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RAND Evaluation ofthe Medicare-DoD Subvention Demonstration: Final Report DonnaO.Farley,KatherineM.Harris, J.ScottAshwood,GeralynK.Cherry, GeorgeJ.Dydek,JohnB.Carleton MR-1580-CMS April2002 PreparedfortheCentersforMedicare&MedicaidServices(CMS) andfortheDoDTricareManagementActivity(TMA) RANDHealth RANDisanonprofitinstitutionthathelpsimprovepolicyanddecisionmakingthroughresearchandanalysis. rand'spublicationsdonotnecessarilyreflecttlieopinionsorpoliciesofitsresearchsponsors. PREFACE TheBalancedBudgetAct(BBA)of1997directedtheDepartmentofHealthandHuman Services(HHS)andtheDepartmentofDefense(DoD)toconductasubventiondemonstrationto testthefeasibilityofestablishingMedicaremanagedcareplanswithintheDoDTRIGARE programforbeneficiarieswhoareeligibleforbothDoDandMedicarehealthinsurance coverage. WithintheHHS,theHealthCareFinancingAdministration,nowtheCentersfor Medicare&MedicaidServices(CMS),workedwiththeDoDtoimplementthisdemonstration. TwomodelstobetestedinthesubventiondemonstrationwereTRICARESeniorPrimeand MedicarePartners,butonlySeniorPrimewasimplemented. Thedemonstrationterminatedasof theendofDecember2001. TRICARESeniorPrimewasnotcontinuedbecausetheTRICARE forLifeprogramhadbeenenactedthatprovidessupplementalDoDcoverageforMedicare- eligibleDoDbeneficiaries. UnderaMemorandumofAgreement,DoDandHHSauthorizedanindependent evaluationofthedemonstrationtobeperformedforCMSandDoD. InSeptember1998,CMS awardedRANDthecontracttoperformtheevaluation,withDoDprovidingthefundingforthe contract. ThisreportpresentsthefindingsoftheRANDevaluationofthedemonstration. It synthesizestheevaluationresultsonthedemonstrationstart-upreportedintheInterimReport, publishedinJuly1999,andthereportonthefirstyearofthedemonstrationoperation,published inDecember2000. ItalsoaddressesthepolicyquestionsposedbytheCongressintheBalanced BudgetActof1997thatauthorizedthedemonstration. Theoriginalcontractprovidedfor analysisofallyearsofSeniorPrimeoperation,buttheDoDdiscontinuedfundingforany analysesbeyondthefirstyearbecauseofthehighcostsofthedemonstrationandresource constraints. Inpresentingourevaluationfindings,wenoteareaswherethisreductioninfunding limitedourabilitytodocumentSeniorPrimeeffectsandrelatedpolicyimplications. TheSummaryofthisdocumentisstructuredasafree-standing,abridgedversionofthe evaluationfindingsandpolicyimplications. Thebodyofthedocumentreportsthefulldetailof theevaluationbackground,methods,results,anddiscussionofpolicyimplications. Itisintended tobeusedasreferenceforthosewhowishtopursuemoredetailedinformationonspecific aspectsoftheevaluation. Chapter1presentsbackgroundforthesubventionevaluationandan overviewofthedemonstrationandprovisionsforTRICARESeniorPrimeoperation. Chapter2 describesthemethodsanddatausedfortheevaluationanalyses. Evaluationresultsarepresented idneCmhaanpdte(rCsha3pttherro4u)g,ha5n,dienfcfleucdtisnognprseorcveiscseeuvtailluizaattiioonnraensdulctsos(tCshfaoprteMred3i),caarnealaysnidsDoofDenr(oClhlampetnetr 