Medicare beneficiaries were given expanded access to a variety of health plan choices in addition to traditional fee-for-service Medicare under the Balanced Budget Act of 1997. In addition to original fee-for-service Medicare, beneficiaries can select from (a) coordinated care plans which include health maintenance organizations (HMOs), provider sponsored organizations (PSOs), preferred provider organizations (PPOs), and plans of religious fraternal benefit (RFP) societies; (b) medical savings accounts; and (c) private fee-for-service plans.
The Balanced Budget Act also required the development of a new payment methodology for the various managed care plans a method of risk adjustment of payment rates that accounts for variations in per capita costs based on health status. Implementation of the risk-adjusted payment methodology began January 1, 2000.
