Medicare provides health benefits to nearly 42 million elderly
and disabled Americans.
Most (88%) have their health bills
paid by the traditional fee-for-service (FFS) program, while
12% are covered by private health plans, primarily HMOs.
HMOs have been an option under Medicare since the 1970s.
The Balanced Budget Act (BBA) of 1997 expanded the
role of private plans under “Medicare+Choice” to include
preferred provider organizations (PPOs), provider-sponsored
organizations (PSOs), private fee-for-service (PFFS) plans,
and medical savings accounts (MSAs) coupled with high-
deductible insurance plans.
Private plan options have
been offered primarily at the county level.
Prescription Drug, Improvement, and Modernization Act of
2003 (MMA) renamed the program “Medicare Advantage”
(MA), created new regional PPOs, “special needs plans” for
dual eligibles, the institutionalized, or those with severe and
disabling conditions, and new private drug plans that will go
into effect January 2006.
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Plan participation and enrollment have fluctuated over the
After a period of rapid growth from 1992–1998,
the number of plans declined by half.
In July 2005, there
were 247 plans (mostly HMOs) with 4.9 million enrollees
(12% of the Medicare population), down from a high of 6.3
million (16%) in 2000.
In 2004, over three-fourths of beneficiaries had access to
a private Medicare plan including PFFS plans; 62% had
access to a Medicare HMO, PPO, or POS plan, down from
71% in 1999.
By 2013, the Administration estimates 30%
of Medicare beneficiaries will enroll in Medicare Advantage
plans, while CBO projects an enrollment rate of 16%.