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Selection bias between 2 Medicare capitated benefit programs.

Walter Leutz¹, Kathleen K Brody, Lucy L Nonnenkamp

¹Schneider Institute for Health Policy, Heller School for Social Policy and Management, Brandeis University, Waltham, MA 02454, USA. leutz@brandeis.edu

The American Journal of Managed Care

|April 6, 2007

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See all related articles

Health maintenance organization (HMO) and social health maintenance organization (SHMO) enrollment showed adverse selection, with healthier individuals choosing the standard HMO. Despite this, the SHMO maintained financial stability through adjusted payments and premiums.

Area of Science:

Health Services Research
Managed Care
Medicare Policy

Background:

Dual-choice Medicare plans, including standard Health Maintenance Organizations (HMOs) and Social Health Maintenance Organizations (SHMOs) with enhanced benefits, present enrollment complexities.
Understanding enrollment selection bias and adverse selection is crucial for financial sustainability and equitable service delivery.

Purpose of the Study:

To evaluate enrollment selection bias between standard HMOs and SHMOs offering expanded benefits.
To analyze how SHMO finances managed adverse selection in a dual-choice Medicare program.

Main Methods:

Analysis of enrollment data, utilization (hospital, pharmacy, nursing facility), health status, and mortality from 1985-2002 in the Portland region.
Comparison of utilization and health status before and after enrollment choice points, controlling for age and sex.

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Main Results:

SHMO enrollees exhibited adverse selection, indicating a tendency for sicker individuals to choose the plan with richer benefits.
Healthier members disproportionately remained in the standard HMO.
The SHMO achieved financial viability despite adverse selection, supported by frailty-adjusted Medicare payments and member premiums.

Conclusions:

The dual-option strategy aimed to provide appropriate care, demonstrating a potential model for managed care organizations.
This approach may inform the development of Medicare Special Needs Plans for aging and disabled populations.