Rate adjusters for Medicare under capitation

This article addresses three issues related to capitation. First, the average adjusted per capita cost (AAPCC) fluctuates with the mix of risks in the fee-for-service system. More sensitive adjusters in the AAPCC are needed. Second, the AAPCC, as now estimated, exhibits large geographic variance; so-called shrinkage estimators may help. Third, the AAPCC requires new adjusters to yield more homogeneous risk classes. Otherwise, the portion of the Medicare population under capitation may experience access problems at alternative delivery systems. Until such adjusters are developed, it seems better to rely upon a blend of capitation and fee-for-service than the present AAPCC.