New Risk-Adjustment System Was Associated With Reduced Favorable Selection in Medicare Advantage

摘要

Health plans participating in the Medicare managed care program, now called Medicare Advantage, have historically attracted healthier enrollees than the traditional fee-for-service program. Medicare Advantage plans have gained financially from this favorable risk selection because until recently Medicare payments to plans were adjusted only minimally for the clinical characteristics of enrollees, such that payments systematically exceeded costs for healthier enrollees and were systematically lower than costs for sicker enrollees. To address favorable selection in Medicare Advantage, a new risk-adjustment system adjusting plan payments for clinical diagnoses was phased in from 2004 to 2007. Also, a lock-in provision was instituted in 2006 and strengthened in 2007 to limit midyear disenrollment by Medicare Advantage enrollees, particularly those experiencing health declines whose disenrollment could benefit plans financially. To determine if these reforms were associated with intended reductions in favorable selection in Medicare Advantage, we compared self-reported utilization and health for Medicare Advantage vs. traditional Medicare beneficiaries and for those who switched into or out of Medicare Advantage vs. non-switchers both before and after these reforms were implemented. In 2001-2003, differences in utilization and health between these groups suggested favorable selection in Medicare Advantage. By 2006-2007, however, most differences were substantially narrowed, indicating reduced selection. For example, Medicare Advantage enrollees reported 17.7% lower utilization than traditional Medicare enrollees in 2001-2003 but 8.1% lower in 2006-2007. Similar risk-adjustment methods may help may help mitigate incentives for Accountable Care Organizations participating in the Medicare Shared Savings Program and plans competing in health insurance exchanges to select patients with favorable clinical risks.