How Does Risk Selection Respond to Risk Adjustment? 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

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...

Steps to reduce favorable risk selection in medicare advantage largely succeeded, boding well for health insurance exchanges.

Within Medicare, the Medicare Advantage program has historically attracted better risks-healthier, lower-cost patients-than has traditional Medicare. The disproportionate enrollment of lower-cost patients and avoidance of higher-cost ones during the 1990s-known as favorable selection-resulted in Medicare's spending more per beneficiary who enrolled in Medicare Advantage than if the enrollee had...

Upcoding or Selection? Evidence from Medicare on Squishy Risk Adjustment⇤

Risk adjustment is commonly used in health insurance markets to deal with problems of adverse selection and cream skimming by compensating health plans for insuring consumers whose diagnoses imply high expected costs. However, in all real world risk adjustment systems, insurers themselves report the diagnoses that determine enrollee risk scores and ultimately insurer payments. If risk scores ar...

Will risk-adjustment decrease health care costs? 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. But because the variance of medical costs increases with the predicted mean, incentivizing enrollment of individuals with higher scores can increase the scope for enrolling “over-priced” individuals with costs significantly below the formula’s pre...