Favorable Selection, Risk Adjustment, and the Medicare Advantage Program

How Does Risk Selection Respond to Risk Adjustment? New Evidence from the Medicare Advantage Program.

To combat adverse selection, governments increasingly base payments to health plans and providers on enrollees’ scores from risk-adjustment formulae. In 2004, Medicare began to risk-adjust capitation payments to private Medicare Advantage (MA) plans to reduce selection-driven overpayments. But because the variance of medical costs increases with the predicted mean, incentivizing enrollment of i...

Does Risk Adjustment Reduce Selection in the Private Health Insurance Market? New Evidence from the Medicare Advantage Program

Does Risk Adjustment Reduce Selection in the Private Health Insurance Market? New Evidence from the Medicare Advantage Program

Views expressed here are those of the authors and not of the institutions with which they are affiliated. Abstract Roughly 25 percent of Medicare beneficiaries are enrolled in a private Medicare Advantage plan, a fraction that has been growing steadily in recent years. Because these plans are " at risk " for the cost of their enrollees' care, they have an incentive to attract and retain differe...

Favorable Selection in the Medicare+Choice Program: New Evidence

Historically, studying the Medicare managed care favorable-selection issue has been difficult because direct data on managed care enrollees have been unavailable. In this study, we analyzed the first year of Balanced Budget Act (BBA)-mandated inpatient encounter data. Based on this comparison of actual managed care and fee-for-service (FFS) beneficiaries, it appears that there are significant d...

Mispricing in the medicare advantage risk adjustment model.

The Centers for Medicare and Medicaid Services (CMS) implemented hierarchical condition category (HCC) models in 2004 to adjust payments to Medicare Advantage (MA) plans to reflect enrollees' expected health care costs. We use Verisk Health's diagnostic cost group (DxCG) Medicare models, refined "descendants" of the same HCC framework with 189 comprehensive clinical categories available to CMS ...