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--> K Medicare Managed Care: Current Requirements and Practices to Ensure Accountability Judith D. Moore* Background and Overview of Medicare Requirements From the beginning of the Medicare program in 1966 there were arrangements for coverage of beneficiaries through prepaid health care organizations. However, until passage of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), organizations that provided managed care to Medicare beneficiaries were few and far between. TEFRA simplified the contracting requirements. The 1985 TEFRA regulations, implementing the 1982 changes, defined a system for Medicare contracting that was much more comparable to the processes that managed care organizations use to conduct their private sector, non-Medicare business. Thus, TEFRA provided the foundation for substantial growth of Medicare managed care arrangements. Various revisions in subsequent legislation (Consolidated Omnibus Budget Reconciliation Act in 1986, Omnibus Budget Reconciliation Act (OBRA) in 1985, OBRA in 1987, and OBRA in 1990) have not altered the basic statute but have usually added protections or modified requirements. * Independent health care consultant, McLean, Virginia.
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--> The extensive statutory provisions governing Medicare managed care are found in Section 1876 of the Social Security Act. The Secretary of the U.S. Department of Health and Human Services, acting through the Health Care Financing Administration (HCFA), administers these provisions of the statute, using lengthy regulations, guidelines, and contract procedures. Number of Medicare Beneficiaries in Managed Care HCFA data as of November 1, 1995, show a total of just over 3.7 million beneficiaries enrolled in prepaid care under 272 contracts.1 The bulk of these beneficiaries—3,030,000—are in 182 plans with risk contracts. Between October 1 and November 1, 1995, enrollment in risk-based plans increased 2.1 percent, a rapid growth phenomenon experienced throughout 1995.2 Over the years, Medicare managed care enrollment has fluctuated greatly. In April 1985, for example, just before TEFRA regulations went into effect, risk-based plan enrollees totaled 300,000 and cost-based plan enrollees totaled more than 900,000. By December of that year, those figures were 440,000 in risk contracts and 730,000 in cost contracts. Since that time, the number of enrollees in cost contracts has stayed about level. Initial growth after TEFRA regulations was rapid; by December 1986 the number of enrollees in risk contracts had almost doubled over the number in the previous year to 813,000. The next few years saw an additional 400,000 beneficiaries covered under risk contracts, with enrollment at 1.2 million in December, 1990. At the end of 1994 there were 2.2 million enrollees. 1 Data reported herein are taken from internal monthly reports generated by and available from HCFA's Office of Managed Care, 7500 Security Boulevard, Mail Stop S3-022-01, Baltimore, MD 21244. 2 The information in this paper will primarily address risk-based contracts, since that is the area of significant current and future growth. HCFA also enters into cost-based contracts, which must adhere to virtually all of the requirements that risk-based contractors follow other than peer review organization review. Another Medicare managed care variation is a health care prepayment plan (HCPP), usually a labor or employer organization that provides services exclusively for its members. There are currently fewer than 700,000 Medicare enrollees in cost-based plans and HCPP.
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--> As noted, about 700,000 beneficiaries were added to risk-based contracts during the first 10 months of 1995. These HCFA figures are shown below: Medicare Managed Care Enrollment in Risk Contracts April 1985 300,000 December 1985 440,923 December 1986 813,712 December 1990 1,263,547 December 1994 2,268,364 November 1995 3,030,159 HCFA Organization and Approach HCFA's Office of Managed Care (OMC) and the 10 HCFA regional offices are primary points of responsibility for administering Medicare managed care contracts. Regional offices receive and process applications and are the principal contact for HMOs after a contract is approved. For new contracts, an extensive application is required. This application, supplemented by an initial site visit and monitoring activity following contract approval, contains the core accountability requirements for any managed care organization that wishes to contract with the government to cover Medicare beneficiaries. A detailed Medicare contract application, available in paper or diskette format from HCFA's OMC, must contain narrative descriptions in numerous areas, as well as accompanying documentation materials. An idea of the requirements can be seen by reviewing Appendix A, which contains the Table of Contents for the Documents Section and the Narrative Section for the Medicare Contract Application. The key requirements for contractors, summarized below, are described in detail in the Medicare Contract Application itself.3 3 The Medicare Contract Application: Competitive Medical Plans is available from HCFA's Office of Managed Care, 7500 Security Boulevard, Mail Stop S3-02-01, Baltimore, MD 21244.
