title: New risk-adjustment system was associated with reduced favorable selection in medicare advantage.
abstract: Health plans participating in the Medicare managed care program, called Medicare Advantage since 2003, have historically attracted healthier enrollees than has the traditional fee-for-service program. Medicare Advantage plans have gained financially from this favorable risk selection since their payments have traditionally been adjusted only minimally for clinical characteristics of enrollees, causing overpayment for healthier enrollees and underpayment for sicker ones. As a result, a new risk-adjustment system was phased in from 2004 to 2007, and a lock-in provision instituted to limit midyear disenrollment by enrollees experiencing health declines whose exodus could benefit plans financially. To determine whether these reforms were associated with intended reductions in risk selection, we compared differences in self-reported health care use and health between Medicare Advantage and traditional Medicare beneficiaries before versus after these reforms were implemented. We similarly compared differences between those who switched into or out of Medicare Advantage and nonswitchers. Most differences in 2001-03 were substantially narrowed by 2006-07, suggesting reduced selection. Similar risk-adjustment methods may help reduce incentives for plans competing in health insurance exchanges and accountable care organizations to select patients with favorable clinical risks.
authors.affiliation: Department of Health Care Policy at Harvard Medical School, Boston, Massachusetts, USA. mcwilliams@hcp.med.harvard.edu
authors.forename: J Michael
authors.initials: JM
authors.lastname: McWilliams
authors.forename: John
authors.initials: J
authors.lastname: Hsu
authors.forename: Joseph P
authors.initials: JP
authors.lastname: Newhouse
mesh_terms: D000368:Aged; D000369:Aged, 80 and over; D016208:Databases, Factual; D005260:Female; D017048:Health Care Costs; D019538:Health Care Surveys; D006801:Humans; D008297:Male; D008329:Managed Care Programs / Q000191:economics* / Q000706:statistics & numerical data; D006278:Medicare / Q000191:economics / Q000706:statistics & numerical data; D020398:Medicare Part C / Q000191:economics* / Q000706:statistics & numerical data; D017063:Outcome Assessment, Health Care / Q000191:economics*; D058991:Patient Protection and Affordable Care Act / Q000191:economics; D020379:Risk Adjustment / Q000191:economics*; D014481:United States