This is the accessible text file for GAO report number GAO-14-210R entitled 'Medicare Advantage: Special Needs Plans Were More Profitable, on Average, than Plans Available to All Beneficiaries in 2011' which was released on January 22, 2014. This text file was formatted by the U.S. Government Accountability Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products' accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. Because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. GAO-14-210R: GAO: United States Government Accountability Office: 441 G St. N.W. Washington, DC 20548: December 19, 2013: The Honorable Sander M. Levin: Ranking Member: Committee on Ways and Means: House of Representatives: Medicare Advantage: Special Needs Plans Were More Profitable, on Average, than Plans Available to All Beneficiaries in 2011: Dear Mr. Levin: In 2011, the federal government paid approximately $124 billion to Medicare Advantage (MA) organizations--entities that offer a private health plan alternative to Medicare fee-for-service (FFS). The private plans offered by MA organizations are generally available to all Medicare beneficiaries in the plans' service areas, although there are some MA plans with more specific eligibility requirements. For example, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 authorized the establishment of special needs plans (SNP) that exclusively serve Medicare beneficiaries in one of three classes of special needs: (1) beneficiaries dually eligible for Medicaid, (2) beneficiaries with severe or disabling chronic conditions, or (3) institutionalized beneficiaries.[Footnote 1] As of November 2011, approximately 1.4 million beneficiaries, or about 12 percent of all beneficiaries enrolled in MA, were in SNPs. Medicare payments to SNPs tend to be higher than payments to other MA plans, in part, because the beneficiaries enrolled in SNPs are generally in poorer health and are expected to use more health services relative to enrollees in other MA plans. However, even after accounting for differences in relative health status, payments to SNPs were higher in 2011, on average, than payments to the average MA plan. The Medicare Payment Advisory Commission (MedPAC) reported in March 2011 that payments to SNPs for 2011 were projected to be, on average, 113 percent of FFS costs for a like set of beneficiaries enrolled in Medicare FFS. In contrast, the payments for all MA plans--including SNPs--were projected to be, on average, 110 percent of costs for a like set of beneficiaries enrolled in Medicare FFS. Earlier this year, you asked us to provide information on how MA organizations' self-reported actual expenses and profits compared to their projections for all MA plans, including SNPs. To address this, we examined how MA organizations' actual expenses for 2011--the most recent year for which data were available at the time of your request- -compared to the organizations' projections for the same year. This information will be contained in a forthcoming report. You asked us to provide additional information about how SNPs allocated the payments they received to medical expenses, nonmedical expenses (such as marketing, sales, and administration), and profits, and how these allocations compared to those made by MA plans available to all beneficiaries.[Footnote 2] In this report, we examined the extent to which actual expenses and profits in 2011 differed, if at all, between SNPs and MA plans available to all beneficiaries. On November 27, 2013, we presented our findings to committee staff (see enclosure 1). To report actual 2011 medical expenses, nonmedical expenses, and profits for SNPs and MA plans available to all beneficiaries, we analyzed 2013 bid data,[Footnote 3] which MA organizations submitted to the Centers for Medicare & Medicaid Services (CMS) in 2012 and which include MA organizations' actual experience for 2011.[Footnote 4] For our analyses of SNPs and plans available to all beneficiaries, we excluded (1) plans that were not included in both an MA organization's 2011 and 2013 bids;[Footnote 5] (2) regional preferred provider organizations (PPO);[Footnote 6] (3) plans that had values equal to zero for per member per month (PMPM) total revenue, PMPM medical expenses, PMPM nonmedical expenses, or total member months; and (4) Part D benefits.[Footnote 7] For our analyses of MA plans available to all beneficiaries, we also excluded (1) SNPs, (2) employer group plans,[Footnote 8] and (3) plans with fewer than 24,000 member months (equivalent to 2,000 beneficiaries enrolled for a full year).