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Medicare cost plans--managed care plans paid based on the reasonable costs of delivering Medicare-covered services--enroll a small number of beneficiaries compared to Medicare Advantage (MA), Medicare's managed care program in which the plans accept financial risk if their costs exceed fixed payments received for each enrolled beneficiary. Despite the small enrollment, industry representatives stated that cost plans provide a managed care option in areas that traditionally had few or no MA plans. Current law allows existing cost plans to continue operating unless specific MA plans of sufficient enrollment serve the same area. In such cases, the cost plan must discontinue serving that area beginning in 2011. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required the Government Accountability Office (GAO) to examine issues related to the conversion of Medicare cost plans to MA plans. In response, GAO (1) determined the MA options available to beneficiaries in cost plans, (2) described key differences for beneficiaries between cost plans, MA plans, and Medicare fee-for-service (FFS); (3) determined the extent to which organizations offering cost plans also offer MA plans; and (4) described concerns cost plans have about converting to MA plans. GAO analyzed data from the Centers for Medicare & Medicaid Services (CMS), the agency that administers Medicare. GAO also reviewed requirements for Medicare managed care plans and interviewed officials from all Medicare cost plans and CMS.

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