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As you know, July 1 was the deadline for managed care plans to apply to participate in Medicare+Choice for the year 2000. Today, 6.2 million of Medicare's 39 million beneficiaries are enrolled in managed care plans. Next year, a small but significant number of health plans have decided to limit their participation in Medicare. Forty-one plans have withdrawn from the program altogether, and 58 have reduced their service areas. These changes will affect about 327,000 beneficiaries, or about 5 percent of all Medicare managed care enrollees. An even smaller number, 79,000 (1.3 percent) will return to the traditional Medicare program because the only managed care plan available in their area has withdrawn.

The Medicare managed care market reflects the trends in the larger health insurance market; and although some plans are leaving Medicare, other new plans are entering the program. We have approved 35 new plans to enter the program or expand their service areas, and are approving four new contracts today. And thousands of beneficiaries are enrolling in managed care plans every month about 50,000, on average, since January. Since the beginning of the year, enrollment in Medicare+Choice plans had increased by nearly 200,000. There's no question that our managed care program is strong.

At the same time, we are disappointed that some managed care plans participating in Medicare are making decisions that will limit the choices available to Medicare beneficiaries. We believe that all the evidence indicates our Medicare+Choice program is strong so we are concerned that some plans are using a routine business decision as an opportunity to scare beneficiaries about the security of their Medicare benefits. These scare tactics are unfounded. Medicare is still there for each and every beneficiary, regardless of where they live.

We have taken strong steps to ensure that no matter what decisions plans make about their participation in the program, Medicare beneficiaries affected by these changes have options. First, we required insurers to provide beneficiaries who are being forced to change their health care coverage, guaranteed access to certain Medigap plans now offered, regardless of their prior use of health care services or their current medical conditions. Second, in order to make the transition easier for these beneficiaries and to help them make the right decisions about their health care coverage, we are providing them with clear information on their new health care options and requiring plans leaving the program to do the same.

But we also want to make sure that Medicare is a fair business partner, and so we have worked with health plans within the guidelines of the Balanced Budget Act to eliminate some of the administrative burden associated with participating in Medicare+Choice.

Over the past year, health plans have argued that there was a heavy administrative burden associated with participating in Medicare+Choice, and we moved quickly to address that. We worked with Congress to extend the deadline for renewing their contracts with Medicare from May to July in order to ensure that they are able to use more current experiences when designing their benefit packages and setting their cost sharing levels. We also used our authority to provide greater flexibility to plans in a number of areas, eliminating redundant administrative requirements in order to make it easier for providers to participate in the program and for plans to provide high quality care.

Some managed care companies and their associations say that we don't pay them enough, and so they're being forced to leave the program. But we believe and independent experts, including the GAO, confirm that Medicare payment rates are more than generous enough for plans to provide Medicare's basic benefits. And this year, every managed care plan that wants to serve Medicare beneficiaries will be paid more in 2000 than in 1999 about 5 percent on average. In some counties, payment rates will increase as much as 12 percent.

A study done by the General Accounting Office in April indicates that plans are making their decisions to serve Medicare beneficiaries on the basis of a number of factors in the overall market not just payment rates in the Medicare+Choice program. For example, some managed care companies such as Kaiser Permanente, left both the Medicare and the private insurance market in certain parts of the country.

The recent decisions by these health plans simply underscores why the country needs the President's plan to strengthen and modernize both the managed care and traditional fee-for-service parts of the Medicare program. The President's Medicare reform proposal includes several policies to preserve beneficiary options, and strengthen beneficiary protections when plans withdraw from Medicare, including:

• Giving beneficiaries affected by plan terminations and service area reductions access to all Medigap plans, including those with prescription drugs when the return to original fee-for-service Medicare;
  
  
• Expanding the 6-month open enrollment period for Medigap to new disabled and ESRD beneficiaries;
  
  
• Mandating a special one-time additional Medigap open enrollment period for beneficiaries who were previously enrolled in Medicare+Choice plans and were affected by a plan termination last fall; and
  
  
• Increasing civil monetary penalties of up to $50,000 per violation plus $5,000 per day per violation of the Medigap open enrollment requirements.
  

The President's plan would also modernize the way that Medicare pays managed care plans. Unlike today's system of flat payments based on a formula, all managed care plans would be paid their full price through a combination of government and beneficiary payments. The split between how much the beneficiary pays and how much the government pays would depend on the plan price. The higher the price, the more beneficiaries pay since the government contribution rate declines relative to the price of the plan. This approach is similar to that of the Federal Employees' Health Benefits Program.

Second, the plan assures that the government pays for the full geographic costs in high-cost areas more than what would be paid under the BBA. And, perhaps most importantly, managed care plans would be explicitly paid for providing a prescription drug benefit under the President's plan. They would no longer be dependent on what the rate is in an area to determine whether or not they can afford to offer a decent drug benefit to their enrollees. These changes would strengthen and stabilize the Medicare managed care market.

And finally, the President's proposal dedicates 15 percent of the surplus over $370 billion dollars over 10 years to extend the life of the trust fund and responsibly finance the prescription drug benefit. This will help keep Medicare on a sound foundation as the baby boom generation begins to retire.

Seniors and Americans with disabilities deserve a strong Medicare program and we are committed to making sure they have health care whether they choose managed care or traditional fee-for-service. The strong action we have taken to date and our proposals for the future of this critical program will ensure that we are able to keep our promise of providing high quality health care services to all 39 million Medicare beneficiaries.