Statement of Victor E. Turvey, President, Midwest Region,
UnitedHealthcare, Maryland Heights, Missouri

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

Hearing on the Medicare+Choice: Lessons for Reform

May 1, 2001

UnitedHealthcare and its parent company, UnitedHealth Group, have 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 through all stages of life.

UnitedHealth Group is the 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, close to 400,000 beneficiaries are enrolled in our Medicare health plans in 63 counties across the country. Through our Evercare program, we provide coordinated care services to an additional 20,000 frail elderly individuals in various care settings (under the auspices of the Medicare+Choice program and a demonstration project). Separately, we provide Medicare Supplement ("Medigap") and Hospital Indemnity insurance to roughly 3.5 million AARP members nationwide through AARP's Health Care Options program.

I want to provide you with a snapshot of Medicare+Choice, focusing on the value we bring to Medicare beneficiaries and a number of issues we face in the current program structure that we believe are detrimental to our members.

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 best interests of the patient. We offer innovative services that help our members lead healthier lives by empowering them to make their own choices, working with their physician, supported by information and clinical evidence. Since 1996, we have offered beneficiaries a health plan that requires no additional premium beyond the monthly Part B premium. Beneficiaries who enroll in our plans get comprehensive coverage, much like the commercial coverage that many had through their employers. In most markets, members also get coverage for prescription drugs (typically offered on a two-tiered basis, with lower copayments for generic equivalents and higher copayments for brand name drugs).

Members also benefit from our value-added features 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 outside of the Medicare+Choice program.

Let me describe some of these special features in more detail:

· Care Coordination^SM allows members 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 members post-hospitalization, identification and support programs for members with complex and chronic illnesses and long-term assessment and education programs to support members with asthma, cardiovascular disease and diabetes. We have received many letters from members describing how this program has changed their perception of what a health plan can do for them and have notably improved health outcomes.

· 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 members 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.

· 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 the year in Florida and other parts of the country.

All of these offerings are underscored by our commitment to support 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 - such as St. Louis - where we work with physician groups who are incented to apply the quality and cost data we can provide to them. UnitedHealthcare is an industry leader in its ability to track utilization patterns and outcomes data; several other companies have similar capabilities. The fundamental point is that proper, balanced incentives aligned with incentives originating from hospital systems are absolutely essential to efforts to improve quality and moderate cost increases.

Difficulties facing current Medicare+Choice offerings

Provider Contracts: Our experience with physicians, hospitals and other health care providers illustrates one of the most significant problem areas in the current Medicare+Choice environment. As stated earlier, one of our hallmark offerings is providing members access to broad, diverse, fully qualified providers. However, in many markets this has been hindered, as hospital systems increasingly prefer to revert to the Medicare fee-for-service payment system because it offers higher payment and no third party (health plan) involvement. In some markets, hospital systems have terminated their relationship with us mid-year (inconveniencing our members who often have to find new primary physicians in the remaining network or disenroll from their health plan to maintain their physician relationship); in others they have demanded payments on par with traditional Medicare.

This occurs as the gap between payment for hospital services under the traditional Medicare program and Medicare+Choice plans grows and provider groups pick and choose between participation in the two programs. Last year's Medicare, Medicaid and SCHIP Benefits Improvement Protection Act of 2000 (BIPA) served to widen the gap considerably as hospital payment increases generally outpaced Medicare+Choice increases. Consequently, in most markets we were forced to dedicate all BIPA increases to hospital and physician reimbursement to meet contracting demands and maintain adequate networks.

Reimbursement: In our experience, beneficiaries have seen a deterioration of benefit offerings since enactment of the Balanced Budget Act (BBA) in 1997, as annual payment increases have not kept pace with inflation. We have been able to continue to provide quality coverage to beneficiaries in many markets by streamlining our administrative procedures. We also have had to adjust benefit coverage, increasing copayment amounts for outpatient visits and hospitalizations and reducing or eliminating our coverage for prescription drugs. In almost half of our Medicare+Choice markets we no longer offer coverage for outpatient prescription drugs. Where we do offer coverage, the annual maximum is in the $200 to $500 dollar range (with the exception of Dade County, Florida where it is $1,500) with coverage limited to generic equivalents or steep copayment differentials for generic and brand. While we would like to see additional funding for the program, we believe that 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.

Administrative Issues: We believe that regulation and accountability is important and necessary to ensure fair, quality coverage for Medicare beneficiaries. However, the way that current administrative rules and procedures are established and enforced is burdensome and strains health plan resources. The complexity of Medicare+Choice administrative requirements, coupled with the lack of coordination between states, HCFA regions and central HCFA, means that plans may face conflicting interpretation of rules and be subject to multiple audits. In addition, the number of new rules has grown exponentially since enactment of the BBA. The new HCFA monitoring guide used to evaluate health plans during their biennial site visits includes 279 items for review (not including the BIPA requirements); before BBA, there were 146 items.

