Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MIAMI AREA HMOs: 

MEDICARE ENROLLMENT PATTERNS 

.,p 

:vIC& . 

Richard P. Kusserow 

INSPECfOR GENERAL 

'li\.-.taa NOVEMBER 1991 
Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

MIAMI AREA HMOs: 

MEDICARE ENROLLMENT PATTERNS 

.,p 

: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 

liable for services, other than emergency or urgently-needed care received outside the 

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 .................................... AAPPENDIX B: Beneficiary Telephone Survey: Enrollment Decisions of 

Beneficiaries Served by South Florida HMOs . . . . . . . . . . . . . . . . . . . . . . .. BAPPENDIX C: Survey of South Florida Physicians . . . . . . . . . . . . . . . . . . .. CAPPENDIX D: Effect of Humana on Data Analysis. . . . . . . . . . . . . . . . . . . DAPPENDIX E: Comments on the Draft Report . . . . . . . . . . . . . . . . . . . . .. E-
INTRODUCTION 

PURPOSE 

Our purpose was to determine if and why enrollment and disenrollment patterns in 

the Miami area differ from those nationally. 

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.! Lockrequires 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 feefor-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 threecounty 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 

entire State. For this reason, we have removed Humana from a number of the 

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 

the fee-for-service beneficiary. AIthough beneficiaries who enroll in HMOs are still 

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€

Number of 

Beneficiary 

Enrollments 

Beneficiaries 

Enrolled 4 or More 

Times 

Beneficiaries 

Enrolled 6 or More 

Times 

All HMOs Nationally South Florida HMOs Percent of National€

HMO Talal€

881 861 182 405 21% 

276 866 82% 

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 

All HMOs, excluding South 

Florida HMOs€

South Florida HMOs 

Humana 

CAC 

Av-Med 

Health Options€

CareFlorida 

Cumulative Disenrollment€

Within 6 Months Within 12 Months€

12% 

17% 28% 

16% 25% 

21% 35% 

16% 

22% 37% 

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 asked about the most recent change 

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 reasons why they had ever changed plans, 33 

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, or advised them to change plans; 

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.€

For at Least 12€

Months€

CareFlorida 20%€

Av-Med 38%€

Health Options 31%€

CAC 28%€

Combined 26%€

National 68%€

Went to Competing 

HMO€

67%€

49%€

55%€

57%€

60%€

13%€

Went to Fee-For-Svc.€

But Joined HMO 

Within 12 Months 

13%€

13%€

15%€

15%€

14%€

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 

HCF A should be vigilant to assure that these people are not abused. The quality and 

continuity of care for these multiple enrollees may unduly suffer. Excessive and 

inappropriate enrollment actions result in avoidable costs to HCF A and SSA. These 

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. 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 11 10 I 38 205 

RESPN % 38 12 I 11 ISl 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. 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. 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. 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. 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. 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 

7. Beneficiary disliked the treatment or services provided by the HMO. 

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 

43. 

31.4 

1.9 

102 100. 

COUNTY 

Dade 

Broward 

Palm Beach 

Pinellas 

Hillsborough 

Pasco 

No Response 

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 

Fee-For-Svc.€

For At Least 

12 Months 

Humana (FL 56%€

Wide)€

Miami Area HMO 

Competitors 26%€

All 5 HMOs€

Combined 44%€

Went To 

Went To Fee-For-Svc. 

Competing But Joined 

HMO HMO Within 

12 Months 

19% 25%€

60% 14%€

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 

DEPART.'t\ENT OF HEALTH &. HU!Y\AN SERVICES ' 0' ' 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") EXSEC €

DATE SENT cr (3 I
 FROM: Assistant Secretary for 

Planning and Evaluation ~~ v, c::::: 

SUBJECT: OIG Draft Reports: Marketing Practices and Enrollm~t . 8j 

Patterns for South Florida HMOs , OEI-04-91~00630 an~ ;:1 OEI-04-91-00640 -- COMMENTS 

I appreciate the opportunity to comment on the reports. In


general, they appear to point more to the need for improved data


collection, closer moni taring and follow-up, particularly disenrollment patterns, than for. implementation of new

procedures. consequently, ~I am inclined to disagree with certain 

of your recommendations, as noted below. 

OEI-04-91-00630: Marketina Practices 

HCF~ to establish standards for sales force 

training and moni taring: I understand that HCFA 

has worked informally with the Group Health 

Association of America to improve marketing 

practices of HMO sales representatives nationally. 

Responsibility for oversight of marketing staff 

rests with state licensing agencies. 

Limi t enrollment to one "open season" per year. 

This recommendation would require legislation and 

has the appearance of a year-long lock-in which 

Congress has constantly rej ected. Moreover, 

section 6206 of OBRA-89 eliminated a coordinated


open enrollment requirement, which had never been


imolemented, exceot under certain circumstances. 

continuous open e;rollment in competi ti ve markets 

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, only page a of the 


sales representatives appear responsible for 


20 percent of changes compared with nearly three 

times more who expressed dissatisfaction regarding 

HMO physicians or services). Admittedly, this practice requires closer mcni taring against 

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 and review cases of frequent enrollment change. Cases in 

which marketing abuses are suspected should be 

reported to state licensing agencies. 

~hird party handling of HMO enrollment actions: 

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.


OEI-O4-91-00640: Enroll ment Patterns 

This analysis indicates the need for mare data


collection, closer monitoring and fallow-up. The


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" sections which distinguish fee-for-service


from prepaid health plans. See, for exa~ple, the 

ttached pages.


"L---

Manin H. Garry 

Attachments 

E - 3

\ . .. 

. .

