#' .,p 
Department of Health and Human 
Services 
OFFICE OF 
INSPECTOR GENERAL 
MIAMI AREA HMOs: 
MEDICARE ENROLLMENT PATTERNS 
:vIC& . 
Richard P. Kusserow 
INSPECfOR GENERAL 
'li\.-.taa  NOVEMBER 1991  .,p 
Services 
Department of Health and Human 
OFFICE OF 
INSPECTOR GENERAL 
MIAMI AREA HMOs: 
MEDICARE ENROLLMENT PATTERNS 
:vIC& 
Richard P. Kusserow 
INSPECfOR GENERAL 
'li\.-cl!la  OEI-O4-91-00640  EXECUTIVE  SUMMAR Y

PURPOSE
Our purpose was to determine if and why enrollment and disenrollment patterns in 
the Miami area Health Maintenance Organizations differ from those nationally.
BACKGROUND
In the fall of 1990, newspapers in the Miami area published articles critical of local
Health Maintenance Organizations' (HMO) practices. Concerned about the situations 
described in these articles, the Administrator of the Health Care Financing 
Administration (HCFA) requested the Inspector General to examine the marketing 
practices and enrollment patterns of South Florida HMOs. This 
report deals with 
enrollment patterns. Marketing practices are described in a separate report (OEI-04-
91-00630). 
Medicare is the Federal health insurance program available to most individuals age 65 
and older and certain disabled people. Most Medicare beneficiaries receive services 
under the fee-for-service sector of the health care system. Under fee-for-service 
beneficiaries may choose their own physicians, hospitals, and other medical care 
providers. The beneficiary is required to satisfy a deductible, then Medicare pays 80 
percent of the allowable charges for covered physician and outpatient services. 
Medicare beneficiaries also may choose to receive their health care from a prepaid 
health organization such as an HMO. These plans contract with HCF A to provide or 
arrange for all Medicare covered services. Beneficiaries enrolled in HMOs that 
contract on a risk basis are considered to be "locked in" to the services provided by 
that plan. Except for emergency care and urgently-needed care when out of the 
HMO's service area, beneficiaries agree to receive all their medical care through the 
providers affiliated with the HMO. Neither the Medicare program nor the HMO is 
, other than emergency or urgently-needed care received outside the 
liable for services
risk-contracting plan. 
The HMO market in the Miami area is unique in the number of elderly and the
number of Medicare-contracted HMOs. In the three county metropolitan Miami area
approximately 18 percent of the population is over age 65. Five HMOs currently 
serve beneficiaries in the Miami area. Since the benefits HMOs offer are quite
similar, marketing of the programs is highly competitive. FINDINGS
This study of Medicare beneficiary enrollment practices in Miami area HMOs found
that:
The proportion of Medicare beneficiaries choosing HMOs over 
Medicare fee-for-service is higher than nationally. 
Medicare enrollees change plans more frequently than any other group
in the nation.

Most Medicare beneficiaries who leave one HMO choose another HMO 
over fee-for-service coverage. 
Excessive turnover of beneficiaries among HMOs may jeopardize patient
care.
Inappropriate enrollments result in unnecessary costs to HCF A and
SSA.
RECOMMENDATIONS
The following recommendations target Medicare prepaid health care program 
vulnerabilities, as well as addressing troublesome situations encountered during this
inspection of South Florida HMOs. 
The HCF A should establish a policy limiting enrollment to one "
open season

(opportunity to enroll) per year.
The HCFA should establish an on-line system to identify and review cases of
frequent enrollment change.

In the three-county Miami service area, HCF A should test the efficacy of a 
third party handling HMO enrollment actions.
The HCFA should impose a "cooling off' period allowing beneficiaries to
reconsider HMO enrollment decisions before enrollment applications are
processed.
COMMENTS
Comments on the draft report were received from HCF A and the Assistant Secretary 
for Planning and Evaluation (ASPE). Both agencies agree that HCFA should identify 
and review frequent enrollment changes, and HCF A believes they now have that
capability. While ASPE supported the concept of a "cooling off' period for Medicare
enrollees, HCF A thinks a "cooling off' period is not needed. Neither agency concurred with the other recommendations. We will defer our 
comments on their responses until the OIG completes its national study on HMO 
disenrollments (OEI-06-91-00730). 
The comments of HCFA and ASPE can be found in appendix E. We have responded 
to each technical change suggested by HCF A and ASPE.  ...... .................. 
. . . ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ...   ...   ...   ...   ...   ...  ... ..  
. . . .. ..  ..  . . . . ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ..  ...  ....  ..   ...  ..  . . . . . . . . . 
TABLE OF CONTENTS
EXECUTIVE SUMMARY 
IN1'RODUCTION ................................................
Purpose ..................................................... 
Background ..................................................
Scope ......................................................
Methods ....................................................
FINDINGS  . . . . . . . . . . . . . . . . . . 5 
In the Miami area, the proportion of Medicare
beneficiaries choosing HMOs over Medicare
fee-for-service is higher than nationally  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Medicare enrollees in Miami area HMOs disenroll 
more frequently than any other group in the nation 
When Medicare beneficiaries in Miami leave one HMO
most choose another HMO over fee-for-service coverage  . . . . . . . . . . . . . . . . . 8
Excessive turnover may jeopardize patient care 
Inappropriate enrollments lead to unnecessary costs . . . . . . . . . . . . . . . . . . . . . 9 
CONCLUSION  ..... ..... ...... 10 
RECOMMENDATIONS 
APPENDIXES 
APPENDIX A: Methodology .................................... A-
APPENDIX B: Beneficiary Telephone Survey: Enrollment Decisions of 
Beneficiaries Served by South Florida HMOs  . . . . . . . . . . . . . . . . . . . . . . .. B 
APPENDIX C: Survey of South Florida Physicians  . . . . . . . . . . . . . . . . . . .. C 
APPENDIX D: Effect of Humana on Data Analysis. . . . . . . . . . . . . . . . . . . D-
APPENDIX E: Comments on the Draft Report  . . . . . . . . . . . . . . . . . . . . .. E- INTRODUCTION 
PURPOSE 
nationally. 
Our purpose was to determine if and why enrollment and disenrollment patterns in 
the Miami area differ from those 
This inspection was requested by the Administrator of the Health Care Financing 
Administration (HCFA). 
BACKGROUND 
In the fall of 1990, newspapers in South Florida published articles critical of local 
HMO sales and marketing practices. The articles also claimed that beneficiaries are 
not adequately informed of the "lock- " feature of HMO enrollment.! Lock-
requires that with the exception of emergencies and urgently needed care when out 
the area, all medical care must be received from HMO affiliated providers. 
Concerned about these newspaper articles, the Administrator of HCF A requested the
Inspector General to examine HMO enrollment and disenrollment patterns in South 
Florida. An inspection of Marketing Practices of South Florida HMOs Serving
Medicare Beneficiaries (OEI-04-91-00630) was also requested. 
The Medicare Program 
Medicare is a Federal health insurance program for individuals age 65 and older and
for certain categories of disabled people. Authorized in 1965 by Title XVIII of the 
Social Security Act, Medicare serves over 33 million beneficiaries nationwide. Within 
the Department of Health and Human Services, HCF A is responsible for 
administering the Medicare Program. 
Method of Service 
In most geographic areas, Medicare beneficiaries obtain medical care through the fee-
for-service program. However, in some places, there are two ways in which 
beneficiaries may obtain medical care covered by Medicare. 
Bergal, J., and Schult, F., "Patients Peel Betrayed by HMO: The Sun-Sentinel, Ft. Lauderdale, FL 
October 23, 1990, pp lA and 6A  Regular Fee-for-Service Coverage - Beneficiaries choose each of their own physicians
hospitals, and other medical care providers. The beneficiary pays the Medicare
premiums, deductibles for inpatient and outpatient care, and 20 percent of the
allowable charge for covered physician and other outpatient services.
Prepaid Health Plans - Beneficiaries enroll in Medicare-contracted health
organizations which manage their medical care. Beneficiaries continue to pay
Medicare premiums. They may pay the plan a monthly premium and/or a copayment
for each service received. However, they do not pay the deductibles or 20 percent of
physician and outpatient charges required under the fee-for-service program. As a
result, these beneficiaries do not need Medicare supplemental policies.
A beneficiary can be in only one program at a time. He/she cannot combine fee-for-
service and prepaid health plans.
The most common types of Medicare prepaid health plans are risk-contracted HMOs.
These HMOs are considered "at financial risk" because they agree to provide a
beneficiary s total medical care for a set amount paid monthly by Medicare.
These HMOs serve beneficiaries who live within a defined geographic area. They are
responsible for providing the full range of Medicare services. They may offer other
benefits not covered by Medicare, such as prescription drugs.
After joining an HMO, the beneficiary selects a primary care physician (PCP)
affiliated with the plan. AIl medical care is managed by that PCP. The PCP either
provides the services needed or refers the beneficiary to appropriate specialists or
other health care providers.

