Estimating the Medicare+Choice Threshold Payment Rate

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Project completed:
August 2001
This analysis will use an empirical model to estimate the threshold payment rate firms need, all else equal, to enter the Medicare managed care market in a given county. By comparing this threshold rate with the rate currently paid by the county, we will use the model to explain empirically why Medicare+Choice (M+C) enrollment growth has been slow in rural areas. We expect that counties where the M+C capitation rate is currently below this threshold will have no enrollment. Furthermore, we can use the threshold payment rate (TPR) to compute a county-level "gap" in the M+C rates, that is, a difference between what the rate currently is (M+C rate), and what it would need to be to attract enrollment, given the county s characteristics (GAP = TPR - M+C rate).