Tracking the Response to the Balanced Budget Act of 1997: Impact on Medicare Managed Care Enrollment in Rural Counties

The impact of the Balanced Budget Act of 1997 on recent changes in enrollment of Medicare beneficiaries into managed care plans is examined. The Balanced Budget Act of 1997 created a new payment structure for Medicare risk contracts, which, in 1998, resulted in all counties receiving either a minimum payment or a payment with the increase restricted at 2 percent growth over the 1997 rate. Using a baseline of December 1997 and enrollment data through June 1998, differences in early enrollment trends between urban and rural counties and between counties at various rates of payment are examined. As expected, continued enrollment increases in all counties is observed but with some concerns about slow enrollment growth--and announcements of plan terminations--in counties with payment rates in the mid-range, above the floor payment but subject to the 2 percent growth. In addition, evidence of considerable changes in the benefits offered by plans and the premiums charged to beneficiaries also was observed during the first nine months of 1998. The implications for growth of managed care options in rural areas are still unclear. The floor on payments may be helpful, but constraints in payment increases and delays in implementing a blended rate can be expected to create a negative impact on decisions to market managed care plans.