5). Discussionoftheimplicafionsoftheevaluation'sfindingsispresentedinChapter6. TheworkpresentedinthisreportwasperformedunderTask6oftheCentersfor Medicare&MedicaidServicesContractNumberCMS-500-96-0056,ProjectOfficerVic McVicker,whichisfundedbyInter-AgencyAgreementCMS-98-76withtheOfficeofthe AssistantSecretaryofDefense(HealthAffairs),ETCPradeepGidwani,DoDAssistantProject Officer. Ill 1 TABLEOFCONTENTS Preface iii TableofContents v ListofTables vii ListofFigures xi Summary xiii KeyFindings xiv SeniorPrimeMetOneofItsGoals xv BackgroundandPolicyFramework xvi TheMedicare-DoDSubventionDemonstration xvii SummaryofEvaluationResults xviii ShouldDoDContinuetoOfferaPlanSimilartoSeniorPrime? xxii Conclusion xxix Acknowledgements xxxi Acronyms xxxiii Chapter1. Introduction 1 PolicyFrameworkfortheDemonstration 2 TheDoDandMedicareHealthPrograms 3 TheMedicare-DoDSubventionDemonstration 5 DemonstrationSitesandTheirMarkets 1 TheRANDEvaluation 14 ScopeoftheFinalEvaluationReport 15 Chapter2. EvaluationMethodsandData 17 OverviewofDesignandMethods 17 ProcessEvaluation 18 ControlSitesfortheEvaluation 23 TheImpactAnalysesandStudyPopulation 26 DataSourcesandLimitations 30 AnalysisofSeniorPrimeEnrollmentDemand 34 AnalysisofEffectsonServiceUtilizationandCosts 38 Chapter3. SeniorPrimeImplementationandMarketEntry 45 SeniorPrimeProgramDesign 45 EarlyImplementationExperiences 49 SeniorPrimeEarlyFinancialPerformance 55 V- 1 StatusoftheSeniorPrimeSitesAfterOneYear 57 SeniorPrimeInfluenceonLocalHealthCareMarkets 64 Discussion 70 Chapter4. TheBeneficiary'sPerspective:EnrollmentDemandandPerceptionsofSenior Prime 71 ViewsExpressedDuringtheSiteVisits 71 ConceptualFrameworkforEnrollmentDemand 72 TrendsinEnrollmentsandDisenroUments 73 FactorsAssociatedwithBeneficiaryChoiceofSeniorPrime 80 ResponsesofBeneficiariestoSeniorPrime 84 Discussion 86 Chapter5. EarlyEffectsofSeniorPrimeonCostsandServiceUse 87 ReviewofMethods 87 TheStudyPopulation 88 EffectsonDoDandMedicareCosts 89 EffectsonUtilizationofMedicareandDoDServices 100 Discussion 109 Chapter6. ImplicationsforBroaderUseofanMTF-BasedOption 11 SeniorPrimeMetOneofitsGoals Ill ShouldDoDContinuetoOfferaPlanSimilartoSeniorPrime? 113 SeekingaFeasibleDoDManagedCareOption 120 Conclusion 129 References 131 AppendixA. RANDProcessEvaluationQuestionsforInitialSiteVisits 133 AppendixB. TemplateforSiteVisitAgenda 143 AppendixC. RANDProcessEvaluationQuestionsforMid-DemonstrationReview 145 AppendixD. FY96-FY98RANDDataDocumentation 151 VI LISTOFTABLES TableS.1. TotalMedicareandDoDCostsfortheFY1998indexPopulation,Before (FY1998)andDuring(FY1999)theDemonstration,byDemonstrationandControl Sites XX TableS.2. MedicareandDoDCostsperBeneficiaryMonthfortheDemonstrationSite Population,bySeniorPrimeEnrollmentStatus,FY1998andFY1999 xxi TableS.3. ApplicabilityofSeniorPrimeandTRICAREforLifetoDoDGoals xxiii TableS.4. ComparisonofSeniorPrimePerformanceIssuesforaModifiedSeniorPrime andSimilarDoDPlansNotCertifiedasMedicare+ChoicePlans xxvii Table1.1. SubventionDemonstrationSitesandPlannedEnrollmentLevels 12 Table1.2. CharacteristicsoftheTreatmentFacilitiesintheDemonstrationSites,1998 