Press release



Over 90 percent of the 41 million Medicare beneficiaries across America could have access to Medicare coordinated care programs and other health plan options in 2005.  Most of these health plans offer benefit packages that are increasingly generous:  beneficiaries who must buy Medigap coverage on their own or who cannot afford Medigap will save nearly $100 a month on average compared to traditional Medicare with Medigap.  The unprecedented availability, enhanced benefits, and increased savings in Medicare Advantage are the result of the Medicare Modernization Act of 2003.


The Centers for Medicare & Medicaid Services (CMS) estimates that if the bulk of the unprecedented number of complete plan applications it has received are approved, as expected, the availability of Medicare Advantage plans will easily exceed the maximum previous availability of health plans.  The average savings for beneficiaries in Medicare Advantage plans also increased significantly compared to previous years.


“This year we will have broader health plan participation than ever before in Medicare’s history, and the savings for our beneficiaries are greater as well,” said CMS Administrator Mark B. McClellan, M.D., Ph.D.  “We are bringing Medicare up-to-date with better benefits and a new emphasis on preventing diseases and preventing disease complications. Medicare Advantage plans help beneficiaries save through a focus on coordinated care and prevention that helps them stay healthy and keep their costs way down.”


Since the beginning of 2005, CMS has received over 130 new health plan organization applications to offer services in 2005, including 50 organizations completely new to the Medicare program and around 70 new local PPOs.  Some 96 current providers plan to increase their service areas this year.  Once the approvals are made final, Medicare Advantage plans are expected to be operating in 49 states covering the vast majority of Medicare beneficiaries.


Many Medicare beneficiaries did not have access to the potentially cost-saving health plans previously, in part because of some difficulties in coordinating provider networks in rural areas.  CMS estimates that for 2005, three-quarters of all Medicare enrollees who live in rural areas could have a Medicare Advantage plan near home, including an unprecedented level of access to coordinated care plans, including PPOs.

Prior to these expansions, there are 160 coordinated care plans, including 28 PPOs, and nine private fee-for-service plans in Medicare, with more than five million beneficiaries enrolled. 


CMS is still reviewing the applications submitted by Medicare Advantage organizations, including the new regional PPOs, and by prescription drug plans that want to serve Medicare beneficiaries in 2006.  Plans had until February 15 to apply for participation in the program for the current year.


“Medicare Advantage plans are able to provide more benefits at lower costs by focusing on high quality, better-coordinated care with up-to-date benefits and proven approaches to keep people healthy,” Dr. McClellan said. “This is especially true for our beneficiaries with chronic diseases.”


The MMA also established a new option for Medicare Advantage plans to exclusively or disproportionately enroll beneficiaries with special needs (known as “special needs plans or SNPs).  The law specifies them as beneficiaries who are dually eligible for Medicare and Medicaid, living in institutions or have severe or chronic or disabling conditions.  These plans make it possible for health plans to improve the quality and coordination of care that is given to these beneficiaries.  CMS has approved 48 SNPs, and is reviewing 18 applications for services to be offered in 2005. In addition, more than 100 SNP applications have been submitted to provide services in 2006.


On average, enrollees in Medicare Advantage plans now save nearly $100 in out-of-pocket expenditures each month because average cost sharing for Medicare-covered services is lower than in original Medicare, and because the plans cover additional services that most Medicare beneficiaries would otherwise have to pay for out of their own pockets.   


Plan enrollees may see savings from their Medicare Advantage plans through:

  • Lower co-payments and deductibles than are available in the traditional Medicare plan for Medicare-covered services.
  • Out-of-pocket limits on certain types of medical spending compared to traditional Medicare.
  • Prescription drug coverage, including more generous benefits being offered by many plans in 2005.
  • Coordination of care for chronic illnesses including heart disease, diabetes, lung disease, and cancer.
  • Nutritional, wellness, and preventive benefits.
  • Dental and vision benefits.


Increases in access to health plans offering expanded benefits and greater savings, and a particular focus on preventing complications of chronic illnesses, comes after changes in the MMA which provides greater and more predictable financial support for Medicare Advantage plans.


“We are already seeing the payoff from reforming the Medicare Advantage program to give seniors better, more reliable choices,” Dr. McClellan said. “We are pleased to see so many plans competing to serve our beneficiaries, particularly those who can benefit from coordinated care and disease management services to prevent complications.”


CMS today also announced the 2006 national per capita Medicare Advantage growth rate of 4.8 percent. This information is used to determine annual increases in Medicare Advantage Payment Rates, and was released in the Announcement of Calendar Year 2006 Medicare Advantage Payment Rates, which includes the annual rates for 2006.   The growth percentage, based on actuarial projections, is the final estimate of growth in Medicare costs from 2005 to 2006 for all Medicare beneficiaries.  It is determined primarily by the increase in costs for beneficiaries in the traditional Medicare program. 


CMS also released the risk adjustment model for the Medicare Part D benefit in 2006.  Paying drug plans appropriately according to the enrollee’s health status will ensure that sicker patients are able to enroll in the plan of their choice. These “risk adjusters” will account for differences in expected drug costs based on patient demographics, chronic diseases, low-income status, and institutional status.


“We’re implementing risk adjustment on 100 percent of our payments to prescription drug plans, and we are moving rapidly from 50 percent risk adjustment of payments to Medicare Advantage plans to 75 percent in 2006 and 100 percent in 2007,” said Dr. McClellan.  “We are concentrating Medicare’s payments to reward plans that help beneficiaries with complex medical problems prevent complications, through greater access to prescription drugs and care coordination services.”


The announcement also includes clarifications and answers to questions on the new prescription drug benefit generated by the earlier notice.  Additional information will be included in other guidance materials.


The announcement of the 2006 MA payment rates is available at