Statement of Richard Jones, President, Government Programs,
UnitedHealthGroup, Minnetonka, Minnesota

Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means

Hearing on Status of the Medicare+Choice Program

December 4, 2001

Thank you Chairwoman Johnson, Representative Stark, and Members of the Subcommittee for the opportunity to testify on our experience in the Medicare+Choice program.  I am Richard Jones, President of Government Programs for UnitedHealth Group, responsible for our Medicare+Choice offerings across the country.

As many of you know, UnitedHealth Group has a longstanding commitment to Medicare beneficiaries. Our participation in the Medicare program is fundamental to our core mission – to support individuals, families, and communities to improve their health and well-being at all stages of life.  We aim to facilitate broad and direct access to affordable, high quality health care through a variety of arrangements, including Medicare+Choice.

UnitedHealth Group is nowthe largest provider of health care services to seniors in America.  For over 20 years, we have provided seniors and disabled individuals a comprehensive alternative to traditional Medicare benefits, now known as the Medicare+Choice program.  Today, over 300,00 Medicare+Choice beneficiaries are enrolled on our health plans across the country.  And through our Evercare program, an innovative Medicare demonstration program, we provide coordinated care services to an additional 20,000 frail elderly individuals, the majority of whom live in nursing homes.

Over the years, we have been proud of the services and benefits we have been able to offer to Medicare beneficiaries.  We believe that the nation’s seniors and persons with disabilities who choose our plans have received a quality product that has produced positive medical outcomes. But like other health plans participating in the Medicare+Choice program, low reimbursement rates have forced us far too often to scale back the scope of benefits we offer enrollees.  Rather than abandon Medicare altogether, as some of our health plan colleagues have done and as many of our own investors have advocated, we decided to stay in as many Medicare markets as possible.  It has been our hope that by staying in as many markets as possible for as long as possible, we can illustrate our commitment to the program and to the idea of providing competitive and innovative choices to our nation’s Medicare beneficiaries.

Medicare+Choice Value

We bring value beyond the traditional Medicare program by coordinating the fragmented, diverse elements of the health care system and organizing the delivery of care around the patient. Our enrollees benefit from many of our value-based offerings such as individually assigned customer service representatives, access to a 24 hour nurse line and internet-based health information resources, and programs that track their special health conditions and remind them to get regularly scheduled diagnostic tests.  They also become a part of our Care Coordination program where dedicated nurses follow their hospitalizations and make sure that services are understood, accessible and coordinated before, during and after they are in the hospital. These services are unavailable to beneficiaries in fee-for-service Medicare.

Since 1996, we have offered a majority of our beneficiaries a health plan that requires no additional premium beyond the monthly Part B premium.  Beneficiaries have access to a wide range of preventive benefits with no cost sharing requirements, including vision, hearing, and physical examinations.  These are not covered in traditional Medicare at the same levels.  In addition, we offer stop-loss coverage to beneficiaries with very high out-of-pocket costs.

The following are dexcriptions of some of the benefits that our Medicare+Choice enrollees enjoy that are not available to beneficiaries in traditional fee-for-service.  For example:

• Care Coordination allows enrollees to work directly with their physician to determine the best way to coordinate their own health care needs.  Care Coordination is designed to make it easier to get care while identifying and addressing gaps in care.   It encompasses hospital admission counseling, health education, prevention and reminder programs, inpatient care advocacy, phone calls to high-risk enrollees post-hospitalization, identification and support programs with enrollees with complex and chronic illnesses and long-term assessment and education programs to support enrollees with asthma, cardiovascular disease, and diabetes.
• Personal Service Specialists are individually assigned to each member, providing them one name to call to answer any questions they may have and resolve problems.  This program helps to provide a familiar face to the health plan, helping beneficiaries navigate the complexities of the health care system – a service particularly important to seniors.
• Care24 provides enrollees 24 hour a day, 7 day a week, access to registered nurses, masters-level counselors and lawyers to get answers to questions about medical issues, personal and emotional health, legal and financial issues, eldercare and other concerns.  It also offers recorded messages from a health information library on over 1,000 health topics.  In addition, we offer a range of health and wellness education for individuals.
• UnitedHealth Passport allows members to obtain coverage for routine care when they travel to other UnitedHealthcare Medicare+Choice markets.  This is invaluable for “snow birds” that spend part of their year in Florida and other parts of the country.

