financing Administration, U.S. Department of Health and Human Services, 1995). The HCFA solicitation produced inquiries from 400 managed care plans in 47 states. HCFA asked 52 plans to submit applications and in April 1996 announced 25 final candidates.

      Although there is general agreement for the need to reduce Medicare spending and even on the potential merit and value of providing Medicare beneficiaries with the same array of health plan options available to the population under age 65, questions continue to be raised about the scope and pace of change being proposed and whether the necessary infrastructure for providing information, protections, and accountability are in place to enable Medicare beneficiaries to move safely and responsibly into what is for the vast majority of them a new frontier of

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      consideration than gaining access to the most affordable plan (personal communication July 22, 1996, Randall Brown, Senior Fellow, Mathematica Policy Research, Inc.).

      Restructuring Medicare and the Context for the IOM Study

      Early conversations about having the Institute of Medicine (IOM) conduct a study on accountability and informed purchasing for Medicare beneficiaries in an environment of broader choice and managed care began against a background of rising concern about the pressing need to dramatically reduce the rate of growth in entitlement spending and focused congressional interest in transforming the Medicare program to give beneficiaries the same health plan choices that have shown promise for holding down costs in the private sector. In the fall of 1995 the U.S. House Committee on Ways and Means of the 104th Congress first introduced the Medicare Preservation Act of 1995 (H.R. 2425). The Act contained provisions to expand the types of health plans to be offered to the elderly beyond traditional fee-for-service and HMOs to include point-of-service plans, provider service networks, and medical savings accounts. The bill contained financial incentives for the elderly to leave traditional Medicare and enroll in managed care plans, provisions that were largely eliminated in the Medicare provisions of the Balanced Budget Act of 1995 (H.R. 2491), which was vetoed by the President on December 6, 1995.

      Congressional proposals to expand Medicare health plan options (Medicare Plus) stipulated that health plans contracting with Medicare be required to meet minimum standards in a number of areas, including solvency, quality assurance, service capacity, and consumer protections. In most cases plans would need to be licensed to bear insurance risk under state laws. Medicare Plus plans would provide benefits to beneficiaries in about the same manner as Medicare HMOs do today. The plans would receive capitated payments from the Medicare program for each beneficiary whom they enrolled. Plans would be responsible for providing at least the level of benefits that the current Medicare program provides, plus any additional benefits that the plan offered. Plans could modify the manner of

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      FIGURE 1-2 Percent of Medicare managed care risk contract plans that offer additional benefits.

      SOURCE: Medicare Chart Book prepared by The Henry J. Kaiser Family Foundation and The Institute for Health Care Research and Policy, Georgetown University, 1995, p. 18. Reprinted with permission of the Henry J. Kaiser Family Foundation.

      redefine this benefit by adding greater cost-sharing provisions for beneficiaries. This trend is making HMO enrollment more attractive to elderly beneficiaries, given that a growing number of plans offer more extensive coverage without deductibles or coinsurance.

      Medicare beneficiaries often face a difficult trade-off between lower cost HMO risk plans or staying with their own physician. This is more obvious in low penetration areas of the country where fewer physicians join HMO networks. Although some research studies indicate that out-of-pocket costs remain the major determinant in deciding what plan an elderly beneficiary will join, other focus groups and survey findings indicate that a portion of the elderly population places even a higher value on the ability to remain with their doctor and their network of specialists and are willing to pay additional dollars in order to do so. Health care is a major priority and preoccupation for many elderly individuals and the value of continuing their relationship with trusted and known providers is often a higher

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      STATE

      Medicare Enrollees (% of national total)

      National Rank

      Medicare Managed Care Enrolleesb

      Percent of State's Medicare Population Enrolled in a Managed Care Plan

      North Carolina

      1,033,000 (2.8)

      10

      4.043

      0.39

      North Dakota

      103,000 (0.28)

      47

      731

      0.71

      Ohio

      1,671,000 (4.5)

      6

      46,803

      3

      Oklahoma

      489,000 (1.3)

      27

      18,006

      4

      Oregon

      470,000 (1.3)

      30

      157,645

      34

      Pennsylvania

      2,075,000 (5.6)

      5

      182,885

      9

      Puerto Rico

      481,000 (1.3)

      28

      0

      0

      Rhode Island

      169,000 (0.45)

      41

      18,425

      11

      South Carolina

      512,000 (1.4)

      25

      0

      0

      South Dakota

      117,000 (0.3)

