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Medicare Advantage Plans and Enrollee Selection

By January 22, 2014Commentary

The Medicare risk contracting business has always been dogged by accusations that it cherry-picks enrollees.  In its earliest form, the claim was that the plans sought the healthiest beneficiaries as enrollees.  Now that CMS has begun risk adjusting payments for the latest iteration of Medicare risk contracting, Medicare Advantage, the plans are charged with seeking less healthy enrollees, for whom they get higher payments and with doing extensive assessments to multiply the diagnoses which lead to the increased reimbursement.  An article in the Journal of Health Economics examines the reality of these practices.    (JHE Article)   The authors used medical claims from two Medicare Advantage plans, one with a contracted provider design and one in an integrated delivery system/health plan model.  The authors found that over 48 combinations of medical conditions, the two types of plans have highly correlated margins, suggesting that the model of plan makes little difference.  For both plans, margins varied very widely across the 48 combinations.  And they find that for conditions which generally are treated by primary care physicians and are amenable to care management, the average cost of treatment is lower for Medicare Advantage than in fee-for-service Medicare, but the same is not true for conditions which are more commonly treated by specialists or are acute conditions for which care management often offers little benefit.  The authors find no evidence to support the hypothesis that Medicare Advantage plans recruit patients with the higher-margin combinations of conditions.

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