[Footnote 9] After all exclusions, our analysis of plans available to all beneficiaries included 691 plans, which enrolled the equivalent of approximately 7.0 million beneficiaries--82 percent of the total MA enrollment in plans available to all Medicare beneficiaries in 2011. For our analyses of SNPs, we also excluded (1) MA plans available to all Medicare beneficiaries, (2) employer group plans, and (3) SNPs with fewer than 24,000 member months. After all exclusions, our SNP analysis included 121 plans, which enrolled the equivalent of approximately 1.0 million beneficiaries--71 percent of the total SNP enrollment in 2011. To determine how SNPs and plans available to all beneficiaries allocated their revenues, we calculated enrollment-weighted profits, medical expenses, and nonmedical expenses. We examined the distribution of profit margins among SNPs and MA plans available to all beneficiaries. We also examined SNPs' profits and expenses by the type of SNP--dual-eligible SNP (D-SNP), chronic condition SNP (C-SNP), and institutional SNP (I-SNP). Using publicly available county-level MA enrollment and benchmark data from CMS, we stratified our analysis by whether a plan had a high or low enrollment-weighted average benchmark.[Footnote 10] We defined an enrollment-weighted average benchmark as low if it was equal to or below the enrollment-weighted average benchmark for MA plans in our analysis that were available to all beneficiaries. Similarly, we defined an enrollment-weighted average benchmark as high if it was above that threshold. To determine whether differences between SNPs and plans available to all beneficiaries varied on the basis of plan characteristics, we stratified our analysis by plan type. Specifically, we compared SNPs and plans available to all beneficiaries that were health maintenance organizations (HMO) or PPOs.[Footnote 11] We excluded private fee-for- service (PFFS) plans from this analysis because there are no SNPs with a PFFS plan type.[Footnote 12] We also performed several analyses after excluding SNPs located in Puerto Rico. The MA market in Puerto Rico has some unusual characteristics, such as having benchmarks that are substantially higher relative to Medicare FFS than other areas of the United States. The results we report are for 2011 and may not be representative of or generalizable to other years. We took several steps to ensure that the data used to produce this report were sufficiently reliable. Specifically, we assessed the reliability of the CMS data we used by reviewing our previous work on MA bids, examining data documentation, and analyzing the data for obvious errors. We determined that the data were sufficiently reliable for the purposes of our study. We conducted this performance audit from November 2013 through December 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. In summary, we found that SNPs reported having higher profit margins and spending a lower percentage of total revenues on medical expenses, on average, than plans available to all beneficiaries in 2011. SNPs also had higher profit margins, on average, and reported spending a lower percentage of total revenues on medical expenses relative to plans available to all beneficiaries regardless of the type of SNP (D- SNP, C-SNP, or I-SNP); whether the plan had a high or low enrollment- weighted benchmark; or the type of plan (HMO or PPO). Agency Comments: We requested comments from CMS, but none were provided. As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the Secretary of Health and Human Services, interested congressional committees, and others. In addition, the report will be available at no charge on the GAO website at [hyperlink, http://www.gao.gov]. If you or your staff have any questions about this report, please contact me at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. In addition to the contact named below, individuals making key contributions to this report include Christine Brudevold, Assistant Director; Sandra George; Gregory Giusto; Brian O'Donnell; and Elizabeth T. Morrison. Sincerely yours, Signed by: James Cosgrove: Director, Health Care: Enclosure: Footnotes: [1] Pub. L. No. 108-173, § 231, 117 Stat. 2066, 2207(2003) (codified at 42 U.S.C. § 1395w-21(a)(2)(A)(ii)). [2] Profits refer to plans' remaining revenue after medical expenses and nonmedical expenses are paid. In certain circumstances, a plan may have a negative profit, meaning that the plan's revenue is less than its combined medical and nonmedical expenses. [3] In some cases, plans available in 2011 were consolidated with other plans by 2013 or the plans were closed and the enrollees were expected to primarily be enrolled in other plans offered by the MA