In 1997, before the establishment of the M+C program, about 5.2 million (14 percent) of Medicare’s 38 million beneficiaries were enrolled in HMOs that contracted with HCFA to serve Medicare beneficiaries. At that time, PPOs and other health insurance arrangements that had become common in the private sector were not permitted in Medicare. The HMOs that participated in Medicare tended to concentrate in urban areas and certain states. Consequently, about 25 percent of beneficiaries had no alternative to the traditional FFS program. In creating the M+C program, the Congress sought to build on, and expand, the existing HMO option. BBA permitted new types of health plans, such as PPOs, to participate in Medicare and included provisions designed to encourage a wider geographic availability of health plans. Medicare’s experience with HMOs has demonstrated that choice, and the ensuing competition among plans for market share, can produce important advantages for some beneficiaries. At a minimum, all HMOs were required to provide the services covered by Medicare’s traditional FFS program. In addition, HMOs that received Medicare payments that exceeded their costs of providing Medicare-covered benefits and normal profits had to use the excess to reduce beneficiary fees or provide additional benefits—such as coverage for prescription drugs or routine physical examinations. HMOs frequently exceeded program requirements and further reduced beneficiary fees or augmented their benefit packages to help retain existing members and attract new ones. As a result, nearly all Medicare beneficiaries enrolled in an HMO received a more comprehensive benefit package than those who remained in traditional FFS. For example, the average Medicare HMO in 1999 spent approximately $660 per member (an amount equivalent to 11.5 percent of its Medicare payment) on beneficiary fee reductions or benefit enhancements that were not required by Medicare. Medicare’s HMO experience has also demonstrated that some beneficiaries need information and help understanding their choices if they are to select the option that best meets their needs. A 1998 study found that many Medicare beneficiaries are unfamiliar with managed care concepts. Nearly one-third of the study respondents who belonged to Medicare HMOs did not understand basic differences between HMOs and FFS. A similar percentage of FFS respondents were uninformed. The authors concluded that only 16 percent of those beneficiaries who had some basic knowledge of HMOs knew enough to make an informed selection between FFS and HMOs. Misunderstandings about managed care concepts—such as the need to obtain referrals for specialty care and a limited choice of providers—may partly explain why some beneficiaries disenroll from HMOs shortly after becoming members. In 1998 we reported that the percentage of new members who left their HMOs within 3 months of enrolling was 10 percent or higher at 21 of 194 Medicare HMOs in 1996. Lack of a basic understanding of HMO processes can also hinder a beneficiary’s ability to obtain care through a health plan. According to a study by HHS’ Office of Inspector General, many beneficiaries who were denied services by their HMOs and subsequently disenrolled did not know they could appeal the HMOs’ decisions. Information that helps beneficiaries to compare specific Medicare health plans is important because covered benefits, fees, and consumer satisfaction can vary substantially among health plans. In our 1998 report, we found a wide variation in one potential indicator of beneficiary satisfaction—the plans’ disenrollment rates—among HMO plans that operated in the same market. For example, in Houston, Texas, the highest disenrollment rate was nearly 56 percent while the lowest rate was 8 percent. Many beneficiaries select a health plan based upon information contained in the plan’s advertisements and marketing materials. However, in 1996 we found that it was difficult to use this literature to compare various benefit packages because plans’ benefit descriptions were not required to follow a common format or use standard terminology. At that time there was no widely available, objective source of information to help beneficiaries compare their Medicare options. We recommended that HCFA compile comparative information and make it available to beneficiaries. In response to our report, HCFA agreed that beneficiaries needed more information and outlined several initiatives designed to help beneficiaries understand Medicare and compare their FFS and managed care plan options. In establishing the M+C program, the Congress included provisions designed to help Medicare beneficiaries become better informed health care consumers. BBA mandated that HCFA take an active role in educating beneficiaries about Medicare and the M+C program. The law specifically mandated that the agency compile and distribute comparative information about M+C plans. To complement these mandated education activities, HCFA took steps to make it easier for beneficiaries to use health plans’ marketing materials to compare benefit packages. Health plans are now required to make available a summary of benefits that follows a common format and uses standard terminology. Future changes in the Medicare program will heighten the importance of informed decisions. Historically, beneficiaries have been able to change