13 Table1.3. MedicareManagedCareMarketProfilesfortheDemonstrationSiteService Areas 14 Table2.1. ProcessEvaluationApproachandSchedule 19 Table2.2. ProcessEvaluationDataCollectionMethods 20 Table2.3. SchedulefortheFirstRoundofSiteVisits,SubventionEvaluation 22 Table2.4. ComparisonofTreatmentFacilitiesintheDemonstrationandControlSites, 1998 24 Table2.5. ComparisonofDuallyEligiblePopulationsintheDemonstrationandControl Sites,1998 25 Table2.6. PercentagesofDoDDEERSandMedicareEDBRecordsMatchedforAll IdentifiedDuallyEligibleBeneficiaries,FY1992throughFY1998 28 Table2.7. PercentageofDEERSandEDBRecordsMatchedforSeniorPrime Enrollees, forCohortsinOctober1998,January1999,andOctober1999 29 Table2.8. FY1998SampleSizesofDuallyEligibleMedicare-DoDBeneficiariesUsedfor theEvaluation,byDemonstrationandControlSites 30 Table2.9. SADRDataCompletionRatesforDemonstrationandControlSiteMTFs, FY1998andFY1999(percentage) 33 Table2.10. TrendsinADSDataCompletionRatesfortheDemonstrationandControl Sites,FY1998andFYI999(percentage) 34 Table3.1. ScheduleofSiteVisitsPerformedbyCMSRegionalOffices 62 Table3.2. SeniorPrimeTechniquesorFeaturesthatSitesAreExtendingtoTRICARE Prime 64 Table3.3. EnrollmentTrendsinMedicareManagedCarePlansinSeniorPrimeMarkets 66 Table3.4. InpatientUtilizationofDemonstrationMTFsbyEnrolleesinPrivateSector MedicareManagedCarePlans 67 Table3.5. MTFRelationshipswithVeteransAffairsMedicalFacilitiesinthe DemonstrationSites 70 Tablein4.th1e.MSoanmtphleThPaotpuSleantiioornPorfimEeligBiebglaenBeOnpeefriactiiaroinesResidingintheDemonstrationSites 74 Table4.2. SeniorPrimeEnrollmentatSixMonthsforThoseWhoObtainedMedicarePart BDuringYearBeforeDemonstrationStartvs.TotalDuallyEligiblePopulation 74 Table4.3. MonthlyEnrollmentCountsbyDemonstrationSitefortheFirstElevenMonths....75 vii- Table4.4. TotalSeniorPrimeEnrollmentsattheendof2000, byOpenEnrollmentand Age-Ins,byDemonstrationSite 76 Table4.5. EnrollmentofEligibleBeneficiariesinSeniorPrimeDuringtheFirst3Months and12MonthsoftheDemonstration 76 Table4.6. ImpactofSeniorPrimeEnrollmentonMedicare+ChoiceMarketbySite 78 Table4.7. DestinationofSeniorPrimeDisenroUeesafterExit,byEnrollmentinthe DecisionMonth 78 Table4.8. ComparisonsofAverageHealthRiskScoresforBeneficiariesWhoWerein Fee-for-ServiceorManagedCareAtBaselineandAfterSeniorPrimeEnrolleesLeft EachSector 79 Table4.9. 12-MonthStandardizedDeathRatesbyEnrollmentinSeniorPrime,bySite 80 Table4.10. DefinitionsofVariablesUsedintheModelsofSeniorPrimeEnrollment 81 Table4.11. EstimatesofFactorsAssociatedwithSeniorPrimeEnrollmentDecisions 82 Table4.12 ChangesinPerceptionsofSeniorPrimeEnrolleesRegardingAccessand QualityofCare,BeforeandAfterEnrollment 85 Table4.13 ChangesinPerceptionsRegardingAccessandQualityofCareforNon- EnroUees WhoWereCrowdedOutofMilitaryHealthServicesAfterSeniorPrime Began 86 Table5.1. DuallyEligibleBeneficiariesinthePopulationbyMedicareSector,FY1998and FYI999 88 Table5.2. DuallyEligibleBeneficiariesandBeneficiaryMonthsintheDemonstration Sites 89 