Most beneficiaries live in areas where they can choose to receive Medicare benefits either through a managed care plan or through traditional fee-for- service Medicare. Of the 6 million beneficiaries enrolled in Medicare managed care, approximately 90 percent are in “risk-contract” HMOs.Medicare pays these HMOs a fixed, per beneficiary fee, regardless of what the HMO spends for each beneficiary’s health care. These plans are called “risk” HMOs because the HMO assumes the financial risk of providing care for the amount Medicare pays. Although HMOs are required to cover all traditional Medicare benefits, many also provide additional services, such as outpatient prescription drugs, routine physical examinations, and hearing aids. In addition, plan costs can vary: some HMOs charge a monthly premium (in addition to Medicare’s part B premium), but others do not. Except for emergency services, HMO enrollees must generally receive all covered care through health care professionals designated by their plans. The number of Medicare beneficiaries enrolled in risk HMOs has more than doubled in the last 3 years, from 2.3 million in December 1994 to 5.2 million in December 1997. The number of Medicare risk HMOs also increased, from 154 to 307, in the same time period. The growth in Medicare managed care enrollees and plans is expected to continue, fueled in part by the BBA, which provided for new types of Medicare managed care plans and increased plan payments in many areas that previously lacked a fee-for-service alternative. Unlike other large health care purchasing organizations, HCFA has not routinely provided plan-specific information directly to beneficiaries. However, the BBA now requires HCFA to distribute comparative information that can help beneficiaries interested in managed care select a health plan. In addition, HMOs will continue to advertise and distribute summaries of benefits as part of their marketing efforts to enroll new members. HCFA, through its regional offices, approves the HMOs’ marketing materials before plans use them. HCFA regional offices also oversee HMO marketing and enrollment efforts by reviewing plans’ sales practices and responding to beneficiaries’ complaints. HMOs must include certain explanations in their marketing materials, such as provider restrictions, but otherwise have wide latitude in what information is included and how it is presented. Each year, as part of the contracting process, HMOs submit to HCFA detailed information on their proposed benefits, premiums, and other beneficiary out-of-pocket costs. HCFA’s central office reviews these proposals for compliance with Medicare regulations and approves the contracts. Although HCFA has efforts under way to publish comparative information on Medicare+Choice plans, it has not taken the steps needed to enable beneficiaries to make similar comparisons using individual plans’ marketing materials. The absence of standards for format and terminology used to describe benefits and out-of-pocket costs limits the usefulness of these materials for comparison purposes. Such standardization would help beneficiaries in comparing health plans and lessen the administrative burden on both HCFA and the plans. Extending these standards to the information that plans provide to HCFA in their contract submissions would facilitate the agency’s efforts to assemble comparative information. Until this year, HCFA produced little comparative information on Medicare HMOs. In March 1998, HCFA made available a database it calls “Medicare Compare,” which posts summary information on the Internet comparing health plans’ benefits and out-of-pocket costs. HCFA intends to update the database and add plan performance indicators as they become available in the coming months and years. In addition, HCFA plans to include comparison charts in the next Medicare Handbook to be mailed to beneficiaries. Agency staff are also conferring with seniors’ advocacy groups to determine how best to inform beneficiaries of their new Medicare+Choice options. Federal employees and retirees can readily compare benefits among health plans in the Federal Employees Health Benefits Program (FEHBP) because the Office of Personnel Management, which administers FEHBP, requires plan brochures to follow a common format and use standard terminology. In contrast, HCFA does not require Medicare HMOs to use standardized formats or terms, including definitions, in their marketing materials. Consequently, Medicare beneficiaries cannot easily use plans’ marketing materials to compare benefit packages. Neither HCFA’s Medicare HMO/Competitive Medical Plan (HMO/CMP) Manual nor its supplemental Medicare Managed Care National Marketing Guide requires standardization in plan materials. In fact, the manual, which provides guidance on the contents of plans’ marketing materials and HCFA’s process for reviewing these materials, specifically states, “HCFA does not mandate a format or style for . . . marketing materials other than requiring that the member rules be written and that the marketing materials . . . be understandable to the average beneficiary.” HCFA’s marketing guidelines do contain model language and documents