National Academies Press: OpenBook

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

Chapter: J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction

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Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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J

Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction

Patricia A. Butler*

Introduction

Although only about 10 percent of Medicare beneficiaries are enrolled in health maintenance organizations (HMOs), enrollment has been growing rapidly, more than 20 percent annually since 1994 (U.S. General Accounting Office, 1995c). Recent congressional proposals also would encourage even greater levels of participation in managed care plans, including provider networks and other arrangements. Any significant change in Medicare requires attention to the effects on its beneficiaries who may be unfamiliar with different delivery systems. Consumer protection is particularly important in a movement to enroll Medicare beneficiaries into capitated managed care organizations because of capitation's incentives to underserve and the greater health care needs of the elderly.

Understanding what managed care features and practices please or disappoint enrollees is important to both plans and policy makers contracting with them in a more competitive Medicare marketplace. The purpose of this paper is to examine sources of Medicare health plan enrollee satisfaction and dissat-

*  

Health care consultant, Boulder, Colorado.

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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isfaction and mechanisms to address consumer complaints through appeals processes and government oversight. The paper is divided into five sections. The next outlines current research evidence on Medicare HMO enrollee satisfaction. The the appeals processes available to Medicare health plan enrollees unhappy with plan coverage, payment, access, and other performance issues are then outlined. Current roles and standards of the federal and state governments in regulating managed care are then described. Consumer protection policy issues that arise in a competitive Medicare market are identified and the paper concludes with recommendations for further research and analysis.

Medicare Managed Care: Sources of Satisfaction and Dissatisfaction

Like most Americans, the vast majority of Medicare beneficiaries enrolled in managed care plans respond positively to surveys of consumer satisfaction (Adler, 1995; Ferguson, 1995; Minnesota Health Data Institute, 1995; Rossiter et al., 1989; Ward, 1987). Working Americans enrolled in HMOs are about as satisfied with overall plan performance as people receiving care on a fee-for-service basis. Health plan enrollees, however, are more likely to rate highly their plan's premiums and cost sharing and are less likely than their indemnity plan counterparts to be happy with physician-patient interactions or general ''quality" (Miller and Luft, 1994). People suffering from poor health or chronic conditions enrolled in managed care plans are more likely than those enrolled in fee-for-service plans to report problems (The Robert Wood Johnson Foundation, 1995). Analysts also have found that although Medicaid managed care improves access to care by several measures, enrollees are somewhat less satisfied than those in fee-for-service care, particularly if they do not remain with their personal physicians (Freund et al., 1989; Hurley et al., 1991).

Despite Medicare enrollees' overall high degree of satisfaction with managed care plans, it is important to understand the sources of complaints of those who are dissatisfied. Disenrollment is costly for plans and beneficiaries. Plans do not want to waste resources enrolling people who will not remain in the

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

plan because marketing to individuals is very labor-intensive. Furthermore, as discussed below, unhappy enrollees sometimes have difficulty disenrolling quickly, and delays can both be costly (if they are liable for bills to nonplan providers) and adversely affect their health (if they are unable to obtain desired benefits). Furthermore, people may have given up their supplemental coverage and have difficulty resubscribing. This paper focuses on consumer reports of satisfaction and dissatisfaction rather than evaluations of HMO quality from other viewpoints. (The paper by Joyce Dubow synthesizes research on Medicare HMO quality on the basis of process and outcome measures.)

HMO Enrollee Satisfaction Surveys

Only a few studies, which vary in scope and methodological sophistication, have been published on the satisfaction of Medicare enrollees in risk contracting plans. The Health Care Financing Administration (HCFA) does not routinely publish information on consumer complaints appealed through its formal process, through plan internal grievance systems, or to the local peer review organization (PRO), although HCFA uses such data in reviewing plan quality (U.S. General Accounting Office, 1995a). The information in this paper derives from a handful of recent surveys of Medicare plan enrollee satisfaction, which produce a reasonably consistent picture of what enrollees do and do not like about their plans.

Although useful, these surveys have limitations. First, they examined a voluntary market and might produce different results if there were greater incentives to enroll in HMOs. Second, even when defined by a series of specific survey questions, "satisfaction" is a subjective concept that measures the extent to which one's personal expectations are met. Furthermore, surveys may not include people most likely to use services, such as those with chronic or acute illnesses, who may experience greater problems with access or provider conduct than healthier enrollees.1 Yet if financial incentives to enroll in managed care

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Regardless of whether Medicare HMOs currently receive favorable or adverse selection, which remains unclear, people with chronic illnesses and disabilities who are likely to use medical care represent a small proportion of the

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

are as strong as many policy makers hope, more people with such conditions are likely to be enrolled in managed care plans in the future. A limitation of studies of problems and complaints is that they generally do not compare HMOs with performance by providers in the fee-for-service Medicare program, making it difficult to determine whether these problems can be attributed only to HMO enrollment. Finally, current Medicare research has examined only HMOs, although HCFA is experimenting with other kinds of managed care organizations, which might raise different consumer protection issues.

Medicare HMO Enrollee Surveys

The first published study to compare Medicare enrollees in the "risk contract" (capitated HMO) demonstrations with those receiving care in the traditional fee-for-service system assessed satisfaction with technical and interpersonal aspects of care, convenience, and waiting times for appointments (Rossiter et al., 1989). The researchers found that about 80 percent of both groups were "very satisfied" with their health care overall. HMO enrollees, however, were considerably less satisfied that other Medicare beneficiaries with perceived professional competence and provider willingness to discuss problems and were more satisfied with waiting times and claims processing. Moreover, disenrollment rates were high. About 18 percent of enrollees disenrolled during the 12 to 15 months between study interviews. Over one quarter of those disenrolling during the first 3 months apparently misunderstood the nature of the plan (limitations on physicians or covered services), and about half of those disenrolling later were dissatisfied with the plan (because of location, poor care, or lack of physician continuity).

Two recent surveys report that Medicare HMO enrollees are happier with their care than those in the traditional Medicare program. The Minnesota Health Data Institute found Minnesotans enrolled in five Medicare HMOs statistically significantly more likely to be "very or extremely satisfied" with their Medi-

   

total enrollment and may be underrepresented in surveys if they are too frail to respond. If an objective is to understand sources of dissatisfaction, the people most likely to use health care should be oversampled.

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

care experience than non-HMO enrollees and much less likely to be dissatisfied (Minnesota Health Data Institute, 1995). This pattern held for several specific measures of satisfaction: adequacy of benefits covered, paperwork, satisfaction with specialists, practitioners' willingness to listen and explain, and thoroughness of examinations and treatment. HMO enrollees expressed levels of satisfaction and dissatisfaction comparable to those of nonenrollees on other measures, such as ability to obtain care when needed, scheduling appointments when they were sick, and getting telephone assistance.