The HMO network of providers may be either HMO employees working in an HMO-
owned facility or private physicians contracting with the HMO to provide services to
the members. Some HMOs use a combination of providers.
Beneficiaries are required to obtain all their medical care through the providers
affiliated with the HMO, except for emergency and urgently needed care.
In an emergency, beneficiaries can receive care anywhere. The HMO will pay for, the
care, even if the provider is not affiliated with the HMO. The HMOs also will pay for
urgently-needed care a beneficiary receives when out of the HMO's service area.
Neither the HMO nor Medicare will pay for non-emergency or non-urgent care
obtained outside the HMO without prior approval of the HMO. The beneficiary is
responsible for those charges.

Uniqueness of Miami HMO Market
The HMO market in the three-county Miami area is unique in the number of elderly
and the number of risk-contract HMOs. Nationally, persons over age 65 comprise 13 percent of the population. In the three-
county Miami area, approximately 18 percent of the population is over the age of 65. 
In 2 of the 3 counties, over 20 percent of the population is over 65.2 Some live in 
Florida full-time. Others live there only part of the year, and reside in other States 
the rest of the time. 
In most locations where HMOs are accessible to Medicare beneficiaries, only one or 
two are available from which to choose. In the Miami area, five risk-contract HMOs 
currently serve beneficiaries. Approximately 33 percent of the elderly are enrolled in 
one of those HMOs. Two additional HMOs have applied to serve beneficiaries in the 
Miami area and will be granted contracts if they meet HCF A requirements. Since the 
benefits HMOs offer are quite similar, marketing of the programs is highly 
competitive. 
SCOPE 
This inspection examined the enrollment and disenrollment practices of Medicare 
beneficiaries served by the five Medicare contracted HMOs operating in the 
metropolitan Miami area during Federal fiscal years 1988 through 1990 (October 1 
1987 through September 30, 1990). The five HMOs, and counties included in their 
service areas, are shown below. 
NAME OF HMO 
I COUNTIES INCLUDED IN SERVICE AREA 
Humana Medical Plan  Broward, Dade and Palm Beach
CAC- RAMSAY  Broward and Dade

Av-Med Health Plan  Broward, Dade and Palm Beach
Health Options of South Florida  Broward and Dade

CareFlorida  Broward, Dade and Palm Beach 
AIthough these HMOs may also have operations outside the Miami area, only the 
service areas listed were included in this inspection. 
METHODS 
Information for this inspection was obtained from a variety of sources. We: 
reviewed State and Federal regulations governing HMOs; 
interviewed HCF A and Florida Department of Insurance officials; 
reviewed prior studies of contracted HMO operations; 
Demographic data from county planning departments in Dade, Broward, and Palm Beach Counties and 
the u.S. Department of Commerce; Bureau of the Census.  reviewed a General Accounting Office audit report;
reviewed various newspaper articles relating to South Florida HMOs; 
reviewed financial and enrollment data for Medicare beneficiaries enrolled in
contract HMOs; and 
conducted telephone and mail surveys of Medicare beneficiaries and physicians. 
To determine reasons beneficiaries changed HMO plans, we asked beneficiaries 
themselves. We randomly selected 237 Medicare beneficiaries from all beneficiaries 
who: 
enrolled in a Miami area HMO between October 1, 1987 and September 30 
1990; and 
changed enrollment at least four times during that period. 
We interviewed these beneficiaries by phone in January 1991. The response rate was 
60 percent. Appendix B contains the survey instrument and response frequencies. 
To get physicians' opinions on reasons for and effects of rapid changes in HMO 
enrollment, we queried 217 South Florida physicians by mail in January 1991. Nearly 
half responded. Appendix C contains the survey instrument and responses. 
The Florida Humana HMO is the largest in the country. Humana operates in several 
geographic areas of the State. In most of those areas, unlike Miami, Humana has no 
competition. We were not able to segregate information about Humana into its 
several Florida service areas. Therefore when Humana is included, the data is for the 
, we have removed Humana from a number of the 
entire State. For this reason
calculations reported in this document. A more detailed explanation of Humana 
effect on the data is provided in appendix D.  FINDINGS
In the Miami area, the proportion of Medicare beneficiaries choosing HMOs over 
Medicare fee-for-service is higher than nationally. 
Nationally, at the time of this study, over 1.3 million Medicare beneficiaries were 
enrolled in risk contract HMOs. Seventeen percent of them presently live in the 
Miami area. In fact, in the Miami area, one out of three Medicare beneficiaries is 
enrolled in an HMO, compared to one in 20 nationally. 
The out-of-pocket cost for an HMO member in Miami is considerably less than for 
for-service beneficiary. AIthough beneficiaries who enroll in HMOs are still 
the fee-
required to pay the standard Medicare Part B premium, they do not need to fulfill any 
deductibles for their care to be fully covered. AIthough HCF A regulations allow 
HMOs to charge an additional monthly premium, none of the Miami area HMOs do 
so. Only two of the HMOs charge nominal copayments for physician services. 
Ninety-two percent of the physicians responding to our survey believe Miami area 
beneficiaries choose HMOs over fee-for-service because the costs to beneficiaries are 
lower than fee-for-service. 
Medicare enroOees in Miami area HMOs disenroll more frequently than any other group 
in the nation.

