IMI Releases Updated Risk Adjustment Model for Medicaid
The Institute for Medicaid Innovation (IMI), in partnership with the University of California San Diego (UCSD), presented updates to a significant risk adjustment model in Medicaid. The new, updated model will assist state Medicaid agencies and health plans in more accurately developing their risk adjustment methodologies.
This marks the first major update to the risk adjustment model, the Chronic Illness and Disability Payment System (CDPS), in more than ten years. CDPS is a diagnostic-based risk adjustment model used to adjust payments for Medicaid health plans and was first developed using data from 2010 and 2011. Using three years of recent? data from several national Medicaid health plans, the outcome of this work led to the release of the latest version of this model last year. The fourth phase, expected to launch this year, will continue to test, and possibly refine, the model.
The updated model supports efficiency in care delivery, ensures adequate financing of health care, and encourages innovation. Risk adjustment is designed to ensure that Medicaid health plans receive appropriate premium revenue or compensation to cover medical costs for the individuals they insure.
Improvements to the model include a new awareness of how treatments and technologies have changed how patients receive care, updates to expected cost of care, changes in how payment structure records costs in managed care settings, and updates in six diagnostic categories.
IMI presented the findings in collaboration with Drs. Todd Gilmer and Rick Kronick of UCSD. CDPS was originally developed by Dr. Kronick. The recording is available online.
Risk adjustment provides increased precision in the predictability of costs and spreads financial risk amongst all insurers. It is a statistical method that seeks to predict a person’s likely use and costs of health care services. Through the use of claims and encounter data, it is used in Medicaid to adjust the capitated payments, a set amount per member per month, and cover expected medical costs of Medicaid members.
There are three primary goals to risk adjustment: to provide a budget-neutral way to allocate funds among Medicaid health plans; to minimize the incentives for health plans and providers to selectively only provide coverage healthier members; and ensure adequate financing for those who treat individuals with higher-than-average health needs.
Currently, 32 Medicaid agencies, including D.C. and Puerto Rico, utilize the CDPS risk adjustment model to inform actuarily sound payments to insurers.
Read the associated fact sheet here.