Similarly, a study of Blue Cross/Blue Shield's Medicare HMO members found them to be statistically significantly more satisfied with overall quality of care, paperwork, cost, prescription coverage, and preventive and vision services but less likely to be satisfied with their freedom to choose physicians (Ferguson, 1995). The rates by which HMO and other respondents were "very satisfied" did not differ statistically significantly on issues such as physician and hospital quality, time with physicians and staff, or access to specialists, hospitals, emergency care, or technology. Respondents with various specific medical conditions or fair and poor health reported similar rates of satisfaction.

To identify sources of dissatisfaction among HMO enrollees who might be more likely to have complaints, a recent study compares Medicare health plan enrollees with those who had disenrolled (Office of Inspector General, 1995). Disenrollees were much less likely to have a full understanding of the restrictions on out-of-plan use. They were more likely to report (1) longer waiting times to get appointments with specialists or appointments with their primary care physicians when they were very ill; (2) dissatisfaction with telephone waiting time; (3) inability to obtain access to care that they felt they needed from their primary care physicians, referral to specialists, or payment for emergency care; (4) out-of-plan use; and (5) lack of sympathetic treatment by their physicians (not perceived as helpful and not taking complaints seriously). Disenrollees without prior experience in a managed care plan were much more likely to report negative perceptions or experiences. These differences were even greater after omitting from the analysis the 30 percent of disen-

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

rollees who left their plans for administrative reasons (who moved or whose physician left the plan).

Among current enrollees, 16 percent said that they would like to leave their HMO. A small share were leaving the service area, but the majority (more than 60 percent) felt that they could not leave because they felt that the HMO was the only way to afford needed care. Although this group represented only 10 percent of the total enrollees surveyed, it is important to understand their concerns. These dissatisfied HMO enrollees reported that disenrollment was not an option and appeared to feel trapped into delivery systems with which they were not satisfied.

One particularly troubling finding in the Inspector General's study was that compared with Medicare disenrollees who were elderly, those who were disabled or had end-stage renal disease were much less satisfied with their ability to obtain access to needed services and specialists and much more likely to report that physicians did not take their health complaints seriously, use out-of-plan care, believe that HMO physicians are motivated by cost rather than providing good care, and indicate that the HMO caused their health to get worse. The disabled disenrollees had shorter waiting times for appointments. Almost two thirds (66 percent) of disabled HMO enrollees, however, reported wanting to leave their HMO but feeling unable to do so because of the cost of the alternative. Similarities between these perceptions and those of commercial HMO enrollees who were ill and who responded to a recent survey (The Robert Wood Johnson Foundation, 1995) raises concerns about the ability of HMOs to serve people with disabilities and poor health status.

Focus Group Studies

The most recent research on Medicare health plan satisfaction comes from two organizations that held focus groups in several U.S. cities among current and former Medicare HMO enrollees as well as people who had never enrolled (Frederick/Schneiders, Inc., 1995; Gibbs, 1995). In addition to noting some persistent impressions about HMOs (poor-quality doctors or long waiting times for appointments) that discourage people from enrolling, those studies found that the biggest obstacle to join-

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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ing an HMO is the limited choice of physicians, especially if one must change from a current physician with whom one is satisfied. Other disadvantages cited by some enrollees were waiting time on the phone and in the office as well as delays in obtaining an appointment. The major advantages of HMOs cited by their enrollees are lower cost, certain valued additional benefits (particularly pharmaceutical benefits but also annual physical examinations), no paperwork, and the opportunity for coordinated care (Frederick/Schneiders, Inc., 1995). The authors of one study reported the negative impressions of HMOs and managed care in certain cities, such as Miami, where health plan reputations have not been good, compared with those in communities such as Minneapolis, where HMO penetration is high in commercial and public sectors and they are regarded favorably (Frederick/Schneiders, Inc., 1995).

Study of Consumer Complaints

In contrast to surveys and focus group research that analyzed overall enrollee experiences, a 1993 study of Medicare enrollees in 10 risk contract HMOs in California focused on consumer problems (Dallek et al., 1993). 2 It was designed to provide examples of problems, not to indicate their prevalence. Because it drew experience from only one state, it may not reflect overall Medicare HMO experience. (As noted above, Minnesota Medicare HMOs have received high satisfaction ratings.) This study is included because it represents the most detailed review of Medicare HMO consumer problems.

On the basis of information from HCFA, the California Department of Corporations (which licenses HMOs), health plan questionnaires, consumer advocacy organizations, and providers, the Medicare Advocacy Project (now the Center for Health Care Rights) cited instances of verified consumer complaints with plan marketing and care delivery. Stiff competition for Medicare enrollees seems to have led to marketing abuses. For

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Additional, more recent examples of similar problems in marketing, disenrollment delays, and access to services in California and New York were provided in congressional testimony in mid-1995 (Dallek, 1995).

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

example, some plans enrolled people who could not have been expected to understand the terms of enrollment because they did not speak English, could not see or hear, or had cognitive limitations such as senility. Because of commission structures, quotas, and lack of training, some sales representatives engaged in high-pressure sales tactics that were especially intimidating for older people in their homes. Some salespeople misrepresented the services available or did not explain plan requirements to use a limited network ("lock-in"), obtain specialist referrals from gatekeepers, or receive payment for emergency care in only narrowly defined emergencies. In a few instances, they forged signatures or lied about the significance of a signature on an enrollment form. State programs assisting Medicare beneficiaries choose health plans, and consumer advocates report that such sales practices remain current problems. These marketing abuses are similar to those in the Medicare Supplemental coverage market that led the U.S. Congress to enact consumer protections (U.S. General Accounting Office, 1991).

As analysts have suggested, disenrollment within 90 days of initial enrollment can indicate misunderstanding of the features and constraints of a managed care plan (Dallek et al., 1993; Rossiter et al., 1989; Office of Inspector General, 1995). In HCFA's Region IX, about 30 percent of disenrollment in the second quarter of 1995 occurred within 90 days, suggesting that a substantial portion of disenrollees did not understand the nature of the program that they enrolled in.

The California report noted the difficulty that some people have in disenrolling when they have been induced into enrollment by fraud, misrepresentation, or misunderstanding. Plans are required to provide enrollees information on disenrollment and to process disenrollment requests promptly, but they do not always do so. As the General Accounting Office (GAO) found, beneficiaries who continue to use their regular providers may be liable for these costs (U.S. General Accounting Office, 1995a). HCFA permits retroactive disenrollment for people misunderstanding the HMO lock-in requirements who have not used HMO services, in which case it will pay charges for services provided during the unintentional HMO enrollment (HCFA

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

HMO/CMP Manual Section 2002.3). It is not clear, however, that beneficiaries are aware of this opportunity.

The California study also identified examples of consumer complaints regarding access to and quality of care. One source of dissatisfaction is the HMO's network of primary and specialty physicians. Some enrollees, for example, did not understand that primary care physicians on the HMO's provider list may not be accepting new patients or a provider may have a limited contract (for example, a tertiary specialty center providing only selected services upon referral). The report raised three concerns about access to specialists: Is the panel of specialists sufficient to serve enrollees, are primary care physicians willing to refer patients to specialists when needed, and are restrictions on access to providers explained clearly? The Medicare statute prohibits HMOs from making specific payments to physicians to limit medically necessary care to an individual enrollee, but most HMOs place physicians at some financial risk to temper their use and authorization of care (Physician Payment Review Commission, 1995). Although patients and physicians may differ on the need for a referral to a specialist, this is a source of considerable dissatisfaction. Disputes over payment for nonplan providers and emergency care represent the majority of Medicare beneficiary appeals filed with HCFA (Network Design Group, 1995).

