PPOs likely will face serious challenges in their bid to increase benefits, improve quality and rein in cost increases under the new Medicare managed-care program, called Medicare Advantage, according to a new study by the Center for Studying Health System Change, Washington, D.C.
Policymakers believe PPOs are an attractive alternative to HMOs because they offer broader provider networks and have fewer restrictions on access to care. But because PPOs typically have less ability to win price discounts from providers or to coordinate care, they likely will have trouble holding down cost increases, the study found.
In addition, the fact that traditional Medicare will remain an option for all providers and beneficiaries also could undermine PPOs' leverage, according to the report.
"The very reasons PPOs are so popular for privately insured Americans -- more choice and less oversight of care than HMOs -- will make it difficult for PPOs over the long haul to slow cost growth and improve quality in Medicare, especially since traditional Medicare already provides a wide choice of providers and few restrictions on care," said HSC President Paul Ginsburg.