Department  of Health  and Human  Services 
OFFICE OF

INSPECTOR GENERAL

Medicare  Beneficiary  Interest 
in  HMOS  in  1995 
# sERVICq 
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JUNE  GIBBS  BROWN 
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<  Inspector  General 
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> OEI-04-93-00151  . 
OFFICE  OF  INSPECIOR  GENERAL 
The  mission of the  Office of Inspector  General  (OIG),  as mandated  by Public  Law 95-452, is 
to protect  the  integrity  of the  Department  of Health  and Human  Services  programs  as well as 
the  health  and welfare  of beneficiaries  send  by them.  This statutory  mission  is carried  out 
through  a nationwide  program  of audits,  investigations,  evaluations,  sanctions,  and fraud  alerts. 
The  Inspector  General  informs  the  Secreta~  of program  and management  problems  and 
recommends  legislative,  regulatory,  and operational  approaches  to correct  them. 
Office  of  Evaluation  and  Inspections 
The  OIGS Office of Evaluation  and Inspections  (OEI)  conducts  short-term  management  and

program  evaluations  (called  inspections)  that  focus on issues of concern  to the  Department,

the  Congress,  and the  public.  The  inspection  reports  provide  findings  and recommendations

on the  efficiency, vulnerability,  and effectiveness  of departmental  programs.

OEIS Atlanta  Regional  Office prepared  this report  under  the direction  of Jesse  J. Flowers,

Regional  Inspector  General,  and Christopher  Koehler,  Deputy  Regional  Inspector  General.

Principal  OEI  staff included:

Atlanta Retion  Headquarters

Betty  Apt,  Team Leader  Winnie  Walker,  Program Specialist

James  Green,  Contractor  Stuart  Wright,  Program Specialist

Jackie  Watkins,  Program Analyst  Barbara  Tedesco,  Statistician

Joe  Townsel,  Program Anaijwt  Brian  Ritchie,  Technical SuppoH

Tammy Hipple,  Statistician

To obtain  a copy of this report,  call the Atlanta  Regional  Office  at (404) 331-5022.
 Department  of Health  and Human  Services 
OFFICE OF

INSPECTOR GENERAL

Medicare  Beneficiary  Interest 
in  HMOS  in  1995 
@ SERViC&$ 
&  C/. 
+ 7 
v  GIBBS  BROWN
#  JUNE 
<  Inspector  General
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4 FEBRUARY  1997
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olw04-93-oo151  -
EXECUTIVE  SUMMARY

PURPOSE 
To  determine  Medicare  beneficiary  awareness  of and  interest  in joining  health 
maintenance  organizations. 
BACKGROUND 
In all geographic  areas,  Medicare  beneficiaries  can obtain  medical  care  through  a fee
for-sefice  arrangement.  However,  approximately  74 percent  of beneficiaries  also 
have  an  option  of obtaining  medical  care  through  managed  care  plans  known  as health 
maintenance  organizations  (HMOS).  As of April  1995, approximately  3.7 million 
beneficiaries  were  members  in one  of 271 Medicare-contracted  HMOS. 
The  Health  Care  Financing  Administration  (HCFA)  asked  us to determine  beneficiary 
interest  in using health  maintenance  organizations  (HMOS).  As part  of a broad  1995 
national  survey, we asked  942 beneficiaries  about  their  awareness  of and  interest  in 
joining  HMOS.  We  excluded  from  our  sample  beneficiaries  who were  already  enrolled 
in an HMO.  Where  possible,  we compared  beneficiary  responses  to their  responses  to 
a similar  survey we conducted  in 1994. 
FINDINGS 
More bene$kiati  were awareof HMOs  than h  1994 
Seventy  percent  of the  beneficiaries  said they  had  heard  of HMOS.  This  is an 
	
increase  from  1994 when  62 percent  said they  knew  about  HMOS. 
About  44 percent  of beneficiaries  said they  knew whether  or not  they  lived in 
	
locations  where  they  could join  an HMO.  This  is an improvement  from  1994 
when  36 percent  said  they knew. 
Fifty-four  percent  of the  beneficiaries  said they would  like to learn  more  about 
	
Medicare-contracted  HMOS.  This  is less than  in 1994 when  64 percent  said 
they wanted  more  information. 
About a thirdof benefkiarieseqressed an interestinjoiningan HMO 
Thirty-five  percent  of the  beneficiaries  expressed  an interest  in joining  an 
	
