4
How to Reach Beneficiaries: Lessons from Private Industry*

As the Health Care Financing Administration (HCFA) prepares to fulfill its requirements under the Balanced Budget Act of 1997 to provide Medicare beneficiaries with information, important lessons may be learned by looking at some of the work that has been done in the private sector. Large purchasers and insurance companies have invested a great deal of time and money in obtaining a better understanding of what people want from their health plans. In light of this, the committee asked several representatives from health plans and other related organizations to discuss lessons that have been learned and best practices in marketing to that population.

HCFA's information dissemination budget for 1998 is $95 million, or less than $3 per person. This amount was whittled down from the original request for $200 million, or about $5.25 per beneficiary. By way of rough comparison, the health insurance industry has approximately $1.5 billion, or nearly $40 per beneficiary, that it can use to market to Medicare beneficiaries. Throughout the workshop, participants called on HCFA and the health plans to work together to leverage the private sector's pool of money to improve beneficiaries' understanding of the Medicare+Choice program.

HCFA's information dissemination budget for 1998 is $95 million, or less than $3 per person.

The evident self-interest of private plans and insurance companies to enter the Medicare+Choice market should not be ignored, however. Medicare+Choice presents an enormous opportunity for health plans to gain many new enrollees, enrollees who are highly "valued" by the health care system for their high levels of use of providers, hospitals, and physicians. At the same time, panelists pointed to a significant potential downside in pursuing members of the senior population, including adverse risk selection and problems associated with contracting with the federal government. The panel indicated that the benefits of dealing with the Medicare population outweigh the potential drawbacks, however.

*  

The material in this chapter is derived from the workshop presentations of Frederick Adler, Tom Anderson, Brace Clark, Martin Rosen, and Jack Tighe.



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--> 4 How to Reach Beneficiaries: Lessons from Private Industry* As the Health Care Financing Administration (HCFA) prepares to fulfill its requirements under the Balanced Budget Act of 1997 to provide Medicare beneficiaries with information, important lessons may be learned by looking at some of the work that has been done in the private sector. Large purchasers and insurance companies have invested a great deal of time and money in obtaining a better understanding of what people want from their health plans. In light of this, the committee asked several representatives from health plans and other related organizations to discuss lessons that have been learned and best practices in marketing to that population. HCFA's information dissemination budget for 1998 is $95 million, or less than $3 per person. This amount was whittled down from the original request for $200 million, or about $5.25 per beneficiary. By way of rough comparison, the health insurance industry has approximately $1.5 billion, or nearly $40 per beneficiary, that it can use to market to Medicare beneficiaries. Throughout the workshop, participants called on HCFA and the health plans to work together to leverage the private sector's pool of money to improve beneficiaries' understanding of the Medicare+Choice program. HCFA's information dissemination budget for 1998 is $95 million, or less than $3 per person. The evident self-interest of private plans and insurance companies to enter the Medicare+Choice market should not be ignored, however. Medicare+Choice presents an enormous opportunity for health plans to gain many new enrollees, enrollees who are highly "valued" by the health care system for their high levels of use of providers, hospitals, and physicians. At the same time, panelists pointed to a significant potential downside in pursuing members of the senior population, including adverse risk selection and problems associated with contracting with the federal government. The panel indicated that the benefits of dealing with the Medicare population outweigh the potential drawbacks, however. *   The material in this chapter is derived from the workshop presentations of Frederick Adler, Tom Anderson, Brace Clark, Martin Rosen, and Jack Tighe.