      46

      0

      0

      Tennessee

      774,000 (2.1)

      16

      0

      0

      Texas

      2,091,000 (5.6)

      4

      167,080

      8

      Utah

      188,000 (0.5)

      40

      30,558

      16

      Vermont

      83,000 (0.22)

      49

      708

      1

      V.I./Guam/ American Samoa

      18,000 (0.05)

      53

      0

      0

      Virginia

      822,000 (2.2)

      15

      5,121

      1

      Washington

      690,000 (1.8)

      18

      104,804

      15

      West Virginia

      330,000 (0.88)

      35

      7,726

      2

      Wisconsin

      763,000 (2.0)

      17

      11,387

      1

      Wyoming

      61,000 (0.16)

      51

      0

      0

      United Mine Workersc

      n/a

      n/a

      81,545

      n/a

      TOTAL

      37,382,000(100)

       

      3,872,618

      10

      a Enrollee data (19,186) for Social Health Maintenance Organizations (SHMOs) are included in the total Medicare Managed Care enrollees. Totals do not necessarily equal the sum of rounded components.

      b Medicare Managed Care Enrollees include: TEFRA Risk, Cost, SHMOs, and Health Care Prepaid Plans.

      c United Mine Workers is a separate entity within Health Care Prepaid Plans (HCPP).

      SOURCES: HCFA/Office of Managed Care/Bureau of Data Management and Strategy and U.S. Department of Commerce/Bureau of the Census.

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      TABLE 1-1 State and Territorial Enrollment in Medicare and the Percent of Beneficiaries Enrolled in Managed Care Plansa (Data as of January, 1996)

      STATE

      Medicare Enrollees (% of national total)

      National Rank

      Medicare Managed Care Enrollees

      Percent of State’s Medicare Population Enrolled in a Managed Care Plan

      Alabama

      645,000 (1.7)

      19

      12,952

      2

      Alaska

      34,000 (0.09)

      52

      0

      0

      Arizona

      604,000 (1.6)

      21 (tie)

      184,742

      31

      Arkansas

      424,000 (1.1)

      31 (tie)

      0

      0

      California

      3,653,000 (9.8)

      1

      1,302,713

      36

      Colorado

      424,000 (1.1)

      31 (tie)

      92,757

      22

      Connecticut

      504,000 (1.3)

      26

      15,259

      3

      Delaware

      101,000 (0.27)

      48

      0

      0

      District of Columbia

      78,000 (0.21)

      50

      11,568

      15

      Florida

      2,630,000 (7.03)

      3

      487,906

      19

      Georgia

      837,000 (2.2)

      12

      2,954

      0.35

      Hawaii

      151,000 (0.4)

      43

      50,092

      33

      Idaho

      150,000 (0.4)

      44

      0

      0

      Illinois

      1,622,000 (4.3)

      7

      117,585

      7

      Indiana

      825,000 (2.2)

      14

      12,446

      2

      Iowa

      475,000 (1.3)

      29

      9,300

      2

      Kansas

      384,000 (1.03)

      34

      9,484

      2

      Kentucky

      589,000 (1.6)

      23

      5,420

      1

      Louisiana

      583,000 (1.6)

      24

      34,311

      6

      Maine

      203,000 (0.54)

      38

      0

      0

      Maryland

      604,000 (1.6)

      21 (tie)

      19,631

      3

      Massachusetts

      936,000 (2.5)

      11

      105,667

      11

      Michigan

      1,353,000 (3.6)

      8

      8,260

      1

      Minnesota

      632,000 (1.7)

      20

      118,500

      19

      Mississippi

      399,000 (1.07)

      33

      0

      0

      Missouri

      835,000 (2.2)

      13

      50,958

      6

      Montana

      131,000 (0.35)

      45

      0

      0

      Nebraska

      250,000 (0.67)

      36

      3,684

      1

      Nevada

      195,000 (0.5)

      39

      50,690

      26

      New Hampshire

      157,000 (0.4)

      42

      0

      0

      New Jersey

      1,173,000 (3.1)

      9

      43,846

      4

      New Mexico

      212,000 (0.57)

      37

      31,915

      15

      New York

      2,647,000 (7.08)

      2

      252,511

      10

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      FIGURE 1-1 Number of Medicare risk contract HMOs, by state, August 1995. SOURCE: U.S. General Accounting Office, 1996, p. 25.

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      Medicare. Its broader purpose is to test beneficiaries' response to a range of health care delivery system options and to evaluate their suitability for Medicare.