HMO. 
Of the  beneficiaries  who were  not  interested  in joining  an HMO,  about  33 
	
percent  said the  main  reason  was they  could  not  select  their  own physicians. 
i 
-.
 Only 7 percent  of the  beneficiaries  expressed  concern  about  quality  of care  in 
9	
an HMO.  This  is similar  to beneficia~  responses  to our  1994 survey. 
Seventeen  percent  of the  beneficiaries  were  aware  that  HMO  members  have 
9	
appeal  rights. 
CONCLUSION 
Clearly,  beneficiary  awareness  of HMOS is increasing.  The  increase  can be  partly 
attributed  to HCFA  projects  designed  to help  educate  Medicare  beneficiaries  about 
managed  care.  For  example,  HCFA  has updated  the  Medicare  and  Managed  Care 
Plans  brochure.  The  increase  in awareness  can  also be partly  attributed  to the 
increase  in number  of HMOS  available  for Medicare  beneficiaries  to join.  Over  half 
of the  beneficiaries  who  knew  about  HMOS had  found  out  about  them  through 
advertising  by the  HMO. 
However,  30 percent  of the  beneficiaries  we surveyed  said they  had  not  heard  of 
HMOS.  Further,  the  most  prevalent  reason  beneficiaries  cited  for not  wanting  to join 
an HMO  was their  inability  to select  and  keep  their  physicians. 
We  recognize  that  HCFA  has taken  significant  steps  to enhance  beneficiaries  choices 
in medical  care.  Still, there  is always more  that  can be  done.  We  suggest  the 
following. 
Intensi&  outreach  efforts  to educate  Medicare  beneficiaries  about  Medicare 
	
HMOS.  For  example,  HCFA  could  distribute  their  managed  care  brochures  to 
senior  citizen  centers  in locations  where  Medicare  beneficiaries  can join  HMOS. 
In their  educational  materials,  HCFA  could  highlight  characteristics  of 
Medicare  HMOS,  including  the  benefits  offered  and  appeal  rights. 
Explore  ways that  allow beneficiaries  greater  freedom  to choose  their  own 
	
physicians  in managed  care  settings. 
AGENCY  COMMENTS 
The  HCFA  Administrator  concurred  with  our  conclusion  that  HCFA  should  intensify 
outreach  efforts  to educate  beneficiaries  about  Medicare  HMOS.  He  reported  that 
the  1996 Medicare Handbook  mailed  to all beneficiaries  included  an extensive 
description  of the  managed  care  benefit.  The  HCFA  has  also worked  with beneficiary 
advocacy  groups,  and  included  representatives  from  those  groups  in the  development 
of educational  materials. 
The  Acting  Assistant  Secretary  for Planning  and  Evaluation  provided  several  usefd 
comments  which  helped  sharpen  the  interpretation  of survey  results.  In response,  we 
made  changes  to  clari~  our  information  where  possible  and  appropriate. 
ii  TABLE  OF  CONTENTS

EXECUTIVE  suMMARY 
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1

FINDINGS


Beneficiary  Awareness  ofHMOs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...4


Interest  inJoininganHMO  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...5

CONCLUSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7

AGENCY COMMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8

APPENDICES

Beneficiary  Responses  to1995  Survey  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  A-1

