Medicare risk contracting: determinants of market entry

The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 made it more attractive for health maintenance organizations (HMOs) and other competitive medical plans to enter into risk contracts with Medicare. Since the start of the TEFRA program in April 1985, more than 160 HMOs have had risk contracts with Medicare under the program. An investigation of factors associated with TEFRA risk-market entry at the end of 1986 revealed that high adjusted average per capita cost payment levels, prior Medicare cost-contract experience, and prior Federal qualification were the most important factors distinguishing market entrants from nonentrants.