      The Medicare Managed Care Population

      Although risk contracts make up the bulk of the Medicare managed care market and have accounted for most of the program's growth (with 197 risk contracts serving 3.4 million beneficiaries as of March 1, 1996), Figure 1-1 and Table 1-1 show that enrollment is concentrated in a few states and a few large HMOs. About 55 percent of Medicare HMO enrollees live in California and Florida and represent approximately 36 and 19 percent of the beneficiaries in those two states, respectively (Office of Managed Care, Health Care Financing Administration, 1996). Similarly, 10 large HMOs enroll 44 percent of all Medicare beneficiaries. As of August 1995, 31 states had no or insignificant enrollment in Medicare risk contract HMOs (U.S. General Accounting Office, 1996).

      States with the highest concentrations of Medicare enrollees have one or both of two characteristics: they contain mature health care markets in which managed care has become a dominant mode of health care delivery for the population under age 65, and they are in areas of the country with high AAPCCs (U.S. General Accounting Office, 1996). As shown in Figure 1-2, to attract Medicare beneficiaries, participating HMOs are increasingly turning to the use of additional incentives: charging elderly enrollees zero premiums as well as offering popular benefits such as routine physicals, eye and ear examinations, and immunizations. About half of the HMOs offer outpatient prescription drug coverage. Over the past 3 years the number of HMOs charging Medicare beneficiaries no premiums for the services provided increased from about 26 to about 49 percent (U.S. General Accounting Office, 1996).

      A number of recent studies indicate that changes in employment-based health care coverage for retirees is another factor contributing to the recent rapid rate of growth of Medicare beneficiary enrollment in HMOs (Interstudy, 1995; U.S. General Accounting Office, 1996). The rising cost of health care coverage for retirees is forcing a growing number of firms to drop or

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      of $177.32 to a high of $678.90 (U.S. General Accounting Office, 1996).

      Under current law risk contract HMOs can retain profits up to the level earned on non-Medicare business. Profits that exceed this amount must be returned to enrollees either in out-of-payment reductions or enhanced benefits. On the basis of guidelines issued in October 1995, selected risk contracts will now be able to include a point-of-service option, upon HCFA's approval, which will allow beneficiaries to use providers outside a plan's network. HCFA expects that the point-of-service benefit may encourage more beneficiaries to join managed care plans.

      Plans also can enter into cost contracts under which they are paid on a fee-for-service basis for the reasonable costs of services provided to their enrolled Medicare beneficiaries.2 Medicare beneficiaries in cost contract HMOs may seek care outside of the HMO at Medicare's expense—a benefit that is not available under risk contracts.

      Medicare SELECT, another plan option, offers a network-based supplemental insurance (Medigap) policy that provides coverage for Medicare cost sharing. Medicare SELECT was created as a demonstration project in 1990 to offer beneficiaries in up to 15 states a new Medigap insurance option. In 1995 it was authorized to expand to all states. It could be made permanent in 1998.

      Under its demonstration authority, HCFA also has operated a number of social HMO (SHMO) pilot projects with the purpose of providing a broad spectrum of acute- and long-term-care services to the frail elderly under a managed care system. In these types of projects HMOs receive higher reimbursements in exchange for providing home-based custodial care. The SHMO demonstrations also receive Medicaid funding.

      In 1995, HCFA announced a new demonstration project called Medicare Choices, designed to offer flexibility in contracting requirements and payment methods for health plans and other organized delivery systems that wish to participate in

      2  

      A variant of the traditional cost contract is the health care prepayment plan (HCPP). Under HCPP contracts, managed care organizations are retroactively reimbursed services covered under Medicare Part B.

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      zations (HMOs) and competitive medical plans, all of which offer Medicare-covered benefits and the majority of which also offer coverage of cost sharing and supplemental services that replace Medigap policies. 1 Beneficiaries may choose to enroll in an HMO when they become eligible for Medicare or at other times that Medicare HMOs offer open enrollment. Plans must have at least one 30-day open season each year and may offer additional open enrollment periods. Furthermore, they must allow enrollment at other times to beneficiaries who have been disenrolled because of contract termination or nonrenewal by another managed care plan. Medicare beneficiaries can disenroll from their plans at the end of any month.

      The Health Care Financing Administration's (HCFA's) managed care program has different types of contracts. Until recently, the only private health plans (risk contracts or risk plans) available to Medicare beneficiaries were HMOs, under which plans receive capitated payments for the beneficiaries whom they enroll. In general enrollees who select a risk plan are required to use the plan's network of providers and to agree to obtain all covered services through the plan, except in emergencies.