The California study reported enrollee complaints about access to rehabilitative services, particularly after hospitalization. For example, HMOs may deny authorization for short-term skilled nursing facility services; home health care;3 physical, speech, or occupational therapy; or durable medical equipment (walkers and wheelchairs), all of which are Medicare-covered services when they are medically necessary or will improve functional status. If the HMO defines medical necessity or functional potential narrowly, disputes over needed care will arise.

3  

It is not clear from current research whether Medicare HMOs generally provide less access to home health care. The Mathematica study found a greater likelihood but lower numbers of visits (Brown et al., 1993), whereas Shaughnessy and colleagues (1994) found less use of home health care and poorer outcomes in Medicare HMOs than in the fee-for-service system.

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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In the fee-for-service realm, such differences of opinion often involve debate over who will pay for a service already provided. In a capitated health plan, however, these disputes generally occur before a service is rendered. Because the appeals process, discussed below, is often not understood and is always lengthy, an HMO's denial of coverage may result in the service not being provided. In some cases, by the time that an appeal is decided in favor of an enrollee, the service, such as short-term rehabilitation, may no longer provide benefit (U.S. General Accounting Office, 1995a).

Summary of Evidence of Medicare HMO Enrollee Satisfaction and Dissatisfaction

Research on what makes Medicare HMO enrollees happy enough to stay in their plans or unhappy enough to desire to leave them reveals the following:

  • Most people are satisfied with their managed care plans (Ferguson, 1995; Minnesota Health Data Institute, 1995; Rossiter et al., 1989), but a substantial fraction (perhaps 20 percent) are dissatisfied and some plans have experienced annual turnover of up to 20 percent (Dallek et al., 1993), although disenrollment rates vary widely and may be lower in mature HMOs.
  • Although instances of deliberate misrepresentation are probably rare, even marketing information approved by HCFA can be confusing to some Medicare beneficiaries and sales tactics can be intimidating (Dallek, 1995; Dallek et al., 1993). Salespeople may not spend enough time answering questions thoroughly or satisfying themselves that each enrollee fully understands the HMO's features, limits, and procedures for use.
  • People who do not understand the nature of the HMO, its limited network, its gatekeeper restrictions, its process for referral to care, the actual availability of primary care physicians, how they can change providers, and limits on out-of-area and emergency care appear likely to be unhappy and disenroll quickly, particularly if they are satisfied with their personal physicians outside the HMO (Office of Inspector General, 1995).
  • Although the vast majority of enrollees are happy, some
Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×
  • who understand and accept the general limitations of an HMO still report problems, whose prevalence is not well documented but which can be grouped into four categories:
    • poor provider technical quality, such as thoroughness of exams (Rossiter et al., 1989);
    • poor provider interpersonal quality, such as unwillingness to discuss problems and explain diagnoses and treatments or lack of sympathy toward the patient (Rossiter et al., 1989; U.S. Department of Health and Human Services, 1995);
    • inconvenience, such as the time required to obtain an appointment or the time that one must wait on the phone or in the office (U.S. Department of Health and Human Services, 1995); and
    • access, including geographic proximity to offices, ability to see specialists, disputes over emergency care (in and out of the plan), and access to posthospital recovery and rehabilitation services or durable medical equipment (Dallek, 1995; Dallek et al., 1993; U.S. Department of Health and Human Services, 1995; U.S. General Accounting Office, 1995a).
  • Persons eligible for Medicare because of disability who disenroll from HMOs report considerably less satisfaction than elderly disenrollees on measures such as obtaining referrals to specialists or obtaining covered services, suggesting that HMOs may not all meet the needs of people with chronic illness and other serious health problems. Most disabled Medicare HMO enrollees report that they want to leave the HMO but are unable to do so because of inability to afford needed care under the fee-for-service system (Office of Inspector General, 1995).
  • Although fewer studies have attempted to discover what HMO enrollees really like about their plans that keep them enrolled, it appears that Medicare enrollees, like those in commercial plans, prefer HMOs for their cost containment and preventive orientation. They especially value additional services such as prescription drugs. They also seem to appreciate the opportunity that HMOs offer to coordinate care-the positive side of a gatekeeper requirement (Ferguson, 1995; Frederick/ Schneiders, Inc., 1995; Gibbs, 1995; Minnesota Health Data Institute, 1995; Rossiter et al., 1989).
Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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Medicare Health Plan Accountability: Mechanisms for Dispute Resolution

One mechanism that can be used to correct, if not prevent, consumer dissatisfaction is a well-functioning dispute resolution system. Two types of appeals processes are available to Medicare HMO enrollees: one for disputes involving coverage of services within the basic Medicare HMO benefits package and one for other grievances.

Disputes over Medicare-Covered Services

Enrollee complaints are processed through Medicare's traditional five-step dispute resolution process if they involve (1) an HMO's refusal to pay for emergency or urgently needed services, (2) services rendered by out-of-plan providers that the enrollee believes are covered by Medicare and for which the enrollee believes the HMO should pay, and (3) an HMO's refusal to provide services an enrollee believes that Medicare covers and the that HMO should furnish (42 C.F.R. Section 417.606-417.638).

If an enrollee requests a service or payment for a service in one of these categories and the HMO denies the request, it must notify the enrollee within 60 days of receiving the request (24 days if the claim is complete [HCFA CMP/HMO Manual Section 2403]), specify the reasons for the determination, and notify the enrollee of the right to request reconsideration of the decision. Because some plans had not provided timely responses to enrollee requests, regulations issued in November 1994 permit a beneficiary to appeal without a formal written denial notice from the HMO. The enrollee or a representative may request reconsideration from the HMO within 60 days of the initial determination and must be allowed to present evidence in person or in writing. The reconsideration must be conducted by a person not involved in the initial determination. If the HMO recommends an action that is adverse to the enrollee's interest, it must forward the appeal to HCFA for reconsideration. HCFA has contracted with a private firm, the Network Design Group (NDG), to process these requests. Notice of the reconsidered determination must be mailed to all parties.

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

If the amount in controversy is $100 or more, any party dissatisfied with the reconsidered determination may have a hearing before an administrative law judge (ALJ) of the Social Security Administration by filing a written request within 60 days of the date of the notice of the reconsideration. An enrollee may present oral evidence at a hearing. Any party to a hearing dissatisfied with the ALJ's decision may appeal to the Social Security Administration's Appeals Council and thereafter, if the amount in controversy is at least $1,000, to a federal district court.

