Tuesday, August 23, 2022

Before risk-adjustment, Medicare Advantage applicants had to climb four flights of stairs

Since the plans were paid a fixed "per member per month" fee (pmpm), they could increase profit only by reducing costs.  So they located their sign-up rooms on fourth-floor walk-ups to "screen out" higher-cost applicants.

After risk adjustment (higher payments to plans to compensate them for covering higher-risk patients), they did enroll people with higher risk scores, but ...

... those people still tended to be significantly below the average cost in their risk category.  (NBER)

HT: Cramer

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