Table5.3. TotalMedicareandDoDCostsfortheFY1998IndexPopulation,Before (FY1998)andDuring(FY1999)theDemonstration,byDemonstrationandControl Sites 91 Table5.4. MedicareandDoDCostsfortheFY1998IndexPopulationinDemonstration andControlSites,byServiceCategory,FY1998andFY1999 92 Table5.5. TotalFY1998andFY1999MedicareandDoDCostsfortheDemonstrationSite Population,bySeniorPrimeEnrollmentStatus 93 Table5.6. CostComponentsforMedicareandDoDDirectCarefortheDemonstrationSite FY1998IndexPopulation,bySeniorPrimeEnrollmentStatus,FY1998andFY1999 94 Table5.7. AdministrativeCostsforStart-UpandFirstYearofSeniorPrimeOperation, EstimatedbytheDemonstrationSitesandtheTRICAREManagementActivityOffice 96 Table5.8. AverageInpatientActivityandCostsforDemonstrationandControlSites, ComparedwithOtherMTFs 97 Table5.9. AverageOutpatientActivityandCostsforDemonstrationandControlSites, ComparedwithOtherMTFs 97 Table5.10. AmountsandChangesinMTFCostsforDirectCareServicesforDually EligibleBeneficiaries,byDemonstrationandControlSites,FY1998toFYI999 98 Table5.11. AnnualizedUtilizationRatesforMedicareFee-for-ServiceBenefitsforDually EligibleBeneficiaries,byTypeofService,FY1998andFY1999 101 Table5.12. PercentageofDuallyEligibleBeneficiariesinDemonstrationSitesWhoEver UsedMedicareFee-for-Service,bySeniorPrimeEnrolleesandNon-Enrollees,FY1998 andFY1999 102 Vlll Table5.13. AnnualizedUtilizationRatesforMedicareFee-for-ServiceBenefitsforDually EligibleBeneficiaries,bySeniorPrimeEnrolleesandNon-Enrollees,FY1998and FY1999 103 Table5.14. MTFInpatientUtilizationRatesfortheFY1998CohortofDuallyEligible Beneficiaries,FY1998andFY1999 104 Table5.15. MTFInpatientUtilizationRatesatDemonstrationSites,bySeniorPrime EnrolleesandNon-Enrollees,FY1998andFY1999 105 Table5.16. AnnualizedRatesofMTFOutpatientServiceUtilizationfortheFY1998 CohortofDuallyEligibleBeneficiaries,FY1998andFY1999 106 Table5.17. AnnualizedRatesofMTFOutpatientServiceUtilizationfortheFY1998 CohortofDuallyEligibleBeneficiaries,byDemonstrationSite,FY1998andFY1999....107 Table5.18. AnnualizedRatesofMTFOutpatientUtilizationatDemonstrationSites,by SeniorPrimeEnrolleesandNon-Enrollees,FY1998andFY1999 107 Table6.1. ApplicabilityofSeniorPrimeandTRICAREforLifetoDoDGoals 114 Table6.2. ComparisonofSeniorPrimePerformanceIssuesforaModifiedSeniorPrime andSimilarDoDPlansNotCertifiedasMedicare+ChoicePlans 120 Table6.3. Top15StatesSortedbyDuallyEligiblePopulation,1998 123 Table6.4. MTFandMarketCharacteristicstoConsiderinSelectingPlanLocations 124 Table6.5. EstimatedAveragePerDiemCostforSelectedTypesofMTFInpatientWards, FY1998 125 Table6.6. EstimatedAverageCostperVisitforSelectedTypesofMTFOutpatientClinics, FY1998 126 Table6.7. DistributionofU.S.CountiesbytheLevelofMedicareCapitationRatesfor CalendarYear2000 127 -IX- LISTOFFIGURES Figure2.1. DesignoftheEvaluationoftiieSubventionDemonstration 18 Figure4.1. TrendsinMixofMedicareStatusforDuallyEligibleBeneficiariesinthe SubventionDemonstrationSites 77 Figure5.1. MTFMonthlyOutpatientUseRatesforSeniorPrimeEnrollees byMonthof OperationfortheDemonstrationSites 99 