An analysis of reconsiderations processed by NDG in 19931994 revealed that just over half (55 percent) of plan decisions were upheld (Network Design Group, 1995). The two most common categories of disputes are the use of out-of-plan practitioners for which the HMO refused to pay (27.5 percent) and emergency room services (26.8 percent). The remaining 45 percent of disputes included durable medical equipment or medical supplies, inpatient hospital coverage, ambulance bills, laboratory or X-ray bills, nursing home care, whether a benefit was covered by Medicare, home health, special therapies, mental health services, and hospice care. The annual rate of reconsideration requests per 1,000 Medicare plan enrollees filed with NDG ranged widely across plans, from none to more than 19 (Network Design Group, 1995). The meaning of such variation is unclear; plans that encourage enrollees to file appeals might appear to have more complaints than those whose enrollees are unaware of their appeal rights.

HMO Grievance Process

Medicare regulations and HMO licensure laws in all states require HMOs to have a grievance system to resolve disputes other than those that can be pursued through the Medicare appeals process described above [42 C.F.R. Section 417.436 (a)(7)]. Consequently, disputes involving optional supplemental services, appointment waiting times, or insensitive treatment by staff must be accepted through a plan's grievance system. Although HCFA requires plans to inform enrollees about this system and monitors the types and numbers of complaints, no

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

federal standards prescribe how it must be structured or administered.

Issues in the Medicare HMO Dispute Resolution Process

As the GAO and others have recently noted, the Medicare appeals process poses several problems for HMO enrollees (Dallek et al., 1993; U.S. General Accounting Office, 1995a). First, it is not designed to provide prompt responses to disputes over whether a service should be provided. Regulations require requests that HMOs take no more than 60 days to reconsider initial determinations (42 C.F.R. Section 417.620), but the GAO reports that some take two to three times as long. Even if plans meet HCFA standards, a reconsideration request may not be forwarded to NDG for 6 months. Although NDG attempts to decide most cases within 30 days, only 38 percent of appeals are decided within that period (45 percent required 3.5 months and others took NDG more than 6 months in 1993 [U.S. General Accounting Office, 1995a]). Such a delay may pose less of a problem in the case of disputes over payment for a service already provided, although it may be difficult for an elderly person to resist demands for payment from providers or collection agencies while pursuing an appeal. Delay, however, can mean denial of care if the dispute involves an HMO's refusal to authorize access to a service, such as a diagnostic specialist, physical therapy, or medical equipment, that may be needed promptly (for example, after a hospital discharge) in order to be effective (Dallek et al., 1993; U.S. General Accounting Office, 1995a).

Furthermore, it appears likely that many beneficiaries do not understand their appeal rights. One-quarter of the respondents to the survey (Office of Inspector General, 1995) indicated that they did not know that they could appeal denials of service or payment. A study of the Medicare HMO experience in California concluded that beneficiaries themselves, hospital social workers, and other providers were unaware of the statutory appeals system or the HMOs' internal grievance processes, even though HMO enrollment materials described these systems in accurate detail (Dallek et al., 1993). Some HMOs do not give enrollees the required written explanation of their appeal rights

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

when denying a service or payment, and some do not process appeal requests promptly. For example, some fail to forward reconsideration requests to NDG or to process appeals that should be decided under the Medicare system as internal health plan grievances (Dallek et al., 1993).

These problems result in some beneficiaries being denied potentially valuable care, facing out-of-pocket costs (at least pending resolution of their disputes), and disenrolling from the HMO. For example, GAO reports that about one quarter of Medicare enrollees appealing coverage disputes disenrolled within 90 days of the reconsidered determination and that more than 40 percent disenrolled within 2 years of the date of the disputed services (U.S. General Accounting Office, 1995a).

GAO found that HCFA recognizes these problems and has addressed some of them. For example, in 1994 HCFA adopted regulations allowing HMO enrollees the same opportunities available to nonenrollees for expedited review by PROs of disputes over hospital discharge, and it has authorized enrollees to file appeals without a formal written notice from the plan denying service. HCFA also is considering expedited appeals for urgently needed services and exploring how to educate beneficiaries about their appeal rights (U.S. General Accounting Office, 1995a).

Medicare Health Plan Accountability: Public Oversight

Federal Medicare HMO Contracting Standards

The Medicare statute and regulations prescribe contract standards for risk-bearing plans: either federal HMO qualification or other similar federal standards (regarding solvency, minimum enrollment, and administrative capacity), state licensure, a minimum number of enrollees, coverage of all Medicare services and 24-hour emergency care, no more than 50 percent enrollment by Medicare and Medicaid beneficiaries, compliance with HCFA marketing standards, limits on physician incentive payments, an enrollee grievance system (including the right to file complaints with the local PRO), and a quality assurance program (42 U.S.C. Section 1395mm, 20 C.F.R. Section 417.1 et

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

seq.). The statute also requires that plans contract with PROs for external review of quality and appropriateness of services.

The 1995 Budget Reconciliation Conference Bill would have permitted provider-sponsored organizations (PSOs) to accept risk contracts to enroll Medicare beneficiaries without meeting requirements of state HMO solvency standards if they meet standards developed by the Secretary of the U.S. Department of Health and Human Services. Furthermore, PSOs could seek an exemption from other state licensure standards. The bill also would have changed several provisions of current law. For example, it provided more detailed requirements for internal quality assurance systems (requiring that they monitor high-volume and high-risk services and evaluate continuity and coordination of care). The bill also would have exempted plans accredited by private organizations from ongoing PRO external review, would no longer prohibit offering gifts to induce enrollment or door-to-door sales, and (after a 2-year transition period) would have permitted disenrollment after 90 days only at an annual enrollment period or if the plan substantially violates a material contract requirement. Policy issues raised by these provisions are discussed below.

GAO recently criticized HCFA's enforcement of Medicare HMO standards. It reported that HCFA does not routinely examine HMO compliance with internal quality assurance plans or limits on provider risk sharing, does not collect utilization data that could reveal patterns of underservice, and has been reluctant to use sanctions to enforce federal rules (U.S. General Accounting Office, 1995a). GAO also has recommended that because HCFA acts like an employer to select and monitoring plans, it should collect and distribute to Medicare beneficiaries information on plan performance, including patient satisfaction and process and outcome standards (U.S. General Accounting Office, 1995b).

State Regulation of Managed Care Organizations
HMO Regulation

States have traditionally regulated the solvency, marketing, grievance process, benefits structure, and rates of traditional

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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insurers. Because HMOs perform the dual function of bearing risk and arranging for the delivery of services, they are regulated in most states under separate laws. The incentive inherent in a fixed per capita payment (capitation) to limit service justifies regulating not just financial solvency but also capacity to serve the enrolled population (network adequacy) and the quality of care provided. Although state laws differ, the laws of more than half of the states are drawn from the 1990 Model HMO Act of the National Association of Insurance Commissioners (NAIC). Only the District of Columbia has no law explicitly regulating HMOs. The NAIC model includes disclosure, rating standards, grievance procedures, ''hold harmless" provisions, and insolvency protections (reserves, deposits, insolvency funds, and allocation of enrollees to other plans in the event of insolvency). It also requires that HMOs have a quality assurance program to ensure availability, accessibility, continuity, and quality of care and that they inform enrollees how to obtain care and provide notice if their primary care provider is terminated from the plan. NAIC is currently developing several other model managed care laws, for example, to expand the requirements for health plan quality improvement systems and to prescribe standards for health care provider contracting by plans with limited provider networks.

