HCFA launches managed care-driven redesign

Vetoed bill would have ‘decimated HCFA’

Whew! That was a close one. HCFA officials can breathe a sigh of relief after Republican congressional proposals to split the office into two competing parts — managed care and fee for service — was vetoed by President Clinton.

But HCFA officials aren’t taking lightly the sentiment favoring Medicare managed care. The agency recently announced its own plan for a major reorganization that will give Medicare HMO activity greater visibility, but will keep it under the supervision of HCFA administrator Bruce Vladeck.

HCFA will be creating these three new divisions, effective in mid-1997, Vladeck said in recent prepared statements for the press:

Beneficiary Services and Operations (fee for service and other administrative support);

Health Plan and Provider Operations (Medicare HMO contracting);

State Operations (largely Medicaid).

The current office of managed care will no longer exist as a separate entity, ripe for assumption by some other agency. It will now be folded into Health Plan and Provider Operations. "This consolidation also gives HCFA the flexibility to adapt to evolving delivery systems," Vladeck said.

"HCFA is definitely placing more emphasis on managed care," as reflected in the reorganization, says David Marcus, PhD, director of health care financing for the Texas Medical Society in Austin. "This is a new reality of the health care scene. HCFA is reorganizing to deal with it," Marcus says. Already in Texas, close to 10% of beneficiary enrollment is in Medicare HMOs, just over 2 million people.

One wolf already howling at the door of HCFA’s new redesign is the issue of rapid disenrollment rates of Medicare HMO beneficiaries, Marcus point out. "Rapid disenrollment" refers to beneficiaries who drop out of a plan within 90 days of joining it. Nationally, the average is 12% to 13%. "Here in Texas, we have rates as high as 40%," says Marcus. "Those numbers come directly from the regional [HCFA] office. This issue has to be dealt with."

A second issue for HCFA’s new managed care division is the ever-looming threat of loss of authority for HCFA. "The other factor you have to look at is what we saw in the Republican proposed legislation," Marcus points out. "It didn’t pass because the President vetoed it, but one of the things in that law was it effectively decimated HCFA. There was a provision in it which would have reorganized HCFA to give more emphasis to Medicare HMOs, create a new agency equal in status to HCFA with an administrator of equal rank as the HCFA administrator." The two agencies would have competed for funding — one taking charge of fee for service, and the other for managed care.

"HCFA sees its primary client as Congress," Marcus points out. "When they get this kind of response from Congress — even though there is Democratic president, there still is a Republican Congress — they will recognize it and respond. This reorganization is their response."

To some extent, physicians favor HCFA’s increased administrative support for Medicare managed care, says Marcus. More support might help lower Texas’ startling disenrollment rates. Marcus attributes the state’s high disenrollment to three key factors:

Patients have little experience with HMOs in general. "If you compare Texas to states like California, Minnesota, or Massachusetts, we’re latecomers to managed care," says Marcus. "In California, a lot of Medicare beneficiaries who were recruited into Medicare HMOs were members of HMOs during their lifetime. They know what to expect."

More seasoned HMOs offer better benefits. "Some of the HMOs in Texas have attempted to get into this cheap," he says. In retiree havens, Medicare HMOs are offering prescription drug benefits up to $3,800 a year, while in Texas, some offer no drug benefit.

Multicultural barriers. Understanding the logistics of managed care isn’t easy for English-speaking people, and it gets tougher for those who speak English as a second language. "I’m not sure there is a Spanish word for networking or gatekeeper," says Marcus. Also, questionable marketing practices to vulnerable populations can attract beneficiaries who don’t understand what an HMO is or how it works. Confusion would likely lead consumers to drop out in favor of something more familiar and understandable.

HCFA and other federal officials are definitely not overlooking the rapid disenrollment issue. The Physician Payment Review Commission, the Washington, DC-based advisory panel to Congress, recently invested in a major media campaign touting a recent report on Medicare HMOs.

The report overall reflects good responses from HMO participants, but it also addressees the problems of disenrollment. The PPRC, which barely escaped dissolution in the 1996 Congress, is eagerly trying to show its value in analyzing Medicare HMO issues. The report points out that the percentage of the Medicare population participating in HMOs is at 12% — up from 9% in 1994. Their study attempts to show what HMO beneficiaries think, including why they join and why they leave. (See charts on p. 11 for summaries of survey responses.)

In the survey of 3,000 beneficiaries, the key reason beneficiaries chose Medicare HMOs was related to cost savings. Reasons they opt to get out include "involuntary" reasons (physicians died, retired, or relocated), problems with physicians, and financial issues.

The survey also asked about other specific issues, including percentages of beneficiaries who had complaints, such as trouble making appointments (15%), not getting specialist referrals (14%), and too early hospital discharge (14%). (See related chart, above.) The biggest complaint, however, involves 36% who complained home health was not adequate — an issue federal regulators are bound to improve upon as Medicare HMOs expands.