Industrial and Systems Engineering (ISyE) Professor Turgay Ayer, was recognized with a team of renowned researchers for their work titled “Strategic Cross Subsidization in Healthcare Capitation Programs: Evidence from Medicare Advantage”.

Recently published in the INFORMS Journal Manufacturing & Service Operations Management, their research calls for transparency in the Medicare Advantage (MA) program. 

Their findings share that Medicare Advantage Plans adjust and reallocate funds inappropriately by implementing strategic cross-subsidization, which directly shifts the quality of care between high-risk and low-risk patients. 

With MA Plans supporting over $2 million enrollees, they’ve provided the first empirical evidence of strategic cross-subsidization happening within a large commercial insurance database. 

Ayer collaborated with faculty researchers, Zhaowei She (Singapore Management University), Bilal Gokpinar (University College London), and Danny Hughes (Arizona State University), to study and address the need for Medicare reform and regulating ongoing health equities.

"This study underscores the urgent need for enhanced transparency in Medicare Advantage. The practice of strategic cross-subsidization we've uncovered could exacerbate socio-economic inequalities in healthcare access and outcomes, highlighting the critical importance of rigorous oversight in capitation payment models."

Examples of this can be seen when individuals become ill or considered high-risk, however the healthcare plan may suggest spending less resources on the patient. These specific findings have the potential to alert policymakers and encourage enforcers to revisit the structure behind MA Plans. 

By revealing this unknown issue of resource misallocation, these types of solutions may have the ability to impact millions of beneficiaries across the entire Medicare Advantage system.

To learn more about their research and the full story, read here.

To read their published paper: https://pubsonline.informs.org/doi/10.1287/msom.2023.0637

About INFORMS and Manufacturing & Service Operations Management 

INFORMS is the leading international association for data and decision science professionals. Manufacturing & Service Operations Management, one of 17 journals published by INFORMS, is a premier academic journal that covers the production and operations management of goods and services including technology management, productivity and quality management, product development, cross-functional coordination, and practice-based research. More information is available at www.informs.org or @informs.

Turgay Ayer co-authored the study with his former PhD student, Zhaowei She (now on the faculty at Singapore Management University), as well as Bilal Gokpinar (University College London) and Danny Hughes (Arizona State University). 

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Camille Carpenter, Communications Manager