1. Medicare Managed Care Risk Selection and Payment Issues Medicare+Choice

2. Plan for Today Review homework Tie up discussion of risk-selection Fruitbasket ! Medicare+Choice Checkpoint #5 Team meetings (Medicare)

3. Chart Comparing Health Status

4. 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”

5. 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

6. 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

7. 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)

8. Checkpoint #5 Capstone 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” ??

9. 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

10. 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

11. Why Medicare+Choice? Competition on Cost, Benefits & Quality Competition Efficiency Save Medicare $

12. 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)

13. Information sources 1. Prefer unbiased sources 2. Get most of their information from marketing materials Medicare Beneficiaries’ Information Sources What Do Beneficiaries Care About? Physician-related factors choice communication technical quality

14. Potential Problems With M+C Risk selection problems Favorable Selection: MSAs, PSOs, HMOs Adverse Selection: Traditional Medicare, FFS Educating/Informing beneficiaries on plan choices 1-800-MEDICARE Medicare Compare (www.medicare.gov) HEDIS CAHPS Beneficiaries’ ability to use quality indicators