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--> How to Target the Medicare Population Medicare Has a Heterogeneous Population The Medicare population is very diverse. Forty percent are over the age of 75, and 48 percent are between the ages of 65 and 74. Fifty-one percent still live with their spouses, while 27 percent live alone and 5 percent live in a long-term-care facility. Forty-six percent have had 12 or more years of education, but 27 percent have had less than 8 years of education (U.S. Department of Health and Human Services, 1997b). This degree of diversity contributes to the difficulty that marketing experts find in conveying a simple message to senior citizens in the United States (Lumpkin et al., 1989). Several of the panelists* indicated that in their experience only two or three factors may influence the health plan decisions made by adults who are not senior citizens. However, their work with senior citizens shows almost no consensus on the range of factors that influence that group's decisions. The Medicare population is very diverse. This degree of diversity contributes to the difficulty that marketing experts find in conveying a simple message to senior citizens in the United States. Bruce Clark and other presenters and participants at the workshop stressed that HCFA must bear in mind the local nature of health care. Different communities have different health care needs and concerns. The panel on marketing indicated that the current trend in private-sector marketing is to move away from mass marketing and toward "mass customization," in which companies reach their customers by building more personal marketing strategies. Successful private-sector marketing to the Medicare population has become more individualized. Companies and plans target potential enrollees along the lines of socioeconomic status, neighborhoods, ethnic groups, language, and religious affiliations. HCFA, however, does not have the financial or personnel resources to target its materials to every subgroup within the Medicare population, and the panelists presented a clear caution to the committee: The size and time line of HCFA's current task will compel the agency to standardize the Medicare+Choice information to the greatest extent possible. At the same time, health plans will be sending customized marketing materials to these same beneficiaries. The committee heard evidence that to help stem the confusion that will result from beneficiaries trying to understand all of the different pieces of information that they will receive, HCFA and the private sector should be encouraged to work together to build a more cohesive and useful information infrastructure. Members of the panel suggested that the marketing dilemma might be addressed by segmenting the Medicare population into at least two groups: those over age 70 and those under age 70 or those beneficiaries who are more familiar with managed care through their former employment status and those who are of an age such that they have not had prior experience with managed care. It is worth noting that the under-70 age group tends to be more active and more Internet savvy, and tends to rely less on family members and doctors for advice on choosing a health plan. Others at the workshop suggested that segmentation by health status might be more *   Tom Anderson, Judith Hibbard, and Jack Tighe.

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--> effective. Those suffering from existing health problems, in particular, need to receive good and impartial information regarding Medicare+Choice from sources other than the health plans. The committee heard testimony indicating that Medicare managed care plans are reluctant to market to these beneficiaries. One of the panelists* informed the committee that it typically takes 3 to 6 months for a health plan to develop a marketing initiative for a single geographical locale—be it a county, town, or region. The challenge for HCFA to develop a national marketing strategy with local applications over the course of approximately a year is truly daunting. Education and Marketing Should Be Done Together Several workshop speakers and participants** spoke about the high degree of confusion among Medicare beneficiaries regarding even basic Medicare program facts. One panelist*** told of focus groups that his organization put together to look separately at issues relating to Medigap and Medicare health maintenance organizations (HMOs). Despite what the company believed were clear instructions, beneficiaries with Medigap coverage showed up at the HMO focus groups and vice versa. All groups that provide health care information to beneficiaries will face the challenge of informing beneficiaries who are not sufficiently knowledgeable about the basic Medicare program, not to mention the new Medicare+Choice options (Frederick Schneiders Research, 1998; Hibbard and Jewett, 1998; Kleimann, 1998a). Those building the information infrastructure for the Medicare+Choice program were cautioned not to confuse marketing to beneficiaries with beneficiary education. Yet, many times these two tasks are performed simultaneously. Health plans that work with the Medicare population often spend time up front informing their plan members about the basic Medicare benefits package and how the Medicare fee-for-service system operates. Each plan, however, will tend to interpret and relay such information differently. Those who work with the beneficiaries on a day-to-day basis warned the committee that beneficiaries need to get the basic information from somebody they can trust, not somebody they know is trying to sell them something.**** HCFA should be encouraged to develop a clear list of questions and answers for beneficiaries that would address, among other issues, the differences between HMOs, point-of-service plans, and preferred provider organizations; what "network" and "capitation" mean; and clear definitions and examples of deductibles, coinsurances, and stop loss coverage. The ability of major national marketing campaigns to influence consumer behavior should not be underestimated. By effectively leveraging the $1.5 billion that the insurance industry spends on marketing to the Medicare population, the gap between education and marketing may be bridged. At the workshop, Robyn Stone of the International Longevity Center suggested that a portion of each marketing dollar spent by Medicare+Choice health plans be *   Frederick Adler. **   Frederick Adler, Joyce Dubow, Judith Hibbard, and Robyn Stone. ***   Frederick Adler. ****   Aileen Harper.