HMOs can adopt, but plans are not required to use the models. Without required standards from HCFA, HMOs are left to their individual discretion, as we reported in 1996. We recently asked the eight Medicare HMOs serving the Tampa, Florida, area to send us their marketing materials. We received a wide array of brochures, pamphlets, and other written documents. Although all plans provided benefit summaries, the formats and benefit categories varied considerably from plan to plan. This lack of consistency may impair a beneficiary’s ability to compare benefits and related costs. For example, we found that only five Tampa plans mention mammograms in their benefit summaries—even though all plans covered mammograms. Most plans listed mammograms under the benefit category of preventive services. One plan, however, listed mammograms under hospital outpatient services. Consistent presentation is important because beneficiaries may rely on plans’ benefit summaries for coverage and out-of-pocket cost information. Beneficiaries typically do not receive more detailed benefit descriptions until after they enroll in a plan. The HMOs we reviewed also differed in the terms they used to describe the same benefit. Some plans used technical terms but did not define them. Consequently, beneficiaries could misinterpret important out-of-pocket costs or benefit restrictions. For example, some plans used the term “formulary” in describing their drug benefit but did not explain what it meant. Beneficiaries reading a plan’s marketing materials may not understand that use of nonformulary drugs may result in substantially higher out-of-pocket costs. To learn what “formulary” means when it is not defined in the marketing literature, beneficiaries would have to ask plan representatives or read the plan’s “evidence of coverage”—a document normally provided to beneficiaries after they enroll in a plan. Seemingly straightforward benefit comparisons may be misleading because plans’ marketing materials sometimes omit key details. Plan descriptions of prescription drug coverage, a benefit offered by many HMOs, illustrate how missing information can lead to erroneous conclusions about the value of plans’ benefits. Under the best of circumstances, the relative value of plans’ prescription drug coverage may be hard to compare. For example, plans that have formularies often set one copayment amount for formulary drugs and another, higher copayment for nonformulary drugs. Beneficiaries’ out-of-pocket costs for such plans depend both on the specific drugs included in the formularies and the two copayment amounts. Beneficiaries may use a plan’s stated annual dollar limit, or cap, to judge the drug benefit’s consumer value. For example, beneficiaries may assume that an HMO offering prescription drug coverage up to a $1,200 annual cap has a more generous benefit than another HMO offering coverage up to $1,000. This comparison may be misleading, however. Plans differ in how they calculate the dollar amount of drugs used by beneficiaries. Some plans use retail prices to compute this amount. Others may use drugs’ average wholesale prices (AWP) or a lower price discounted from AWP to calculate a member’s total drug usage in dollars. One HMO gave us an illustration of how the value of a drug benefit depends on whether drug cost is measured by retail prices, AWP, or discounted AWP. The HMO used the drug Prilosec for the example because it is one of the brand-name drugs most commonly prescribed for its Medicare members. According to the plan, the retail price of Prilosec is $123 and the AWP is $101. The HMO said it computes the dollar amount of a member’s Prilosec usage using a discounted AWP of about $91 per prescription. If the plan used AWP, or the even higher retail price, members would receive fewer prescriptions before reaching the annual dollar coverage limit. The consumer value of a drug benefit could vary substantially between two HMOs with the same annual cap if they used different prices to compute drug usage. In addition, HMOs’ marketing materials do not always disclose key details that beneficiaries need to make accurate comparisons. For example, marketing materials from several Tampa HMOs did not mention what prices plans used (that is, retail, AWP, or some price below AWP) to compute the dollar amount of members’ drug use. One-half of the plans did not disclose that their prescription benefits involve formularies. Similarly, plan materials often failed to inform members that they face higher out-of- pocket costs if they choose a brand-name drug when a generic drug is available. HCFA’s lack of standards for benefit descriptions also complicates HCFA’s review of marketing materials and delays their distribution. HMO officials said that HCFA’s Medicare Managed Care National Marketing Guide provides broad criteria for plan materials sent to beneficiaries. It does little to ensure that HCFA’s regional office staff will review plans’ marketing materials consistently and uniformly nationwide—a problem we noted in 1996 when the guidelines were being developed. Individual HCFA staff have wide discretion in approving and rejecting plans’ marketing materials.