      Capitation payments to the plans are based on an estimate of local fee-for-service costs and are established for each county at 95 percent of the adjusted average per capita cost (AAPCC) for Medicare fee-for-service beneficiaries. HCFA adjusts the AAPCC for enrollees' demographic characteristics such as age, sex, Medicaid eligibility, and residence in an institution such as a nursing home. The "risk adjustment" attempts to prevent HMOs from benefiting from favorable selection of health risk, which occurs when HMOs enroll beneficiaries who are healthier (and therefore less costly to care for) than those in the fee-for-service sector. In 1995 AAPCC monthly rates ranged from a low

      1  

      Only beneficiaries who are eligible for Medicare because of old age or disability may choose to enroll in an HMO. Beneficiaries who are eligible for Medicare because of end-stage renal disease are not eligible unless they already were HMO enrollees at the time that they were certified to be eligible for Medicare because of end-stage renal disease. Also, beneficiaries choosing to receive care in a Medicare-certified hospice are not eligible for HMO enrollment.

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      care benefit package is less generous than about 85 percent of the employer-based plans primarily because of comparatively high deductibles and copayments (Iglehart, 1992). The program covers less than half of all health care costs incurred by elderly individuals and even less of all health care costs incurred by the oldest old, who require more nursing home care. Although the Medicare benefit package has remained reasonably constant over the years, enrollees' out-of-pocket medical care costs represent an increasing share of their incomes. In 1994 out-of-pocket spending on acute-care services and premiums averaged 21 percent of the incomes of all elderly individuals, moving to 30 percent on average for the poor elderly and people over age 80 (Moon and Mulvey, 1996).

      Most elderly beneficiaries (89 percent) have supplemental coverage to fill in the gaps that Medicare does not cover. More than one third of these individuals receive such insurance from a former employer, whereas another one third buy supplemental insurance (Medigap) for themselves. Eleven percent lack supplemental insurance altogether, and 12 percent of Medicare beneficiaries are protected from some or most out-of-pocket health care costs by the Medicaid program. Since 1988 state Medicaid programs have been required to pay Medicare Part B premiums and cost-sharing for all qualified Medicare beneficiaries (QMBs) whose incomes are less than 100 percent of the federal poverty threshold and whose assets are below a certain level. For low-income beneficiaries whose incomes are between 100 and 120 percent of the federal poverty level, Medicaid pays for Medicare Part B premiums only. Individuals must apply for Medicaid in their state to be eligible. Less than half of the eligible QMB population has applied for Medicaid payments (Neumann et al., 1995).

      Medicare Managed Care

      Since the early 1970s the federal government has supported the voluntary enrollment of Medicare beneficiaries in managed care programs through a number of demonstration projects. The 1982 Tax Equity and Financial Responsibility Act, which became operational in 1985, gave Medicare beneficiaries the option to enroll in federally-qualified health maintenance organi-

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      Medicare's fastest-growing groups. During the 1990s, the number of Medicare beneficiaries has been growing at 1 to 2 percent annually (Physician Payment Review Commission, 1996).

      Medicare Part A provides coverage for inpatient hospital, home health, hospice, and limited skilled nursing facility services. Medicare Part A is financed from the Hospital Insurance Trust Fund, paid for primarily through a payroll tax on employers and employees. Beneficiaries are responsible for deductibles and copayments. The Congressional Budget Office forecasts that Part A spending will increase by 10.2 percent in 1995, with annual growth rates of between 7.5 and 10 percent projected for the rest of the decade (Congressional Budget Office, 1995b). A recent report by the trustees of the Social Security and Medicare trust funds forecast that unless changes are made, the Hospital Insurance Trust Fund will run out of money by 2001 (Board of Trustees, 1996).

      Medicare Part B coverage is optional and helps pay for covered beneficiaries' physician services, medical supplies, and other outpatient treatments and is financed by a combination of general tax revenue (about 75 percent of program costs) and enrollee premiums (about 25 percent of program costs). In addition to their premiums, beneficiaries are responsible for copayments and deductibles. According to the Congressional Budget Office, Medicare Part B spending is expected to increase by 10.9 percent in fiscal year 1995, and to average 12 to 13 percent annual rates of increase through the remainder of this decade (Congressional Budget Office, 1995b).

