New Law Boosts Private Medicare Plans
The Medicare Modernization Act (MMA) of 2003 appears to have breathed some life into the troubled Medicare+Choice program—now called Medicare Advantage—in some communities, according to a report by Mathematica Policy Research.
Specifically, provisions in the law allowing private plans to receive at least 100 percent of traditional Medicare payments in the counties where they provide services appear to be modestly reviving the program in six communities tracked by Mathematica.
Those communities are Albuquerque, N.M., Baltimore, Detroit, New Orleans, Orange County, Calif., and Orlando, Fla.
Medicare Advantage provides care under contract to Medicare as an alternative to traditional Medicare coverage. There are two types of plans from which beneficiaries can choose: managed care plans (including health maintenance organizations and preferred provider organizations) and private fee-for-service plans. In the fee-for-service plans, insurers, rather than Medicare, decide how much to pay for the services provided to beneficiaries.
The Medicare Modernization Act also mandates a new method for calculating annual updates guaranteeing an increase in payments of at least 6.3 percent this year to private plans that participate in the program. This is up from the 2 percent increase in the previous two years.
Although market penetration for plans in the six communities has held steady between March 2003 and March 2004, as of May penetration had increased slightly in five of the six markets. This pattern suggests that benefit improvements and premium reductions resulting from the increased payments to plans may be having a beneficial effect on enrollment.
“The MMA raised payments to plans in 2004 and 2005 to stabilize the market in anticipation of 2006,” said Marsha Gold, Ph.D., a senior fellow at Mathematica and co-author of the report. “Changes to date show some beneficial effects from these payments. However, it is too early to tell whether the additional funding will be sufficient to offset the reactions of plans, providers, and beneficiaries to earlier withdrawals and erosion of choice and benefits.”
Mathematica, a nonpartisan research firm based in Princeton, N.J., Washington, D.C., and Cambridge, Mass., conducts policy research and surveys for federal and state governments, foundations, and private-sector clients.
Under the new law, private plans participating in Medicare must use the increased payments to reduce enrollee premiums or cost sharing, enhance benefits, stabilize provider networks, and/or put the dollars in a stabilization fund to offset potential future premium or cost-sharing increases or benefit cuts.
Plans in four markets chose to use some of the increase to reduce premiums or cost sharing, and plans in all six markets chose to enhance their benefits by improving drug coverage, according to the Mathematica report.
Reactions from plan representatives interviewed soon after the MMA was enacted ranged from cautiously optimistic to enthusiastic about whether the MMA would help resuscitate the Medicare Advantage market.
The research is based on telephone interviews conducted in January and February with insurance counselors from state health insurance plans, staff at Area Agencies on Aging, state aging and insurance officials, and health plan officials in the six communities.
Respondents were asked about plan and provider changes in the local Medicare Advantage market, the effect of the MMA on plans in the short and long term, how beneficiaries responded to the MMA, and how they think it will affect the Medicare information infrastructure.
The report, “MMA Attempts to Breathe Life Into Troubled Markets,” is posted online at<www.mathematica-mpr.com/publications/pdfs/opinsights13.pdf>.▪
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Published online: 20 August 2004
Published in print: August 20, 2004
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Benefit improvements and premium reductions resulting from increased payments to private plans in Medicare Advantage may be having a beneficial effect on enrollment in six communities.
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