Whereas nationally about 12 percent of Medicare HMO enrollees disenroll within one 
year of joining, in the Miami area, 28 percent do so. 
Some beneficiaries have made a very high number of changes. In the three years 
studied, 2 276 beneficiaries had enrolled four or more times. Of these, 82 percent live 
in the Miami area. As the numbers of enrollments increase, the proportion of 
multiple enrollees living in the Miami area also increases. For example, of all 
Medicare enrollees who have enrolled 6 or more times, 98 percent live in the Miami 
area.  This phenomenon is illustrated in the following table.
MEDICARE BENEFICIARY ENROUMENlS IN HMOs: NAll0N AND SOUTH FLORIDA
All HMOs Nationally  South Florida HMOs  Percent of National
HMO Talal
Number of 
Beneficiary 
Enrollments  881 861  182 405  21% 
Beneficiaries 
Enrolled 4 or More 
Times  276  866  82% 
Beneficiaries 
Enrolled 6 or More 
Times  364  356  98% 
South Florida HMOs experience beneficiary disenrollment rates that dramatically 
exceed the national quarterly disenrollment averages. Even A V-MED' s disenrollment 
rate, which is closest to the national average at six months, is one-
third higher at 12 
months. 
RAPID TURNOVER AMONG SOUTH FLORIDA HMOs 
Cumulative Disenrollment
6 Months  Within 12 Months
Within 
All HMOs, excluding South 
Florida HMOs 12% 
South Florida HMOs  17%  28% 
Humana  16%  25% 
CAC  21%  35% 
Av-Med  16% 
Health Options 22%  37% 
CareFlorida  29%  46% 
In efforts unrelated to this inspection, HCFA and the U.S. Public Health Service 
previously determined that about 10 percent of the elderly population report having 
no continuous source of health care. The national HMO disenrollment figures above 
are not inconsistent with this. However, South Florida HMO disenrollment, averaging 
28 percent over 12 months, far exceeds this general experience of the elderly.
We examined the records of a sample of 237 Miami area Medicare beneficiaries who
had 4 or more HMO enrollments within three years.  We found that: 
140 changed HMOs four times; 
45 changed five times; and 
52 (22 percent) changed 6 or more times. 
When we asked these beneficiaries if they planned to change again, 13 percent of the 
respondents said they do. 
The HCF A guidelines allow beneficiaries to change the form of their Medicare 
coverage as often as every 30 days. By contrast, most employers who offer several 
private health insurance plans to their employees, allow just one opportunity a year to 
change plans. The HCF A policy has set up a potential for as many as 12 
changes a 
year. Nationally this license seems no cause for concern, however in the Miami area it 
sets the stage for high enrollment turnovers. 
The many choices of HMOs available to the Miami area Medicare beneficiaries may 
be an incentive to switch plans frequently. There are five HMOs for Medicare 
beneficiaries to choose from, as well as the regular fee-for-service Medicare system. 
Four of the 5 Miami area HMOs - CareFlorida, Av-Med, Health Options and CAC -
operate only in the 3-county Miami service area. The fifth, Humana, the HMO with 
the nation s largest number of enrollments during this period, operates in Tampa/St. 
Petersburg, Orlando, and Daytona, as well as Miami. (See appendix D for a 
description of the effect of Humana s disproportionate size and lack of competition in 
three of its four Florida markets, on the analysis of HMOs in this report). 
Fifty-six percent of the beneficiaries responding to our survey say they changed 
enrollment in the past because, simply, they didn t like the plans they were in. When 
the most recent change 
asked about 
59 percent said they were dissatisfied with the HMOs doctors or services; 
17 percent said they changed because the HMO had financial problems or the 
ownership changed; and 
16 percent cited HMO location, or lack of transportation. 
When asked to think back and give  had ever changed plans, 33 
reasons why they 
percent of these respondents cited at least one reason related to the "lock- " feature 
of HMO enrollment: 
16 percent said they wanted to use a particular doctor who was not affiliated 
with their plan;  14 percent said their doctor left the plan advised them to change plans; 
, or 
11 percent said they could not get the specialty care they needed within the 
HMO; and 
10 percent said they needed to see a doctor more often than their HMO would 
allow. 
Twenty-seven respondents (20 percent) said they had changed coverage on advice of 
an HMO sales representative, but only four beneficiaries said they had been offered a 
free gift or other incentive to change. 
Friends and relatives are as likely as sales representatives to influence beneficiaries to 
change HMOs. Nineteen percent of the respondents said they had changed plans on 
the advice of a friend or relative. 
Physicians we surveyed generally confirmed these findings. They suggested that 
Medicare beneficiaries change HMOs because of: 
quality of care; 
restrictions and limitations on services; 
limitations in number of HMO physicians, especially consultants 
enrollee misunderstanding of the HMO system; and 
manipulation by HMO sales representatives. 
In-person interviews during the HMO marketing practices inspection showed some 
beneficiaries who changed HMOs frequently were exposed to unethical HMO 
marketing practices. Others were not fully aware of their enrollment actions. These 
findings are described in detail in the inspection entitled Marketing Practices of South 
Florida HMOs Serving Medicare Beneficiaries (OEI-04-91-00630). 
When Medicare beneficiaries in Miami leave one HMO, most choose another HMO over 
fee-for-service coverage. 
This inspection shows Medicare HMO enrollees in the Miami area disenroll from their 
HMOs with much greater frequency than their peers nationwide. In the Miami area 
28 percent disenroll within one year vs. 12 percent nationwide. AIthough the reasons 
most often given for leaving an HMO relate to dissatisfaction with one or more 
features of the HMO, preference for the HMO form of coverage is remarkably high.  Figures from this study show that nearly three of four Miami area beneficiaries who 
leave HMOs join another HMO immediately or within the next 12 months. The 
following table (which excludes Humana for reasons explained in appendix D) 
illustrates this pattern. 
ACTIONS OF MEDICARE BENEFICIARIES WHO DISENROLLED 
Went to Fee-For-Svc. Went to Competing  Went to Fee-For-Svc.
For at Least 12 HMO But Joined HMO 
Months Within 12 Months 
CareFlorida  20% 67% 13%
Av-Med  38% 49% 13%
Health Options  31% 55% 15%
CAC  28% 57% 15%
Combined  26% 60% 14%
National  68% 13% 19%
Excessive turnover may jeopardize patient care. 
Nearly all physicians who responded to our survey are affiliated with one or more 
HMOs. AIl serve Medicare patients. Sixty percent of them say they believe frequent 
HMO changes disrupt the continuity of care. Fifteen percent say frequent changes 
degrade the quality of care. 
Inappropriate enrollments lead to unnecessary com.
The HCF A Region IV office estimates that over the past three years it has received
000 inquiries from beneficiaries regarding HMOs. The office investigated 1 500
potentially fraudulent HMO enrollments and 1 800 failures to disenroll beneficiaries in
a timely manner.
Reviewing and resolving HMO enrollment problems now requires three HCF A 
Regional office staff. Further, many of the inquiries received by HCFA originate in an 
SSA District Office, or are ultimately referred to SSA for resolution. 
There are approximately 3 000 enrollments and 2 000 disenrollments in the Miami 
area per month. The HCF A estimates that 20 percent of these, or 12 000 
enrollment/disenrollment actions per year, may be inappropriate. Better informed 
beneficiaries and more effective enrollment verification procedures by HMOs would 
reduce significantly the number of inappropriate actions, resulting in savings to both 
HCFA and SSA.  CONCLUSION 
Beneficiaries enrolled in Miami area HMOs change plans more frequently than any 
other group in the nation. They disenroll because of dissatisfaction with their HMOs 
care and services. When they leave an HMO, however, most beneficiaries enroll in 
another HMO. Despite problems they encounter with HMOs, beneficiaries in the 
Miami area who have once joined an HMO prefer HMO coverage to fee-for-service. 
Because some of the beneficiaries who change most 0ften are particularly vulnerable 
A should be vigilant to assure that these people are not abused. The quality and 
HCF 
continuity of care for these multiple enrollees may unduly 
suffer. Excessive and 
inappropriate enrollment actions result in avoidable 
A and SSA. These 
costs to  HCF 
conditions warrant that steps must be taken to protect both beneficiaries and the 
integrity of the health care delivery system.  RECOMMENDA TIONS
A number of HCF A policies and HMO practices leave the Medicare prepaid health 
care program vulnerable to abuse. The following recommendations target those 
vulnerabilities, as well as address troublesome situations encountered during this 
inspection of South Florida HMOs. 
The HCFA should establish a policy limiting enrollment to one "open season 
(opportunity to enroll) per year. 
Presently, HCF A rules allow Medicare beneficiaries to change their health insurance 
coverage as frequently as every month. Disenrollment from prior coverage is 
automatic when the new enrollment occurs. This policy allows beneficiaries to change 
plans without thoughtful consideration of the pros and cons of their actions. The 
policy also encourages an aggressive approach to sales, since it allows a new sale to 
each enrollee every thirty days. 
This policy clearly undermines HCFA' s commitment to managed health care. It also 
increases the likelihood of confusion among beneficiaries over coverage issues, and 
may jeopardize the well-being of those who have not made thoughtful decisions. 
Physicians queried in this inspection indicate that frequent change of 
health care 
coverage disrupts continuity of care and may affect the quality of care. 
Based on health insurance industry norms, HCF A should establish an annual "open 
season " so that changes in coverage may be made only once a year. The effective 
date of change should be no sooner than 30 days after a new plan/form of coverage is 
selected by the beneficiary.
To safeguard that beneficiaries are not disadvantaged by enrollment decisions contrary 
to their best interests, HCF A should allow disenrollment "for cause" between open 
season periods. The HCF A should develop criteria for determining whether sufficient 
cause" is established. 
The HCFA should establish an on-line system to identify and review cases of 
frequent enrollment change.

