DR. WOOD: Good morning, everyone. Welcome to the second day of our regional hearing in Phoenix.

    Our major topic today is Medicare+Choice but before we begin, I would like to recognize Leslie Norwalk for an announcement.

    MS. NORWALK: Just in case someone here might be interested in something called the HIPAA privacy regulations, I am told that they will be on display at the Federal Register in two hours. So for those of you who are interested and want to take a look, the proposed regs will be out in a couple of hours. Thanks.

    DR. WOOD: So that means we'll get our work done, we'll have a break and we'll figure out how long the break needs to be to read the regulations. Do you have any idea how many pages it is?

    MS. NORWALK: No, I do not. Not my regulations.

    DR. WOOD: What was that?

    MS. MARGULIS: It's good advertisement for the committee.

    DR. WOOD: All right. We'll we're going to begin with a special today. Actually again with the format we've used before on the major issues area with an overview provided by CMS and I'm particularly pleased to welcome Mr. Gary Bailey and Mr. Robert Donnelly to the discussion today.

    Gary is the director for Health Plan Benefits Group at the Center for Beneficiary Choices and Robert is in the Health Plan Policy Group, also at Center for Beneficiary Choices. They both work out of Baltimore and Gary, are you going to go first? Or --

    MR. BAILEY: Bob's -- no.

    DR. WOOD: Bob's going to go first? Okay.

    MR. DONNELLY: Good morning. I appreciate the opportunity to come and speak to you all today about Medicare+Choice and when Gary and I sat down trying to figure out how to cover all the ground we have to cover in Medicare+Choice, we recognized a couple of things.

    I think the first thing was that this is a very broad issue area and it's not clear to us how many of the members of the committee really have a good background in Medicare+Choice so it seemed that we needed to do a little contact setting.

    The second piece was that we've already done a lot in terms of trying to reduce the burden of Medicare+Choice although there are still opportunities available. So that's the two things really that we tried to build our presentation around.

    I'll speak to you about kind of the background of Medicare+Choice, where it came from, what it's supposed to be doing and kind of a program status and then Gary will get up and talk to you all about what we've done so far to try to reduce burden and some of the opportunities that may exist to go forward.

    So I guess we have a long way to go and not that much time to get there. So let me start out. What is Medicare+Choice? The Balanced Budget Act created Medicare+Choice as an attempted expansion on the successful Medicare Risk program that existed before the BBA. In the BBA, they created the Medicare+Choice program. It was named that way because one of the main goals of it was to try to increase beneficiary's choices of private sector options, not just HMO's but to broaden their opportunities to enroll in different types of plans.

    The BBA also added new elements to Medicare Managed Care. For example, it changed the payment system. There were new beneficiary education requirements. There were new enrollment requirements. It also further extended some existing managed care requirements by adding such provisions as some quality assurance provisions and some marketing review things that were tightened up a bit.

    Congress also came back into the program a couple of times in the Balanced Budget Refinement Act in 1998 and the Benefits Improvement and Protection Act in 2000. So there's been a lot of changes going on in this program from a legislative point of view as well.

    What are some of the goals of the Balanced Budget Act? What was Congress trying to do when they set this up? One of the first things is to expand the types of organizations available to participate in Medicare+Choice. Prior to the BBA, we generally had coordinated care plans which were the traditional HMO type plans. The BBA was attempting to provide other options, PSO's, PPO's, private fee for service, MSA's, things like that.

    It also expanded our beneficiary education effort. The BBA required CMS to provide more information to beneficiaries to compare their choices. For example, beneficiaries were to be given information comparing the supplemental benefits offer by plans. The call sharing amount, the limits on out of pocket costs, if any, plan rules, plan service areas, things like that, so beneficiaries can make a better choice of the plans available to them.

    And then finally on this side at least, they expanded quality assurance and quality improvement requirements.

    More of the goals of the BBA, one of the things that was major from my perspective of what the BBA did was redesign a payment system. And the goal of redesigning the payment system, one of the first goals was bluntly to reduce payments. This was a Balanced Budget Act after all. Another thing it was trying to do is create stability in rate changes from year to year. The prior system, prior to the BBA, the payment rates were based on fee for service county level pay level costs and if the county level costs went down, the Medicare Managed Care rates could go down. And so there was some fluctuation there and the plans really needed some way to better plan what they were going to get in terms of revenue streams.

    We also -- the BBA also tried to reduce the substantial geographic variation in payment rates. Prior to the BBA, the rates ranged from a low of about $227 I think in Nebraska to in the high $600, $700 range in South Florida and in New York. And through the payment structure, they were trying to reduce that variation.

    In addition, there was an addition of risk adjustment in an attempt to provide more accurate payments to provide higher payments for beneficiaries who were predictably sicker and lower payments for beneficiaries who were more likely to be well. So that's just the goals.

    The next question I think is how does the program actually work? And this part I have a little more detail about the guts of the program under the BBA.

    First question, who can enroll? This is pretty straightforward. A beneficiary has to live in the service area of the Medicare+Choice Plan, they must have both Parts A and Parts B of Medicare and if they have in stage renal disease, they've not eligible to enroll. Although if a beneficiary develops in stage renal disease as a member of the plan, then they may continue.

    So now that we can enroll, how do beneficiaries learn about their options? After the BBA, the BBA required us to establish a certain amount of communication channels for beneficiaries. The first one is the Medicare 1-800 Medicare number. This is the help line and in the past year we've taken this number to be 24 hours a day, seven days a week and we're trying to really expand the information available to beneficiaries through that avenue.

    In addition, we had an Internet site that was required which is the medicare.gov. This site includes a tool that beneficiaries can use called Medicare Compare that lines up for each county a beneficiary go or anybody can go in and put in their county and determine what plans are available in their areas and compare some of the benefits so they can make a better choice.

    In addition, we're required to give beneficiaries general information, all beneficiaries, by October 15 of every year. And this also has to include comparison of plan options by October 15 of every year. And so we did this through the Medicare new handbook and we try to provide as much information so beneficiaries can make the best choice possible.

    So beneficiaries -- we know who can enroll. We know how they find out about the plans. What kind of plans are available is the next question?

    As I mentioned earlier, the BBA expanded on the previous program that HMO and HMO like plans, coordinated care plans, and tried to broaden the offerings available. For example, it included provider sponsor organizations which are essentially HMO or HMO like plans owned and/or operated by provider groups, physician groups, hospitals.

    And then beyond the kind of tightly managed programs that might be represented by HMO's and PSO's, the BBA sought to increase the availability of more loosely managed networks like PPO's, like private fee for service plans and like MSA's. As I'll mention a little bit later in the presentation, these haven't really taken off in the way that Congress had hoped.

    What kind of benefits are available under M+C? Well there are two real categories of benefits. The first is basic benefits and you can break the basic benefits down into two subcategories. The first category is Medicare's basic benefits, the Medicare fee for service benefits. Medicare Managed Care has to cover everything that Medicare fee for service covers.

    In addition, there are called additional benefits and these are funded through federal payments. This basically -- the requirement here is that plans have to take whatever money is left over after providing the Medicare basic benefit and then they need to provide other benefits with that money. And so some options that they use are reducing premiums, reducing cost sharing, enriching benefits, adding things like drugs for example.

    Now one thing I want to mention specifically about this slide and about this relationship between basic -- this relationship inside of basic benefits is that while it's important for us to reduce burden just to be good business partners and that's obviously an important point, this slide makes it clear I think that it's also important for us to do this because the dollars that we're able to work with the plans to save in terms of administrative costs flow to beneficiaries because the additional benefits are where that money would go. And so if we reduce -- if we can work with the plans and reduce the amount of money they have to spend to provide Medicare's basic coverage, then Medicare beneficiaries get more drugs, get lower cost sharing, get lower premiums. So it's really important not just to be good business partners but to help the beneficiaries get everything they can under this program.

    The next slide -- there's more benefits available though. The next set of benefits that are available are called supplemental benefits and these again have two subcategories. The first is mandatory supplementals and these are benefits that the beneficiary has to purchase to be part of the plan. And these basically, if the plan determines for example that without a good drug benefit, they can't appropriately manage care, they might put that into a package like this to require the beneficiary to buy it if they want to be part of the plan.

    Another kind of supplemental benefit are optional supplementals. These are basically benefits that beneficiaries can choose to take. Once they get the basic benefit and the mandatory supplemental benefit that they have to purchase, they have the opportunity if the plan chooses to offer them to choose from optional supplementals and these could be, you know, anything from a long range of possible benefits.

    One thing that should be made clear here is just as in the basic benefits, we have a requirement to make sure that the savings is actually spent on additional revenue -- additional benefits. Here the law requires CMS to price these benefits as well. And there's a limitation on the cost for beneficiaries to the cost of the benefit essentially and so, you know, our ACR process, these also come through and we look at these benefits as well.

    Now how do benefits -- how do we pay for Medicare+Choice is really the next step I think. And this is going to be complicated and we have a short period of time but I think it's important to understand a little bit about how the payments are made.

    First, on kind of a theoretical level with -- and one of the things that Congress tried to do is break the link between fee for service and managed care. As I mentioned earlier, prior to the BBA, managed care payments were based on local fee for service spending in each county and basically it was 95 percent of the local fee for service spending was the payment amount, the payment rate, for a managed care plan in each county.

    The BBA, however, required us to calculate the rates much differently. The starting point for all of the stuff I'm going to show you now is the 1997 rates that were actually in effect at the time of the BBA. And then we jump off with how to grow them.

    What we have is the highest of three rates method. What this method does is basically say it imposes a floor. In 1998, there was a floor set and in 2000, BIPA also created new floors and no county can have a rate that's below the floor.

    The next step is a blend amount. This is basically a combination of local rate and national average rate. Now taken together, the floor amount and the blend rate are really efforts to reduce the geographic variation in payment rates. It's trying to compress -- not only supposed to bring up the bottom end but if we look at it also, if you look at the blend rate, it also brings down the top end and that brings in the third piece of this which is a two percent minimum update. And Congress didn't want to actually bring down any payment rates and so they included a minimum payment increase, minimum rate increase.

    Now the last piece of this is a bunch of neutrality which makes it really difficult and what this says is that payments under this system shouldn't be anymore than payments under a completely locally based system. And what that does, because the floors have been pushed up, and because spending and fee for service hasn't grown that fast, although recently it's starting to move up again. What it's meant is that there's money left over that has to be taken out of the system. Now the law is pretty explicit about what the floor is and the law is very explicit about what the minimum update is. You know, they give us actual numbers for that. The blend is less explicit. So the only place we have the really ability to take the money out to make the program budget neutral is through the blends. And the effect that that's had over the last few years is that in only year I think has there been any blend and most places where we have blends, have experienced the minimum update every year. And I'm sure they'll tell us about their cost trends and probably not being two percent.

    The next piece of payments -- so we know how the rates are set. How do we apply the rates? What this slide starts to tell you is we take the rates and make a per person per month prospective payment. There are separate rates set for aging and disabled as a group and beneficiaries with ESRD. Now the aged disabled rates are set in the geographic unit of the county and the ESRD's are for a state.

    Now the rates then are adjusted at the present level for demographic factors, age, sex, Medicaid institutional status, things like this. And then beginning in 2002, a portion of the rates have been adjusted for risk as through a risk adjustment system.

    Now I know that was quick. I know that nobody can pass a test now on how the payment rate system works but it's a complex system and it gets through at the end of the day with 3,000 counties, lots of adjustments to those counties.

    For this adjustment, I'll be brief on this. There may be more discussion later I'm sure. By law, the current payment model of risk adjustment is based on inpatient and counter data only. But really the way the law worked is that it -- the law only authorized CMS to collect inpatient and counter data at the beginning of the payment process. And so right now until 2004 when the law requires us to start using outpatient data or other sites data actually, it's all based on inpatient data. Now one thing that we've done as a recognition that this is inpatient data only is we're including add-on payments in 2002 and 2003 for plans that have folks with congestive heart failure and this money only is going to go to plans that meet certain thresholds in terms of quality and their performance. The idea here is that the underlying payment system that uses, the risk adjustment system that uses only inpatient encounters doesn't take into account the effects of plans that are doing really good work to keep CHF patients out of the hospital and so the idea here is if the plans are doing a really job there, we can put some extra money into the system this way.

    And as I mentioned in 2004, the payment model is going to start adding diagnostic data from ambulatory settings.

    Really here most of the stuff in this program is a balance and this is another balance of the more data we have, the more accurate our adjustments can be. But the higher burden we're putting on the plan. So we're doing it to balance the question of how much data is enough.

    I'll speak briefly about the adjusted community rate proposals because I think Gary's going to get into it as well. But this is just the piece that ties the payment system together somewhat. This provides justification for the plans benefit and charge structure. This ACRP, the Adjusted Community Rate Proposal, prices the plan and we have to review it to make sure that the plan is offering the minimal benefits required by law so that they're offering the Medicare covered benefits and that they're using the savings to buy additional benefits for beneficiaries. And we also need to make sure that the premiums and the cost sharing don't exceed the amounts that are required under law. And that's for the Medicare covered benefits, the basic benefits and the additionals, as well as the amounts that are charged for the supplemental benefits as I mentioned before.

    Okay. Now where are we now? This is the current program status and this is pretty brief. The BBA's vision

    has really not been realized. There are about five million Medicare beneficiaries currently enrolled in M+C plans, it's about 12 percent. This is down from the peak of 6.3 million beneficiaries in 1999 and this is just the same point graphically. A lot of the charts that you might see about Medicare+Choice have this kind of distribution or this kind of trend where things were really increasing in terms of enrollment. There was really rapid growth up until 1999 and then it starts to tail off after that.

    The issue -- the question of broader choice really also hasn't materialized. There's only a couple of PSO's and PPO's and private fee for service plans and we have no MSA's. And so that also hasn't happened. And instead of increasing the participation by plans, actually plans have had to withdraw and/or reduce their service areas. And pretty much going out on a limb, pretty much all benefit packages have had to be cut based on the payment rates that are going to the plans.

    And a couple of other just statistics I'll throw out. You know, in 1999, we had 309 contracts with M+C organizations. We now have 155. Over the three year period from 1999 to 2001, 1.6 million Medicare beneficiaries were affected by withdrawals so they lost their plan and a lot of them had the opportunity to enroll in other plans but at the minimum it was a severe disruption. And then in 2002, this is the point made on this, about 60.5 percent of Medicare beneficiaries have access to at least one Medicare coordinated care type plan where they live. This is down from 74 percent in 1998 I think and so you can see again the kind of tailing off of the program after the BBA.

    Now we are addressing these issues and Gary's going to get through a lot of it. The first thing that I'll mention just briefly is that we have the permission to study, we've worked on trying to figure out where the burden is in this program. We contracted with Price Waterhouse Coopers to conduct a study on the burden of complying with our requirements. I think an interim report from this study has been included in your package. The interim report that you have really compiles or partners the plans and other folks' concerns about the program and none of these preliminary findings frankly were very unexpected for us. We had met with the industry a lot and we knew where a lot of these problems were and I think we've made a lot of progress on a lot of them but I'll get very briefly into the preliminary findings. One question -- one issue that was raised was our business relationship with the industry. We needed to be more proactive in reaching out and working with the industry to solve problems. And I think we've made some progress there.

    We need to improve communication internally with partners and that has to do with coordinating the efforts of our central and our regional offices to make sure that we're all singing from the same songbook and also to provide better and clearer guidance to the organizations who contract with us so they know what the rules are and how to comply.

    The next question was about regulatory style. Were we being too restrictive and I think we've tried to make some progress there as well and then finally there's discussion about the impact of our requirements on our managed care plans on the downstream providers who actually have to provide the care. And we also made some progress there.

    And on that note, I think it's time to pass it off to Gary. I don't know how much time I've used up. Thanks.

    MR. BAILEY: Thank you. Technology's great if you conquer it.

    Okay. Anyway, good morning. Thank you for inviting me and providing the opportunity to talk to you all today about what we've done in the area of burden reduction and simplification of the program and what's some of our additional ideas have been.

    In terms of what Bob did, I think he's given a good background of the legislative and policy history of the program. I think it was somewhat uncomplicated so I think you did a good job on that because I understood some of it. And he took it up to the time of the significant non-renewals where to summarize I believe over the last four years over 300 plans have left the program. All either have left the program in terms of all of their service area or a partial county reductions affecting over 2.2 million Medicare beneficiaries and I believe out of those 2.2 million, there was around 250,000 to 300,000 of those beneficiaries did not have any other alternatives other than fee for service. So I'd like to pick it up at that point.

    But first I'd like to talk about some other background information before I go into more detail about some of the things we've done and some of the things that are planned. I think as Bob said, a lot has been accomplished but there's certainly a lot more opportunities for collaboration with the industry and other partners in terms of making the program work a little easier. But before I go into that, I thought as background for the committee members, I'd like to speak quite briefly about who does what in CMS with regard to the administration of the M+C program. What roles do the regions have? What roles do central office have? I'd like to summarize the industry concerns in one slide that we've heard from all those plans that have left plus some of the plans you'll probably hear from today. And I also want to take some time to talk about the extensive communications that we have with the industry and then I'll pick up with the burden reduction.

    And in discussing this with Bob, we felt that what I'd do would I'm going to identify four areas of program interaction between CMS and the managed care industry, briefly describe the nature of that interaction for about a minute or two, talk briefly about some of the accomplishments that have occurred to date but probably more important, we also have a list of additional opportunities for burden reduction.

    I also want to highlight the recent Tom Scully demonstration issue that started last summer. And I also will wrap it up with a list of some other areas of interaction with the plans that didn't fit neatly into one of the four areas and talk about some other things we've done as well as some additional areas of opportunity.

    On a personal note, I've been with the Medicare program almost -- well almost 28 years, 16 of which have been in managed care. I think the only other person in this room that probably has as much as managed care experience as I do is probably Heidi because we both came to the program right about the time that the TEFRA risk contracts were signed which I think was April 1, 1985 and I think you came in 1986. So but certainly I've seen a lot in here.

    I'm going to move a little more quickly through the slides than I initially thought. I went over this late last night and I realized after 15 or 20 minutes, a lot of this may lose its luster and I also noticed a disproportionate share of people sitting near the door versus spread out evenly. So I'm going to take -- I just saw that this morning. And also on a personal note, usually when a speaker talks before lunch, they say the only thing between this presentation and lunch is me. Well in this case, the only challenge I have between now and tomorrow morning is this presentation because tomorrow at 5:00 in the morning, the airport shuttle picks up the whole family and we're going to Orlando. So I have an incentive to move through this rather rapidly.

    Okay. The CMS administration of the Medicare+Choice program. CMS recently completed a reorganization, not only structural but we took a look at the way we did business. Up until the reorganization, responsibility for M+C was basically fragmented throughout the agency. A lot of different people were involved in a lot of different aspects of the program. It was certainly a challenge for us to administer it and I think it was a challenge for the industry to find a single focal point within the agency in terms of resolution of problems.

    In response to the industry concerns that there be a single focal point, and in response to our concerns that it was very difficult to manage and coordinate a program consistently across the country when responsibility was diffused throughout CMS, we reorganized. And basically we've consolidated all of the M+C responsibility into one center called the Center for Beneficiary Choices within CMS. I believe at your Miami hearing, you met Michael McMullen who is the acting director of CBC and the acting deputy director, Jennifer Bolinger. In terms of what we do in Baltimore which is where CBC is located, the group is primarily responsible for all of the M+C policy, that's Bob and his group, in terms of the regulation, the manuals and other type of guidance. And the majority of operations is lodged in CBC, the majority of the operations are in fact my responsibility and I'll go into them in several more minutes but it's basically the submission of the adjusted community rate proposals to us. It's the applications, all applications for any type of M+C product roll into CBC in Baltimore. It's also the PM management or contract administration and also the payments are made out of our office, too.

    The staff that work in risk adjustment, the staff that work with demonstrations, are also within CBC under Michael and Jennifer and the beneficiary information activities, not only for M+C but for fee for service are also lodged in the same unit in terms of the Medicare Compare website, Medicare and You, and we do a significant outreach with the SHIPS with volunteer stations across the United States and serving and counseling the beneficiaries. So the good news is it's all consolidated into one group now in Baltimore, Maryland.

    Across the ten regional offices and you probably recognize these because a lot of the people that are in this room deal with the regional offices extensively. There are M+C staff dedicated in each regional office. And they're primarily responsible for the day to day contract administration, the day to day phone calls and interaction between the plans. Once a contract's been signed, it actually goes into a contract administration in a monitoring their performance and assessment mode and 99 percent of that monitoring is actually done in the regional offices by the regional office staff. I'll go over that in a little bit more. The marketing materials are actually reviewed by the regional office staff and I'll go into that somewhat. And they also perform the reviews of the applications and the application comes into central office, it's a joint review between my staff and the CBC as well as the staff in the appropriate regional office. And they spend a lot of time in terms of resolution of enrollee problems.

    The M+C program challenge. I think there's a lot of challenge but the primary one is to react to the industry concerns. Bob went over the non-renewal information. We probably know at this point we can see a mess after several years of this and gee, we're having studies and a lot of interaction with the industry. There's two primary reasons for the non-renewals and that is the payments are too low and the administrative burden is too high or as they tell me, they're underpaid and overregulated. Since payments to the MCA's are really statutorily based, I'm not going -- and therefore within the purview of Congress, I'm really not going to spend too much or in fact any time talking about that. I'd rather talk about things that I think we can do within CMS.

