AOA-IM-97-08 -- April 4, 1997
TO: STATE AND AREA AGENCIES ON AGING AND TRIBAL ORGANIZATIONS
ADMINISTERING PLANS UNDER TITLES III AND VI OF THE OLDER AMERICANS
ACT OF 1965, AS AMENDED
SUBJECT: Managed Care Principles for the Aging Network
LEGAL AND RELATED REFERENCES: Older Americans Act, as
The purpose of this memorandum is to convey a set of principles
to assist and help guide state and area agencies on aging, tribal
organizations and service providers in interactions and activities
related to managed health care. These principles reinforce the
essential role which state and area agencies on aging and other
aging organizations play with regard to consumer education, protection,
and representing the interest of the elderly.
Many members of the aging network have requested additional assistance
and guidance following the successful Administration on Aging
(AoA) Managed Care Conference in February 1996. The University
of Minnesota National Long Term Care (LTC) Resource Center, funded
under Title IV of the Older Americans Act (OAA), provided substantive
background and technical assistance for that successful event.
Since the changes in this new health care environment are so complex,
this set of principles seemed to be the best approach for assisting
the aging network. This approach was broadened and clarified through
input from and review of draft documents by other federal agencies,
various state and area agencies on aging, national aging organizations,
universities and groups representing consumer concerns. We greatly
appreciate the contributions of many managed care experts as we
analyzed, revised and refined various aspects of the managed health
Why Are We Issuing This Document?
In many meetings and discussions, the question of the appropriate
roles of state and area agencies on aging in managed care has
been widely discussed. In an effort to respond to the issues and
questions which have been raised, it was concluded that AoA needed
to call attention to, and reinforce, the public mission of state
and area agencies funded under the Older Americans Act in this
rapidly changing era of health and long-term care reform. Our
goal is to provide guidance for responding to new issues facing
the elderly as they encounter changes in health and LTC delivery
systems. This information will assist the aging network in its
decision making as its representatives work with managed care
organizations and policy makers in addressing managed care issues.
This guidance alerts the aging network to some of the potential
benefits and possible pitfalls of managed health care plans.
Although the primary audience for these managed care principles
is state and area agencies on aging, tribal organizations, aging
service providers, aging organizations and others who work with
the elderly, these principles may be of value to others with responsibility
for vulnerable populations, particularly those concerned about
persons with disabilities.
Managed Care Enrollment:
As of March 1, 1997, approximately 5 million Medicare beneficiaries
are enrolled in managed care plans, accounting for approximately
14 percent of the total Medicare population. Of the total 369
prepaid contracts, 285 are risk contracts, 37 are cost contracts,
19 are demonstrations and 48 are health care prepaid plans. There
was a 1.6 percent increase in managed care enrollment during February
Enrollment in Medicaid managed care plans is increasing also.
As of June 30, 1996, approximately 40.1 percent of the Medicaid
population is enrolled in managed care. This figure is an increase
from 29.37 percent enrolled in 1996. The data available from the
Department of Health and Human Services Health Care Financing
Administration do not indicate the proportion of elderly and persons
with disabilities enrolled in managed care arrangements. While
a number of states have moved aggressively to enroll the Supplemental
Security Income (SSI) disabled and the dually eligible (e.g.,
Oregon, Tennessee, and Massachusetts), it currently appears that
only a small percentage of elderly and disabled are served under
managed care contracts.
A survey of 26 states completed in 1997, which was conducted
by the Center for Vulnerable Populations, codirected by the National
Academy for State Health Policy in Portland, Maine and the Institute
for Health Policy at Brandeis University in
Waltham, Massachusetts, indicates that there are no strong trends
in the approach to serving elderly persons or persons with disabilities.
However, half of the states plus the District of Columbia do enroll
elderly persons and/or persons with disabilities into risk-based
Medicaid managed care programs. The report, which was prepared
by the Center, is entitled "Directory of Risk-Based Medicaid
Managed Care Programs Enrolling Elderly Persons or Persons with
Disabilities, Update: January 1997." More detailed information
is available by contacting Joanne Rawlings-Sekunda at (207) 874-6524.
