NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Fahad Khalil

Department of Economics
University of Washington
410 Spokane Lane
Seattle, WA 98105

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Washington

NBER Working Papers and Publications

November 2017Service-level Selection: Strategic Risk Selection in Medicare Advantage in Response to Risk Adjustment
with Sungchul Park, Anirban Basu, Norma Coe: w24038
The Centers for Medicare and Medicaid Services (CMS) has phased in the Hierarchical Condition Categories (HCC) risk adjustment model during 2004-2006 to more accurately estimate capitated payments to Medicare Advantage (MA) plans to reflect each beneficiary’s health status. However, it is debatable whether the CMS-HCC model has led to strategic evolutions of risk selection. We examine the competing claims and analyze the risk selection behavior of MA plans in response to the CMS-HCC model. We find that the CMS-HCC model reduced the phenomenon that MA plans avoid high-cost beneficiaries in traditional Medicare plans, whereas it led to increased disenrollment of high-cost beneficiaries, conditional on illness severity, from MA plans. We explain this phenomenon in relation to service-level se...
 
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