organizations in 2013. In either of these situations, MA organizations may have reported data in their 2013 bids that reflected the combined actual expenses and profits for more than one plan. The bid data were not structured in a way that allowed us to disaggregate the expenses and profits by plan in these cases. As a result, we assigned the expenses and profits reported on the bid to the plan that submitted the bid. [4] CMS is the agency that administers the Medicare program. [5] We used similar exclusions for this report and our forthcoming report on how MA organizations' actual and projected expenses and profits compared in 2011. We required plans to be included in both 2011 and 2013 bids to ensure that we had reliable data on MA organization's projected and actual expenses and profits for 2011. [6] Beneficiaries in PPOs can see both in-network and out-of-network providers but pay higher cost-sharing amounts if they use out-of- network services. Regional PPOs serve state or multistate regions established by CMS. We excluded regional PPOs from our analysis because of differences in the way such plans are paid by Medicare. [7] Medicare Part D provides coverage for outpatient prescription drugs to beneficiaries purchasing such coverage. MA plans may provide coverage for Medicare Part D benefits and bid separately to offer this coverage. [8] Employer group plans are MA plans offered by employers or unions to their Medicare-eligible retirees and Medicare-eligible active employees, as well as to Medicare-eligible spouses and dependents of participants in such plans. [9] We excluded plans with fewer than 24,000 member months because CMS officials stated that they do not consider data from these plans to be fully credible. [10] A benchmark is the maximum amount Medicare will pay plans to serve an average beneficiary. Benchmarks vary on the basis of plans' service areas. CMS's publicly available county-level MA enrollment data do not include enrollment counts for counties in which a plan has 10 or fewer enrollees. Because of this exclusion, we used approximately 98 percent and 93 percent of our SNP population and population in plans available to all beneficiaries, respectively, to calculate benchmark weights. [11] Beneficiaries in HMOs generally are restricted to seeing providers within a network. [12] Beneficiaries enrolled in PFFS plans generally may see any provider that accepts the plan's payment terms; however, since 2011, these plans generally have been required to maintain a network of contracted providers, and beneficiaries that see out-of-network providers may pay higher cost-sharing amounts. [End of section] Enclosure: Briefing slides: Medicare Advantage: Special Needs Plans Were More Profitable, on Average, than Plans Available to All Beneficiaries in 2011: Briefing to staff of the House Committee on Ways and Means: November 27, 2013 (updated): For more information, contact James Cosgrove at (202) 512-7114 or cosgrovej@gao.gov. Introduction: In 2011, the federal government paid approximately $124 billion to Medicare Advantage (MA) organizations—entities that offer a private health plan alternative to Medicare fee-for-service (FFS). The health plans offered by MA organizations are generally available to all Medicare beneficiaries in the plans’ service areas, although there are some MA plans with more specific eligibility requirements. For example, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 authorized the establishment of special needs plans (SNP) that exclusively serve Medicare beneficiaries in one of three classes of special needs: (1) beneficiaries dually eligible for Medicaid, (2) beneficiaries with severe or disabling chronic conditions, or (3) institutionalized beneficiaries.[Footnote 1] As of November 2011, approximately 1.4 million beneficiaries, or about 12 percent of all beneficiaries enrolled in MA, were enrolled in SNPs. Medicare payments to SNPs tend to be higher than payments to other MA plans, in part, because beneficiaries enrolled in SNPs generally are in poorer health and are expected to use more health services relative to enrollees in other MA plans. However, even after accounting for differences in relative health status of beneficiaries enrolled in SNPs and in the average MA plan, payments to SNPs were higher in 2011, on average. * The Medicare Payment Advisory Commission (MedPAC) reported in March 2011 that payments to SNPs for 2011 were projected to be, on average, 113 percent of FFS costs for a like set of beneficiaries enrolled in Medicare FFS. * In contrast, the payment for all MA plans-—including SNPs-—was projected to be, on average, 110 percent of