Managed care has three basic dimensions: the payment mechanism,
the organization of services and the delivery of care. It is important
to recognize that capitation is not synonymous with managed care,
and that managing costs does not guarantee that care will be managed.
Since "managed care" is a continuously evolving approach
in how America pays for and organizes its health care, it is difficult
to provide precise information about the many variations in the
practice of "managed care." The variations are driven
by geographic concerns, including historic trends in managed care
penetration and population characteristics, past practices in
paying the "going-rate" of health care services, which
organization is "at risk," and many other socio-political
and economic factors.
Managed care can be thought of as some combination of an insurance
mechanism and health care delivery system which covers health
care costs in return for the premium paid. Each plan has its own
network of providers such as doctors, hospitals, skilled-nursing
facilities and other health care providers. Premium costs and
copayments for services received vary from plan to plan and the
circumstances of the enrollee. The range of plans available varies
considerably in different geographic parts of the country.
The managed care alternative to fee-for-service medicine offers
the potential for more appropriate services and continuity of
health care at lower cost, but its incentives to control health
care costs makes inadequate access, undertreatment, and inappropriate
care of particular concern to older persons and persons with disabilities.
As managed care continues to evolve, the aging network, including
states, area agencies on aging, Indian tribes, service providers
and other agencies providing care to older adults, (e.g., care
management agencies and community action agencies) is in a unique
advocacy position. The day-to-day "hands-on" experience
with high risk, vulnerable populations is a valuable asset in
developing "best-practice" approaches, standards and
shaping managed care organizations (MCO) approaches for gaining
consumer input and satisfaction with the services received. The
Aging Network can offer considerable expertise in discussions
which relate to access, benefits and coverage, ethics, conflict
resolution procedures and consumer issues.
POTENTIAL BENEFITS AND PITFALLS OF MANAGED CARE FOR OLDER
Among the potential benefits are:
- Enhanced service coordination through a single entry point;
- Reduced copayments and deductibles;
- Reduced paperwork for beneficiaries;
- Emphasis on prevention (both primary and secondary) and patient
- Flexible benefits, i.e., service packages developed around
individual needs or added-value services which the insurer may
- Fewer tests, procedures and treatments which may eliminate
duplication, overlap and unnecessary procedures;
- More appropriate use of medications resulting from increased
care management; and
- More efficient use of public funds available for health care.
Potential pitfalls may include:
- Choice of physician and providers may be limited to those
participating in the plan selected.
- (Special note: Under "risk" plans, beneficiaries
generally must receive all of their covered care from providers
participating in that particular plan, unless the primary care
physician refers the patient to services outside the plan. Emergency
or urgent care are exceptions if the beneficiary is away from
the service area. Some "risk" plans offer a "point-of-service"
type option in which the insured person pays a higher copayment.
Services obtained outside plan coverage must be paid for by
the individual receiving the service.)
- Competitive plans may be nonexistent in rural and low-income
- Consumer confusion about enrollment, benefits, and coverage;
- Service delivery sites may be less accessible;
- Treatment regimes may be less flexible and adaptable to individual
- Inadequate or delayed access to specialty care;
- Less aggressive care and under-service, particularly for those
who have multiple, chronic infirmities; and
- Less than adequate medical tests, treatment, medications,
and choices of medical procedures.
