For these beneficiaries, enrollment in an MA plan replaces not only traditional Medicare but also a Medicare supplemental insurance policy (i.e., Medigap). In return, they receive health insurance for all services through (and may pay supplemental premiums to) their MA plan. Those beneficiaries who choose to enroll in an MA plan continue to pay, directly to Medicare, their required Part B premium for physicians' services and, if they elect it, their Part D premium for drug coverage. TEFRA was passed in 1982, and the rules to implement risk-based contracting were completed in 1985. In this article, we refer to the program by both its current names, Part C and Medicare Advantage (MA). This program has been called a variety of names over the past three decades (e.g., Medicare Advantage, Medicare+Choice).
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The Medicare Advantage (MA) program, formally Part C of Medicare, originated with the Tax Equity and Fiscal Responsibility Act (TEFRA), which authorized Medicare to contract with risk-based private health plans, or those plans that accept full responsibility (i.e., risk) for the costs of their enrollees' care in exchange for a prospective, monthly, per-enrollee payment. But Medicare Advantage generally has cost more than the traditional Medicare program, an overpayment that has increased in recent years.Ĭonclusions: Major changes in Medicare Advantage's payment rules are needed in order to simultaneously encourage the participation of private plans, the provision of high-quality care, and to save Medicare money. Additionally, we compare the experience of Medicare Advantage and of employer-sponsored health insurance with managed care over the same time period.įindings: Beneficiaries' access to private plans has been inconsistent over the program's history, with higher plan payments resulting in greater choice and enrollment and vice versa. Methods: In this article we review the economic history of Medicare Part C, known today as Medicare Advantage, focusing on the impact of major changes in the program's structure and of plan payment methods on trends in the availability of private plans, plan enrollment, and Medicare spending. Context: Twenty-five years ago, private insurance plans were introduced into the Medicare program with the stated dual aims of (1) giving beneficiaries a choice of health insurance plans beyond the fee-for-service Medicare program and (2) transferring to the Medicare program the efficiencies and cost savings achieved by managed care in the private sector.
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