      The distribution of Medicare expenditures for different services has shifted over time, partially because of greater reliance on ambulatory rather than inpatient medical care. Between 1980 and 1995 Medicare spending for inpatient hospital services declined from 66 to 44 percent, whereas spending for home health services increased from 1 to 8 percent. In the same time period spending for post-acute-care services—skilled nursing facility, home health, and hospice services—increased from 3 to 13 percent.

      As it is presently structured the Medicare program provides incomplete protection; for example, it provides poor catastrophic coverage, no coverage for outpatient prescription drugs, and high deductibles and copayments for hospitalization costs. The Medi-

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      1
      Overview

      The Medicare Program

      Medicare is the single largest payer in the U.S. health care system, purchasing about 19 percent of all personal health care services. The program pays for 30 percent of U.S. expenditures for hospital services, 21 percent of expenditures for physician services, and 40 percent of expenditures for home health care services (Congressional Budget Office, 1995c). In 1995 the Medicare program paid $178 billion, 11 percent of the total federal budget, to cover 37 million individuals. Medicare is the nation's largest single business-type operation and is larger than General Motors, the largest private company in the United States (Fortune, 1995).

      Medicare provides coverage to 33 million elderly individuals (those over age 65), 4 million disabled individuals, and about 210,000 people with end-stage renal disease (Prospective Payment Assessment Commission, 1995). The Medicare population has nearly doubled since the program began, growing from 19.5 million in 1967 to 37 million in 1995. This increase reflects the aging of the population and the rising number of disabled beneficiaries. The oldest old (ages 85 and older), disabled individuals under age 65, and those with end-stage renal disease are

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      tional, 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 utilizing the best technologies available currently or projected to be available in the near term.

      RECOMMENDATION 4. The federal government should require all Medicare choices to be marketed during the same open season to promote comparability and to enable beneficiaries to adequately assess and compare the benefits and prices of the various options.

      RECOMMENDATION 5. The committee is concerned about the increasing restrictions on physicians (and the potential conflict of interest of physicians) when they act in their professional role as advocates for their patients and carry out their contractual responsibilities and receive economic incentives as health plan providers. The committee favors the abolition of payment incentives or other practices that may motivate providers to evade their ethical responsibility to provide complete information to their patients about their illness, treatment options, and plan coverages. So-called anticriticism clauses or gag rules should be prohibited as a condition of plan participation.

      RECOMMENDATION 6. The federal government should hold Medicare choices accountable by requiring them to meet comparable conditions of participation as a Medicare option and by monitoring and reporting on their compliance with these conditions.

      RECOMMENDATION 7. Serious consideration should be given and a study should be commissioned for establishing a new function along the lines of a Medicare Market Board, Commission, or Council to administer the Medicare choices process and hold all Medicare choices accountable. The proposed entity would include an advisory committee composed of key stakeholders, including purchasers, providers, and consumers.

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      parameters of the study. Chapter 1 also outlines how the committee defined and approached its charge and work agenda. Chapter 2 presents highlights from testimony heard at the invitational symposium held on February 1 and 2, 1996, and summarizes the major points made by the authors of the commissioned papers, by the invited respondents, and at the discussion that followed the panel presentations. As a summary, however, this section cannot do adequate justice to the rich and valuable data and information included in the eight commissioned papers found in Appendixes E to L. The information found in the papers contributed significantly to the committee's findings and recommendations.

      With these caveats and ruminations, the committee formulated its recommendations, which are summarized below and described in greater detail in Chapter 3.

      RECOMMENDATION 1. All Medicare choices3 that meet the standard conditions of participation and that are available in a local market should be offered to Medicare beneficiaries to increase the likelihood that beneficiaries can find a plan of value. Traditional Medicare should be maintained as an option and as an acceptable ''safe harbor" for beneficiaries, especially those who are physically or mentally frail.

      RECOMMENDATION 2. Enrollment and disenrollment guidelines, appeals and grievance procedures, and marketing rules should reflect Medicare beneficiaries' vulnerability and lack of understanding of traditional Medicare and Medigap insurance, and their current lack of trust in important aspects of alternative health plans.

      RECOMMENDATION 3. 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 na-

      3  

      For the purpose of this report, the term Medicare choices is an umbrella term for alternative health plans (including managed care) as well as traditional Medicare and Medigap plans.

