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Memorandum: Medicare+Choice Provisions in the Balanced Budget Act of 1997 1 (November 1997)

handle is hein.congrec/cbo9204 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE June E. O'Neill U.S. CONGRESS Director WASHINGTON, D.C. 20515 November 12, 1997 TO: Interested Parties FROM: Sandy Christensen SUBJECT: Medicare+Choice Provisions in the Balanced Budget Act of 1997 In the Balanced Budget Act of 1997 (P.L. 105-33, hereafter called the BBA), the Congress made a number of changes to Medicare in an effort to limit growth in program costs. About half of the savings expected over a 10-year projection period come from provisions that would reduce payments to providers in Medicare's traditional fee-for-service sector, Another quarter of the savings come from keeping the premium paid by Medicare Part B enrollees at 25 percent of program costs, rather than letting it drop as a percentage of costs as it would have under prior law. The remaining savings come from provisions that would alter participation by and payments to risk-based plans that are available to enrollees as an alternative to Medicare's traditional fee-for-service sector This memorandum describes the changes enacted for Medicare's risk-based (or Medicare+Choice) sector and assesses the likely effects on beneficiaries and plans. Risk-based plans agree to provide all covered medical services to their Medicare enrollees for a predetermined per-capita payment-a capitation amount. Under both prior law and the BBA, the capitation amount is set by Medicare each year, and plans then determine whether they will serve Medicare enrollees for that amount. Currently, the payment rate is high enough in many areas that capitated plans provide enrollees with free supplemental benefits. CHANGES IN MEDICARE'S RISK-BASED SECTOR When the Medicare provisions of the BBA are fully in place, they will change Medicare's risk-based sector in four primary ways, They will expand the types of capitated plans available to beneficiaries, the conditions under which plans may participate, the way in which Medicare's payment rates to plans are calculated, and the process by which beneficiaries enroll. The BBA also imposes new requirements on medigap plans that are intended, in part, to facilitate movement between Medicare's traditional fee-for-service sector and the risk-based sector.

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