In 1999, and again in 2000, Congress passed legislation that increased payment rates in an effort to make participation in the M+C program more attractive for MCOs. MCO Withdrawals

In the years following the implementation of BBA’s payment and other reforms, MCOs terminated approximately 160 Medicare contracts and reduced the size of the geographic areas served under many of the contracts they renewed. Approximately 1.6 million beneficiaries had to switch to a different M+C plan or return to the FFS program because of these withdrawals. MCOs Used BIPA Payment Increase for Stabilizing Access More Frequently Than for Benefit Improvements

MCOs reported that some or all of the BIPA payment increase would be used to stabilize or enhance beneficiary access to providers for the majority of their M+C plans. MCOs put additional money into a benefit stabilization fund for a few of their plans. For Most M+C Plans, Additional Money Used to Stabilize or Enhance Beneficiary Access to Providers

For about 83 percent of the 543 M+C plans, MCOs reported that some or all of the additional money authorized by BIPA would be used to stabilize or enhance beneficiary access to providers (see fig. 1). In about 20 percent of M+C plans, MCOs reported that they would also improve the benefit packages or contribute to a benefit stabilization fund. 2). 1). BIPA Had Little Effect on Beneficiary Access to M+C Plans in 2001

BIPA had little effect on the number of beneficiaries with access to at least one M+C plan in 2001. Seven MCOs, offering a total of 12 M+C plans, either reentered counties they had previously dropped from their service areas or expanded into counties they had not previously served. Representatives of the MCO that both reentered counties and expanded into new ones also stated that the higher payments motivated their decision to increase their plan’s service area.
What GAO Found

The number of contracts under Medicare's managed care program--Medicare+Choice (M+C)--fell from 340 to 180 between 1998 and 2001. The reduction reflected decisions by some managed care organizations (MCOs) to terminate selected contracts or to discontinue service in some covered areas. Although nearly all MCOs renewed at least some of their Medicare contracts over this period, many reduced the geographic areas served. As a result, 1.6 million beneficiaries had to switch MCOs or return to Medicare's traditional fee-for-service program. Other MCOs plan either to terminate or reduce their participation in M+C at the end of 2001. Concerned about MCO withdrawals, Congress sought to make participation in the program more attractive. As a result of the Benefits Improvement and Protection Act of 2000, aggregate Medicare+Choice payments in 2001 are estimated to have increased by $1 billion. The act permitted three basic uses for the higher payment. MCOs could (1) improve their health plans' benefit packages, (2) set aside money for future years in a benefit stabilization fund, or (3) stabilize or enhance beneficiary access to providers. Most MCOs reported that additional money would be used to stabilize or enhance beneficiary access to providers. A minority of MCOs reported that the money would go toward benefit improvements or be placed in a benefit stabilization fund. In 83 percent of M+C plans, MCOs stated that some or all of the additional money would be used to stabilize or enhance beneficiary access. The payment increases had little effect on the availability of M+C plans during 2001. Following passage of the act, three MCOs reentered counties they had dropped from their service areas, three MCOs expanded into counties that they previously had not served, and one MCO both reentered previously served counties and expanded into new ones.