Trends in premiums, cost-sharing, and benefits in Medicare+Choice health plans, 1999--2001.

T hough only 16 percent of Medicare beneficiaries were enrolled in managed care plans in 2000, these plans continue to be attractive for several reasons. Foremost, such plans (termed Medicare+Choice plans) provide a much more affordable source of supplemental coverage than is available through such offerings as Medigap, which covers many costs that Medicare alone does not (Nelson et al. 1997; Schoen et al. 1998). Managed care plans finance their supplemental coverage through savings they achieve in providing basic Medicare benefits or by charging premiums. Throughout the midto late 1990s, plans offered increasingly generous benefits to attract more enrollees. A sharp reversal of this trend occurred in 2000, however, when coverage became somewhat less comprehensive and many plans began either charging premiums or increasing premiums (Cassidy and Gold 2000). In that same year, enrollment in Medicare+Choice plans decreased for the first time (Figure 1). This Issue Brief provides an early look at trends from 1999 to 2001 in plan benefits, premiums, and cost-sharing requirements. Overall, the analysis reveals continued growth in premiums in 2001 and a simultaneous continued decline in benefit comprehensiveness. Whether this erosion will persist remains to be seen. In December 2000, Congress approved legislation that increased federal payments to Medicare managed care plans effective March 2001. These increases could allow plans to restore benefits or reduce premiums. A major change in this direction is unlikely, however, because most plans received relatively small increases in their capitation rates and many may opt to use funds to stabilize the benefits they offer. They could achieve this by increasing provider payments or allowing for benefit stabilization over time, which Congress has allowed. The Commonwealth Fund is a private foundation established in 1918 by Anna M. Harkness with the broad charge to enhance the common good. The Fund carries out this mandate by supporting efforts that help people live healthy and productive lives, and by assisting specific groups with serious and neglected problems. The Fund supports independent research on health and social issues and makes grants to improve health care practice and policy.