    Now this is some background. The Price Waterhouse Coopers study that Bob referred to did have a number of recommendations, a lot of them were unexpected. It was good to have an outside neutral third party so as to document this for us into one place that it had not been done up till then. But they did make two recommendations. They did say the quality of the business relationship needs to change. I'm assuming they meant to improve between the CMS and the industry. And they also said that we need to improve communication with the partners. Now while I think a lot has happened over the last year or 18 months since that report was issued, there certainly is significant room for improvement. But I think it is well worth noting some of the collaboration that we do have with their partners.

    For example, recently Tom Scully has recently instituted these -- the two hour open door meetings where anyone can call in on any topic once a month for two hours and we basically -- although the callers don't see it, we have around 30 people in various offices in Baltimore available to answer any questions, our ears are perked up to hear if there's any issues that we haven't heard about and we take these things seriously. There's action items in the meeting from them. And Leslie Norwalk is all over us every week saying have you completed the action items. So the open door meetings are available.

    We've also participated in the Managed Care Trade Association meetings for years. I was invited to the sometimes quarterly meetings of the American Association of Health Plans, Blue Cross Blue Shield Association and Health Insurance Association of America meetings where they bring in the member plans and we're invited to participate in them in a collegial discussion that can last anywhere from two hours to six hours where we go over a jointly developed agenda. What's working and what isn't working and what's coming down the road. And I think they've been pretty successful.

    We have quarterly calls with our multi-region plans. We've just started this. The problem in administering a program as complex as M+C across the country is making sure that it's consistent. So for our large partners that have HMO's or other types of managed care products and multiple sites across the country, we now have calls with them and we invite the managers of the CMS regional offices in all of those regions where the site is located as well as the management of the plan and we sit down once a quarter, rather it's a conference call and we go over anything. Anything that's on their mind, anything that's on our mind. I have found them to be very productive and I personally participate in each one.

    We also have calls from selected M+C topics. Where the capability is probably you do two where we'll set up a two or three hour call and we'll have hundreds of callers on the line, everything from these instructions are coming out and here's what they're about to the instructions that have been out for several weeks. Do you have any questions and they seem to work pretty well.

    And we also have solicitation of early industry input on most of our program issuances. And it's mostly to make sure that the people in the industry, they're responsible for implementing our instructions. Actually that what we put out as responsive as possible to the people implementing it so I think it's a very valuable insight to us. I think talking with them points out any problems.

    And I think this is a good example, a classic example, I'm certainly not going to give you an example of one that didn't work, but was BIPA. December 21, 2000, BIPA was signed into law and it basically said that within the next 69 days, CMS had to put out new payment rates, ACR's had to come in from the plans, plans that wanted to return to the program could and marketing material had to be approved so the whole process was up and running by March 1st and literally within 69 days, the industry and CMS figured out a way to do this and received over 650 ACR's from almost 200 plans. Everything went well. We had several phone calls and meetings with the industry saying we think we're going to do this. They countered with this and we basically said what do you think is the least burdensome way to implement BIPA from your perspective and ours to make sure that the beneficiaries had what they needed March 1st and I think it worked very well. So I wanted to just point that out as an example.

    Now as I said before, I want to talk about four primary areas of interaction. I want to talk a little bit about what is the nature of the interaction for a minute or two and then what we've done to date but I'm probably going to spend a little less time on that and more time on what I think are some of the ideas in terms of improving it.

    Okay. The adjusted community rate proposals. As required by law, the M+C organization must submit an ACR to CBC, I don't think the law actually says CBC, but must submit to the agency by July 1st an ACR. On July 1st, I usually receive one of two documents. Either a contract showing that the plan is going to participate for the upcoming contract year and an ACR or I receive a letter of non-renewal. The ACRP submission includes primarily three packages of information. There's the ACR itself, there's a fee and benefit package, and there's supporting documentation.

    In terms of the goal of the ACRP, if the plan benefit package basically describes in great detail all the benefits the plan proposes to make available for the upcoming contract year while the ACR actually prices out the benefits. The ACR as Bob said insures that the cost sharing for the beneficiary doesn't exceed in the aggregate the Medicare fee for service equivalent which I think is about $105.61 or $106. That's one of the primary purposes of the ACR. The PBP however which has to be in sync with the ACR is actually a document filled out by the plan on site listing all of the benefits and it flows into (indiscernible) electronically, into CMS electronically, and it actually feeds into the Medicare Compare website and it also feeds into a document called a summary of benefits which is a document that the plans provide to their beneficiaries showing what changes are going to be coming up for the upcoming year.

    We've done a lot of work in terms of improvements but I think I'm going to reduce it to the fact that we've automated as much of the process as possible in terms of the submission of the ACR and submission of the PBP. I think we're doing pretty well on the ACR submissions. The PBP is an evolutionary tool. There are instances where the benefit the plan wants to offer don't fit neatly into the standardized language required by the PBP so we have lessons learned conferences where we invite the plans in and talk to the people that know the most about the PBP from their perspective and try to make these changes. But we've tried to alternate as much as possible.

    In terms of additional possibilities for burden reduction to the ACR PBP process, there's some of them that move the ACR submission date from July 1st to September but of course that is legislative but it's worth mentioning. We could eliminate the one-third ACR audit requirement which is legislative. In the BBA I believe it was, CMS was charged with auditing one-third of the plans each year in terms of the assumptions and data use to back up their ACR submission. It's a very labor intensive process and basically we have to audit one-third of the plans every year. Perhaps there could be some flexibility there that we really just want to use data and just visit those plans that we think there's a problem versus every plan whether we think there's a problem or not. So I think there's some flexibility there legislatively.

    We could also eliminate the requirement for the actuarial review of the ACR's. I believe it was in BIPA that said that the CMS actuaries had to review the actuarial assumptions in the ACR document. That is virtually impossible to accomplish given the time frame so we've talked about a retrospective actuarial review of the assumptions in the ACR. Perhaps that could be folded into the PBA audits which perhaps would be -- we'd have more flexibility in just one site to those plans that we want and consolidate it. That's certainly one of the top priorities of the industry.

    And there is something we can do and we're looking into that right now which is actually reduce the amount of documentation that comes in with the ACR and perhaps just indicate to the plans, keep it on site if we need to see it, we'll look at it then but don't send it in.

    One of my favorite topics. Marketing. You'll probably hear a lot about marketing today. Marketing by law, CMS must review marketing materials within 45 days of submission by the plan or in effect they're deemed approved where we only have ten days to review them or if not, they're deemed approved if it's model language. The entire purpose of the marketing review that's conducted by CMS staff is to make sure that the information is accurate. We try to be as consistent and timely as possible. The marketing review is carried out by the regional offices and the guidance -- in fact I actually think there's a manual chapter on marketing now up on the web and it was actually prepared by the folks in central office in close collaboration with the regional offices.

    In terms of marketing, there's several improvements that I think are worth mentioning that we've already used and I'll just mention three of them. Use and file. To a limited extent, we've been using use and file in regions nine and ten which is the San Francisco and Seattle regional offices. And basically based on the good performance of a particular plan and our review of their previous submissions if they're 95 percent accurate over "x" amount of time, we'll allow them to use certain materials. They can actually release it to the beneficiaries and provide us a copy at the same time. So it's an incentive for the plans to do a good job first time and it's an incentive for us to work with them in that area. And we're actually working on that now.

    We've also implemented a systems module for the first time this past summer which I think contributed to a better marketing review process where basically we've opened up the system, the CMS system, so the plans as well as the managers can see how long it's taking to review the marketing materials. And it's like anything else, if you're going to measure something, chances are the performance is going to improve. So the plan can actually go in the system and find out who's got what and it's helped me manage the process somewhat better. At least the agency because now if we see bottlenecks occurring and things aren't being approved timely, we can move resources around. So I think that's helped a lot and we just began to scratch the surface in terms of what we can do with that data.

    And we've also implemented the lead region concept. If you were a national plan dealing with five or six different regional offices in CMS, it was very much of a challenge to have any of your materials approved consistently. So we basically set up a lead region so one national plan deals with one lead region and that lead region speaks for the other ones and it just avoids a situation where a plan has to negotiate changes or improvements with five or six different regional offices.

    Additional possibilities. Expand use and file. We think we actually need legislation to expand this on a permanent basis although we are testing it and have been testing it in several regions. I think it's an incentive for the plans to know that they don't have to have CMS review if the information is accurate. I think it's a win-win situation, certainly something I'm very much involved in and support. We want to continue our use of the model language wherever possible. We have beneficiary focus tested model language and we make it available to the plans and it shortens the review time. We think a lot of the plans do a good job in marketing material reviews. A lot of them don't. A lot of the regions do a good job in reviewing the materials, a lot of them don't. We'd like to come together with the industry and come out with some best practices based on the things that are working the best and we'd like to see some plan quality control to reduce some of the errors as well as in the regional office.

    We've had some GA studies and one was several years ago where basically the GA staff said HCFA's review, HCFA at the time, HCFA's review didn't pick up two-thirds of the errors that had been submitted or whatever so. The marketing material -- the marketing process is very labor intensive for the industry and for us. But ultimately the goal is to provide clear and accurate information so we're very interested in pursuing this. It's going to be a challenging area but it's something we have to be involved in.

    Performance assessment goals. Basically, this is the MCO monitoring program that I referred to earlier that once a contract's been signed, the responsibility or rather the focus then shifts to the contract administration. One of the primary purposes is just to enforce beneficiary consumer protections. We want to make sure in fact if -- that the appeals are timely delivered, that the language in the appeals is accurate. So we look at that. We want to make sure and this is the challenges in marketing material, that the reviews which are conducted across the country are consistent and accurate and timely. We want to make sure that come May when we have an opportunity to not renew a contract if CMS so desired that we would actually have some information on which to base that decision but that has not happened. And also just to promote program integrity.

    Now, how does CMS perform the monitoring? Basically, it's accomplished through two processes. One are routine and special audits and that is where a federal team of three to five auditors will spend perhaps a week on site at a plan at least once every two years. And they basically go through every aspect of contract administration. At least that's how it's done now. We may we have a special audit. We had a situation down in South Florida where we did a focus marketing review of all the plans involved in South Florida because there were some alleged marketing abuses. So we actually sent a team out and we each did each one of the plans and we documented what we found and issued reports to them or letters closing out the appeals. But generally speaking, it's once every two years unless something else comes up.

    We're also, and I'll go into this in several more minutes, we look at a lot of data. There's a lot of data that emanates from the plans. Data the plans have available to them, it's available to us, and we look at that and we'll see if there's anything that would trigger it. If for example, we saw that claims were not being timely paid by an HMO, by a particular plan, or the appeal rate was high, chances are there's a problem and we're probably going to send someone on site or at least we're going to talk to the plan.

    We work closely with our other partners, the plans, the states. In fact, yesterday the staff from the San Francisco region office met with the regulators in the State of Arizona to see how can we work together on this and avoid some duplication of effort. We're also working with the advocacy groups and the private purchasers, the VA group. We want to see how some of the employers evaluate the performance of their plans. They're talking to us. We're talking to them to see if there any best practices we can share.

    And we're also excited because we're now going to be working through some private accreditation organizations through (indiscernible).

    Performance assessment. Probably just one or two improvements before I go to the additional possibility. We have come up with a new streamlined monitoring protocol. We basically took the previous protocol we had and we went through it with the help of a consultant and we eliminated as much duplication as possible. We're also tracking it the way that the manual that Bob puts out is organized. It's not perfect but I think it's a lot less labor intensive than the one that we had. The number of elements has probably been cut by 60 percent but again it's not -- we're not at the data driven aspect of it yet but I think this is a lot better than it was.

    And we just started conducting pilots of the multi-team plans again. Again, if you're an HMO and you're national, rather than have three or four different regions monitor you, we've actually pulled together a team. One person form each region where you have a site and that team and that team alone will monitor you. It's certainly better from the plan's perspective and I think it's more consistent from our perspective.

    We're also looking into the use of consolidated audits. CMS alone has at least four audit requirements that I'm aware of. We do the special or focused audits. We do the BBA audits. We have HEDIS data audits and we have ENCOUNTER data audits. So we've got a team working in CMS that will be working with the industry also saying is there any way we can consolidate this. Instead of having four sets of auditors, teams of auditors going on site, can we consolidate our needs and perhaps do less frequent auditing. I've got a preliminary report back yet that I'll be talking to the industry about. It seemed like the greatest area for eliminating duplication of effort in terms of consolidation was probably with the states. The number of recommendations have come out which is only audit when you have to, work with the states to avoid duplication and better train your auditors. That's some of the findings so far. But we're going to be doing a lot more work in that area.

    Additional possibilities. We're now in the process of moving to a much more data driven monitoring program. We have a lot of data from appeals, HEDIS, CAMPS, disenrollment data and we'd like to reduce the reviews for the high performing plans. We'll see them less often if the data coming in shows that there doesn't seem to be any problems there. It's a significant effort and there's going to be a lot of industry collaboration on this.

    We're also talking about the use of pilots. If a particular organization and a lot of the plans do have very extensive and complete internal audit programs. They're in compliance programs. Maybe we'll tap into that if we're convinced that the plan has a good compliance program, perhaps we don't go inside as often. We basically rely on their program.

    And we're going to also -- I guess you could also legislatively expand the use of dealing. I believe right now dealing is only in six areas but it's been suggested by folks perhaps you would expand it more.

    So when I look at the areas that operationally that I think that we're focusing most of our effort on this year, I've talked about two of them so far. One more at the end. There's basically marketing, monitoring and reconciliations which I'll go to in several minutes.

    Quality. By law, the M+C organizations must have a quality assessment performance improvement program. And of course you know they all do. M+C organizations have for quite a while been collecting HEDIS data and CAMPS data and of course M+C organizations have to perform a quality assessment performance improvement project. I believe that there used to be two or three of those required. Now it's just one a year.

    So in terms of improvements, I'd like to maybe skip over them and look and really focus into probably some exciting additional possibilities. We'd like to explore, the agency would like to explore opportunities to recognize and publicize high quality performance plans, plans that have done well in a number of indicators. For example, if you did well in HEDIS in 2001, you didn't have to do the required QAPI project. Some of the employers are working with their plans to do this and we'd like to do the same thing. And we'd like to continue to work with industry to identify the appropriate quality assessment performance improvement project that we've selected over the next several years.

    Let me reduce -- I have two slides on the M+C payment demonstrations and I'm going to move through rather rapidly. I think the point is that this past summer in numerous meetings with the administrator, Mr. Scully made it clear to us that he was looking for innovative ways for plans to participate in the M+C product outside of the traditional M+C program. And we went through a very accelerated time frame to identify certain demonstrations. Especially focusing on those plans that were just not having much success at administering the M+C program for a variety of reasons. They had basically just said it's not something we want to participate in and as a result of a lot of activity with the industry and with CMS, we were actually awarded five or six M+C demonstrations. They mostly were centered around different ways of paying the plans in terms of risk corridors, paying in a certain percentage of fee for service, changing the M+C payment. Most of these were transparent to the beneficiary. The one -- probably the one demonstration that comes to my mind is Humana in DuPage County, Illinois switched from an M+C product to a private fee for service product. But most of them were in fact transparent to the beneficiary.

    I think that was the first phase of really a two-phase process that the agency is very interested in. The second phase is actually going to be rolling out now. We're going to encourage more innovative models in M+C especially PPO's and HMO's with point of service to give people the same broad -- Medicare beneficiaries, the same broad choices that they have now as commercial enrollees. The target is for solicitation some time this spring and I believe we're on track for that. A solicitation will go out to the industry. We'd like to make the awards by summer and actually begin to enroll the people January 1st, 2003. So it's an ambitious schedule but the administrator basically has told us to pull out all the plugs.

    There needs to be a significant amount of outreach in terms of CMS to the industry to find out from your perspective what do you think would work for the Medicare beneficiary so I just want to stress that as opposed to perhaps previous efforts. I think this will be a significant amount of outreach.

    And also in terms of demonstrations, we also provide some flexibility with regard to the current M+C requirements. Now we're almost in the home stretch.

    Improvements. Well there primarily were four categories I talked about. The ACR, marketing, monitoring and quality. But there's some other things we've been doing that didn't fit neatly into any one of those and on this particular one, I think I just want to focus on the resources on reducing inventory with special status retroactive actions in terms of what we've done and then on the next level, go in terms of what we're doing.

    For a variety of reasons, a backlog of retroactive actions has built up in the plans and in the regional offices. As Bob said, you're actually paid, the HMO's are paid on -- based on a demographic rate so people can move from one rate cell to another for a variety of reasons. Those changes need to be recognized so the payment to the plans is accurate and there's some cumbersome processes that the plan and the regional offices have to do to make that correct. We've been spending a lot of time on that.

    We discovered there was actually a backlog. A lot of the regional offices weren't working these because of other higher priority items that they had to work on plus a lot of the plans basically had just -- had allowed an inventory to develop. So we sent a letter out to all of the industry and we said give us all of your materials and all the backlog cases and we've actually contracted out with a company to take care of those. The backlog is pretty much reduced. I think for some of the larger organizations, we're still working with it. But we've processed thousands and thousands of these on retroactive actions and millions of additional dollars have gone out to the plans so I think we're proud of what we've done in that.

    But I think moving on to the additional possibilities, right in the first one. A lot more has to be done. I think the ultimate goal with the retroactivity issue as we call the reconciliation is to allow as much direct input by the MCA's as possible into the CMS system that's going to reflect that change. For example, in the state and county code, this summer the plans will actually input that directly into a CMS system rather than going to a contractor who goes through a different process to do that. I think that's a long term goal. In the interim, we're also going to make an award this spring to another contractor. It may or may not be the same one that's doing it now to basically take over responsibility for all the retroactive actions. So they will not flow into my office anymore and I actually had a lot in there. They won't flow into the regional offices anymore. WE'LL have one organization doing them. I think it will increase the consistency, the timeliness and the accuracy of the review and probably for the first time ever, we'll actually get a handle on what different types of actions are flowing through the system which might help us figure out what is the root cause of this.

    But again, long term, I think I'd like to see -- I'd like to get out of the handling the reconciliation business and move on to some other areas.

    We've also talked with several plans and I don't think -- I'm not sure if this would be -- I don't think we need legislation for the first thing about the improving reconciliation process. I don't think we need legislation for the second one. Right now, as Bob said, there are 140 rate cells per county and there's 3,250 counties so we're in a -- and managed care organization. What if someone in that payment rate could be one of a half a million payment rates.

    What we'd like to do is simplify that and make one payment rate per person throughout the contract year and have some type of reconciliation at the end of the year, put in a dipstick, pull it out, say this is what we agree on, maybe even a third party does it and either -- and just at that point reconcile and be done with it because it's a very labor intensive process.

    And last, I know we spend a lot of our time in terms of retroactive adjustments and working in aged. I think there's a lot of different ways we can go and work in aged. I think legislation is going to be involved but one way that I think makes a lot of sense is actually incorporate the work in aged adjustment at the -- by the actuaries and have it flow through the payment rates and really get out of this process where the MCA's have to track down every Medicare beneficiary and report them in a cell by a cell process.

    So, I'm sorry I may have gone over. I see a red light there. I thank you for the opportunity to present this to you and as I say, this is not the entire list of what we've done or what we plan to do but I think it's a good starting point. Thank you.

    DR. WOOD: Very good. Pretty soon your alarm will be set for tomorrow for Orlando without the red light. We do have a little bit of time for questions from committee members before we invite our panelists for a view from the fields so are there any specific questions that committee members have? Eric?

    DR. OLSEN: You mentioned that you were doing some demonstration projects and you're getting industry input, et cetera. Is there any avenue for beneficiary input into the construction of those demonstration projects?

    MR. BAILEY: The answer is yes. We have a focal point within the agency and I will give you the name of that person. David Crites is actually the person that works out of the office of Tom Scully, our administrator, along with Leslie. And he's working in close conjunction with the staff and CBC, Sid Treedman (phonetic) and Sharon Arnold. So I think they can provide you a lot more information on that. But we're really looking for innovation here. Good products for the beneficiaries.

    MR. FAY: Thank you, Mr. Chairman. My question is administratively is there anything CMS can do to increase enrollment opportunities in rural areas. I think I've read a lot of material where the rural areas are particularly the under served by Medicare+Choice because of the unwillingness of plans to go into those areas.

    MR. DONNELLY: That's a tough one. I think that some of this may be -- I'm not involved too intimately with the demonstration possibilities. There may be something that could happen there. The difficulty there is a couple things. The first is payment and the payment rates have been increased but the question is whether the increases are enough to have the providers in those areas be willing to play with managed care. And so it's not clear that it's a tremendously viable option in those areas to have a really strongly tightened managed care product. There are private fee for service options that are moving into a lot of those areas but it's not clear that there's really a strong ability and maybe the folks from the industry can talk about it later. But it seems like it may be -- it's kind of not an administrative issue so much as a market issue. And so hopefully there may be some way to do stuff related to the demos where we can try to mitigate the risk of going into those areas for some plans. But I think it's a broader issue than our administrative requirements.

    DR. WOOD: Thank you.

    MR. FAY: I'm trying to follow up. We had a presentation yesterday from Senator Kyl's health person relative to making it mandatory if you're in a state to have the whole state -- without getting into that issue, is that a legislative thing that it goes county by county or is that a regulatory requirement?

