Fact Sheet

Background: The Medicare + Choice program was created by Congress in the Balanced Budget Act (BBA) of 1997. The first Medicare + Choice plans began providing health care services to people served by Medicare in January,1999. Most Health Maintenance Organization (HMO) contracts and Private Fee For Service plans (PFFS) with the federal Centers for Medicare & Medicaid Services (CMS) operate under the Medicare + Choice program. A Medicare + Choice plan typically provides health care coverage that exceeds the coverage of original fee-for-service Medicare. Currently, of nearly 40 million Americans in Medicare, about 5 million (12 percent of all beneficiaries) have chosen to be in a Medicare + Choice plan.

Greater access and more choices in health care are key goals of the Bush Administration’s plan to improve and strengthen Medicare by giving people who are covered by Medicare additional and better benefit options, as well as access to affordable prescription drugs. This is especially important for lower-income and minority seniors and disabled individuals who depend the most on the Medicare + Choice plans for helping them keep costs affordable for the valuable benefits that are not available in fee-for-service Medicare.

In August of 2002, HHS Secretary Tommy G. Thompson announced the approval of additional health plan options for people with Medicare. A total of 33 new health plans in 23 states will begin to serve Medicare beneficiaries in 2003 as part of a demonstration program modeled after the preferred provider organization (PPO) coverage available to the vast majority of Americans under age 65.

Over the past four years some beneficiaries who enrolled in a Medicare + Choice plan have been affected by their plan's withdrawal from the Medicare program, or a decision by the plan to reduce its service area:

• In 1999, 407,000 enrollees (about 6.5 percent of 1998 Medicare + Choice enrollees) were affected. About 51,000 of these people (less than one percent of enrollees) were left without any other Medicare + Choice option.
• In 2000, 327,000 enrollees (5 percent of Medicare + Choice enrollees) were affected by plans' withdrawals and 79,000 people (1.3 percent of enrollees) were left with no other plan option.
• In 2001, 118 Medicare + Choice plans either withdrew from the Medicare + Choice program (65 contracts) or reduced a service area (53 contracts) affecting about 934,000 people (15 percent of total enrollment in Medicare + Choice). Of these, 159,000 people were left with no other Medicare + Choice option.
• In 2002, 58 Medicare + Choice plans either withdrew (22 contracts) or reduced their service areas (36 contracts) affecting about 536,000 beneficiaries (10 percent of enrollees in Medicare + Choice). Of these, about 52,000 people had access to a private fee- for-service plan. About 38,000 had no other Medicare + Choice option.
• For 2003, 33 Medicare + Choice plans withdrew (9 contracts) or reduced their service areas (23 coordinated health plans and 1 private fee for service contract) affecting approximately 217,000 beneficiaries (about 4 percent of the 5 million current Medicare + Choice enrollees). Of these,186,710 will have another Medicare + Choice option - a coordinated care plan, private fee for service plan or one of the new preferred provider options (PPO) recently announced by Secretary Thompson. About 28,555 will have no other Medicare + Choice option (about 0.5 percent of the 5 million current Medicare + Choice enrollees).

• A s of September 2002, nearly 5 million people covered by Medicare are enrolled in 155 Medicare + Choice plans which offer Medicare + Choice plans to people with Medicare. About 63.5 percent of seniors and disabled people covered by Medicare live in counties served by at least one Medicare + Choice plan.

As private sector managed care companies make business decisions that affect Medicare beneficiaries, CMS continues to undertake a comprehensive outreach effort to educate beneficiaries about their remaining health care options and the rights and protections they are guaranteed by law. These options can include other Medicare + Choice organizations such as HMOs, PPOs or private fee for service plans or original fee-for-service Medicare with or without a Medigap policy.

Working with Medicare + Choice Organizations

A goal of the Bush Administration, the Department of Health and Human Services, and CMS is to reverse the decline in Medicare + Choice HMO participation and stabilize the program. President Bush has proposed a 6.5 percent payment increase in an effort to stabilize the Medicare + Choice program. And, in August 2002, HHS Secretary Thompson announced the approval of 33 demonstration projects that will offer Medicare beneficiaries the option of preferred provider networks (PPOs) and more flexible structures that are popular in the commercial insurance sector.

