Health plans competing in a managed care system may face serious financial
consequences if they are disproportionately selected by enrollees with expensive
health conditions. Academic medical centers (AMCs) have traditionally provided
medical care for the sickest patients and may be at particularly high risk
for adverse selection, but whether this occurs is not known.
To determine whether managed care organizations (MCOs) representing
AMCs are adversely selected by Medicaid managed care (MMC) enrollees with
expensive chronic health conditions.
Design and Setting
Observational study using state Medicaid claims data from all of 1994
and January to August 1995 for Tennessee's statewide MMC program (TennCare).
All 12 capitated MCOs in Tennessee, which collectively provided services
for 1.2 million Medicaid enrollees from January 1994 through August 1995 following
the initiation of TennCare.
Main Outcome Measures
Prevalence of 6 state-specified high-cost chronic conditions—acquired
immunodeficiency syndrome (AIDS), coagulation defects, cystic fibrosis, pregnancy,
prematurity, and organ transplantation—and 27 additional high-cost conditions
compared by academic, statewide, and regional MCOs.
The prevalence of state-specified high-cost chronic conditions was generally
higher for academic MCOs compared with other MCOs. Specifically, prevalence
of AIDS was 14.1 times higher in academic MCOs than in statewide MCOs; coagulation
defects, 6.4 times higher; transplantations, 4.4; pregnancy, 3.3; cystic fibrosis,
2.4; and prevalence of prematurity was equivalent. Prevalence was higher for
academic than for statewide MCOs for 22 of the additional 27 high-cost conditions
considered and similar for the remaining 5 conditions.
Our results suggest that academic MCOs in an MMC system are selected
by a large percentage of the sickest patients. Adverse selection may present
serious financial risks for AMCs participating in managed care.