All of these offerings are underscored by our commitment to supporting the physician-patient relationship.  Our relationship with physicians, hospitals and other health care providers is critical.  Our medical directors, physicians themselves, work closely with network providers to share our data on best practices within their community and in other cities as well.  We also have undertaken a number of initiatives to simplify a doctor’s interaction with the health plan so that they can focus on their patients instead of paperwork.  Our Medicare health plans have been most successful in markets where we work closely with physician groups who apply the quality and cost data we can provide to them.

Challenging Decisions for 2002

Over the past several years, beneficiaries have experienced a deterioration of benefits Medicare+Choice plans are able to offer to supplement those covered in fee-for-service, as well as an increase in cost-sharing requirements.  In addition, in some markets, beneficiaries have lost their health plan choices altogether.  We agree with the Centers for Medicare and Medicaid Services (CMS) and with many members of this Subcommittee, that flaws in the current payment formula have caused this instability, as annual payment increases have not kept pace with medical cost growth in many areas.

In our view, this situation has been exacerbated by problems contracting with physicians, health care professionals, hospitals, and other providers.  In many markets, hospital systems increasingly prefer to participate exclusively in Medicare fee-for-service because it offers higher payment and no third party involvement.  In some markets, hospital systems have terminated their relationship with us mid-year, inconveniencing enrollees who often have to find new providers.  While we have sought to remain in the Medicare+Choice program, this problem has been a major factor causing us to exit some areas.  As we’ve made these difficult decisions, the quality of care that we can offer our customers has been our paramount concern.

Earlier this year, the Administration called upon health plans to remain in the market in 2002 and restated their commitment to work with Congress to enact comprehensive Medicare reform.  We heeded this call to stay in the market, consistent with our long-term commitment to be a major partner with the federal government in providing quality health plan choices to beneficiaries.  We stayed in as many markets as we could, despite the financial pressures.  Ultimately, we reluctantly concluded that we had to discontinue service in 11 of 64 counties, affecting 57,000, or 16% of our enrollees.  As of January 1, we will continue to provide coverage to over 300,000 enrollees in 53 counties nationwide.

In order to stay in the market, we had to reduce some benefits and increase beneficiary cost sharing in order to remain financially viable.  In the absence of either short or long-term reforms, we are faced with a Hobson’s choice -- we can either stay in markets by reducing benefits, or exit and lose the chance to serve Medicare beneficiaries.  No one wants to make this choice. We want the Medicare+Choice system to work.  We believe that it is possible to reform the system to include adequate resources combined with quality and accountability measures that health plans must meet to reinvigorate and stabilize the program.  And we hope this hearing will allow all of us to begin discussions aimed at injecting more innovation, more choice, and more stability into this important program for seniors and people with disabilities. 

Our experience in Wisconsin is an example of the problems faced by Medicare+Choice plans nationwide.  We have offered a Medicare+Choice plan in Wisconsin since 1995.  Medical cost inflation has exceeded 20 percent per year over the last few years, and has caused mounting financial losses.  In fact, the other health plan in the Milwaukee area will leave the market at the end of this year, and two others left previously.  In order to stay in the market for one more year, we increased beneficiary cost sharing, including imposing a copayment on inpatient hospital and other services.

This was a difficult decision for us.  These are not the levels of benefits we would ideally want to offer, such as the benefits we were able to offer in the late 1990’s.  As a result of our ongoing discussions with CMS, we recently altered the benefit package we originally filed to lower the inpatient hospital copayment to $295 per day.  Although the difference between fee-for-service and this set of benefits is not as great as in years past, we believe a comparison of the overall benefits and costs of traditional Medicare, Medigap, and our Medicare+Choice plan shows that we still provide seniors in Wisconsin with a choice that many will value.

