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This report presents the results of that analysis. It describes the supplemental health benefits options available to Medicare beneficiaries in the demonstration sites, reviews the theoretical literature on risk selection, and develops hypotheses regarding risk selection that can be tested in the evaluation of the demonstration. It also suggests analytic methods for measuring selection and estimating the extent to which it may occur for enrollments in the FEHBP demonstration. The methods are designed to estimate (1) the extent to which adverse selection occurs in Medicare supplemental insurance enrollments for the DoD FEHBP demonstration, and (2) how much effect selection has on DoD health care costs for Medicare-eligible beneficiaries.