Payments subject to new formula as of 2000

One of the biggest changes in Medicare risk contracting that will result from the Medicare+Choice program will be implementation of a new risk-adjustment methodology, effective Jan. 1, 2000. The new methodology is intended to discourage plans from enrolling only the healthiest members of the eligible population.

As opposed to the current per capita rate for all patients used under fee-for-service Medicare, the new proposed risk-adjusted capitation model will pay a higher per capita fee for sicker members and a lower rate for healthier ones.

Based on a hierarchy of medical conditions, the model takes the most severe medical problems for which a patient has been treated into account - plus other multiple conditions that may also be present - to predict the patient's medical costs for the upcoming year.

Due to the variety of individualized medical data included in one of these hierarchical coexisting condition (HCC) models, this system is "better able to identify people who will be very expensive,'' contends its creator, Arlene Ash, PhD, a mathematician and research professor at Boston University's School of Medicine.

Under current payment protocols, current Medicare risk payments for an 85-year-old male diagnosed with metastatic cancer would be $2,519 for this patient's age and sex "demographic cell," and $16,952 for treating the disseminated cancer, for a total outlay of $19,471.

Using the new Medicare+Choice model, the demographic cell payment for the same patient would be $2,725, plus related condition payments of $6,185 for high-end cancer, $2,069 for heart failure, $883 for angina pectoris, and $4,037 for staphylococcal pneumonia.

Total payment under the proposed Medicare+ Choice model would be $15,899, or $3,582 less than Medicare presently pays.