The HCFA's automated systems are capable of identifying individual Medicare 
beneficiaries who have applied for HMO enrollment at the point each new enrollment 
begins. The agency should capitalize on this capability by: 
determining an appropriate threshold for number of changes acceptable over a 
specified period of time (e.g., two per year) or minimum time between new 
enrollments (e.g., six months);  automatically scanning new enrollments for beneficiaries who exceed those 
thresholds; 
alerting the new HMO-of-enrollment to these cases, with adequate beneficiary 
identification information; 
requiring the HMO to explain and document the circumstances surrounding the 
sale and application for enrollment; and 
developing corrective actions and penalties for HMOs found to have 
inappropriately enrolled Medicare beneficiaries. 
We note that HCFA has already taken preliminary steps to develop such a system. 
We endorse the agency s early efforts in this regard. The refinements outlined above 
are recommended to strengthen and standardize HCF A's monitoring of excessively 
frequent HMO enrollment change. 
The system recommended here would be obviated by implementation of 
Recommendation #3 to follow. 
In the three-county Miami service area, HCFA should test the 
efficacy of a third 
party handling HMO enrollment actions. 
A major vulnerability of the present system is that an HMO sales agent can sign up a 
Medicare beneficiary in his/her home at the time of the sales presentation. 
Beneficiaries may not object to this practice in many instances, since it is convenient. 
However, in cases where the beneficiary is intimidated by the sales agent, he/she may 
sign-up just to get the salesperson to leave. 
AIthough the HMOs included in this review do have procedures for verifying that 
beneficiaries understand certain provisions of HMO coverage, this may not be 
adequate protection against inappropriate sales practices. We note in this report that 
one HMO allows the verification call to be made while the salesperson is stilI present 
in the beneficiary s home. 
The best safeguard for an informed choice by the beneficiary is to ensure that the 
decision to enroll in a new HMO is made independent of the salesperson and even of 
the HMO. 
We recommend that HCFA contract, on a two to three year pilot basis, with a third 
party to provide HMO enrollment services. One possible enrollment agent is the 
Social Security Administration (SSA) District Offices (DO). In each DO in the Miami 
area, HCF A could fund a position or part of a position for a service representative to 
advise new enrollees on their decisions, and process the enrollments. An SSA service 
representative would be able to provide objective, balanced information on health  coverage to the beneficiary, and answer applicants' questions stemming from the sales
presentation.
This proposal is consistent with Secretary Sullivan s Program Direction which calls for 
a more expansive role for SSA district offices in integrating SSA and other health and 
human services.
If an arrangement cannot be made with SSA, HCF A might 
contract for this service 
with a private contractor in the Miami area. Such services could possibly be provided 
under the auspices of senior citizen or other neighborhood service centers. Assuming 
proper guidelines to the contractor, this recommendation would obviate 
Recommendations #1 and #2 above. 
The HCFA should impose a "cooling off' period allowing beneficiaries to
reconsider HMO enrollment decisions before enrollment applications are processed.
Florida law now requires that, after an individual has applied to enroll in an HMO, a 
verification phone call must be made by the HMO to ascertain 
the applicant' 
understanding of the "lock- " feature of HMO enrollment, and assure that he/she 
affirms his enrollment decision. This consumer protection step would seem a good 
model for HCF A to adopt, with application nationally, to cover Medicare beneficiary 
enrollments in prepaid health plans. 
To further refine Florida s model, HCF A should require that enrollment verification 
take place no sooner than 72 hours after the beneficiary has signed his/her application 
to enroll. This "cooling-off' period is consistent with consumer contract protection in 
many states.  APPENDIX A
METHODS AND SAMPLE SELECTIONS 
Information for this inspection was obtained from a variety of sources. We: 
reviewed State and Federal regulations governing HMOs;
interviewed HCF A and Florida Department of Insurance officials; 
reviewed prior studies of risk-contracted HMO operations, U.S. GAO Audit 
Reports, and various newspaper articles relating to the South Florida HMOs; 
reviewed enrollment data for Medicare beneficiaries enrolled in risk contract 
HMOs; 
conducted telephone interviews with Medicare beneficiaries served by Miami
area HMOs; and 
conducted a mail survey of physicians practicing in South Florida. 
Review of State and Federal Regulations
We examined State and Federal regulations governing HMO enrollment practices.
This information was compared to data obtained from beneficiaries 
who were served 
by the HMOs and from beneficiary enrollment data maintained by HCF A. 
Discussions with officialr of HCF A and Florida Department of Insurance 
We met with officials from HCF A and discussed beneficiary enrollment characteristics 
identified during their monitoring of HMO activities. We also met with officials of the 
State of Florida s Department of Insurance and discussed the results of their financial 
and performance audits for South Florida HMOs. 
Prior studies of risk contracted HMO operations, U.S. GAO Audit Reports, and
various newspaper articles relating to the South Florida HMOs 
We reviewed the results of prior studies and investigative reports of risk contract 
HMOs. 
We also reviewed relevant newspaper articles regarding South Florida HMO business 
practices. These articles indicated Medicare beneficiaries are sometimes  , p. 
inappropriately enrolled and not adequately informed of the requirements related to 
membership in an HMO. 
Enrollment data for Medicare beneficiaries enrolled in risk contract HMOs 
Episodes of HMO disenrollments may be measured using one of two basic methods. 
One approach uses a time-related disenrollment rate (or ratio) while a second 
approach uses a cohort-based disenrollment rate. We used a cohort-based 
methodology in this inspection. 
The ratio method expresses disenrollments in a given time period as a percentage of 
total enrollment in the same period, where total enrollment is defined as the sum of 
enrollment at the start of the period plus new enrollees during the period. 
The cohort-based methodology tracks a cohort of enrollees over time and determines 
what percentage of them disenroll within a certain length of time after joining the 
HMO. 
We obtained information on each episode of beneficiary disenrollment from HCFA' 
Group Health Plan Operations (GHPO) master file and computed enrollment 
patterns for all beneficiaries enrolled in South Florida HMOs during Federal fiscal 
years 1988 and 1989 (October 1, 1987 through September 30, 1989). Cumulative 
disenrollment rates by duration of enrollment were computed for each HMO on a 
three, six, nine and twelve month basis. 
Enrollment data were examined for beneficiaries enrolled in South Florida HMOs. 
The data was obtained from the Group Health Plan Operations (GHPO) master file 
and the Medicare Automated Data Retrieval System (MADRS). 
Telephone interviews with Medicare beneficiaries served by Miami area HMOs 
We developed a survey instrument and asked beneficiaries why they changed HMO 
plans. A random sample of 237 Medicare beneficiary names were selected from the 
GHPO file for use in the telephone survey. 
This sample was selected from the universe of Medicare beneficiaries who: (1) had 
enrolled in Miami area HMOs during the period October 1, 1987 through September 
, 1990 and (2) had changed HMO plans at least four times during that period. 
Fifteen of the beneficiaries had expired, reducing the sample size to 225 beneficiaries. 
Telephone interviews were performed during January 14- , 1991. One hundred thirty 
six beneficiaries (60 percent) were interviewed. 
Mathmatica Research Policy, Inc.  "DISENROILMENT EXPERIENCES IN THE MEDICARE HMO 
AND CMP RISK PROGRAM: 1985 TO 1988 , HCFA Contract No. 500-88-0006, 1990  20.  Questionnaires mailed to physicians practicing in South Florida 
For information on why physicians thought beneficiaries changed HMO plans so 
frequently, we developed a survey instrument and mailed questionnaires to 217 
physicians practicing in the South Florida area. The survey instruments were mailed 
January 25, 1991. One hundred and two physicians responded, a response rate was 47 
percent. Appendix D contains the survey instrument and total responses.  APPENDIX 
RESPONDENT ANSWERS: BENEFICIARY SURVEY 
ENROILMENT PRACTICES OF MEDICARE BENEFICIARIES 
SERVED BY SOUTH FLORIDA HMOs 
We collected proxy responses when the beneficiary was not available for this interview. 
An analysis of the answers provided by the different types of respondents (beneficiary, 
spouse, and other) revealed there was no difference in the outcome. 
NUMBER OF RESPONDENTS, BY HMO 
Respondents  HMO Plan 
65 Humana Gold Plus Plan (Dade, Broward, & Palm Beach)
26 CAC-RAMSA Y
11 Av-Med Health Plan
Health Options of South Florida
29 
CareFlorida (Formerly Heritage) 
136 Total Respondents 
100.(cid:1) Are you a year-round Florida resident or do you live in Florida only part of the 
year? 
Percent  Response 
96.3  131  Live in Florida year-round 
Live in Florida only part of the year