A recent analysis of the HMO licensure statutes and regulations in all 50 states concluded that most states regulate marketing activities and require basic benefits, protections against insolvency, consumer grievance systems, quality assurance plans, and external quality audits (Dailek et al., 1995). That study also pointed out, however, the wide diversity in state HMO licensure laws and found that few states set explicit standards for access (such as provider-to-enrollee ratios, referral requirements, or maximum distance or appointment waiting times), limit provider risk-sharing arrangements, survey enrollee satisfaction, prohibit self-dealing, establish specific quality standards, or require a consumer role in plan governance. GAO also has noted the variation in state health insurance regulation. Not only do statutes vary but so do the resources devoted to their enforcement. Such variety results from political and regulatory philosophy, the state's economy, business cli-

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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mates, and historical trends (U.S. General Accounting Office, 1993a).

Several state HMO licensure laws address common Medicare health plan enrollee complaints (Dallek et al., 1995) and could serve as models to strengthen Medicare risk contracting standards. Some involve enrollee information, which could be especially useful in view of the fact that as many as 25 percent of Medicare HMO enrollees do not seem to understand plan constraints and procedures. For example, Florida requires that an HMO employee not in the marketing department verify that each new enrollee intends to enroll and understands the HMO's restrictions. (One of the Medicare plans whose administrator was interviewed for this paper contacts each Medicare enrollee by telephone after receiving HCFA confirmation of enrollment to discuss lock-in, appointment procedures, and other plan features and requirements.) Minnesota requires HMOs to explain that the listed providers may not be accepting new patients. Arizona requires plans to provide enrollees information on how to obtain referrals and whether provider compensation programs include incentives or penalties to encourage withholding of services or referrals.

Few state laws regulate health plan features that make obtaining care more convenient, but several require that appointments be available within a "reasonable" time. Florida law requires that patients be seen within an hour of their scheduled appointment times except when delay is "unavoidable." Several states address issues of access to care. About half have a general requirement that HMOs have a sufficient number of physicians to serve enrollees. California, Delaware, Pennsylvania, and South Dakota establish specific primary care physician-to-enrollee ratios. Because access to specialists involves both network capacity and the willingness of gatekeepers to refer, Minnesota requires that referrals be made in accordance with accepted medical practice standards. Several states prescribe maximum travel time or distance. For example, Minnesota requires that primary care providers and general hospitals be located within the lower of 30 miles or 30 minutes from enrollees and that other providers be available within 60 miles or 60 minutes.

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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Because of the confusion surrounding the definition of emergency services, California requires plans to pay for out-of-plan emergency care unless an enrollee reasonably should have known it was not an emergency. Minnesota law provides that plans consider several factors in deciding when to pay for emergency care, including an enrollee's reasonable belief that the condition required immediate care, time of day, symptoms, efforts to follow the HMO's procedures, and other circumstances that might preclude following them.

PPO Regulation

Preferred provider organizations (PPOs) emerged in the 1980s as networks of providers serve enrollees of health plans or self-funded employers (Rolph et al., 1987). They generally encourage enrollees to use network providers by imposing higher cost sharing on out-of-network use. To overcome uncertainty about whether such delivery arrangements could be authorized, about half of the states have adopted PPO enabling legislation to permit selective contracting with and channeling business to a limited set of providers. Because PPOs typically do not bear risk (those that do are licensed under HMO or other insurance standards), these state laws are less prescriptive than those licensing HMOs. Yet even without bearing risk, limited networks raise issues of whether consumers have adequate access to appropriate quality care (Rolph et al., 1987). Consequently, most include consumer protections, such as requirements that plans inform consumers about network providers or offer adequate access to care. Some state laws also require participation of any willing provider in PPOs or set limits on cost sharing or payment differentials for out-of-network use.

New Types of Delivery Arrangements

State policy makers are currently exploring the extent to which new types of managed care organizations that share risk with providers should be regulated under traditional insurance regulatory principles. Among the organizations emerging in the fast-evolving health care marketplace are integrated provider networks, such as provider-sponsored organizations, created to

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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contract with employers and other health care purchasers. To the extent that they are independent from insurers or HMOs but bear risk (for example, accepting a monthly capitation payment to provide various categories of care to enrollees), these new entities raise consumer protection issues. According to a recent survey of state regulators, organizations bearing even partial risk must be licensed as HMOs in half of the states, but the regulatory situation in other states is less clear (Group Health Association of America, 1995). Many insurance regulators assert that a provider organization that bears any risk should be regulated as an HMO to protect consumers against insolvency, misinformation, access capacity, and poor-quality care. Opponents of state regulation of new types of integrated provider organizations argue, however, that application of traditional HMO licensure law, with its high reserve requirements, solvency provisions, and access standards, will stifle delivery system innovation and increase purchaser health care costs and that limited provider risk arrangements ought to be permitted without requiring HMO licensure.

Minnesota has tried to strike a balance between consumer protection and health plan development in areas currently not served by HMOs. It permits the creation of "community integrated service networks" (CISNs) serving up to 50,000 people that have a governing body whose majority is residents of the service area. CISNs are subject to standards less stringent than those for other HMOs for cost sharing, net worth, insolvency protection, and quality assurance. For example, CISNs may partially satisfy capital requirements by guaranteeing that providers will care for enrollees if the plan becomes insolvent. To encourage integrated health care delivery, Iowa also has enacted authority for risk-bearing "organized delivery systems" that meet standards less demanding than those in the HMO law.

State Oversight of Medicaid Managed Care Plans

Because about 5 million Medicare beneficiaries are also eligible for Medicaid, they are affected by state regulation of Medicaid managed care plans (Saucier, 1995). Federal statute and regulations set out a few standards (generally consistent with

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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those under Medicare) that states must follow when they pay health plans on the basis of capitation to serve enrolled Medicaid populations. States must ensure that plans do not discriminate on the basis of health status; provide evidence of ability to deliver services efficiently, effectively, economically, and promptly; make any emergency services covered available 24 hours per day, 7 days per week; provide an internal grievance system and quality assurance system; use only acceptable physician incentive payments; and enroll no more than 75 percent of their members as Medicare or Medicaid beneficiaries (42 C.F.R. Section 434.20 et seq.). Medicaid agencies also are required to conduct periodic medical audits to evaluate plan quality and accessibility and to contract with outside agencies such as PRO or private accreditation bodies to review quality of care. Within these broad federal guidelines, state standards vary considerably.

For example, the Office of the Inspector General of DHHS examined states' use of 13 types of quality assurance measures (Office of Inspector General, 1992). Its 1992 survey of Medicaid agencies in 25 states revealed that all states included patient education, procedures to ensure access to care, and enrollee grievance systems; most required written quality assurance (QA) plans and provider credentialing and either conducted patient satisfaction surveys or required HMOs to do so; about half required HMOs to report patient care data, review enrollee complaints, review utilization, and review medical records. Few states, however, require HMOs to use clinical practice guidelines; monitor patient outcomes; control physician practice through selection, education, or payment; or report problems with physician performance.

