Increasing Medicare enrollment in HMOs: the need for capitation rates adjusted for health status.

Abstract

Although the federal government has sought to increase enrollment of Medicare beneficiaries in HMOs, at the end of 1981 less than 2% were HMO members. Of these, only two-tenths of 1% were enrolled under the type of risk-sharing contracts characteristic of HMOs. HMOs might have greater incentives to market to Medicare beneficiaries if a factor that adjusts for health status could be incorporated into the capitation formula. This paper develops such a factor using measures based on prior-year utilization, perceived health status, and functional health status.