1.5  Respondents were unable to answer question
100.  136  Total  200. Primary reasons beneficiaries changed plans.
SEQUENCE OF  BENEFICIARY RESPONSES 
RESPONSE
TOTAL
FIRST  135
SECOND
THIRD
FOURTH
Total  78  24 I  23  151  205 
11  10  I 38 
ISl 
RESPN %  38  12 I  11 
I 19  1 ()()% 
REASONS WHY BENEFICIARIFS CHANGED PIANS (CODES 1 THROUGH 8)
Dissatisfied with doctors and/or services.
HMO had financial problems or plan changed ownership.
Beneficiary experienced transportation problems or desired a plan closer to 
his/her home.
Restrictions or limitations on services, including specialists referrals.
Quality of care issues.
Marketing tactics by HMO sales persons.
Followed physician when HMO went out 
of business.

Other
300.  Did (CURRENT HMO) offer a free gift to enroll in their plan?
Percent  Response 
Beneficiaries didn t remember 
94.  128
Yes
100.  136  Total
* Type of free gift provided to the BeneficiaI)': 
1. Beneficiary never picked up gift. 
2. Pocket book
3. Transportation from home to doctor s office. 
4. Cloth bag & $25 coupons for use at the grocery store. 400.(cid:1) When you signed the application form for (CURRENT HMO), was it clear
that you were enrolling in an HMO?
Percent  Response 
Beneficiaries didn t remember 
7.4 
88.  121  Yes
100.  136  Total
500.(cid:1) When you joined (CURRENT HMO) was it clear that you could 
.m!!x use the 
services of the HMO's doctors and hospitals (EXCEPT IN EMERGENCIES)? 
Percent  Response 
Beneficiaries didn t remember 
7.4 
88.  121  Yes
100.  136  Total
Some people give the following reasons for changing health care plans. Have you ever 
changed plans because of any of these reasons? 
600.(cid:1) You needed the services of a specialist and those services were not available in
your plan?
Percent  Response 
1.5  Beneficiaries didn t remember 
87.(cid:1) 119
11.0  15*  Yes
100.  136  Total
* Type of specialist not available in plan:
1. Chiropractor

2. Cardiologist

3. Dentist

4. Podiatrist - 2

5. Gastroenterologist - 2

6. Urologist - 3

7. Neurologist -

8. Ophthalmologist

9. Diabetes shots required
 601.  You needed to see a doctor more often than your plan would allow? 
Percent  Response 
Beneficiaries didn t remember 
86.	 118 
Yes 
100.  136  Total 
602.  You wanted to use a specific doctor and he/she was not in your plan? 
Percent  Response 
Beneficiaries didn t remember 
81.6  111 
15.  Yes 
100.  136  Total 
603.  Your doctor advised you to change to another plan? 
Percent  Response 
Beneficiaries didn t remember 
92.	 126 
Yes 
100.  136  Total 
Reasons doctor advised beneficiary to change plan: 
1. Follow doctor - Last HMO went out of business. 
2. Transportation - Closer to home. 
3. Dentist advised beneficiary that only minimal dental care was required. 
4. Followed doctor from one HMO to another - 2 
5. Reason not provided. 
B - 4
 604.  Your doctor left the plan and you wanted to continue with that doctor?
Percent  Response
Beneficiaries didn t remember 
85.  116
12.  Yes
100.  136  Total
605.  An HMO sales representative advised you to join a new plan?
Percent  Response
Beneficiaries didn t remember 
77.  105
19.  Yes
100.  136  Total
606.  A free gift or a special offer was made to you? 
Percent  Response
1.5  Beneficiaries didn t remember 
97.(cid:1) 133
Yes
100.  136  Total
607.  A friend or relative suggested that you join a different plan?
Percent  Response
Beneficiaries didn t remember 
78.7  107
19.  Yes
100.  136  Total
B - 5 608.  You didn't like the plan you were in? 
Percent  Response 
Beneficiaries didn t remember 
40.4 
55.  Yes
100.  136  Total
Primary reasons why beneficiaries disliked their HMOs:
1. Didn t like the medical treatment. 
2. Didn t like the doctors/staff.

3. Didn t like the services.

3. Needed the services of a specialist. 
4. Office waiting time was too long. 
5. Transportation problems
6. Other -
various reasons. 
609.  Have you changed health care plans for any other reason we did not mention?
Percent  Response
81.6  111
18.4  Yes
100.  136  Total
700.  Do you plan to change from (CURRENT HMO PLAN) to another plan? 
, why? 
Percent  Response
86.  118
13.  Yes
100.  136  Total
Primary reasons for the forthcoming change in HMOs:
1. Moving - 3 
2. Desires plan that allows beneficiary to select Doctor - 2 
3. Need plan closer to home - 2
4. HMO too expensive - 2 
B - 6  5. Other or No reason provided - 4 
6. Plan went out of business 
the treatment or services provided by the HMO. 
7. Beneficiary disliked 
8. Shopping for maximum services 
9. HMO changed beneficiary s primary doctor 4 times in three years. 
10. Beneficiary couldn t get an appointment with the doctor. 
800.	 Is there anything else you would like to tell us about why you have changed 
HMO plans in the past? 
Percent  Response 
71.3 
28.  Yes 
100.  136  Total 
B - 7
 APPENDIX C
HMO ENR 0 U.MENT 
SURVEY OF SOUTH FLORIDA PHYSICIANS 
For information on why physicians thought beneficiaries changed HMO plans so 
frequently, we developed a survey instrument and mailed questionnaires to 217 
physicians practicing in the South Florida area. One hundred and two responded. 
The responses are shown below. 
Primary County of Practice? 
PHYSICIANS  RESPONSE 
RESPONSES  PERCENTAGE  COUNTY 
43.  Dade 
31.4  Broward 
Palm Beach 
Pinellas 
Hillsborough 
1.9  Pasco 
No Response 
102  100.  TOTAL 
PLEASE PROVIDE ANSWERS TO THE FOlLOWING QUESTIONS. 
1. In your clinical practice, are you: 
RESPONSE 
96 
Currently affiliated with a Health Maintenance 
Organization (HMO) or other prepaid health care plan? 
Nature of your affiliation: 
Contractual 
Salaried 
Other: 
- Fee-For-Service 
- Capitation 
C - 1
 No Response 
Not currently affiliated with an HMO but have been in the past 3 years? 
Not affiliated with an HMO and have not been in the past 3 years? 
Name of plans with which you are/were affiliated?
RESPONSE 
45 
HUMANA GOLD PLUS PLAN in Dade, Broward, & Palm Beach 
counties service area 
10 
HUMANA GOLD PLUS PLAN in PineIIas, Hillsborough, & Pasco 
counties service area 
28 CAC-RAMSAY 
64 AV-MED HEALTH PLAN 
58 HEALTH OPTIONS OF SOUTH FLORIDA 
52 CAREFLORIDA (formerly Heritage) 
23 OTHER(S): 
16 - METLIFE 
7 - PRU-CARE 
Do you serve Medicare patients? 
RESPONSE 
102 YES 
0 NO

