An HMO paid by capitation is called a risk-contract HMO because it assumes the financial risk of providing health care within a fixed budget. Objectives, Scope, and Methodology

In February 1996, Senator Pryor, the Ranking Minority Member of the Senate Special Committee on Aging asked us to examine issues related to the marketing, education, and enrollment practices of health plans participating in the Medicare risk-contract HMO program. This report focuses on information that can help beneficiaries become discerning consumers. In particular, the report reviews (1) HCFA’s performance in providing beneficiaries comparative information about Medicare HMOs to assist their decision-making and (2) the usefulness of readily available data that could inform beneficiaries and caution them about poorly performing HMOs. In addition, each HMO develops its own format to summarize its benefits and premiums. Instead, HCFA plans to make information on benefits, copayments, and deductibles available on the Internet. HCFA also collects other information that could be useful to beneficiaries, including HMOs’ financial data and reports from HCFA’s periodic monitoring visits to HMOs. These initiatives may eventually provide Medicare beneficiaries with objective information that will help them compare available plans. Nonetheless, HCFA does not routinely compare plans’ disenrollment rates or disclose such information to the public. High disenrollment rates may result from poor education of enrollees during an HMO’s marketing and enrollment process. 3.2.) The Secretary should direct the HCFA Administrator to require standard formats and terminology for important aspects of HMOs’ informational materials for beneficiaries, including benefits descriptions; require that all literature distributed by Medicare HMOs follow these produce benefit and cost comparison charts with all Medicare options available for each market area; and widely publicize the availability of the charts to all beneficiaries in markets served by Medicare HMOs and ensure that beneficiaries considering an HMO are notified of the charts’ availability.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the marketing, education, and enrollment practices of health maintenance organizations (HMO) participating in the Medicare risk-contract program, focusing on whether: (1) the Health Care Financing Administration (HCFA) provides Medicare beneficiaries with sufficient information about Medicare HMO; and (2) available HCFA data could be used to caution beneficiaries about HMO that perform poorly.

What GAO Found

GAO found that: (1) HCFA does not provide beneficiaries any of the comparative consumer guides that federal government and many employer-based health insurance programs routinely provide to their employees and retirees; (2) Medicare beneficiaries seeking similar information face a laborious, do-it-yourself process which includes calling to request area HMO names and telephone numbers, calling each HMO to request marketing materials, and attempting to compare plans from HMO brochures that may not use the same format or standardized terminology; (3) HCFA collects volumes of information that could be packaged and distributed to help consumers choose between competing Medicare HMO and also compiles data regarding HMO disenrollment rates, enrollee complaints, and certification results; (4) HCFA is developing comparison charts that will contain information on the benefits and costs for all Medicare HMO, but plans to post the charts in electronic format on the Internet rather than distribute them to beneficiaries; and (5) HCFA provision of information on HMO disenrollment rates may be particularly useful in helping beneficiaries to distinguish among competing HMO, since beneficiaries could then ask HMO representatives questions and seek additional information before making an enrollment decision.