Medicare + Choice:

Recent Payment Increases Had Little Effect on Benefits or Plan Availability in 2001

GAO-02-202: Published: Nov 21, 2001. Publicly Released: Dec 4, 2001.

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The number of contracts under Medicare's managed care program--Medicare+Choice (M+C)--fell from 340 to 180 between 1998 and 2001. The reduction reflected decisions by some managed care organizations (MCOs) to terminate selected contracts or to discontinue service in some covered areas. Although nearly all MCOs renewed at least some of their Medicare contracts over this period, many reduced the geographic areas served. As a result, 1.6 million beneficiaries had to switch MCOs or return to Medicare's traditional fee-for-service program. Other MCOs plan either to terminate or reduce their participation in M+C at the end of 2001. Concerned about MCO withdrawals, Congress sought to make participation in the program more attractive. As a result of the Benefits Improvement and Protection Act of 2000, aggregate Medicare+Choice payments in 2001 are estimated to have increased by $1 billion. The act permitted three basic uses for the higher payment. MCOs could (1) improve their health plans' benefit packages, (2) set aside money for future years in a benefit stabilization fund, or (3) stabilize or enhance beneficiary access to providers. Most MCOs reported that additional money would be used to stabilize or enhance beneficiary access to providers. A minority of MCOs reported that the money would go toward benefit improvements or be placed in a benefit stabilization fund. In 83 percent of M+C plans, MCOs stated that some or all of the additional money would be used to stabilize or enhance beneficiary access. The payment increases had little effect on the availability of M+C plans during 2001. Following passage of the act, three MCOs reentered counties they had dropped from their service areas, three MCOs expanded into counties that they previously had not served, and one MCO both reentered previously served counties and expanded into new ones.

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