Risk differential between Medicare beneficiaries enrolled and not enrolled in an HMO.
Eggers, Paul W
Date of Pub
Medicare provides incentive reimbursements to health maintenance organizations (HMOs) which enroll Medicare beneficiaries
on a risk option and provide care at a lower cost than expected. The incentive reimbursements are tied to an actuarial calculation
of Medicare Adjusted Average Per Capita Cost (AAPCC). The AAPCC adjusts for a number of variables which affect Medicare reimbursements
and for which data are available: place of residence, age, sex, welfare status, and institutional status of beneficiaries.
These factors account for much of the expected difference in health care reimbursements. They do not, however, account for
differences in health status. Because of this, AAPCC calculations of expected costs may be too high if a selected group of
beneficiaries is healthier than average, or too low if the selected group has a poorer health status than average. This case
study examines the utilization behavior and reimbursement experience of a group of Medicare beneficiaries prior to their joining
an HMO (during an open enrollment period) under a risk-sharing option. Their use was compared with a comparable Medicare population
(the comparison group) to determine if their usage rates were greater, equal, or less than average. Results show that beneficiaries
who joined during open enrollment had a rate of hospital inpatient use over 50 percent below the comparison group and a reimbursement
rate for inpatient services 47 percent below the comparison group. These beneficiaries'
use of Part B services also appears to be lower than the comparison group. These results must be interpreted with care. The
information came from a single case study. Specific aspects of the open enrollment process, described in the paper, further
limit the general liability of the findings. Also, while some studies of the same subject support the results, many others
Reimbursement Mechanisms : Reimbursement, Incentive : Actuarial Analysis : Comparative Study : Health Maintenance Organizations/economics
: Hospitals/utilization : Medicare/economics : Risk : Washington