Both the Office of the Inspector General and GAO have concluded that most Medicaid QA standards are structural or process-oriented and do not measure actual patient health outcomes (Office of Inspector General, 1995; U.S. General Accounting Office, 1993b). A recent joint federal-state effort has developed new quality assurance protocols for managed care, combining standards from the National Committee for Quality Assurance (NCQA), the National Association of Managed Care Regulators (NAMCR), and HCFA (Booth and Fuller, 1995). In addition to structural and process measures, QARI (the Quality

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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Assurance Reform Initiative) tested the use of outcome-oriented standards through focused studies in clinical areas such as prenatal care, immunizations, asthma services, and diabetes care in Minnesota, Ohio, and Washington State. This approach offers an opportunity for improved state oversight of managed care plan performance.

Experience with public agency regulation of health plans through licensure or contracting authority suggests the following:

  • Standards tend to focus on health plan structural capacity (such as credentialing or written policies) and processes (such as patient education or use of internal QA programs) rather than enrollee outcomes. Some state Medicaid programs, however, are developing outcomes standards, such as those used by commercial purchasers.
  • Compared with some states' standards, HCFA has weak standards for access and quality of Medicare HMOs, and HCFA has not aggressively enforced its existing requirements.
  • Legal standards as well as the capacity and willingness to enforce them vary among states. Just as HCFA can be criticized for lax enforcement of Medicare standards, some states regulate health insurers, including licensed health plans, less actively than others. In a time of potentially rapid change in Medicare health plan enrollment, it is important to develop federal and state regulatory capacities to monitor plan performance.
  • Several states have enacted HMO laws designed to address some of the problems experienced by Medicare beneficiaries related to marketing, access, emergency care, and plan capacity.
  • States have focused on HMOs, but many license PPOs and a few are beginning to regulate new types of delivery arrangements, such as integrated provider networks.
Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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Medicare Health Plan Consumer Protection Policy Issues

The Role for Government in a Competitive Medicare Marketplace

Although many policy makers prefer a limited role for government in a more competitive medical care marketplace, there are reasons that government should remain a forceful presence in Medicare. First, as trustee for billions of dollars, the federal government is responsible to taxpayers for prudent spending. Furthermore, it acts in a fiduciary capacity as the primary health care purchaser for millions of elderly and disabled people, many of whom face language or cultural barriers, are in poor health, are unsophisticated buyers of medical care, or are unfamiliar with integrated delivery systems.

To meet these responsibilities, the federal government performs functions ranging from facilitating the operation of a fair market to a more active regulatory role. As the foundation for a functioning market, the government should, at least, set standards for information that health plans must make available to prospective and current enrollees. The complexity of comparing plans suggests that the government should go further to compile and distribute accurate and detailed, yet simple and useful information to Medicare beneficiaries4 and support counseling programs that assist beneficiaries in using such data.

Like an employer that buys health coverage for employees, the federal government's interest in access to high-quality care for its Medicare beneficiaries justifies setting and enforcing health plan contract standards. Oversight is particularly important for capitated plans because of prepayment plans' financial incentive to underserve. Despite differences among policy makers on the content of such standards, there appears to be consensus on the need for government regulation of risk-bearing

4  

Omnibus Budget Reconciliation Act 1995 would have required the Secretary of DHHS to provide comparative information on plan benefits, premiums, and quality indicators such as disenrollment rates, enrollee satisfaction, enrollee outcomes, and compliance with federal requirements.

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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Medicare contractors. Retaining a strong role for government does not, however, diminish the potential for collaboration with private sector accrediting bodies, such as NCQA.

What Types of Managed Care Organizations Should Be Regulated?

Most analysts and policy makers agree that there is a public interest in ensuring that organizations agreeing to pay for or provide a service if an unpredictable future event occurs (i.e., to bear risk) are capable of meeting that obligation. Any health plan that accepts a premium to pay for future hospitalization that might occur is bearing a financial risk and must demonstrate a financial ability to meet that commitment. Health plans, like Medicare HMOs, that promise not only future payment but also a service delivery system must have both financial capacity and a system to meet enrollee needs for covered services. This additional responsibility justifies regulatory standards that include, beyond financial solvency, an adequate provider network, access assurances, quality standards, and expedited appeals processes.

There is no consensus on what standards should apply to the types of provider networks now emerging in the health care marketplace. Although agreeing that any organization bearing risk must demonstrate financial capacity, some state policy makers recognize that the level of protection could vary according to the level of risk assumed. The NAIC is developing model "risk-based" solvency standards, under which organizations bearing partial risk could maintain lower levels of reserves than full-risk HMOs. These standards must be developed with care: Although Medicare's proposed PSOs might be community-based and more responsive to consumer needs, provider inexperience in the business of insurance may lead to capacity, access, and financial problems.

Overcoming Barriers to Satisfaction

As more Medicare beneficiaries enroll in HMOs and other kinds of managed care plans, it will be important to evaluate current contracting standards to determine whether they need

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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to be strengthened, whether they may differ according to types of plan, and how they can be enforced to protect consumers while encouraging innovation in health care delivery.

Accurate and Usable Information

A major source of dissatisfaction among Medicare HMO enrollees is the result of misinformation about or misunderstanding of the nature of managed care. A multivariate analysis involving Medicare enrollees in one HMO found that reported understanding of coverage and procedures to obtain care was the greatest predictor of enrollee satisfaction (Ward, 1987). Problems with marketing in the Medicare Supplemental coverage market suggest that ongoing review of materials and sales staff training and performance will be necessary (U.S. General Accounting Office, 1991). Dissatisfaction could be reduced by ensuring that marketing materials are not only accurate but also understandable to beneficiaries. Features as simple as typeface and reading level can make a difference in whether the information in a marketing flier or enrollment brochure is first read, then understood, and finally retained. Information must be developed with attention to the various levels of literacy, cognition, sophistication, and self-confidence of the Medicare population. Accurate and useful information will become more important as the variety of choices expands, for example, to include point-of-service plans, PPOs, and other delivery arrangements.

Although some potential enrollees are skeptical about sales promises, others may be misled by promotional advertising that paints an unrealistic picture and raises expectations about what the plan will offer. Training salespeople to ascertain whether prospective enrollees understand the plan's basic features and allowing them enough time to answer questions could minimize enrollee confusion. For example, a list of physicians in the network may be read as guaranteeing that a practice is accepting new patients. If having a particular physician is a sine qua non for a new enrollee, plans should help prospective enrollees determine whether that physician would accept the patient. Prospective enrollees should be helped to understand that because a specialist or tertiary institution is in the provider network

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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does not guarantee that they will be referred to such providers. It also may be useful for prospective enrollees to understand how HMOs pay their physicians in order to evaluate disincentives to provide needed care (Stocker, 1995), although this information might be difficult to convey in a simple and comprehensible way.