For example, in fee-for-service Medicare, there is no limit on the out-of-pocket expenses a beneficiary may incur each year – expenses like inpatient hospital visits, stays in a skilled nursing facility, diagnostic tests, durable medical equipment and supplies, outpatient services, and emergency room care. For seriously ill Medicare beneficiaries, these costs can quickly add up to tens of thousands of dollars.

Under our Wisconsin Medicare+Choice plan, there is  $4,800 cap on the amount of out-of-pocket expenses that our members would pay in any one year. This is not simply a limit on hospital co-payments.  It is a total and complete limit on out-of-pocket costs such as those I outlined above:  hospital costs, inpatient hospital costs, costs of stays in a skilled nursing facility, diagnostic tests, durable medical equipment and supplies, outpatient services, emergency and urgent care, and more. This limit, combined with the clinical and preventive services described earlier, make this plan especially attractive to people with serious illnesses who have high service utilization during the year.  Our plan is the only Medicare+Choice product that offers such a benefit, anywhere in the country.

We are well aware that even with this cap on out-of-pocket costs, our Wisconsin plan will be quite different next year than the one we currently offer or would like to offer.  We are continuing to work with CMS on a demonstration in Wisconsin that would improve benefits and share financial risk between UnitedHealth Group and CMS.  And we know that even under the best of circumstances, making decisions about healthcare is not easy for many seniors, given the complicated set of options around Medicare fee-for-service, Medicare+Choice, and Medigap policies.

There has been particular confusion over these changes in Wisconsin. We want our enrollees to be knowledgeable and comfortable with the health plan choices they make.  And we are committed to take whatever actions we can to support these choices. For example, we run a toll-free number in Wisconsin that allows seniors to ask questions about our Medicare+Choice plan. As required by the Centers for Medicare and Medicaid Services, we mailed a detailed explanation of our benefit changes to all of our enrollees.  We will continue to review our benefit offerings during the year and want to work with CMS to explore ways to continue to improve our offerings in Wisconsin and across the country.

Conclusion

We appreciate the recent focus of this Subcommittee and the Administration on improving the Medicare+Choice program.  We believe, as you do, that the program must undergo fundamental reform to provide beneficiaries broad choices of coverage that best meet their needs and the kind of coverage they will be able to enjoy and count on for years to come.

Three points deserve special consideration. As others have testified, fundamental reform of the reimbursement system is necessary to address the many moving parts of the payment system and ensure long-term stability and viability of the program.  A fair, competitive payment approach that is more closely aligned with current medical cost trend and factors in cost variability in rural and urban markets is an important short-term goal.

Congress should also explore the increasing difficulties with hospital and physician participation in Medicare+Choice, focusing particularly on Medicare+Choice plans’ limited provider payment leverage in some areas.

Reform must recognize the evolutionary nature of the health care system, developing a range of program options that allows for change as the system warrants.  We encourage Congress and CMS to adopt successful contracting arrangements in the employer sector and non-risk-based alternatives as the basis for its own contracts with private health plans.  Other options include disease management, care coordination, and specialized plans for frail elderly and dual eligible beneficiaries.  We are encouraged by CMS’s recent effort to encourage demonstrations in this area and want to continue to work together to develop innovative alternatives to traditional fee-for-service and HMO coverage. 

Medicare+Choice has much to offer. As Congress and the Administration begin to discuss adding a prescription drug benefit to Medicare and other reforms, we urge you to consider changes to Medicare+Choice as part of the discussion.  UnitedHealth Group is willing to go the extra mile to work with Congress and the Administration to help develop innovative solutions.  Working together to address many of the items raised today, we can help to develop a renewed Medicare program that meets the needs of beneficiaries both today and in the future.  The problems with the program are very real, but there is a great opportunity for positive change.

Thank you for the opportunity to share our thoughts.  I would be happy to answer any questions you might have.