Since the passing of the Medicare Modernization Act of 2003 (MMA) the number of managed care plans in the market has increased significantly leading to the volume of Medicare Advantage enrollees nearly doubling over the last five years.

Below are some of the key drivers of Medicare managed care growth:

• Revamped reimbursement leading to increases in payments to managed care plans
• A fast growing Medicare population
• More attractive base benefits to members including Medicare Part D to cover drugs
• CMS introduction of demonstrations to increase choice for Medicare beneficiaries with extra consideration offered to Private Fee For Service (PFFS), Local PPO, Regional PPO, and Special Needs Plans. These programs, specifically PFFS, have led to some the most significant growth areas for Medicare Advantage over the last two years.

As you can see in the charts below Medicare managed care plans and enrollment have nearly doubled since 2003 and this trend will continue:

Key market observations for the near term:

• Federal dependence on Medicare Advantage will continue, regardless of the administration, due to its ability to drive quality standards while managing costs.
• The “baby boomer” population continues to age in to the Medicare beneficiary population and thus bring a comfort level and demand for the cost savings that come with managed care.
• Managed Care co-pays and benefits may not significantly improve over the coming years, but they will maintain their current levels and continue to be significantly better than basic Medicare FFS.
• Due to the changes in PFFS legislation requiring contracted networks in most metro areas instead of deemed networks, Medicare managed care plans will be increasing their efforts to build provider networks.
• Managed Care bottom-line concerns may lead to greater administrative burden added to physicians in an effort to reduce medical costs.