A primary goal of many Medicare reform proposals is to move program beneficiaries into managed care plans operated by private insurance companies. Advocates contend that managed care based reforms? This article summarizes the claims that are made for and against incorporating managed care into Medicare, and reviews evidence from the program’s experience with HMOs on financial savings, benefit coverage, and quality of care. This evidence raises concerns regarding the ability of HMOs to provide adequate care for chronically ill Medicare patients. Moreover, there is considerable uncertainty about the future performance of managed care plans. I therefore conclude that policy makers should move cautiously in embracing managed care and that Medicare should not adopt financial incentives, such as vouchers, that are intended to push beneficiaries into HMOs. However, Medicare beneficiary enrollment in managed care plans is likely to increase substantially in coming years regardless of public policy. It is therefore critical for Medicare to pursue policies that protect the quality of care for elderly and disabled patients in managed care plans; curtail excessive payments to HMOs that result from favorable selection of healthier enrollees; and preserve the current fee-for-service Medicare program. plans, especially health maintenance organizations (HMOs), can save substantial money for the federal government, while also improving the quality of medical care and scope of covered benefits for Medicare enrollees. Should Medicare follow the private sector by adopting managed care–

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