Should Medicare HMO Benefits Be Standardized?

PROLOGUE: When Medicare was enacted in 1965, one of its hallmarks was a benefit package that treated every beneficiary equally. However, the majority of beneficiaries not eligible for Medicaid have additional private coverage, mostly through Medicare supplement (“Medigap”) policies, employer-sponsored retiree benefits, or health maintenance organizations (HMOs). HMOs must offer all of Medicare's covered benefits, but beyond that they are free to structure their insurance plans as they deem fit. In contrast, Medigap coverage must conform to any one of ten standardized packages approved by the National Association of Insurance Commissioners. In this paper Peter Fox and his coauthors discuss whether Medicare HMO benefits should be similarly standardized, because beneficiaries are often left confused by the diversity of what health plans actually cover, the premiums they charge, and the providers with whom they contract. As with many policy questions, there are no simple answers. Fox is an independent consultant who has devoted considerable attention to Medicare supplementary coverage questions and also specializes in managed care. He spent ten years as a vice-president of the Lewin Group before becoming an independent consultant in 1991. Rani Snyder is a doctoral fellow at the School of Public Health, University of California, Los Angeles (UCLA). Geri Dallek is a project director at the Institute for Health Care Research and Policy, Georgetown University, where she is studying managed care consumer protections and the early implications of the Medicare+Choice program. Tom Rice is professor and chair of the Department of Health Services at UCLA's School of Public Health and editor of Medical Care Research and Review. ABSTRACT: Legislation enacted in 1990 standardized Medigap benefits but not the benefits of health maintenance organizations (HMOs) that serve Medicare beneficiaries. An examination of marketing materials in two large counties reveals the potential for enormous confusion among beneficiaries because of differences in wording to describe the same benefit, health plans’ failure to list Medicare-covered services, and the differences in the benefits themselves. To date, the Health Care Financing Administration (HCFA) has not been able to overcome this confusion through the comparative material distributed on its Web site; indeed, significant errors were found, reflecting to some extent the underlying difficulties in characterizing benefits. Ways of ameliorating the situation are discussed.