Agency  Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  B-1
 INTRODUCTION

PURPOSE 
To  determine  Medicare  beneficiary  awareness  of and  interest  in joining  health 
maintenance  organizations. 
BACKGROUND 
The M&are  13vgram 
Medicare  is a Federal  health  insurance  program  for individuals  age65  and  older  and 
for certain  categories  of disabled  people.  In  1995, Medicare  insured  about  37.6 
million  beneficiaries,  and  paid  benefits  totalling  over  $159 billion.1  The  Health  Care 
Financing  Administration  (HCFA)within  the  Department  of Health  and  Human 
Services  has  responsibility  for the  Medicare  program. 
In all geographic  areas,  Medicare  beneficiaries  can obtain  medical  care  through  afee
for-setvice  arrangement.  However,  approximately  74 percent  of beneficiaries  also 
have  an  optionof  obtaining  medical  care  through  managed  care  plans  known  as health 
maintenance  organizations  (HMOS).  As of April  1995, approximately  3.7 million 
beneficiaries  were  members  inone  of 271 Medicare-contracted  HMOS.2 
In the  interestof  expanding  health  care  options,  HCFA  asked  us to determine 
beneficiary  interest  in joining  HMOS. 
llvo Method  of ObtainingiUixlicalCare 
Fee-for+enke  - Beneficiaries  choose  their  own physicians,  hospitals,  and  other 
medical  care  providers.  Providers  submit  claims  to Medicare  for services  to Medicare 
beneficiaries.  For  physician  and  most  other  outpatient  services,  Medicare  pays 80 
percent  of the  amount  allowable  for a covered  service.  Beneficiaries  pay the 
remaining  20 percent  of allowable  charges,  plus Medicare  premiums  and  deductibles. 
HMOS  - Beneficiaries  enroll  in Medicare-contracted  HMOS which  manage  their 
medical  care.  Each  HMO  has  a defined  geographic  area,  and  the  HMO  serves 
beneficiaries  who  live in that  area.  HMOS are  responsible  for providing  a full range 
of Medicare  services,  and  may offer  other  benefits  not  covered  by Medicare,  such as 
prescription  drugs. 
lHealth  Care Financing Administration, United States Department of Health and Human SeMces, 
Data Compendium, March 1995, 
2Health Care Financing Administration Press Release, November 27, 1995. 
1  Typically,  after  joining  an HMO,  a beneficiary  selects  a primary  care  physician  who is 
affiliated  with  the  HMO.  All medical  care  is managed  by that  physician  or a case 
manager.  The  primary  care  physician  either  provides  needed  services  or refers  a 
beneficiary  to  appropriate  specialists  or other  health  care  providers  associated  with  the 
HMO.  Beneficiaries  are  required  to obtain  all their  medical  care  through  providers 
affiliated  with  the  HMO  they joined,  except  for  emergency  and  urgently  needed  care 
when  they  are  out  of the  HMO  service  area. 
Medicare  pays  HMOS  a set  amount  each  month  to provide  beneficiaries  all hospital 
and  medical  services  available  under  fee-for-service.  Beneficiaries  continue  to pay 
Medicare  Part  B premiums.  They  may also have  to pay the  managed  care  plan  a 
monthly  premium  and  a copayment  for services  received.  However,  they  do not  pay 
Medicare  deductibles  or 20 percent  of physician  and  outpatient  charges  that  are 
required  under  the  fee-for-setice  program. 
METHODS 
As part  of a broad  1995 national  survey to determine  beneficiary  satisfaction  with 
Medicare,3  we asked  beneficiaries  about  their  awareness  of and  interest  in joining 
HMOS.  We  used  questions  that  were  developed  by HCFA  staff. 
In September  1995, we mailed  a questionnaire  to  1244 randomly-selected  Medicare 
beneficiaries  for whom  Part  B claims  had  been  filed  in Calendar  Year  1994. 
Beneficiaries  were  located  both  in areas  that  had  Medicare  HMOS  and  in areas  that 
did not  have  Medicare  HMOS.  We  excluded  from  our  sample  beneficiaries  who were 
already  enrolled  in an HMO.  We  used  standard  equations  for estimating  sample  size 
with  a binary  response  variable. 
Beneficiary  participation  in the  survey was volunta~.  A total  of 942 beneficiaries 
returned  completed  questionnaires,  for a response  rate  of 76 percent.  Percentages  in 
the  report  are  based  on the  number  of beneficiaries  answering  each  question.  Based 
on the  response  rate,  estimates  are  within  3.2 percent  of the  true  value  at the  95 
percent  confidence  level.  The  individual  findings  may be  less precise,  depending  on 
the  number  of beneficiaries  who responded  to specific  questions.  Appendix  A shows 
beneficiary  responses. 
A consideration  in surveys  of this type  is that  the  results  maybe  biased  if non-
respondents  are  significantly  different  from  respondents.  To  determine  whether 
significant  differences  exist in this survey, we performed  various  analyses,  including  a 
comparison  of age  and  gender  for the  942 respondents  and  the  302 non-respondents. 
The  analyses  revealed  no significant  difference,  which  suggests  that  our  survey  results 
30ffke  of Inspector General, United States Department of Health and Human Services. Medicare 
BeneficiarySatisfaction: 1995.  0EI-04-93-O0150. 
2  were  not  biased  based  on age  and  gender.  We were  unable  to determine  if any non-
response  bias  existed  as a result  of other  factors,  such  as health  and  disability. 
(hnpw&on  m I?evious Suwy
In  1994, we conducted  a similar  national  survey of Medicare  beneficiaries  to assess 
their  awareness  of and  interest  in joining  an HMO .4  Since  most  of the  questions  used 
in the  1995 survey were  also used  in our  1994 survey, we were  able  to compare 
beneficiary  responses  in  1994 and  1995.  We  have  determined  significant  differences  in 
beneficiary  responses  through  use of a t-test. 
We conducted  this inspection  in accordance  with the  Qua2i~  Standards for Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
40ffice of Inspector General, United States Department of Health and Human Services. Medicare 
Beneficiq  Merest in HA40s. 0EI-04-93-O0142. 
3  FINDINGS

