Overview

The Medicare+Choice (M+C) program, created by the Balanced Budget Act of 1997 (BBA), was a congressional effort to provide a wide choice of private health plans to Medicare beneficiaries. But five years later the number of plans available has in fact declined, and those remaining have made significant changes to their benefit packages. The BBA and federal budget constraints limit M+C payment rates, while health care costs are increasing and providers are more aggressive in their contract and price negotiations with plans. As a result, beneficiaries looking to Medicare HMOs as an affordable supplemental insurance option are being asked to pay more for fewer benefits.

This report continues the joint effort of Mathematica Policy Research, Inc., and The Commonwealth Fund to provide policymakers with critical information on M+C program trends to support policy development. We examine broad trends in benefits and premiums since 1999 and analyze 2002 benefit packages, focusing on changes that are likely to affect chronically ill beneficiaries who require more services. Finally, we analyze the patterns in plan benefit and premium changes since 1999 and speculate about what these might reveal about health plan strategies.

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