Policy Context for the Workshop

Since the early 1970s the federal government has supported the voluntary enrollment of Medicare beneficiaries in managed care programs through a number of demonstration projects. The 1982 Tax Equity and Financial Responsibility Act, which became operational in 1985, gave Medicare beneficiaries the option to enroll in federally qualified health maintenance organizations (HMOs) and competitive medical plans, all of which offer benefits covered by Medicare and the majority of which also offer cost-sharing and supplemental service coverage that replaces the coverage obtained through Medigap policies.*

In 1995, HCFA announced its Medicare Choices demonstration program. This demonstration program had a broad goal of testing beneficiaries' responses to a range of health care delivery system options and of evaluating the suitability of these options for Medicare. The passage of the Balanced Budget Act of 1997 gave HCFA the authority to contract with an even greater variety of managed care and fee-for-service plans under its Medicare+Choice program. These include:

  • coordinated care plans (HMOs [with and without point-of-service options], preferred provider organizations, and provider-sponsored organizations);
  • private fee-for-service plans;
  • medical savings accounts; and
  • religious fraternal benefit society plans.

According to the Medicare Payment Advisory Commission, at least 72 percent of Medicare beneficiaries currently have access to a Medicare risk plan and 39 percent have five or more plans available in their local area (Medicare Payment Advisory Commission, 1998a).

The Balanced Budget Act gives HCFA until 2002 to develop a comprehensive beneficiary education and information infrastructure. Both private-and public-sector workshop participants stated that the task with which HCFA is charged is among the most challenging that any organization has faced. HCFA will be responsible not only for providing information about the traditional Medicare program but also for educating its 35 million beneficiaries and other information intermediaries about the Medicare+Choice enrollment process. Extensive research findings and workshop participants who work with the Medicare population, such as Age Wave and The Senior Network, have found that the current Medicare population lacks adequate basic knowledge about what the traditional Medicare program covers, let alone what the newer health care delivery options will add to the mix (Hibbard and Jewett, 1998; Kleimann, 1998a; U.S. Department of Health and Human Services, 1997a).


Beneficiaries who are eligible for Medicare because of age or disability may choose to enroll in an HMO. Beneficiaries who qualify for Medicare because of end-stage renal disease are not eligible to enroll in an HMO unless they were already enrollees in a commercial plan at the time that they became Medicare eligible. In addition, as a result of the Balanced Budget Act of 1997, beneficiaries receiving hospice care may also now enroll in a Medicare+Choice plan. Beneficiaries must be enrolled in both Medicare Parts A and B to participate in Medicare+Choice.

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