Author Affiliations: Departments of Medicine (Drs Bailey and Schaberg and Mr Spears) and Preventive Medicine (Drs Bailey, Van Brunt, and Mirvis), University of Tennessee; Memphis Managed Care Corp (Mr McDaniel); and Department of Economics, University of Memphis (Dr Chang), Memphis. Mr McDaniel is employed by Memphis Managed Care Corp, which is an academic managed care organization providing services to Tennessee Medicaid enrollees. At the time of the study, Mr Spears was a summer research assistant for the Department of Medicine, University of Tennessee, through the McNair Program at the University of Tennessee, Memphis.
Context 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.
Objective 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).
Participants 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.
Results 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.
Conclusions 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.
Bailey JE, Van Brunt DL, Mirvis DM, McDaniel S, Spears CR, Chang CF, Schaberg DR. Academic Managed Care Organizations and Adverse Selection Under Medicaid Managed Care in Tennessee. JAMA. 1999;282(11):1067-1072. doi:10.1001/jama.282.11.1067