    MR. DONNELLY: The payment rates are county by county under statute. They could be broader. Provisions to allow a state's governor to choose -- to ask for a broader service area or for a payment -- I mean for plans. Ultimately that has never been requested by any of governor because really what you're talking about then is it has to be budget neutral so you're taking money out of the places where there are higher rate and you're putting it into places where there are lower rates so it gets down to a difficult decision at that point.

    The service area is not statutory. But the general process, thought process has been if the payment they're going to be at a county level and you know, we have a lot of plans that can cover only, you know, certain counties, certain areas. They can't cover much, you know, tremendously broad areas, that the logic has been to tie as much as possible the payment area concept to the service area concept so that's at county level.

    I hope that answers your question.

    DR. WOOD: Bill.

    MR. TOBY: First, Gary and Bob, I'd like to thank you for a splendid presentation on this complicated topic. I have two questions. One deals with an issue I have a very keen interest in and I wondered if you, Bob, or you, Gary, can comment on. It has to do with the lock-in requirement which I know is -- which is legislatively imposed. But to me it seems as though it put beneficiaries at a much higher risk of higher copays and the reason that they have higher copays is because plans are facing rising costs and CMS cannot pay. As you said, Congress sets the payment rate. So consequently, beneficiaries now do not have the freedom to shop in the market place for a plan which is going to have a lower copay.

    So it seems to me that this is utterly unfair and I just wondered if you could just comment on that for me. And then I have another question to follow up.

    MR. BAILEY: I was just –- we're very aware of the lock-in requirement because a lot of the responsibility for how we're going to do that from an assistance point of view falls in my shop. The only thing I could say at this point about the lock-in requirement is that it's currently the law. It went into effect January 1st and that we'll implement it and really until we hear anything different. But I'm well aware of the pros and the cons associated with it because a lot of the operational issues or challenges that the plans will have to face also I have to face but we're aware of that.

    MR. TOBY: Okay. Well, good. I'd just like to have some hope that eventually this will change but it's up to Congress and I know that. The second question I have deals with my time in CMS which used to be HCFA. One of the great pains I had was whenever a new plan would apply for -- enroll in the program and I'm talking about the application process, it would take up to six months for a plan to be approved and I'm sure you've made improvements since then. I just wonder if you can comment on what has been done or what is being done within CMS to kind of reengineer the application process in terms of the standards you use for evaluating contracts and that sort of thing. It used to take forever. I'm sure you've made improvements.

    MR. BAILEY: Yes, thank you. Yes, we've made improvements. Quite frankly we haven't had a lot of applications recently. The inventory of applications is not as it was in the --

    MR. TOBY: They may not apply because they know it takes forever.

    MR. BAILEY: I don't think that's the case. What we did, we found a lot of the applications for example are service area expansions. And in other words, they're requests from contractors we've dealt with over the years, we know them, we know their healthcare network. It's just to expand into another county or another part of the state. In those cases, we actually have something called the accelerated service area review process. It doesn't take anywhere near the 19 weeks. We've done them rather quickly. Basically if you can convince us, you're just going to take what you already do and move it to another county, the only thing we're going to focus on is anything different that you may be doing. And with many plans, they're not doing any different.

    In terms of available application. Some of the delays may have been around a while back but they're really not there anymore. The ones that have come in recently have been rather quickly. Now -- have been processed quickly. Some though have "dragged on" because we've gone back to the plan and it's a new contractor and they just -- they need to get consultant help or think about what it is. So it used to be the benchmark was 19 weeks, worst case scenario. But if a particular plan just needed to provide us more information or think about what they wanted to say, it could take more time. But right now, I can assure you if an application comes in, it will be promptly processed. I can assure anyone of that. So if you have any applications now, we'll start the process right now.

    MR. TOBY: Thank you.

    DR. WOOD: Good. Heidi.

    MS. MARGULIS: Thank you, Mr. Chairman. As one of CMS's largest contractors, I would say we've forgotten how to apply for a new plan. So with that in mind, I have a couple of questions. The first has to do with lock-in, Gary and this may I think go to Bob if I'm not mistaken. I had heard that in one of the manual revisions that with regard to a Medicare+Choice organization that has two plans in an area, that if one plan is a zero premium plan, soon to go into extinction but they still do exist out there, and they have one that has a premium and a beneficiary fails to pay the premium and wishes or wishes to change to a zero premium plan, that that would not -- that would be considered a special enrollment period and not subject to lock-in provisions. Is that true?

    MR. DONNELLY: Well let me just provide a little background about what special election periods are just to make sure everybody understands. The law has a lock-in provision which says the beneficiaries can make one decision to leave their plan between January and July of this year. And then after July 1st, they're locked in. They can't make an election until the beginning of next year.

    But the law also provides the Secretary authority to account for exceptional conditions that would allow a beneficiary to -- should allow a beneficiary to make a choice outside of those time frames. And this is one of the questions that -- this is what the question is about. And the problem specifically about this is that the law specifically talks about the lock-in at a plan level. And what we have in our program is we have organizations that offer plans. So if you unite as an organization and they have a bunch of plans. And the plan is the benefit package in the service area. And so basically the law said that the beneficiary is locked into a plan whether that was intended or not but that's what the law says.

    And so how we interpreted it up till now is that if a beneficiary is in a benefit package in a service area, they are locked in under the current rules. The specific question though is, you know, the beneficiary doesn't pay their premium in a plan that has a premium and there's one available in the service area from the same organization that has a zero premium. Could we consider that an exceptional circumstance under the special election period rules to allow the beneficiary to move within the organization to that other plan? And that is under evaluation. I think we're likely to move in that direction. That's something that will come out in the next week or two. The kind of thought process behind that could have been that a move like that would be that if a beneficiary doesn't pay their premium, they could be disenrolled without their consent because they didn't pay their premium which would trigger the ability to make another election and so they could move into another plan. So you could argue that that's an exceptional condition that we shouldn't go through that administrative hassle of dumping them out like that. So I can't answer it for you specifically but in the next few weeks, we'll have something that addresses that.

    MS. MARGULIS: Gary, what are the top three priorities from your department's standpoint? You have a list of areas of possibilities but what is CBC's healthplan's areas top three?

    MR. BAILEY: In terms of where I sit, it's the three that I mentioned. I think it's monitoring, marketing and reconciliations. Bob may say something a little different policywise but from where I sit in terms of my dealings with the MCA's, most of the contention -- those issues rise in those three and that is to make sure that we are more consistent and less burdensome for both of us in the marketing review, to find better more focused data driven ways to monitor the plans and assess their performance in conjunction with other entities and thirdly, to basically move the backlog out, make the payments to the organizations, contract out in the interim and look for ways beginning this summer for direct plan input. So I tend to think of marketing, monitoring and reconciliation but it's not the only three but that's the top three.

    MS. MARGULIS: Okay. I have one more. I have several more but I'll take one.

    DR. WOOD: Well let's do one more, then we'll start looking at others.

    MS. MARGULIS: Just then as feedback to you in terms of -- from this organization's standpoint that in order to reduce enough administrative burden for plans to stay in the program, from a plan perspective, we look at it in terms of savings because the savings to us go back to beneficiaries in terms of additional benefits or to providers in terms of network stability. So that to use our corporate term, we would score each of the improvements in terms of savings as you well know. And so from where this person -- this relic of 16 years sits, those might be reducing the amount of data that is required for (indiscernible) collection for the payments beginning in 2004 in terms of risk adjustment from the perceived 25 diagnoses groups to between 25 and 100 down to between 6 and 15 saving the industry as a whole around $200 to $300 million which I would think that beneficiaries would like to see in continuing prescription drug benefits and providers in terms of payment.

    Secondly, that the agency followed kind of Congressional intent in terms of how risk adjustment was to be administered in terms of budget neutrality for the risk adjustment payment.

    And thirdly, as you mentioned in terms of special status, on our ability to input all special status, not just state and county code but all of those as a whole. Thanks.

    DR. WOOD: Thank you. Kristin, we'll take yours as the and I would like to start on our panel. So go ahead.

    DR. CROSBY: Thank you, Mr. Chairman. A comment and perhaps a response. As somebody who works for one of the new applications for a Medicare+Choice organization that is not an HMO, I would comment it took much longer than 19 weeks or six months and much of the difficulty and lengthening of the time seemed to be related to the fact that there was very little familiarity with private fee for service plans and because we are outside the HMO template, there was little preparation. And so perhaps the reason there had been few applicants for PSO's private fee for service point of service plans is because as was implied earlier, it is known that it'll take a really long time if you fall outside the template. Anything you can do for that?

    MR. BAILEY: Well, that's interesting. The first private fee for service product that came across our desk was the Sterman (phonetic). It took probably a year at the time between us working with them and just working with the (indiscernible) because we had never seen this. This was a hybrid between fee for service and managed care. And it really pointed out to CMS that we needed to be talking to a lot of other people within the agency.

    Once we got over that hurdle, for example, we had another private fee for service application come in from another organization that moved along rather rapidly. But what we've done to address what you just said is we pulled together a cross cutting team called the product consistency team.

    DR. CROSBY: Called what?

    MR. BAILEY: It's called a product consistency team. In effect it will work within CMS and it has members of Bob's shop, the assistant's shop, our fee for service colleagues, members of my shop and all the regional offices. And if an application comes in, it's going to go to this particular team. I think that the first one we had to write and working with it, basically my staff was snowed with HMO's. We did move through a PSO application pretty quickly but quite frankly we haven't had a lot PSO applications and I don't think it's because they think it may or may not take a long time within CMS. I think there's a lot of other industry concerns of that just being a PSO.

    But with regard to private fee for services, that was one of the demonstrations in DuPage County and we basically had an organization that also had to go from thinking about a closed panel agent with a private fee for services. And I think we went through that rather, very rapidly. So I would hope that it's not because someone thinks it's going to take a long time because it won't. But again, that was a complicated product and we've set up a mechanism that was not in place before to handle that.

    DR. WOOD: Gary and Bob, we appreciate your opening discussion. If I might ask you to take a seat in the audience or around the end of the table so we'll have enough room for the next group of people that I would like to invite to the table for perspective from the field. We have four people who have been so kind to help us this morning. And as they are coming up, I'd like to introduce them to the audience.

    Ms. Pam MacEwan is the Vice President of Public Affairs for Group Health Cooperative in Seattle, Washington. We have Mr. Steve Tucker, the Vice President of Regulatory Compliance for Pacificare Health Systems in Santa Ana, California. We have Dr. Joseph Johnson, who is the Chief Medical Officer of Sun Health here in Sun City, Arizona. And we have Mr. Donovan Ayres who is the Director of Medicare Compliance for Blue Shield of California from Woodland Hills. And in the order of affairs here, I would like to ask Ms. MacEwan to lead off unless you have made previous arrangements between the four of you. Okay. Pam, you can go ahead. If you want to stand you can, otherwise you can just go from right where you are.

    MS. MACEWAN: I would prefer to sit if it's all right.

    DR. WOOD: You're welcome.

    MS. MACEWAN: Thank you.

    DR. WOOD: Go ahead.

    MS. MACEWAN: And I'm going to read some of my testimony which is against all of my principles but this topic is so complicated and detailed, it's hard to do it any other way.

    Good morning, members of the Commission. I'm Pam MacEwan, Vice President for Public Affairs for Group Health Cooperative in Seattle, Washington. We were founded in 1947. Group Health is a not for profit with over 600,000 members, it's the nation's largest consumer government healthcare organization.

    Group Health has a national reputation for it's commitment to providing high quality care and to developing innovative programs to improve our members health.

    Recently both our commercial Medicare plans were reaccredited and received the highest ranking from NCQA. Group Health has more than 25 years experience in serving Medicare beneficiaries. Shortly after Medicare's creation, we began working with the government to design a program that would allow Medicare to work with prepaid healthcare organizations like Group Health. In 1976, we were the first organization to partner with the government under the Medicare Risk Program. Today we serve 60,000 Washington state beneficiaries under Medicare+Choice. We appreciate this opportunity to participate in the Commission's work to address regulatory requirements that Medicare providers face and that in many cases have led to unintended consequences for beneficiaries.

    In recent months, CMS has taken steps to improve the M+C regulatory environment which I think you just heard about. Aside from the program level changes, such as those related to Quizmik (phonetic), we at Group Health have noticed other improvements particularly in a more collaborative approach on site review. According to our staff, the CMS region ten reviewers demonstrated a collaborative approach as they assessed our compliance with Medicare+Choice rules and regulations. Even when they found something not quite right with us, they worked with us to solve these problems.

    Without question, Medicare+Choice plans must be held accountable to CMS and to the beneficiaries they serve. The current oversight approach, however, often results in plans expending substantial resources on activities and in our view brings CMS and beneficiaries very little value. Group Health supports the Commission's interest in making requirements more effective and efficient for CMS plans, providers and beneficiaries.

    With that in mind, we offer two specific areas in which we believe the current requirements and approaches could be improved in ways that squarely align with the Commission's goals. The first area relates to the on site review process which is the primary approach used by CMS to assess compliance. The second relates to the linkage between adjusted community rate proposals in the plan benefit package and the summary of benefits.

    In October 2001, CMS notified Group Health that it would conduct an on site review of our Medicare operations in December. Approximately 50 staff members contributed to preparing for the review which entailed compiling information that filled 79 three ring binders. Stacked on top of each other, the binders would reach a height of 20 feet. The information documented Group Health's policies and procedures to meet the broad ranging and very detailed requirements set forth in the monitoring guide, CMS's primary tool for assessing compliance.

    We recognized that CMS has initiated work to reduce administrative burden by streamlining the monitoring guide. In addition to this work, we would also like to suggest that CMS re-examine a fundamental aspect of the current monitoring approach, namely that each requirement seemingly receives equal weight. This approach contributes to the administrative burden and in many cases the resources necessary to comply far outweigh the value gained for CMS or for beneficiaries.

    We also would encourage CMS to work and develop tools that may reduce a need to submit such a large volume of information and use data such as CAMPS and HEDIS data in ways that could better pinpoint compliance issues that warrant closer scrutiny. By no means are we suggesting that CMS not examine compliance issues. But rather we urge CMS to consider an approach that would recognize consistent good performance and focus a review more closely on areas identified as problematic. Such an approach would result in more efficient use of resources for both CMS and plans and enable plans to concentrate their efforts on improving areas that have greater impact and beneficiaries.

    To illustrate, CMS staff during our review requested that we change some of the language used in the explanation of benefits which is sent to beneficiaries. While this may sound straightforward, Group Health will need to make many systems changes to accommodate the new language. We felt that this new system not even seem to be an issue. We had not received any complaints from our members about the language. We should not have had to make the change.

    Aside from financial implications, we are also concerned that the language change could cause concern or confusion among members.

    Our recommendations are consistent with decisions recently made by CMS regarding monitoring of clinical quality. Specifically, CMS will recognize plans that have achieved high level clinical performance as measured by HEDIS data. Plans that meet certain parameters will be exempt from conducting the project to redemonstrate the performance. This decision is very much appreciated and embodies the goals of efficiency and effectiveness that Group Health is suggesting with respect to the on site review process.

    The Balanced Budget Act of 1997 established an information campaign program to insure that beneficiaries received timely and easily comparable information about Medicare coverage options. Group Health without question supports the goal of this project. To help accomplish the program's objectives, CMS developed electronic links between our ACR proposal and a worksheet known as the plan benefit package which in essence translates information from the ACR into a description of benefits.

    The PBP in turn issues to generate a summary benefits for distribution to beneficiaries. In order to correspond to the high level of detail in PBP, CMS modified the ACR so that it now requires much more detail than it previously did. Reporting this information in the ACR requires plans to develop systems for capturing the data at this level of detail and expend time and resources to analyze the data.

    For example, plans must describe the copayment information for 12 types of healthcare professionals in the PBP. As a result, the copayment information previously summarized on one line in the ACR for all types of healthcare professionals now must be apportioned across all 12 types of healthcare professionals in the ACR. If a plan has 12 different copayments, that flexibility could be valuable. However, for the many plans like ours that have only one outpatient visit copayment for all types of healthcare professionals, reporting this additional detail is time consuming and costly. The additional data in the ACR does not add value for beneficiaries nor is it relevant to insure the appropriate use of federal funds or computation of beneficiary premiums.

    In many cases, the computed number is so small to the fourth decimal place that it does not have any actuarial or statistical significance.

    To facilitate generation of the summary of benefits to link in the ACR and PBP, CMS standardized the format and language used in the document. However, we have found that CMS affords plans no flexibility in deviating from the standard language and then in some cases, the standard language does not best describe our benefit. As a result, language can become more confusing to our members. In one case, a member after reading the summary of benefits called because he was unsure whether a particular benefit would still be covered. The standardization project also affected the length of our summary of benefits which grew a link from two pages a few years ago to 19 pages this year. This important document became overwhelming in length and in our view actually less helpful to the beneficiaries.

    In summary, there is no doubt that the current regulatory framework has contributed to instability in the Medicare+Choice program. In our comments, we have not described the current Medicare+Choice regulatory environment in a very positive light. Our goal is by no means to assign blame but rather to offer constructive information for improvement to benefit CMS beneficiaries, providers and healthplans. Achieving improvements will not be easy but our recent experience shows that it can be done. Group Health is pleased to have the chance to offer a few recommendations here today and committed to working with CMS and other stakeholders in achieving the Commission's objective of regulatory efficiency and effectiveness. Thank you very much.

    DR. WOOD: Thank you, Pam. Mr. Tucker.

    MR. TUCKER: Thank you, Mr. Chairman, and I'm very happy to be here to talk to this Commission. And I'd like to commend the Secretary for establishing this. I really look forward to seeing some of the fruits of the recommendations that I'm sure you'll be providing.

    My name is Steve Tucker and I'm the Vice President of Regulatory Affairs for Pacificate Health Systems which is currently the country's largest M+C organization. We have about 850,000 members. A couple of years ago I was able to say we had over a million members which was the case but we have seen our membership decline which is largely attributable we think to inadequate federal reimbursement relative to our healthcare costs.

    But in addition to the funding problem, there are administrative burden issues that we think CMS can solve and we certainly heard some of those this morning. I have prepared a written testimony. I'd be happy to share that with folks where I hit on about ten or 11 of those issues, a couple of which Gary mentioned and if I was able to talk as quickly as Gary is, I could probably get those in this oral testimony but I'm just going to hit on two of them in the oral testimony.

    And one of them is one that Gary hit on, the other one is not. But I want to talk about reconciliation in particular because it is a big problem with plans. You know we're prepaid organizations but in reality we just spend a lot of time on the back end making sure that our payment is correct. Of course, our payments are adjusted for things like institutional members, working aged, people who are entitled to both Medicare and Medicaid as well as when people move to a different state or county or for folks who have ESRD. CMS uses a lot of different processes and systems to track these sorts of changes and adjust our payments accordingly and some of them work well but most of them don't work that well. Institutional probably is the exception. It works pretty well where plans report the data and then it's subject to back end review by CMS.

    The trends or the problems I think that underlie the other areas include the data that CMS uses to adjust the payments is not that credible. Secondly, once plans identify payment errors, it just takes too long to get it fixed. In many cases, we have identified things and two years later, we still can't get the record corrected even though eventually it may get corrected.

    CMS system glitches occur that increase the prevalence of the problem. You know, I could probably have developed charts to show all the different systems that have to touch other systems in order to get the correct payment outcome but suffice it to say there are breakdowns along the way. And as a result of that, plans just spend too much time chasing these payments. Let me give you an example. Last year, for two of these categories alone during the calendar year 2001, we recovered almost $30 million in ESRD underpayments based on a 1,000 records, a little over a 1,000 records that were incorrect in the systems and for the same period on the working aged category, we recovered a little over $11 million in underpayments based on almost 6,000 incorrect records in the systems. So the point I guess here that I'd like to make is, you know, we had to chase $40 million in underpayments and we're supposed to be a prepaid organization and have those monies on the front end.

    So I guess what I would propose as a solution is that for ESRD, working aged, and state and county codes, the plans be able to directly input that data onto the systems and then be held accountable for its accuracy by signing payment attestations and subject to back end audits, you know, if we were making claims under the false claims act that it proved to be incorrect. I think you'd find we would take that process very seriously.

    For Medicaid, I'm not sure if direct input's the answer although I think that needs to be explored but I would certainly encourage this committee to ask CMS to move very quickly and establish a task group to look at that and make recommendations. Gary alluded that this was the long term goal and I would suggest it should be a shorter term or intermediate goal to move to this because it's a serious problem. And CMS should also immediately eliminate the 36 month retroactivity adjustment policy that they have in place currently.

    The second issue I want to talk about I guess falls in the category and I would underscore what Pam said in terms of, you know, the agency has done a lot to work with us and we have good relationships with the agency. It's just that in some instances, it's from a plan's perspective, it seems like the agency does put more emphasis on following the rules than doing what's right for beneficiaries and I want to give an example of something we're living through now.

    Increasingly in our markets, we're finding that the medical groups that we contract with want to have differentiation in the market. These medical groups used managed care techniques to manage their costs, quality and service outcomes and they'd like to sort of be differentiated according to, you know, their costs or their quality, their service levels and so forth. So at Pacificare, we have been looking at ways to develop more provider specific plans. Gary mentioned that weren't a lot of PSO's coming into the organization. I would say it's more of a risk issue as opposed to, you know, how long it takes to process an application or something else. But in any case, CMS does allow us to offer these provider specific plans but they have overly strict and counterintuitive requirements when we elect to do that. So let me give an example.

