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. 1985 Spring;6(3):27-38.

Using prior utilization to determine payments for Medicare enrollees in health maintenance organizations

J Beebe, J Lubitz, P Eggers

Using prior utilization to determine payments for Medicare enrollees in health maintenance organizations

J Beebe et al. Health Care Financ Rev. 1985 Spring.

Abstract

The Tax Equity and Fiscal Responsibility Act of 1982 is expected to make it more attractive for health maintenance organizations (HMO's) to participate in the Medicare program on an at-risk basis. Currently, payments to at-risk HMO's are based on a formula known as the adjusted average per capita cost (AAPCC). This article describes the current formula and discusses a modification, based on prior use of Medicare services, that endeavors to more accurately predict risk. Using statistical simulations, formulas incorporating prior use performed better for some types of biased groups than a formula similar to the one currently employed. Major concerns involve the ability to "game the system." The prior-use model is now being tested in an HMO demonstration. This article also outlines the limitations of a prior-use model and areas for future research.

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Figures

Figure 1
Figure 1. Study design: Building and testing models incorporating prior-use variables in an adjusted average per capita cost (AAPCC) formula
Figure 2
Figure 2. Groups used to test how the prior-use models would perform
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