health plans or switch between a health plan and the FFS program on a monthly basis. However, starting in November 2001, beneficiaries generally will make choices only during an annual open enrollment period for the following year. Each November, beneficiaries must decide whether they want to enroll in a particular M+C plan, change from one M+C plan to another, or return to the traditional FFS program. They will then be “locked in” to that choice for the following calendar year. Some proponents of this provision believed that constraining enrollment opportunities into a few weeks each year would encourage concentrated health plan advertising that would help make beneficiaries more aware of the M+C program and available health plans. The extent to which this will occur is uncertain. However, it is clear that the lock-in provision will magnify the consequences and importance of each beneficiary’s decision. Changes in the beneficiary population may add to the demand for information. A recent Kaiser Family Foundation survey found that 69 percent of Americans under age 65 want more private plans in Medicare.The same survey found the opposite among those over age 65—only 31 percent want greater choice of private plans, while the rest are content with Medicare as it has been. These findings suggest that future beneficiaries may be more interested in a private health plan option, increasing the need for information. To fulfill BBA’s beneficiary education requirements, HCFA established a NMEP that included four major approaches for delivering information to beneficiaries (see table 1). A new telephone help line (1-800-MEDICARE) handled about 3.9 million calls in 2000. The Medicare handbook, now titled Medicare & You, was expanded to contain comparative information on M+C plans and is now mailed annually to all households with a Medicare beneficiary (about 34 million). Prior to 1998, the Medicare handbook did not contain information on specific managed care plans and was generally mailed only to newly eligible beneficiaries or those who requested a copy. A Medicare Internet site (www.medicare.gov) was established to provide more detailed information on M+C plans and other topics. Community outreach efforts were implemented to inform beneficiaries who might face language or cultural barriers or otherwise need special assistance. Finally, to help ensure that its education efforts operated effectively, the agency sponsored a number of internal and external evaluations. HCFA phased in a Medicare telephone help line (1-800-MEDICARE) beginning in November 1998. First available in five states (i.e., Arizona, Florida, Ohio, Oregon, and Washington), the help line was expanded to cover all states in March 1999. As publicity about the help line increased and more beneficiaries became aware of its existence, the number of calls grew from an average of 27,000 calls per month shortly after the line went nationwide to an average of 326,000 calls per month in calendar year 2000. Even with the substantially increased call volume, most beneficiaries had no trouble getting through. According to a HCFA- sponsored study, during 2000 92 percent of calls were answered within 30 seconds. About 60 percent of Medicare help line callers speak directly to a customer service representative (CSR). The most common reason why beneficiaries call is to request a copy of Medicare & You or another publication. Beneficiaries also frequently ask how to apply for Medicare or get a replacement Medicare card, or ask questions about Medicaid, Medicare coverage and claims payment, or M+C plans. CSRs attempt to answer beneficiaries’ questions by following a prepared script. Because beneficiaries call with a wide variety of questions, about half the time the information required is not contained in the script. In those instances the CSR transfers the caller to an appropriate third party, typically a Medicare claims processing contractor (37 percent of the transferred calls); the state Medicaid office (19 percent); the Social Security Administration (16 percent); State Health Insurance Assistance Programs (SHIP) that support counselors who answer beneficiary questions about Medicare, Medigap, and Medicaid (10 percent); or other entities including M+C plans (18 percent). The remaining 40 percent of callers obtain the information they seek through the help line’s automated system. The automated system processes requests for publications and provides answers to frequently asked questions. HCFA produced and distributed a variety of printed materials to help beneficiaries understand the Medicare program and the options available to them. The most widely distributed document is the Medicare & You handbook. However, the agency also produces more than two dozen educational booklets and brochures on specific topics, including Medicare managed care. (Appendix II contains a list of these publications.) Prior to the enactment of BBA, HCFA annually produced a Medicare handbook but generally distributed it only to newly eligible beneficiaries and other individuals who requested a copy. Every few years HCFA mailed a current copy of the handbook to all beneficiaries. The intervals between mailings varied and depended partly on the extent to which the Medicare program had changed since the last mailing. However, in response to BBA, HCFA changed its handbook distribution practices.