    Last year in one large county, we went from a single benefit plan in the county to two provider specific plans. They were two large delivery systems that covered the whole county and they each wanted to have their own plan. So in having to decide how we would map members to those continuation plans, CMS required us, the organization, to pick one plan and map all of the members to that single plan and of course from our perspective that was very problematic because the plan you didn't pick wasn't going to be very happy with it. And it creates capacity issues when you have to load all of the members onto that single plan so there could be access and availability issues. There's discontinuity of care because, you know, whenever we talked to consumers about why they pick one plan over another plan, choice of doctors is always at the top of their list.

    So we propose that we would map members to the plan that was associated with their current primary care physician. We weren't allowed to do that and as a result, we had to go through a lot of expense to communicate to members as to why this made sense because members didn't think it made sense. And at the end of the day, just to tell you, we disrupted 12,000 people from their current primary care physician and by the end of January, 10,000 of those people had to reenroll in the plan that was affiliated with their original primary care physician. So at the end of the day, the data suggested that members did want to stay with their primary care physician when that was an option.

    So in this regard, we would strongly recommend that in the immediate term, the Committee recommend to fix this issue. And with that, I've got several other issues, but maybe they'll come up in the questioning. I'll turn it over to Donovan.

    MR. AYRES: Okay. Great. Hi, I'm Donovan Ayres. I'm the Compliance Director with Blue Shield. I wanted to thank you for letting me testify today. Blue Shield of California just to clarify.

    Blue Shield of California is a not for profit organization. We represent about 72,000 Medicare beneficiaries in Los Angeles, Orange, Riverside and San Bernardino Counties. In my role as Compliance Director, I work with all areas of the organization and am familiar with a lot of the challenges that have been presented by the burden, the regulatory burdens that we have.

    I'm going to hit on two areas in my testimony and I will also provide written testimony that's a little more detailed than what I'm going to hit on here orally due to the time issues. But the first item I wanted to talk about which is one that Gary already touched on is the marketing review process and the issue that CMS has a 45 day review for marketing and member materials for their normal review cycle. BIPA created a review where model documents are used verbatim which is a critical issue.

    And some of the challenges we've had are that minor changes to model documents to make them more accurate moves them from a ten day to a 45 day review. Language in the summary of benefits chart is not allowed to be changed and it doesn't always accurately reflect the best description of the plan benefit structure. And it also creates issues where the description of a benefit that we can modify in the evidence of coverage is not the same description as the member gets in their summary of benefits.

    The CMS model documents that are released need to be released with sufficient advance notice for compliance with implementation or mailing requirements to occur without additional burdens of increased administrative expenses for rush production and overtime. And again, if the model is not followed and changes are made which we have found we have followed the model, we have some small changes that we have to make, it falls into the longer review cycle.

    And situations arise such as unforeseen issues like provider bankruptcies where member communication about this type of an event falls under a 45 day review cycle. So there are delays in the process that impact beneficiary communication that should be occurring.

    Proposed solutions are to have minor changes to the model documents still quality for a ten day review cycle, to also allow minor changes to the summary of benefits chart so that language can match more precisely an give an accurate description of the plan benefits and that that should also fall under an expedited ten day review process, and that the model document should be released with sufficient advance notice to allow plans to integrate implementation according to the new models that are released. And we recommend that the 45 day review process be shortened around this whole cycle. It's just too long of a time frame.

    We would also like to recommend that with the release of the model documents, by releasing those with sufficient advance notice, that that can actually reduce the administrative burden that we have.

    And on the fourth item that critical member communication about plan benefit changes can follow what Gary talked about a use and file system. We have been able to be part of the pilot in California around some of the use and file materials, however, there are critical situations such as, you know, providers that go under where filing a letter to really clearly explain to the beneficiary what occurred, waiting for approval is really delaying getting a critical notice out when the provider has disappeared.

    The second major topic that I'd just like to touch on is around claims and encounter data and clean claims have a requirement that clean claims from non-contracted providers have to be paid within a 30 day time frame. All other claims need to be paid or denied within a 60 day time frame. The related issue is under original Medicare, carriers and intermediaries are able to reject claims back to the billing provider if the claim is incomplete and does not contain all of the elements required by Medicare for the claim to be a valid claim.

    Plans are being held to a different standard by being required to develop the claim and at the end of 60 days, plans must make a decision to pay or deny the claim based upon the information available. And this can create real challenges. For example, if you have an ER service, it comes in, there's a prudent lay person diagnosis that it is a reasonable claim for a prudent lay person to have received, but it doesn't have all of the coding that would be required for that claim to be submitted as an encounter, we've been told we still have to pay that claim because we have enough information and try to chase down the additional data elements from the non-contracted provider after payment which is a challenge. So the proposed solution is to create authority for plans to be able to reject incomplete claims to the billing provider the same way as carriers and intermediaries do and requesting the billing provider be submitted or the claim be resubmitted as a new claim with complete information. And it's also in the situation where that type of a claim is denied, you're now denying a claim to a member telling them they have appeal rights but their appeal rights are the description of why it's being denied is the provider didn't provide complete information for us to pay the claim. So it's a little odd to have that type of an issue be triggered into an appeal process. So thank you.

    The one thing I'd like to say in closing is that, you know, as with other plans, we are, you know, struggling to provide the Medicare beneficiaries with enhanced benefits. And the funding issue is really a critical issue for us to continue to have viable options and choices for the beneficiaries. Without changes to the funding, the beneficiaries will be impacted by continued benefit reductions and less choice in the coming years. So thank you for allowing me to testify.

    DR. WOOD: Thank you. Dr. Johnson.

    DR. JOHNSON: Thank you, Mr. Chairman. Mr. Chairman and members of the Advisory Committee, I'm Dr. Joseph Johnson, Chief Medical Officer with Sun Health MediSun. I appreciate the opportunity to testify regarding opportunities for improving the administration and decreasing the regulatory burden placed on the Medicare+Choice program.

    I have practiced general surgery in this community for over 20 years and have worked part time and now full time as a medical director and chief medical officer. So I have seen it from many sides of the coin.

    Sun Health MediSun serves 14,000 Medicare beneficiaries in the Sun City communities of Arizona. In addition, MediSun's parent hospital organization, Sun Health Corporation and its affiliated physicians, serve approximately 30,000 Medicare+Choice members represented by several plans.

    We applaud the Committee for exploring options for improving program performance for beneficiaries while reducing administrative burdens in Medicare+Choice and other programs administered by the U.S. Department of Health and Human Services. Today we're pleased to contribute to this effort by outlining a series of recommendations for improving regulatory requirements and procedures that affect Medicare+Choice organizations and their members. And I'm also happy that Gary Bailey has indicated a lot of things that I'm going to discuss are currently on their radar screen.

    While we appreciate the efforts of Senators for Medicare and Medicaid services has made to date, additional action is obviously needed as has been demonstrated to improve benefits for our members.

    Broadly speaking, our goal is to insure that the regulatory environment and the Medicare+Choice program allows us to fulfill our mission of providing high quality affordable patient centered health coverage to the beneficiaries we serve.

    To advance this goal, our recommendation focuses on issues relating to the following. The adjusted community rate, ACR filing process; the ongoing administration and management of the Medicare+Choice program; the monitoring process that is used for the Centers for Medicare and Medicaid services to insure that Medicare+Choice organizations are meeting their contractual and regulatory obligations. The agency's review of Medicare+Choice plan's marketing materials and the quality assessment and performance and improvement programs.

    First, the ACR process. I'd like to begin by discussing the process by which Medicare+Choice organizations are required to submit the ACR proposal that describes their benefit package and premiums for their coming contract year. This is an unnecessarily burdensome process, of course, as health plans spend considerable time and resources on a broad scope of activities, many of which provide little or no value to the beneficiaries. In 2001, Sun Health MediSun spent more than $37,000 for a 137 hours of actuarial work to crunch the numbers in the form and the detail demanded by the current ACR process. It was necessary to break utilization, copayments and cost allocation into more than 2,900 fields and variables for each Medicare+Choice plan we offered or a total of 5,800 variables for the two plans we offer.

    In addition, our staff spent approximately 170 hours working on the ACR proposal and related benefit proposal.

    To relieve this administrative burden, we recommend that CMS streamline its ACR submission requirements in two important ways. One, by reducing the number of required benefit categories in the rate proposal. And two, by allowing Medicare+Choice organizations to file a single ACR proposal for all Medicare+Choice plans in different regions of their service areas with appropriate documentation to support benefit design and premium variations.

    This does not directly impact nor affect the Sun Health MediSun as we serve only one geographic area but it's an issue for the national plans.

    We also recommend that in consultation with Medicare+Choice organizations, the agency re-examine all the submission requirements to identify an approach that meets oversight goals in a way that is more compatible with Medicare+Choice organization rate setting practices, less wasteful and more focused on key reporting elements.

    Under administration and management, Medicare+Choice organizations face many challenges and unnecessary costs in complying with the constantly changing regulatory requirements that CMS issues on a seemingly continuous basis. In numerous instances, we have moved forward to implement CMS requirements and policies at considerable cost and staff time only to have the agency issue a subsequent modification that required rework and incurred additional unplanned expenses.

    For example, Sun Health MediSun was issued a policy interpretation that directly contraindicated an earlier interpretation of the same policy which caused confusion among members and caused MediSun to incur unplanned pharmacy losses. While I appreciate that the agency is making meaningful efforts to adjust program requirements in ways that are beneficial to our Medicare+Choice members and our organization, it's critical for CMS to adopt a more efficient and consistent approach to policy interpretation and overall program administration.

    To address this concern, we recommend that CMS establish (a) a reliable mechanism for issuing consistent interpretation of policies across and within regional offices; and (b) a system for strategically selecting a multi-year plan that specifically identifies annual program priorities in setting specific goals and time frames for their approach in order to stabilize the regulatory environment.

    We would prefer taking a specific rifle approach to administration and modifications as posed to the often shotgun approach of addressing multiple regulatory areas which then creates confusion and rework and unnecessary expenditure of scarce resources.

    Payment reconciliation of special statuses has also been discussed here today. It's another important area which deserves immediate attention. The process of correction of beneficiary status information, it affects payments, because the current system frequently results in significant delays in making retroactive payments to Medicare+Choice organizations. I'd like to highlight several issues of particular concern.

    Until recently, state and county codes have been updated manually by regional offices when beneficiaries move to a new location or errors are identified. This inefficient process has resulted in the huge backlog of codes that are waiting to be updated which in turn has resulted in a significant delay in determining accurate payments to Medicare+Choice organizations who serve these beneficiaries. We appreciate the effort CMS has made to engage a contractor to address this backlog but believe that the solution lies in CMS plans to allow Medicare+Choice organizations to make these coding changes themselves.

    We recommend the agency accelerate implementation of the necessary system changes.

    There are a number of other areas in which inefficient procedures need to be improved. Medicare+Choice organizations need to have a more effective way of obtaining accurate information and which beneficiaries are duly eligible for both Medicare and Medicaid and we recommend that CMS improve the flow of this information from states to CMS and from CMS to Medicare+Choice organizations.

    CMS also needs to establish more effective ways of communicating with the Social Security Administration about beneficiaries who have been erroneously identified as deceased. Correction of these records is currently the responsibility of the affected beneficiary who often experiences significant difficulties navigating the Social Security bureaucracy.

    The agency should establish a streamlined mechanism for these corrections to be made to insure the beneficiaries will not continue to be disadvantaged.

    Under the monitoring process, I'd also want to raise concerns about the monitoring process CMS uses to insure that Medicare+Choice plans are meeting their contractual and regulatory obligations. Mr. Bailey has really addressed this I think pretty well today.

    As currently structured, this process uses a monitoring guide that places equal weight on a broad spectrum of detailed requirements addressing every aspect of program participation. Although some requirements are more important than others and some provide no value at all to beneficiaries, all requirements are assigned equal value under the agency's monitoring guide. As a result in some cases, the healthplan may be forced to implement a corrective action plan at considerable expense when it has failed to meet a relatively small number of requirements that have nothing to do with patient care. There are currently 258 Medicare+Choice standards in the monitoring guide and at our last audit, we met 240 of them.

    Unfortunately, the 14 standards that did not meet the 95 percent elevated threshold for acceptability resulted in considerable focus of administrative resources to validate future compliance.

    Additionally, although many of the 14 standards did not directly impact beneficiary services or protections and were administrative in nature or were in the 90 plus percent category of performance. Results had to be expended to meet -- resources had to be expended to meet this artificially high level of standards and equal (indiscernible).

    Other problems that are raised by the agency's approach in conducting multiple site visits that are often duplicative and overlapping. Specifically the bi-annual audit, the ACR audit, and county reporting audit and others. These site visits are time consuming and too wide ranging to be of optimal value because they do not focus on specific areas of organizations that are most deserving of close scrutiny.

    We recommend that CMS move quickly to complete work on a streamlined monitoring guide that provides -- that prioritizes requirements based on the value they provide to the beneficiaries. The quality of care and service received by Medicare+Choice organizations members rather than the details of its administrative process should be the focal point of these requirements. We also recommend that site visitors should concentrate in the areas that are identified as potentially problematic rather than assigning equally to all areas of review.

    In addition, the frequency of audit should be reduced for plans that meet specified performance standards that are modified through the substantial flow of data the agency already receives on an ongoing basis.

    We note that for a small organization such as ours that serves only Medicare members, the requirement for HEDIS reporting is particularly burdensome. One frustrating and costly aspect of reporting is it is not required to report on measures for which the sample size is too small. Last year, we had 6,000 members unlike a Pacificare which has 850,000 members and it cost us $300,000 to comply with this. I would have loved to have had that money to provide better benefits.

    However, we have to invest significant resources in preparing data submission. For example, contracting with a source code vendor and an experienced consultant in order to document that reporting is not necessary. We recommend that CMS provide appropriate opportunities for small organizations to demonstrate the value of their quality improvement programs for their members as an alternative to meeting requirements that are costly but of very limited value.

    Review of marketing materials. Another serious concern is that all written communications we send to beneficiaries are treated as marketing materials that are subject to the rigorous approval process established by CMS. This policy is harmful to beneficiaries because it often delays the distribution of information they need to understand their covered benefits and how to access services. We recommend that CMS be more selective in applying this review process to only a limited range of beneficiary communications focused on marketing to potential members. This approach would enable beneficiaries to receive information about their coverage on a more timely basis.

    The quality assessment and performance improvement program. We also believe it's important to insure that resources devoted to quality improvement projects are used in a way that provides meaningful value to the enrollee population served by each particular Medicare+Choice organization. In many geographic areas for example, beneficiaries will be well served by programs that provide culturally and linguistic appropriate services. However, in the Sun City areas, this type of program is not relevant because the beneficiaries do not face significant cultural or linguistic challenges. Our beneficiaries are better served by quality improvement programs that focus on conditions such as congestive heart failure and diabetes that are also topics that have been selected for the national improvement study.

    Accordingly, we recommend that the quality improvement program should give Medicare+Choice plans greater flexibility in determining the topics of the quality improvement projects we implement on behalf of all beneficiaries. CMS should allow us to tailor these programs to meet the unique needs and circumstances of the beneficiaries we serve.

    In conclusion, I strongly urge the Advisory Committee to give serious consideration to these recommendations. By supporting the implementation of these changes, you take important steps toward improving the administration of the Medicare+Choice program. While Medicare+Choice organizations will welcome these improvements, I want to emphasize that our members are the ones who would benefit most from a stable regulatory environment. Recognizing the progress that CMS has already made, if you succeed in your mission to further reduce the regulatory burden and eliminate the inefficient practices that are still present in the Medicare+Choice program, you will make an important contribution to fostering availability of expanded healthcare choices and high quality health coverage for Medicare beneficiaries in the future. Thank you.

    DR. WOOD: Thank you. We have a few minutes for specific questions for this group of panelists from the members committee. Jack.

    MR. ROVNER: I just have one quick question. And as you mentioned about the point of submission, will the transaction standards when they go into effect, solve this problem for you?

    MR. AYRES: The counter data you're asking?

    MR. ROVNER: Yes, there -- is an electronic claim and then counter data standard transaction that will go into effect under HIPAA which as I understand it will designate the required and situational fields that must be filled in on an electronic claim by the provider to you or the provider will have violated HIPAA. I'd like to know whether that solves your claim and counter problem?

    MR. TUCKER: It -- yeah, it would.

    MR. AYRES: Some providers can revert to paper though.

    MR. ROVNER: I understand that. But that's a different issue. I mean getting on the electronic claim aspect, will that at least solve the problem?

    MR. AYRES: If -- we get very few electronic claims now, however, if that is going to require electronic claims to be submitted to plans, it would help address the issue.

    MR. ROVNER: As I understand it, the law will not require the submission of electronic claims although it's an interesting question since you're a Medicare+Choice plan. The extension statute does require the submission of electronic claim to Medicare. I don't know if that's going to cover over the Medicare+Choice but thank you.

    MR. AYRES: Okay.

    DR. WOOD: Mr. Toby.

    MR. TOBY: Thank you, Mr. Chairman. My question goes to Mr. Tucker and I suspect it will require a response from Mr. Bailey as well. It relates to the whole payment reconciliation process. To his credit, Mr. Bailey did say it was one of his top three management priorities and Mr. Tucker I think eloquently defined the problem as seen from the plan perspective. I know a little bit about how this works. The reconciliation workload actually falls primarily on the regional offices. They're the work horses in the operational setting. And in terms of looking for solution, I'm wondering whether the process itself which is resulting in long delays in payment, lots of money involved, I'm aware of that, is the problem one of a resource problem at the regional level because there's so much work to be done or was it a system problem as well in terms of the regional offices may and the central office not having sufficient, you know, computer tracking systems so that -- that sort of can be resolved more quickly or is it a combination of both or neither of the two?

    MR. TUCKER: I think it's a combination. You know the systems problem shouldn't be overlooked. You know on the working aged, we report working aged data and their interfaces with other federal systems including the IRS data match. So in some cases, you know, we get -- we report the status and it shows up correctly and then HCFA system touches another system and it cause the data to be corrupt and it's bad and we have to go back through the process again. So that's an example of the systems problem that the same issues on the ESRD system where it's systems problem.

    But it's also a resource -- I don't know if it's a resource problem in the region or it's just how the work is prioritized within the regional offices, but on state and county code changes where historically those have been done in the regional offices, there's a great amount of variance amongst the regional offices. Some have even told us don't send them in because we're not working them. And I don't know if that's regional politics relative to what the resources are or what.

    We box them up and send them in because we feel we're obligated to report those discrepancies because we're required to do monthly attestations attesting to the accuracy of our review of our payment. It's the federal equivalent for managed care of false claim if we were to misreport information on our, you know, on the accuracy of our payments. So we take that very seriously.

    MR. TOBY: Thank you.

    DR. WOOD: Other questions. Heidi.

    MS. MARGULIS: Actually I have two. With regard to this, I might give Phil an add-on. It is, I would say number one, a systems problem at CMS because it's really not just CMS's systems that interact to pay us. And then the workload of the regions is clearly and just to give an example on ESRD which can take on average seven months for a correct ESRD payment only to have it then overwritten by the fee for service system. But there are actually five systems that it goes through. A member visits a dialysis facility, a form is completed by the renal network, the renal network then enters it into something called a Standard Information Management System, that system then stores the data, it then is submitted to the CMS mainframe on the 5th of the month, the mainframe updates, then another system called the Renal Beneficiary and Utilization System, that data is then updated or uploaded into the enrollment database and that particular database updates it to the Group Health plan system and then the plan is notified. So that's a whole lot of handoffs and a whole lot of systems that could have something wrong with them on a regular basis and really the most expeditious way for this in I think most plan's opinions to get it done is for us to enter the data. We're subject to the False Claims Act and can be audited on the back end.

    Lastly, this question goes to Mr. Tucker. What is the regulation that was violated with regard to the provider plan problem that you had? What was that particular problem?

    MR. TUCKER: First of all, I want to say Heidi, we would never consider you a relic. An icon maybe. Well it has to do with the fact that in the statute and in the law the beneficiary has to make the election. But we believe there's sufficient leeway because the statute says or is deemed to have made an election. And in this case, the irony of it is the member wasn't making the election anyway because we had one plan so all the members were in that plan. They were supposed to choose their next plan. But we could choose either plan. So we had to choose one plan. We couldn't choose both plans. We thought we needed to map at two places but it had to do with the regulations -- I think it's probably cited in my testimony and the statutory references there too that the beneficiary needs to make the choice. But in this case, we were making the choice and then we working with the beneficiary to get the correct choice of what they really wanted. So members want to keep their doctors if at all possible.

    MS. MARGULIS: By the way, we do not have your testimony nor do we have Mr. Donovan's.

    MR. AYRES: I have it right here in my briefcase.

    MR. TUCKER: I have it. Right here.

    DR. WOOD: Great. I want to thank the members of this panel actually for giving us a perspective from the field. I will tell you actually that this is a topic that at least one of our subcommittees, actually probably two of them, have been working on so there's been a fair amount of work already. And we are pleased to hear what you have to share with us because I think it tells a couple of our subcommittees that they're on the right track with some of the things they're thinking about.