POTENTIAL ROLES FOR THE AGING NETWORK
- The aging network agencies can facilitate the effective dissemination
of accurate and timely consumer information about managed care
plans offered in their geographic area. Dissemination efforts
should be accompanied by counseling, translating, and explaining
benefits and requirements. Elderly enrollees, or potential enrollees,
and their families need understandable and accurate information
about benefit packages, consumer satisfaction with various plans,
and may need assistance in deciding which plan best suits their
- The information sharing role is closely intertwined with the
network's advocacy role, which requires a full understanding
of contracting practices, arrangements between and among Medicare
and Medicaid plans and providers, and regulatory issues. Potential
roles for the aging network include:
- Educating and assisting consumers to make informed health
- Building community coalitions or partnerships with other advocacy
organizations, particularly with those organizations that represent
persons with disabilities, to influence needed improvements
in health care quality;
- Creating partnerships with the state insurance departments
and other state and local regulatory entities to assist with
monitoring and oversight responsibilities in the quality of
- Contracting with managed care organizations to provide selected
services, such as information and assistance, care management,
public education, and staff training;
- Developing health care ombudsman programs to assist consumers
with complaints, consumer rights and protection, assist with
grievances and appeals; and
- Establishing mechanisms to measure consumer satisfaction with
subsequent actions to improve the quality of health care services.
Although the enrollment of older Americans into managed health
care plans continues to increase daily, Medicare beneficiaries
still have the option to remain in "fee-for-service"
arrangements. An additional safeguard is that once enrolled in
a managed care arrangement, Medicare beneficiaries can disenroll
from one managed care plan and enroll in another plan or return
to "fee-for-service." One caution in returning to "fee-for-service"
is that reinstatement in a Medi-gap insurance plan may be more
Many elderly persons and their families look to the aging network
to provide expert advice and counsel as to whether to join an
MCO. For many older Americans, a managed care plan may offer good
health care coverage and care at a reasonable cost; additional
benefits such as prescription drugs and more aggressive and comprehensive
health promotion and disease prevention efforts, may enhance the
quality of life. However, for those individuals with complex,
long-standing health problems or chronic conditions, managed care
plans may restrict access to necessary specialists and treatments.
With managed care becoming the dominant approach for the delivery
of health care services, those of us who work with the elderly
must carefully examine our relationships with managed care organizations.
Our long-standing public mission of advocating on behalf of vulnerable
elderly and protecting them from abuse, neglect and exploitation
should guide our decision making as to how to work with managed
care organizations. We must be supportive of consumer efforts
to make informed and reasoned choices, as well as supportive of
efforts to achieve high quality care at a reasonable cost. The
ethical issues raised in this new health care environment are
complex and create many new dilemmas in the allocation of scarce
resources. The set of principles attached to this memorandum are
offered to the aging network to help guide and assist aging organizations
in making decisions about what roles to play in this new health
This nation has prided itself on the quality of health care it
delivers. In this time of uncertainty, it is essential to incorporate
safeguards and protections for the elderly and persons with disabilities
as new systems are built. Over the years, Older Americans Act
programs have taken a strong leadership role to ensure that the
needs and concerns of older persons are adequately considered
as times change. An informed proactive role, during this period
of change, is critically needed to ensure that we continue to
fulfill the mission of the Older Americans Act in improving the
lives of our nation's elderly.
EFFECTIVE DATE : Immediate
Robyn I. Stone
Acting Assistant Secretary for Aging
ADMINISTRATION ON AGING
MANAGED CARE PRINCIPLES
Today managed care is dominating this country's health care reform
debate. In view of the Administration on Aging's (AoA) mandate
to serve as a visible advocate on behalf of the elderly, this
paper sets forth operating principles to guide the aging network
in its activities related to managed health care systems.
Although the principles are primarily focused upon managed health
care arrangements for Medicare recipients, they also have applicability
to Medicaid participants and elderly persons participating in
various types of managed long-term care (LTC) arrangements.
Managed care can be thought of as a combination insurance company
and health care delivery system which covers health care costs
in return for the premium paid. Each plan has its own network
of providers, such as doctors, hospitals, skilled-nursing facilities,
and other health care providers. Premium costs and copayments
for services received vary from plan to plan and the circumstances
of the enrollee. The variety of plans available varies considerably
in different geographic parts of the country.
