Alternative geographic configurations for Medicare payments to health maintenance organizations

Under prevailing legislation, Medicare payments to health maintenance organizations (HMOs) are based upon projected fee-for-service reimbursement levels for enrollees' county of residence. These rates have been criticized in light of substantial variations in rates among neighboring counties and large fluctuations in rates over time. In this study, the use of nine alternative configurations and the county itself were evaluated on the basis of payment-area homogeneity, payment rate stability, and policy criteria, including the fiscal impacts of reconfiguration on HMOs. The results revealed rather modest differences among most alternative configurations and do not lend strong support for payment area reconfiguration at this time.