MORE  BENEFICIARIES  WERE AWARE OF HMOS THAN IN 1994 
Seventy  percent  of 918 beneficiaries  who  responded  to our  question  about  awareness 
said  they  had  heard  of HMOS.  This is an increase  from  1994 when  62 percent  said 
they  had  heard  of HMOS. 
We  asked  the  308 beneficiaries  who said they  lived in a location  with  an HMO  to tell 
us how they  heard  about  the  HMO.  Seventy-eight  percent  (240 of 308) of them 
responded.  Table  1 shows that  most  of those  who had  heard  of HMOS  did so through 
advertisements. 
Advertising  138  58 
(Television,  Newspaper,  Direct  Mail) 
Family  and  Friends  55  23 
Former  or Current  Employment  22  9 
Insurance  Companies  9  4 
Physicians  9  4 
Previous  Experience  in an HMO  4  2 
Other  15  6 
(Hospitals,  Senior  Citizen  Centers, 
and  Newscasts) 
Some beneficiaries  mentioned  two ways of learning  about  HMOS. 
Therefore,  the  percentages  total  more  than  100%. 
These  methods  of awareness  are  similar  to those  identified  by beneficiaries  during  our 
1994 survey. 
About 44 Penxnt of theBeni@ia&  Khew WhetherorNot l%eyLivedina Location
W%erel%ey CouklJoinanHMO
We  asked  beneficiaries  if they  lived in a location  where  they  could join  an HMO. 
Thirty-four  percent  of the  beneficiaries  (308 of 916) said they  lived in a county  with 
HMOS  that  contract  with Medicare.  About  10 percent  said they  did not  live in 
locations  where  beneficiaries  could join  HMOS.  Table  2 shows that  in 1995 more 
4  beneficiaries  than  in 1994hew  whether  they  lived invocations  seined  by Medicare 
HMOS. 
TABLE 2 
BENEFICIARIES  WHO ARE AWARE OF HMOS THEY  CAN JOIN 
m  1 
  o  ~N~~Qw
E
1995  34%  10%  56% 
1994  26%  10%  64% 
FewerBenefichriesWantedMore InforrnutionAbout HMOS llaanin1994
Fifty-four  percent  of 796 beneficiaries  who answered  our  question  said they would  like 
to learn  more  about  Medicare-contracted  HMOS.  This  is less than  the  64 percent 
who,  in  1994, said  they wanted  more  information  about  HMOS. 
ABOUT A THIRD  OF BENEFICIARIES  EXPRESSED  AN INTEREST  IN 
JOINING  AN HMO 
Thirty-five  percent  of the  796 beneficiaries  who  answered  our  question  expressed  an 
interest  in joining  an HMO.  In  1994, 27 percent  said they would  be  interested. 
However,  as shown  in Table  3, we offered  a Dont Know response  in the  1994 survey 
which we did not  include  in the  1995 survey.  Therefore,  we cannot  determine  if there 
is a significant  difference  between  responses  to the  1994 and  1995 surveys. 
TABLE 3
BENEFICIARY  INTEREST  IN JOINING  AN HMO

