News and Commentary

Risk Pays Off Under HCFA's New Medicare Scheme


The Health Care Financing Administration has taken steps to make Medicare+Choice more attractive to health plans in low-paying rural counties, while encouraging them to enroll or keep sicker patients. HCFA will boost the payment floor by nearly 6 percent in 2000, while instituting a blending formula that pushes health plan capitation rates in many low-to-moderate-payment counties even higher. Additionally, HCFA is beginning a risk-adjustment scheme that pays Medicare+Choice plans more for treating sicker patients.

Beginning in 2000, the payment floor for plans in rural counties will rise from $380 to $402. Additionally, fewer markets will be at this level; in 63 percent of the nation's counties, plans will benefit from a formula that blends local payment rates with the higher national average. Some counties will see significant increases; for instance, health plans in Fresno County, Calif., will see a 13-percent jump in per-member, per-month payments. Medicare HMOs in the highest-cost areas, such as Miami and Philadelphia, will receive incremental 2-percent increases.

The risk-adjustment system, meanwhile, can increase payment to an HMO for a single enrollee as much as sixfold, depending on age, severity of illness, and Medicaid eligibility.

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