To combat risk selection, it is becoming increasingly common for payments to insurers (and providers) to adjust for patients' chronic conditions. A possible unintended negative consequence is to reduce insurers' (and providers') incentives to prevent chronic conditions. This study examined the effect of Medicare's risk adjustment for payments to Medicare Advantage plans, first introduced in 2004, on pneumonia and influenza vaccination for the elderly. The analysis used the 2000 through 2010 waves of the Medicare Current Beneficiary Survey and a difference-in-differences approach. Presumably by decreasing Medicare Advantage plans' positive influence on vaccination, Medicare's risk adjustment policy was estimated to have reduced pneumonia vaccination rates by 2.9 percentage points (4%, p = .039) and to have possibly reduced influenza vaccination rates by 2.2 percentage points (3%, p = .096). The results clarify an argument against including vaccine-preventable conditions, like pneumonia, in a risk adjustment model.
