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 enrollme nt of Medicare beneficiaries into managed care plans is examined. The Balan ced Budget Act of 1997 created a ne ru payment structure for Medicare risk contracts, which, in 1998, resulted in all counties receiving either a mini mum payment ol a payment with the increase restricted at 2 percent growth o ver the 1997 rate. Using a baseline of December 1997 and enrollment data th rough lune 1998, differences in early enrollment trends between urban and r ural counties and between counties at various rates of payment are examined . As expected, continued enrollment increases in all counties is observed b ut with sol ne concerns about slow enrollment growth-and announcements of p lan terminations-in counties with payment rates in the mid-range, above the floor payment but subject to the 2 percent growth. In addition, evidence o f considerable changes in the benefits offered by plans and the premiums ch arged to beneficiaries also was observed during the first nine months of 19 98. The implications for growth of managed care options in rural areas are still unclear. The floor on payments may be helpful, but constraints in pay ment increases and delays in implementing a blended rate can be expected to create a negative impact on decisions to market managed care plans.