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--> Membership Requirements To demonstrate its operational experience, a managed care organization seeking to contract for coverage of Medicare beneficiaries must have certain minimum numbers of commercial enrollees. For a risk-based contract, at least 5,000 prepaid capitated members must be covered, or 1,500 members must be covered in a rural HMO. This number may be met by the parent organization, but a minimum of 1,000 members must be in any subdivision or subsidiary that will serve Medicare beneficiaries.4 In either cost- or risk-based contracts, the membership may not exceed 50 percent combined Medicare and Medicaid enrollees. This is referred to as the 50/50 rule, and this rule can be waived only for government entities or if the service area itself contains a general population that exceeds 50 percent Medicare and Medicaid beneficiaries (that is, if more than half of the residents of a county are covered by Medicare and Medicaid, the rule could be waived).5 Medical Services Managed care organizations must be able to provide directly or through arrangements all Medicare Part A and Part B services available in their service area and must use Medicare-certified providers. The organization must provide 24-hour emergency services and make provision for payment of emergency services for out-of-area emergencies. All services must be available with reasonable promptness, and record-keeping must ensure continuity of care. In addition to Medicare Part A and Part B services, non-Medicare services can be provided in several ways: as additional benefits, as optional supplemental benefits that a beneficiary can choose to purchase, through mandatory supplemental benefits that a beneficiary must purchase as a condition of en- 4 To be eligible for a cost-based contract, there must be at least 1,500 commercial enrollees. 5 Membership requirements are located in the Commercial Marketing and Medicare Marketing Sections of the Medicare Contract Application.
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--> rollment (e.g., preventive benefits), or as benefits offered only to employer group retirees. Because of policy changes made in October 1995, point-of-service (POS) options may be offered under several of these approaches. These POS plans are subject to additional HCFA review and monitoring related to financial solvency, accessibility of care, quality, appeals processes, and marketing.6 Enrollment Requirements Plans must have, at a minimum, an annual 30-day open enrollment and must also open their enrollment to Medicare enrollees from area plans that have not renewed or that have had their federal contract terminated, except that patients with end-stage renal disease and hospice patients must be denied enrollment. Open enrollment may be waived under a few special circumstances. Beneficiaries must be able to disenroll monthly, either through the plan or, at the beneficiary's option, at local Social Security offices.7 Marketing Specifications Managed care organizations must market the Medicare plan throughout the service area that it specifies in its contract. All marketing material, including membership and enrollment material, must be approved by HCFA before use (HCFA has 45 days to review materials submitted by the organization). Certain marketing practices are prohibited, including door-to-door solicitation, marketing that is discriminatory (e.g., geographically targeted marketed is not acceptable), and marketing that misleads or misrepresents the plan.8 6 Medical service requirements are located in the Organizational and Contractual and Health Service Delivery sections of the Medicare Contract Application. 7 Enrollment requirements are located in the Health Services Delivery section of the Medicare Contract Application. 8 Marketing specifications are located in the Commercial Marketing and Medicare Marketing sections of the Medicare Contract Application.
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--> Financial and Administrative Requirements HCFA carefully reviews the fiscal soundness of all applicants to determine financial viability and whether the organization has sufficient administrative capacity to carry out contract provisions. HCFA requires that certain financial records be submitted with the application and has the right to inspect any financial records; this inspection usually takes place during site visits. Data systems to record beneficiaries coming into and leaving the plan (referred to as ''accretions and deletions") must be compatible with the HCFA system, or plans may submit data through two private sector contractors that HCFA uses. Plans must accept electronic funds from the Treasury Department on the first day of every month.9 Quality Assurance A plan's internal quality assurance program must be the same for Medicare and commercial patients. The contract requirements center around traditional process measures, which call for systematic data collection of performance and patient results, peer review, and ongoing monitoring and evaluation with written procedures for remedial action. 10 Since 1987, peer review organizations (PROs) have provided external review of inpatient and ambulatory care in managed care organizations. For both managed and fee-for-service care, the PROs are moving away from individual case review toward a continuous quality improvement model involving collaborative review of patterns of care. For example, in managed care, HCFA has begun a program to gather outcomes data and performance measures for the treatment of diabetes. In five states, PROs are working collaboratively with volunteer plans to abstract clinical data from medical records of diabetic beneficia- 9 Financial and administrative requirements are located in the Organizational and Contractual and Financial sections of the Medicare Contract Application. 10 Quality assurance requirements are located in the Health Services Delivery section of the Medicare Contract Application.
