Press Releases



More Medicare beneficiaries are expected to have access to Medicare Advantage plans, based on a substantial number of new applications from health plans to participate in the program.


The Centers for Medicare & Medicaid Services (CMS) received applications for more than 141 new local Medicare Advantage plans in 2005.   If the applications are approved, beneficiaries in at least 39 states will have access to Medicare Advantage plans. 


“The additional Medicare Advantage plans will provide new lower-cost coverage options to millions of Medicare beneficiaries previously without choice,” said CMS Administrator Mark B. McClellan, M.D., Ph.D.   “The interest of these new plans should assure beneficiaries that they will see a robust Medicare Advantage Program when it really gets started next January.”


The applications were provided by the deadline for offering a new Medicare Advantage plan in 2005.  Beginning later this year, based on approval of these applications, there will likely be more than 300 Medicare Advantage plans available for beneficiaries across the nation, the largest number of plans since 1999.  CMS received applications from 55 new health maintenance organizations (HMOs), 73 preferred provider organizations (PPOs) and 13 new private fee-for-service plans (PFFS).  Currently there are 152 HMOs, 26 PPOs and 7 PFFS plans.  Medicare Advantage HMO and PPO options will be available in four additional states.  Fifty-one of the new applications are from organizations currently not offering Medicare Advantage plans.


Medicare Advantage plans are able to provide lower costs and more benefits through better-coordinated care.   Medicare Advantage plans also encourage higher-quality care by providing up-to-date benefits using proven approaches to keep beneficiaries healthy and manage their chronic diseases.  The new Medicare law strengthens preventive benefits and disease management services in fee-for-service Medicare, but these approaches are already fully integrated in Medicare Advantage coordinated care plans.


Medicare Advantage plans also provide information on the quality and results of care so beneficiaries are better able to find the best care for their needs and providers are encouraged to improve quality.   Overall, beneficiaries in these plans should expect to save more than $90 a month compared to the costs of fee-for-service Medicare.


CMS expects to receive additional applications from health plans to expand the areas they currently serve by the March 1 deadline for 2005 service area expansions.   The deadline for the new regional plans, local Medicare Advantage HMOs, and prescription drug plans to submit applications to serve beneficiaries beginning January 1, 2006, is March 23. 


In addition, CMS today issued the preliminary estimates of the 2006 national per capita Medicare Advantage growth percentage, which is used to determine annual increases in Medicare Advantage payment rates in all counties for Medicare Part A and B.   The notice also discusses how Medicare prescription drug plans will be paid beginning in 2006.


Included in this notice is  the announcement of a demonstration program designed to help beneficiaries enrolled in the Medicare prescription drug benefit program receive supplemental drug coverage.   The demonstration enables plans to provide more comprehensive prescription drug coverage for beneficiaries at no additional cost to the Medicare program.


For 2006, the minimum percentage increase will be the national Medicare Advantage growth percentage.  The preliminary estimate is 4 percent, based on actuarial projections of fee-for-service cost growth.  The preliminary estimate could be updated before the final 2006 capitation rates for all counties are announced on April 4.  The growth rate is an average that reflects current fee-for-service costs.


The preliminary estimate of 4 percent for 2006 for aged and disabled combined is calculated from the 2006 payment trend change of 4.5 percent, less revisions to overestimates of Medicare spending in 2004 and 2005 of 0.2 percent and 0.3 percent, respectively because fee-for-service Medicare spending increased less than previously estimated in those years.   The smaller increases were due to lower than estimated spending under Medicare Part A.  The Medicare Advantage payment rate increases, and the related revisions for earlier over/underpayment, are actuarial calculations based upon actual fee-for-service Medicare spending for which CMS does not have any discretion.


Today’s announcement also describes the methodology by which health plans intending to offer Medicare Part A and B services in 2006 both locally – by county – or regionally as a preferred provider organization plan are paid to offer services to Medicare beneficiaries.     In addition, the notice includes the methodology that will be used to pay Medical Savings Account (MSA) plans.


The notice also describes changes in risk adjustment of payments to Medicare Advantage plans.   Medicare will move to 75 percent risk adjustment in 2006, then to 100 percent risk adjustment in 2007.  As announced with the President’s budget proposal, Medicare will phase out the current “budget neutral” risk adjustment policy from 2007 through 2011, yielding savings to Medicare.


The notice issued today also explains the payment methodology for prescription drug benefits (Part D) offered by a Medicare Advantage organization or a Prescription Drug Plan sponsor.   There are four distinct types of payment mechanisms.


CMS is asking for comments and input within the next two weeks on the provisions and proposals contained in the advance notice. 


Final rates will be announced on April 4.   All Medicare Advantage organizations and prescription drug plan sponsors are required to submit their final bids by June 6.  CMS expects to approve those bids by September 15 and plan information will be available to beneficiaries later this Fall.  Open enrollment for 2006 will begin November 15 and last through the first six months of 2006.


The 45-day notice can be found at


The demonstration can be found at