Selection bias between 2 Medicare capitated benefit programs.
OBJECTIVE
To assess enrollment selection bias between a standard Medicare health maintenance organization (HMO) and a higher-priced social health maintenance organization (SHMO) offering full prescription drug and unique home-based and community-based benefits and to assess how adverse selection was handled through SHMO finances.


METHODS
Kaiser Permanente Northwest offered the dual-choice option in the greater Portland region from 1985 to 2002. Analysis focused on 3 "choice points" when options were clear and highlighted for beneficiaries. Data collected included age and sex, utilization 1 year before and after the choice points, health status data at enrollment (1999-2002 only), mortality, and cost and revenues. Data were extracted from health plan databases.


METHODS
Hospital, pharmacy, and nursing facility utilization for 1 year before and after the choice points are compared for HMO and SHMO choosers. Health and functional status data are compared from 1999 to 2002. Utilization and mortality data are controlled by age and sex.


RESULTS
SHMO joiners evidenced adverse selection, while healthier members tended to stay in the HMO, with leaner benefits. Despite adverse selection, the health plan maintained margins in the SHMO, assisted by frailty-adjusted Medicare payments and member premiums.


CONCLUSIONS
This high-low option strategy sought to offer the "right care at the right time" and may be a model for managed care organizations to serve aging and disabled beneficiaries under Medicare's new special needs plan option.
Leutz
Walter
W
Schneider Institute for Health Policy, Heller School for Social Policy and Management, Brandeis University, Waltham, MA 02454, USA. leutz@brandeis.edu
Brody
Kathleen K
KK
Nonnenkamp
Lucy L
LL
Perrin
Nancy A
NA
D000368:Aged; D000369:Aged, 80 and over; D000704:Analysis of Variance; D002204:Capitation Fee; D003256:Community Participation; D004465:Economic Competition; D006801:Humans; D015273:Insurance Selection Bias; D016015:Logistic Models; D008329:Managed Care Programs / Q000191:economics*; D006278:Medicare / Q000191:economics*; D009922:Oregon; D014481:United States