    Next, we'd like to get the perspective of beneficiaries and so as our first group of panelists are adjourning to the audience, I'd like to invite to the table three people who have been so kind to share with us their thoughts today and in particular, Ms. Martha Taylor from the Arizona SHIP program; a volunteer counselor from the SHIP program, Mr. Dick Griffith; and then last, Dr. Len Kirschner. And all of them are here to help us today and if we could ask as they get settled if Ms. Taylor would lead off.

    MS. TAYLOR: Good morning. I am Martha Taylor. I'm the coordinator of the Arizona State Health Insurance Assistance Program called SHIP. I'm also the representative to the SHIP Steering Committee for the SHIP programs in Regions 9 and 10 and I am the chair of the National Steering Committee. So these comments are going to reflect at least Regions 9 and 10 and some of them will reflect the SHIPs across the country.

    First of all, one of the problems that beneficiaries are seeing is provider networks and individual providers. It's extremely hard for Medicare+Choice managed care plans to find providers and networks in the rural areas that will contract with the managed care plans. They say that it's low payments. It could be but it also has to do with the fact that several counties only have five or six providers and there just aren't enough doctors in the rural areas.

    I think that an increase in payments may alleviate some of the problems but I also think that the burden may fall on the states and that some incentive is going to have to be provided to get those providers back into the rural areas.

    As far as private fee for service plans go, all the information tells beneficiaries that they can select any provider when they sign up for the private fee for service plan, use that provider and that provider will be paid. Many beneficiaries across the country are finding that under the private fee for service plan, they are going to the doctor showing their insurance card and sometimes as late as when the doctor comes in and they're sitting on the examining table undressed, they are being told that the doctor doesn't accept that health plan. So the biggest problem beneficiaries are finding with the private fee for service plan is the fact that the providers do not know enough about the private fee for service plan and they're rejecting that plan.

    As far as the managed care plan drug formularies, a lot of them across the country don't provide a drug benefit anymore but there are a lot who still do. And they have drug formularies that need to be followed. They not only have drug formularies for brand names but also for generic and the plans are asking beneficiaries to try all the drugs on the formulary and generic brands that are available before they're being permitted to have access to the drug that the doctor provided. A solution to this problem would be for the plans to accept the doctor's opinion and that a person has tried these drugs and they don't work for them instead of having the beneficiary go over trying those drugs again when they go to a new plan.

    In 1998, one of the Medicare+Choice plans in Arizona went into receivership. In September of 2001, the receiver went back to court with recommendations for payment of claims. Many beneficiaries and providers are still waiting for payment and providers who have received partial payment are getting beneficiaries for the balance. They are asking that some information be sent to beneficiaries who had the premiere plan on what their rights and protections are in this situation. They really aren't provided any updated information nor do they feel that CMS has been there for them during this process.

    In regards to lock-in, I'm not going to get into it in great detail because I know that other people here on the panel are going to discuss it. But one of the main problems we're finding is there's lack of communication to the beneficiaries on how to switch plans. It is described in Medicare in the year 2002, it's described in termination letters and the process that they have been educated to follow to leave a health plan will in fact send them back to original Medicare and use up their choice so they're not allowed to join another plan.

    The recommended solution would be to change the disenrollment forms at Social Security and 1-800-Medicare and at the plans so that beneficiaries are offered a choice of going back to original Medicare or to blank plan and then Medicare can give the beneficiary up to the termination date to apply for a new plan. This may eliminate some of the confusion.

    An additional problem with lock-in that we're finding is that a beneficiary chooses their new plan for the next year in November. And we know that most of the plans know that it takes six to eight weeks in order to get the system changed to reflect that change in plan. Beneficiaries however want to go to the doctor the 1st of January or the 2nd because the 1st is a holiday in order to see the doctor to get their prescriptions changed and everything under the new plan. When they go to this doctor, they're not listed on the health plan yet, the system doesn't reflect what plan they belong to, they don't have a card and they feel like they're being rejected by the doctor. Sometimes the doctors will ask them to pay up front the 20 percent because they could have gone back to original Medicare.

    The SHIPs across the country feel that perhaps in order to give beneficiaries a chance to try the plan, that the first three months of the year they shouldn't be allowed to make a choice and that they should be allowed to make their one choice between April 1st and June 30th. This gives the time for the system to make the change for the beneficiaries to actually try the plan to give it a chance to see if it works for them.

    The 1-800-Medicare number and the website. Information is set up by zip code. In rural areas in Arizona and other states, zip codes sometimes cross county lines because they share the same post office. And so when beneficiaries will go to the website or go to 1-800-Medicare to access this information, they are being told that a plan either is not in your area or a plan is in your area and when they contact the plan to join it, they're being told by the plan that they can't join because they're not in their county. So we've got the federal government, CMS, telling them they can join and the plan telling them they can't. So it's conflicting information.

    In addition, family members and social service providers have to know the zip code of a person in another state or another county in order to access information to help that person and if they don't know the zip code, they're told by 1-800-Medicare that they really can't be helped.

    Plan information on Medicare Compare on the website is incomplete and it really fails to reveal the rules that a beneficiary would have to comply with in order to get their brand name drugs, their generic drugs, the number of services that they can have as far as mental health, chiropractic, et cetera and it's very confusing to beneficiaries. They sign up for a plan based on that information and they really don't know if it's true or not.

    The Medicare Compare on the website, the information is outdated. Many of the phone numbers are no longer in service and it would be helpful if that was updated.

    Also with the 1-800 number, beneficiaries are being provided information that's incorrect by operators. Some of the operators will read the first part of a script and then ad lib the rest making the information incorrect and the beneficiary thinking that they do have a right that they really don't have.

    And then lastly, the SHIP program. According to the February 2002 OIG report on SHIPs, the SHIPs are able to target their program to meet the needs of local communities. Use a variety of initiatives and unique -- use unique ways in order to contact clients and give them information that they need. We not only talk about their Medicare benefits and all the options they have under Medicare but we also try and sign them up for additional programs like tax abatements, utility assistance, so that they can increase their incomes to afford the things that they're not allowed.

    We also have created Medicare -- we've recreated Medicare documents that are in different languages so that they can be provided adequate information. The SHIPS do provide this service at nationally 31 cents per beneficiary and the SHIPs really could do a better service now if they had 50 cents per beneficiary. But needless to say, we are happy to provide the services and we do feel that the information that SHIPs provide on a local level is very necessary and especially now with all the changes. Thank you very much.

    DR. WOOD: Thank you. Mr. Griffith.

    MR. GRIFFITH: I'm a SHIP volunteer here in Maricopa County. By way of background, I'm a retired federal employee. Most of my career spent back in Baltimore with Social Security and HCFA in the 1970's during the Medicare legislative and program policy and the 80's and 90's doing Social Security program in legislative policy with SSA.

    I've been a volunteer with the program here now for about three years.

    I'd like to focus my remarks this morning on the Medicare+Choice lock-in requirements. In particular, what I am seeing emerging as a great deal of confusion among the beneficiaries and problems that are being caused in moving form one Medicare+Choice plan to another. I think there's a need for better public information about the rules that apply to these individuals and I also think there's a need for a similar consistent policy that will offer the individuals who find themselves in a circumstance other than what they intended, some measure of relief.

    The lock-in provisions I'm sure that the panel is already aware of, basically one shot to move from original Medicare to a plan, from a plan to original Medicare, from a plan to another plan through the first six months this year, the first three months during the open enrollment periods in succeeding years.

    The problem that we're finding with beneficiaries at this point is that those who intended to go from one Medicare+Choice plan to another. If they follow what's in the Medicare and You 2002 which begins by telling them or suggesting to them if they disenroll from their current plan, leads them down a path contrary to their intention.

    If they disenroll from their current plan and subsequently enroll in a new plan and those two actions don't have the same effective date, in effect, they hit a stop sign at the point that they disenrolled from the current program, they go to the original Medicare and the election to go into a new managed care plan is invalid under the lock-in rules.

    I think there are two reasons that probably explain why this is happening. One, past practice under continuous open enrollment beneficiaries could go from plan to plan to plan to plan pretty much at will. This is what they're used to doing. In particular, with managed care beneficiaries that we've got out here in the wintertime who are somewhere else and there are thousands of them in Illinois, Wisconsin, Minnesota, Iowa all through the summer months, it will -- they are used to changing, used to being able to make whatever choice they wanted to.

    I think the other reason that we're seeing some of the problems is that I don't think the public information materials that's been available to beneficiaries on this point of the lock-in are as clear as they could be and need to be. In particular, I put together a little handout last night that I hoped will illustrate the point a little more clearly. Drawing from a number of documents, some of them that I got off of the web, it appears to me that documents that have been prepared for your internal use with or professional use are very clear on what constitutes an election. And in particular, the one that is labeled "Quick Reference for Medicare Professionals" says specifically individuals should be told not to disenroll from their current MAC plan before enrolling in a new one. This may count as a second election and result in the denial or rejection of their enrollment.

    If you come down those excerpts to the excerpt from Medicare and You 2002, what is to be called I guess the Medicare handbook, and the language of the form that is used for disenrollment from a managed care plan, I think what you find is language that suggests to any reasonable person, they can disenroll today and when they get around to it, they can re-enroll in another plan at another time. That doesn't happen.

    The other aspect I'd like to touch on with all of this is the matter of what can be done to address these problem cases as they arise? It's my understanding at present, that beneficiaries are being told to write a letter requesting reinstatement in the Medicare+Choice plan from which they disenrolled. A few things are unclear. Whether they're going to get a favorable decision to be able to go back into it and if they are, if they're in the same position that they would have been if they never had disenrolled which is to say can they then go to a new plan having been reinstated in the old one? We just don't know at this point. We also don't know I think on what basis these are going to be adjudicated.

    Again, in preparing for the testimony this morning, I took a look at the CMS website. The only policy statement I could find was in something called Operational Policy Letter 100. Under the section reinstatements due to mistaken disenrollment by member, what I found was "deliberate member at issue the disenrollments imply intent to disenroll. Therefore, reinstatements generally will not be allowed if the member deliberately initiated a disenrollment." The only exception is for those members who are able to cancel the disenrollment before it becomes effective.

    If that's the policy that's in effect, I think it needs to be modified to take account of the shortcomings in public information that's been distributed to beneficiaries. And if it's not the policy that's in effect, then I think it's incumbent upon CMS to provide a clear explanation of the current policy both to beneficiaries and to those of us who assist them.

    Thank you.

    DR. WOOD: Thank you. Dr. Kirschner.

    DR. KIRSCHNER: Thank you very much. That was well done. I liked that. Energetic -- I like energetic speakers and let me introduce myself and I'll stand up. I would imagine everybody here needs to stand up and stretch for a minute. It's been a long morning. I have a wonderful cartoon from the Wall Street Journal. It says -- the girl was up on the hill and he says, "I can explain the meaning of life but don't ask me to explain Medicare." And I think we've heard that today. It is very complicated.

    Let me just say, my name is Lenny Kirschner. Can you turn that off for a second. I was going to turn that on in a minute, not right now. You're too fast for me. Just -- I am here representing AARP Arizona and it's executive council and the state executives are here and it's 700,000 members in Arizona. 35 million members nationwide.

    My background. I've seen Medicare from so many different places I don't know exactly which hat to wear. Physician; hospital administrator; HMO medical director; the director for six and a half years of Arizona's Medicaid program, working for three different governors; I'd like to say only two were indicted; consultant -- brought me over the last seven to eight years to visit all 50 state capitols primarily dealing with their Medicaid programs but clearly we deal with Medicaid because of the dual eligibles and the important part of that you deal with Medicare.

    I'm now a Medicare member. I turned 65 last year. I have Medicare and Tricare for life as a wraparound. Wonderful. But probably most important, the closest I've gotten to Medicare+Choice is my 93-year-old mother, we moved her from Florida to Arizona about two years ago, she's a MediSun member and she keeps saying, "I don't understand this managed care stuff." But she's getting good care and I really appreciate that.

    I'm speaking for the members on Medicare. You can put that up now. And I want in the background this wonderful picture of Lyndon and Lady Bird Johnson, Harry and Bess Truman, Herbert Hoover, not Herbert Hoover -- no, Humphrey, signing Medicare and Medicaid legislation into place. Mr. Toby, you were probably around in those days. Remember those days? Well back when I was the director of the AHCCCS program, I regulated health plans and Mr. Toby for a time as the acting HCFA administrator and we agreed yesterday we will never say CMS. We will always spit out HCFA because we grew up saying that. He was my administrator.

    They were not talking about health plans, they were not talking about others. They were talking about members, people in this country who would get health care benefits through these programs and I think we ought to once again focus on the members. We have heard lots of talk about the administrative burden put on the plans if we had physicians and I think I have a few in the audience that I see out here. We'll talk about the problems the physicians have. I'm on the board of the Arizona Hospital Association. I can tell you we talk about the problems that we have with Medicare, fee for service and Medicare+Choice but the reality is it's the people who are on Medicare, the 40 million people that are on Medicare and what this program promised.

    1997, we were promised choice. We heard that from Gary. Isn't that -- both of you said that in your presentation. But I think that also in articles that came out and I can't say that this was in legislation but we talked about preventive care, we talked about pharmacy care, we tossed about cost sharing issues, we talked about a modern healthcare program, not the program that was signed into law in Independence, Missouri in July of 1965 with Blue Shield Blue Cross model that dated back to the 30's, 40's and 50's. We were promised that.

    What have we got in 2002? Well, we got decrease in choice. Clearly we've heard that all day. Got decrease in benefits. We've heard that all day. We have increase in copayments, deductibles. We've heard that today. And complexity. What we have got is change, constant, pervasive and complex. And my favorite philosopher of the end of the 20th century was Dilbert and he said, "Change is good. You go first." And the problem for many of our members is change is hard. My 93-year-old mother doesn't like change. She's still talking about why I moved her from Florida to Arizona and she's picking on me on that.

    A national perspective. The Medicare program itself. Just the broader program. Whether it Donna Shalleo (phonetic) or Senator (indiscernible) calling it a Cadillac, unfortunately a 1960's Cadillac. Whether it was Bruce Freed writing the Medicare+Choice program is a code blue for the Health Insurance Association of America. Whether it was Debra Steelman testifying before Congress a number of years ago saying only three things wrong with Medicare. Part A, Part B and the benefit package. So clearly there's been angst in the system. Marsha Grove last week came out with another report from Mathematica talking about beneficiaries would face higher cost sharing in 2002. But one of your members and I wish he was here, is Leonard Schafer, and in Health Affairs that -- were hit the -- the written document that came out last week from their website and he did an interview and this is what he said. "Medicare+Choice, not just a disaster but a screaming flaming disaster." I was going to ask him what he meant. I think I understand what he meant.

    But the reality is Medicare has in fact been a wonderful for so many reasons and I'll come back to that.

    In a document that came out from the Kaiser Family Foundation and say, "What happens with all this chaos in this change?" And I think that you pointed out some of those chaos in that change. But this is what it said. Let me just read two things.

"Overall, a substantial share of beneficiaries who were involuntarily disenrolled from the Medicare HMO while a portion of their traditional Medicare of a safety net after the plan withdrew from the market experienced a decline in their supplemental benefits, an increase in the premiums for these benefits and a disruption to their medical care arrangements. In addition, this adversely impacted far greater numbers of those who were under 65 and disabled, those who are poor, those who are African-American and those who are Hispanic."

    So clearly, these changes in the plans that we have seen over these past years have real implications for people on Medicare. We're not just talking about the numbers, we're not talking about the forms to fill out, we're talking about real people. And I think that's got to be critical. So when you talk about regulatory change, keep your eye on the ball. They things they were talking about that President Johnson and President Truman were talking about, were the people who were going to get care under this. And the system needs to be responsive to that.

    So what do we want? We want stability in the program. That's been hard to see over these five years. We want choice. That includes plans but it probably includes providers most often. We heard that in the previous panel. People respond to their providers, not to plans. They don't know what the plan is. They know who their doctor is. My mother now has a new primary care doctor. She says, "She's pregnant, I've never gone to a pregnant doctor before." So that's something very interesting about it. But that's -- she's now attached to her.

    We want information. And I think that we talked about that just in this panel. Accurate, standardized, up to date, complete, providing information and why it is provided. In a plain language. And Gary, is that hard to do? It seems very hard to do. I agree we did that.

    You're in Arizona. This is a great state. We have 20 years experience on a demonstration program. We can't get out of being a demonstration because of the Social Security rules so we're an 1115 demonstration. We'll be a demonstration forever. But you can look at states as the laboratories of democracy. Arizona has 20 years experience. There's 1115 waivers that have been given to Hawaii and Oregon, Minnesota, Wisconsin, Rhode Island, New York. They need to be the models you look at in developing managed care systems that work. Clearly Medicaid and Medicare are aligned so much. I use a slide that says they're twins locked at the hip. One is Arnold Schwarzenneger and one is Danny DeVito according to HCFA but that's another story.

    And the SHIP plans, you know, I think I've learned a little bit in talking to Martha. They are important. Finance them, support them.

    You said in your handout, we're invited to speak on other subjects beside this and I thought I'd point out that the Diamondbacks are going to win the World Series again this year. But I pass on that and I won't.

    Pharmacy benefits for all. It is clear that that is a critical issue. In conversations yesterday with my friend Lee Partridge who was the Medicaid director in the District of Columbia, she and Vern Smith were at the Johnson Library in Austin, Texas, last September and they found a memo in Joe Califano's paper, it's dated 26 October 66 from Robert Ball, the Social Security administrator, those of you who remember him, to Dr. Phillip Lee, Assistant Secretary, and he said, "We need a Medicare pharmacy benefit." That was 36 years ago. I think it's time that we started taking that seriously. It's past time. And that I think would stabilize the overall program. It would level the playing field, it would do away with some of the aspects of adverse selection that managed care plans have in a voluntary system.

    Let me end with a quote from Emily Freedman. In a wonderful article which she wrote as part of a theme subject for the Journal of the American Medical Association at the 30th anniversary of the signing of the Social Security Amendments of 1965. This is what she said and I'll shut up after that.

"Medicare and Medicaid are supposed to last five or six years. They were temporary programs. They have lasted 30 and remain with us incomplete, imperfect, illogical, and under attack as always. Their survival would be remarkable but it was not accidental. So far we have been unable as a nation to come up with better means of addressing the basic viscera and human troubles that Medicare and Medicaid seek to alleviate. Until we do, these programs remain the best answers we have. Their underlying mission remains necessary. It is a reconfigured as they have been so often. For no matter how many times they have failed, they have accomplished much and it's painful to contemplate the burden of suffering that Americans, the people on these programs, would have gone without their protection."

    Thank you for inviting me to speak to your group.

    DR. WOOD: Thank you, Dr. Kirschner. We have some time for questions from committee members.

    MR. BLOOM: Thank you, Mr. Chairman. First of all, let me say I'm rather dismayed that we didn't have a panelist that was a disenrolled Medicare beneficiary on this panel. I think we really needed to hear from someone that was disenrolled so I will take that opportunity to say I was a disenrolled Medicare beneficiary so I know what that was like. And I was disenrolled by my HMO.

    And it's a very complicated thing and I really commend Ms. Taylor for bringing this up.

    One of the things that happens with disenrollment is that there's a current place where there's maybe if you're lucky enough to be in a situation where there may be four or five other plans, and then when you go to apply for that plan, you find all the slots are filled up and you can't even get into the plan. So there really aren't those choices.

    The other thing that I wanted to say that I think Ms. Taylor also brought to the fore that I think is very, very important is the Medicare Compare that's on the CMS website is extremely poor. The information is vague, misleading and confusing at times. The Medicare Compare also does not provide information on which drugs are on the formularies and how the plans calculate the cost towards the prescription drug limits that those plans offer. I might add as well the Medicare and You 2002 book is actually a rather poor book for figuring out exactly what your benefits are. There's very little information in there. I'm not sure what reading level it's made for. I think I'm fairly intelligent and I have a hard time getting through, you know, understanding exactly what my benefits are from it.

    I think this is a problem that's going to be ongoing. I don't know the answer to it. But, you know, when you see more and more disenrollments in this program constantly, the money is obviously an issue, the SHIPs program I think is vastly underfunded when you compare it to the number of people that you have to serve and I commend you for doing the SHIPs thing. I think it's a wonderful program.

    But it really disheartens me that we couldn't find one Medicare beneficiary that was disenrolled so they could tell what it's like to go through trying to find a new plan because I think it's a real, real challenge.

    DR. WOOD: Thanks, Jeff, for that perspective. Other questions? I was just commenting to Wesley. I had reviewed the screen shots we have of a couple of the Medicare Compare sheets and I was a little challenged in reading one of them. It says, "You pay zero dollars for Medicare covered ambulance services. Do not pay this amount if you are admitted to the hospital." And I was trying to figure out if it's not zero dollars, then what is it? But Leslie just gave me an explanation and I'm trying to figure it out.

    MS. NORWALK: You want me to explain it?

    DR. WOOD: Leslie will explain it.