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×
      1. Medicare program, they were outside the mandate of the present study.
      2. The committee focused much of its work on learning from model programs and major purchasers in the private sector, with the full realization that Medicare as a government social insurance program requires, in many important respects, a different response. The committee also heard considerable testimony from public purchasers including state-based organizations and the Health Care Financing Administration.
      3. In defining the parameters and vehicles that can be used to promote public accountability and informed purchasing, the committee recognizes the importance of maintaining the necessary flexibility to respond in a timely, appropriate fashion to a dynamic and evolving marketplace.

      The committee's major charge and responsibility was to provide direction and guidance on how to promote public accountability and informed purchasing by and on behalf of Medicare beneficiaries in a new market-oriented environment characterized by choice and managed care. The committee was cognizant that in the new health care marketplace, Medicare beneficiaries as consumers or customers will be given both greater freedom and more responsibility for choosing their health plans and for making many of the important decisions associated with purchasing their health care and judging its value, adequacy, and responsiveness. Given the breadth and scope of its charge, the committee recognizes that many of the issues and topics that it addressed will benefit from additional review and analysis as better data and research findings become available.

      It should also be noted that the committee was carefully formulated to reflect a balance of expertise particularly relevant to its charge. It included two experts from health plans, two individuals from the world of large purchasers—one public and one private, two consumer advocates with special expertise in elderly consumers in the health care marketplace, an expert on state insurance laws and regulations, a geriatrician, and an economist who has written extensively on the issue of opening choice and the structure of choice under market conditions.

      The report is divided into three chapters and 12 appendixes. Chapter 1, an overview, provides the background, context, and

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×
      1. ciary) rather than plans, clinicians, or group purchasers. Much of the current information relating to performance and quality has been developed for these groups and may not be useful or relevant to the Medicare population.
      2. The committee was asked to focus its attention on the issue of choice and the number and range of health plans, not the inherent merit or value of individual types or forms of plans to be offered (i.e., preferred provider organizations versus medical savings accounts versus unrestricted fee-for-service indemnity coverage).
      3. Although the committee recognizes the great diversity of the Medicare population, this report focuses primarily on the "mainstream" Medicare beneficiary. The committee realizes that severely disabled individuals and dually eligible beneficiaries (Medicare and Medicaid recipients) may need additional protections with regard to public accountability and informed purchasing. It was not possible within the scope of this particular study to reflect adequately on the special and additional information and accountability requirements that may be needed by these groups as they enter a more market-oriented delivery environment.
      4. Many of today's elderly are particularly apprehensive about managed care and are concerned about their ability to make informed choices among health plan options. The committee heard evidence that the move to a choice paradigm with an emphasis on managed care represents greater challenges and problems for the current generation of Medicare beneficiaries, particularly the older cohort. With the increasing role of managed care, there is every expectation that future Medicare beneficiaries will have had considerable experience with this new delivery structure and therefore will be better informed and more comfortable consumers of managed care.
      5. The committee did not focus on the issue of risk selection, although it acknowledges that it is a major problem that must be addressed.
      6. Although the issues of fraud and abuse, estimated by the U.S. General Accounting Office to be in the range of 10 percent of Medicare health care costs, are a significant problem in the
      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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      primarily around real-world experts who could comment on and respond to the available research findings and to the current congressional Medicare reform proposals from their well-recognized experiences. The committee also was primarily interested in learning about current best practices in the public and private sectors as they relate to developing infrastructures for public accountability, informed purchasing, and competition based on performance.

      In considering its work and statement of task, the committee had to be mindful of the relatively short time frame within which this report had to be completed and the limited resources available to support the commissioned papers/research syntheses and the symposium activity. Given the committee's broad charge and the many issues that potentially fall under the rubric of ensuring public accountability and informed purchasing in an environment of choice and managed care, the committee believed that it was important and essential to set some priorities, parameters, and caveats regarding its work agenda. They are as follows:

