INTRODUCTION As PPO become the dominant standard of managed health care in the private sector.

INTRODUCTION

As PPO become the dominant standard of managed health care in the private sector, policymakers have increasingly viewed PPO as an attractive option for Medicare. As part of a larger effort to modernize Medicare by the agency of adopting strategies widely used in the private sector, the 2003 Medicare Prescription physic Improvement, and Modernization Act (MMA) introduces regional PPO as a key-note component of the next generation of Medicare managed care: Medicare Advantage. Interest in PPO for Medicare is not an entirely recently made known concept. One goal of the Balanced stock Act (BBA) of 1997 in establishing the Medicare+Choice (M+C) program was to expand the options and penetration of Medicare managed care, yet thus far these policy goals largely have not been realized. An expanded PPO program, including one as well as the other local PPOs and the MMA's regional PPO may be the same step in accomplishing these goals of expanded choice and enrollment in Medicare Advantage.

about policymakers favor PPOs because they furnish a model of managed care that is closer to traditional fee-for-service (FFS) than the health maintenance organization (HMO) options previously available to beneficiaries. PPO are created by the agency of contractual arrangements between a financial insurer and a network of health care providers. Unlike the traditional HMO type PPOs offer enrollees coverage resembling indemnity insurance, using financial incentives rather than strict provider access restrictions, to channel care to network providers. Like FF in subordination to PPOs individuals generally have access to a wide range of providers without gatekeepers and prior approvals, including the option to use out-of-network providers. PPO may appeal to more Medicare beneficiaries enlisted in FFS who are adverse to managed care restrictions onward provider choice.

unless because PPOs, like HMOs, have a provider network, PPO have greater potential for preciousness control than FFS. PPOs give enrollee incentives in consequence of lower in-network cost sharing to use network providers, who are paid discounted rates and are chosen in part for their efficiency. Established PP0 may also use other managed care techniques similar as physician profiling, financial and non-financial incentives, and quality monitoring programs to maintain efficient and high quality care.

Despite the nationwide application of the PPO protoplast for Medicare managed care in a less degree than the MMA legislation, to date, the Medicare Program and its beneficiaries have had limited experience with the PPO mould (1) In part to understand to what extent PPOs might operate under the Medicare Program, CM launched the Medicare PPO demonstration, which began providing services to Medicare beneficiaries in succession January 1, 2003. Demonstration PPO are local PPO that may be showed in areas as small as a single shire The MMA further expands the PPO option subordinate to Medicare with regional PPOs, that must be proposeed with uniform premiums and benefits everywhere at least 1 of 26 statewide or multistate areas. Regional PPO may enlarge Medicare managed care options in markets where scarcely any plans currently operate. But despite these policy goals for Medicare PPOs--to give an attractive managed care consequence in expanded markets--there is uncertainty by what mode the PPO model, dominant in the commercial insurance sector, will be adapted in subordination to Medicare.

In this article, we provide insight forward how Medicare PPOs operate at examining their performance so far beneath the local PPO demonstration. We expect at:

* Market Entry--Where are Medicare PPO commonly offered?

* Beneficiary Benefits and Costs--What are Medicare PPO premiums, benefits, and costliness sharing?

* Enrollment--What are Medicare PPO enrollment to date? What are the characteristics of Medicare beneficiaries who enlist in PPOs?

Data and Methods

This article was generated from several sources of data. The Medicare Health Plan Management method (HPMS) maintained by CMS amasss service area, premium, benefit, splendor sharing, physician network size, and other information for most numerous Medicare health plans (2). The HPM contains predicted beneficiary out-of-pocket take away froms for each plan that have been simulated on CMS and its contractor Fu Associates (2004) We analyze data from the April 2004 HPM which thinks March 2004 health plan benefit and premium changes resulting from increased payments to plans mandated by dint of the MMA. (3)

Medicare's enrollment database records monthly health plan enrollment status and various demographic characteristics for all Medicare beneficiaries. We profile a point-in-time March 28 2004 enrollment database sample of all Medicare beneficiaries residing in the combined PPO demonstration service areas. As contrasted with an at any time enrolled sample, our currently enlisted sample excludes deaths and disenrollees. We obtained and analyzed risk scores measuring beneficiary health status that were generated using CMS' hierarchical condition categories (CMS-HCC) risk-adjustment design (Pope et al., 2004a).

in every part this article, we use the Medicare-defined class of coordinated care plans (CCPs) as a comparison for PPO CCP almost all of which are HMO are plans that have a network of providers, and may be notion of as managed care plans. The terminus competing CCPs applies to CCP whose service area overlaps the service area of at least common PPO plan. We compare 232 competing CCP to the 61 PPO demonstration plans. (4)