Medicare Managed Care

Risk Selection and Payment Issues

Medicare+Choice

Plan for Today

• Review homework

• Tie up discussion of risk-selection

• Fruitbasket ! Medicare+Choice

• Checkpoint #5

• Team meetings (Medicare)

Chart Comparing Health Status

Risk Selection

Insurer’s (or capitated provider’s) mix of high-cost and low-cost enrollees does not match the average– More low-cost enrollees: “Favorable selection”– More high-cost enrollees: “Adverse selection”

Risk-Adjustment

• Adjusting capitation payments to an insurer (or provider) to reflect actual (not average) mix of high-cost and low-cost enrollees

• Equivalent to paying different rates for high-cost and low-cost enrollees– Similar to Medicare’s inpatient Diagnosis-Related

Groups (DRGs)

• The challenge is identifying who is in which group

Medicare Risk-Adjustment

• Instituted by Balanced Budget Act of 1997

• Based initially on inpatient diagnoses

• Goals– Stop overpaying plans that serve healthier mix

of enrollees (save $2 billion per year)– Encourage plans to serve sicker enrollees– Get plans to compete on price and quality, not

by skimming off good risks

Checkpoints

• Checkpoint #5 – due 4/18– Will be returned by end of week

• Checkpoint #4 – revision due 4/25

• Checkpoint #5 – revision due by noon, 5/3 (middle of exam week)

Checkpoint #5Capstone Exercise

• How/why different types of consumers choose different types of plans

• Mix of risks enters into averages that determine– premiums– utilization rates (-->plan costs)

– capitation

• But what if patients are not “average” ??

Medicare+Choice

• What is Medicare+Choice? • Why Medicare+Choice?

• Plan alternatives

•Information Sources & Important Aspects of Plans

• Who’s likely to choose which plans?

• Potential problems with M+C

What is Medicare+Choice?

• Created by the Balanced Budget Act of 1997• effective January 1999

• Expanded beneficiaries’ plan choices• provide beneficiaries with more alternatives to traditional Medicare

Why Medicare+Choice?

• Competition on Cost, Benefits & Quality

• Competition Efficiency Save Medicare $

Medicare Beneficiaries’ Alternatives

• Prior to Medicare+Choice:Medigap, HMO or POS

• New alternatives under M+C:

1. Preferred Provider Organizations (PPO)

2. Provider Sponsored Organizations (PSO)

3. Private Fee-for-Service (FFS)

4. Medical Savings Accounts (MSA)

• Information sources1. Prefer unbiased sources2. Get most of their information from marketing

materials

Medicare Beneficiaries’ Information Sources

What Do Beneficiaries Care About?

• Physician-related factorschoicecommunication technical quality

Potential Problems With M+C

• Risk selection problemsFavorable Selection: MSAs, PSOs, HMOsAdverse Selection: Traditional Medicare, FFS

• Educating/Informing beneficiaries on plan choices1-800-MEDICAREMedicare Compare (www.medicare.gov)

HEDIS CAHPS

• Beneficiaries’ ability to use quality indicators