      1. The task of the committee was not to judge the value of managed care as a vehicle for providing more appropriate, cost-effective care to Medicare beneficiaries or reducing the rate of escalation in the costs of the Medicare program over time. The committee operated under the assumption that managed care plans will continue to grow and develop and to be made available to the Medicare population. Several members of the committee, however, expressed concern that any balanced appraisal by the elderly population of the potential of managed care to provide better care may be made more difficult for two important reasons. One, current proposals to restructure Medicare are being viewed by many elderly as a means of financing deficit reduction and achieving other political objectives. Two, in the case of all areas of health in which fundamental change are being proposed, the media tends to focus on areas of discord and contention, contributing perhaps to additional anxieties among the already risk-averse elderly.
      2. In looking at the issue of public accountability and the availability of information for informed purchasing, the committee's major focus was the consumer (Medicare benefi-
      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×
      • aspects of the leading issues and current policy proposals as they pertain to ensuring public accountability and informed purchasing in a system of broadened choice;
      • to guide, develop, and convene an invitational symposium to (1) examine what is known (or not known) about ensuring public accountability and informed purchasing in the current Medicare program and other health plans, (2) recommend how public accountability and informed purchasing can be ensured for Medicare beneficiaries in managed care and other health plan choices, and (3) discuss options and strategies that can be used to help government and the private sector achieve the desired goals in this arena; and
      • to produce a report that will include the commissioned background papers, a summary of the symposium discussion, and recommendations on the major issues that need to be addressed to ensure public accountability and the availability of information for informed purchasing by and on behalf of Medicare beneficiaries in managed care and other health care delivery options.

      The study was initiated in the fall of 1995 with the expectation that Medicare legislation providing broader beneficiary choice would pass the U.S. Congress before the study was completed. The committee used the Medicare reform provisions of the Balanced Budget Act of 1995 (H.R. 2491) as a template for its work agenda. Although, President Clinton vetoed the final bill, the committee believes that the bill's Medicare reform provisions still provide a useful and relevant framework for reform.

      In carrying out its charge, the committee recognized that the science-based and peer-reviewed literature on the major areas of the committee's scrutiny is sparse since the field is young and continues to evolve at an unprecedented pace. The state-of-the-art information in this arena resides primarily among a number of large private and public purchasers that currently define the field and various other organizations and agencies (i.e., the National Committee on Quality Assurance, HCFA, the Physician Payment Review Commission, the Foundation for Accountability, and the Agency for Health Care Policy and Research) that have a major interest in and programs directed to this area. With that in mind, the committee constructed a symposium

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      for Medicare. If capitation payments are not appropriately adjusted for health status, over or underpayments can be quite serious. The incentives to enroll only healthier enrollees or to encourage less healthy enrollees to disenroll may be formidable.

      Unlike many employed individuals, who have the help of their employers in screening and evaluating their health plan options, most Medicare beneficiaries must rely on their own information and judgment to select wisely. Yet, a recent study found a higher prevalence of inadequate functional health literacy skills, skills needed to function in the health care environment, among the elderly (Williams et al., 1995). For elderly individuals who have the skills required to select health plan options, they often are unable to make effective choices because the variation and array of coverage are confusing (McCall et al., 1986; Jost, 1994). Although the availability of useful and reliable information is critical for consumer choice, such information is still in a stage of infancy.

      Whether or not current Medicare reform legislation eventually becomes law, private industry and the Health Care Financing Administration (HCFA) are poised to lend a big boost to the managed care market for the elderly, a market already showing signs of rapid expansion. In 1994 health maintenance organization enrollment by Medicare beneficiaries was one of the health care industry's three fastest-growing market lines, in addition to enrollment in the Medicaid program and open-ended products. HCFA reports that 70,000 Medicare beneficiaries are enrolling in managed care plans each month.

      The current national debate over "bringing the market" to Medicare and offering choice in health plans with an emphasis on managed care arrangements stimulated the Institute of Medicine to appoint a committee that would provide guidance to policy makers and decision makers on ensuring public accountability, promoting informed purchasing, and installing the necessary protections to help Medicare beneficiaries to operate effectively, safely, and confidently in the new environment of greater health plan choice.

      Three tasks framed the committee's charge:

      • to commission background papers from experts and practitioners in the field that review the literature and synthesize
      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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      a high deductible with medical savings accounts, and plans offered by provider-sponsored organizations. In recent years the greatest growth in managed care arrangements for the population under age 65 has been in preferred provider organization and point-of-service-type networks. The existing fee-for-service Medicare program, which consists of a traditional indemnity insurance arrangement, would remain available.

      As major efforts move forward to shift Medicare patients into managed care plans, many experts and patient advocates are concerned whether the necessary information and protections are in place to enable Medicare patients to select an appropriate health care plan wisely and to ensure that this group continues to have access to high-quality care.2 The potentially daunting scope and speed of the transition by elderly Americans into what for most beneficiaries remains uncharted waters makes the need for high-quality and trustworthy information and accountability particularly critical. Only by laying a sound infrastructure in which individuals can make informed purchasing decisions and in which competition is based on quality performance can there be the public confidence needed to move Medicare beneficiaries safely and responsibly into a marketplace for choice and managed care.