m  ~:?~   ,... 
,!?wmwIi !
No . 
E
1995  35%  65% 
1994  27%  39%  34% 
Ba@cbia  Want  to Choose  l%eir Physicians 
Of the  65 percent  who  said they would  not  be interested  in joining  an HMO,  63 
percent  (330)  cited  one  or more  objections.  Table  4 shows that  most  beneficiaries 
were  concerned  about  their  inability  to select  their  doctors  if they joined  an HMO. 
Only 7 percent  of the  330 beneficiaries  expressed  concern  about  quality  of care  in an 
HMO,  These  concerns  are  similar  to those  expressed  by beneficiaries  in 1994. 
5
 Inability  to Select  Physician(s)
 108  33 
Desire  to Keep  Present  Physician
 88  27 
Satisfied  with  Insurance  Coverage
 43  13 
Perceived  Restrictions  in an HMO
 27  8 
Perceived  Poor  Quality  of Care
 22  7 
Lack  of Enough  Information  on HMOS
 14  4 
Friends  and  Relatives  Bad  Experiences
 11  3 
Other
 28  8 
(Too  Old,  Do  Not  See Advantage,  Too

Far  to Drive,  and  Too  Expensive)

*Some beneficiaries  mentioned  ~oobjections  tojoining  HMOs.  Therefore, 
the  percentages  total  more  than  100%. 
FewBenefi&ries KkewAbout TheuAppealR&h
In the  1995 survey, we asked  beneficiaries  if they were  aware  that  Medicare  HMO 
members  could  appeal  decisions  HMOS made  about  their  medical  care.  Only  17 
percent  (149 of 883) were  aware  of this.  [Readers  should  recall  that  respondents  to 
~his sumey  were  ~  members  of an HMO.  An OIG  survey of HMO  m;mbers 
conducted  in  1995 showed  that  HMO  members  were  knowledgeable  about  their 
general  right  to  complain  about  HMO  services--OEI-07-94-O028  l.) 
6
 CONCLUSION 
Clearly,  beneficiary  awareness  of HMOS  is increasing.  The  increase  can  be partly

attributed  to HCFA  projects  designed  to help  educate  Medicare  beneficiaries  about

managed  care.  For  example,  HCFA  has updated  the  Medicare  and  Managed  Care

Plans  brochure.  The  increase  in awareness  can  also be  partly  attributed  to the

increase  in number  of HMOS  available  for Medicare  beneficiaries  to join.  Over  half

of the  beneficiaries  who knew  about  HMOS said they  found  out  about  them  through

HMO  advertising.  However,  30 percent  of the  beneficiaries  we surveyed  said they  had

not  heard  of HMOS.

The  most  prevalent  reason  beneficiaries  cited  for not  wanting  to join  an HMO  was

their  inability  to select  and  keep  their  physicians.  We recognize  that  HCFA  has  taken

significant  steps  to enhance  beneficiaries  choices  in medical  care.  For  example,  under

HCFA  guidelines,  some  HMOS  are  implementing  a point  of service  option  which

allows beneficiaries  to obtain  health  care  sewices  outside  the  HMOs  contracted

provider  network  for specified  services.  Beneficiaries  usually  pay higher  copayments

for those  services  received  outside  the  HMO.

Still, there  is always more  that  can be  done.  We  suggest  the  following.

Intensify  outreach  efforts  to educate  Medicare  beneficiaries  about  Medicare 
	
HMOS.  For  example,  HCFA  could  distribute  their  managed  care  brochures  to 
senior  citizen  centers  in locations  where  Medicare  beneficiaries  can join  HMOS. 
In their  educational  materials,  HCFA  could  highlight  characteristics  of 
Medicare  HMOS,  including  the  benefits  offered  and  appeal  rights. 
Explore  more  ways that  allow beneficiaries  greater  freedom  to choose  their 
	
own physicians  in managed  care  settings. 
7
 AGENCY  COMMENTS 
The  HCFA  Administrator  concurred  with our  conclusion  that  HCFA  should  intensify 
outreach  efforts  to educate  beneficiaries  about  Medicare  HMOS.  He  reported  that 
the  1996 Medicare Handbook  mailed  to all beneficiaries  included  an extensive 
description  of the  managed  care  benefit.  The  HCFA  has also worked  with beneficiary 
advocacy  groups,  and  included  representatives  from  those  groups  in the  development 
of educational  materials. 
The  Acting  Assistant  Secretary  for Planning  and  Evaluation  provided  several  useful 
comments  which  helped  sharpen  the  interpretation  of sumey  results.  In response,  we 
made  changes  to clari~  our  information  where  possible  and  appropriate. 
Appendix  B shows the  full text  of the  comments  provided  by HCFA  and  ASPE. 
8
 APPENDIX  A

