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Medicare risk contracting: identifying factors associated with market exit
1Gerontology Center, University of Massachusetts, Boston 02125-3393.
Abstract:
Over the past few years, a number of HMOs have chosen to discontinue their Medicare risk contracts. Using logistic regression, this study sought to identify factors associated with Medicare risk contract market exit in 1988. Low AAPCC rates were found to systematically affect the market exit of only Medicare risk contractors that were regional components of a central HMO organization. The Medicare risk market exit of other HMOs was found to be principally related to two attributes suggestive of possible unfavorable risk selection: the dropping of a previously offered prescription drug benefit and higher proportions of categorically disabled Medicare enrollees.
Insights
Many Health Maintenance Organizations (HMOs) exited Medicare risk contracts. Factors like low Adjusted Community Per Capita Cost (AAPCC) rates, dropping prescription drug benefits, and high numbers of disabled enrollees influenced this market exit.
Area of Science:
- Health Services Research
- Healthcare Management
- Health Economics
Background:
- A number of Health Maintenance Organizations (HMOs) have recently discontinued their Medicare risk contracts.
- Understanding the reasons behind this market exit is crucial for policy and planning.
Purpose of the Study:
- To identify factors associated with Medicare risk contract market exit among HMOs in 1988.
- To analyze the influence of specific organizational and enrollment attributes on contract termination.
Main Methods:
- Logistic regression analysis was employed to examine the factors influencing market exit.
- Data from 1988 was utilized to assess the relationships between variables and contract discontinuation.
Main Results:
- Low Adjusted Community Per Capita Cost (AAPCC) rates were associated with market exit for regional HMOs within larger organizations.
- For other HMOs, market exit was linked to the discontinuation of prescription drug benefits and a higher proportion of categorically disabled Medicare enrollees, suggesting potential adverse risk selection.
Conclusions:
- Organizational structure and specific benefit offerings significantly impact HMO participation in Medicare risk contracts.
- Adverse risk selection may play a role in the market exit decisions of certain HMOs, particularly those not part of larger, centralized organizations.