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CBO: Medicare PPOs To Face Tough Competition

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NU Online News Service, March 25, 2004, 3:07 p.m. EST – Congressional Budget Office analysts doubt preferred provider organizations will have much luck attracting Medicare beneficiaries.[@@]

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 includes provisions that will encourage PPOs to join the new Medicare Advantage managed care program.

The Bush administration is expecting private insurers to set up many Medicare PPOs that will have costs substantially lower than the cost of providing traditional fee-for-service Medicare coverage in the same markets, CBO Director Douglas Holz-Eakin testified Wednesday at a House Ways and Means Committee hearing.

The Bush administration is predicting that as many as 32% of Medicare beneficiaries could join Medicare PPO plans by 2013.

PPO pilot programs have been successful, but CBO analysts believe private PPOs chose to set up pilot program PPOs in markets where their costs were especially competitive, Holz-Eakin said.

“The fact that those plans were offered almost exclusively in areas already served by Medicare [managed care] plans that have provider networks also suggested to CBO that their experience might not apply in areas where such plans and provider networks were less prevalent,” Holz-Eakin said.