costs for a like set of beneficiaries enrolled in Medicare FFS. At the time of your request for this work, little was known about how SNPs allocated the payments they received to medical expenses, nonmedical expenses, and profits,[Footnote 2] or how these allocations compared to those made by MA plans available to all beneficiaries. Objective: This report examines the extent to which actual expenses and profits in 2011 differed, if at all, between SNPs and MA plans available to all beneficiaries. Scope and Methodology: To report actual 2011 medical expenses, nonmedical expenses, and profits for SNPs and MA plans available to all beneficiaries, we analyzed 2013 bid data, which MA organizations submitted to the Centers for Medicare & Medicaid Services (CMS) in 2012 and which included MA organizations’ actual experience for 2011. For both our analysis of SNPs and plans available to all beneficiaries, we excluded: * plans that were not included in both an MA organization’s 2011 and 2013 bids; * regional preferred provider organizations (PPO);[Footnote 3] * plans that had values equal to zero for per member per month (PMPM) total revenue, PMPM medical expenses, PMPM nonmedical expenses, or total member months; and; * Part D benefits.[Footnote 4] For our analysis of plans available to all Medicare beneficiaries, we excluded: * SNPs; * employer group plans;[Footnote 5] and; * plans with fewer than 24,000 member months (equivalent to 2,000 beneficiaries enrolled for a full year). After all exclusions, our analysis of MA plans available to all beneficiaries included 691 plans, which enrolled the equivalent of approximately 7.0 million beneficiaries-—82 percent of the total MA enrollment in plans available to all Medicare beneficiaries in 2011. For our analysis of SNPs, we excluded: * MA plans available to all beneficiaries; * employer group plans; and; * SNPs with fewer than 24,000 member months. After all exclusions, our SNP analysis included 121 plans, which enrolled the equivalent of approximately 1.0 million beneficiaries—-71 percent of the total SNP enrollment in 2011. We examined the distribution of profit margins for SNPs and MA plans available to all beneficiaries.[Footnote 6] We also examined SNPs’ profits and expenses by the type of SNP-—dual- eligible SNP (D-SNP), chronic condition SNP (C-SNP), and institutional SNP (I-SNP). Using CMS’s publicly available county-level MA enrollment and benchmark data, we also stratified our analysis by whether a plan had a high or low enrollment-weighted average benchmark. * We defined an enrollment-weighted average benchmark as low if it was equal to or below the enrollment-weighted average benchmark for MA plans in our analysis that were available to all beneficiaries and as high if it was above that threshold. To determine whether differences between SNPs and plans available to all beneficiaries varied on the basis of plan characteristics, we stratified our analysis by plan type. Specifically, we compared SNPs and plans available to all beneficiaries that were health maintenance organizations (HMO) or PPOs. We excluded private fee-for-service (PFFS) plans from this analysis because there were no SNPs with a PFFS plan type.[Footnote 7] We also performed several analyses after excluding SNPs located in Puerto Rico. The MA market in Puerto Rico has some unusual characteristics, such as having benchmarks that are substantially higher relative to Medicare FFS than other areas of the United States. The results we report are for 2011 and may not be representative of or generalizable to other years. We took several steps to ensure that the data we used were sufficiently reliable. Specifically, we assessed the reliability of the CMS data we used by reviewing our previous work on MA bids, examining data documentation, and examining the data for obvious errors. We determined that the data were sufficiently reliable for the purposes of our study. We conducted this performance audit from November 2013 through December 2013 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Background•: Payments for SNPs and MA plans available to all beneficiaries are based in part on the relationship between MA organizations’ plan bids—- their projection of the revenue required to provide beneficiaries with services that are covered under Medicare FFS—-and a benchmark—-the maximum amount Medicare will pay plans to serve an average beneficiary and which may vary based on plans’ service areas. * If an MA organization’s bid is higher than the benchmark, the organization must charge beneficiaries a premium to collect the amount by which the bid exceeds the benchmark. * If an MA