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Lecture 7

IHS 4504 Lecture Notes - Lecture 7: Tax Credit, Managed Care, Prescription Drug

Interdis. Health Sciences
Course Code
IHS 4504
Jayanta Gupta

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Chapter 7- Risk Adjustment
Medicare AAPCC: Adjusted Average Per Capita Costs
- Average Medicare Part A +Part B expenditures
oBy county
- Adjusted for:
oInstitutional Status
oMedicaid Status
oActive Worker Status
- 95 percent payment
“Adjusting Capitation Rates Using Objective Health Measures and Prior Utilization”
- Effort to explore the potential of enhancing the AAPCC to reflect health status
- Uses RAND Health Insurance Experiment Data, 1970-1974
Updating AAPCC: Guiding Principles
- Clinically meaningful measures
- Predictive of current and future medical expenditures
- Yield accurate and stable predictions
- Related conditions treated hierarchically
- Vague measures grouped with low-paying diagnoses
- Discourage multiple reporting of similar conditions
- No penalty for reporting many conditions
- Transitivity holds
- All diagnoses map to the payment system
- Discretionary diagnostic codes excluded.
Updating the AAPCC Comprehensive Model
- Funded development of several approaches but ultimately choose:
oPrincipal In-Patient Diagnostic Cost Group (PIP-DCG)
- Which, with refinement, became:
oHierarchical Coexisting Conditions
- And was renamed Hierarchical Condition Categories (HCCs)
Medicare Modernization Act of 2004
- Provided for prescription drug coverage (Part D)
- Modified payment for Medicare Advantage plans.
oPlans proffer a bid per enrollee per month to provide a basic set of benefits
consistent with traditional Medicare.
oIf this bid is below the CMS established “benchmark”, the managed care plan
keeps 75% of the difference to apply to reduced cost sharing or expanded
benefits for enrolled beneficiaries.
oIf it is above the benchmark, the plan charges enrollees an additional premium.
oCMS-HCC is used to adjust the payments for beneficiaries actually enrolled by
the plan to reflect their demographics and health status.
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