Rural beneficiaries with chronic conditions: does prevalence pose a risk to Medicare managed care?

One of several possible barriers to the growth of Medicare managed care in rural areas is the fear of adverse selection (i.e., the perception that rural beneficiaries are less healthy and have pent-up demand for services). Using 1993 Medicare Current Beneficiary Survey data, we conclude that specific chronic conditions common among the elderly are not more prevalent among rural than urban beneficiaries. Medicare reimbursements for beneficiaries with chronic conditions are generally lower in rural counties. However, the difference between actual Medicare reimbursements and projected capitated payments to managed care organizations is similar in magnitude for rural and urban beneficiaries with these conditions.