. :.. ,

... ..:.. :;::::; . iD (b- c\') .(

'-1 ) \ 

~ Cu1'\~--?CV '\ 1-\ ' 

I": ;- Health Care \-\ c:: 't) 

DEPARTMENT OF HEALTH &. HUMAN SERVICES ,\:'::l":i', .:!J Financing-Administration 

I:.FF::::: CF ::C 

:::-i 

AUG I 5 199( . 1/ ; :1 :C: 28 

Memorandum 

Date 

Gail R. Wilensky, Ph. -i) )
 V'-" 

From Administrator 1 

Subject OIG Draft Reports: "Marketing Practices and Enrollment Patterns for South 

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 

the erroneous preconceptions about the marketing and enrollment practices of


Medicare-contracting HM:Os in the South Florida area. 

Given the positive nature of the reports, we do not believe that the findings as 

reported in the two reportS warrant all of the changes in the Medicare HMO 

program suggested by OIG. However, we agree with one of your recommendations. 

Our specific comments on the reports' recommendations are attached for your 

consideration. 

Thank you for the opportunity to comment on these reports. Please advise us of 

whether you agree with our position on the reports' recommendations at your 

earliest convenience. 

Attachment 

PDIG 

DIG-AS 

.;:DIG-E!. 

DIG-QI 

AIG-MP 

QGC/IG EX~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) 

Recommendation 1 is contained only in OEI-O4-91-00630. Recommendations 2 

through 5 are contained in both OIG reports. 

Recommendation 

HCF A should establish standards for sales force training and monitoring, and hold 

HMOs accountable for maintaining those standards. 

HCF A Response 

We do not believe it is appropriate or necessary to prescribe more than the general 

standards for sales activities of organizations that are already required for HCF A 

contracts. HMOs are currently held accountable for marketing practices that lead 

to erroneous and uninformed enrollments. Without effective sales force training 

and monitoring, an HMO will be subject to contract termination, intermediate 

sanctions, and/or civil monetary penalties for marketing and enrollment failures. 

Under the authority of 42 CFR ~417.428(a), which requires an HMO to provide a 

written statement of rules "and other information for beneficiaries to make an 

informed decision about enrollment," HCF A has taken a number of actions to 

correct problems found at individual HMOs. 

In Southern California, for example, where there have been problems with 

beneficiaries not understanding lock-in, an after-the-fact (i. after-sale ) enrollment 

verification process is the norm among all HMOs in the area, and the situation has 

improved as a result of the efforts of the HCF A regional office. Similarly, for 

Humana Medical Plan of Florida, we believe that marketing practices have 

significantly improved since October, 1990 (after the OIG survey of beneficiaries) as 

a result of Humana s working with the HCFA regional and central office staff, in 

conjunction with intensified monitoring of the Plan. HCF A was successful in its 

efforts to encourage Humana to set up its own internal monitoring of certain 

operations, and we can monitor Humana through its internal reportS. 

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 

intermediate sanctions can be applied against entities that provide false information, 

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 

on a frequent basis, is not necessarily indicative of marketing or enrollment abuses 

but rather beneficiary choice, as noted above. Where "ping-ponging" does in fact 

result from marketing or enrollment abuses, HCF A has the means to require an 

HMO to cease such practices. 

A hallmark of the Medicare fee-for-service program is the beneficiaries' freedom of 

choice of providers. Beneficiaries who choose to enroll in a Medicare risk-based 

HlVfO consciously choose to r~ceive care from only the fThtfO providers, in order to 

minimize their administrative burden and to benefit from lower out-of-pocket costs. 

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 

HCF A has traditionally viewed the HMO option as a choice that is available on a 

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 

policy of enrollment other than on a year-round, continuous basis. Curr~ntly, only 

3 percent of Medicare beneficiaries are enrolled in Medicare risk-based HNfOs. 

HNfOs that have a capacity to conduct continuous open enrollment should be 

allowed the option of flexible enrollment periods, since it expands beneficiaries 

choices. 

A legislative change would be necessary to impose a single open enrollment period. 

Since 1985 (the first year of "TEFRA" Medicare risk contracting), Congress has 

changed the original provisions of the Social Security Act relating to Medicare 

HNfO enrollment and disenrollment. Congress mandated that Medicare risk-based 

I-llvfO enrollees have the right of immediate disenrollment from the HNfO (to 

replace the previous provision that could delay a disenrollment for up to 60 days). 

Congress also did away with a coordinated open enrollment period requirement 

(introduced in the Deficit Reduction Act of 1984). The intent of Congress has 

been consistently to give beneficiaries maximum flexibility in choosing the HNfO 

option while giving HJYl0s the leeway to determine the appropriate enrollment 

periods. 

Recommendation 

HCF A should establish an on-line system to identify and review cases of frequent 

enrollment change. 

HCF A ResDonse 

HCF A has developed such a capability. The Managed Care Option Information 

(MCCOY) Group Health Plan (GHP) System provides online management 

information reports and the capability to update beneficiary enrollments 

disenrollments, health status indicators and residence codes. We believe this system 

satisfies the intent and spirit of GIG' s recommendation. 

Recommendation 

In the three-county Miami service area, HCF A should test the efficacy of a third 

rqrty handling HMO enronment actions. 

E - 7

Page 4 

HCF A Response 

Ti1C efficacy of a third party enrollment process has been tested and many problems 

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 

of cases (72 percent), the beneficiary initiated the first contact with an fllyfO. A 

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 

monitoring responsibility of assuring that the third party was properly enrolling 

individuals in the appropriate HNfO, etc. 

The OIG may wish to consider the findings of the General Accounting Office 

(GAO) in its evaluation of the HealthChoice demonstration project in Oregon and 

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 revised the figure, and adjusted the percent enrolled in Miami 

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