Managed Care: HCFA to Phase in Risk-Adjusted Payment to Medicare Managed Care Plans

The 1997 Balanced Budget Act required the Health Care Financing Administration to phase in the use of a risk-adjusted payment plan making Medicare payments to health maintenance organizations (HMOs) based on the health of their beneficiaries. A five-year phase-in would result in $11.2 bil in Medicare savings.The goal of risk-adjusted payment is to remove the incentive for plans to insure only the healthiest Medicare beneficiaries by paying plans more for covering sicker people, and the managed care industry has lobbied hard against its implementation.