Review of Inpatient Services Performed on Beneficiaries After Disenrolling from Medicare Managed Care

This review was made to determine whether Medicare managed care risk plans may be selectively enrolling healthier beneficiaries and encouraging sicker beneficiaries to disenroll. Our review of beneficiaries who disenrolled from six managed care firms during 1991 through 1996 found that Medicare paid hospitals $224 million for inpatient services furnished to these beneficiaries within 3 months of their disenrollment. Medicare would have paid $20 million in capitation payments to these six firms had these beneficiaries not disenrolled, a difference of $204 million. Moreover, about 18 percent of the expenditures ($41 million) were paid for beneficiaries who reenrolled in Medicare managed care after receiving inpatient care under the Medicare fee-for-service system. Recommendations call for actions the Health Care Financing Administration can begin to take to identify and preclude this inappropriate manipulation of Medicare's health care system.