Figure6.1. AverageCapitationRatesforCatchmentAreasofMilitaryTreatmentFacilities intheContinentalUnitedStates 128 -XI- SUMMARY TheCentersforMedicare&MedicaidServices(CMS),formerlytheHealthCare FinancingAdministrationandtheDepartmentofDefense(DoD)havebeentestingthefeasibility ofmakingMedicare-coveredhealthcareservicesavailabletoMedicare-eligibleDoD beneficiariesthroughtheTRICAREprogram(themanagedcareprogramoftheMilitaryHealth Service)andmilitarytreatmentfacilities(MTFs). ThevehicleusedwastheMedicare-DoD SubventionDemonstration,whichwasestablishedbytheBalancedBudgetActof1997(BBA). Thegoalofthedemonstrationwastoimplementcost-effectivealternativesforcareforthis duallyeligiblepopulationwhileensuringbudgetneutrality,thatis,neitherCMS'snorDoD's totalcostsincrease. TheSecretariesoftheDepartmentofHealthandHumanServicesandofthe DepartmentofDefenseexecutedaMemorandumofAgreementthatspecifiedhowthe subventiondemonstrationwastobedesignedandoperated. TheMemorandumprovidedforan independentevaluationofthedemonstration,whichRANDconducted. Thisreportdescribesthe finalresultsoftheRANDevaluation. ThedemonstrationtestedTRICARESeniorPrimeplans,whichwereMedicaremanaged careplansthatDoDoperatedatsixdemonstrationsites. SeniorPrimeplanswerecertifiedby CMSasMedicare+Choice(M+C)healthplans,whicharealternativestothestandardfee-for- serviceMedicareprogram. TheM+Cprogram,whichreplacesthepreviousMedicaremanaged careprogram,allowsavarietyofmanagedcareorganizationstocontractwithCMSascapitated healthplans. CMSpaystheseplanscapitationpayments,whicharecountyratesadjustedby enrollees'riskfactors. IntheTRICARESeniorPrimemodel,enrolleesreceivedhealthcare servicesthroughtheTRICAREsystem,includingprimarycareandotherservicesatMTFs,and hadaccesstocivilianprovidersintheSeniorPrimenetworkwhenneeded. Thedemonstrationincludedasecondmodel,calledMedicarePartners,whichweretobe formalagreementsbetweencivilianM+CplansandMTFsinthedemonstrationsites,under whichtheMTFswouldprovidespecialtyservicesforDoDbeneficiariesenrolledinthecivilian plans. MedicarePartnersmodelwasnotimplementedbyDoDduetolimitedinterestbylocal M+Cplans,aswellasconcernsbyCMSandDoDregardingpossiblenegativeeffectsonaccess tocareandfinancialissuesforSeniorPrime. UnderthetermsoftheMemorandumofAgreement,DoDhadtospendatleastasmuch obenfcoarreeitfowradsuaellilgyibelleigtioblreecbeeinvefeiccaipairtiaetsiaosnpitasypmeennttisnf1r9o9m6,CtMheSbafsoerlSienneiloervePlr-iofm-eefefnorrotllyeeeasr., Furthermore,DoDspendingforduallyeligiblebeneficiarieshadtomeetseveraltestsbeforeit couldretainanyofthosepayments. DoDspendingdidnotmeetallthelevel-of-efforttestsfor thefirstperiodofthedemonstration,whichwasafour-monthperiodattheendofcalendaryear 1998. Therefore,itdidnotretainanycapitationpaymentsforthispaymentperiod. Although interimpaymentsweremadebyCMS,DoDhadtoreturnthesepaymentsduetofailuretomeet thetests.' DoDdidnotretainpaymentsforcalendaryear1999either. Inthiscase,low ' WenoteherethedistinctionbetweencalendaryearandFederalfiscalyear(FY).Thefiscalyearbeginson