RESPONSES TO 1995 SURVEY OF BENEFICIARIES 
In some  cities,  Medicare  beneficiaries,  like yourself,  can join  managed  care  plans  such 
as health  maintenance  organizations  (HMOS).  In an HMO,  the  primary  care  doctor 
authorizes,  arranges  for, and  coordinates  all medical  services  for you.  You  are  usually 
required  to receive  all your  medical  care  from  the  HMOs  doctors,  hospitals,  and  other 
providers  that  belong  to the  HMO. 
QUESTION  RESPONSES  PERCENTAGE 
1.  Before  today,  had  you ever  heard  of HMOS? 
Yes  643  70 
No  275  30 
Not  Answering:  24 
------------------------------ -------------------- ----------------------- --------------------------- ------------------
2.  a.  Are  there  HMOS in your  city or town  that  Medicare  beneficiaries  can join? 
Yes  308  34 
No  89  10 
Dont  Know  519  56 
Not  Answering:  26 
b.  If yes, how did you hear  about  those  HMOS?  [Open-ended  question) 
(N =  241, Number Answering Question) 
HMO  Advertising  129  54 
Family  and  Friends  55  23 
Former  Employers  22  9 
Insurance  Company  9  4 
Physicians  9  4 
Previously  in HMO  4  2 
Other  15  6 
A -1
 QUESTION  RESPONSES  PERCENTAGE 
3.	 a.  If there  were  HMOS in your  city or town  that  Medicare  beneficiaries  could 
join,  would  you be  interested  in joining? 
Yes  276  35 
No  520  65 
Not  Answering:  79 
b.	 If no, what  would  be your  objections?  (Open-ended  auestion) 
(N  =  330, Number  Answering  Question) 
Inability  to Select 
Physician  108  33 
Desire  to Keep  Present 
Physician  88  27 
Satisfied  with Present 
Insurance  43  13 
Perceived  Restrictions  27  8 
Perceived  Poor  Quality 
of Care  22  7 
Lack  of Information 
on HMOS  14  4 
Friends/Relatives  Poor 
Experiences  11  3 
Other  28  8 
------------------------- ------------------------ ------------------------- ------------------------- -------------------
4.	 Before  todav,  were  you aware  that  Medicare  HMO  members  can  appeal 
decisions  HMOS  make  about  their  medical  care? 
Yes  149  18 
No  684  82 
Not Answering:  80 
-------------------- ------------------------------ --------------------------------- ------------------------ -----------
5.  Would  you like  to learn  more  about  Medicare  HMOS? 
Yes  462  56 
No  400  46 
Not Answering:  80 
A -2