      Among the 37 million Medicare beneficiaries are those with limited financial resources, those with very serious disabling conditions, and those for whom catastrophic medical expenses are commonplace. Medicare spending averaged about $4,000 for beneficiaries in 1993. For the 10 percent of beneficiaries with the highest health care costs, Medicare spent an average of more than $28,000 per beneficiary. Medicare paid no benefits on behalf of the healthiest 20 percent of beneficiaries (Henry J. Kaiser Family Foundation and Institute for Health Care Research and Policy, Georgetown University, 1995). Understanding this variation in expenditures is particularly important in any discussion of expanding capitated managed care coverage

      2  

      The Institute of Medicine's 1991 report, Medicare: New Directions in Quality Assurance defines quality of care as, "the degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge."

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
      ×

      vinced that interventions that go beyond the traditional strategies of reducing provider payments or asking beneficiaries to pay more are needed. It is widely believed that more attention must be focused on controlling the volume of services used by the elderly to slow the growth in program expenditures.

      Strategies to reform and preserve Medicare focus on redesigning elements of the 31-year-old program to reflect some of the major financing and organizational changes revolutionizing the provision of health care services in the private sector. Chief among these changes has been a major influx of the population under age 65 into managed care, viewed by many researchers and policy specialists as holding the potential for providing more appropriate, quality services at costs lower than those of fee-for-service plans. A number of studies and surveys attribute the slowing rate of spending on health benefits by large employers over the past 2 years to the growth of managed care programs.

      Until recently, enrollment of the Medicare population in managed care programs has lagged the enrollment in such programs in the private sector: about 10 percent of all Medicare beneficiaries are enrolled in managed care, whereas more than 70 percent of the population under age 65 are enrolled in such programs.1 After existing for nearly a decade, the current Medicare risk contract program now appears to be attracting more beneficiaries. Enrollment more than doubled between 1987 and 1995, with the annual growth rate reaching about 25 percent between 1993 and 1994 (U.S. General Accounting Office, 1996).

      The pressing need to reduce Medicare's rate of growth and to create a more competitive, market-oriented environment for health delivery is resulting in a major emphasis on moving beneficiaries away from the current fee-for-service system, in which the vast majority of the Medicare population continues to receive care, into a broad range of managed care and other delivery options, including health maintenance organizations with a point-of-service option, preferred provider options, unrestricted private fee-for-service plans that have utilization review, a network of contracted providers, plans that combine insurance with

      1  

      Enrollment in managed care is growing at approximately 2 percent per year.

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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      Executive Summary

      America's health care system is being transformed at an unprecedented pace. As part of deficit reduction and the call for smaller government, public programs are being downsized, reorganized, and privatized. This call for smaller government comes in the wake of a dramatic revolution that continues to take place in the private health care sector, characterized by the move to managed care, increased vertical and horizontal integration, and new partnerships and relationships among insurers, providers, and purchasers in an increasingly competitive marketplace.

      All of these changes and new dynamics have placed a special focus on the need to reform the Medicare program to make it more efficient and to secure its future viability. As the government's second biggest social program, Medicare expenditures grew from $34 billion in 1980 to an estimated $183.8 billion in 1995, representing an annual growth rate of 11.7 percent (Physician Payment Review Commission, 1996). With the inexorable upward trend in Medicare expenditures and the aging of the baby boom generation, deepening concern is being expressed about the future solvency of the program and its drain on the federal budget (Board of Trustees, 1996). The U.S. Congress is now intent on slowing Medicare growth and has become con-

      Suggested Citation:"D Commissioned Papers." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
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      Next: E The Structure and Accountability for Medicare Health Plans: Government, the Market, and Professionalism »
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      Medicare beneficiaries are rapidly moving into managed care, as attempts to restrain the growth of this costly entitlement program progress.

      However, advocates for patients question whether the necessary information and structures are in place to enable Medicare consumers to select wisely among private-sector managed care options. Improving the Medicare Market examines how to give Medicare beneficiaries the same choice of health plan options enjoyed in the private sector—yet protect them as consumers and patients.

      This book recommends approaches to ensuring accountability and informed purchasing for Medicare beneficiaries in an environment of broader choice and managed care—how the government should evaluate and approve plans, what role the traditional Medicare program should play, how to help to elderly understand their options, and many other practical matters.

      The committee discusses the information requirements of Medicare beneficiaries and explores in detail how best to respond to their special needs. And it examines the procedures that should be developed to provide the necessary protections for the elderly in a managed care system.

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