A new analysis of Medicare HMO marketing materials reveals a bewildering array of benefit packages, inconsistent descriptions of benefits, and even failure to list covered services, that could result in widespread confusion among beneficiaries. The study, "Should Medicare HMO Benefits Be Standardized?," conducted by Peter D. Fox, Rani Snyder, Geraldine Dallek, and Thomas Rice with Commonwealth Fund support and published in the July/August 1999 issue of Health Affairs, compares marketing materials of six large HMOs in Los Angeles County, California, and Cook County (Chicago), Illinois. Three main sources of confusion were found:
- The wide variety of benefits offered by plans and numerous coverage combinations make comparing plans and assessing their value difficult. Beneficiaries are often left puzzled by the sheer diversity of what health plans actually cover, especially benefits not included in Medicare, such as prescription drugs. For example, one HMO has an unlimited prescription drug benefit, another has an annual limit of $2,000, and a third has no limit on generic drugs but a $900 annual limit on brand-name drugs. Copayments for drugs also vary among plans as well as within each plan, depending on whether drugs are brand- name or generic and whether they are obtained through mail order. The maximum supply allowed per refill for drugs can be 30, 90, or 100 days.
- Plans use different wording to describe the same benefit: for example, a plan without a supplemental premium requirement is described by one plan as having "no premiums" and by another as having "low or no monthly premiums." Another plan states that "members must continue to pay monthly Part B premiums."
- In some instances, plans fail to list all the benefits offered-notably Medicare benefits that plans are required to offer-which can leave enrollees unaware of all covered services. One plan, for example, did not specify that Pap tests or colorectal screening were covered, even though plans are required by law to specify all services that are covered.
"It is important to assure that Medicare beneficiaries, who include the most vulnerable elderly and disabled Americans, get consistent information about benefits so they can make an informed choice when deciding on a health plan," said Karen Davis, president of The Commonwealth Fund. "Developing some benefit standards would promote consumer choice and encourage competition based on cost and quality."
About 6 million Medicare beneficiaries are enrolled under capitated arrangements in HMOs, which have wide latitude in benefit package design as long as Medicare benefits are included. The authors interviewed government officials, health plans, large employers, and consumer groups to understand how standardization similar to that regulating Medigap-supplementary private insurance that offers some benefits that Medicare does not-might work for Medicare HMOs. Medigap policies must conform to one of 10 standard packages outlined in federal legislation.
A key argument against full standardization for HMOs identified by the authors is that it would limit plans' ability to design innovative new benefit packages. Plans would also lose their capacity to respond to geographic variation in benefit levels, and consumer choice would be curtailed if benefits were limited. Finally, standardization could shift the process of benefit package design from the marketplace to the political arena.
The authors propose partial rather than full standardization of Medicare HMO benefits to avoid these negative consequences while still addressing the problem of consumer confusion. A good place to start would be with prescription drug benefits. HMOs could be required, for example, to allow physician discretion to prescribe up to a 90-day supply of medication. Any dollar limits for benefit packages could be set on an annual basis, and the method used to calculate whether the benefit had been reached could be standardized. Also, health plans could be required to choose from among a limited number of copayment structures.
"Consumer confusion will remain a significant problem without some benefit standardization," said Peter D. Fox, the study's lead author. "By starting out modestly, results could be assessed before expanding it further, thus minimizing the likelihood of unintended negative consequences."