Reversal of Fortune: Medicare+Choice Collides with Market Forces

Publication Date: May 2002

Publisher: Center for Studying Health System Change

Author(s): Joy M. Grossman; Bradley C. Strunk; Robert E. Hurley

Research Area: Health

Type: Brief


Private health plans’ participation in Medicare was envisioned as a way to save taxpayers money and offer Medicare beneficiaries more choices and benefits. As enrollment grew, there were concerns about overpayments to some private health plans and wide geographic variation in plan payments. The Balanced Budget Act of 1997 (BBA) introduced significant payment changes and regulatory requirements for plans participating in the newly named Medicare+Choice (M+C) program. SinceJanuary 1999, scores of plans have reduced or ended their participation, disrupting coverage for more than two million seniors. While the BBA often is blamed for this turnabout, research by the Center for Studying Health System Change (HSC) indicates private market forces also played a key role in M+C’s growing instability.