Skip to Main Content

Medicare Law: Medicare Cost Plans


Medicare Cost Plans are authorized by Section 1876 of the Social Security Act. Unlike Medicare Advantage Plans, beneficiaries keep their Medicare Parts A & B, and traditional Medicare kicks in when the beneficiary goes outside the network. This means that the plans do not have financial risk, as Medicare Advantage plans do. Because of this, Congress has been phasing out  Medicare Cost Plans. No new ones are being creating.

Medicare cost contracts generally are limited to existing contractors, who had a cost contract in place before the date of enactment of the Balanced Budget Act of 1997. The only exception to this rule is for entities that currently have an HCPP contract under §1833(a)(1)(A) of the Social Security Act (the Act), and wish to convert to a §1876 cost contract. In order for an HCPP to contract CMS under a cost contract, the entity must meet certain qualifying conditions as outlined in 42 CFR 417, Subpart J. One of these qualifying conditions requires the entity to demonstrate an ability to enroll members and to sustain a membership that ensures effective, efficient and economical care to the plan’s Medicare enrollees. Meeting these requirements is also a condition for continuing to contract with CMS as an existing cost contractor.