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Statement of Need: Implementation of the Medicare Advantage (MA) Program is required by section 201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The MA program replaces the Medicare+Choice (M+C) program established under part C of title XVIII of the Social Security Act. The primary goal of the MA program is to expand health plan choices available to Medicare beneficiaries in areas that previously had no private plans and in areas with few competing plans. Beneficiary choice should be enhanced by the introduction of new types of plans, including specialized MA plans, and regional plans that are structured as preferred provider organizations. The MA program becomes effective January 1, 2006.

Summary of the Legal Basis: Section 201 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173).

Alternatives: None.

Anticipated Costs and Benefits: In general, the MA program will have a positive impact on beneficiaries. Transfer payments from the Federal Government will go towards the provision of additional benefits to enrollees of health plans and reduced out-of-pocket costs, including reduced part B and part D premiums for these enrollees. The law will result in increased revenue for participating private plans for the provision of the basic Medicare benefit and the provision of additional benefits. This is expected to help improve the availability of health plan choices for beneficiaries.

Risks: Risks include not publishing the final regulation in time to allow prospective local and regional MA plans to participate in the MA program. Prospective MA plans need to apply to become an MA plan and prepare bids in the spring of 2005. This is a particular concern for MA organizations considering offering new types of plans, such as MA regional PPOs and specialized MA plans. If plans choose not to participate due to a delay in publishing the final regulation, there may be the risk of low participation in the MA program for 2006 and beneficiaries will continue to have little choice or only the choice of fee-for-service in many parts of the country. Because expanded choice of plans for beneficiaries is the cornerstone of the MMA legislation, this is a big risk.