--CONSULTATION REPORT-- HARVARD PILGRIM HEALTH CARE ETHICS ADVISORY GROUP March 9, 2011

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1 --CONSULTATION REPORT-- HARVARD PILGRIM HEALTH CARE ETHICS ADVISORY GROUP March 9, 2011 A FRAMEWORK OF ETHICS FOR DISCONTINUING PRODUCTS OR EXITING MARKETS USING MEDICARE ADVANTAGE AS THE EXAMPLE Attendees: Gerald Belastock; Lynn Bowman; Pat Canney; Dick Cannon; Cheryl Cassidy; Michael Comerford; Chris Flanagan; Kim Garcia; Ken Grundfast; Rita Hart; Michael Hurst; Allen Hymovitz; Jan Jankowski; Mary Joyce; Rose Judge; Jack Lane; Lisa Lehmann; Brian Mackintosh; Eloise McGaw; Lisa Melly; Peter Mongeau; Denise O Connor; Laurie Pascal; Denst Petrus; Dana Rashti; Jim Sabin; Paul Solomon; David Steinberg; Sharon Steinberg; Nancy Turnbull; Samantha Wei. Customer: The customer for the March 9 EAG meeting was Lynn Bowman, Vice President of Customer Service and Sales Operations and leader of Harvard Pilgrim s retiree strategy, along with colleagues from what was previously configured as the Medicare Line of Business. Background The one constant for Medicare since it was launched in 1965 is change! This isn t surprising. Medicare is the third largest federal expenditure, after Defense and Social Security. It currently covers 47 million people 39 million 65 and older and 8 million nonelderly with a permanent disability. Medicare represents 15 percent of the federal budget and 20 percent of total healthcare spending. In 2011 there will be 7,000 new beneficiaries every day. By the time the last of the baby boom generation turns 65 in about 20 years, Medicare will be covering 80 million people. At the same time, the ratio of workers paying taxes to support Medicare will have decreased from 3.5 per beneficiary to 2.3. (Medicare taxes have been unchanged since 1986, with employee and employer each contributing 1.45% of wages.) It s guaranteed that Medicare will be the focus of intense political attention, conflict, and changing policies, for the foreseeable future. Harvard Pilgrim has participated in Medicare since the HMO Act of 1976 opened the door for Medicare HMOs. But its mode of participation has changed over the years. In 2006, when Harvard Vanguard Medical Associates, which cared for the majority of Harvard Pilgrim s First Seniority Medicare HMO members, elected to contract exclusively with the Tufts Medicare HMO, Harvard Pilgrim left the Medicare HMO market and introduced (as of January 1, 2007) First Seniority Freedom, a private fee-forservice Medicare Advantage program. But in the context of regulatory and reimbursement changes, Harvard Pilgrim decided to end that program in December Here s how the Boston Globe covered the story on September 28, 2010: Harvard Pilgrim Health Care has notified customers that it will drop its Medicare Advantage health insurance program at the end of the year, forcing 22,000 senior