organization’s bid is lower than the benchmark, the organization receives the amount of the bid plus additional payments, known as rebates, equal to a percentage of the difference between the benchmark and the bid. MA organizations are required to use rebates to provide additional benefits, such as dental or vision services; reduce cost-sharing; reduce premiums; or some combination of the three. CMS adjusts payments to MA organizations to account for differences in projected and actual enrollment, beneficiary residence, and health status. Results: SNPs had higher profit margins and reported spending a lower percentage of total revenues on medical expenses, on average, than MA plans available to all beneficiaries in 2011. SNPs also had higher profit margins and reported spending a lower percentage of total revenues on medical expenses relative to plans available to all beneficiaries regardless of: * the type of SNP plan (dual-eligible, chronic condition, or institutional); * whether the plan had a high or low enrollment-weighted benchmark; or; * the type of plan (HMO or PPO). SNPs were more profitable than MA plans available to all beneficiaries: Compared to plans available to all beneficiaries, SNPs had substantially higher profit margins and reported spending a lower percentage of total revenue on medical expenses. SNPs received higher total revenue per beneficiary than plans available to all beneficiaries, which could be, in part, because beneficiaries enrolled in such plans may have greater health care needs (see table 1). After excluding SNPs in Puerto Rico, the average profit margin for SNPs fell from 8.6 percent to 7.3 percent but remained substantially higher than the 4.6 percent average profit margin for plans available to all beneficiaries. Table 1: Actual Expenses and Profits for Special Needs Plans and Plans Available to All Beneficiaries, 2011: Medical expenses: Special needs plans: Percentage of revenue: 82.7%; Amount per beneficiary: $10,711; Total (dollars in billions): $10.5; Plans available to all beneficiaries: Percentage of revenue: 86.4%; Amount per beneficiary: $8,579; Total (dollars in billions): $60.0. Nonmedical expenses: Special needs plans: Percentage of revenue: 8.7%; Amount per beneficiary: $1,133; Total (dollars in billions): $1.1; Plans available to all beneficiaries: Percentage of revenue: 9.0%; Amount per beneficiary: $895; Total (dollars in billions): $6.3. Profits Special needs plans: Percentage of revenue: 8.6%; Amount per beneficiary: $1,115; Total (dollars in billions): $1.1; Plans available to all beneficiaries: Percentage of revenue: 4.6%; Amount per beneficiary: $461; Total (dollars in billions): $3.2. Total revenue Amount per beneficiary: $12,959 Total (dollars in billions): $12.8; Amount per beneficiary: $9,934 Total (dollars in billions): $69.4. Source: GAO analysis of CMS data. Note: Data for plans available to all beneficiaries include 691 plans, which enrolled the equivalent of approximately 7.0 million beneficiaries—-82 percent of the total MA enrollment in plans available to all Medicare beneficiaries in 2011. Data for special needs plans include 121 plans, which enrolled the equivalent of approximately 1.0 million beneficiaries-—71 percent of the total SNP enrollment in 2011. Medical expenses, nonmedical expenses, and profits may not equal total revenue due to rounding. [End of table] Twenty-three percent of beneficiaries enrolled in SNPs were in plans with profit margins of 15 percent or higher, while only 6 percent of beneficiaries enrolled in plans available to all beneficiaries were enrolled in plans with profits of 15 percent or higher (see table 2). The median plan-level profit margin for SNPs was 7.1 percent, compared to 3.2 percent for plans available to all beneficiaries. Table 2: Distribution of Profit Margins for Special Needs Plans (SNP) and Plans Available to All Beneficiaries, 2011: Profit margin: more than or equal to 15%; Special needs plans: Number of beneficiaries in SNPs: 229,607; Percentage of beneficiaries in SNPs: 23%; Cumulative percentage of beneficiaries in SNPs: 100%; Plans available to all beneficiaries: Number of beneficiaries in plans available to all beneficiaries: 444,284; Percentage of beneficiaries in plans available to all beneficiaries: 6%; Cumulative percentage of beneficiaries in plans available to all beneficiaries: 100%. Profit margin: 10 to less than 15%; Special needs plans: Number of beneficiaries in SNPs: 197,632 Percentage of beneficiaries in SNPs: 20%; Cumulative percentage of beneficiaries in SNPs: 77%; Plans available to all beneficiaries: Number of beneficiaries in plans available to all