  APPENDIX  B 
AGENCY  COMMENTS 
B-1  //.
,.
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wachinmwn. D-C.  20201 
DATE: 
T():	 June Gibbs Brown 
h.specter Gefieral 
FROh&	 Bruce C, Vkiec K&d 
Admhistiator  , 
, 
SUBJECrI	 CM@e of inspector General (OIG) Drafl Report: Mcticarc  13encficiary 
Interest in HlvKls in 1995, (OEI-04-93-00131) 
We reviewed the above-referenced report that examines beneficiary awareness of and 
interest in joining health maintenance organizations, 
Our detailed comments cmthe report recommendations are attached for your 
consideration,  Thank you fortheoppodunitytoreviewandcommentonthisreport. 
Attachment 
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.,  ..  Ckwttxmtsiof the l@dth  Care Finabcing Adm.inis&g~ 
QLQffLccof ~cctor  G~ 
J&dcarc  Bene@iaxv Interest in ~ 
(OEI-04-93-00151] 
(31GRecwn.mendstion 
o  outreach~orts  to educateMedicarebeneficiaries aboutMedicare 
intemsi~ 
HMOs. For  HCFAoould distibutc itsmanagedcarebrochuresto smiur 
example, 
centershi locationswhereMedicarebeneficiariescm join HMOS. IrIits 
dthmn 
educationalrnatwials,HCFAcouldhighlightcharacteristics ofMedicareHMOS, 
including the benefitsoffered@dappealrights. 
, 
0	 Explore ways that allow beneficiaries greater freedom to choose their own 
physicians in mannged caJe settings. 
HCFA Res~onse 
We concur.  HCFA has been particularly active in reaching out to a wide variety of 
beneficiary advocacy groups and included several of them in internal managed care 
trt@ing tffoti,  We also i.ndudtd  these  groups  and other  Departmental oqyinizations in 
the development of educational materials.  A  a result of this outreach  our presence and 
voice among these groups have enabled us to develop additional channels for distribution 
and fe~dbwki These  channels  include  many  SCIQOIWxm  qnters  as suggested by  the 
OIG. 
HCFA is committed to continu@  efforts to enhance the beneficiaries Medicare program 
knowledge, including theh rights and options.  Much of this effo~trelies on the 
dcveloprttcnt and distribution of clearly state~ objective information upon which an 
informed choice cau confidently be made. 
This Summer (1996) HCFA mailed the Medicare Handbook to all beneficiaries.  This 
handbook included an extensive description of the managed care benefit.  If CNG 
resurveys, we would be interested to see if this effort has significantly changed both the 
overall awareness of HMO options and the appeal rights for HMO beneficiaries.  The 
Medicareand managedcarebrochurehas againbeenwised  andwidelydistributed. 
Boththeb~ochweandtlwhwdbook haveadvertisedthatMlle[  jnformtion is available 
through the Medicare 800 number. The  hotltie  inquiries regarding access to lfMOs have 
increased significantly and are documented cmthe contractors monthly reports.  HCFA 
has also been active in development and disbibution of Medicsm managed care plan 
comptirativeinformation,  SevcKalHcFA RegionalOfflce~preparedcomparative 
. 
..  ..  Page 2 
infimnation  assist beneficiaries in their regions in selecting among the options 
to 
available.  St~te and tegiumd Insurance Covnschug ad  Assistance Programs (N%)  as 
well as ~omeadvocacgyroupshavealsoproduoed  rnamged  caw  informathnal  materials 
and comparison chmts.  Within HCl?Acentral office, a major projectis undenvay10 
developanddistributecomparisontiormation  onallMedicaremanagedcarecontractors 
and  e1tMmMnwie6lalst radimteiaonnsa,l
make it availabJevia  HCFAp articipatewdith 
the (N3 in the dcvelopmen~publication and distributionof the MedicareBcncfieiary 
AdvMq  Bulletin&Ml~  What  McdiGarcEleneficiarNicesedto KnowAboutHwdth 
MaintenancCe. hgan.izati(oHm? W)ArrangemenKt;nowYourRights,
,  HCFA encourages contractiq  plans and other organizations to provide materiah that 
, 
describe the physicianselectionprocessinmanagedcareplansandthebeneficiiuys 
abilitytochangeprimarycarephysicianwsithintheplans,  We  the need  to select  fkom 
aplanphysicianisewentidto the managed care modelt,hefactthatmorethan 
70 percent of physician$now have contractualrelationshipswith HMOSis lesseningthe 
needto sever aIong=sWtig  reladontip.  lndee~ thefastestgrowingHMOmodel 
contracts with individualpracticingphysicianstoprovideservicestomembersintheix 
offices.  ,..  ,  y,
:,. 
DEPARTMENT  OF  HEALTH&  HUMAN  SERVICES  Office of the Secretary 
Washington,  D.C,  20201 
d