2 citizens in Massachusetts, New Hampshire, and Maine to seek alternative supplemental coverage. The decision by Wellesley-based Harvard Pilgrim, the state's second-largest health insurer, was prompted by a freeze in federal reimbursements and a new requirement that insurers offering the kind of product sold by Harvard Pilgrim - a Medicare Advantage private fee for service plan - form a contracted network of doctors who agree to participate for a negotiated amount of money. Under current rules, patients can seek care from any doctor. "We became concerned by the long-term viability of Medicare Advantage programs in general," said Lynn Bowman, vice president of customer service at Harvard Pilgrim's office in Quincy. "We know that cuts in Medicare are being used to fund national health care reform. And we also had concerns about our ability to build a network of health care providers that would meet the needs of our seniors." Under Medicare Advantage plans, the federal government pays private health insurers to sell customers over 65 years old enhanced policies, many of which offer prescription drug coverage not covered by standard Medicare. But the US Centers for Medicare and Medicaid Services has been seeking to reduce the amount it pays to private insurers for such programs. Medicare told Harvard Pilgrim to notify customers that its Medicare Advantage program, known as First Seniority Freedom, was being canceled. In a mailing, the insurer was required to list alternative Medicare Advantage plans, including those offered by its competitors. Harvard Pilgrim in a second mailing this week will urge customers to switch to a new Medicare Supplement plan it will begin offering in October. Unlike Medicare Advantage, which is overseen by the Centers for Medicare and Medicaid Services, the new Harvard Pilgrim plan will be overseen by the Massachusetts Division of Insurance. It will be "slightly more expensive" than the Medicare Advantage plans, but competitive with supplemental insurance plans offered by rivals such as Blue Cross Blue Shield of Massachusetts, the state's largest health insurer, Bowman said. She said the Medicare Supplement plan will feature some benefits not covered by the current plan, such as fitness reimbursements, but won't pay for prescription drugs, which are covered by some versions of the current plan. Instead, seniors can buy separate supplemental drug coverage through a partnership with Coventry Health Care, in Bethesda, Md. 2

3 Newton resident Robert Gray, 68, a retired computer engineer and technology researcher, said he was disturbed to find out his plan was being discontinued. But he said he prefers to remain with Harvard Pilgrim because he is a longtime customer. "If there's a big increase in price or the various options in the new plan don't seem to be the same... we might consider going to another plan," Gray said. More than 60 percent of senior citizens in Massachusetts are covered only by Medicare, according to Harvard Pilgrim research. Those who buy supplemental insurance are divided roughly evenly between Medicare Advantage and Medicare Supplement plans. Questions for the Ethics Advisory Group 1. With regard to the broad issue of discontinuing a product or exiting from a market, the EAG was asked to advise about a framework of values for how HPHC can handle situations like leaving the Medicare Advantage program (or future situations in other market areas) in ways that are most consistent with HPHC s values and the values of key stakeholders. 2. With regard to Medicare itself serving all segments of the population is a longstanding and deeply held HPHC value. However, as a government program in an era of tremendous concern about health care costs and the deficit, Medicare policy, regulations and financing are susceptible to major changes in direction from year to year. Given that the population served by Medicare the elderly and disabled is uniquely sensitive to disruption in access to care, the EAG was asked: what Harvard Pilgrim values are most important for how HPHC does, and does not, participate in various Medicare programs? Relevant precedents On September 24, 2009, the EAG took a first crack at the topic of the March 9 meeting developing a framework of values for discontinuing a product or exiting a market. That meeting used HPHC s decision to retire a rich benefit/no deductible product in New Hampshire that was not financially viable as its focus. The EAG supported Harvard Pilgrim s decision to retire the product, with the following rationale: The EAG found the aphorism no margin, no mission helpful. As a nonprofit organization, HPHC s mission is the rationale for its existence, but without a positive financial margin it cannot pursue the mission. One participant put it this way - the challenge to HPHC is to be realistic in the marketplace and to retain its soul at the same time! The EAG s primary recommendation was to use decisions of this kind as opportunities to educate members, other stakeholders, the public, and itself, about the economic and ethical realities of health care and health insurance: 3