CMS has continued to reduce administrative burdens on Medicare + Choice Organizations by:

• Consolidating private plan functions. The Center for Beneficiary Choices was reorganized to bring together all functions affecting health plans and beneficiary choice.
• Re-evaluation of the risk adjustment system. After the Secretary and the Administrator suspended encounter data collection, CMS developed a new data collection system that resulted in a 98 percent burden reduction on Medicare + Choice Organizations.
• Consistent quality improvement requirements. Quality requirements for Medicare + Choice Organizations reflect the best practices requirements of the private sector. For the first time, CMS awarded more than two-thirds of the Medicare + Choice Organizations incentive payments for exceeding the thresholds on two quality indicators for Medicare beneficiaries with congestive heart failure, which recognizes high quality care. This was the first time that CMS has linked payment to improved quality health care, making incentive payments to the 97 Medicare + Choice Organizations that met the requirements.
• Emphasis on better results for beneficiaries. CMS has replaced calendar-driven audits with results-based performance audits so that we target audits at "bad actors." "Good actors" can spend less time with paper and more time with patients.
• Quarterly policy changes. CMS has coordinated policy changes to coincide with contracting cycles and is working to provide quarterly updates in a manual.
• Fall advertising campaign. CMS has expanded its fall advertising campaign to educate beneficiaries about the full range of options open to them. CMS has also enhanced its toll-free telephone help line, 1-800-MEDICARE (1-800-633-4227 or TTY/TDD 1-877-486-2048) with 24-hour service, seven days a week. Additional customer service representatives have been added. They can tailor answers to individualized beneficiary questions and mail a copy of customized information immediately after each call.

Better Employer/Union-Based Medicare Options for Beneficiaries

In 2001, CMS announced that Medicare + Choice organizations have new options available to facilitate their work with employer and union-sponsored health plans. These options help to streamline the process when Medicare beneficiaries elect to receive their employer or union-based health benefits and Medicare benefits from a Medicare + Choice Organization. This flexibility gives some beneficiaries the kind of private plan choices available to many working Americans. Medicare + Choice Organizations can tailor plans to the specific needs of employer group members while supplying all Medicare-covered health services. Now, it's easier for Medicare + Choice Organizations to contract with employers. CMS intends to further re-invigorate the Medicare + Choice program by encouraging health plans to improve their designs from "closed panel" HMOs to preferred provider organization and point-of-service models that have proved popular in the private sector.

A Comprehensive Effort to Provide Beneficiaries Affected by Non-Renewals with Accurate Information about Their Remaining Options

CMS continues to work with its partners to provide Medicare beneficiaries affected by non-renewals with accurate information as soon as possible. CMS works to inform beneficiaries through 1-800-MEDICARE (1-800-633-4227), http://www.medicare.gov/, and its regional and national offices, and through the Medicare + Choice Organizations that are withdrawing. (More about this later).

CMS also provides information to public officials including members of federal, state, and local government agencies, members of Congress, State Health Insurance Assistance Programs (SHIP) including some 12,000 trained counselors in 1000 local organizations administered by the states' insurance departments or departments of aging, and other programs. In past years over a third of the 1.3 million face-to-face counseling sessions and the 30,000 education events held by these insurance counselors have revolved around the Medicare + Choice program and Medigap insurance.

CMS also works with the news media to provide information to beneficiaries affected by non-renewals. A key piece of the CMS message is that beneficiaries are automatically eligible to return to original fee-for-service Medicare. In addition they may have a right to buy supplemental insurance policies, known as Medigap policies, on a guaranteed issue basis. A Medigap plan can help pay for some costs not covered by Original Medicare.

Medicare & You 2003 contains general and plan comparison information and will be mailed to 36 million beneficiaries during October, 2002. Information about how to choose and buy a Medigap policy is available in our free publication, the 2002 Guide To Health Insurance for People with Medicare: Choosing a Medigap Policy. (This can be downloaded at http://www.medicare.gov/ or ordered by calling 1-800-MEDICARE (1-800-633-4227).

Beginning in October CMS will conduct its annual national advertising campaign, with a special outreach to ethnic groups, to acquaint Medicare beneficiaries and their caregivers with the easy access to information available on our toll-free telephone help-line, 1-800-MEDICARE (1-800-633-4227), which is staffed 24 hours a day, seven days a week. After the phone call, information can be mailed directly to the beneficiary. Helpful publications can be ordered over the phone or read and downloaded, along with much of the information that can be conveyed by telephone representatives or from http://www.medicare.gov/.

Partners in our efforts to disseminate information to our beneficiaries include: the Leadership Council of Aging Organizations, the American Association of Health Plans, AARP, the National Council of Senior Citizens, the National Rural Health Association, the National Council on Aging, the National Hispanic Council on Aging, the National Caucus and Center on Black Aged, the Older Women's League, the Social Security Administration, the U.S. Administration on Aging and State Health Insurance Assistance Programs.

Medicare + Choice Organizations' Obligations To Beneficiaries After Non-Renewal

Even after Medicare + Choice Organizations notify CMS of their intention to withdraw for the coming year, certain obligations to enrollees remain. Chief among them is the plan's obligation to provide contracted services through December 31, 2002, when most annual plan contracts expire. Non-renewing plans, or those reducing a service area, are required to send plan members affected by the change an information package by October 2, 2002. This package explains remaining options for health care coverage, including another Medicare + Choice Organization, if available, or Original Medicare, which can be supplemented by a Medigap policy. The package also explains beneficiaries' rights and protections if they choose to return to fee-for-service Medicare and buy a Medigap policy.

