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Wiley InterScience | ||||||||||||||||||
  Health Services ResearchVolume 39 Issue 1, Pages 111 - 130 Published Online: 6 Jan 2004 © 2009 Health Research and Educational Trust Published on behalf of Health Research and Educational Trust in cooperation with AcademyHealth.
Abstract | References | Full Text: HTML, PDF (Size: 139K) | Related Articles | Citation Tracking  The Costs of Decedents in the Medicare Program: Implications for Payments to Medicare+Choice Plans We would like to acknowledge support from the Commonwealth Fund and the National Institute on Aging grant numbers AG 17253 and AG05842. We would also like to thank Richard Frank, Chris Hogan, Hal Luft, Joanne Lynn, and Kathy Swartz for their helpful comments, and Jeffrey Geppert and Hoon Byun for programming assistance. Melinda Beeuwkes Buntin also thanks the Harvard/Sloan Center for the Study of the Managed Care Industry for financial support during the writing of this paper. Address correspondence to Melinda Beeuwkes Buntin, Ph.D., RAND Health, 1200 South Hayes St., Arlington VA 22202. Alan M. Garber, M.D., Ph.D., is with the Department of Veterans Affairs, Palo Alto, CA and Stanford University, Stanford, CA. Mark McClellan, M.D., Ph.D., is with Stanford University, Stanford, CA, and the Food and Drug Administration, Rockville, MD. Joseph P. Newhouse, Ph.D., is with the Department of Health Care Policy, Harvard University, Boston. Copyright © 2004 Health Research and Education Trust. All rights reserved KEYWORDS Medicare • risk adjustment • managed care • end-of-life costs ABSTRACTObjective. To discuss and quantify the incentives that Medicare managed care plans have to avoid (through selective enrollment or disenrollment) people who are at risk for very high costs, focusing on Medicare beneficiaries in the last year of life—a group that accounts for more than one-quarter of Medicare's annual expenditures. Data Source. Medicare administrative claims for 1994 and 1995. Study Design. We calculated the payment a plan would have received under three risk-adjustment systems for each beneficiary in our 1995 sample based on his or her age, gender, county of residence, original reason for Medicare entitlement, and principal inpatient diagnoses received during any hospital stays in 1994. We compared these amounts to the actual costs incurred by those beneficiaries. We then looked for clinical categories that were predictive of costs, including costs in a beneficiary's last year of life, not accounted for by the risk adjusters. Data Extraction Methods. The analyses were conducted using claims for a 5 percent random sample of Medicare beneficiaries who died in 1995 and a matched group of survivors. Principal Findings. Medicare is currently implementing the Principal Inpatient Diagnostic Cost Groups (PIP-DCG) risk adjustment payment system to address the problem of risk selection in the Medicare+Choice program. We quantify the strong financial disincentives to enroll terminally ill beneficiaries that plans still have under this risk adjustment system. We also show that up to one-third of the selection observed between Medicare HMOs and the traditional fee-for-service system could be due to differential enrollment of decedents. A risk adjustment system that incorporated more of the available diagnostic information would attenuate this disincentive; however, plans could still use clinical information (not included in the risk adjustment scheme) to identify beneficiaries whose expected costs exceed expected payments. Conclusions. More disaggregated prospective risk adjustment methods and alternative payment systems that compensate plans for delivering care to certain classes of patients should be considered to ensure access to high-quality managed care for all beneficiaries. | 
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