Performance Improvement 2008. What Was the Effect of Improved Financing for Medicare Advantage Plans on Plan Offerings?


Researchers examined whether funding affected availability of Medicare Advantage plans available locally and premiums and benefits under such plans. The Medicare Modernization Act (MMA) revised the monthly capitation rates, paying more to MA plans. HHS was required to report to Congress on the impact of additional financing provided under MMA and other Acts. Congress intended these revisions to enhance beneficiary choice by increasing and stabilizing health care plan participation in the Medicare program. Since 1997, plan participation had declined from 346 risk plans to 155 plans in late 2003; enrollment in Medicare+Choice plans had fallen from 6.2 to 4.6 million beneficiaries. Plans already participating in the Medicare program for 2004 were permitted to use the additional funds provided by MMA to reduce premiums and cost sharing, improve benefits, and stabilize and enhance access to providers. The additional funding was short-term or temporary and had little effect on Medicare Advantage plan availability or benefits. Increasing plan availability, lowering premiums and increasing benefits did not occur until passage of the MMA, with its permanent restructuring of the program under the MA program.

Under the MMA, the availability of Medicare Advantage plans improved substantially, premiums and beneficiary cost sharing were lowered, and drug benefits improved. Access to Medicare private fee-for-service plans increased considerably in all parts of the country including the rural areas. Access to Medicare managed care plans -- health maintenance organizations and preferred provider organizations – still remained limited through 2005 in the rural setting. Inherent characteristics of rural areas such as less provider competition and discounting, as well as fewer enrollees over which to spread fixed costs, may have made these areas less attractive to managed care plans. It was expected that the addition in 2006 of regional preferred provider organizations in 37 States would improve access to managed care in rural areas.

Report Title: Impact of Increased Financial Incentives to Medicare Advantage Plans. Report may be obtained from Federal Contact
Agency Sponsor:
CMS-ORDI, Office of Research, Development, and Information
Federal Contact: Melissa Montgomery, 410-786-7596
Performer: Research Triangle Institute International

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"PerformanceImprovement2008.pdf" (pdf, 1.29Mb)

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