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--> dedicated to disseminating HCFA's message to the beneficiaries. One of the easiest ways for HCFA to use health plans in its educational campaign is to have the plans disseminate HCFA's literature as part of any set of marketing materials sent to the Medicare population. HCFA's information enclosure would look identical from plan to plan to ensure that beneficiaries understood that the basic Medicare information was coming from a reliable source. Bruce Clark pointed out that Internal Revenue Service (IRS) forms, whether they are picked up at a neighborhood library, at a drugstore, or off the Internet, are virtually identical and are all visually recognized by the general public as IRS forms. He and others told the committee that HCFA should attempt to achieve similar visual recognition with its materials. Partnering with Expert Outside Groups and Resources to Get the Job Done The increased choice of health plans available to Medicare consumers will likely lead to heightened confusion among those unaccustomed to exercising choice. Health plans, HCFA, information counseling and assistance programs, and other consumer information services will need to be prepared for the number of beneficiaries wanting their questions answered in the aftermath of the planned fall 1998 mailing of the Medicare & You handbook and bulletins. The committee heard recommendations that HCFA should stagger the fail mailing to help alleviate some of the pressure that will be brought to bear on the fledgling information infrastructure. The tight time line mandated in the Balanced Budget Act of 1997, however, makes it difficult to stagger the mailing over more than 1 or 2 weeks. On June 18, 1998, HCFA announced that only 5.5 million beneficiaries in five states (Arizona, Florida, Ohio, Oregon, and Washington) will receive a version of the comprehensive Medicare & You handbook that includes comparative health plan information. HCFA explained that this pilot testing will allow it to refine the handbook before it is distributed nationwide. The use of Industry Advisory Councils was suggested as one method of helping HCFA lean on health plans for further assistance. The committee was reminded of the Health Insurance Benefits Advisory Council implemented at the time of Medicare's establishment. A new council or set of councils could provide HCFA with senior-level advice and guidance on important issues that the agency might not have the time or resources to address carefully. The Alliance Network being implemented by HCFA and outlined by Michael McMullan earlier in this report (Chapter 2) was recognized as a good step in the direction of establishing public-private partnerships. Relying on Traditional Medicare The quick introduction of the Medicare+Choice program raises concerns that Medicare beneficiaries will not understand enough of the options before them to make an effective and informed choice. It is the committee's strong sense that Medicare beneficiaries should be clearly told that they do not have to make a choice at all and that remaining in the traditional Medicare program is still an option. Beneficiaries need to be assured that if they are content with their current Medicare arrangement, they do not have to change (Medicare Payment Advisory Commission, 1998b).

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--> Beneficiaries need to be assured that if they are content with their current Medicare arrangement, they do not have to change. However, traditional Medicare is not a flawless program, and it may not be the best alternative (either in overall costs or benefits) to be offered to beneficiaries. For example, to cover gaps in traditional Medicare coverage, most beneficiaries purchase a separate Medigap policy, usually at a significant cost. Medicare+Choice was designed to save money on two fronts: (1) by enabling the Medicare program to reap the financial benefits of the cost savings associated with managed care and (2) by helping beneficiaries save money by no longer having to purchase a Medigap policy to obtain benefits not covered by traditional Medicare. A number of workshop participants noted that the overall Medicare program has yet to realize real savings from managed care. Cautions Concerning Private Plan Marketing As part of its oversight responsibilities, HCFA reviews each health plan's Medicare marketing materials and assesses them for accuracy. As part of the agency's new guidelines for the Medicare+Choice program promulgated in 1997, marketing practices that could mislead or confuse beneficiaries were prohibited. Even though only 5.5 million beneficiaries will have received the Medicare & You handbook initially, private plans and companies will market their services to a wider set of beneficiaries. The marketing practices of several health plans have recently been called into question (Hopkinson, 1998; Neuman et al., 1998). In addition, a recent study of four media markets (Cleveland, Los Angeles, Miami, and New York) by the Kaiser Family Foundation (1998, p. vii–viii) found that: lower costs and better benefits are pitched in the majority of ads across markets and media. Medicare HMOs appear to target physically and socially active seniors rather than beneficiaries in poor health; nonelderly beneficiaries are not targeted by Medicare HMO ads; marketing seminars are not consistently accessible to beneficiaries with physical disabilities; and although important information is conveyed in ads, much of it is in fine print that is difficult for older people to read.

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