beneficiaries: 765,050; Percentage of beneficiaries in plans available to all beneficiaries: 11%; Cumulative percentage of beneficiaries in plans available to all beneficiaries: 94%. Profit margin: 5 to less than 10%; Special needs plans: Number of beneficiaries in SNPs: 258,414; Percentage of beneficiaries in SNPs: 26%; Cumulative percentage of beneficiaries in SNPs: 57%; Plans available to all beneficiaries: Number of beneficiaries in plans available to all beneficiaries: 1,990,476; Percentage of beneficiaries in plans available to all beneficiaries: 28%; Cumulative percentage of beneficiaries in plans available to all beneficiaries: 83%. Profit margin: 0 to less than 5%; Special needs plans: Number of beneficiaries in SNPs: 189,603; Percentage of beneficiaries in SNPs: 19%; Cumulative percentage of beneficiaries in SNPs: 30%; Plans available to all beneficiaries: Number of beneficiaries in plans available to all beneficiaries: 1,772,470; Percentage of beneficiaries in plans available to all beneficiaries: 25%; Cumulative percentage of beneficiaries in plans available to all beneficiaries: 54%. Profit margin: -5 to less than 0%; Special needs plans: Number of beneficiaries in SNPs: 54,362; Percentage of beneficiaries in SNPs: 6%; Cumulative percentage of beneficiaries in SNPs: 11%; Plans available to all beneficiaries: Number of beneficiaries in plans available to all beneficiaries: 1,431,968; Percentage of beneficiaries in plans available to all beneficiaries: 20%; Cumulative percentage of beneficiaries in plans available to all beneficiaries: 29%. Profit margin: less than -5%; Special needs plans: Number of beneficiaries in SNPs: 55,135; Percentage of beneficiaries in SNPs: 6%; Cumulative percentage of beneficiaries in SNPs: 6%; Plans available to all beneficiaries: Number of beneficiaries in plans available to all beneficiaries: 585,442; Percentage of beneficiaries in plans available to all beneficiaries: 8%; Cumulative percentage of beneficiaries in plans available to all beneficiaries: 8%. Source: GAO analysis of CMS data. Note: Data for plans available to all beneficiaries include 691 plans, which enrolled the equivalent of approximately 7.0 million beneficiaries=—82 percent of the total MA enrollment in plans available to all Medicare beneficiaries in 2011. Data for special needs plans include 121 plans, which enrolled the equivalent of approximately 1.0 million beneficiaries—=71 percent of the total SNP enrollment in 2011. [End of table] Dual-eligible, chronic condition, and institutional SNPs were more profitable, on average, than MA plans available to all beneficiaries: With average profit margins of at least 8.4 percent, all three types of SNPs had higher average profit margins than the 4.6 percent profit margin for plans available to all beneficiaries. None of the three types of SNPs reported spending more than 82.9 percent of their total revenue on medical expenses, which is less than the 86.4 percent of total revenue that plans available to all beneficiaries spent, on average, for medical expenses (see table 3). Table 3: Actual Expenses and Profits for Dual-Eligible, Chronic Condition, and Institutional Special Needs Plans, 2011: Dual-eligible special needs plans: Beneficiaries = 904,483. Medical expenses: Percentage of revenue: 82.9%; Amount per beneficiary: $10,585; Total (dollars in billions): $9.6. Nonmedical expenses: Percentage of revenue: 8.8%; Amount per beneficiary: $1,117; Total (dollars in billions): $1.0. Profits: Percentage of revenue: 8.4%; Amount per beneficiary: $1,067; Total (dollars in billions): $1.0. Total revenue: Amount per beneficiary: $12,770; Total (dollars in billions): $11.5. Chronic condition special needs plans: Beneficiaries = 56,522. Medical expenses: Percentage of revenue: 80.6%; Amount per beneficiary: $9,702; Total (dollars in billions): $0.5. Nonmedical expenses: Percentage of revenue: 9.8%; Amount per beneficiary: $1,182; Total (dollars in billions): $0.1. Profits: Percentage of revenue: 9.6%; Amount per beneficiary: $1,149; Total (dollars in billions): $0.1. Total revenue: Amount per beneficiary: $12,033; Total (dollars in billions): $0.7. Institutional special needs plans: Beneficiaries = 23,748. Medical expenses: Percentage of revenue: 80.1%; Amount per beneficiary: $17,928; Total (dollars in billions): $0.4. Nonmedical expenses: Percentage of revenue: 7.1%; Amount per beneficiary: $1,590; Total (dollars in billions): $0.0. Profits: Percentage of revenue: 12.8%; Amount per beneficiary: $2,855; Total (dollars in billions): $0.1. Total revenue: Amount per beneficiary: $22,372; Total (dollars in billions): $0.5. Source: GAO analysis of CMS