There is no question that managed care is a rapidly growing reality
in the lives of persons with disabilities and the elderly. The
challenge faced by older consumers and the aging network is to
obtain the possible benefits of managed care, while guarding against
its possible pitfalls.
Given the changing environment brought about by the rapid growth
of managed health care, AoA offers the following principles to
help guide the aging network in the development and establishment
of strategies and policies to respond to the challenges and opportunities
that managed care presents. The principles are grounded in the
mission, programs and history of the Older Americans Act of 1965
(OAA), as amended. It is AoA's intent to offer guidance to the
OAA network in fulfilling our long-standing advocacy and consumer
protection functions by working to assure high quality and appropriate
health care for seniors. A key objective of the OAA is to help
older persons secure:
"Freedom, independence, and the free exercise
individual initiative in planning and managing
their own lives, full participation in the planning
and operation of community-based services and programs
provided for their benefit, and protection against
abuse, neglect, and exploitation."
The following principles are thus designed to afford states and
localities flexibility for conducting business in diverse managed
care environments, while ensuring that the rights of older persons
are protected. As such, they are not intended to instruct entities
within the aging network as to specific activities they should
or should not undertake, but rather they are meant to serve as
a guide and anchoring point for helping to make hard decisions
within fluid health care environments.
The overarching principles cover four major themes:
- All individuals should have uninterrupted and unhindered access
to benefits that are medically necessary;
- A variety of plans and options within plans should be available
and consumers should have freedom of choice among the plans
and options within plans;
- The care system should meet basic quality standards and be
adequately monitored; and
- There should be guaranteed consumer protections.
The following describes, in more detail, the key elements of
the four themes with respect to managed care arrangements for
AoA and the aging network:
- All individuals should have uninterrupted and unhindered access
to benefits that are medically necessary.
- Plans should be available to all without regard to age, ethnicity,
gender, existing health status, pre-existing conditions, or
economic situation. Plans should include preventive health services
and a continuous care system which ensures provision of appropriate
care without interruption.
- Information about plans, and criteria to assist in evaluating
them, should be readily available and understandable to consumers.
- Facilities and services should be available in reasonable
proximity to enrollees.
- Health care coverage should be portable when the consumer
travels out of the service area and with accommodation for those
who live in other residential locations on a temporary or part-time
- Care should be appropriate to the presenting condition, with
referral to specialists, medical tests and rehabilitative services
provided when needed. This care should be provided in a timely,
efficient manner and include ready access to emergency care.
- Plans should not include barriers to accessing services, such
as unduly burdensome or time-delayed pre-authorization requirements,
unreasonable restrictions on second opinions, or lengthy appeals
B. Consumer Choice:
- Consumers should be free to choose whichever plan best fits
their needs, including "fee-for-service" plans. Plans
should offer provider and treatment options.
- All printed materials should be understandable to the consumer
with print size to accommodate elderly vision.
- Coverage and non-coverage provisions should be clearly specified.
- Consumers should be advised that they have the option to change
from or disenroll from plans which are non-responsive to needs,
inefficient, inadequate, and which misrepresent plan coverage.
(Medicare beneficiaries may disenroll at any time.)
- Consumers should be free to choose their own physician within
the plan and be referred to specialists by the primary care
physician when a medical condition warrants such a referral.
- The care system should, at a minimum, meet the basic quality
standards set forth by the National Committee for Quality Assurance
(NCQA). Quality of care, consumer satisfaction and cost savings,
together, should define the success of a managed care arrangement.
Plans must have the mechanisms to make information on quality
(both process and outcome) available to consumers in an understandable
and timely fashion.
- Care should be provided by qualified providers and meet the
basic standards of care.
- State and local mechanisms should be created for regular monitoring
of appropriateness and quality of care by qualified, independent
- Consumer satisfaction with care received should be an important
determination in monitoring quality.
- Health promotion and disease prevention should be an integral
part of every care plan.
- Pressures to control costs should not compromise or adversely
affect quality of or appropriateness of care.
