Overview

The future of Medicare+Choice, Medicare's managed care program, is in question. In the last three years, beneficiary enrollment in Medicare+Choice has declined from a high of 6.3 million in 1999 to less than 5.7 million in 2001. Meanwhile, a total of 151 health plans terminated their Medicare+Choice contracts during this period, while another 165 health plans reduced their service areas. The result: nearly 1.7 million beneficiaries have been displaced by a Medicare+Choice plan in one of the last three years. In January 2001 alone, a total of 934,000 beneficiaries were affected, of whom 159,000 were left without any health plan choice.
An often-cited reason for large-scale health plan withdrawals from Medicare+ Choice relates to health plan payment rates, particularly the limits Congress established for annual rate increases in the Balanced Budget of 1997. In recent years, most plans have been limited to 2 percent annual rate increases, at a time when medical cost inflation has run more than twice the amount of payment increases.

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