December 18, 2009

Medicare Managed Care: Observations about Medicare Cost Plans

Medicare cost plans enroll a small number of beneficiaries compared to Medicare Advantage (MA), Medicare's managed care program in which the plans accept financial risk if their costs exceed fixed payments received for each enrolled beneficiary. Despite the small enrollment, industry representatives stated that cost plans provide a managed care option in areas that traditionally had few or no MA plans. Current law allows existing cost plans to continue operating unless specific MA plans of sufficient enrollment serve the same area. In such cases, the cost plan must discontinue serving that area beginning in 2011. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) required the United States Government Accountability Office to examine issues related to the conversion of Medicare cost plans to MA plans. In response, GAO determined the MA options available to beneficiaries in cost plans, described key differences for beneficiaries between cost plans, MA plans, and Medicare fee-for-service (FFS), determined the extent to which organizations offering cost plans also offer MA plans, and described concerns cost plans have about converting to MA plans.