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Limitations of the Risk Adjustment System
Converting Medicare to a kind of Premium support system would not be beneficial to the less healthy individuals because they would not afford to pay for the private plans. The separation of the healthy from the less-healthy people is an adverse selection problem that could be addressed using the risk adjustment system (McWilliams, Hsu, & Newhouse, 2012). However, according to research it has been identified that this is not the case. The premiums for traditional Medicare would rise, and the healthier enrollees would move to the private plans. This would result in further premium increases, and the people the scheme is meant to assist would not afford to pay the premiums. In the end, the system would have to be abolished or revised in order to offer the required service to the less-healthier people. The risk adjustment system is meant to raise or lower payment to the traditional Medicare or private plans based on the health status of the enrollees. The system would not manage to capture all the costing's, and this would result in traditional Medicare receiving only a partial compensation that would not be enough to cover all the costs. The only alternative would...
The Department of Health and Human Services has also been fighting the policy by indicating that the proposed risk adjustment system would not be beneficial in the long run. These two bodies serve as advisors to Congress. This in turn means that Congress would be more inclined to listen to their proposals than to anyone else. The policy was meant to protect the traditional Medicare by offering a similar premium system to the healthier people. In turn, the premiums paid by the healthier people would be used to support or supplement the costs for the less-healthier people. Research carried out by McGuire et al. (2013) showed that the accuracy of the risk adjustment system has increased over time, which should be a good thing, but his research findings have been overshadowed by MedPAC and HHS. From the current political process, it looks like the proponents of a premium support…
References
McGuire, T. G., Glazer, J., Newhouse, J. P., Normand, S.-L., Shi, J., Sinaiko, A. D., & Zuvekas, S. H. (2013). Integrating risk adjustment and enrollee premiums in health plan payment. Journal of health economics, 32(6), 1263-1277.
McWilliams, J. M., Hsu, J., & Newhouse, J. P. (2012). New risk-adjustment system was associated with reduced favorable selection in Medicare Advantage. Health Affairs, 31(12), 2630-2640.
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