    MS. NORWALK: I think the point of Medicare Compare and certainly Gary if you and Bob want to add to this, is really to give us a quick way to get all the information that the plans give us in their PBP and be able to disseminate it without rewriting something for all the plans we have across the country. And this particular chart that the chairman is referring to looks at for example ambulance services. And if this particular plan had a copayment for ambulance services, the box would actually make some sense. It would say you pay $25 for Medicare covered ambulance services which would be the copayment amount. Except if you are admitted in which case, that you would get that refunded or you wouldn't pay that at all. And I think that's where the point but it doesn't read correctly or it doesn't read rationally because what you're saying is correct but it's not rational because there is no copayment so it says it's zero dollars and if you're admitted, you don't pay anything. Well that doesn't make any sense but if you look at it from the perspective of this is a -- it's your fill in the blank document that is computer generated, you can see why that happens.

    Now, maybe we need to think about how we can make some tweaks to that so when the default value is zero, that -- the next box would change and that might be something that we could do that's computer generated as opposed to juts having blanket language so that it actually makes a little bit more sense.

    MS. MARGULIS: You're on the right track. Thank you.

    The plans have complained tremendously about the problem, Jeff, that you brought up because it appears as though it's misleading information. And the law clearly states that two reasons that CMS can deny a piece of marketing or communication material is that it was inaccurate or willfully misleading. So the plans have bothered Gary enormously about the interface between the plan benefit package and the information that gets -- and the summary of benefits which gets fed into Medicare Compare so that we are given some flexibility so that we can explain the situations like the one that Dr. Wood just explained. There are those that had to do with pharmaceutical benefits that are also -- can be somewhat misleading in other areas as well.

    So each year, CMS has worked with plans and lessons learned, trying to go forward with changes that allow for greater flexibility. We would recommend certainly that that be accelerated because these areas are not (indiscernible) plans in terms of providing confusing information.

    DR. WOOD: Jack.

    MR. ROVNER: Enlighten me please. Who writes this template?

    FEMALE VOICE: Do you know who wrote it?

    MR. BAILEY: From what I recall, the template was actually developed as a result and we're talking summary of benefits?

    MR. ROVNER: I'm talking about the thing that said I'm curious as to which is --

    MR. BAILEY: It was developed as an approach -- well to back up. The summary of benefits was the first material that we were interested in standardizing so beneficiaries across the country would basically have the same information presented to them whenever they enrolled or disenrolled from a plan. And that was developed in a process in DC with -- we brought the plans in, the advocates in and the agency.

    The Medicare Compare, I'm not too familiar with the process because I wasn't that much involved in it but it's also one that as Heidi said, that each year we're trying to have the PBP catch up with all the different types of benefit designs and it's tough to take a very specific benefit design and put it in something that may not work. So we do have a lessons learned conferences and the plans come in and we make the adjustments to it.

    If in fact there's something that because of the way the PBP is designed, if something comes out and it's inaccurate or wrong on Medicare Compare and also in the summary of benefits, while it's very difficult to change Medicare Compare, we will allow the summary benefits to be changed. We don't want to have it misleading in both instances.

    MR. ROVNER: With respect, that's really not my question. My question is who wrote the template for Medicare Compare that the computer fills in this information which quite frankly as I look at it says things like you pay premium, you pay zero each month, you will also continue to pay the Medicare Part B premium $54 each month. That is really not in the English language designed for an ordinary human being, let alone if you will my 93-year-old mother who is an immigrant, lived here 80 years but -- could understand. I'm not sure I understand it so I'd like to know who writes the template and then who reads it before it's posted on the computer?

    MR. BAILEY: CMS certainly wrote the template and I'm not sure exactly what review process it goes through but we can certainly provide that information to the committee.

    MR. ROVNER: Is there something that prevents the plans to write their own description for the template subject obviously to, you know, CMS review and I assume I heard from the panelists earlier, you know, if it's false or misleading, a penalty or something. So that they're held accountable. But what would be -- I mean if you have a designed a template to allow comparison, that makes sense to me but the working that goes in there makes no sense. So what is -- is there something that prevents the plans basically to write their own fill for the templates that would then be subject to your oversight and accountability?

    MR. BAILEY: And the answer is I don't have that information available but I can talk to the folks at CMS that do and get back to you.

    DR. WOOD: Can we ask Martha. She might have a little answer and then I'll come over to you, Martha, go ahead.

    MS. TAYLOR: I can see your point in having the plans being able to write own. However, the confusion comes up with just the readability of the template and actually what CMS's goal I think, I can't speak for CMS, but what their goal is is to have a template which gives beneficiaries non-partisan information and if the plans have the ability to write their own or fill in their own template, it may, you know, they may get a creative writer or, you know, or worse a lawyer to fill in the box. I know, I'm just teasing you. But to get somebody else to fill in the box that may give one plan an advantage over the other and it would seem the way CMS works is that they're trying to give non-partisan information.

    As far as the Medigap Compare, I know I worked for a long time with CMS on getting information on Medigap Compare and the biggest problem with that is that CMS is dependent on private insurance companies who don't have a contract with Medicare to voluntarily submit that information in a timely manner.

    DR. WOOD: Eric.

    MR. GRIFFITH: Yeah, I support what Martha says. I think three's a terribly critical need for uniformity when you're making comparisons. So, you know, I agree with that. And one of the things our subcommittee is coming out with is the need for or focus groups that represent to review these materials and but I do want to emphasize I think it'd be wrong to have different wordings from different plans because that would knock your comparisons out. But it certainly needs to be made readable.

    DR. WOOD: Before we break, I'll make one observation and if the committee members have not looked at this information, it is behind Tab B in your briefing books and is from the website looking at Compare and it gets back to some of the quality data and I was intrigued by the quality data since one of my professional interests is in assuring the best possible care.

    But I was struck by a couple of the graphs that are labeled the percentage rate of their own care is the best possible care with a rating of 10 and I presume -- this is where clarity comes into play. I presume that the way this graph is written, it's the percentage of respondents who would have a rating of 10 out of a 10-point scale for each of the questions. But the four questions are the percentage of original Medicare plan average for the United States or for the observations. The managed care plan rate for the United States, the original Medicare plan rate for Arizona and then the managed care plan rate for Arizona and then there are two specific plans which I won't identify. But what is striking is that for the original Medicare plan that was for the United States, only 47 percent of respondents and again I presume this is a correct interpretation of the graph but I could be wrong but only 47 percent of respondents rated their original Medicare plan as the best possible care. That was the question. Well that's my point. Actually if you're going to put the information out, it needs to be useful information. I mean -- and then managed care is actually the same. And then you have the 40 percent rate. But there really isn't any way of saying that that 40 percent is statistically different than the 48 percent or the 47 percent that is the average. I would presume that based on the number of respondents which would we also don't have here, that that 40 percent rate is actually a statistically valid difference and not simply a matter of chance but I don't know that for sure. So from the perspective of putting information out like this, as I was trying to use it to think about who I would pick or how I would pick, it's not helpful. And so from that perspective, then all of the time and effort that goes into collecting, processing, presenting that information is effectively a waste if it doesn't help people make a reasonably informed choice. So that's another opportunity for us. That was just an observation.

    It's time for us to take a break. I want to Thank particularly our last group of panelists for giving us a very good perspective from the beneficiary side. We'll take a ten minute break and then reconvene for public comment.

(Recess)

    DR. WOOD: Committee members back to the table please. We have some members of the public who have come today that we would like to hear. For those of you who are joining us today to make public comment, let me share with you the observations that we made yesterday. The Secretary has charged this Committee with finding solutions to regulatory problems and our charge is to find especially those solutions to regulatory problems that make it hard for beneficiaries to get the services that they should get and make it hard for people who are providing care for beneficiaries to work effectively in that job. We do not address issues of payment, payment policy or funding. It is not within our charge and since we're not elected officials, we can't spend anybody's money.

    I'd like to invite the first of four public commenters. Ms. Randy Kammer, if you would please share with us your thoughts. We'll give each of you five minutes to be consistent with what we've granted our public commenters yesterday.

    MS. KAMMER: Thank you. I'm not actually a member of the public technically so let me explain something. My name is Randy Kammer. I'm Vice President for Regulatory Affairs in Public Policy, Blue Cross Blue Shield of Florida. And the reason I'm here is I didn't shlep from Florida. I want you to know that. I was at the National Association Commissioner's Meeting in Reno, Nevada and AHP and BCPSA asked me to come testify. I didn't make it on the panel, so I'm here testifying. And like Dr. Kirschner's mother, I don't know why someone would leave Florida so I don't really understand that myself.

    Steve Tucker told you that he's going to supply you with a written testimony. I have several points and I marked up my written testimony but I promise you I will mail it to you.

    My organization has participated in the M+C programs since its inception. In 2001, we served approximately 150,000 members in 13 counties. I believe at the time, we were the 10th largest M+C plan in the country. We made a very difficult decision last year and it was the first time we did any withdrawals and those withdrawals resulted in a reduction to 74,000 beneficiaries in about five and a half counties.

    We very much support the goals of the Advisory Committee and we're hopeful that the initiative will build on changes that I have to be honest that Mr. Baily has already begun. There are a lot of good administrative changes that we've seen. A lot of good communication with industry. But I think they have a little way to go.

    I'm going to try not to be too repetitive. Bob talked about the failure of the BBA and Dr. Wood, you just said you don't have any purview over the funding. We understand that. But the reality is the failure of the BBA is due to lack of funding from Congress and the lack of recognition that with increasing medical costs both on the inpatient hospitalization and the pharmacy side, two percent is just not going to do it anywhere.

    There's also a perception which I continue to fail to understand that some plans are making a ton on these kinds of programs. If you can find one, show me and we'll see if we can get into that county.

    The Medicare+Choice program can provide valuable choices available to Medicare beneficiaries, especially for low income beneficiaries and on their behalf, I will tell you, we have so many dual eligibles registered in Florida in this program, it's been a real godsend to them. We even worked with our state agency for a time when our pharmacy benefits were adequate which I would argue with benefit reductions. They probably are not. But when they were adequate, our state agency, the agency for healthcare administration actually paid the premium for the dual eligibles in order to keep them in a fully funded pharmacy program which was better than the Medicaid program. So the reduction in benefits has hurt a whole segment of the population. I haven't heard that addressed much today.

    I would also urge that any work by CMS on regulatory initiatives looked to initiatives in the private sector for efficiency and the kind of way we run a business to make it more like a business.

    Instead of going through all my areas of concern, I'm going to just highlight a couple of areas. Most of them have been discussed but I don't -- as Candy Shaller says, "you can't repeat enough on some of these." And I would agree with that.

    You've heard a lot of testimony on the issue about streamlining the ACR proposal requirements. I am not an actuary. Sometimes I feel like one. And I'm proud to admit that I am a lawyer. But some of the items that we have identified, I think you haven't heard in detail and I think that you need to be aware of. The reduction of the requirements that Gary mentioned and that Bob mentioned as a possibility is great news for us. Right now, Medicare+Choice trends are assumed to be those of the commercial population and including under 65 individual business. Because there are three fundamentally different populations with different healthcare needs, we have to 1) collect data on the commercial and under 65 segments, 2) adjust the ACR to replace the non-Medicare trends with Medicare trends and it's an incredible labor intensive process and it's not very productive. It doesn't make any sense in the context of the ACR.

    Another issue that was not mentioned is you've heard that a third of all the MCO plans have an ACR audit on an annual basis. And that's part of the law. We recognize three's not much you can do in terms of regulatory streamlining.

    I will tell you and not to slam -- please don't go look up who did our audit, okay -- not to slam the accountants and the outside consultants who have done this, but they have been tremendously unfamiliar with both the ACR itself and the actuarial concepts in general. Our most recent experience was the audit was performed from the perspective of replicating the math. As an example, too much time was spent asking us how to tie numbers from one spreadsheet to another. I would suggest that if you have people who have a lot of experience in this area, you can cut a lot of waste and time and I think you're paying them and ultimately I guess we are. So it's not a very productive manner of auditing the ACR's.

    Another thing you've heard a lot about is the consistency and timely review of marketing material. Gary said they were going to expand the model language and look for legislative authority to expand that use and file. We applaud that effort but there is still inconsistency between the regions and since we're only in one region, I'll speak to inconsistency between central office and the regional office. I know they're working on it. We had some personnel issues in our RO that were fixed. So that we actually had a period of time where we would send in marketing materials and the next week, almost the exact same marketing materials were sent in and they were disapproved. So there was no understanding of that.

    DR. WOOD: Could you wrap up please.

    MS. KAMMER: Huh?

    DR. WOOD: Could you wrap up please?

    MS. KAMMER: Yes, I'll be happy to. Am I over five minutes? I'm very sorry.

    DR. WOOD: Well, that's all right.

    MS. KAMMER: Well, I just would encourage you to streamline the monitoring process if you would and make it easier for plans to go through it, particularly plans who don't have a lot of adverse findings, giving them the benefit of a doubt to make a streamlined process. Thank you.

    DR. WOOD: Thank you. Dr. George Burdick.

    DR. BURDICK: I'm Dr. George Burdick and I'm recent President of the Arizona Medical Association and was on the statewide Arizona Insurance Task Force appointed by the governor and have learned quite a bit over the last few years about statewide problems.

    I know you're talking about Medicare Choice plans here. That's not what I'm here to talk about. I will just make one comment. And Dr. Kirschner mentioned the fact that the drug benefit program should be, I think he said, should be for all Medicare beneficiaries. I think the only reason that in my practice we had any Medicare Choice plans was because of the strong drug benefits in the state. Otherwise, we would have never done it. The reimbursement for physicians was obscene. So that's a major problem and I certainly hope you take care of what you can, particularly for the rural areas of this community which are tremendously under served by Medicare Choice plans.

    What I'm here to talk about and I've been asked to talked about by my organization, the Arizona Medical Association, is the EMTALA laws and I think you're probably getting tired of hearing about them. But we're very tired of dealing with them. And to talk about something that is important to the care of sick people, particularly I think Medicare and Medicaid patients, things that affect them the most, these laws have been an absolute disaster in this state and probably we almost all border states and I suspect it has affected other states as well.

    The emergency room system in particular and trauma centers are on the verge of collapse in this state. We have waits in Phoenix of over five hours on most weekends at the major trauma centers. One ambulance driver last week suggested that he probably could have driven his patient to San Diego and gotten care faster than he did at one of the local trauma centers.

    Very often there are -- the ambulances are on diversion and are just waiting in line outside of our major trauma centers, particularly in Phoenix but also in Tucson.

    From a physician's standpoint, which I will address primarily, traditionally we've covered emergency rooms and we've covered emergency services as part of our medical professionalism. We did it on a voluntary basis. What's happening with EMTALA is it's no longer voluntary. It's mandatory. And it's mandatory work for no pay. I think we thought a little bit about that 140 years ago. And it is de facto slavery in the opinion of most physicians and in fact the physicians have in fact taken action.

    Now in addition to the usual problems with the EMTALA laws or the threat thereof have required physicians to see patients that they do not feel qualified to see and would not see in their offices because of their lack of qualifications.

    As a result, doctors have re-evaluated their practices. The Draconian penalties including two years off the Medicare rolls entirely, $50,000 in fines for violations, have caused everybody to re-evaluate just where they stand. Many specialists find gee, I really don't know the hospital at all. And there are large groups of (indiscernible) specialists for emergency care that do not take (indiscernible) call and resigns from all hospital staffs. Those specialists have in fact resigned for -- and in Phoenix and Tucson, it's typical to be on several hospital staffs. My practice was on six. We're now on three but we're going to go to two by the end of the year.

    The border communities -- they're (indiscernible) and I have a tape her from Dr. Lou Hyde, an orthopedist in Yuma, which gives graphic detail I think of the problems that she runs into in trying to deal with patients in a border community. Those physicians never -- they just leave. When they leave Yuma, they often leave the state.

    What would we recommend? Well, I saw the recommendations from Florida. I frankly think that's -- most of that is silliness. I don't think the laws need to be revised. I think they need to be revised. In 35 years of seeing patients in the emergency center and in referral centers, I don't ever recall using the phrase, gee, I was dumped on. I don't -- I was referring to many times but never dumped on.

    I have no other comments but I think this law was made based on anecdotal data and probably has caused much more harm than it's otherwise good intentions.

    DR. WOOD: May I ask you to wrap up please?

    DR. BURDICK: Yes. In addition to the videotape which takes about ten minutes and I encourage all of you to look at, if anybody wants to come back to the state maybe as the (indiscernible), we'd be glad to arrange site visits for you and take particularly the border communities. EMTALA causes different problems all over the state. If you go to ShowLow, it's one problem. If you go to Yuma, it's another. If you go to (indiscernible), it's something else. But in any case, the border states, (indiscernible) that look at the biggest problems. Thank you very much.

    DR. WOOD: Thank you. Next I'd like to invite Mr Michael Parks.

    MR. PARKS: I'm a lawyer. I wanted to not broadcast that too much. I've worked with Medicare and Medicaid beneficiaries for over 30 years with the Senior Citizens Office in Albuquerque, New Mexico. I hope you folks will visit our town some day and see how the Medicare+Choice system is working there.

    I agree with everything that Dr. Kirschner said. He set forth my view on the situation exactly. The Medicare+Choice program has produced a lot of benefit for a lot of people. At the same time, it has also introduced a lot of disruption in care and a lot of confusion for beneficiaries. I have several specific recommendations and if time permits, one or two recommendations in other areas as well.

    First of all, I recommend that the Secretary exercise his or her discretion to contract with Medicare+Choice plans for at least two year periods rather than one. The constant in and out of the market on a yearly basis drives people crazy.

    Secondly, in terms of the special enrollment periods, which is authorized by statute and regulations, rather than curtail those options, I really recommend that the Secretary in specific ways clarify and expand what counts as a special situation for purposes of disenrollment outside the lock-in period and such situations would include your PCP leaving the HMO and the HMO stopping covering a particular service like a specific drug that you need and that the HMO no longer provides.

    The whole theory of the Medicare+Choice statute as people have noted was that choice was going to explode, get geometrically greater and people would have much more access and choice. That has not happened. Why the lock-in feature which was part of that misguided theory remains in effect is beyond me.

    I think benefits that are promised at the beginning of the year should all remain in effect until the end of the year and the Secretary through his discretion has enabled plans to make changes such as to drug formularies and other things in the middle of the year and I think that's reprehensible.

    In addition, the Secretary by policy has been allowing some plan benefits to in fact be worse than those particular benefits would be in the Medicare system. Especially in the area of cost sharing. Since the statute and the regulations say plans must provide coverage at least as good as Medicare, that policy should definitely be changed.

    In terms of marketing, there have been many good points about whether the definition of what is a marketing material may be a bit too broad and whether some of the reviews are a little bit too picayune but as a politician of prominence recently said with respect to affirmative action, "maybe amend it, but definitely don't end it." There remains and always has been a very strong need for review of all types of marketing materials so that they're clear and accurate.

    There's some comments I have about appeals. There has been some suggestion to reduce notice of appeal rights. Perhaps reduce some appeal rights. In fact, I think notice should be strengthened. Under the present system, it's CMS policy that particular major providers of a managed care plan don't have to tell people of appeal rights when they deny them a service because supposedly that's the organization's job to do. Well I constantly have people who are denied services by the major home healthcare provider and other types of major specialty providers of a particular plan. They never know about their appeal rights and when I get involved in situations like that, so often I see that the decisions are just totally contrary to law. In terms of comparative marketing, yes, it's a constant problem for people and I think everyone saw that today by looking at the materials.

    Two or three last comments which are not exactly on Medicare+Choice plans but I noticed that they were brought up in the Price Waterhouse partner issues report. One was that thing I mentioned about decreasing the volume of required beneficiary notices relating to appeal rights and preservices denials, aside from being probably illegal, it's really going in the wrong direction. There is a massive problem in the Medicare+Choice system of people not knowing that they can appeal decisions which are often made by clerks and other people who misinterpret the rules and people lose services.

    There's also a reference to including Medicare+Choice plans in early stages of policy development. I think that's a great idea. I notice also that Price Waterhouse's comment or title was called the CMS partner issues report. Well if beneficiaries and their advocates are partners, they are awfully junior partners in all of this. Usually they're not at the table. Their input which is probably pretty reliable because they work with beneficiaries day in and day out is rarely solicited and rarely honored.

    Last but not least, totally unrelated. I would suggest a recommendation that the Secretary encourage Medicare supplemental insurance plans to have their claims electronically coordinated with Medicare claims. The failure to do so constantly requires both beneficiaries and doctors to have to submit multiple claims and it's just a waste of time and effort.

    And lastly, Price Waterhouse also mentions -- I'm wrapping up. I see the red light here. Price Waterhouse says that the notice of discharge from hospitals should be eased up. HCFA probably influenced by the Office of Management and Budget has gone in the exact opposite direction of that in its recently proposed rule. It's a perfect example of trying to combine a horse and a camel and having a one humped animal or something like that. Whatever the analogy is. The notice of discharge from hospitals and the relevant appeal rights that people have was placed in the law and regulations when the DRG system, the kind of per case system of reimbursement was adopted in Medicare. And it was done with the realization that when hospitals suddenly were paid on a per case basis rather than a per day basis, there would be an incentive for them to push people out of hospitals as quickly as possible and often too soon. And so what Congress did was say well we'll give people two notices. One, a notice of their rights when they first enter a hospital and second, a notice of the rights when the discharge takes place. Peoples' rights are constantly misconstrued, misstated and denied every day. I have calls on this every other day.

    What was the response of HCFA I think as influenced by OMB was to take these two notices, blend them together, insist on using only a single page so that all the good features of both of these notices have been like totally confused now and I think I would recommend that the Secretary go back to this two notice format with simple language so people know their rights. Thank you.