4 The EAG discussed whether the decision to retire the high benefit/no deductible products created a potential teachable moment for HPHC s constituents and the public. Several participants suggested that since HPHC s decision in New Hampshire had a strong economic and ethical rationale, a message could perhaps have been crafted that (a) gave the necessary information, (b) offered teaching about the economic and ethical rationale for HPHC s actions, and (c) was worded in a way that minimized the risk of being misunderstood or quoted out of context. One participant commented that this kind of educative forthrightness would support HPHC s vision of being the most trusted and respected name in health care and its #1 national ranking. Another encouraged HPHC to find ways to say it like it is in situations like the New Hampshire small group market. On July 19, 2000, Charlie Baker asked the EAG to review HPHC s exit from Rhode Island, to see what lessons could be derived for the future. Interestingly, in terms of the March 9 meeting, the EAG connected the Rhode Island topic to Medicare: Several EAG members commented that First Seniority raises issues similar to those associated with Rhode Island. HPHC has a longstanding commitment to serving the Medicare population with high quality managed care and has many long term First Seniority members The EAG felt that Charlie s message of July 5, 2000 about First Seniority appears to apply the lessons the EAG felt could be derived from the Rhode Island experience. It 1) lays out the financial problem associated with the program very clearly, 2) acknowledges that there is a strong case for exiting the program completely, and 3) states that during 2001 HPHC will reevaluate whether to continue into The a EAG commented that the decision to shrink the network and service area in FY 2001 was the kind of proactive/fix-itbefore-it-is-completely-broken approach that would ideally have been pursued in Rhode Island well before the crisis developed. The EAG encouraged the First Seniority team to develop a Plan B for how HPHC could exit from Medicare with least disruption for members and other concerned stakeholders if HPHC were to exit from the First Seniority market at some point in the future. Clinicians commented that the needs of the frail elderly would require special attention in an exit strategy. EAG DISCUSSION/RECOMMENDATIONS Lynn Bowman opened the discussion with a very clear explanation of the considerations that went into HPHC s decision to exit from the Medicare Advantage program. She emphasized two factors the requirement that HPHC would have to provide a network to First Seniority Members and the expectation that reimbursement for the program from CMS would continue to decline. For a range of logistical reasons, creating a national network, which would have to be available as of January 2011, was deemed to be impossible. Because of its mission to improve the health of the entire community - HPHC has had a longstanding commitment to including products for Medicare beneficiaries in its 4

5 offerings. Dick Cannon, who is now Vice President for Finance and Administration at the University of New Hampshire, but who was Senior Vice President at Harvard Community Health Plan in the 1970s and 1980s, told the EAG that even before HCHP entered the Medicare HMO market it had offered a Medicare Supplement program as early as Lynn Bowman reported that in accord with the almost 40 year participation in Medicare, although HPHC had discussed the possibility of exiting from the Medicare market entirely, it had discarded full exit as an option. The EAG reviewed the initial letter that had been sent to First Seniority Freedom members on October 2, The wording and layout, which frightened many members, were required in their exact form by CMS. Here s how the six page letter opened: IMPORTANT NOTICE: Your Medicare Coverage Is Changing. Harvard Pilgrim Health Care Will No Longer Offer Your Plan in Dear <member name>, First Seniority Freedom (PFFS) by Harvard Pilgrim Health Care, a Health plan with a Medicare contract, will no longer operate as of January 1, 2011, so your coverage through First Seniority Freedom will end December 31, You need to make some decisions about your Medicare coverage. Unless you act before December 31, 2010, you ll only have Original Medicare coverage starting January 1, Take action by December 31 to avoid losing coverage Lisa Melly, who works in Member Services, reported that between arrival of the letter and the end of the year, HPHC received more than 60,000 telephone calls, an average of between 2-3 calls/member! She told the group that some members read no further than the bold print (the letter itself was six pages long) and concluded that Harvard Pilgrim was going out of business and that they might be left with no insurance at all! Member Services added staff to ensure a prompt response to member calls. Representatives called members who had not been heard from to make sure that they were making plans for their future insurance. Providers introduced the ethical concept of patient abandonment into the discussion. The group discussed whether exiting from a product that members in a vulnerable population valued and relied on was an ethically acceptable course of action, or whether it was an unacceptable form of abandonment. The group concluded that although exiting from Medicare Advantage was a painful decision, the decision itself was justified and the process by which it was carried out was consistent with key HPHC values. The EAG acknowledged how uncomfortable it is to talk about money in the health sector. Health is regarded as priceless. Making decisions based on financial considerations (such as exiting from the Medicare Advantage market) can cause moral distress to those 5