CMS reviews and approves the information packages that are sent by plans to Medicare beneficiaries affected by the plan changes. Basically, the letter says that beneficiaries can remain in their plan through December 31, 2002, or they can disenroll before that time and either return to Original Medicare or enroll in another Medicare + Choice plan if available. If they take no action they will automatically be disenrolled from their plan after December 31, 2002 and return to original Medicare. For help in selecting their best option, beneficiaries are invited to call 1-800-MEDICARE, or their local SHIP.

CMS Encourages Health Plans To Enter New Markets

CMS will continue to expedite review of potential Medicare + Choice organizations that would serve markets left without a Medicare + Choice option or other alternatives to Original Medicare.

Beneficiaries May Have Other Medicare + Choice Options

Other Medicare managed care plans and private fee-for-service plans that operate in the same area as a non-renewing plan are required to be open to accept new enrollments during a Special Election Period from October 1 through December 31, unless they have a CMS-approved capacity limit that has been met. If another plan in a county accepts new members, beneficiaries can select an effective start date of November 1, December 1, or January 1 as long as the new plan receives the completed election form prior to the start date. Beneficiaries who enroll in another Medicare managed care plan or a private fee-for-service plan should not submit a disenrollment form to the non-renewing plan. They will be automatically disenrolled.

Returning To Original Medicare

Beneficiaries who wish to return to Original Medicare may consider buying Medicare supplement insurance (a Medigap plan) before they disenroll from a Medicare + Choice plan. A beneficiary can stay enrolled in the Medicare + Choice Organization until December 31, 2002, or voluntarily disenroll and return to Original Medicare before December 31. It is best for each beneficiary to get complete information about his or her specific situation before disenrolling in order to know how to use the right to buy certain Medigap insurance plans.

People who wish to leave their Medicare + Choice Organization before January 1, 2003 can call 1-800-MEDICARE (1-800-633-4227) or complete a disenrollment form that is available from their health plans, any Social Security Administration office, Railroad Retirement Board office (for railroad retirees). Purchasing a Medigap policy does not automatically disenroll a beneficiary from a Medicare + Choice plan.

Beneficiaries who don't disenroll will automatically be enrolled in Original Medicare starting January 1, 2003.

Medigap Policies

Beneficiaries whose plans leave Medicare have a guaranteed right by law to buy Medigap policies designated as Plans A, B, C, or F. Some beneficiaries may have more choices of Medigap policies depending on the length of time they've been in a Medicare managed care plan, or if state law provides additional rights.

Beneficiaries must apply for a Medigap policy within 63 days of the date on which coverage of the non-renewing Medicare + Choice plan ends. During this time period an insurance company that sells Medigap insurance cannot deny you medical coverage or place conditions on the policy due to a pre-existing condition or past or present health problems.

CAUTION: Beneficiaries should make a copy of their Medicare + Choice Organization's final notification letter (dated October 2) to send with their application for a Medigap policy to prove loss of coverage under a Medicare + Choice Organization and to show they have the right to buy a Medigap policy. Beneficiaries should also keep a copy of their Medigap application as proof that they applied for Medigap insurance within the required time period.

Supplemental Coverage For Medicare Beneficiaries Enrolled In An Employer or Union-Sponsored Plan

A beneficiary whose employer, former employer or union has an arrangement with the managed care organization offering the Medicare + Choice plan in which he or she is enrolled is advised to consult with that employer, union or benefits administrator before making plan changes.

Affected Beneficiaries May Be Able To Retain Their Doctors

Beneficiaries who choose to return to Original Medicare will probably be able to continue with many of the doctors they saw in their Medicare + Choice Organization. More than 90 percent of Medicare + Choice doctors participate in Original Medicare, as well as in multiple Medicare + Choice Organizations. To see if a physician participates in Original Medicare (and accepts Medicare assignment) look at the Participating Physician directory at http://www.medicare.gov/.

Information On Other Medicare + Choice Plans and Health Care Options

Current information about other Medicare + Choice plans available in a local area is available at 1-800-MEDICARE (1-800-633-4227 and TTY 1-877-486-2048), and on the web site: http://www.medicare.gov/. Once on site, click on Medicare Health Plan Compare, then key in your state, and zip code. (Some Medicare + Choice plans are available only in certain zip codes.) Many libraries and senior centers can also help with web site access and information. Information about Medicare + Choice Organizations available in 2003 will be online October 29, 2002. The new Medicare Personal Plan Finder tool will help beneficiaries compare the aggregate out-of-pocket costs of available Medicare + Choice options and Medigap policies. For general help understanding health care options, beneficiaries may contact their State Health Insurance Assistance Program. They may also contact the U.S. Administration on Aging's toll-free Elder Care Locator at 1-800-677-1116 to be referred to their local area agency on aging.