lG 
DEC201996  EAIG  

SAIG

PDIG  3

DIG-AS

DIG-EC 
TO:  June Gibbs Brown  DIG-El  x 
Inspector General  DIG-01 
DIG-MP= 
/41G-LC 
oGUIG 
FROM:  Acting Assistant  Secretary for 
ExecSec 
Planning and Evaluation  Date Sent 
s 
SUBJECT:  Comments on the Office of the Inspector General (OIG) Draft Report: 
Medicare Beneficiary  Interest in HMOS in 1995,(OEI-04-93-0015  1) 
The report on Medicare beneficiaries  knowledge  and interest in joining  Health Maintenance 
Organizations  (HMOS) in 1995 includes some useful information.  However, the inclusion  of 
beneficiaries  who lived in geographic  areas not served by risk contracting HMOS makes some of 
the results and comparisons  in trends presented  in the study very difficult to interpret.  For 
example,  the report mentions that 35/0 of all Medicare beneficiaries  would be interested  in 
joining  an HMO if one were available.  But if one of the goals of the study is to see if 
beneficiaries  are informed about their health care options and propensity to join an HMO, it 
would be preferable to focus on the responses of beneficiaries  who actually have the option of 
joining  an HMO. 
The inclusion of all beneficiaries  in the analyses also confounds the discussion of trends in 
beneficiaries  knowledge.  For example,  the report mentions that seventy percent of beneficiaries 
surveyed in 1995 were aware that they could join an HMO under the Medicare program; this 
represents  an eight percentage  point increase from a year previously.  An  interesting  question  k 
whether the increase in beneficiaries  knowledge  of HMOS is the result of greater outreach by 
HCFA and the HMOS themselves,  or increases in the market penetration of HMOS (or both?). 
The report mentions  HCFA projects designed to educate Medicare beneficiaries  about their 
health care options and the updating  of the Medicare and Managed Care Plans Brochure as 
possible reasons for this increase, but does not discuss the effect of increasing market penetration 
on changes in beneficiaries  knowledge  of HMOS. The number of plans participating  in the risk 
contracting  program increased by nearly thirty from 1994 to 1995, and the percentage  of 
beneficiaries  enrolled in HMO rose from 8.1 (2.3 million beneficiaries)  to 10.1%(3.1million). 
YO 
Some of the increase in the knowledge  of beneficiaries  about their health care options is no doubt 
the result of greater market penetration  by HMOS and  competition.  -.. 
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;  -J  Page 2- June Gibbs Brown 
To summarize,  we have three broad  recommendations  that will  hopefidly  improve  the report: 
(1) Clarifi  the study population.  The Executive  Summary mentions that 942 Medicare 
berieficiaries  were surveyed, but does not indicate that HMO enrollees were excluded in the 
analyses (see p. I). 
(2) Discuss the implications  of including all beneficiaries--both  those in managed care market 
areas and those who are not--in the analyses. 
(3) Discuss the importance  of HMO market penetration  as a possible reason for the increase in 
beneficiaries  knowledge  of Medicare managed care.  This should be included in the Executive 
Summary  and Conclusion  section of the report. 
, 
Three additional  recommendations  not discussed above include: 
(4) Add caveats regarding the absence of nonresponse  bias.  The fact that the respondents  and 
nonrespondents  to the survey did not differ significantly  with respect to either age or gender does 
not warrant the conclusion  that the survey results are probably not biased (p. 2).  Health and 
disability  are likely to be stronger predictors  of response than either age or gender, and we know 
from several studies that health status is an important predictor of Medicare managed care 
enrollment  and hence knowledge  of Medicare HMOS. 
(5) Discuss the new Point of Service (POS) options that HMOS are developing (under HCFA 
guidelines)  to allow enrollees to have access to providers outside of the HMOs  network.  This 
could  have  an impact  on enrollment  since,  as reported  in the study,  beneficiaries  greatest 
objection  to joining  an HMO  stems  from  their  inability  to choose  their  own physician. 
(6) Address  the following  specific  problems: 
On p.  1, the report  states  For physician  and most  other  outpatient  services,  Medicare 
	
pays  80 percent  of the amount  allowable  for a covered  service.  Beneficiaries  pay the 
remaining  20 percent  of allowable  charges,  ph.Is Medicare  premiums  and deductibles  for 
inpatient  and outpatient  care.  The last sentence  is very confusing  and mixes  up the 
premiums,  deductibles,  and co-pays  under  Medicare  Part A and Part B. 
On p. 2, the report  states  Beneficiaries  are required  to obtain  all their medical  care 
	
through  providers  affiliated  with  the HMO  they joined,  except  for emergency  and 
urgently  needed  care when  they  are out of the HMO  service  area.  As discussed  above, 
this  ignores  POS  options  that some  HMOS may  adopt.  Page 3- June Gibbs  Brown 
	 Again on p. 2, the report states The HMOS agree to provide a beneficiarys total medical 
care for a set amount paid monthly by Medicare.  The HMO is not required to provide a 
beneficiarys  total medical care, but rather health care that is equivalent  to the Medicare 
covered services available in fee-for-service. 
	 The report states that Beneficiaries  continue to pay Medicare premiums  (p. 2). This 
statement  needs to be clarified--HMO  enrollees only pay Medicare Part B premiums. 
An additional  recommendation  is that fhture surveys should either collect data exclusively  from 
beneficiaries  living in areas serviced by HMOS, or if data are to be collected  from all 
beneficiaries,  the results should distinguish between the two populations. 
/	 If you have any additional comments or questions, please contact William Marton of my staff at 
(202) 690-6443.