Prior to this year, payments to Medicare managed care organizations (MCOs) were based on the demographic characteristics of enrollees. The Balanced Budget Act (BBA)of 1997 changed payments and required that MCOs' payments be adjusted for the health status of enrollees. Using inpatient hospital encounters, payments to Medicare managed care organizations are now based on the Principal Inpatient Diagnostic Cost Group (PIP-DCG) model. In 2000, payments to MCOs are based on 90% demographically-adjusted, 10% risk adjusted payments. This analysis examines the impacts of risk adjustment on these organizations. Two years of inpatient encounters were run through the PIP-DCG model. Average risk scores and payment impacts were determined for both time periods. The correlation of MCO level risk scores is +0.73, which suggests stability over time in the relative health of a plan's enrollees. The average payment impacts for both years ranged from about -2.0% to about +0.6%. Other analyses show similarities in payment impacts among various types of plans. In conclusion, the successful implementation of risk adjustment is the most major change in Medicare managed care over the past 15 years. Because the average impact is less than 1%, payment impacts during 2000 will be minimal. Risk adjustment, including implementation of comprehensive risk adjustment in 2004, remains critical for ensuring accurate Medicare managed care payments.
Learning Objectives: Participants will learn about Medicare's new payment approach for managed care organizations and understand risk adjusted payment impacts on Medicare+Choice organizations
Keywords: Financing, Medicare
Presenting author's disclosure statement:
Organization/institution whose products or services will be discussed: None
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.