Medicare Advantage Payments (CRS Report for Congress)
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| Release Date |
Revised June 20, 2005 |
| Report Number |
RL32618 |
| Report Type |
Report |
| Authors |
Hinda Ripps Chaikind and Paulette C. Morgan, Domestic Social Policy Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
Medicare has a long-standing history of offering its beneficiaries managed care coverage through
private plans as an alternative to the traditional fee-for-service (FFS) program, in which a payment
is made for each Medicare-covered service provided to a beneficiary. Beginning in the 1970s,
private health plans were allowed to contract with Medicare on a cost-reimbursement basis. In 1982,
Medicare's risk contract program was created, allowing private entities, mostly health
maintenance
organizations (HMOs), to contract with Medicare. Then, in 1997, Congress passed the Balanced
Budget Act of 1997 (BBA, P.L. 105-33 ), replacing the risk contract program with the
Medicare+Choice (M+C) program. Most recently, Congress passed the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (MMA, P.L.108-173 ) which included provisions to
create the Medicare Advantage (MA) program offering a variety of managed care options for
Medicare beneficiaries. The MA program replaces the M+C program.
The newly created MA program offers a new payment structure and provides more options than
its predecessor, the M+C program. In addition to the immediate payment increases to plans,
beginning in 2006, the MA program will change the payment structure and introduce regional plans
that operate like Preferred Provider Organizations -- a popular option in the private health insurance
market. The MA program provides financial incentives for plans to participate in this new regional
option. Additionally, in 2006, beneficiaries will have access to a Medicare Part D prescription drug
plan whether they are in fee-for-service Medicare or enrolled in Medicare managed care. Finally,
beginning in 2010, for a six-year period, a limited number of geographic areas will be selected to
examine enhanced competition among local MA plans and competition between private plans and
FFS Medicare.
This report focuses on MA payments. For a discussion on the effect of the MMA on Medicare
managed care, see CRS Report RS21761 , Medicare Advantage: What Does It Mean for Private
Plans Currently Serving Medicare Beneficiaries? This report will be updated as necessary to
reflect
significant changes to the program.
