As a first step toward full risk adjustment, Medicare should pay reduced premiums for new enrollees in risk HMOs because they tend to cost Medicare less than average before they join the managed-care plans, a congressional advisory panel said last week.
Gail Wilensky, chairwoman of the Physician Payment Review Commission, said such a proposal should be considered as an alternative to President Clinton's plan to cut Medicare managed-care payments to 90% from 95% of average fee-for-service costs.
Clinton's proposal seeks to reduce Medicare overpayment that results from enrollment of a younger, healthier population than the general Medicare population. Numerous studies have documented such adverse selection (Aug. 19, 1996, p. 8).
Wilensky said the PPRC plan isn't perfect but is something that can be implemented as an interim mechanism while data are collected to do better risk adjustment. "It's a crude measure, but it's something that could be put in place," she said. "We don't have to be as crude as (lowering HMO payment rates from) 95% to 90%."
Unlike Clinton's plan, the PPRC proposal would recognize that some risk HMOs have older enrollees by allowing premium rates to increase as beneficiaries grow older.
According to the PPRC's annual report, to be delivered to Congress this week, in the six months before beneficiaries join Medicare HMOs, their costs are 37% below the average of beneficiaries receiving fee-for-service care.