    DR. WOOD: Thank you. And Ms. Anita Murdock (sic).

    MS. MERKO: My name is Anita Merko. I'm the Medical Director for Health Services Advisory Group, the peer review organization in Arizona and I also speak today on behalf of the Organization of Peer Review Organizations called AHQA, Arizona Health, or excuse me, American Health Quality Association. And I'm going back to everyone's favorite topic and that's EMTALA. Specifically I would like to speak to a few issues that were outlined in the draft that I had a chance to review of the Advisory Committee regulatory form issue statement on EMTALA. And I would like to say that our organization is in support of specifically 8, 9 and 10 and I would like to very specifically address 10 which discusses the peer review organization role in the EMTALA process.

    The language for those of you who don't have it available in number 10 is "modify enforcement practices by making peer review mandatory early in the process." I wanted to strengthen the fact that the key is to perform the review of the medical issues prior to the determination that a violation has actually occurred. In the current interpretation, this is a five day review. For those of you who are not aware, this five day review is an optional review. It is optional at the discretion of the regional office. And so it is not necessarily performed and in fact in Arizona during my tenure as Medical Director, we have never performed a five day review which means that we have not had the ability to make any recommendation on whether a violation has occurred or not. So we get involved at the 60 day when the violation has actually occurred and it is mandatory that the peer review organization involve the medical issues.

    And the reason why I think it's important that we look at the early involvement of the PRO as well as not just involvement but some sort of mandatory or binding use of the decision of the PRO is because between 1997 and 2001 in Arizona, we reviewed 35 violations which involved 23 hospitals. Within each of these 35 violations, there were an average of seven cases per hospital which is about 200 cases. When we looked at the medical issues, the are just the medical issues, these do not involve logs or signature problems, just medical issues, of these 88 percent were true emergency cases which means that 22 (sic) percent of these were not even included in the definition of an emergency medical condition. So should not have been determined a violation.

    84 percent of the cases included appropriate medical screening exams and in 95 percent, we found no delay in the provision of services. So the overall medical questions that we reviewed, 70 percent of the cases we found no evidence of medical violation of EMTALA so that in 30 percent, we did. So based on the testimony that now they've already heard that once a violation has already occurred, the hospital must invest significant time and resources into their response. 70 percent of the time, an early review could have potentially prevented this expenditure. So that's the first point.

    And the second point that is involved in item number 10 is the improved training of regional offices and state agencies to improve performance and consistency of the review of complaints. And I also want to speak to general support of that and very specifically that the inconsistency across the United States makes the optional use of the five or 60 day optional but also the actual issues that are referred to the PRO's and the way that they are directed to interpret them varies very widely.

    The AHQA Association is trying to bring together the peer review organizations so that we can help with training of the regional offices to let them know when these inconsistencies are occurring. But if we had some support from CMS in general so that we would have as was recommended in House Bill 3391, a federal advisory committee where all these stakeholders came together to deal specifically with the nuts and bolts of the EMTALA determination, I think we could make a lot of progress.

    So I thank you very much for listening and I appreciate the recommendations as they are listed and hope that the specifications and clarifications that I discussed will make it in at some point. Thank you.

    DR. WOOD: Thank you. I'd like to engage the Committee in some thinking and discussion of the things we've heard as well as a reflection on our site visits yesterday.

    Before I do that actually, one of the concerns that I think all of us have to consider is the growing disaster perhaps might not be too strong a word to use that is coming from an inevitable collision of regulation, it's adverse impact and reimbursement pressures. If the two of these might be considered as celestial bodies on a direct collision course, it is not too difficult to imagine what the impact will be and how it will adversely affect those who were served by all of the programs that we are reviewing.

    Now we know that it's going to be difficult and out of the purview of this Committee to address the issues of reimbursement. On the other hand, if we can somehow deflect the course of that body that is regulation and its adverse affect, we should be able to have a chance to diminish the angle of momentum that could be destructive.

    From that perspective, I've been concerned in the last week as I've read passages from newspapers around the country regarding the impact on physicians and the decisions of physicians to leave the Medicare program as well as the Medicaid program and in a discussion yesterday, actually day before yesterday, with Judy Sutherland, she brings some information regarding nursing staffing. Now we heard a little bit of this in Miami and the information that she brings is current and from Colorado and I wanted to give her a chance to share that with the Committee so that we can consider these findings as we go forward. So Judy.

    MS. SUTHERLAND: Thank you, Mr. Chairman. What I'm passing out is a copy of an article that was in the Rocky Mountain News Denver Post and basically what this article says is that there's a huge nursing gap today in Colorado and it's going to get worse. And essentially approximately 20 percent of the people who are nurses have left their profession. And they're leaving it faster and faster every day. And one of -- the two major reasons that this is occurring is that people are working very, very hard in hospitals and in home care and in long term care settings. They're truly understaffed and then the other part of the dilemma is that they're being required to do most of their time in administrative functions such as filling out documentation and not actually delivering patient care.

    And I will tell you from the home care perspective, our nurses spend doubt three hours a day doing their documentation. And the OASIS document, while I believe in data gathering, I believe in the potential of knowing the things that we will learn from this, I also say to you we need to be realistic about things because if you have no nurses to gather the data, it will be useless anyway.

    And what I'd like for everybody to understand is that there is a reality factor with physicians and with nurses, the very people who we want to be able to take care of our patients are in fact fleeing the field at enormously increasing numbers. So please take this document, read it over, and consider that as we consider all of the other regulations and while the intent may be good, it may not be what we really want to have happen. Thank you.

    DR. WOOD: Thank you. Yesterday we had the chance to do some site visits and since we split up to go, I would like to ask that members who were here and who visited each of the sites take a couple minutes to summarize their findings for the Committee and particularly any comments that would bear on our issue statements and recommendations that we might have.

    Now who traveled to the nursing home. Judy and Heidi. Who wants to talk?

    MS. SUTHERLAND: I'll talk first. Thank you, Mr. Chair. And then I'll turn it over to Heidi. I'll make this quick. I was particularly interested in going to this nursing home because my father was admitted to a nursing home in Georgia and he only stayed there a week and he died. He was rather fragile. But I scoured the city of Atlanta looking for a nursing home that I thought would be acceptable and to tell you the truth I didn't find anything. I was so disappointed at what was available. And so I was particularly pleased when I had the opportunity to see this nursing home. It was what most of us would want to send a relative to. It was -- they had animals. They had bunnies where people were feeding them lettuce. The place was clean, it was warm and it was a very home like setting to the extent that would be possible.

    And obviously the staff had been there a while and they were truly caring people and knew everybody by name and people were up and about and treated with dignity. And I found that most remarkable and actually said wouldn't it be wonderful if we could take these best practices throughout the country because my impression is their reimbursement rate is not too different from what Georgia has and use these best practices to find the good institutions when you do have to make that decision. Thank you.

    DR. WOOD: Heidi.

    MS. MARGULIS: I would concur with what Judy said and only add to it that with regard to the MDS presentation that we had yesterday and perhaps Christy can also, I believe you were part of a conversation with the Director of Nursing, share some of those responses. But I think that to me the facility had really put people in very experienced positions in charge of areas like MDS who truly understood patient need versus administrivia (sic) in order to deliver the maximum benefit to the beneficiaries and to the patients and focus as little time as possible on the administrative side.

    And I know that not all facilities are able to do that for lack of financial resources. But it clearly made a difference in this facility.

    I also talked with one of the employees who had changed positions and had done so principally for the reasons that Judy outlined in her previous remarks which is that the amount of time spent by this clinician filling out papers outweighed her desire to have patient time and I think that was pretty much mirrored in the conversations that we've had with clinicians. So it was an outstanding facility. A facility that was going to try for the Baldridge Award and I commend them. It was a most incredible site visit.

    DR. WOOD: Any questions? Tony, did you go to the claims processing center?

    MR. FAY: Yes, sir, Mr. Chairman. I went with Dr. Crosby to the Pacificare Claims Processing Center located here in Phoenix. They manage 180,000 Medicare+Choice lives at that center and they're in the process of transitioning another 70,000 or so lives from the Colorado operations. They're merging the two data centers. And we spoke with several members of the administrative team including their chief operating officer for this region. And he went through in pretty good detail what it's like from the time they get a capitation payment from Medicare+Choice to the time they actually pay a claim on behalf of a beneficiary. And he reiterated pretty much what we heard today in regards to the membership reconciliation being a significant issue in terms of the amount of time it takes and the amount of exceptions that are generated every month. Of the volume of lives that they have, 180,000, they get on average about 4,000 or so exceptions a month that they have to reconcile and as we've heard today, those reconciliations can take up to months to resolve.

    He did add an example that we didn't hear today. It deals with the working aged. These are people that are on Social Security but they've got jobs and maybe they have a job one month and not the next and they might have one month after. Sort of like somebody that when they're feeling good, they work at Wal-Mart as a greeter and then maybe they're not going to work the next month, et cetera. And that information is in the IRS database but it lags with respect to time because of the way employers file their payroll tax returns. So if their database shows that this person is not a working aged and then this IRS data comes through which might not even relate to that time period, then it will overwrite the M+C plans designation of how that person is treated. So that was just one example and as you can imagine, trying to prove whether somebody actually worked three months or so or not may be a difficult thing to prove.

    I guess that's about the gist of it. They did indicate that on some of the approval of the model forms and so forth -- for instance, if they make -- if they inadvertently don't pay a claim and they get a phone call from the beneficiary that says oh, you should have paid this claim and they look at it and said you know, you're right, we just had a computer error, we'll pay the claim, they really can't do that under the current set of rules. They actually have to open up a case file, generate a letter that says we're looking into this, then generate another letter we've looked into this and we are closing it and we will pay your claim within 30 days, and they said if they just had the ability to go ahead and you know, fix these errors where they just inadvertently didn't pay a claim, that would relieve a lot of the paperwork that they had to deal with.

    DR. WOOD: Nice little service issue. Any other comments about that visit? On the hospital visit yesterday -- Mary?

    MS. MARTIN: I think the visit to Good Samaritan particularly hammered home once again that we really need to do something immediately about EMTALA. I think some of the suggestions that we -- preliminary suggestions that we talked about are important and the Committee needs to move that forward as quickly as we can to provide relief immediately.

    I was really impressed with the dedication of the people at the hospital, the charge nurse, Christine, and just the unbelievable amount that they are dealing with in human terms with the patients and their level of commitment and concern.'

    And we've talked a little bit I think about what we want to do for the consumers. But I think the best thing we can do for our constituents and our consumers is truly freeing up those nurses and those doctors to deliver care. That's why they went into the field. They should be able to do that instead of becoming legal writers in terms of filling out paper and data and while some of it may be important for us to cover, I do have some personal issue problems with the amount of data and the level of data that we're collecting.

    But like I said, we've got a lot to do and -- but EMTALA really bothers me.

    DR. WOOD: Bill, did you want to make any other comments? You went on that visit, too?

    MR. TOBY: Yes, Mr. Chairman, I -- first I'd like to thank you and Chris and her staff and the San Francisco regional office for arranging the visit to Good Samaritan Hospital. I think we witnessed firsthand among other things the unintended consequences of good legislation like EMTALA. I know the legislative history and all of you know it as well. It was a very good law in terms of intending to have good consequences but the implementation of it has been almost a disaster.

    I think it demonstrates clearly what happens in the field when a law like EMTALA passes, there's litigation that comes out of it in 1998 which I remember in which the court -- the federal courts got involved. And I think that had an impact on the federal agency which was responsible for the law resulting I think in some very narrow definitions.

    So I think what happened here is that I walked away from the hospital yesterday reassured that you're on the right track with this committee with respect to a fix. I think we're on the right track with regard to the need for HHS to revisit the regulations so that we can provide some relief to these hospitals and physicians so that it doesn't interfere with the practice of medicine and the delivery of healthcare. Thank you.

    DR. WOOD: I would like to actually invite to the microphone Dr. Orient who has some additional comments about Medicare+Choice and we will give you five minutes for those.

    DR. ORIENT: Thank you very much. Yesterday, I spoke on behalf of the Association of American Physicians and Surgeons. Today I'd like to speak from the perspective of a prospective Medicare beneficiary.

    I am on the leading edge of the baby boom, call us Pac-Man with respect to the Federal Treasury and not just the Medicare Trust Funds. I'm reacting to the skit that we were treated to yesterday. Had I been Joey, I would have told the lady with the clipboard, "I do not need a recreational counselor to tell me how to amuse myself. I am a grownup, not a kindergartner. I am not willing to pay a dime for such a person nor for your multidisciplinary team or for your interdisciplinary team or for somebody to fill out 200 to 500 items on the MDS questionnaire to chronicle my decline into decrepitude every three months. And if I'm not willing to pay for these things, I think it's outrageous that the cost is being imposed upon my sister's grandchildren but I understand you people can't do anything about this. You've told us you're virtually powerless and if indeed you try to do something, you would collide head on with a vested interest who testified yesterday. It's like the left main coronary artery is totally clogged and you have three vessel disease and what you need is a bypass." And that is why the Medicare+Choice program is so extremely important but as described, it too is upside down and backwards.

    What's important to me as an older person is to have insurance which Medicare is not. I want a plan such that in the hospital, I'm treated like a paying customer instead of like a loser on the DRG. And for that catastrophic benefit, I would be willing to forego all of this other stuff that it's required to be part of the plans including the Medicare+Choice plans. So the greatest disappointment about Medicare+Choice is there is no provision whatsoever for a workable medical savings account plan that you can have catastrophic insurance only combined with patient's assuming their responsibility for the little stuff that they could afford to pay for if they want it. I believe that you would have to relieve the regulations on these plans os that there could be enough of them to provide a true marketplace and enough possible buyers that the insurance companies would be willing to develop and to market such a proposal.

    I guess that's really all that I have to say that Medicare's not insurance. We need insurance. We need medical savings accounts. Ideally I should have started that when I was age 20 with the prospect of carrying this over into Medicare. And in that case, a lot of you people would be totally irrelevant to the older population because we would have so much money in our medical savings account that we wouldn't need you. But it's not too late to start now with something that makes sense from an insurance standpoint and certainly whatever regulations you have that you can effect that stand in your way, should be pruned, rescinded, done away with. We want a plan for insurance, not for -- coverage -- prepayment for the fluff and guaranteed rationing for the things that we really need when we get sick.

    Right now, it is impossible to escape from Medicare Part A. If you try to do that, you lose all of your Social Security benefits and the insurance marketplace has been destroyed by Lyndon Johnson whose picture we showed up there so that we would have an escape hatch. Give us a bypass.

    I would like to reflect what Len Kirschner said, "It's not just the Medicare+Choice program now. It's the whole Medicare program that's a screaming flaming disaster." That my generation is going to prove to you get working on that bypass operation now, now, now. It's not a minute too son. Thank you.

    DR. WOOD: Thank you. We have Dr. Elizabeth Valdez has come today and she is the Executive Director of the Council Latino de Salud and has laryngitis. And so each of you have her statement but for the benefit of the audience, let me highlight four important points that she brought for our consideration.

    Her work by the way actually has been in community based health and human services, particularly serving the Hispanic community of Phoenix and she has noted particularly that the implementation of the department's policy guidance and the Executive Order 13166 is critical to the health and well being of limited English proficient persons. This is a topic by the way that we had discussion about in Miami and with the benefit of some of the leaders at CMS who were some very strong recommendations that came from senior leaders about how we can approach this particular problem.

    But the first important point was the department's LEP policy guidance and the Executive Order does affect the quality of healthcare provided to a significant portion of the population.

    The 2000 census indicated 45 million persons in the United States do speak a language other than English at home and almost 20 million of them will say that they speak English less than very well.

    A review of the language spoken at home data on a state by state basis also indicates that LEP populations are found in every state. It's a nationwide circumstance. And the Institute of Medicine in the 1997 report found that more than 18 percent of federally qualified health center patients, which would be about eight million people, required translation services.

    The second important point. The department's LEP policy guidance recognized the essential fact that the patient provided communication and medical translation is a quality of care issue.

    The availability of language interpretation services is already a part of patient rights accreditation standards that are used by the Joint Commission and the Joint Commission now performs accreditations that cover 19,000 healthcare organizations and programs in the United States.

    Although this is not in her testimony, I would make the comment that the Joint Commission accredits more non-hospitals than it does hospitals. So it's much more of a large scale accrediting organization.

    The literature does demonstrate that access to a translator or language concordant healthcare providers does have a significant impact on the quality of care as well as the satisfaction with health service. The central importance of patient provided communication is taught in every health professional school in the country and the failure to bridge the communication gap and with brief professional standards of medical care for both the provider and the healthcare institution.

    The third important point. The cost of providing medical translation services is far less than the cost of medical error that's associated with communication. According to the Institute of Medicine, every year medical errors which could be reduced by communication result in more deaths that are attributable to breast cancer or HIV and AIDS and result in a cost to the economy of 9 to 15 billion dollars a year.

    The IM went on to estimate that when accounting for other indirect costs which would be lost income and disability, then the total cost of medical error would be almost $30 billion.

    At Stanford University where a study was done looking at medical errors, it was considered that 14 percent of major medical errors in Spanish speaking patients which occurred in this setting most often with emergency medicine residents were clearly a problem and in addition research has shown when providers do not have access to medical translation and interpretation with an LEP patient, they tend to order more tests which increases overall costs to the healthcare system.

    The last important point. Pooling of resources and planning for services can dramatically decrease the cost of providing medical translation services. The most often cited reason that medical translation cannot be provided from a medical provider is that the access to the service is limited and that you have to be able to have access so even in emergency circumstances.

    By having a plan for meeting the needs of LEP patients and pre-arranged access to medical translation services, providers could significantly reduce the cost of the services and a wide range of cost effective solutions are available to providers that do not see significant numbers of LEP patients. And those options include contract interpreters, that is negotiating a rate with interpreter agencies that have the time, especially if they would be in affiliation with other physicians. There is a need to accomplish an assessment of agencies in the area and comparing rates between community based agencies and for profit language companies would be an important part of arranging for contract interpreters.

    Community based agencies, that is negotiated with community agencies that work closely with immigrants and LEP individuals. I would say by the way this actually was recognized by the Assistant Secretary in Miami and was specifically encouraged.

    Telephone services are a possibility in isolated areas or in last minute requests. Telephonic interpretation could offer a solution. And again, affiliation with other medical practice could assist in the right negotiation.

    Affiliation with hospitals and affiliation with educational institutions could provide other options at more reasonable costs.

    We have two other points that are made and that is a specific recommendation for this Committee is that we should look at ways where you could pool resources most effectively to provide access to medical translators. There are lots of these options that are included including community based organizations, national translation banks, state and national purchasing of services for LEP individuals. So we've been offered a variety of things that we in fact could use and could incorporate in our draft recommendations and we can take a look at these.

    It's also noted that the Office of Management and Budget in a report that was released last week actually, March 15th, on the cost of LEP services found that the cost of language banks runs about $20 an hour compared to about $132 an hour for language line services. So some additional information on cost.

    So that gives us a little more to work on from a topic that we had in Miami that we won't talk about here and we appreciate your sharing a written testimony for us and hope that your recovery from your laryngitis is quick. I appreciate your consideration in letting me read quickly from the document. Thank you.

    Let us proceed next to review what we have heard from our discussions yesterday and today and I'd like to begin with the minimum data set. So Bela or Erin, were you going to put something up for us for the MDS? We'll try to do a quick draft of some minimum issue sets or minimum things that we heard from MDS. I have to be careful about minimum but --

    Okay. There were several things that we heard. First, in order to make sure that this data set was more useful, it needs to be updated and we heard pretty clearly that those in the field would like to have Version 3.0 faster. We heard suggestions about predictive software, allowing time for real time data analysis, clarifying data elements that are needed for quality and for reimbursement and actually that was part of the comment that was made about streamlining. And this by the way is the same recommendation we had for OASIS.

    For OASIS, we should we should eliminate all of those data elements that are not needed for quality care which would include care planning, reimbursement and there was one other subject. I forgot it. But at any rate, that would be the recommendation.

    Now you'll also notice here that what we heard for OASIS is somewhat similar and that is in OASIS, it used to be a panel of experts or a technical advisory panel that would constantly look at the tool and make sure that it is achieving what is necessary, modifying elements that seem not to be relevant and making sure that as practice changes, you can incorporate new things. And that needs to be done in a relatively timely fashion. It's quite striking that from both of these, the development time was very, very long, like a decade and the practice actually of medicine and delivery systems were changing much more rapidly than that. So we have to find a way that we can actually do that better.

    The other key issue was to insure the use of the data having the quality data available for public and for policy use adding case mix adjustment, facilities presented comparisons, summary data elements. These are all things that I think are going to be important in the future. Again, if we're going to make large improvements, we have to have an informed consumer or consumer's agent that is for those of us who are choosing usually skilled nursing care for our parents, we're the ones making the decision and not our parents. But there may be some circumstances where people are making their own choices as well. We have to find a way that we can get the information to them that again is useful.

    I didn't see the stuff from MDS in our briefing packet but we did get a handout about Nursing Home Compare and I have to say the template for Nursing Home Compare is about as bad as the template for Medicare+Choice. So we've got some work to do there, too. I did read it by the way. Actually it was available -- it is in the information we got yesterday.

    And the other issue is one that we talked about yesterday and that's beginning to think about all of the data that we collect in the different silos and this was something that Eric raised, Heidi raised --

    MS. MARTIN: Jack raised.