It is not entirely clear what kind of information Medicare beneficiaries want in order to choose among managed care plans and other options. Research under way at NCQA to learn from focus groups and other sources what plan information consumers would like. Some Medicare beneficiaries not enrolled in HMOs who participated in two recent focus group studies were skeptical about consumer satisfaction ratings and indicated that this information would not be useful to them in choosing among plans unless the reports included specific questions of interest to them, information on who responded, and the sponsoring organization (Frederick/Schneiders, Inc., 1995; Gibbs, 1995). Medicare consumers appear similar to other prospective health plan enrollees recently surveyed by GAO who reported wanting more information on health plan outcomes and quality but expressed skepticism about reliability and validity of plan-generated "report cards" (U.S. General Accounting Office, 1995b).

Counseling and Advocacy Services

Even with better-trained and motivated plan sales staff and improved marketing and enrollment materials, prospective health plan enrollees may need the assistance of independent counselors to answer questions about the nature of managed care and specific plans. Although some people may be misled by plan marketing, others doubt that a plan's information will be objective and would value access to an outside source of information. Such assistance is provided by information, counseling, and assistance (ICA) programs funded by HCFA. Omnibus Budget Reconciliation Act 1990 provided federal funding for ICA programs (operating through a combination of paid staff and volunteer counselors at the state and local levels) to assist Medicare beneficiaries with obtaining appropriate public and private health insurance coverage (McCormack et al., 1994). Participants in a recent set of Medicare focus groups said that they

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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trust and would use such organizations (Gibbs, 1995). Currently, all states have established ICA programs. Departments of Aging administer the grants in two thirds of the states, whereas Insurance Commissioners operate the remainder.

Through individual counseling, group presentations, and written materials, the programs provide information about Medicare, supplemental insurance products, long-term-care insurance, managed care plans, and eligibility for Medicaid and other public programs. They also can help Medicare beneficiaries complete claims forms and file appeals. Programs in half of the states have developed consumer guidebooks. An evaluation of the first year of ICA program experience reported that it provides a valued service and has attracted committed volunteers and in-kind support, although evaluators recommended increased publicity and outreach and more standardized data collection and sharing of materials. For many years, some states had developed a spectrum of senior information and counseling services financed with state funds (Davidson, 1988; U.S. General Accounting Office, 1991). California, for example, funds its counseling programs through an earmarked portion of insurance agent and broker licensure fees. Neither the ICA program evaluation nor the few assessments of earlier programs for providing health insurance information to Medicare beneficiaries has demonstrated a clear effect on knowledge, attitudes, or decision making (Davidson, 1988).

It is likely that most plans employ customer service representatives and other staff who can assist enrollees with access or other problems, but one plan providing information for this paper reported its intention to create a formal Medicare ombudsman position in 1996. An ombudsman can be either a neutral mediator or, as with long-term care ombudsmen, a patient advocate (Harris-Wehling et al., 1995). PROs in some states act as patient advocates. Wisconsin requires plans enrolling Medicaid beneficiaries to employ an independent enrollee ombudsman. ICA programs with sufficiently large paid or volunteer staffs function as mediators or patient advocates in some states.

Quality, Access, and Information Standards

In view of the types of problems reported by some Medicare

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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HMO enrollees, the U.S. Congress and HCFA should consider adopting some additional standards to ensure access to appropriate care. They could draw upon state HMO licensure laws and regulations in defining more precisely the adequacy of provider networks, definitions of medical necessity and emergency care, standards for specialty referrals, and time or distance standards. Requiring verification of new enrollment and including cautions about whether physicians with HMO contracts are accepting new patients also could prevent or eliminate some sources of dissatisfaction.

Which Level of Government Is Best Qualified to Set and Enforce Medicare Health Plan Standards?

The choice of the level of government that should regulate Medicare health plans raises several competing considerations. Unlike the federal government, states have historically regulated the insurance industry, authority sanctioned by the U.S. Congress in the 1945 McCarran-Ferguson Act. Furthermore, all states have experience regulating the ''delivery system" aspects of managed care through their HMO licensure laws. Although managed care organizations are often national in operation, care delivery itself is inherently local, and state governments may be more responsive to local consumer concerns. Despite this state experience, however, the federal government should retain a significant role in Medicare health plan oversight. Medicare is a national program. As plans become more regional or national in organization, regulatory differences across state lines may complicate health plan operations. Model laws developed by NAIC can enhance the likelihood that state laws will be similar, although GAO points out the existence of many NAIC model laws does not guarantee that all states will adopt them (U.S. General Accounting Office, 1993a).

Each level of government has strengths and weaknesses. GAO has criticized both federal Medicare HMO oversight (U.S. General Accounting Office, 1995a) and insurance regulation and Medicaid HMO oversight by some states (U.S. General Accounting Office, 1993a, U.S. General Accounting Office, 1993b). Consequently, consumers might best be served by a federal-state partnership similar to that used to certify health care institu-

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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tions' compliance with federal law. The Medicare statute sets standards for hospitals, nursing homes, home health agencies, and other providers that the states are primarily responsible for applying and enforcing. Because state HMO licensure is currently required for Medicare risk contracts, it forms a floor for solvency and other standards and provides jurisdiction for state managed care regulators to monitor compliance with consumer protection standards. As the number and types of Medicare risk-bearing health plans increase, this relationship could be formalized so that states monitor compliance with federally established standards. As it does for health care facility certification, the federal government could oversee state performance of this responsibility and accept consumer complaints. Government standards and periodic audits could be coordinated with private accreditation to the extent that private standards serve Medicare consumer interests.

Proposed Statutory Changes in Medicare Managed Care

As part of a restructured Medicare program, the U.S. Congress considered changes to current policy regarding enrollment in or standards for managed care organizations. Some of these proposals could have enhanced consumer protections. For example, as discussed above, the conference bill would have required the federal government to provide comparative plan information on benefits, premiums, and quality indicators. The U.S. Senate's version of the bill (but not the conference bill) would have required an expedited process of appeal to HCFA for disputes over services or payment that would result in "significant harm" to an enrollee.

On the other hand, several of these proposals would not benefit Medicare consumers. Door-to-door solicitation and gifts to encourage enrollment would no longer have been prohibited, which would likely lead to marketing abuses found in Medicaid managed care enrollment more than 25 years ago (D'Onofrio and Mullen, 1977) and Medicare Supplemental markets before 1990 congressional changes (U.S. General Accounting Office, 1991). Substituting accreditation (which typically involves review only every 2 or 3 years) for currently required annual ex-

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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ternal review would have eliminated a more frequent source of oversight of plan performance. Because quality problems early in the life of these Medicare market changes could undermine the program's future, federal policy makers should ensure that quality and consumer satisfaction are paramount objectives in any move to increase Medicare managed care enrollment and that policy development and enforcement are adequately funded.

