Medicare risk contracting: identifying factors associated with market exit

Abstract

Over the past few years, a number of HMOs have chosen to discontinue their Medicare risk contracts. Using logistic regression, this study sought to identify factors associated with Medicare risk contract market exit in 1988. Low AAPCC rates were found to systematically affect the market exit of only Medicare risk contractors that were regional components of a central HMO organization. The Medicare risk market exit of other HMOs was found to be principally related to two attributes suggestive of possible unfavorable risk selection: the dropping of a previously offered prescription drug benefit and higher proportions of categorically disabled Medicare enrollees.