vinced that interventions that go beyond the traditional strategies of reducing provider payments or asking beneficiaries to pay more are needed. It is widely believed that more attention must be focused on controlling the volume of services used by the elderly to slow the growth in program expenditures.

Strategies to reform and preserve Medicare focus on redesigning elements of the 31-year-old program to reflect some of the major financing and organizational changes revolutionizing the provision of health care services in the private sector. Chief among these changes has been a major influx of the population under age 65 into managed care, viewed by many researchers and policy specialists as holding the potential for providing more appropriate, quality services at costs lower than those of fee-for-service plans. A number of studies and surveys attribute the slowing rate of spending on health benefits by large employers over the past 2 years to the growth of managed care programs.

Until recently, enrollment of the Medicare population in managed care programs has lagged the enrollment in such programs in the private sector: about 10 percent of all Medicare beneficiaries are enrolled in managed care, whereas more than 70 percent of the population under age 65 are enrolled in such programs.1 After existing for nearly a decade, the current Medicare risk contract program now appears to be attracting more beneficiaries. Enrollment more than doubled between 1987 and 1995, with the annual growth rate reaching about 25 percent between 1993 and 1994 (U.S. General Accounting Office, 1996).

The pressing need to reduce Medicare's rate of growth and to create a more competitive, market-oriented environment for health delivery is resulting in a major emphasis on moving beneficiaries away from the current fee-for-service system, in which the vast majority of the Medicare population continues to receive care, into a broad range of managed care and other delivery options, including health maintenance organizations with a point-of-service option, preferred provider options, unrestricted private fee-for-service plans that have utilization review, a network of contracted providers, plans that combine insurance with

1  

Enrollment in managed care is growing at approximately 2 percent per year.



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