Background: Selection bias, the assumption that healthier individuals are more likely to choose managed care plans because they do not have the longstanding ties to providers that sicker individuals have, is so widely accepted that actuaries routinely reduce capitation rates paid to managed care organizations (MCOs) participating in voluntary managed care programs. This assumption is based on the MCO model that typically offers a limited number of providers to a given population of patients.
Methods: Utilization data from two populations of Georgia Medicaid recipients was analyzed. One which chose to join the primary care case management program and one which did not choose to join.
Results: Utilization rates for the two populations varied dramatically with those that chose to join the PCCM using over 24 times the level of physician services than those that did not choose to join (279.51 vs. 11.58 visits/1000).
Conclusions: While selection bias may have validity for MCOs offering a limited choice of physicians, MCOs that offer extensive choices of providers may find that sicker rather than healthier patients tend to voluntarily choose to join their plan. Start-up MCOs and those providing services for areas or populations that are medically underserved often have no choice but to enroll all or the most willing providers into their network and suffer adversely rather than favorably by selection bias. Capitation rate setting methodologies should take into account the participating MCOs' provider networks rather simply reducing capitation rates based on the traditional assumption of selection bias.
Learning Objectives: N/A
Keywords: Managed Care, Contracting
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.