The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 allowed competitive medical plans (CMPs) to participate in the Medicare program on a risk basis. Under the terms of Medicare risk contracts, CMPs were required to deliver all medically necessary Medicare-covered services in return for a

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Under the Medicare risk contracts established by TEFRA, competitive medical plans (CMPs) were required to provide all medically necessary Medicare-covered services in exchange for a fixed monthly capitation payment from CMS. This payment was intended to cover the cost of providing care to Medicare beneficiaries enrolled in the plan, regardless of the amount of care they required. The purpose of this approach was to encourage greater efficiency and cost savings within the Medicare program by shifting financial risk from the government to the private sector.