What are the reasons you believe Medicare beneficiaries ENROIL in HMO 
plans? 
RESPONSE 
75 - Reduced costs of services. 
19 - Unlimited free care. 
3 - Improved advertising campaigns. 
2 - Avoidance of paperwork. 
1 - False advertising.
1 - Other answers not listed/no answer. 
1 - AIl medical services in one place. 
C - 2 What are the reasons you believe Medicare beneficiaries DISENROIL from 
HMO plans? 
RESPONSE 
31 - Quality of care issues.
19 - Restrictions and limitations on services.
17 - Limited doctors available, especially consultants.
11 - Disenchantment with plan.
7 - No answer
6 - Misunderstanding of plan and/or benefits.
6 - Unrealistic expectations of plan.
5 - "Snowbirds" (moving in and out of area)

Data maintained by the Health Care Financing Administration show a small 
percentage of Medicare beneficiaries ENROlL AND DISENROIL in HMOs 
numerous times. Why do you think they do this? 
RESPONSE 
25 - Looking for better plan. 
19 - No other answer. 
17 - Manipulated by salesman. 
13 - Quality of care issues. 
10 - Misunderstanding of system/plan. 
9 - "Snowbirds" (moving in and out of area) 
5 - Unrealistic expectations of plan. 
3 - Dementia 
1 - Propaganda through media. 
What are the effects on health care quality for patients who move in and out of 
HMOs, or between HMOs, frequently? 
RESPONSE 
85 - The effects of frequent movement on medical care would be: 
61 - Lack of continuity of care. 
15 - Degrading quality of care. 
6 - Duplication of test and/or procedures. 
3 - Uncontrolled medical records. 
10 - Quality of medical care is not necessarily affected. 
7 - No other answer or other. 
19 - Doctor provided additional comments. 
C - 3 APPENDIX D
EFFECf OF HUMANA ON DATA ANALYSIS 
Beneficiaries in the Miami area have five HMO plans to choose from. The unusually 
high rate at which they change plans reflects the availability of several competing 
plans.
Humana s Florida enrollment is five to 14 times larger than the Miami area HMOs 
included in this study. Because no data was available on Humana s enrollee 
population in the Miami area only, the Humana figures can skew the analysis of 
HMO-to-HMO turnover in the Miami area. 
The following analysis, therefore, treats Humana separately, and demonstrates the 
effect of its Florida-wide experience on the turnover analysis. Excluding the Humana 
population, of all Medicare beneficiaries who disenrolled from their HMOs within 12 
months of enrolling, 26% went to Medicare s fee-for-service coverage and remained 
there for at least one year. Sixty percent immediately enrolled in another HMO; and 
the remaining 14% moved to fee-for-service coverage, but once again joined an HMO 
within 12 months. Figures for the Humana Florida-wide HMO, its Miami area HMO 
competitors and all five HMOs combined are shown below. 
The figures for Humana, which include its Tampa/St.Petersburg, Orlando and Daytona 
markets where there are no HMO competitors, are quite different. Due to Humana 
much greater size, including its figures in the overall analysis substantially changes the 
conclusion regarding beneficiary enrollment patterns. 
HUMANA FLORIDA - WIDE COMPARED TO ITS MIAMI AREA COMPETITORS 
ACTIONS OF MEDICARE BENEFICIARIES WHO DISENROLLED 
Went To 
Went To 
Went To  Fee-For-Svc. 
Fee-For-Svc.
Competing  But Joined 
For At Least 
HMO  HMO Within 
12 Months 
12 Months 
Humana (FL  56% 19%  25%
Wide)
Miami Area HMO 
Competitors  26% 60%  14%
All 5 HMOs
Combined  44% 35%  21%
D - 1 Even though Medicare HMO enrollees in South Florida disenroll from their HMOs with much 
greater frequency than their peers nationwide (28% disenrollment within one year in South
Florida vs. 16% nationwide) their loyalty to the HMO form of coverage is remarkably high. 
Figures from this inspection show that nearly 3/4 of all Miami area beneficiaries who leave 
HMOs and have other HMOs available join another HMO immediately or within the next 12 
months. 
D - 2  APPENDIX E
COMMENTS TO DRAFT REPORT 
Comments on the draft report were received from HCFA and the Assistant Secretary for 
Planning and Evaluation (ASPE). Both agencies agree that HCFA should identify and review 
frequent enrollment changes, and HCF A believes they now have that capability. While ASPE 
supported the concept of a "cooling off' period for Medicare enrollees , HCF A thinks a 
cooling off' period is not needed. 
Neither agency concurred with the other recommendations. We will defer our comments on 
their responses until the OIG completes its national study on HMO disenrollments (OEI-06-
91-00730). 
We have responded to each of the technical changes suggested by HCFA and ASPE. 
E - 1
 """" /
..  --- -- U--------f-~/---~.r- ... (,  .--:-. ;;:~;./  ;r.,~:.:.. '-.:, . c ...:....:.:,..,",,..,.-C 
' 0' ' 
DEPART.'t\ENT OF HEALTH &. HU!Y\AN SERVICES  9'c
f1.  &"Jl~~/ 
::::i  Washington . D.C. 20201 
MAY 2 9 1991  l:"~u 
D!&::\S 
?1" 
::7'1 
OIC 
TO:  Richard P. Kusserow 
AIG- :;:0
Inspector General 
G) ;;,
aGo/ IG 
C") 
FROM:  Assistant Secretary for  EXSEC  cr (3 I

Planning and Evaluation  DATE SENT  ~~ v, c::::: 
Enrollm~t . 8j 
SUBJECT:(cid:1) OIG Draft Reports: Marketing Practices and  an~ 
, OEI-04-91~00630 
OPatEteIr-ns0 f4o-r 9S1ou-t0h 0Fl6or4id0a  -HM-O sCOMMENTS  ;:1
the reports. In

I appreciate the opportunity to comment on 
general, they appear to point more to the need for improved data

follow-up, particularly
collection, closer moni taring and 
disenrollment patterns, than for. implementation of new
procedures. 
consequently, ~I am inclined to disagree with certain 
below. 
of your recommendations, as noted 
Marketina Practices 
OEI-04-91-00630: 
HCF~ to establish tsatrainndagr:d sI  for sales force 
understand that HCFA 
training and moni 
has worked informally with the Group Health 
Association of America to improve marketing 
nationally. 
practices of HMO sales representatives 
Responsibility for oversight of marketing staff 
agencies. 
rests with state licensing 
year. 
t enrollment to one "open season" per 
Limi 
This recommendation would require legislation and 
has the appearance of a year-long lock-in which 
rej ected. Moreover, 
Congress has constantly 
section 6206 of OBRA-89 eliminated a coordinated

open enrollment requirement, which had never been

imolemented, exceot under certain circumstances. 
markets 
continuous open e competi ti ve 
;rollment  in 
allows beneficiaries to select the benefit package 
that best fits ~~eir needs, regardless of when

that decision is reached (and, given the data on 
Miami Area HMO I S  report, at most,
page a of the 
 only
sales representatives appear responsible for 

20 percent of changes compared with nearly three 
times more who expressed dissatisfaction regarding 
services). Admittedly, this
HMO physicians or 
practice 
taring against 
requires closer mcni 
abus i ve marketing practices. 
E - 2 . . . ----.
Page 2 - Richard P. Kusserow

Based on the preceding comment, I agree that HCFA 
should establish systems to identify aCnda sreesv iine w
cases of frequent enrollment change. 
which marketing abuses are suspected should be 
reported to state licensing agencies. 
actions: 
~hird party handling of HMO enrollment 
Except for existing authority to disenroll at

social Security District Offices, closer

moni toring and fallow-up would be preferable. 
OtherJise, responsibility for training

salespersons and the question of payment for these

services arise. 
I support the concept of a "cooling off" period

for Medicare risk enrollees.

Enroll ment Patterns 
OEI-O4-91-00640: 
This analysis indicates the need for mare data

fallow-up. The

collection, closer monitoring and 
inability to segregate the Miami Area enrollment

for Humana makes it difficult to interpret the

resul ts . 
Editorial Comments

Regarding both reports, I suggest that OIG staff

solicit technical assistance from HCFA/Office of

Prepaid Health Care operations and oversight on the

"Background" sectionps lwahnicsh.  distinguish fee-for-service

See, for exa~ple, the 
from prepaid health 
ttached pages.