    DR. WOOD: Yeah. So we're collecting -- especially for the older population, we're collecting a lot of data and when you look at the elements in OASIS and the elements that are in MDS, there is actually a fair amount of overlap. And then there's some things that are missing from one or the other. I mean some have -- one of them has the actual prescription drugs and one has the actual medical conditions. Some of them missing other things but we need to find a way that we can collect this information, collect it only once and then allow it to be used by all providers.

    Now the other thing that I would add to this actually is that in order to find a technology that's going to allow you to do that, and we've heard the problem today about keeping the data sets up to date, that is what's in other data sets. In the Medicare+Choice program, this issue of coordination is a big problem. So it's pretty clear that if we depend on the management of those independent data sets, that's not going to work. So we need some other technology that's going to allow us to keep these things updated and I think that brings us to a smart card technology. So we should actually consider that in perhaps the requirements of BIPA that we move forward, we need to incorporate a smart card capability that we can update the information so that it is the most recent information and everybody can use that. We don't have to worry about then sending everything back in and waiting for it to be checked by all kinds of databases. We would have it. That way every provider would have the information by the way.

    It would go a long way, too, towards solving some of the these LEP problems that we just heard about because you could really make headway in a lot of circumstances where you have the information and you didn't have to even wait for some translation.

    We will have to get some other things done in streamlining. The first day assessment it was really striking that for people who are in nursing homes for a short stay, the MDS might not even be completed then. An increasing number of patients are in those nursing homes for a short stay. Thus, it's more important that we have a system that all of the information is integrated so we've got it and it's available.

    We heard about expanding use of quarterly assessment instruments. I guess I must say that in some circumstances for patients how are there for chronic custodial care where things aren't changing, even quarterly might be too frequent. But an advisory panel, a technical advisory group, I think could make an appropriate decision about how that could be done.

    Well, we did hear that the agency plans to reduce the number of elements that are required for payment and to look only at those. So I think that's already under way.

    And then a longer term issue would be improving training and education but kind of an intermediate or short term issue would be to make sure that we have the user guide updated and we've got the best information that there should be one place to go for all the information related to the use of this instrument. The same recommendation by the way was made for OASIS. So that's pretty consistent.

    And then going down to payment systems, we already heard again from Tom Hoyer, there's going to be a specific link to the number of elements that would be used for payment. And we had some additional concerns about integration with Part A. Again I think that's where if you had an ability to share this information back and forth, it wouldn't make any difference how many times a patient was in the hospital or not. The stuff would go with the patient.

    And then for reviews. The reviews here actually I think -- as I listened to the M+C discussion today, I thought the reviews were -- the process for review had become something we can generalize across programs. We need to do reviews in Medicare+Choice, we need to reviews in the office practice, you've got to do reviews; in the hospital, you've got to do reviews and home care, you've got to do reviews; and long term care.

    Ultimately I think what we want to do if we're going to be aiming at services, we want to make sure that everybody understands that the primary objective is to provide the best service to every patient, every day, regardless of the setting. And that all of the measurement that we do would be done in a way that would allow us -- well would first allow us to be more successful in achieving that service and second, easily demonstrating that we achieve that level of performance. So that should be basically the goal.

    Now from that perspective, if we have measurements that allow us to show performance like in the M+C side, it might be HEDIS measures and CAMPS data. In long term care, it could be a certain number of clinical outcomes. It could be some satisfaction issues on the part of patients and their families.

    But if we have those capabilities and then we look at that data and we concentrate our reviews only where there seem to be problems and not worry about the other places where the data looks okay, that would make the reviews probably shorter and reduce the administrative time to get ready for the reviews. So I think that's a recommendation that we could make potentially across the board.

    Am I going too fast, Bela?

    BELA: No.

    DR. WOOD: Now those are most of the concerns I think that we heard from MDS. But let's make sure we add. So we'll go down the table. Tony, then Eric, and --

    MR. FAY: Mr. Chairman, you made a comment, you know, regarding OASIS concerning the lock periods.

    DR. WOOD: Yeah.

    MR. FAY: And a similar phenomenon exists with respect to MDS although I don't believe we were able to bring it out in our testimony. But there are some time frames that should possibly be looked at in terms of more of a grace period in terms of getting the instruments uploaded because at least I am told by different folks that that does affect the type of payments they get.

    DR. WOOD: Yeah, and actually I did have a note about that, too. The other question is where you have to have multiple assessments in a short period of time, we either need to find a way to do away with those or make them one serve for another.

    MR. FAY: And that was going to be my second point. There appears to be a different series of due dates for quality measurement and another series of due dates for payment. So you end up doing additional assessments and somehow that should be looked at again and a common set of due dates determined.

    DR. WOOD: Eric.

    DR. OLSEN: This isn't really a change at all but and when you're discussing -- she put the parenthesis Smart Card. Somehow I want to get the wording in there that the continuum of care follows the patient and just to get that concept into -- obviously I'll have a chance to react to the wording but that to me is important. Just get that -- move it from provider to provider to silo to silo over to the patient. And that's -- somehow I want that in the wording.

    DR. WOOD: Okay. We'll make sure we get it in. Jeff, did you have anything? Heidi.

    MS. MARGULIS: There was one -- I have a very loud voice so generally that's not necessary. There was one comment that Judith Ryan made and I don't know if it was brought out but that the MDS up front is automated however in the -- as it rolls out and I'm not sure because I don't know this process very well, but with regard to RAPs and other aspects of how the program or how the outcomes are used, it is not automated. And so as at least I look across all of the provider areas, certainly the use of E technology in all aspects of those programs needs to be put to maximum use. So that's a very general recommendation but automation where possible throughout these programs would be one advantage.

    DR. WOOD: Any other -- Suzanne, Judith, Mary?

    MS. SUTHERLAND: I think that there was one other ting when we're talking about data is if you recall this was implemented I think in 1990. They've only just recently begun to receive data so, you know, I would encourage this Committee to make a point of data ten years old may not be the most important data in the world. So if we're going to collect it, we ought to use it as quickly as possible.

    DR. WOOD: Yeah, this is always a challenge with data collection. I must say that having been involved in some large data collection efforts for other conditions, now granted it's a little easier when you're talking about something that's a little more constrained like heart disease and acute myocardial infarction. We did manage to do a cooperative cardiovascular project within CMS that we went from concept through pilot testing to implementation within the space of about four years and in that time frame even in the pilot showed an improvement in survival in the pilot states. So that's at least half the time that it has taken to do these other two sets.

    I do recognize it's a little different when you're talking about chronic care and maybe more than one condition but I don't think it's inappropriate for us to think that if we're going to do these and do these effectively, we have to find a way that they can be done fast enough that they're not behind once we start. So just a general observation.

    Any other comments about MDS?

    MS. MARTIN: How long did it take you to fill out that form on yourself?

    DR. WOOD: When we did the QMI, it's only 11 things. It was just 11. That doesn't take very long and actually it's done a way that you don't have to fill out very much. It's done where you can get it from the record almost electronically. That would be a little harder to do actually for the circumstances of OASIS and MDS. I don't think you're going to get to that point but if you can sort of get it to a point where it -- as you collect the data, you follow some of the principles that Dr. Don Berwick has articulated. You collect the data at the point of care, you collect it only once, you collect only what you need, then you make sure that it -- have done that that assures that the data actually is useful and accurate so you don't have to go back and redo it. And it makes the process actually much more manageable. It's considerably shorter so we can incorporate those actually as we do the writing of the report, the final report, we can incorporate those principles.

    Now what we'll do with this is we'll put it in a typically Fay format. I actually did one last night that way so it would be fairly easy. Then we'll send it to the subcommittees for review and it will go back up also for technical advice so after having seen this and going to senior leadership where we'll get the technical advice back and then we'll come back here for a review. Hopefully by the next meeting. If not, by the one after.

    Now let's shift to M+C. Now with this one --

    MS. PATTEE: Before we switch gears, I just wondered if there was impact here from HIPAA that would help us with getting more unanimity between these different data sets or hurdles -- the hurdles with the unique identifier discussion in the marketplace that's -- a barrier.

    DR. WOOD: Yeah, there might be actually and as we've kind of been going through this the last couple of days, my HIPAA expert is sitting at my left so I've constantly leaned over and asked Leslie. As we go forward, these will be important points. There will be some places clearly where HIPAA will help us. Some of the things we've actually heard in the last couple of days would be helped by HIPAA. There will be others where we will have to be very careful and that's one of the reasons we have on our agenda for the next couple of meetings, HIPAA issues and the very first one of those will be the privacy issues because of the publication of the notice today. And then we'll do the technical aspects of HIPAA the meeting after in Denver. So those are big things. And if you want to be a HIPAA expert, we'll be glad to have you that way.

    Be careful what you ask for, you might get it. Eric.

    DR. OLSEN: Doug, this is a process issue. Somehow if we were still under the old snail mail process, when we get the issue statement that say with CMS or whatever input and such, that becomes almost the document that we're really going to be focusing on. We would have it in a different color or something and I guess my question is how, and I'm not asking for an answer, this is more to Christy, how we can identify the real document that's -- that let's say comes out of this and now it's going to go through these processes as you said. But what is -- we need some identifier somehow on the real stuff that's going to be on the agenda for the face to face discussion. We can react ahead of time, blah, blah, blah. And I'm really not asking for an answer at this point but somehow -- for instance this will go out and this is just a rough draft by a few people and doesn't, you know, but at some point it's going to be more. This is where we are. So I guess I'm asking somehow to have a pink piece of paper if that's possible on the computer. I'm sure you can.

    MS. SCHMIDT: Well, the staff can figure out a way to do that so you can see it go through the process.

    DR. OLSEN: I just see a need coming up for that.

    MS. SCHMIDT: That's a good point.

    DR. WOOD: I think that would be pretty clear because we're going to have a lot to cover that way. Okay. Medicare+Choice. Now this one's kind of interesting because we already have some subcommittees that have been at this and I heard today actually some things that I know that have already been identified by the subcommittee so one of the issues here actually I think might be just to get the comment of the critical people in the subcommittee and then we would refer this back to the subcommittee for consolidation if you will or reconciliation with what already has been done so we don't have duplication. So in that regard then, Heidi, tell us how we should proceed.

    MS. MARGULIS: Okay. I believe there are about 11 recommendations from Medicare+Choice, many of which were discussed today. I would like a little more time, Mr. Chairman, to go through to make sure that there were not issues that were raised today that are not included and have the subcommittee review those and then bring them back.

    The -- just for the sake of the public, the ones that were identified previously were those that have to do with reconciliation which was on everything from ESRD, working aged, state and county codes, dual eligibles, et cetera. Simplification of the adjusted community rate proposal which is the rating benefit package, audits and monitoring visits. Let's see, marketing review and simplification in that process. There actually also was a recommendation with regard to the Medicare Compare materials that you identified.

    There are recommendations having to do with data collection for risk adjustment, for budget neutrality, for risk adjustment, I think I've covered the majority of them in that listing.

    There were some specific issues brought up on technical points, one by Mr. Tucker with regard to two plans that are provider network based in one area that we'll have to take a look at.

    Pages of notes, excuse me.

    One of the issues that was brought up as well across a number of continuums is the issue of training and what there is a recommendation in the M+C package that talks about including Medicare+Choice organizations in all training and I would make that broader that when training is conducted across the continuum of providers, that that training always include the affected entity if you will so that when there's training in Medicare+Choice for audits of the adjusted community rate proposals, M+C has to be present for that as well as all the people who would be affected by that audit. The outside contractor, as well as CMS. And similarly when there is training for monitoring visits for M+C plans for example, by the central office, the regional office, and M+C has to be included so that everyone hears the same directions at the same time.

    I would also add just as a comment, in the M+C program, it's a little bit different than most in that CMS functions and if you will a tripartheid manner. They are both or including purchaser, they act as a purchaser -- they act as a regulator and they also act as an insurer via the fee for service system. So that puts them in a unique position of being both in essence judge and jury. And until that particular situation is corrected, there will always be problems in a program where competitors, where CMS is a competitor if you will, with the folks they're also regulating. So that's a structural problem that legislation or an executive order probably and probably legislation would have to take care of.

    The last piece that I would note just for the record is just an observation and that is that in essence there are a finite number of resources for all of us in all the programs or all of the delivery systems. And that I guess we have a choice in terms of how we spend those limited resources and it's especially true in the Medicare+Choice program because any extra money we have by law goes back to the beneficiary in terms of services. And indirectly back to providers for network stability.

    So I would encourage us as we look to revisions, that as we rid ourselves of paperwork and administrative burden, that in essence we are indeed providing some stability out in the marketplace both to providers and more importantly being able to deliver to beneficiaries the majority of whom are very low income seniors benefits that they could not afford any other place. So thank you.

    DR. WOOD: Now, Eric, there are a number of things that came up in terms of communication that would go to your subcommittee so your thoughts.

    DR. OLSEN: Well, I was going to bring up the fact that I think we heard quite a bit about the lock in situation. Even a unique one and not probably just here in Arizona but the people who migrate across, I presume there's problems in Florida I would presume, so I think we have to deal with that problem that Jeff brought up of the disenrollment. Clearly, it's not clear. One was brought up about the bankruptcy balanced billing I think needs to be addressed. Many it's a very unique one but maybe not of using the zip codes to list benefits when in fact that's not where they are. They run over across different counties. It's probably a very minor problem but it's a 100 percent for those who have it.

    Those are some of the issues I heard today that I think sound they're in the regulatory arena that we ought to be dealing with.

    DR. WOOD: Yeah, there were a couple of others I think in terms of communication that --

    DR. OLSEN: Well she had the Compare, Medicare Compare was one of Heidi's.

    DR. WOOD: Well making sure the website is accurate and updated. And I guess, you know, quite frankly I have the physician edition of this Medicare Plus You. And three is the 800 number though that you can call, the 1-800-Medicare and maybe it's easier to do that but in the back of this, I still struggle with the fact that I wanted to find the answer to a specific question, I had to figure out what I wanted to do. Now it starts out -- you can start at 1-800-Medicare and it tells you what you can call about. And some of these, it's not quite clear who will answer the question. For example, under the coordination of benefits contractor, if you had a question about who pays first, or a question about Medicare as a secondary payer, that's not listed as anything that you would call under 1-800-Medicare. Now I presume that it would be answered if you called 1-800-Medicare but the way this is structured, it looks like that's not under the purview of the expertise of 1-800-Medicare.

    And then there is -- it just goes on for your carrier and then the SHIP program and then durable medical equipment and fiscal intermediary. It keeps going and you sort of have to know a lot to figure out where you're going. And from a beneficiary perspective, we'll (indiscernible) on the communication's side, we ought to be able to make it a little simpler on the web page and on this.

    MR. BLOOM: One of the problems with 1-800-Medicare and if Medicaid is the secondary payer, they can't answer the question.

    DR. WOOD: Yeah, that's a good observation. I mean those are the certain things we got to figure out how we could fix. But that's a big challenge obviously because Medicaid's pretty complex with each of the states.

    MR. BLOOM: Right. There are some stays that do have by the way -- it's going to the bilingual issue, too, and this may be something that we'll look at and it was on the sheet that I turned in where it's about I think 10 or 11 states that are putting in a 211 number where people can call and they can get information about benefits, both Medicare and Medicaid benefits, and it's also linked to an AT&T operator that for a $1.50 can get any language to be helped with benefits and in some states it's contracted through United Way. I just recently found out about this and you may want to talk to a person at the FDA that works with Linda Sudam. She's the one that told me about it just recently. But it sounded like a very interesting program.

    DR. WOOD: That's a good observation. So we'll make sure we figure that out. Heidi.

    MS. MARGULIS: The advisory panel on Medicare beneficiary information or beneficiary education, made a recommendation in this regard which is that everyone should call the 1-800-Medicare number. It should function in the same way for example when one calls Humana, a Humana 1-800 number. And if the question can't be answered on the first call, then it's normally transferred or whatever the technical term for that is to the correct person. So instead of 27 pages of telephone numbers, that person is taken care of. Call centers can be organized in such a way that, they can be immediately triaged to the right team that takes care of that. They can be triaged in a number of different ways to get people to where they need to go but yet there's just one number. There's also technology that allows specific information to be placed on screens and where the customer service rep can just follow directions on the screens so they don't have to have a 150 yellow stickies appended to the computer screen that tells them how to do things. So the technology is there. That same technology that's used in the private sector probably is an answer to your thumbing through 27 pages of telephone numbers.

    DR. WOOD: What we'll do with this one actually is the two subcommittees that have an important role here, will send this back to each of them to review as well as send it on up for technical advice and it'll come back to us.

    Now yesterday I gave you the three issue statements from Miami to review and see if you had any concerns. Christine actually had to leave early to go to a college visit with her daughter and she had noted in the EMTALA issue that previous recommendation would have made about ABN's and LMRP's not being (indiscernible) wasn't there and that might actually have been the piece of technical advice because I had -- Leslie has been working actually and it's quite simple on the issue of ABN's and the question that is under -- well I shouldn't say it's unresolved. The question that has to be answered is what is exactly the statutory requirement when ABN is supposed to given and I know from preliminary discussion with Leslie, it's not exactly a simple answer. So that we have a need to do a little more work.

    MS. NORWALK: Actually the CMS website and the PRIT which is the Positions Review Issues Task Force or some acronym like that, after we looked at ABN's in the EMTALA context, and it was determined that the ABN would actually not be submitted or couldn't be submitted until after stabilization if it were required. So I think that that has already been addressed. Part of the reason why I took it out was because -- while I'd be delighted to take credit for something -- it was really done last summer. And it may be a matter of -- I think last June -- it may be a matter of doing better education. Well it is in fact on our website and available for questions asked, Q&A format, et cetera, we could do a better job as we roll out training on EMTALA generally and make it known that the ABN process is not in fact contradictory with EMTALA and how we've currently required it.

    In terms of LMRP's, I'm not sure it's really -- I think -- which is a local medical review policy is what LMRP is and that is when it is determined I think that's really more of a payment issue. They typically go to -- and since this is not about red tape, it's -- that was in terms of technical advice, that falls into the category of payment.

    DR. WOOD: What's an ABN?

    MS. NORWALK: In terms of when they had to be submitted. In terms of when it would be -- when they had to be submitted.

    DR. WOOD: (indiscernible).

    MS. NORWALK: Well, in any event, so I suspect that we've already hopefully we're going -- to the next meeting I'll bring the Q&A's. All right.

    DR. WOOD: And actually that's going to be kind of generic. When we get to the ABN issue, that will come back so it will be rather general in that circumstance. Tony.

    MR. FAY: What you were saying about the LMRP's, and I guess my recommendation is the (indiscernible) the LMRP's should not be invoked in an emergency room setting because, you know, you don't know what tests you have to order. You order the tests because the patient seems to indicate a heart attack or something like that and then after the fact you find out it's not a heart attack and so this test was not medically necessary. To me, now that may seem like a payment issue but it's really a red tape issue. It's a catch-22 issue that the provider and the physician are caught in because they're trying to practice good medicine and deliver good care and then oh, by the way, you really didn't need that. So a disallowance of these charges is going to be made.

    DR. WOOD: That does happen actually I can tell you that. We deal with that in Minnesota all the time and so then I have to go back and appeal it. I appeal it because I have the time and resources to do it. But it is frustrating that it keeps happening.

    MS. NORWALK: Well I think the issue is beyond just in an emergency room setting. And the point is really if you for example are a radiologist and you -- and someone comes in and you want to rule out a broken bone or rule out whatever it is, if you code and actually put in your medical records rule out "X" you will not get paid for that screening if it turns out that the patient complained of chest pains and it was -- if you put a rule out diagnosis, you don't get paid for it basically. So this across the board whether it be in the emergency room setting or otherwise -- how I could be articulate.

    If you -- if it were to determine that in fact the person did have a heart attack, then that would be covered. But general screening for Medicare is not covered so it is -- it depends on how you look at the issues. They're generally is some that we could discuss. I don't think it is unique to the ER setting and EMTALA. Dale Murphy issue.

    DR. WOOD: It's not. That's true. It's really across the board. That would happen in a hospital setting too and but that's really still a matter of concern because it shouldn't make any difference how the physician writes it. It's still the same particular problem and you have to do the testing but those are things that we will address in subsequent --

    MS. NORWALK: (indiscernible) so there's (indiscernible).

    DR. WOOD: That's true.

    MR. FAY: Well and I raise the issue in the context of EMTALA because I think it's very important that when people come to the emergency room they are seen as emergencies until determined otherwise. Now you may have instances with lab and other areas where you do have ABN's and they do come into play and then you can determine whether or not you want to appeal that or get the patient to appeal it or whatever. And I view those as somewhat more sustainable than the situation in the emergency room where you're really called upon to do the right thing.

    MS. NORWALK: Right.

    DR. WOOD: Now do any of you have any other comments about this one, OASIS or the communication piece. I mean is there anything that we need to -- okay. Do any of you have any other things that we need to consider for executive committee discussion or subsequent meeting? All right. Do we have site visits this afternoon for people who are interested? So the travel arrangements did not work out unfortunately. So that means that there will be no other testimony for us to hear or business before us, then I will adjourn and wish each of you a safe return. We'll keep our hard work going in between times on the subcommittee.

(Proceedings Concluded at 12:33 p.m.)

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