Based on our experience, the more problematic administrative items are:

· 2002 Enrollee "Lock-In." The new lock-in requirement, which will be phased- in beginning next year, will likely add to beneficiary confusion and anxiety about the product, placing additional strains on a Medicare+Choice plan's ability to attract and retain members. We have found that the ability to disenroll at any time provides added comfort for a beneficiary who is enrolling in Medicare+Choice for the first time. If he or she is unhappy with the plan, the beneficiary can revert back to original Medicare or try another Medicare+Choice plan at any time.

· ACR process. The new June filing deadline (formerly in the fall) makes it very difficult to make accurate financial projections, and thus appropriate benefit decisions, given that only first quarter (January through March) data is available at that time.

· Encounter data collection. The current requirement to submit encounter data is very time consuming and costly, given questionable returns. Foremost in our concerns is the process for submitting the data to HCFA, which is cumbersome and resource intensive under the current fee-for-service based claims system. Additionally, the scope of data required for submission seems excessive, given the more limited data that is required for risk adjustment.

· Standardized beneficiary materials. HCFA's new requirement to use a standardized Summary of Benefits (created automatically from the database used for ACR submissions) has been problematic for our members. While standardization is helpful in allowing comparisons between plan offerings, some information and materials do not lend themselves well to standardization. In some cases, standardization has resulted in inaccurate descriptions and has made it difficult for beneficiaries to gain specific information about individual Medicare+Choice benefit offerings and health plan administrative requirements.

· Marketing materials/HCFA review. The new marketing and member communication requirements, particularly the 45-day review period, make it very difficult to get materials finalized in a timely manner. The 45-day period has had a particular impact on our ability to communicate product changes with our members in a timely manner, often leading to confusion for our those who hear about changes in media reports, but then fail to receive notice until much later. This is particularly troublesome when we are held to a 30-day notice period for changes to the network or mid-year benefit improvements. In a number of markets we hear from the reviewers that they do not plan to comment on the materials until the end of the review period. If they ask for changes on day 44, the 45-day review period begins all over again. Moreover, the prescriptive nature of the review often requires the materials to be very generic, taking away our ability to make statements reflecting on our unique attributes.

· Regulatory implementation. The frequency and content of new regulatory and policy changes has increased staff time and resources considerably. In 2000, HCFA issued 15 new Official Policy Letters (OPLs), two revisions of one OPL, and the final Medicare+Choice regulation (the "mega reg"). Inconsistencies between regional offices and central HCFA add to the strain of regulatory interpretation, particularly for national health care organizations, such as UnitedHealthcare.

How do we fix the program and ensure its future viability?

While there clearly are a number of obstacles facing the current Medicare+Choice program, we believe the program continues to have much to offer seniors and disabled individuals and believe there are a number of changes that could significantly enhance the future viability of the program. First and foremost, we believe that the program must undergo fundamental reform to provide beneficiaries broad choices of coverage that best meets their needs in a manner that they can count on for years to come.

There are four key areas for program improvement: reimbursement, administrative simplification, provider relations, and allowance for evolutionary benefit design:

· 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 different geographical markets and care settings is desirable.

· A thorough review of current administrative requirements with an aim to streamline processes, improve coordination and eliminate items that have negligible benefits for members would be advantageous.

· Congress should explore the increasing difficulties with hospital and physician participation in Medicare+Choice, focusing particularly on Medicare+Choice plans' limited provider payment leverage in markets with dominant hospital systems. Also, payment to hospitals and physicians should include incentives for efficient and appropriate health care delivery and outcomes.

· Reform of the system must recognize the evolutionary nature of the health care system, developing a program that allows for change as the system warrants. We encourage Congress and HCFA to study successful contracting arrangements in the employer sector (such as non-risk-based alternatives) as the basis for its own contracts with private health plans. HCFA could operate like an employer who leverages its assets by self funding employee health coverage and partnering with health plans, like ours, to bring value to their offerings by administering and managing the health and operational aspects of the benefit. In addition, Medicare+Choice should recognize the value of specialized programs like Evercare and allow them to exclusively serve frail elderly beneficiaries.

Medicare+Choice has much to offer. We encourage Congress and HCFA to experiment with different types of product offerings within Medicare that are tailored to specific populations and geographic areas. To this end, we already have begun to explore options with HCFA that bring the many unique, value-based attributes of our product offerings to the more traditional Medicare benefits and may be more sustainable in certain markets than risk-based Medicare+Choice offerings. Working together to address many of the items raised today, we can help to develop a renewed Medicare program that meets the needs of today's and tomorrow's beneficiaries. 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.