"L---
Manin 
H. Garry 
Attachments 
E - 3
 ~~ 
.. 
:" 
""'. .~~~. .------- . ,~" .."- '- -.  --:;:- :~::;' - .' (' 
\ .  - -- ..:..  iD (b- c\')  ~. 
'-1 ) \ 
~ Cu1'\~--?CV '\ 
Health Care 1\--\\  ' c:: 't) 
, .:!J 
I": ;-
&. HUMAN SERVICES ,\:'::l":i' Financing-Administration 
DEPARTMENT OF HEALTH 
I:.FF::::: CF 
::C 
Memorandum 
:::-i 
. 1/ ;
:1 :C: 28 
AUG I 5 199( 
Date 
Gail R. Wilensky, Ph.  -i) )

V'-" 
From  Administrator 1 
Marketing Practices and Enrollment Patterns for South 
Subject OIG Draft Reports: "
Florida HJ.\t10s" (OEI-O4-91-00630 and OEI-04-91-00640) 
InspectOr General 
Office of the Secretary

We have reviewed the above referenced draft reports evaluating Health 
Maintenance Organization (HNfO) marketing practices for South Florida and HMO 
enrollment patterns in the Miami area. As an overall comment on each of the 
above reports, we view the findings as generally positive in that they dispel many 
practices of

the erroneous preconceptions about the marketing and enrollment 
area. 
Medicare-contracting HM:Os in the South Florida 
we do not 
Given the positive nature of the reports,  believe that the findings as 
all of the changes in the Medicare HMO 
reported in the two reportS warrant 
program suggested by OIG. However, we agree with one of your recommendations. 
Our specific comments on the reports' recommendations are attached for your 
consideration. 
Please advise us of 
Thank you for the opportunity to comment on these reports. 
whether you agree with our position on the reports' recommendations at your 
earliest convenience. 
Attachment 
PDIG 
DIG-AS 
.;:DIG-E!. 
DIG-QI 
EAIG-MP X~
QGC/IG 91 
v' 
ID~..;~.... 
E - 4 , " 
Comments of tpe Health Care Financing Administration 
on OIG Draft Reports: 
Marketing Practices and 
Enrollment Patterns for South Florida HMOs 
(OEI-O4-91-00630 and- OEI-O4-91-00640) 
O4-91-00630. Recommendations 2 
Recommendation 1 is contained only in OEI-
through 5 are contained in both OIG reports. 
Recommendation 
standards for sales force training and monitoring, and hold 
HCF A should establish 
standards. 
HMOs accountable for maintaining those 
HCF A Response 
necessary to prescribe more than the general 
We do not believe it is appropriate or 
HCF A 
standards for sales activities of organizations that are already required for 
practices that lead 
contracts. HMOs are currently held accountable for marketing 
enrollments. Without effective sales force training 
to erroneous and uninformed 
and monitoring, an HMO will be subject to contract termination, intermediate 
failures. 
sanctions, and/or civil monetary penalties for marketing and enrollment 
an HMO to provide a 
Under the authority of 42 CFR ~417.428(a), which requires 
beneficiaries to make an 
and other information for 
written statement of rules "
actions to 
" HCF A has taken a number of 
informed decision about enrollment,
correct problems found at individual HMOs. 
In Southern California, for example, where there have been problems with 
in, an after-the-fact (i.  after-sale ) enrollment 
beneficiaries not understanding lock-
verification process is the norm among all HMOs in the area, and the situation has 
Similarly, for 
improved as a result of the efforts of the HCF A regional office. 
believe that marketing practices have 
Humana Medical Plan of Florida, we 
1990 (after the OIG survey of beneficiaries) as 
significantly improved since October, 
office staff, in 
a result of Humana s working with the HCFA regional and central 
HCF A was successful in its 
conjunction with intensified monitoring of the Plan. 
of certain 
efforts to encourage Humana to set up its own internal monitoring 
reportS. 
operations, and we can monitor Humana through its internal 
E - 5
 Page 2

We believe the regulation of insurance and HMO sales agents is more properly a 
State function and we wish to note that many States impose requirements on HM:O 
marketing personnel and brokers. Florida has taken a number of steps to prevent 
marketing abuses, including a requirement that there be certification of enrollment 
in a Medicare H110 by someone other than a sales agent. 
Finally, we do believe our civil monetary penalties (CMP) and intermediate 
sanctions authority in this area could be expanded. Currently, although CMPs and 
against entities that provide false information, 
intermediate sanctions can be applied 
we do not have that authority in regard to entities that engage in door-to-door 
marketing or that offer gifts or payment- of more - than- a nominal value to induce 
enrollment. In addition, we currently only have the authority to impose a CMP 
against an entity; we do not have the option of imposing a CMP against an 
individual, such as a sales agent. We are submitting an A-19 to the Department 
which addresses these issues. We would hope that you will support our proposal. 
Recommendation 
HCF A should establish a policy limiting enrollment to one "open season 
(opportunity to enroll) per year. 
HCFA Resuonse 
We do not believe that OIG findings, which show that a minority of HMO enrollees 
have had multiple H110 enrollments, are sufficient cause to make a major policy 
change in HCF A's approach to beneficiaries' ability to choose HMO enrollment as 
a Medicare option. The OIG found that switching from one plan to another, even 
, is not necessarily indicative of marketing or enrollment abuses 
on a frequent basis
noted above. Where "ping-ponging" does in fact 
but rather beneficiary choice, as 
result from marketing or enrollment abuses, HCF A has the means to require an 
HMO to cease such practices. 
' freedom of 
A hallmark of the Medicare fee-for-service program is the beneficiaries
Beneficiaries who choose to enroll in a Medicare risk-based 
choice of providers. 
, in order to 
HlVfO consciously choose to r~ceive care from only the fThtfO providers
pocket costs. 
minimize their administrative burden and to benefit from lower out-of-
Under current law, it should be noted that they are  able  to exercise the choice 
betWeen HMOs and fee-tor-service at any time, if they choose to disenroll from an 
HM:O. However, there are limitations under current law, if an HNfO conducts only 
the minimum 30-day required annual enrollment period. 
E - 6 Page 3 
as a choice that is available on a 
HCF A has traditionally viewed the HMO option 
voluntary basis to beneficiaries residing in areas where Medicare HMOs are 
available, and we have left it up to the HM:Os to decide whether they preferred a 
, continuous basis. Curr~ntly, only 
policy of enrollment other than on a year-round
based HNfOs. 
3 percent of Medicare beneficiaries are enrolled in Medicare risk-
HNfOs that have a capacity to conduct continuous open enrollment should be 
, since it expands beneficiaries 
allowed the option of flexible enrollment periods
choices. 
necessary to impose a single open enrollment period. 
A legislative change would be 
TEFRA" Medicare risk contracting), Congress has 
Since 1985 (the first year of "
changed the original provisions of the Social Security Act relating to Medicare 
based 
mandated that Medicare risk-
HNfO enrollment and disenrollment. Congress 
HNfO (to 
immediate disenrollment from the 
I-llvfO enrollees have the right of 
60 days). 
replace the previous provision that could delay a disenrollment for up to 
Congress also did away with a coordinated open enrollment period requirement 
(introduced in the Deficit Reduction Act of 1984). The intent of Congress has 
choosing the HNfO 
been consistently to give beneficiaries maximum flexibility in 
option while giving HJYl0s the leeway to determine the appropriate enrollment 
periods. 
Recommendation 
cases of frequent 
line system to identify and review 
HCF A should establish an on-
enrollment change. 
HCF A ResDonse 
The Managed Care Option Information 
HCF A has developed such a capability. 
System provides online management 
(MCCOY) Group Health Plan (GHP) 
information reports and the capability to update beneficiary enrollments 
this system 
disenrollments, health status indicators and residence codes. We believe 
satisfies the intent and spirit of GIG' s recommendation. 
Recommendation 
service area, HCF A should test the efficacy of a third 
In the three-county  Miami 
HMO enronment actions. 
rqrty handling 
E - 7
 Page 4 
HCF A Response 
enrollment process has been tested and many problems 
Ti1C efficacy of a third party 
were found. We do not believe that the GIG's findings warrant anotlier test 
because this problem affects a small number of beneficiaries. In the vast majority 
fllyfO. A 
of cases (72 percent), the beneficiary initiated the first contact with an 
third party enrollment process would be more appropriate in a situation where the 
fllyfO contacts the beneficiaries first, in the majority of cases. 
If enrollments were the responsibility of a third party, such as the Social Security 
Administration (SSA) (as OIG suggests), the level of enrollment activity in the 
Miami area would make the function a massive undertaking in terms of personnel 
and costs (costs currently financed through the HCF A capitation payments made to 
the HM:Os). Unless the third party could fairly present each HMO's advantages 
. competition in the marketplace could be stifled. ; HCFA would also have a new 
enrolling 
monitoring responsibility of assuring that the third party was properly 
individuals in the appropriate HNfO, etc. 
The OIG may wish to consider the findings of the General Accounting Office 
(GAO) in its  HealthChoice demonstration project in Oregon and 
evaluation of the 
California-a demonstration of the use of a third-party broker for Medicare HMO 
enrollment. Problems that the GAO pointed out included the questionable 
authority for HCF A's financing the project, unfair treatment of fllyfOs (those paying 
the broker for its services versus those that did not), inadequate Privacy Act 
safeguards, and the erroneous impression given by the broker that it was an agent 
of the Government. Many of the GAO objections would be obviated if SSA were 
the third party, but having SSA function as an HMO broker is itself problematic 
beginning with the difficulty of getting SSA to agree to undertake such a function. 
(Please note that the SSA HM:O disenrollment function was a legislative mandate. 
Recommendation 
HCF A should impose a "cooling off' period allowing beneficiaries to reconsider 
IDfO enrollment decisions before enrollment applications are processed. 
HCFA Response 
An official "cooling off' period is not needed. If a beneficiary does change his or 
her mind, there is usually a certain time lag between the marketing presentation 
and the time the enrollment is actually transmitted to HCF A; a timely cancellation 
is therefore possible. HCF A also permits retroactive disenrollment of beneficiaries 
for good cause (for example, failure to fully understand lack-in) if there has not 
been a fully informed decision to ~nroll in an HNfO. 
E - 8  COMMENTS

