NCPA - National Center for Policy Analysis

The Failure Of Medicare+Choice

September 15, 1999

Medicare+Choice, the health policy centerpiece of the Balanced Budget Act (BBA) of 1997, was touted originally as a major reform of Medicare that would increase options for beneficiaries. Its sponsors projected its Medicare "reforms" would save $116 billion between 1998 and 2002, with the bulk of these "savings" to be generated by reductions in payments to health plans for medical services.

Instead, says physician Sandra Mahkorn, it expanded the regulatory powers of the Health Care Financing Administration (HCFA) -- which administers Medicare -- and reduced the options available to beneficiaries.

Since the inception of the program, over 100 health maintenance organizations (HMOs) serving more than half a million voluntarily enrolled Medicare patients either have left the areas they served or have retreated from parts of those regions.

  • Senior citizens in 71 percent of all counties now have no Medicare managed care option, compared with 68 percent in 1998, according to the Medicare Payment Advisory Commission.
  • About 50,000 Medicare HMO patients reportedly had to return to the traditional Medicare plan and find affordable Medigap insurance.
  • Although it anticipated 50 applications from provider sponsored organizations (PSOs), HCFA received only four by October 1998 and approved one.
  • There were no applications to provide medical savings account plans or other fee-for-service insurance.
  • Faced with rate cuts and the cost of complying with HCFA regulations, remaining HMOs dropped important benefits; for example, 21 percent of Medicare enrollees lost coverage for glasses, and 12 percent lost coverage for hearing aids.

Finally, according to a recent report in American Medical News, over a quarter of a million more Medicare patients will lose their health plan coverage in 2000 because of the plan withdrawals, and almost all other enrollees will experience a reduction in benefits, an increase in payments, or both.

Source: Sandra Mahkorn, "How Not to Reform Medicare: Lessons From the Medicare+Choice," Backgrounder No. 1319, September 15, 1999, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400.

 

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