D. Consumer Protection
- There should be adequate consumer safeguards and protections.
- States and managed care organizations should assure consumer
input and involvement in the planning, designing and monitoring
of the quality of the provider's plan, its services and providers.
- A system for routinely measuring consumer satisfaction with
services received should be built into every managed care plan.
- All informational materials should clearly state who pays
for what and under what conditions.
- Medically necessary care should not be denied solely on the
basis of cost. Other factors, such as health status, prognosis,
and medical directives should be taken into
consideration in making decisions.
- Grievance and appeals mechanisms must be available, and information
about such grievance and appeals must be provided to consumers
upon entry into the plan.
- Consumers should have access to an independent consumer advocate
for assistance with appeals if needed.
- Special provisions should be available for appealing decisions
in emergency care situations.
- Consumers should receive written responses to complaints.
- Care organizations and providers should be subject to independent
reviews on a periodic basis, with performance information available
- Plans should ensure complete confidentiality of medical records,
requiring consumer consent for disclosure of personal information.
- Arrangements should be made for an appropriate surrogate decision-maker
for physically and mentally challenged individuals who are unable
to handle their own affairs.
- Consumers should be protected from financial liability of
- Consumer bills and reimbursements should be processed promptly
and accurately using appropriate billing procedures and should
III. POTENTIAL ROLES OF THE AGING NETWORK - DISCUSSION
The roles that individual state and area agencies on aging, Indian
tribes, and local service providers play in managed care will
be greatly determined by decisions made by each state and locality
as they respond to their unique service needs and to the peculiar
requirements of their managed care marketplace. No matter how
responsibilities differ, the aging network is responsible for
advocacy on behalf of older Americans, this is the cornerstone
of the Older Americans Act, and represents an important common
ground among aging network agencies, and it is critically important
to the achievement of all the consumer protection principles enumerated
Advocacy, in the context of managed care, can take many forms,
ranging from systems change to case management, to benefits and
legal counseling. Some examples are:
- Providing leadership and expertise in shaping the systems
of care designed by the managed care organizations;
- Developing and supporting citizen groups that attempt to shape
public and corporate policy relative to managed care;
- Presenting testimony and written comments about proposed and
approved policies of managed care organizations;
- Participating in regulatory oversight that addresses such
matters as program eligibility, marketing and enrollment practices,
service package design, bidding and contract procedures, rate
setting, contract oversight, financial solvency and consumer
- Providing timely, accurate, and informative consumer education
and materials about available options for managed care plans;
- Developing and disseminating criteria which will help older
persons evaluate the appropriateness of plans in meeting their
- Providing a "health-ombudsman" type of assistance
for vulnerable older persons which will help them navigate in
a rapidly changing health care environment. This assistance
- Counseling and assistance to help educate older persons
about plan options;
- Information about how to obtain needed services;
- Assistance with language barriers and understanding of
complex medical procedures and various treatment alternatives;
- Information about patient rights and appeal procedures;
- Assistance in filing and resolving complaints, grievances,
- Monitoring plans for quality of care, access to care,
consumer choice, and consumer protections; and
- Providing training to health professionals and paraprofessionals
in areas related to caring for the elderly, particularly
those who are chronically disabled.
Agencies functioning in an advocacy capacity must recognize the
potential risk of becoming involved in direct service provision
in a managed care arrangement. Direct service provision, either
contracted for or carried out directly through network agencies
that intend to pursue advocacy and direct service provision, must
demonstrate the existence of formal mechanisms to ensure the explicit
separation of functions. A managed care organization has the potential
for compromising or limiting credibility and independence of aging
network agencies to serve as trusted and effective advocates for
older persons. A crucial challenge for the network, in assuring
consumer protection in managed care, is to separate, to the extent
possible, advocacy functions from service provision responsibilities.
This separation minimizes the potential for actual and perceived
conflicts of interest and maintains the integrity of advocacy