May 14, 2015 • 24M

What Is Risk Adjustment and How Is It Accomplished Under MA: A Conversation with Robert Book (May 13th)

 
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David Introcaso, Ph.D.
Podcast interviews with health policy experts on timely subjects. The Healthcare Policy Podcast website features audio interviews with healthcare policy experts on timely topics. An online public forum routinely presenting expert healthcare policy analysis and comment is lacking. While other healthcare policy website programming exists, these typically present vested interest viewpoints or do not combine informed policy analysis with political insight or acumen. Since healthcare policy issues are typically complex, clear, reasoned, dispassionate discussion is required. These podcasts will attempt to fill this void. Among other topics this podcast will address: •Implementation of the Affordable Care Act •Other federal Medicare and state Medicaid health care issues •Federal health care regulatory oversight, moreover CMS and the FDA •Healthcare research •Private sector healthcare delivery reforms including access, reimbursement and quality issues •Public health issues including the social determinates of health Listeners are welcomed to share their program comments and suggest programming ideas. Comments made by the interviewees are strictly their own and do not represent those of their affiliated organization/s.
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Risk adjustment is a statistical method by which payers can reasonably predict how much a patient's care needs are expected to cost in any given year.  In so called Fee-For-Service Medicare this matter is essentially moot since since providers are simply paid for the reimbursable services they provide their patients.  However, health care payment is rapidly moving towards fixed or pre-arranged reimbursement models.  For example, Medicare Advantage plans are paid a pre-determined or fixed per member per month fee and ACOs are incented to spend less annually than a pre-determined benchmark that amounts to an ACO's patients' historical costs risk adjusted.  Therefore, risk adjustment, or getting risk adjustment right, becomes critically important.  

During this 23 minute discussion Dr. Book explains the theory behind risk adjustment, how it's calculated for Medicare Advantage plans using hierarchical condition categories (HCC) codes and demographic data, the phenomenon known as "up coding," what CMS has done to address the issue and whether predicted costs tend to be lower than actual costs for high cost beneficiaries is a problem.

Dr. Robert Book is a Health Economist and Senior Research Director at the Health Systems 
Innovation Network.   (His paper discussed during this interview was authored via his work with the American Action Forum.)  Dr. Book's work primarily focuses on modeling of the effects of the ACA.   He has also expertise in a wide variety of related issues including Medicare and Medicare Advantage pricing, provider incentives, employer-sponsored insurance, drug regulation and the economics of medical research.  Dr. Book earned his Ph.D. in economics and his MBA at the University of Chicago, an MA in computational and applied mathematics at Rice and his undergraduate in mathematics at Duke.     

Dr. Book's primer on Medicare Advantage risk adjustment is at: http://americanactionforum.org/research/primer-medicare-risk-adjustment.

For a discussion on Medicare Advantage pricing more generally see the May 6, 2013 interview with Dr. Brian Biles.   

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