data. Note: The table includes 79 percent of the total 2011 Medicare Advantage dual-eligible SNP population; it includes approximately 30 percent of the total populations of chronic condition and institutional SNPs. In total, the table includes data from 121 SNPs, which enrolled the equivalent of approximately 1.0 million beneficiaries—-71 percent of the total SNP enrollment in 2011. Medical expenses, nonmedical expenses, and profits may not equal total revenue due to rounding. [End of table] SNPs were more profitable than MA plans available to all beneficiaries, regardless of high or low benchmarks: On average, SNPs had higher profit margins and reported spending a lower percentage of their total revenue on medical expenses in both high and low benchmark areas compared to plans available to all beneficiaries (see table 4). After excluding SNPs in Puerto Rico, the average profit margin for low benchmark SNPs fell from 9.5 percent to 6.9 percent but remained substantially higher than the 3.5 percent average profit margin for plans available to all beneficiaries. The average profit margin remained the same for high benchmark SNPs after excluding SNPs in Puerto Rico. Table 4: Actual Expenses and Profits for Special Needs Plans and Plans Available to All Beneficiaries by High or Low Benchmarks, 2011: High benchmarks: Beneficiaries = 400,224; Medical expenses: Special needs plans: Percentage of revenue: 84.0%; Amount per beneficiary: $12,766; Total (dollars in billions: $5.1; Plans available to all beneficiaries: Beneficiaries = 2,222,954; Percentage of revenue: 85.1%; Amount per beneficiary: $9,807; Total (dollars in billions: $21.8. Nonmedical expenses: Special needs plans: Percentage of revenue: 8.4%; Amount per beneficiary: $1,274; Total (dollars in billions: $0.5; Plans available to all beneficiaries: Percentage of revenue: 8.3%; Amount per beneficiary: $961; Total (dollars in billions: $2.1. Profits: Special needs plans: Percentage of revenue: 7.6%; Amount per beneficiary: $1,162 Total (dollars in billions: $0.5; Plans available to all beneficiaries: Percentage of revenue: 6.5%; Amount per beneficiary: $749; Total (dollars in billions: $1.7. Total revenue: Special needs plans: Amount per beneficiary: $15,202; Total (dollars in billions: $6.1; Plans available to all beneficiaries: Amount per beneficiary: $11,518; Total (dollars in billions: $25.6. Low benchmarks: Beneficiaries = 584,529; Medical expenses: Special needs plans: Percentage of revenue: 81.5%; Amount per beneficiary: $9,305; Total (dollars in billions: $5.4; Plans available to all beneficiaries: Beneficiaries = 4,766,736; Percentage of revenue: 87.1%; Amount per beneficiary: $8,006; Total (dollars in billions: $38.2. Nonmedical expenses: Special needs plans: Percentage of revenue: 9.1%; Amount per beneficiary: $1,036; Total (dollars in billions: $0.6; Plans available to all beneficiaries: Percentage of revenue: 9.4%; Amount per beneficiary: $864; Total (dollars in billions: $4.1. Profits: Special needs plans: Percentage of revenue: 9.5%; Amount per beneficiary: $1,082; Total (dollars in billions: $0.6; Plans available to all beneficiaries: Percentage of revenue: 3.5%; Amount per beneficiary: $326; Total (dollars in billions: $1.6. Total revenue: Special needs plans: Amount per beneficiary: $11,423; Total (dollars in billions: $6.7; Plans available to all beneficiaries: Amount per beneficiary: $9,196; Total (dollars in billions: $43.8. Source: GAO analysis of CMS data. Note: Data for plans available to all beneficiaries include 691plans, which enrolled the equivalent of approximately 7.0 million beneficiaries—-82 percent of the total MA enrollment in plans available to all Medicare beneficiaries in 2011. Data for special needs plans include 121 plans, which enrolled the equivalent of approximately 1.0 million beneficiaries-—71 percent of the total SNP enrollment in 2011. We defined an enrollment-weighted average benchmark as low if it was equal to or below the weighted average benchmark for MA plans in our analysis that were available to all beneficiaries and as high if it was above that threshold. Percentages may not add to 100, and medical expenses, nonmedical expenses, and profits may not equal total revenue due to rounding. [End of table] SNPs were more profitable than MA plans available to all beneficiaries, regardless of plan type: SNPs were predominantly HMOs. For both HMOs and PPOs, SNPs, on average, had higher profit margins and reported spending a lower percentage of total revenue on medical expenses compared to plans available to all beneficiaries (see table 5). After excluding SNPs in Puerto Rico, the average profit