General 
The beneficiary sample of 237 Medicare beneficiaries was taken over a 36-month 
period ranging from October 1, 1987 to September 30, 1990. During this period
, 1 
percent of enrollees (1 866 enrollees out of 182 405) were enrolled 4 or more times in 
South Florida HMOs. Nationally during this same period .3 percent (2 276 out of 
881 861) were enrolled 4 or more times in an HMO. Non-South Florida HMOs during 
the same period had .1 percent of their enrollees enrolled 4 or more times in HMOs. 
South Florida enrollees thus have enrolled in 4 or more HMOs over the above noted 3-
year period at a rate 10 times the national average. 
It should always be kept in mind when looking at Medicare enrollment patterns in 
South Florida that: 
Medicare enrollees in South Florida are able to change physicians (and HMOs 
almost as freely as a Medicare fee-far-service enrollee. Most HMOs in South 
Florida charge no premium to the Medicare beneficiary nor is an individual 
locked- " to any HMO longer than 30 days before a change can be made to 
another HMO. 
As we emphasized above, evidence of frequent change of enrollees is not 
necessarily evidence of illegal ar unethical marketing practices. 
The report often refers to activity in South Florida as being higher than the national 
average. It is important to recognize, as noted above, these higher activity levels may 
be unique to the South Florida market where five "zero premium" plans compete 
intensely for enrollees, or they may be indicative of "normal" conditions in a highly 
competitive market. The Southern California market most closely resembles the market 
studied. Perhaps a comparison of these two areas would be useful. 
OIG Response: We added a section that describes the uniqueness of the Miami market 
to the Background of the report. 
Page 4 states that Humana data are not included in parts of the analysis since there was 
no way to distinguish South Florida from other parts of the service area. We believe 
that analysis of South Florida data without Humana figures presents less than a 
complete and accurate picture of the situation. 
OIG Response: Humana has four separate service areas in Florida: Miami, Tampa, 
Orlando, and Daytona. The HCF A data base combines enrollment data for all four 
service areas. It does not distinguish the separate service areas. Therefore, it was not 
possible to identify Humana enrollment data for Miami alone. Appendix D shows the 
effect of including the Humana data that represents all of Florida. 
E - 9
 Specific 
Page i 
AIthough five TEFRA risk contractors serve the area, it should be noted that Medicare 
beneficiaries may also be members of HMOs or other entities which are not Federally 
qualified. In paragraph three of the BACKGROUND section, sentence three should 
read "Beneficiaries enrolled in risk-based HMOs are considered to be "locked in... 
DIG Response: We have 
revised the sentence. 
Page 3

Comprehensive American Care is now CAC-RAMSA Y, Inc. 
DIG Response: We have made that change throughout the report. 
Page 5

TEFRA risk-based contract enrollment is now approximately 1.3 million, and was about 
the same level during the period of the GIG study. 
OIG Response: We  , and adjusted the percent enrolled in Miami 
revised the figure
HMOs. 
Page 8

only four of the 237..." Since only 136 responses were received, should this be 136? 
OIG Response: We have made the correction. 
Page 9

How many of the 16 000 beneficiary inquiries were complaints? Of those, how many 
were legitimate complaints about enrollment and disenrollment? Of the 1 500 
potentially fraudulent" HMO enrollments and 1 800 failures to disenroll, how many 
provided, upon investigation, to be the fault of the HMO? 
It is not clear what is meant by the potentially inflammatory term "inappropriate" in 
sentence two of the final paragraph. What is the basis on which HCF A (and which 
HCFA component) has estimated that 20 percent of 
enrollments or disenrollments are 
inappropriate? 
OIG Response: We revised the report to show that Region IV HCFA provided the 
estimates cited. 
E - 10
 APPEND IX A 
Page A- , last paragraph. The data reflecting at least four enrollments actually means 
at least three changes, since the individual would have been in an HMO on the starting 
date of the study period. Another data run with a threshold of 4 changes would likely 
show significantly fewer beneficiaries involved. 
DIG Response: We acknowledge that a data run with a threshold higher than fom 
would likely show fewer beneficiaries. A threshold of fom was chosen for this study. 
APPEND IX B 
The small number of responses (136) and the use of proxy information raises questions 
of overall value of the information gained. 
It is important to distinguish which of the various operational elements of the Plan 
influence the enrollment and disenrollment process (e.  , marketing agency activity, 
member services, as well as the health care providers). In this way, specific problems or 
perceptions can be more accurately attributed. 
DIG Response: Our survey of beneficiaries did not identify the specific operational 
element that influenced the enrollment and disenrollment activity. Appendix B reports 
each reason they gave us for changing HMOs.
10.  Page B- 7 
The chart is incomplete. There are 8 responses identified, but only seven are reflected 
in the chart. 
OIG Response: We have deleted the chart as it duplicated information found
elsewhere in Appendix B. 
11.  APPENDIX C 
Appendix C should be deleted form the report as well as references to Appendix C in 
the body of the report. Appendix C: HMO Enrollment Survey of South Florida 
Physicians sought to ascertain "why physicians thought beneficiaries changed HMO 
plans so frequently." Physicians have no reason to determine, and perhaps no way of 
ascertaining, why a patient left them if the first they learn of the patients' departure is 
from the physicians panel, through a deletion from an eligibility listing, or a request for 
records transferral from another physician. 
E - 11  Therefore, the evaluation of a physician s assessment of why a Medicare enrollee left 
one HMO to join another is anecdotal at best and certainly not informed or statistically 
valid. It would have been more effective to ask the HMOs themselves the reasons for 
enrollee disenrollment, rather than asking the physicians. 
OIG Response: We surveyed physicians to obtain their opinions on not only the 
reasons beneficiaries change HMOs, but also on the effects of rapid turnover. 
E - 12