Oficstcoalbeyrea1r.aBsetchaeutsiemethbeassiusbvfeonrtoiuornedveamlounatsitorna,tiwohnerbeegwaencopoemrpaatrieondccloosstestaontdhesesrtavritceofutFiYliz1a9t9i9o,nwfoeruFsYed19t9h8e Xlll utilizationofspaceavailablecarebynon-enrolleesreducedtheamountofpaymentsallowed,and theremainingpaymentsweredisallowedbecausetherewaspositiveselectioninenrollment resultinginanaverage7.6percentreductioninpaymentswhenriskadjustmentwasapplied. Computationsforcalendaryear2000paymentshadnotbegunatthetimethisreportwaswritten. TheBBAprovidedforoperationofthesubventiondemonstrationthroughtheendof 2000,andlaterlegislationextendeditthroughtheendof2001. TheSeniorPrimeplanswere discontinuedattheendof2001,asspecifiedbylegislation. DoDnotifiedCMSthatitwas terminatingtheM+CcontractsfortheSeniorPrimeplans,andthetwoagenciescarriedoutthe necessaryprocedurestonotifyenroUeesandprovidefortheirsmoothtransitiontoother Medicarecoverage. KEYFINDINGS Sixkeyfindingsemergedfromourevaluation: • ThedemonstrationsitessuccessfullyobtainedMedicarecertificationfortheSeniorPrime plans,organizedtheplans,enrolledbeneficiaries,andprovidedservicesforenroUees. EnrolledbeneficiarieswerereportedtobepleasedwithimprovedaccesstoMTFcareand theservicesprovided. However,theprograminvolvedasubstantialadministrativeburden forstaffintheMTFs,LeadAgentoffices,andmanagedcaresupport(MCS)contractors. • EnrollmentratesinthesixSeniorPrimeplansgenerallywereconsistentwiththeplanned enrollmentlevels,althoughafewsitesdidnotreachthoselevels. Enrollmentscontinued throughoutthedemonstration,includingage-inenrollmentsbybeneficiarieswhowerein TRICAREPrimeandbecameeligibleforMedicarewhentheyturned65. Evidenceofweak positiveselectionwasfoundforenrollmentsfromMedicarefee-for-servicebutnorisk selectionwasidentifiedforenroUeeswhoswitchedfromM+CplanstoSeniorPrime. • Theoverallgovernmentcostforhealthcareservicesforthedemonstrationsites(excluding administrativecosts)wasanestimated$659millionduringthefirstyearofSeniorPrime (FY1999),whichwas5.1percenthigherthanthe$627millionincostestimatedforthe baselineyear(FY1998). (RefertoTableS.l.) Whennormalizedtoanestimated4.3percent increaseinaggregatecostsforthecontrolsites,whichisanestimateofwhatcostswould havebeenintheabsenceoftheSeniorPrimeplans,thedemonstrationyieldedaslightcost increase(0.8percent). ResultsmightdifferifadifferentsetofMTFshadbeenselectedas controlsites. However,theobservedchangesinMedicareandDoDcostsforthecontrol sitesbetweenFY1998andFY1999areconsistentwithknownserviceusetrends,where accesstoMTFcarewasdecliningforMedicare-eligibleDoDbeneficiaries. • CostsshiftedfromMedicaretoDoDinthefirstyearofSeniorPrime. AggregateMedicare costsforduallyeligiblebeneficiariesinthedemonstrationsitesdeclinedbyamodest3.4 percentwiththeintroductionofSeniorPrime,whileDoDcostsincreasedby29.8percent (TableS.l). ThesizeofthecostshiftwasmitigatedbecausebeneficiarieswhochoseSenior PrimealreadywereheavyusersofMTFservices. ThosewhoenrolledinSeniorPrimein (beforethedemonstration)andFY1999(thefirstyearofthedemonstration).Capitationpaymentcalculations arebasedoncalendaryear. XlV-