This Government Accountability Office (GAO) report, required under the Medicare Improvements for Patients and Providers Act of 2009 (MIPPA), reviews the conversion of Medicare cost plan enrollees into Medicare Advantage (MA) plans.  Medicare cost plans are managed care plans that CMS reimburses based on the reasonable costs of provided services; in contrast, Medicare Advantage (MA) plans, though also managed care plans, receive fixed per-enrollee payments and assume the financial risk of cost overruns.  Under current law, cost plans may exist only if there are no MA plans with sufficient enrollment in the same area.   The GAO found that, as of June 2009, beneficiaries enrolled in all 22 cost plans had multiple MA plans available to them.  The GAO also found that cost plans had higher than average quality scores and offered lower out-of-pocket costs for beneficiaries with poorer health. 

From the report:

All Medicare beneficiaries enrolled in the 22 cost plans had multiple MA options available to them. Nearly all beneficiaries enrolled in cost plans had at least 5 MA plans serving their county in June 2009, and more than 57 percent had a choice of 15 or more MA plans.

Some of the differences between cost plans and MA plans that affect beneficiaries are out-of-network coverage, enrollment periods, and prescription drug coverage. Cost plans’ quality scores, on average, were higher than the average of competing MA plans’ scores in the county with the cost plan’s highest enrollment. Estimated out-of-pocket costs varied between cost plans and other options depending on the self-reported health status of the beneficiary. In general, beneficiaries reporting poor health had lower estimated average out-of-pocket costs in most cost plans compared to competitor MA plans and FFS, while beneficiaries reporting good or excellent health had relatively higher estimated costs in most cost plans compared to MA plans and FFS.

Full report: Medicare Managed Care Observations about Medicare Cost Plans (PDF | 1.39 MB)

US Government Accountability Office. (2009). Medicare managed care observations about Medicare cost plans.