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Medicare Advantage: Characteristics, Financial Risks, and Disenrollment Rates of Beneficiaries in Private Fee-for-Service Plans

GAO-09-25 Published: Dec 15, 2008. Publicly Released: Dec 15, 2008.
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Highlights

Medicare Advantage (MA) plans are an alternative to the original Medicare fee-for-service (FFS) program. Private fee-for-service (PFFS) plans--one type of MA plan--give beneficiaries an option that is more like Medicare FFS than other MA plans, with a wider choice of providers and less plan management of services and providers. PFFS enrollment increased from about 35,000 beneficiaries in June 2004 to about 2.3 million in June 2008. This report compares PFFS plans to other MA plans and Medicare FFS in three areas: (1) characteristics of beneficiaries, (2) financial risks for beneficiaries who do not contact their plans before receiving services, and (3) disenrollment rates. To do this work, GAO reviewed materials from a selected sample of nine PFFS plan sponsors, analyzed Medicare data, and interviewed officials from CMS, which administers the Medicare program, and other organizations.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare & Medicaid Services The Acting Administrator of Centers for Medicare and Medicaid Services (CMS) should investigate the extent to which beneficiaries in PFFS plans are faced with unexpected out-of-pocket costs due to the denial of coverage when they did not obtain an advance coverage determination from their plan.
Closed – Not Implemented
Agency staff has not provided GAO with evidence that CMS has taken specific action to implement this recommendation.
Centers for Medicare & Medicaid Services The Acting Administrator of Centers for Medicare and Medicaid Services (CMS) should ensure that CMS guidance on prior authorization accurately reflects CMS policy and that PFFS plan materials conform to CMS requirements.
Closed – Implemented
Our report on Medicare Advantage (MA) Private Fee-for-Service (PFFS) plans found that some beneficiaries were responsible for higher cost sharing if they or their providers did not contact their plans in advance of receiving certain covered services (a process called prenotification). In addition, we found that plans inappropriately used the term prior authorization rather than prenotification in informational materials, which may have caused confusion about beneficiaries? financial risks. Prior authorization, unlike prenotification, can involve denying service coverage if prior plan approval is not obtained. We recommended that the Centers for Medicare & Medicaid Services (CMS) ensure that guidance on prior authorization accurately reflects CMS policy and that PFFS plan materials conform to CMS requirements. As a result, CMS prohibited PFFS, preferred provider organizations and medical savings account plans from establishing prior notification rules under which a beneficiary is charged lower cost sharing when either the beneficiary or provider notifies the plan before a service is furnished. CMS asserted that this prohibition will reduce the complexity of MA plans? cost sharing designs and improve transparency for beneficiaries and providers.
Centers for Medicare & Medicaid Services The Acting Administrator of Centers for Medicare and Medicaid Services (CMS) should mail to Medicare beneficiaries MA plan disenrollment rates for the previous 2 years for MA plans that are or will be available in their areas, as required by statute, and update disenrollment rates provided to Medicare beneficiaries through MOC.
Closed – Not Implemented
Our report on Medicare Advantage (MA) Private Fee-for-Service (PFFS) plans found that although the Centers for Medicare & Medicaid Services (CMS) provided information on disenrollment rates to beneficiaries through Medicare Options Compare (MOC), as of August 2008, this information was based on data for 2004 and 2005.We recommended that CMS update disenrollment rates provided to Medicare beneficiaries. CMS updated the MA plan disenrollment rates provided to Medicare beneficiaries through MOC in October 2009. However, CMS noted that, because this information is available publicly, the agency does not feel that it is appropriate, or cost-effective, to mail this information to every Medicare beneficiary. Therefore, this recommendation will be closed.

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Topics

BeneficiariesCost analysisCost sharing (finance)Data collectionFee-for-service plansFinancial managementHealth care costsHealth care planningHealth care programsHealth care servicesMedicarePayPreferred provider organizationsProgram managementRisk factors