margin for HMO SNPs fell from 8.4 percent to 7.1 percent but remained substantially higher than the 5.4 percent average profit margin for HMOs available to all beneficiaries. The average profit margin remained the same for PPO SNPs after excluding SNPs in Puerto Rico. Table 5: Actual Expenses and Profits for Special Needs Plans and Plans Available to All Beneficiaries by Type of Plan, 2011: HMO: Beneficiaries = 958,488; Medical expenses: Special needs plans: Percentage of revenue: 82.8%; Total (dollars in billions): $10.28; Plans available to all beneficiaries: Beneficiaries = 5,273,550; Percentage of revenue: 6.0%; Total (dollars in billions): $46.9. Nonmedical expenses; Special needs plans: Percentage of revenue: 8.7%; Total (dollars in billions): $1.1; Plans available to all beneficiaries: Percentage of revenue: 8.6%; Total (dollars in billions): $4.7. Profits; Special needs plans: Percentage of revenue: 8.4%; Total (dollars in billions): $1.0; Plans available to all beneficiaries: Percentage of revenue: 5.4%; Total (dollars in billions): $2.9. PPO: Beneficiaries = 26,266; Medical expenses; Special needs plans: Percentage of revenue: 77.0%; Total (dollars in billions): $0.3; Plans available to all beneficiaries: Percentage of revenue: 87.4%; Total (dollars in billions): $9.3. Nonmedical expenses; Special needs plans: Percentage of revenue: 8.7%; Total (dollars in billions): $0.0; Plans available to all beneficiaries: Percentage of revenue: 10.0%; Total (dollars in billions): $1.1. Profits Special needs plans: Percentage of revenue: 14.3%; Total (dollars in billions): $0.1; Plans available to all beneficiaries: Percentage of revenue: 2.5%; Total (dollars in billions): $0.3. Source: GAO analysis of CMS data. Note: Data for plans available to all beneficiaries include 625 plans, which enrolled the equivalent of approximately 6.5million beneficiaries-—76 percent of the total MA enrollment in plans available to all Medicare beneficiaries in 2011. Data for special needs plans include 121 plans, which enrolled the equivalent of approximately 1.0 million beneficiaries-—71 percent of the total SNP enrollment in 2011. Percentages may not add to 100 due to rounding. Regional PPOs were excluded from the PPO category in this analysis because of differences in the way such plans are paid by Medicare. Private fee-for-service plans were excluded from our analysis because there are no special needs plans with a PFFS plan type. [End of table] GAO on the Web: Web site: [hyperlink, http://www.gao.gov/] Congressional Relations: Katherine Siggerud, Managing Director, siggerudk@gao.gov: (202) 512-4400, U.S. Government Accountability Office: 441 G Street, NW, Room 7125, Washington, DC 20548: Public Affairs: Chuck Young, Managing Director, youngc1@gao.gov: (202) 512-4800, U.S. Government Accountability Office: 441 G Street, NW, Room 7149, Washington, DC 20548: Copyright: This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. Briefing slides footnotes: [1] Pub. L. No. 108-173, §231, 117 Stat. 2066, 2207 (2003) (codified at 42 U.S.C. §1395w-21(a)(2)(A)(ii)). [2] Profits refer to plans’ remaining revenue after medical expenses and nonmedical expenses are paid. In certain circumstances, a plan may have a negative profit, meaning that the plan’s revenue is less than its combined medical and nonmedical expenses. [3] Beneficiaries in PPOs can see both in-network and out-of-network providers but pay higher cost-sharing amounts if they use out-of- network services. Regional PPOs serve state or multistate regions established by CMS. We excluded regional PPOs from our analysis because of differences in the way such plans are paid by Medicare. [4] Medicare Part D provides coverage for outpatient prescription drugs to beneficiaries purchasing such coverage. MA plans may provide coverage for Medicare Part D benefits and bid separately to offer this coverage. [5] Employer group plans are MA plans offered by employers or unions to their Medicare-eligible retirees and Medicare-eligible active employees, as well as to Medicare-eligible spouses and dependents of participants in such plans. [6] Throughout the report, we calculate profit margins by dividing profits by total revenue. [7] Beneficiaries in HMOs generally are restricted to seeing providers within a network. Beneficiaries enrolled in PFFS plans generally may see any provider that accepts the plan’s payment terms; however, since 2011, these plans generally have been required to maintain a network of contracted providers, and beneficiaries that see out-of-network providers may pay higher cost-sharing amounts. 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