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Blog   |   11.11.15

Hats Off to CMS for Considering More Generous Risk Adjustment for Dual Eligibles

Last week, the risk adjustment world received promising news from the Centers for Medicare and Medicaid Services (CMS).

CMS underpaying for some dual eligibles

Cheri Rice, the Director of the Medicare Plan Payment Group authored a letter revealing that CMS underpays health plans who serve large numbers of “dual eligibles,” or low-income seniors and disabled youth who are eligible for both Medicare and Medicaid benefits. More specifically, plans providing care for dual eligibles living in the community (rather than a long-term care institution) are underpaid by a factor of around 10%.

Changes to risk adjustment model considered

In response, Rice continued, CMS is considering changes to its risk adjustment model that would establish six separate payment tiers, with segments for people under full Medicare-Medicaid benefits, partial benefits, and single-program benefits. “The updated model results in more appropriate relative weights for the HCCs [Hierarchical Condition Categories] because the relative weights reflect the disease and expenditure patterns of each of the six community segments.” The adjusted model would go into effect in Payment Year 2017.

An expensive, vulnerable population

Technical jargon aside, this move makes a great deal of sense, because dual eligibles are a very vulnerable population which may not receive care without adequate compensation. The nine million Americans eligible for both Medicare and Medicaid have uniquely complex and costly care needs. For example, treating a malnourished senior with diabetes for unexplained fever requires more time, tests and expertise than working with an active senior with the same illness. For the sicker senior, physicians must consider a greater raft of possible diagnoses and prescribe treatment more sensitively.

Because of their demanding care needs, dual-eligibles account for a high proportion of health care costs. They comprise 18% of Medicaid enrollees but 46% of total Medicaid spending, and they comprise 16% of Medicare enrollees but 25% of total Medicare spending.

It’s clear that the American health care system must take better care of dual-eligibles, to reduce costs and improve quality. But because these people are a greater clinical and financial risk  than their comparatively healthy counterparts, strong health plans and physicians don’t want to take them on as patients. This creates a vicious cycle: the sickest patients can’t get the best care, so they get sicker, and cost the system even more money, and require even more care.

Where more generous risk adjustment comes into play

This is where more generous risk adjustment policies comes into play. Risk adjustment measures the baseline severity of patient health by tracking chronic conditions through HCC codes. It compensates payers and providers if the measurement concludes that their cohort is sicker than normal. It was developed to even the playing field for plans who had sicker populations and encourage high-quality payers and providers to care for sicker patients.
Should CMS use risk adjustment to increase compensation for dual eligibles care, as last week’s letter suggests, this population might finally get the care and attention they deserve. Hat’s off to them for moving on this issue and understanding the important role that risk adjustment plays in creating an equitable health system.

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