This paper discusses the policy implications of Medicare reform on beneficiaries with cognitive and physical difficulties. Elderly and disabled persons are more likely to suffer from these disabilities; in 1997, almost one-third of Medicare beneficiaries had either a physical or cognitive problem, and almost 13% had both types of afflictions. Beneficiaries with physical and cognitive difficulties spent considerably more on health care, and thus are classified as being at risk to Medicare reform proposals that contain significant cost-sharing increases. Additionally, Medicare HMOs have historically been successful in enrolling healthier beneficiaries. Therefore, any reform that includes reliance on the private sector must incorporate an appropriate risk adjustment mechanism to protect the physically and cognitively vulnerable beneficiaries.
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