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--> ries, looking at such measures as annual eye examinations and blood glucose control to determine how ambulatory care can be improved. This effort to develop outcomes measures for other clinical conditions will be expanded in the future.11 Beneficiary Rights The beneficiary has the right to remain enrolled in a plan for the duration of the government contract, except for cause which must have prior HCFA approval. Beneficiaries may appeal decisions about coverage or services. Through a contractor, HCFA reviews all decisions that are adverse to a member. Appeals to an administrative law judge and the federal court system may follow.12 The lock-in is one of the most difficult concepts for many beneficiaries who are used to fee-for-service medicine. Plans therefore are required to explain the lock-in to potential enrollees, and HCFA strongly recommends (but does not require) face-to-face discussion of this feature. HCFA itself provides an explanation of the lock-in when the beneficiary receives notice that he or she has been enrolled in a managed care plan.13 As noted, beneficiaries can disenroll monthly, effective the first day of the month after request, either through the managed care plan directly or through a local Social Security office. Ongoing Monitoring by HCFA Both regional and central HCFA office staff monitor managed care contracts through monthly reports and biennial onsite visits. In 1996, HCFA will begin annual targeted on-site reviews. HCFA's overall ongoing monitoring involves the following: 11 Interview with Paul Elstein, HCFA Office of Managed Care, November 30, 1995. 12 Interviews with Gary Bailey and Rae Loen, HCFA Office of Managed Care, December 1995 and January 1996. 13 Interview with Gary Bailey, HCFA Office of Managed Care, December 13, 1995.
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--> review of self-reported enrollment, financial, and other information, and targeted site visits and comprehensive monitoring to review insolvency arrangements, legal and financial requirements for plan, quality of care, marketing practices, enrollment and disenrollment, claims payment, and grievance and appeals procedures.14 HCFA reviewers follow a detailed, specific written protocol during on-site reviews. Two or three HCFA reviewers spend at least 1 week on-site at the plan. They pull and check a sample of appeals, grievances, and correspondence. They review all internal processes, especially contracts. Following the site visit, they prepare a report, and the plan may be required to submit a corrective action plan. The corrective action plan is closely supervised.15 Protocol requires regional offices to follow-up on all beneficiary complaints. These are handled in a case work fashion, working through the problem with the beneficiary and the health plan. When HCFA identifies a major problem, a full-scale on-site investigation is launched, with as many as 10 HCFA employees spending 2 weeks or more at a plan. 16 Other HCFA Approaches to Medicare Managed Care Communications and Accountability HCFA has under way a number of activities to help Medicare beneficiaries better understand that they may be able to choose different types of medical service arrangements. 14 Interviews with Bruce Fried, Paul Elstein, Rae Loen, and Gary Bailey, HCFA Office of Managed Care, and Carlos Zaraboza, HCFA Office of Special Analysis, November and December 1995 and January 1996. 15 Interview with Rae Loen, HCFA Office of Managed Care, January 18, 1996. 16 Interviews with Bruce Fried, Rae Loen, Paul Elstein, and Gary Bailey, HCFA Office of Managed Care, November and December 1995 and January 1996.
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--> Consumer Information for Beneficiaries HCFA has begun an extensive program to revise and update Medicare publications. For example, a new section of the HCFA Medicare Handbook explains choices and managed care. A new HCFA publication currently under development has been reviewed by advocacy organizations and focus groups and is scheduled for publication in 1996. Finally, a brochure describing managed care choices to be sent out with the initial enrollment package17 is being developed and will be tested in coming months.18 Information to Assist in Purchasing Managed Care HCFA is developing comparability charts on a state-by-state basis to show in a standard format comparisons with plan benefits, copayments, premiums, geographic areas served, and so forth. It will also contain a general comparison to fee-for-service Medicare. Prototypes of this chart have been reviewed in focus groups; the publication goal is spring 1996. In Phase II of the comparability chart, targeted for spring 1997, consumer satisfaction data obtained from surveys of members in every Medicare contract plan will be included. In a final phase, scheduled for summer 1997, quality performance measures will be added.19 All of the basic information about managed care plans with Medicare contracts is available on the Internet. The comparison charts described above will likewise be available on the Internet when they are completed. Insurance Counseling and Assistance Programs The insurance counseling and assistance (ICA) grants pro- 17 The initial enrollment package is a set of explanatory materials about Social Security and Medicare sent to beneficiaries 6 months before their 65th birthday. 18 Interviews with Bruce Fried, Paul Elstein, and Gary Bailey, HCFA Office of Managed Care, November and December 1995 and January 1996. 19 Interview with Gary Bailey, HCFA Office of Managed Care, December 13, 1995.
