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Life Health > Health Insurance > Medicare Planning

Medicare plan market tilts toward HMOs

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An effort to make Medicare Advantage plan options more like commercial health insurance market plan options may be losing steam.

Local and regional preferred provider organization (PPO) plans will account for just 26 percent of the 2,174 separate Medicare Advantage program plan options in 2016, down from 27 percent this year, according to analysts at Mark Farrah Associates.

Health maintenance organization (HMO) plans will account for 67 percent of the plans, up from 65 percent.

The Mark Farrah analysts came up with those figures by going through the 2016 Medicare plan data files posted earlier this week by the Centers for Medicare & Medicaid Services (CMS). CMS treats identical plans from the same insurer that operate in different counties as separate plans. The Mark Farrah analysts use plan identification codes to treat a plan that operates in multiple counties in a state as a single plan.

HMO plans tend to take a more active role in managing enrollees’ use of care, and in steering them toward using in-network providers, than PPO plans do.

The Medicare Advantage program gives insurers a chance to offer private plans that serve as alternatives to traditional Medicare coverage. Officials in the administration of President George W. Bush created the Medicare Advantage program in 2003, in an effort to persuade private insurers to return to the Medicare market after reimbursement cuts chased insurers away from an earlier private Medicare plan program, the Medicare+Choice program.

See also: Aetna, PacifiCare Announce Medicare HMO Cuts

Medicare+Choice was open only to HMOs. The Bush administration made a point of encouraging PPOs to join the Medicare Advantage program, to give Medicare enrollees a chance to sign up for the kinds of PPO plans many employers were offering.

See also: Industry Welcomes Bush Medicare Proposal

HMO plans came on strong in the health insurance market for working-age people in the 1980s and early 1990s, then began to lose ground to PPO plans in the late 1990s, after some patients complained that HMOs were putting harmful restrictions on their ability to get necessary care. In 2014, HMOs covered about 12 percent of the employees in employer-sponsored health plans, according to United Benefit Advisors. 

PPO plans have dominated the commercial health insurance market in recent years, but pressure from the Patient Protection and Affordable Care Act (PPACA) for insurers to use tighter networks to hold down the cost of care has been helping HMOs make a comeback in the under-65 market.


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