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Published on: January 8, 2020
Exploring benefits of risk-based contracting under Medicare
Summary
Medicare authorized alternative health plans to receive prospective payments. Demonstrations showed these plans offer attractive benefits and adapt market strategies based on competition, though biased selection and payment levels require further study.
Area of Science:
- Health economics
- Medicare policy
- Healthcare management
Background:
- The Balanced Budget Act of 1982 (TEFRA) enabled Medicare to contract with alternative health plans on a prospective payment basis.
- Initial implementation involved authorized experiments due to limited experience with risk-based contracting.
Purpose of the Study:
- To evaluate the performance and market strategies of alternative health plans operating under Medicare risk-based contracts.
- To identify key factors influencing the expansion of these plans within the Medicare market.
Main Methods:
- Analysis of demonstration projects authorized by Congress and the Department of Health and Human Services (HHS).
- Assessment of benefit packages offered by alternative plans compared to standard Medicare benefits.
Main Results:
- Alternative health plans successfully provided more attractive benefit packages than traditional Medicare.
- Plan expansion strategies were significantly influenced by the prevailing competitive landscape.
Conclusions:
- Alternative health plans demonstrate potential for enhancing Medicare benefits and market penetration.
- Further research is needed to address biased selection and determine optimal Medicare patient payment levels.
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