Reforming Medicare Risk Payment Through Competitive Market Forces

Does Risk Adjusted Competitive Rating (RACR) in conjunction with Global Risk Assessment Model (GRAM) result in more appropriate and efficient Medicare reimbursement? Researchers at Kaiser Family Hospital tried to simulate a new payment system for Medicare Risk enrollees in four Kaiser Permanente Regions with medicare risk contracts covering over 10,000 beneficiaries, as well as for HealthPartners and Group Health of Puget Sound. Their objective was to simulate the replacement of Medicare’s current reimbursement system (AAPCC) with local RACR, a system developed by Mark Hornbrook, et. al. RACR uses competition in a HMO’s non-Medicare market to set efficient Medicare prices. A nationally standardized risk adjustment model, GRAM also developed by Hornbrook,, was used to convert non-Medicare rates to payment rates for Medicare Risk beneficiaries. The goals for this project were to: 1) assess RACR’s feasibility for setting Medicare risk payments using GRAM; 2) specify policy strategies and modifications required for full RACR implementation; and 4) disseminate the GRAM grouper program and RACR payment procedures to other Medicare HMO’s.