Finally, permitting disenrollment only within 90 days after initial enrollment or at an annual open enrollment period, although increasing a plan's ability to budget and manage an individual's care, would eliminate an important safety valve for enrollees. In contrast to the current right to disenroll monthly, the conference bill would have permitted disenrollment after 90 days only if the plan misrepresented plan requirements or "substantially" violated a "material" contract provision. At least in the short term, the latter standard may be too restrictive. About 40 percent of Medicare beneficiaries filing appeals disenroll within 2 years of the disputed services (U.S. General Accounting Office, 1995a) and would not be able to disenroll under this standard.

Recommendations for Further Research

Information on Enrollee Satisfaction

Additional research is needed on health plan enrollee sources of satisfaction and dissatisfaction. Of particular interest would be information from people recently disenrolled and from both enrollees and disenrollees who have actually used services and those who have poor health status. Satisfaction surveys can serve several functions and should be designed to meet multiple objectives. If they elicit information that prospective enrollees could use to compare plans, such as features that both satisfy and dissatisfy, they can enhance consumer choice. Surveys are also an important source of information for government monitoring agencies in deciding whether plans are meeting contract requirements and should be retained as contractors. Although regulatory sanctions would rarely seem appropriate for poor consumer ratings, survey responses (like other outcomes measures) could suggest patterns of poor care or access barriers

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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that require further public agency investigation into actual care delivery or administrative systems. Multiple sources of information on satisfaction, such as routine enrollee surveys, targeted surveys of vulnerable groups, disenrollee "exit interviews," and information from appeals and grievance processes, are more likely than any single source to provide an accurate picture of reasons for satisfaction and dissatisfaction.

National and plan-specific data on the prevalence of complaints and problems could be important to government monitoring agencies as well as plans that want to improve their performance. Valid and reliable measures of the construct of consumer satisfaction are needed. NCQA has begun a study to determine what information Medicare consumers would like in order to choose among health plans. Some plans have developed their own Medicare enrollee assessment tools (Hanchak et al., 1996). Both HCFA and the Prospective Payment Assessment Commission are developing surveys for Medicare managed care enrollees and disenrollees. It would be useful to collect such information routinely over time. Under a grant from the Agency for Health Care Policy and Research, the Research Triangle Institute is developing survey modules on consumer satisfaction that will generate information that consumers can use in choosing among health plans. Although that project does not include Medicare beneficiaries, the instruments could provide models that could be tested on them in order to develop model Medicare consumer satisfaction survey tools. These current research efforts may be able to shed light on an issue not addressed in the literature, the cost to administer consumer satisfaction surveys and to compile and distribute their results.

HMO "Best Practices"

Perhaps because of the competitive nature of the current market, it was difficult to obtain information from Medicare HMOs regarding enrollee complaints and policies to solicit and address them. (Only three of seven plans contacted for this paper responded to a request for a telephone interview.) A few plan administrators, however, did report that their plans conducted Medicare member surveys (some as often as quarterly) that reveal very high levels of satisfaction. These plans use

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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information from surveys, member forums, and their grievance processes to inform physicians about enrollee concerns, educate members about plan features, and change policy. For example, one plan uses the results of consumer surveys in determining physician incentive pay and another uses the results in determining management incentive pay. One requires each of its contracting physician groups to include as part of its annual work plan a means of addressing at least one consumer satisfaction problem identified in the survey responses. Another decided to provide additional coverage of out-of-plan use in response to enrollee complaints about limits on such payment. Although competition creates incentives for plans to determine what makes enrollees happy or unhappy, information on the state-of-theart of Medicare HMO managed care could be useful to policy makers to set contract standards and promote innovation. It would be interesting to know, for example, whether more mature HMOs or those with more experience enrolling the elderly have more satisfied enrollees.

How Best to Provide Information and Facilitate Its Use

It also is important to determine not only what kinds of information Medicare beneficiaries say they want and will use (as discussed in other papers prepared for the committee) but also what channels of information are trusted and actually used. More research is needed on how plans should provide information. Because some enrollees will not avail themselves of even the most accessible outside information sources, it is imperative that plan sales staff provide accurate information in an atmosphere that fosters consumer trust, the opportunity to ask questions, and full understanding. Furthermore, it may be necessary to mandate that each salesperson use a checklist to disclose key information, such as lock-in restrictions, gatekeeper requirements (including in-plan and out-of-plan service use), referral procedures, and definitions of what emergencies will be covered.

Research on ICA programs and other senior information and counseling programs could reveal what programs are best able to provide information and facilitate its use. Of particular interest could be the advocacy/ombudsman role of these programs and whether a conflict exists between responsibilities to provide

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." 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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unbiased information and to assist enrollees in resolving disputes. It would also be useful to study whether these programs reach not only better-educated beneficiaries but also those with less education, experience, and sophistication, who need them most. For these more vulnerable elderly, additional resources, including representatives who can actively facilitate decision making, may be necessary.

If managed care enrollment increases as rapidly as some proponents expect, support for information and counseling services must grow as well. Consequently, research is needed on the costs of these programs and the levels of funding required to provide accessible and useful consumer information. It is difficult to measure the effectiveness and cost-effectiveness of these programs in affecting decision making. Yet such an assessment seems worth some effort, particularly to determine what features are associated with the most efficacious programs.

Effectiveness of Government Consumer Protection Standards

Government contracting and licensure standards should be evaluated. It would be useful to know, for example, whether the quality and access standards in innovative state HMO laws and various enforcement strategies are effective in improving quality and enrollee satisfaction. Of particular interest is how to strike the appropriate balance between adequately protecting consumers while not unduly micromanaging health plans.

Conclusion

Policy makers need to understand the sources of satisfaction and dissatisfaction of Medicare health plan enrollees. Such information can be useful to help prospective enrollees understand plan features in order to enroll in plans most likely to meet realistic expectations, provide the basis for establishing Medicare contract standards, and monitor contract compliance. Because plan performance will not always meet expectations, it is important to establish mechanisms to accept and resolve enrollee complaints in a time frame that does not impede access to needed care.

Suggested Citation:"J Medicare Managed Care: Protecting Consumers and Enhancing Satisfaction." Institute of Medicine. 1996. Improving the Medicare Market: Adding Choice and Protections. Washington, DC: The National Academies Press. doi: 10.17226/5299.
×

In a more competitive health plan market, Medicare beneficiaries will be asked to be much more active consumers. Although consumer empowerment may be a laudable goal, policy makers should recognize that not all Medicare beneficiaries are equally comfortable with or able to perform such a role. Given adequate and well-presented information, some will be happy to make choices with little outside help. Others will have less confidence or ability to do so (because of age, education, or limited past experience with managed care) and will need independent information sources and possibly other assistance. It will be particularly important to monitor the health plan choice and enrollment experiences of the most vulnerable Medicare beneficiaries, especially those who are sick or frail, to determine whether a market system works for them.

Some of the confusion, concern, and dissatisfaction about Medicare managed care may subside as working Americans currently familiar with managed care plans age into Medicare. However, especially during the transition to a system very different from that which most elderly people have previously experienced, public agencies have a responsibility to set and enforce standards to protect Medicare beneficiaries and to ensure expeditious disenrollment and expedited grievance mechanisms.

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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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