Lessons from Medicare+Choice for Medicare reform.

C urrent discussions of the future of Medicare include proposals to increase the enrollment of beneficiaries in private health insurance plans. These proposals would provide incentives for beneficiaries to join private plans, rely on more loosely structured health plans such as preferred provider organizations (PPOs), change the way health plans are paid, and in some cases create competition between private plans and traditional fee-for-service Medicare. Today’s proposals follow upon Medicare’s long history with private health plans.The most significant effort to expand the enrollment in private plans occurred with the passage of the Balanced Budget Act of 1997 (BBA), which created the Medicare+Choice (M+C) program.The objectives of M+C included expanding the types of plans available to Medicare beneficiaries, increasing payments to plans in low-cost areas, and fostering competition among private plans. M+C has not met proponents’ expectations.Tied to the low increases in Medicare’s fee-for-service program and buffeted by provider pushback and an inability to control costs of care, HMOs have left the M+C program in large numbers. Although many private M+C plans perform well compared with fee-for-service (FFS) Medicare on selected preventive health measures, on other measures—including access to care, stability of providers, simplicity of benefit structure, and costs to the Medicare program—the history of M+C is less positive. Turbulence in the program and beneficiary dissatisfaction have contributed to a decline in M+C enrollment, from 16 percent in 1998 to 11 percent in 2003 (Figure 1). It had originally been projected that enrollment would reach 34 percent by 2005. The six-year history of M+C provides seven lessons to help inform the policy debate on Medicare reform proposals. The Commonwealth Fund is a private foundation supporting independent research on health and social issues.The views presented here are those of the authors and should not be attributed to The Commonwealth Fund or its directors, officers, or staff.