Medicare+Choice: the California Experience -- California Capitol Hill Bulletin -- Volume 10, Bulletin 1 -- January 9, 2003

A new report prepared by Marsha Gold and Timothy Lake for the Henry J. Kaiser Family Foundation offers several insights and lessons into the Medicare+Choice (M+C) program. Twenty-five percent of all M+C beneficiaries live in California, which has had a long experience with the program, and 35 percent of all Medicare beneficiaries in the state are part of an M+C plan, far exceeding the national rate of 14 percent. In addition, the M+C market in California is dominated by a handful of firms like Kaiser Permanente, PacifiCare, and Health Net with 39 percent, 36 percent, and 8 percent share of the market respectively.

Instituted by Congress in 1997, the M+C program expanded Medicare into a larger program which gave Medicare recipients an increased choice of health plans available and encouraged a more active consideration of their health plan. The program also established new eligibility and payment standards and set up new quality requirements for participating organizations.

Drawing on an analysis of M+C data on plan participation, withdrawals, and enrollment from 1997 through 2002, the study presents several lessons that could be learned from the California experience. For instance, the study suggests that plans are not immune from destabilizing pressures, though maturity in the M+C market contributes to stability. Unique characteristics and behaviors of the M+C market firms influence and determine M+C's future. In particular, the authors predict that "the dynamic tension between health plans and providers and how it evolves will be the most significant force influencing both the future of M+C or managed care in California and elsewhere." The study also found that even though California has enjoyed a mature M+C market and a long history with managed care, M+C market has yet to be established in the rural areas of the state.

Judging by the California experience, the study concludes that some firms in the M+C market may experience difficulty retaining their provider base in some parts of the state. For more information about this report, go to http://www.kff.org/medicare .

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