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--> gram was created in OBRA 1990 to support state-based provision of insurance information to Medicare and Medicaid beneficiaries. States generally train senior volunteers to provide one-on-one or group counseling information via telephone, written materials, and presentations. Each state defines its own program, and HCFA has worked closely with many ICA program grantees to develop and provide information on managed care. Most states have trained their volunteers to answer questions about managed care choices. Many states have also developed written pamphlets and materials. For example, comparability charts have been developed by ICA program grantees in several geographic areas, including Chicago, to better explain features of Medicare managed care plans. 20 HCFA Research and Demonstrations HCFA's Office of Research and Demonstrations has under way a series of projects to learn more about effective Medicare managed care programs and to refine current program elements. The Research Triangle Institute conducted focus groups under a research contract to assess the usefulness of three types of plan choice information: consumer ratings, quality of care measures, and cost comparisons. The Research Triangle Institute report notes that participants responded most favorably to samples of consumer ratings of plan performance. The focus groups were held to guide the development of information prototypes, which are now under way as the next phase of the contract. In the meantime, HCFA's OMC staff has used much of the information generated in developing its new publications and materials.21 Medicare Choices, a demonstration project just getting started, will waive some of the existing contract provisions (including, for example, financial solvency and 50/50 rules) for selected applicants. The project will test experience with several 20 Interview with Eric Lang, HCFA Office of Beneficiary Services, November 30, 1995. 21 Interview with Leslie Grunwald, HCFA Office of Research, November 30, 1995.
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--> different types of plans-including provider-sponsored networks, preferred provider options, and POS plans to see if relaxed rules will produce more interest and higher levels of beneficiary satisfaction. Marketing, provision of information, quality, and beneficiary satisfaction will be carefully evaluated in these plans. In the area of quality, for example, the demonstrations will favor new continuous quality improvement models, using Health Plan Employer Data and Information Set, version 3.0, reports when they are available.22 Additional Future HCFA Plans HCFA Online, an umbrella plan developed by the agency as a vision of state-of-the-art communications and data transmission for the 21st century, includes many features designed to provide more and better information about Medicare and choices to beneficiaries. This includes such features as toll-free telephone service, additional market research to better meet beneficiary needs, and more printed and database information about insurance, health care services, and managed care plans. Budget realities will limit some of these plans, but there has been a strong commitment to these activities on the part of HCFA leadership, even in the face of significant administrative cuts in the agency budget.23 Potential Impact of Reconciliation Legislation Numerous provisions in the pending reconciliation legislation would affect Medicare managed care. Although the final outcome of ongoing negotiations is still quite uncertain, it appears that many of the basic regulatory processes and requirements related to Medicare managed care contracting would likely remain similar to the current processes. The addition of 22 Interview with Leslie Grunwald, HCFA Office of Research, November 30, 1995. 23 Interview with Kathy King, HCFA Office of the Administrator, December 1, 1995.
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--> new types of plans would require new approaches, and quality of care requirements might be delegated to accrediting organizations. A major change would result if states rather than HCFA were involved in the regulatory process. Some observers close to the negotiations have suggested that the regulatory role of HCFA could be significantly more extensive under reconciliation provisions. Definitive judgments are impossible given the current inconclusive status of the legislative process. References Research Triangle Institute. 1995. Information Needs for Consumer Choice. Prepared for the Office of Research and Demonstrations, Health Care Financing Administration. Research Triangle Park, N.C. U.S. Department of Health and Human Services, Health Care Financing Administration. 1993a. Medicare Contract Application: Competitive Medical Plans. U.S. Department of Health and Human Services, Health Care Financing Administration. 1992. Health Insurance Information, Counseling and Assistance Grants Program (program description). Zaraboza, C., and J. LeMausurier. 1996. Medicare and Medicaid. Chapter 28 in Managed Health Care Handbook, Peter Kongspvedt, ed. Gaithersburg, Md.: Aspen Press.
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