In the 1970s, less than a decade after the beginning of fee for service (FFS) Medicare, Medicare beneficiaries gained the option to receive their Medicare benefits through managed, capitated health plans, mainly Health Maintenance Organizations, as an alternative to FFS Original Medicare, according to Wikipedia.
At first, this choice was only available under random temporary Medicare demonstration programs. The Balanced Budget Act (BBA) of 1997 formalized these into Medicare Part C and introduced the term Medicare+Choice as a pseudo-brand for this option.
Initially, fewer sponsors participated than expected. This lead to less competition than expected by the Democrats who in 1995, conceived what became Part C in 1997.
In a 2003 law, the Part C capitated-fee benchmark/framework/competitive-bidding process was changed in 2005 to increase sponsor participation. It also made the costs per person of the program variable, whereas during the demonstration projects and under the BBA, the cost was 95% of the FFS cost per person.
However, on average, counting all the various types of Part C health plans, over the period 1997-2017, the cost per person for a person on Part C has been lower than the cost per person not on Part C. However, in some years, it has been as much as 6% negative and in other years, as much as 6% positive.
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