6 who make the decision and can trigger moral outrage among observers. The fact that HPHC did not believe it could create a high quality national network for First Seniority Freedom by January 2011 made the decision to exit from the product unavoidable. But the EAG reaffirmed that apart from that logistical problem, participants in the health sector have an ethical obligation to promote affordability and financial stability. Without an element of margin, a not for profit enterprise is unable to pursue its mission. The goal of the EAG meeting was to recommend a framework of values that could be used in the future in relation to exiting from a product or a market. The robust discussion pointed to the following recommendations, which I have articulated in light of HPHC s mission, vision, and core values (which are included as an appendix to this report): 1. Communicate with the affected stakeholders as early as possible. Doing so is consistent with the core value of INTEGRITY: We treat others fairly and honestly the same way we would want to be treated. 2. Nurture trust throughout the process, as called for by the vision of being the most trusted and respected name in health care, and the core value of TRUST: we collaborate and built trust through open, honest and respectful communication. 3. Work intensively with members and employers to help them identify the best possible alternatives for their future insurance needs (even if their choices mean leaving Harvard Pilgrim). Members must not be abandoned, and, to the greatest extent possible, should not feel abandoned, as called for by the mission to improve the health of the people we serve and the health of society. 4. Even in the context of exiting from a product or market, whenever possible HPHC should provide members with tools developed by HPHC or by third parties (such as the Medicare Shine program), to help them make wellinformed choices for the future. Introducing decision support tools is consistent with the core value of INNOVATION: We find creative, new ways to bring value to the marketplace. 5. Support the important role of HPHC member services for responding to constituents who are confused and sometimes angry about the changes, and helping HPHC learn from their reactions. Doing so is consistent with the core value of INCLUSION: We respect and value differences. We benefit from many points of view. 6. Retiring a product or exiting from a market often creates a teachable moment about health policy. This offers HPHC an opportunity to educate its constituents and the wider public, in accord with the corporate goal of being a good corporate citizen and influential public advocate. 6

7 Summary 1. The EAG supported HPHC s commitment to participating in the Medicare market as (a) consistent with HPHC s mission of improving the health of the community, and (b) a sound business decision, given the aging of the baby boom generation. 2. Medicare involves beneficiaries who are vulnerable to change and a policy framework susceptible to recurrent bouts of major change. This makes anticipatory planning for a range of future possibilities important as a means of protecting vulnerable members. 3. The EAG thanked Lynn Bowman and her colleagues for inviting it to use the decision to exit from Medicare Advantage as an opportunity to propose a framework of values (above) for future situations of exiting from a product or a market. 4. The EAG congratulated Lynn and her colleagues for the thoughtful way they handled a challenging set of ethical issues. Jim Sabin 7

8 Appendix I: Mission, Vision and Core Values Mission To improve the health of the people we serve and the health of society. Vision To be the most trusted and respected name in health care Core Values At Harvard Pilgrim, we believe that greatness is built from the inside out and comes from the values that we all practice and share. Integrity We treat others fairly and honestly - the same way we would want to be treated. Trust We collaborate and build trust through open, honest and respectful communication. Innovation We find creative, new ways to bring value to the marketplace. Excellence We expect the best from ourselves and strive to maximize value and service for our constituents. Inclusion We respect and value differences. We benefit from many points of view. Community We make a positive difference in the communities we serve. People We succeed by building a talented workforce and caring about our employees and their families. Accountability We do what we say we will do and lead by example. 8

--CONSULTATION REPORT-- HARVARD PILGRIM HEALTH CARE ETHICS ADVISORY GROUP. Health Insurance/Rapid Change: Developing a Framework of Values

--CONSULTATION REPORT-- HARVARD PILGRIM HEALTH CARE ETHICS ADVISORY GROUP Health Insurance/Rapid Change: Developing a Framework of Values May 19, 2004 Customer for the Ethics Advisory Group The customer